Civil Law Reviewer

CIVIL LAW REVIEWER I. Effect and Application of Laws – New Civil Code A. When law takes effect GENERAL RULE:

Laws take effect 15 days following the completion of its publication in the Official Gazette, or in a newspaper of general circulation. EXCEPTION:

Unless it is otherwise provided.1 B. Ignorance of the Law Ignorance of the law excuses no one from compliance therewith2. C. Retroactivity of Laws Laws shall have no retroactive effect, unless the contrary is provided.3 1

Art. 2 This refers to the 15 day period and NOT to the requirement of publication. (Tanada vs. Tuvera) Administrative rules and regulations must also be published if their purpose is to enforce or implement existing laws pursuant to a valid delegation. The publication must be in full since its purpose is to inform the public of the contents of the law. (Phil. Int’l Trading Corp. vs. Angeles) Publication must be in full or it is no publication at all since its purpose is to inform the public of the contents of the laws. 2 Art. 3 Considered a conclusive presumption and applies only to mandatory and prohibitory laws. (Consunji vs. CA) What Laws Covered.--Philippine laws are covered. There is no conclusive presumption of knowledge of foreign laws. Even our courts cannot take judicial notice of them. Ignorance of a foreign law will not be a mistake of law but a mistake of fact. Mistake of Fact.--Ignorance may either be of law or of fact. Ignorance of fact (ignorantiafacti) may excuse a party from the legal consequences of his conduct; but not ignorance of law, for ignorantiajurisneminemexcusat. Difficult Question of Law.--In specific instances provided by law, mistake as to difficult legal questions has been given the same effect as a mistake of fact, e.g., Art. 526, par. 3 which provides: "Mistake upon a doubtful or difficult question of law may be the basis of good faith." 3 Art. 4 Exceptions: 1.Unless the law otherwise provides

1

D. Mandatory or Prohibitory Laws GENERAL RULE:

Acts which are contrary to mandatory or prohibitory laws are void.4 EXCEPTIONS:

1. When the law itself authorized its validity5 2. When the law makes the act only voidable and not void6 3. When the law makes the act valid but punishes the violator7 E. Waiver of Rights GENERAL RULE:

Rights may be waived. EXCEPTIONS:

1. If the waiver is contrary to law, public order, public policy, morals, or good customs, or 2. prejudicial to a third person with a right recognized by law. F. Repeal of Laws Laws are repealed only by subsequent ones, either expressly or impliedly. Their violation or non-observance shall not be excused by disuse, custom or practice to the contrary

2. Curative statutes 3. Interpretative statutes 4. Procedural/remedial 5. Emergency laws 6. Laws creating new rights 7. Tax laws Exceptions to the exceptions: 1. Ex post facto laws 2. Laws that impair obligation of contracts 4 Art. 5 5 ex. lotto, sweepstakes 6 ex. voidable contracts where consent is vitiated) 7 ex. marriage solemnized by a person without legal authority)

2

When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution.8 G. Judicial Decisions Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines.9 H. Duty to Render Judgment No judge or court shall decline to render judgment by reason of the silence, obscurity or insufficiency of laws.10

8

Art. 7 General v. special law: If the general law was enacted prior to the special law, the latter is considered the exception to the general law. If the general law was enacted after the special law, the latter remains unless: There is an express declaration to the contrary. There is a clear, necessary and irreconcilable conflict. The subsequent general law covers the whole subject and is clearly intended to replace the special law on the matter. If the general law treats a particular matter in specific, while the special law treats such matter in general, the former will prevail. Lapse of laws: there are laws which, without any repeal, cease to have effect because they lapse by their own terms. A law may expressly provide that it shall be effective only for a fixed period. Repeal of repealing law: The law first repealed shall not be revived unless so expressly provided. But if the prior law was repealed, not expressly but by implication, the repeal of the repealing law will revive the prior law, unless the language of the last law provides otherwise. Implied repeals: not favored. Requisites: the laws cover the same subject matter and the latter is repugnant to the earlier. 9 Art. 8 Only Supreme Court decisions establish jurisprudence; decisions of other judicial or quasi-judicial bodies are merely persuasive. This principle, however, does not mean blind adherence. The duty of the Court is to abandon any doctrine found to be in violation of the law in force. 10 Art. 9 This article does not apply to criminal prosecutions, bec. when there is no law punishing an act, the case must be dismissed, however, reprehensible the act may seem to the judge (Tolentino). If the law is vague or obscure, the court should clarify it in the light of the rules of statutory construction; it is silent or insufficient, the court should fill the deficiency by resorting to customs or general principles of law.

3

I. Presumption and Applicability of Custom11 In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail.12 Customs which are contrary to law, public order or public policy shall not be countenanced.13 A custom must be proved as a fact, according to the rules of evidence.14 J. Legal Periods When the laws speak of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours; and nights from sunset to sunrise. If months are designated by their name, they shall be computed by the number of days which they respectively have. In computing a period, the first day shall be excluded, and the last day included15

11

the juridical rule w/c results from a constant and continued uniform practice by the members of a social community, w/ respect to a particular state of facts, and observed w/ a conviction that it is juridically obligatory 12 Art. 10 13 Art. 11 14 Art. 12 Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory." The law requires that "a custom must be proved as a fact, according to the rules of evidence." On this score the Court had occasion to state that "a local custom as a source of right can not be considered by a court of justice unless such custom is properly established by competent evidence like any other fact." The same evidence, if not one of a higher degree, should be required of a foreign custom 15 Art. 13 superseded by Sec. 31, Book I of EO 292 (Administrative Code of 1987) w/c provides that Sec. 31.Legal Periods.-- "Year" shall be understood to be twelve (12) calendar months; "months" of thirty (30) days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; "day," to a day of twenty four (24) hours; and "nights," from sunset to sunrise. This article applies only to legal provisions and not to contracts, where the parties may stipulate on the manner of computing years, months and days (Baviera).

4

K. Applicability of Penal Laws Penal laws and those of public security and safety shall be obligatory upon all who live or sojourn in Philippine territory, subject to the principles of public international law and to treaty stipulations.16 L. Conflict of Laws Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad.17 Real property as well as personal property is subject to the law of the country where it is situated.18 However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found.19 The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed.20 16

Art. 14 Art. 15 Theories on Personal Law.-Domiciliary theory, followed in the US, according to w/c the personal laws of a person are determined by his domicile. Nationality theory w/c makes nationality or citizenship as the basis for determining the personal laws of an individual. (Tolentino) The question of how a citizen may strip himself of the status as such citizen is governed by his national law. 18 Art. 16, 1st par. The lexsitusor lexreisitae governs real or personal property 19 Ibid., 2nd par. The second par. of this article can be invoked only when the deceased was vested w/ a descendible interest in prop. w/in the jurisdiction of the Phils. The intrinsic validity of the provisions of the will of a foreigner who dies in the Phils.is to be determined by the laws of his own state or country, and not by those of the Phils. Thus, a condition in a will of a foreigner that his legatee respect his order that his prop.be distributed according to the laws of the Phils. instead of the laws of his own country, was held illegal and considered as not written. The law governing succession may be considered from the point of view of (a) the execution of wills, and (b) the distribution of property. The formalities of execution of will are generally governed by the law of the place of execution (Art. 17, par. 1.) But the distribution of the estate is governed by the law of the nation of the deceased. 20 Art. 17, 1st par.,known as the lex loci celebrationis 17

5

When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by Philippine laws shall be observed in their execution.21 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.22 In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied by the provisions of this Code.23 Relative to Divorce Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law.24 II. Human Relations – New Civil Code A. Relative to breach of promise to marry25 Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.26 21

Ibid, 2nd par. Ibid, 3rd par. 23 Art. 18 24 Art. 26 (2nd par.), FC 25 General rule: Breach of promise to marry by itself is not actionable. Exception: In cases where there is another act independent of the breach of promise to marry which gives rise to liability: 1. Cases where there was financial damage. 2. Social humiliation caused to one of the parties. 3. Where there was moral seduction. Sexual intercourse is not by itself a basis for recovery; damages could only be awarded if the sexual intercourse is not a product of voluntariness or mutual desire. While a breach of promise to marry is not actionable, it has been held that to formally set a wedding and go through and spend for all the wedding preparation and publicity, only to walk out of it when the matrimony was about to be solemnized is a different matter. This palpably and unjustifiably contrary to good customs for which the defendant must be held answerable for damages in accordance with Art. 21 of the Civil Code. (Wassmer vs. Velez) 22

6

Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.27 Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.28 Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.29 PERSONS I. Persons and Personality – New Civil Code A. Capacity to Act30 1. Civil Personality31 Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every natural person and is lost only through death. Capacity to act, which is the power to do acts with legal effect, is acquired and may be lost.32 2. Restrictions on Capacity to Act Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person from certain obligations, as when the latter arise from his acts or from property relations, such as easements.33

26

Art. 19 Principle of abuse of rights 27 Art. 20 28 Art. 21 29 Art. 22 30 Power to do act with legal effects 31 aptitude of being the subject, active or passive, of rights and obligations 32 Art. 37 Capacity may be (1) juridical capacity, and (2) capacity to act. The union of these 2 forms the full civil capacity. Juridical capacity is synonymous to legal capacity and to personality. They all refer to the aptitude for the holding and enjoyment of rights. On the other hand, capacity to act refers to the aptitude for the exercise of rights, and is often referred to merely as "capacity." 33 Art. 38

7

The following circumstances, among others, modify or limit 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 by this Code, other codes, the Rules of Court, and in special laws. Capacity to act is not limited on account of religious belief or political opinion. A married woman, eighteen years of age or over, is qualified for all acts of civil life, except in cases specified by law.34 3. Birth Birth determines personality; but the conceived child shall be considered born for all purposes that are favorable to it, provided it be born later with the conditions specified in the following article.35 For civil purposes, the foetus is considered born if it is alive at the time it is completely delivered from the mother's womb. However, if the foetus had an intrauterine life of less than seven months, it is not deemed born if it dies within twenty-four hours after its complete delivery from the maternal womb.36 4. Death Civil personality is extinguished by death. The effect of death upon the rights and obligations of the deceased is determined by law, by contract and by will.37

34

Art. 39 Art. 40 Personality from Birth.-- Birth means the removal of the foetus from the mother's womb. Conceived Child.-- The personality of the conceived child has 2 characteristics: (1) it is essentially limited, bec. it is only for purposes favorable to the child, and (2) it is provisional or conditional, bec. it depends upon the child being born alive later, such that if it is not born alive, its personality disappears as if it had never existed. For civil personality to be acquired, one must be born.-- A foetus is born after it is completely separated from the mother's womb w/c is produced by the cutting of the umbilical cord; after the separation, the child now survives by itself. 36 Art. 41 Once birth occurs, personality for favorable purposes retroacts from the moment of conception.-- The retroactivity rule is qualified-- only for purposes favorable to the child. 37 Art. 42. Physical death and legal death are the same. (Balane) 35

8

a. Compare Art. 43 with Rule 131, Sec. 3 (jj) presumption of Survivorship Under Art. 43:38 If there is a doubt, as between two or more persons who are called to succeed each other, as to which of them died first, whoever alleges the death of one prior to the other, shall prove the same; in the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other. Under Rule 131, Sec. 3 (jj):39 Except for purposes of succession, when two persons perish in the same calamity, such as wreck, battle, or conflagration, and it is not shown who died first, and there are no particular circumstances from which it can be inferred, the survivorship is determined from the probabilities resulting from the strength and the age of the sexes, according to the following rules: 1. If both were under the age of fifteen years, the older is deemed to have survived; 2. If both were above the age sixty, the younger is deemed to have survived; 3. If one is under fifteen and the other above sixty, the former is deemed to have survived; 4. If both be over fifteen and under sixty, and the sex be different, the male is deemed to have survived, if the sex be the same, the older; 5. If one be under fifteen or over sixty, and the other between those ages, the latter is deemed to have survived.40 B. Domicile41 and residence42 of person For the exercise of civil rights and the fulfillment of civil obligations, the domicile of natural persons is the place of their habitual residence.43

38

Civil Code Rules of Court 40 Sec. 3 (jj), Rule 131. 41 denotes a fixed permanent residence, which when absent, one has the intention of returning There can only be one place of domicile 42 used to indicate a place of abode, whether permanent or temporary There can be several places of residence 43 Art. 50. Requisites of Domicile: (1) physical presence; (2) animusmanendi (intent to remain) (Gallego v. Vera, 73 P 453.) Three kinds of Domicile: (1) Domicile of Origin.-- Domicile of the parents of a person at the time he was born 39

9

When the law creating or recognizing them, or any other provision does not fix the domicile of juridical persons, the same shall be understood to be the place where their legal representation is established or where they exercise their principal functions.44 II. Marriage – Family Code45 A. Requisites 1. Nature of Marriage A special contract of permanent union between a man and a woman entered into in accordance with law for the establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution whose nature, consequences, and incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property relations during the marriage within the limits provided by this Code46 2. Kinds of Requisites Essential requisites: (1) Legal capacity of the contracting parties who must be a male and a female; and (2) Consent freely given in the presence of the solemnizing officer.47 Formal requisites: (1) Authority of the solemnizing officer; (2) A valid marriage license except in the cases provided for in Chapter 248 of this Title; and (3) A marriage ceremony which takes place with the appearance of the contracting parties before the solemnizing officer and their personal declaration that they take each other as husband and wife in the presence of not less than two witnesses of legal age.49

(2) Domicile of Choice.-- Domicile chosen by a person to change his original domicile. Aside from the 2 requisites mentioned above, a third requisite must be present in domincile of choice, animus non revertendi (intention not to return to one's old domicile as his permanent place.) (3) Domicile by Operation of Law.-- E.g., Art. 69, FC. Domicile and Residence. Domicile is not the same as residence. Domicile is residence plus habituality. Importance of Understanding Domicile.-- In case of revocation of wills (Art. 829), place of performance of obligation (Art. 1251, par. 3), renvoi (Aznar v. Garcia.) 44 Art. 51. 45 Aug. 3, 1988 46 Art. 1 47 Art. 2 48 Marriages Exempted from License Requirement, see Reference 49 Art. 3

10

3. Effect of absence of requisites The absence of any of the essential or formal requisites shall render the marriage void ab initio, except as stated in Article 35 (2).50 A defect in any of the essential requisites shall not affect the validity of the marriage but the party or parties responsible for the irregularity shall be civilly, criminally and administratively liable.51 4. Essential a. Age52 Any male or female of the age of eighteen years or upwards not under any of the impediments mentioned in Articles 37 and 3853, may contract marriage. 5. Ceremony No prescribed form or religious rite for the solemnization of the marriage is required. It shall be necessary, however, for the contracting parties to appear personally before the solemnizing officer and declare in the presence of not less than two witnesses of legal age that they take each other as husband and wife. This declaration shall be contained in the marriage certificate which shall be signed by the contracting parties and their witnesses and attested by the solemnizing officer.54 In case of a marriage in articulo mortis, when the party at the point of death is unable to sign the marriage certificate, it shall be sufficient for one of the witnesses to the marriage to write the name of said party, which fact shall be attested by the solemnizing officer55 6. Formal Marriage may be solemnized by:56 (1) Any incumbent member of the judiciary within the court's jurisdiction; (2) Any priest, rabbi, imam, or minister of any church or religious sect duly authorized by his church or religious sect and registered with the civil registrar general, acting within the 50

infra Art. 4 52 Art. 5 53 See Reference 54 Art. 6 55 Art. 6 56 Art. 7 51

11

limits of the written authority granted by his church or religious sect and provided that at least one of the contracting parties belongs to the solemnizing officer's church or religious sect; (3) Any ship captain or airplane chief only in the case mentioned in Article 31;57 (4) Any military commander of a unit to which a chaplain is assigned, in the absence of the latter, during a military operation, likewise only in the cases mentioned in Article 32;58 (5) Any consul-general, consul or vice-consul in the case provided in Article 10.59 7. Solemnizing authority The marriage shall be solemnized publicly in the chambers of the judge or in open court, in the church, chapel or temple, or in the office the consul-general, consul or viceconsul, as the case may be, and not elsewhere, except in cases of marriages contracted on the point of death or in remote places in accordance with Article 2960 of this Code, or where both of the parties request the solemnizing officer in writing in which case the marriage may be solemnized at a house or place designated by them in a sworn statement to that effect.61 Marriages between Filipino citizens abroad may be solemnized by a consul-general, consul or vice-consul of the Republic of the Philippines. The issuance of the marriage license and the duties of the local civil registrar and of the solemnizing officer with regard to the celebration of marriage shall be performed by said consular official.62 a. Exceptions Those solemnized by any person not legally authorized to perform marriages unless such marriages were contracted with either or both parties believing in good faith that the solemnizing officer had the legal authority to do so.63 8. License Required A valid marriage license except in the cases provided for in Chapter 2 of this Title64

57

infra ibid 59 ibid 60 See reference 61 Art. 8; for Art. 7, supra 62 Art. 10 63 Art. 35 (2) 64 Art. 3 (2) 58

12

A marriage license shall be issued by the local civil registrar of the city or municipality where either contracting party habitually resides, except in marriages where no license is required in accordance with Chapter 2 of this Title65 Where a marriage license is required, each of the contracting parties shall file separately a sworn application for such license with the proper local civil registrar which shall specify the following: (1) Full name of the contracting party; (2) Place of birth; (3) Age and date of birth; (4) Civil status; (5) If previously married, how, when and where the previous marriage was dissolved or annulled; (6) Present residence and citizenship; (7) Degree of relationship of the contracting parties; (8) Full name, residence and citizenship of the father; (9) Full name, residence and citizenship of the mother; and (10) Full name, residence and citizenship of the guardian or person having charge, in case the contracting party has neither father nor mother and is under the age of twenty-one years. The applicants, their parents or guardians shall not be required to exhibit their residence certificates in any formality in connection with the securing of the marriage license.66 The license shall be valid in any part of the Philippines for a period of one hundred twenty days from the date of issue, and shall be deemed automatically cancelled at the expiration of the said period if the contracting parties have not made use of it. The expiry date shall be stamped in bold characters on the face of every license issued.67 a. Foreign National 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 respective diplomatic or consular officials.

65

Art. 9. Art. 11 67 Art. 20 66

13

Stateless persons or refugees from other countries shall, in lieu of the certificate of legal capacity herein required, submit an affidavit stating the circumstances showing such capacity to contract marriage.68 b. Exceptions In case either or both of the contracting parties are at the point of death, the marriage may be solemnized without necessity of a marriage license and shall remain valid even if the ailing party subsequently survives.69 A marriage in articulo mortis between passengers or crew members may also be solemnized by a ship captain or by an airplane pilot not only while the ship is at sea or the plane is in flight, but also during stopovers at ports of call.70 A military commander of a unit, who is a commissioned officer, shall likewise have authority to solemnize marriages in articulo mortis between persons within the zone of military operation, whether members of the armed forces or civilians.71 No license shall be necessary for the marriage of a man and a woman who have lived together as husband and wife for at least five years and without any legal impediment to marry each other. The contracting parties shall state the foregoing facts in an affidavit before any person authorized by law to administer oaths. The solemnizing officer shall also state under oath that he ascertained the qualifications of the contracting parties are found no legal impediment to the marriage72 9. Marriage Certificate The marriage certificate, in which the parties shall declare that they take each other as husband and wife, shall also state: (1) The full name, sex and age of each contracting party; (2) Their citizenship, religion and habitual residence; (3) The date and precise time of the celebration of the marriage; (4) That the proper marriage license has been issued according to law, except in marriage provided for in Chapter 2 of this Title; (5) That either or both of the contracting parties have secured the parental consent in appropriate cases; (6) That either or both of the contracting parties have complied with the legal requirement regarding parental advice in appropriate cases; and 68

Art. 21 Art. 27 70 Art. 31 71 Art. 32 72 Art. 34 69

14

(7) That the parties have entered into marriage settlement, if any, attaching a copy thereof73 B. Effect of Marriage celebrated abroad and foreign divorce74 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 Articles 35 (1), (4), (5) and (6), 36, 37 and 3875. 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. C. Void and Voidable marriages 1. Void Marriages The judgment of annulment or of absolute nullity of the marriage, the partition and distribution of the properties of the spouses and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect third persons.76 Either of the former spouses may marry again after compliance with the requirements of the immediately preceding Article; otherwise, the subsequent marriage shall be null and void.77 a. Absence of Requisites The following marriages shall be void from the beginning: (1) Contracted by any party below eighteen years of age even with the consent of parents or guardians; (2) Solemnized by any person not legally authorized to perform marriages unless such marriages were contracted with either or both parties believing in good faith that the solemnizing officer had the legal authority to do so; (3) Solemnized without license, except those covered by the preceding Chapter;78 73

Art. 22 Art. 26 75 infra 76 Art. 52 77 Art. 53 78 Marriages exempted from License Requirement 74

15

(4) Bigamous or polygamous marriages not failing under Article 41;79 (5) Contracted through mistake of one contracting party as to the identity of the other; and (6) Subsequent marriages that are void under Article 53.80 b. Psychological incapacity A marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital obligations of marriage, shall likewise be void even if such incapacity becomes manifest only after its solemnization.81 c. Incestous marriages Marriages between the following are incestuous and void from the beginning, whether relationship between the parties be legitimate or illegitimate: (1) Between ascendants and descendants of any degree; and (2) Between brothers and sisters, whether of the full or half blood.82 policy:

The following marriages shall be void from the beginning for reasons of public

(1) Between collateral blood relatives whether legitimate or illegitimate, 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; (5) Between the surviving spouse of the adopting parent and the adopted child; (6) Between the surviving spouse of the adopted child and the adopter; (7) Between an adopted child and a legitimate child of the adopter; (8) Between adopted children of the same adopter; 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.83 2. Prescription The action or defense for the declaration of absolute nullity shall not prescribe. However, in case of marriage celebrated before the effectivity of this Code and falling 79

infra Art. 35; Art. 53, infra 81 Art. 36 82 Art. 37 83 Art. 38 80

16

under Article 36, such action or defense shall prescribe in ten years after this Code shall take effect.84 3. Subsequent marriages 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.85 A marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse present has a wellfounded belief that the absent spouse was already dead. In case of disappearance where there is danger of death under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient.86 For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse. The subsequent marriage referred to in the preceding Article shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse, unless there is a judgment annulling the previous marriage or declaring it void ab initio. A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil registry of the residence of the parties to the subsequent marriage at the instance of any interested person, with due notice to the spouses of the subsequent marriage and without prejudice to the fact of reappearance being judicially determined in case such fact is disputed.87 The termination of the subsequent marriage referred to in the preceding Article 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 84

Art. 39 Art. 40 86 Art. 41 87 Art. 42 85

17

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; (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 succession88 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.89 4. Annullable marriages In case either or both of the contracting parties, not having been emancipated by a previous marriage, are between the ages of eighteen and twenty-one, they shall, in addition to the requirements of the preceding articles, exhibit to the local civil registrar, the consent to their marriage of their father, mother, surviving parent or guardian, or persons having legal charge of them, in the order mentioned. Such 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 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.90 A marriage may be annulled for any of the following causes, existing at the time of the marriage: (1) That the party in whose behalf it is sought to have the marriage annulled was eighteen years of age or over but below twenty-one, 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 twenty-one, such party freely cohabited with the other and both lived together as husband and wife; 88

Art. 43 Art. 44 90 Art. 14 89

18

(2) That either party was of unsound mind, unless such party after coming to reason, freely cohabited with the other as husband and wife; (3) That the consent of either party was obtained by fraud, unless such party afterwards, with full knowledge of the facts constituting the fraud, freely cohabited with the other as husband and wife; (4) That the consent of either party 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) That either party was physically incapable of consummating the marriage with the other, and such incapacity continues and appears to be incurable; or (6) That either party was afflicted with a sexually-transmissible disease found to be serious and appears to be incurable.91 Any of the following circumstances shall constitute fraud referred to in Number 3 of the preceding Article: (1) Non-disclosure of a 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 sexually transmissible disease, regardless of its nature, existing at the time of the marriage; or (4) Concealment of drug addiction, habitual alcoholism or homosexuality or lesbianism existing at the time of the marriage. No other misrepresentation or deceit as to character, health, rank, fortune or chastity shall constitute such fraud as will give grounds for action for the annulment of marriage92 5. Voidable marriages93 The action for annulment of marriage must be filed by the following persons and within the periods indicated herein:

91

Art. 45 Art. 46 93 Arts. 45 & 46, see (4) Annullable marriages, supra 92

19

(1) For causes mentioned in number 1 of Article 45, by the party whose parent or guardian did not give his or her consent, within five years after attaining the age of twenty-one, 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 twenty-one; (2) For causes mentioned in number 2 of Article 45, by the same spouse, who had no knowledge of the other's insanity; or by any 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 number 3 of Articles 45, by the injured party, within five years after the discovery of the fraud; (4) For causes mentioned in number 4 of Article 45, by the injured party, within five years from the time the force, intimidation or undue influence disappeared or ceased; (5) For causes mentioned in number 5 and 6 of Article 45, by the injured party, within five years after the marriage.94 6. Presence of prosecutor 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. In the cases referred to in the preceding paragraph, no judgment shall be based upon a stipulation of facts or confession of judgment.95 7. Pendency of action During the pendency of the action and in the absence of adequate provisions 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. The Court shall give paramount consideration to the moral and material welfare of said children and their choice of the parent with whom they wish to remain as provided to in Title IX. It shall also provide for appropriate visitation rights of the other parent96

94

Art. 47 Art. 48 96 Art. 49 95

20

8. Effects of nullity The effects provided for by paragraphs (2), (3), (4) and (5) of Article 43 and by Article 4497 shall also apply in the proper cases to marriages which are declared ab initio or annulled by final judgment under Articles 40 and 45.98 The final judgment in such cases shall provide for the liquidation, partition and distribution of the properties of the spouses, the custody and support of the common children, and the delivery of third presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings. All creditors of the spouses as well as of the absolute community or the conjugal partnership shall be notified of the proceedings for liquidation. In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated in accordance with the provisions of Articles 102 and 129.99 In said partition, the value of the presumptive legitimes of all common children, computed as of the date of the final judgment of the trial court, shall be delivered in cash, property or sound securities, unless the parties, by mutual agreement judicially approved, had already provided for such matters. The children or their guardian or the trustee of their property may ask for the enforcement of the judgment. The delivery of the presumptive legitimes herein prescribed shall in no way prejudice the ultimate successional rights of the children accruing upon the death of either of 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 legitime100 The judgment of annulment or of absolute nullity of the marriage, the partition and distribution of the properties of the spouses and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect third persons.101

97

supra ibid 99 Art. 50; for Arts. 102 & 109, see Reference 100 Art. 51 101 Art. 52 98

21

Either of the former spouses may marry again after compliance with the requirements of the immediately preceding Article; otherwise, the subsequent marriage shall be null and void.102 Children conceived or born before the judgment of annulment or absolute nullity of the marriage under Article 36103 has become final and executory shall be considered legitimate. Children conceived or born of the subsequent marriage under Article 53 shall likewise be legitimate.104 III. Legal Separation A. Grounds (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 imprisonment of more than six years, even if pardoned; (5) Drug addiction or habitual alcoholism of the respondent; (6) Lesbianism or homosexuality of the respondent; (7) Contracting by the respondent of a subsequent bigamous marriage, whether in the Philippines or abroad; (8) Sexual infidelity or perversion; (9) Attempt by the respondent against the life of the petitioner; or (10) Abandonment of petitioner by respondent without justifiable cause for more than one year. 102

Art. 53 supra 104 Art. 54 103

22

For purposes of this Article, the term "child" shall include a child by nature or by adoption.105 B. Defenses (1) Where the aggrieved party has condoned the offense or act complained of; (2) Where the aggrieved party has consented to the commission of the offense or act complained of; (3) Where there is connivance between the parties in the commission of the offense or act constituting the ground for legal separation; (4) Where both parties have given ground for legal separation; (5) Where there is collusion between the parties to obtain decree of legal separation; or (6) Where the action is barred by prescription106 An action for legal separation shall be filed within five years from the time of the occurrence of the cause.107 C. Cooling-off Period An action for legal separation shall in no case be tried before six months shall have elapsed since the filing of the petition108 D. Reconciliation efforts No legal separation may be decreed unless the Court has taken steps toward the reconciliation of the spouses and is fully satisfied, despite such efforts, that reconciliation is highly improbable109 E. Confession of Judgment No decree of legal separation shall be based upon a stipulation of facts or a confession of judgment.

105

Art. 55; see also R. A. 9262, Anti-Violence Against Women and Children Art. 56 107 Art. 57 108 Art. 58 109 Art. 59 106

23

In any case, the Court shall order the prosecuting attorney or fiscal assigned to it to take steps to prevent collusion between the parties and to take care that the evidence is not fabricated or suppressed.110 F. Effects of Filing Petition After the filing of the petition for legal separation, the spouses shall be entitled to live separately from each other. The court, in the absence of a written agreement between the spouses, shall designate either of them or a third person to administer the absolute community or conjugal partnership property. The administrator appointed by the court shall have the same powers and duties as those of a guardian under the Rules of Court.111 G. Effects of pendency During the pendency of the action for legal separation, the provisions of Article 49 shall likewise apply to the support of the spouses and the custody and support of the common children.112 H. Effects of legal separation The decree of legal separation shall have the following effects: (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 Article 43(2);113 (3) The custody of the minor children shall be awarded to the innocent spouse, subject to the provisions of Article 213114 of this Code; and (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. 110

Art. 60 Art. 61 112 Art. 62 113 supra 114 See Reference 111

24

After the finality of the decree of legal separation, the innocent spouse may revoke the donations made by him or by 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. 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 donation under this Article must be brought within five years from the time the decree of legal separation become final.115 I. Reconciliation If the spouses should reconcile, a corresponding joint manifestation under oath duly signed by them shall be filed with the court in the same proceeding for legal separation.116 The reconciliation referred to in the preceding Articles shall have the following consequences: (1) The legal separation proceedings, if still pending, shall thereby be terminated at 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's order containing the foregoing shall be recorded in the proper civil registries.117 The agreement to revive the former property regime referred to in the preceding Article shall be executed under oath and shall specify: (1) The properties to be contributed anew to the restored regime; (2) Those to be retained as separated properties of each spouse; and (3) The names of all their known creditors, their addresses and the amounts owing to each.

115

Art. 64 Art. 65 117 Art. 66 116

25

The agreement of revival and the motion for its approval shall be filed with the court in the same proceeding for legal separation, with copies of both furnished to 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 properties. The recording of the ordering in the registries of property shall not prejudice any creditor not listed or not notified, unless the debtor-spouse has sufficient separate properties to satisfy the creditor's claim.118 IV. Rights and Obligations Between Husband and Wife A. Essential Obligations The husband and wife are obliged to live together, observe mutual love, respect and fidelity, and render mutual help and support.119 B. Family domicile 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 family120 C. Support The spouses are jointly responsible for the support of the family. The expenses for such support and other conjugal obligations shall be paid from the community property and, in the absence thereof, from the income or fruits of their separate properties. In case of insufficiency or absence of said income or fruits, such obligations shall be satisfied from the separate properties121

118

Art. 67 Art. 68 120 Art. 69 121 Art. 70 119

26

D. Management of household The management of the household shall be the right and the duty of both spouses. The expenses for such management shall be paid in accordance with the provisions of Article 70.122 E. Effect of neglect of duty When one of the spouses neglects his or her duties to the conjugal union or commits acts which tend to bring danger, dishonor or injury to the other or to the family, the aggrieved party may apply to the court for relief123 F. Exercise of profession 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 occurred to the family prior to the objection or thereafter. If the benefit accrued prior to the objection, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent. The foregoing provisions shall not prejudice the rights of creditors who acted in good faith.124 V. Property Relations of the Spouses A. Marriage Settlements In order that any modification in the marriage settlements may be valid, it must be made before the celebration of the marriage, subject to the provisions of Articles 66, 67,125 128, 135 and 136.126 The marriage settlements and any modification thereof shall be in writing, signed by the parties and executed before the celebration of the marriage. They shall not prejudice 122

Art. 71 Art. 72 124 Art. 73 125 supra 126 Art. 76; see Reference for Arts. 128, 135-6 123

27

third persons unless they are registered in the local civil registry where the marriage contract is recorded as well as in the proper registries of properties.127 A minor who according to law may contract marriage may also execute his or her marriage settlements, but they shall be valid only if the persons designated in Article 14128 to give consent to the marriage are made parties to the agreement, subject to the provisions of Title IX of this Code.129 For the validity of any marriage settlement 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 thereto130 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.131 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 country 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 its extrinsic validity. Everything stipulated in the settlements or contracts referred to in the preceding articles in consideration of a future 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 marriages shall be valid.132

127

Art. 77 The father, mother, surviving parent or guardian, or persons having legal charge of them, in the order mentioned. 129 Art. 78 130 Art. 79 131 Art. 80 132 Art. 81 128

28

B. Donations by Reason of Marriage 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.133 These donations are governed by the rules on ordinary donations established in Title III of Book III of the Civil Code, insofar as they are not modified by the following articles134 cases:

A donation by reason of marriage may be revoked by the donor in the following

(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 Article 81; (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 Civil Code on donations in general135 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;136 The effects provided for by paragraphs (2), (3), (4) and (5) of Article 43137 and by Article 44 shall also apply in the proper cases to marriages which are declared ab initio or annulled by final judgment under Articles 40138 and 45139. The final judgment in such cases shall provide for the liquidation, partition and distribution of the properties of the spouses, the custody and support of the common children, and the delivery of third presumptive legitimes, unless such matters had been adjudicated in previous judicial proceedings.

133

Art. 82 Art. 83 135 Art. 86 136 Art. 43 (3) 137 See (3) Subsequent marriages, supra 138 ibid 139 See (4) Annullable marriages, supra 134

29

All creditors of the spouses as well as of the absolute community or the conjugal partnership shall be notified of the proceedings for liquidation. In the partition, the conjugal dwelling and the lot on which it is situated, shall be adjudicated in accordance with the provisions of Articles 102 and 129.140 C. Void donations by the spouses 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.141 D. Absolute Community of property 1. General Provisions The future spouses may, in the marriage settlements, agree upon the regime of absolute community, conjugal partnership of gains, complete separation of property, or any other regime. In the absence of a marriage settlement, or when the regime agreed upon is void, the system of absolute community of property as established in this Code shall govern142 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 onefifth of their present property. Any excess shall be considered void.143 Donations of future property shall be governed by the provisions on testamentary succession and the formalities of wills. 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.144

140

Art. 50; see Reference for Arts. 102 & 129 Art. 87 142 Art. 75 143 Art. 84 144 Art. 85 141

30

The absolute community of property between spouses shall commence at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the community regime at any other time shall be void.145 No waiver of rights, shares and effects of the absolute community of property during the marriage can be made except in case of judicial separation of property.146 When the waiver takes place upon a judicial separation of property, or after the marriage has been dissolved or annulled, the same shall appear in a public instrument and shall be recorded as provided in Article 77147. 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. The provisions on co-ownership shall apply to the absolute community of property between the spouses in all matters not provided for in this Chapter.148 2. What constitutes Community Property Unless otherwise provided in this Chapter or in the marriage settlements, the community property shall consist of all the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter.149 The following shall be excluded from the community property: (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; (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.150 Property acquired during the marriage is presumed to belong to the community, unless it is proved that it is one of those excluded therefrom.151

145

Art. 88 Art. 89 147 See Reference 148 Art. 90 149 Art. 91 150 Art. 92 151 Art. 93 146

31

3. Charges Upon and Obligations of the Community Property 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 this Code on Support; (2) All debts and obligations contracted during the 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) Antenuptial debts of either spouse insofar as they have redounded to the benefit of the family; (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) Antenuptial debts of either spouse other than those falling under paragraph (7) of this Article, the support of illegitimate children of either 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.

32

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.152 Whatever may be lost during the marriage in any game of chance, betting, sweepstakes, or any other kind of gambling, whether permitted or prohibited by law, shall be borne by the loser and shall not be charged to the community but any winnings therefrom shall form part of the community property.153 4. Ownership, Administration, Enjoyment and Disposition of the Community Property The administration and enjoyment of the community property shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. 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 disposition or encumbrance without 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.154 Either spouse may dispose by will of his or her interest in the community property.155 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.156

152

Art. 94 Art. 95 154 Art. 96 155 Art. 97 156 Art. 98 153

33

5. Dissolution of Community Regime 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 (4) In case of judicial separation of property during the marriage under Article 134 to 138.157 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 separate property of the other spouse and use the fruits or proceeds thereof to satisfy the latter's share.158 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 for receivership, for judicial separation of property or 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. A spouse is deemed to have abandoned the other when her or she has left the conjugal dwelling without intention of returning. The spouse who has left the conjugal dwelling for a period of three 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.159

157

Art. 99; see Reference for Arts. 134-138 Art. 100 159 Art. 101 158

34

6. Liquidation of the Absolute Community Assets and Liabilities Upon dissolution of the absolute community regime, the following procedure 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 Article 94.160 (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 provided in this Code. For purpose of computing the net profits subject to forfeiture in accordance with Articles 43, No. (2) and 63, No. (2),161 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 Article 51.162 (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 seven years are deemed to have chosen the mother, unless the court has decided otherwise. In case there in no such majority, the court shall decide, taking into consideration the best interests of said children.163 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.

160

supra ibid 162 ibid 163 Art. 102 161

35

If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the community property either judicially or extra-judicially within six months from the death of the deceased spouse. If upon the lapse of the six months period, no liquidation is made, any disposition or encumbrance involving the community property of the terminated marriage shall be void. Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage.164 Whenever the liquidation of the community properties of two or more marriages contracted by the same person before the effectivity of this Code is carried out simultaneously, the respective capital, fruits and income of each community shall be determined upon such proof as may be considered according to the rules of evidence. In case of doubt as to which community the existing properties belong, the same shall be divided between the different communities in proportion to the capital and duration of each.165 E. Conjugal Partnership of Gains 1. General Provision In case the future spouses agree in the marriage settlements that the regime of conjugal partnership gains shall govern their property relations during marriage, the provisions in this Chapter shall be of supplementary application. The provisions of this Chapter shall also apply to conjugal partnerships of gains already established between spouses before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with the Civil Code or other laws, as provided in Article 256.166 Under the regime of 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 otherwise agreed in the marriage settlements.167

164

Art. 103 Art. 104 166 Art. 105; see Reference for Art. 256 167 Art. 106 165

36

The rules provided in Articles 88 and 89168 shall also apply to conjugal partnership of gains.169 The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.170 2. Exclusive Property of Each Spouse The following shall be the exclusive property of each spouse: (1) That which is brought to the marriage as his or her own; (2) That which each acquires during the marriage by gratuitous title; (3) That which is acquired by right of redemption, by barter or by exchange with property belonging to only one of the spouses; and (4) That which is purchased with exclusive money of the wife or of the husband171 The spouses retain the ownership, possession, administration and enjoyment of their exclusive properties. 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 the property is located.172 A spouse of age may mortgage, encumber, alienate or otherwise dispose of his or her exclusive property, without the consent of the other spouse, and appear alone in court to litigate with regard to the same.173 The alienation of any exclusive property of a spouse administered by the other automatically terminates the administration over such property and the proceeds of the alienation shall be turned over to the owner-spouse.174

168

supra Art. 107 170 Art. 108 171 Art. 109 172 Art. 110 173 Art. 111 174 Art. 112 169

37

Property donated or left by will to the spouses, jointly and with designation of determinate shares, shall pertain to the donee-spouses as his or her own exclusive property, and in the absence of designation, share and share alike, without prejudice to the right of accretion when proper.175 If the donations are onerous, the amount of the charges shall be borne by the exclusive property of the donee spouse, whenever they have been advanced by the conjugal partnership of gains.176 Retirement benefits, pensions, annuities, gratuities, usufructs and similar benefits shall be governed by the rules on gratuitous or onerous acquisitions as may be proper in each case.177 3. Conjugal Partnership Property 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.178 The following are conjugal partnership properties: (1) 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; (2) Those obtained from the labor, industry, work or profession of either or both of the spouses; (3) The fruits, natural, industrial, or civil, due or received during the marriage from the common property, as well as the net fruits from the exclusive property of each spouse; (4) The share of either spouse in the hidden treasure which the law awards to the finder or owner of the property where the treasure is found; (5) Those acquired through occupation such as fishing or hunting; (6) Livestock existing upon the dissolution of the partnership in excess of the number of each kind brought to the marriage by either spouse; and

175

Art. 113 Art. 114 177 Art. 115 178 Art. 116 176

38

(7) Those which are acquired by chance, such as winnings from gambling or betting. However, losses therefrom shall be borne exclusively by the loser-spouse.179 Property bought on installments paid partly from exclusive funds of either or both spouses and partly from conjugal funds 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. In either case, any amount advanced by the partnership or by either or both spouses shall be reimbursed by the owner or owners upon liquidation of the partnership.180 Whenever an amount or credit payable within a period of time belongs to one of the spouses, the sums which may be collected during the marriage in partial payments or by installments on the principal shall be the exclusive property of the spouse. However, interests falling due during the marriage on the principal shall belong to the conjugal partnership.181 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 rules: 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; otherwise, said property shall be retained in ownership by the owner-spouse, likewise subject to reimbursement of the cost of the improvement. In either case, the ownership of the entire property shall be vested upon the reimbursement, which shall be made at the time of the liquidation of the conjugal partnership. 4. Charges upon and obligations of the CPG The conjugal partnership shall be liable for: (1) The support of the spouse, their common children, and the legitimate children of either spouse; however, the support of illegitimate children shall be governed by the provisions of this Code on Support;

179

Art. 117 Art. 118 181 Art. 119 180

39

(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; (3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have benefited; (4) All taxes, liens, charges, and expenses, including major or minor repairs upon the conjugal partnership property; (5) All taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse; (6) Expenses to enable either spouse to commence or complete a professional, vocational, or other activity for self-improvement; (7) Antenuptial debts of either spouse insofar as they have redounded to the benefit of the family; (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; and (9) Expenses of litigation between the spouses unless the suit is found to groundless. If the conjugal partnership is insufficient to cover the foregoing liabilities, the spouses shall be solidarily liable for the unpaid balance with their separate properties.182 The payment of personal debts contracted by the husband or the wife before or during the marriage shall not be charged to the conjugal properties partnership except insofar as they redounded to the benefit of the family. Neither shall the fines and pecuniary indemnities imposed upon them be charged to the partnership. However, 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 of illegitimate children of either spouse, may be enforced against the partnership assets after the responsibilities enumerated in the preceding Article have been covered, if the spouse who is bound should have no exclusive property or if it should be insufficient; but at the

182

Art. 121

40

time of the liquidation of the partnership, such spouse shall be charged for what has been paid for the purpose above-mentioned.183 Whatever may be lost during the marriage in any game of chance or in betting, sweepstakes, or any other kind of gambling whether 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.184 5. Administration of the CPG The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. 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 disposition or encumbrance without 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.185 Neither spouse may donate any conjugal partnership property without the consent of the other. However, 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.186 6. Dissolution of CPG Regime The conjugal partnership 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 Articles 134 to 138.187 183

Art. 122 Art. 123 185 Art. 124 186 Art. 125 187 Art. 126 184

41

The separation in fact between husband and wife shall not affect the regime of conjugal partnership, 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 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 proceeding, be given judicial authority to administer or encumber any specific separate property of the other spouse and use the fruits or proceeds thereof to satisfy the latter's share.188 If a spouse without just cause abandons the other or fails to comply with his or her obligation to the family, the aggrieved spouse may petition the court for receivership, for judicial separation of property, or for authority to be the sole administrator of the conjugal partnership property, 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. A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without intention of returning. The spouse who has left the conjugal dwelling for a period of three 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.189 7. Liquidation of the Conjugal Partnership Assets and Liabilities Upon the dissolution of the conjugal partnership regime, the following procedure shall apply: (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. 188 189

Art. 127 Art. 128

42

(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 paragraph (2) of Article 121.190 (5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them. (6) Unless the owner had 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 this Code. (8) The presumptive legitimes of the common children shall be delivered upon the partition in accordance with Article 51.191 (9) In the partition of the properties, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreed upon 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 said children.192 Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in the same proceeding for the 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 extra-judicially within six months from the death of the deceased spouse. If upon the lapse of the six-month period no liquidation is made, any disposition or encumbrance involving the conjugal partnership property of the terminated marriage shall be void.

190

supra ibid 192 Art. 129 191

43

Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage.193 Whenever the liquidation of the conjugal partnership properties of two or more marriages contracted by the same person before the effectivity of this Code is carried out simultaneously, the respective capital, fruits and income of each partnership shall be determined upon such proof as may be considered according to the rules of evidence. In case of doubt as to which partnership the existing properties belong, the same shall be divided between the different partnerships in proportion to the capital and duration of each.194 The Rules of Court on the administration of estates of deceased persons shall be observed in the appraisal and sale of property of the conjugal partnership, and other matters which are not expressly determined in this Chapter.195 From the common mass of property support shall be given to the surviving spouse and to the children during the liquidation of the inventoried property and until what belongs to them is delivered; but from this shall be deducted that amount received for support which exceeds the fruits or rents pertaining to them.196 F. Separation of Property of the Spouses and Administration of Common Property by One Spouse During the Marriage In the absence of an express declaration in the marriage settlements, the separation of property between spouses during the marriage shall not take place except by judicial order. Such judicial separation of property may either be voluntary or for sufficient cause.197 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;

193

Art. 130. Art. 131 195 Art. 132 196 Art. 133 197 Art. 134 194

44

(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 Article 101;198 (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 the cases provided for in Numbers (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.199 The spouses may jointly file a verified petition with the court for the voluntary dissolution of the absolute community or the conjugal partnership of gains, and for the separation of their common properties. All creditors of the absolute community or of the conjugal partnership of gains, as well as the personal creditors of the spouse, shall be listed in the petition and notified of the filing thereof. The court shall take measures to protect the creditors and other persons with pecuniary interest.200 Once the separation of property has been decreed, the absolute community or the conjugal partnership of gains shall be liquidated in conformity with this Code. During the pendency 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.201 After dissolution of the absolute community or of the conjugal partnership, the provisions on complete separation of property shall apply.202 The petition for separation of property and the final judgment granting the same shall be recorded in the proper local civil registries and registries of property.203 198

supra Art. 135 200 Art. 136 201 Art. 137 202 Art. 138 203 Art. 139 199

45

The separation of property shall not prejudice the rights previously acquired by creditors.204 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 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 spouses who have separated in fact for at least one year, reconcile and resume common life; or (7) When after voluntary dissolution of the absolute community 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 Article 67.205 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.206 204 205

Art. 140 Art. 141.

46

G. Regime of Separation of Property Should the future spouses agree in the marriage settlements that their property relations during marriage shall be governed by the regime of separation of property, the provisions of this Chapter shall be suppletory.207 Separation of property may refer to present or future property or both. It may be total or partial. In the latter case, the property not agreed upon as separate shall pertain to the absolute community.208 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.209 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. The liabilities of the spouses to creditors for family expenses shall, however, be solidary.210 H. Property Regime of Unions Without Marriage When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on co-ownership. In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the former's efforts consisted in the care and maintenance of the family and of the household.

206

Art. 142. Art. 143 208 Art. 144 209 Art. 145 210 Art. 146 207

47

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 respective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation.211 In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money and evidences of credit. If one of the parties is validly married to another, his or her share in the coownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly married to another, his or her shall be forfeited in the manner provided in the last paragraph of the preceding Article. The foregoing rules on forfeiture shall likewise apply even if both parties are in both faith.212 VI. The Family A. The Family as an Institution The family, being the foundation of the nation, is a basic social institution which public policy cherishes and protects. Consequently, family relations are governed by law and no custom, practice or agreement destructive of the family shall be recognized or given effect.213 Family relations include those: (1) Between husband and wife; (2) Between parents and children;

211

Art. 147 Art. 148 213 Art. 149. 212

48

(3) Among brothers and sisters, whether of the full or half-blood.214 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 is shown that no such efforts were in fact made, the same case must be dismissed. This rules shall not apply to cases which may not be the subject of compromise under the Civil Code.215 B. The Family Home 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.216 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 resides therein, the family home continues to be such and is exempt from execution, forced sale or attachment except as hereinafter provided and to the extent of the value allowed by law.217 The beneficiaries of a family home are: (1) The husband and wife, or an unmarried person who is the head of a family; and (2) Their parents, ascendants, descendants, brothers and sisters, 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.218

214

Art. 150 Art. 151 No compromise upon the following questions shall be valid: (1) The civil status of persons; (2) The validity of a marriage or a legal separation; (3) Any ground for legal separation; (4) Future support; (5) The jurisdiction of courts; (6) Future legitime (Art. 2035) 216 Art. 152 217 Art. 153 218 Art. 154. 215

49

The family home shall be exempt from execution, forced sale or attachment except: (1) For nonpayment of taxes; (2) For debts incurred prior to the constitution of the family home; (3) For debts secured by mortgages on the premises before or after such constitution; and (4) For debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building.219 The family home must be part of the properties of the absolute community or the conjugal partnership, or of the exclusive properties of either spouse with the 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 the subject of a conditional sale on installments where ownership is reserved by the vendor only to guarantee payment of the purchase price may be constituted as a family home.220 The actual value of the family home shall not exceed, at the time of its constitution, the amount of the three hundred thousand pesos in urban areas, and two hundred thousand pesos in rural areas, or such amounts as may hereafter be fixed by law. In any event, if the value of the currency changes after the adoption of this Code, the value most favorable for the constitution of a family home shall be the basis of evaluation. For purposes of this Article, urban areas are deemed to include chartered cities and municipalities whose annual income at least equals that legally required for chartered cities. All others are deemed to be rural areas.221 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.222 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

219

Art. 155 Art. 156 221 Art. 157 222 Art. 158 220

50

reasons therefor. This rule shall apply regardless of whoever owns the property or constituted the family home.223 When a creditor whose claims is not among those mentioned in Article 155 224 obtains a judgment in his favor, and he has reasonable grounds to believe that the family home is actually worth more than the maximum amount fixed in Article 157225, he may apply to the court which rendered the judgment for an order directing the sale of the property under execution. The court shall so order if it finds that the actual value of the family home exceeds the maximum amount allowed by law as of the time of its constitution. If the increased actual value exceeds the maximum allowed in Article 157 and results from subsequent voluntary improvements introduced by the person or persons constituting the family home, by the owner or owners of the property, or by any of the beneficiaries, the same rule and procedure shall apply. 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 Article 157, and then to the liabilities under the judgment and the costs. The excess, if any, shall be delivered to the judgment debtor.226 For purposes of availing of the benefits of a family home as provided for in this Chapter, a person may constitute, or be the beneficiary of, only one family home.227 The provisions in this Chapter shall also govern existing family residences insofar as said provisions are applicable.228 VII. Paternity and Filiation A. Legitimate Children The filiation of children may be by nature or by adoption. Natural filiation may be legitimate or illegitimate.229 Children conceived or born during the marriage of the parents are legitimate. Children conceived as a result of artificial insemination of the wife with the sperm of the husband or that of a donor or both are likewise legitimate children of the husband 223

Art. 159 supra 225 ibid 226 Art. 160 227 Art. 161 228 Art. 162 229 Art. 163 224

51

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.230 Children conceived and born outside a valid marriage are illegitimate, unless otherwise provided in this Code.231 Legitimacy of a child may be impugned only on the following grounds: (1) That it was physically impossible for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days which immediately preceded the birth of the child because of: (a) the physical incapacity of the husband to have sexual intercourse with his wife; (b) the fact that the husband and wife were living separately in such a way that sexual intercourse was not possible; or (c) serious illness of the husband, which absolutely prevented sexual intercourse; (2) That it is proved that for biological or other scientific reasons, the child could not have been that of the husband, except in the instance provided in the second paragraph of Article 164;232 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.233 The child shall be considered legitimate although the mother may have declared against its legitimacy or may have been sentenced as an adulteress.234 If the marriage is terminated and the mother contracted another marriage within three hundred 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 one hundred eighty days after the solemnization of the subsequent marriage is considered to have been conceived during the former marriage, provided it be

230

Art. 164 Art. 165 232 supra 233 Art. 166 234 Art. 167 231

52

born within three hundred days after the termination of the former marriage; (2) A child born after one hundred eighty days following the celebration of the subsequent marriage is considered to have been conceived during such marriage, even though it be born within the three hundred days after the termination of the former marriage.235 The legitimacy or illegitimacy of a child born after three hundred days following the termination of the marriage shall be proved by whoever alleges such legitimacy or illegitimacy.236 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 the 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 or where it was recorded, the period shall be two years if they should reside in the Philippines; and three 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 of registration of said birth, whichever is earlier.237 The heirs of the husband may impugn the filiation of the child within the period prescribed in the preceding article only in the following cases: (1) If the husband should died 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.238 B. Proof of Filiation The filiation of legitimate children is established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or (2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned.

235

Art. 168 Art. 169. 237 Art. 170 238 Art. 171. 236

53

In the absence of the foregoing evidence, the legitimate filiation shall be proved by: (1) The open and continuous possession of the status of a legitimate child; or (2) Any other means allowed by the Rules of Court and special laws.239 The action to claim legitimacy may be brought by the child during his or her lifetime 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 five years within which to institute the action.240 Legitimate children shall have the right: (1) To bear the surnames of the father and the mother, in conformity with the provisions of the Civil Code 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 legitimate and other successional rights granted to them by the Civil Code.241 C. Illegitimate Children Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children. The action must be brought within the same period specified in Article 173, except when the action is based on the second paragraph of Article 172, in which case the action may be brought during the lifetime of the alleged parent.242 Illegitimate children shall use the surname and shall be under the parental authority of their mother, and shall be entitled to support in conformity with this Code. However, illegitimate children may use the surname of their father if their filiation has been expressly recognized by the father through the record of birth appearing in the civil register, or when an admission in a public document or private handwritten instrument is made by the father. Provided, the father has the right to institute an action before the regular courts to prove non-filiation during his lifetime. The legitime of each illegitimate child shall consist of one-half of the legitime of a legitimate child.243

239

Art. 172 Art. 173 241 Art. 174 242 Art. 175 243 Art. 176, as amended by R.A. 9255 240

54

D. Legitimated Children Only children conceived and born outside of wedlock of parents who, at the time of the conception of the former, were not disqualified by any impediment to marry each other may be legitimated.244 Legitimation shall take place by a subsequent valid marriage between parents. The annulment of a voidable marriage shall not affect the legitimation.245 Legitimated children shall enjoy the same rights as legitimate children.246 The effects of legitimation shall retroact to the time of the child's birth.247 The legitimation of children who died before the celebration of the marriage shall benefit their descendants.248 Legitimation may be impugned only by those who are prejudiced in their rights, within five years from the time their cause of action accrues.249 VIII. Adoption A. Domestic Adoption Law250 1. Who can 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 sixteen (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 sixteen (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; b) Any alien possessing the same qualifications as above stated for Filipino nationals: Provided, That his/her country has diplomatic relations with the Republic of the Philippines, that he/she has been living in the Philippines for at least three (3) continuous 244

Art. 177 Art. 178 246 Art. 179 247 Art. 180 248 Art. 181 249 Art. 182 250 RA 8552 245

55

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 government 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 former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or (ii) one who seeks to adopt the legitimate son/daughter of his/her Filipino spouse; or (iii) one who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a relative within the fourth (4th) degree of consanguinity or affinity of the Filipino spouse; or (c) The guardian with respect to the ward after the termination of the guardianship and clearance of 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 of 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 other. In case husband and wife jointly adopt, or one spouse adopts the illegitimate son/daughter of the other, joint parental authority shall be exercised by the spouses.251 2. Who can be adopted (a) Any person below eighteen (18) years of age who has been administratively or judicially declared available for adoption; (b) The legitimate son/daughter of one spouse by the other spouse;

251

Sec. 7

56

(c) An illegitimate son/daughter by a qualified adopter to improve his/her status to that of legitimacy; (d) A person of legal age if, prior to the adoption, said person has been consistently considered and treated by the adopter(s) as his/her 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 six (6) months from the time of death of said parent(s). 3. Rights of an adopted child 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).252 The adoptee shall be considered the legitimate son/daughter of the adopter(s) for all intents and purposes and as such is entitled to all the rights and obligations provided by law to legitimate sons/daughters born 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.253 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. Adoption shall have the following effects: (1) For civil purposes, the adopted shall be deemed to be a legitimate child of the adopters and both shall acquire the reciprocal rights and obligations arising from the relationship of parent and child, including the right of the adopted to use the surname of the adopters; (2) The parental authority of the parents by nature over the adopted shall terminate and be vested in the adopters, except that if the adopter is the spouse of the parent by nature of the adopted, parental authority over the adopted shall be exercised jointly by both spouses; and

252 253

Sec. 16 Sec. 17

57

(3) The adopted shall remain an intestate heir of his parents and other blood relatives.254 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 adopter, they shall divide the entire estate, one-half 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 shares, one-half 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, one-third to be inherited by the illegitimate children, one-third by the surviving spouse, and one-third 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.255 4. Rescission of adoption Upon petition of the adoptee, with the assistance of the Department if a minor or if over eighteen (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 on the life of the adoptee; (c) sexual assault or violence; or (d) abandonment and failure to comply with parental obligations. 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 Article 919256 of the Civil Code.257 254 255

Art. 189, FC Art. 190, ibid.

58

If the petition is granted, the parental authority of the adoptee's biological parent(s), if known, or the legal custody of the Department 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.258 C. The Law on Inter- Country Adoption259 1. Who can Adopt An alien or a Filipino citizen permanently residing abroad may file an application for inter-country adoption of a Filipino child if he/she: (a) is at least twenty-seven (27) years of age and at least sixteen (16) years older than the child to be adopted, at the time of application unless the adopter is the parent by nature of the child to be adopted or the spouse of such parent: (b) if married, his/her spouse must jointly file for the adoption; (c) has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and has undergone the appropriate counseling from an accredited counselor in his/her country; (d) has not been convicted of a crime involving moral turpitude; (e) is eligible to adopt under his/her national law; (f) is in a position to provide the proper care and support and to give the necessary moral values and example to all his children, including the child to be adopted;

256

See Reference Sec. 19, R.A. 8552 258 Sec. 20, ibid. 259 RA 8043 257

59

(g) agrees to uphold the basic rights of the child as embodied under Philippine laws, the U.N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement the provisions of this Act; (h) comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption is allowed under his/her national laws; and (i) possesses all the qualifications and none of the disqualifications provided herein and in other applicable Philippine laws.260 2. Who can be adopted Only a legally free child may be the subject of inter-country adoption. In order that such child may be considered for placement, the following documents must be submitted to the Board: (a) Child study; (b) Birth certificate/foundling certificate; (c) Deed of voluntary commitment/decree of abandonment/death certificate of parents; (d) Medical evaluation /history; (e) Psychological evaluation, as necessary; and (f) Recent photo of the child.261 IX. Support A. What it Compromises Support compromises 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 and from school, or to and from place of work.262

260

Sec. 9 Sec. 8 262 Art. 194 261

60

B. Who are Obliged Subject to the provisions of the succeeding articles, the following are obliged to support each other to the whole extent set forth in the preceding article: (1) The spouses; (2) Legitimate ascendants and descendants; (3) Parents and their legitimate children and the legitimate and illegitimate children of the latter; (4) Parents and their illegitimate children and the legitimate and illegitimate children of the latter; and (5) Legitimate brothers and sisters, whether of full or half-blood263 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 Article 194264, 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.265 In case 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 the 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 the conjugal partnership.266 Whenever two or more persons are obliged to give support, the liability shall devolve upon the following persons in the order herein provided: (1) The spouse; (2) The descendants in the nearest degree; (3) The ascendants in the nearest degree; and (4) The brothers and sisters.267 When the obligation to give support falls upon two 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. 263

Art. 195 supra 265 Art. 196 266 Art. 197 267 Art. 199 264

61

When two 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, the order established in the preceding article 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.268 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 intention of being reimbursed.269 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 right of reimbursement from the person obliged to give support. This Article shall particularly apply 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.270 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. Furthermore, contractual support shall be subject to adjustment whenever modification is necessary due to changes of circumstances manifestly beyond the contemplation of the parties.271 C. Support during marriage litigation 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 the 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.272

268

Art. 200 Art. 206 270 Art. 207 271 Art. 208 272 Art. 198 269

62

D. Amount The amount of support, in the cases referred to in Articles 195 and 196273, shall be in proportion to the resources or means of the giver and to the necessities of the recipient.274 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.275 E. When Demandable 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 extrajudicial demand. Support pendente lite may be claimed in accordance with the Rules of Court. Payment shall be made within the first five days of each corresponding month or when the recipient dies, his heirs shall not be obliged to return what he has received in advance.276 F. Options 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 a moral or legal obstacle thereto.277 G. Attachment The right to receive support under this Title as well as any money or property obtained as such support shall not be levied upon on attachment or execution.278

273

supra Art. 201. 275 Art. 202 276 Art. 203 277 Art. 204 278 Art. 205 274

63

X. Parental Authority A. General Provisions 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 them for civic consciousness and efficiency and the development of their moral, mental and physical character and well-being.279 Parental authority and responsibility may not be renounced or transferred except in the cases authorized by law.280 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. Children shall always observe respect and reverence towards their parents and are obliged to obey them as long as the children are under parental authority.281 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.282 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 years of age, unless the parent chosen is unfit.283 In case of death, absence or unsuitability of the parents, substitute parental authority shall be exercised by the surviving grandparent. In case several survive, the one designated by the court, taking into account the same consideration mentioned in the preceding article, shall exercise the authority.284

279

Art. 209 Art. 210 281 Art. 211 282 Art. 212 283 Art. 213. 284 Art. 214 280

64

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.285 B. Substitute and Special Parental Authority In default of parents or a judicially appointed guardian, the following person shall exercise substitute parental authority over the child in the order indicated: (1) The surviving grandparent, as provided in Art. 214;286 (2) The oldest brother or sister, over twenty-one years of age, unless unfit or disqualified; and (3) The child's actual custodian, over twenty-one years of age, unless unfit or disqualified. Whenever the appointment or a judicial guardian over the property of the child becomes necessary, the same order of preference shall be observed.287 In case of foundlings, abandoned neglected or abused children and other children similarly situated, parental authority shall be entrusted in summary judicial proceedings to heads of children's homes, orphanages and similar institutions duly accredited by the proper government agency.288 The school, its administrators and teachers, or the individual, entity or institution engaged in child are shall have special parental authority and responsibility over the minor child while under their supervision, instruction or custody. Authority and responsibility shall apply to all authorized activities whether inside or outside the premises of the school, entity or institution.289 Those given the authority and responsibility under the preceding Article shall be principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor. The parents, judicial guardians or the persons exercising substitute parental authority over said minor shall be subsidiarily liable. 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. 285

Art. 215 supra 287 Art. 216 288 Art. 217 289 Art. 218 286

65

All other cases not covered by this and the preceding articles shall be governed by the provisions of the Civil Code on quasi-delicts.290 C. Effect of Parental Authority upon the Persons of the Children The parents and those exercising parental authority shall have with the respect to their unemancipated children on wards 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 in them compliance with the duties of citizenship; (4) 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; (5) To represent them in all matters affecting their interests; (6) To demand from them respect and obedience; (7) To impose discipline on them as may be required under the circumstances; and (8) To perform such other duties as are imposed by law upon parents and guardians.291 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.292

290

Art. 219 Art. 220 292 Art. 221 291

66

The courts may appoint a guardian of the child's property or a guardian ad litem when the best interests of the child so requires.293 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 as it may deem just and proper.294 The measures referred to in the preceding article 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 homes duly accredited by the proper government agency. 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.295 D. Effects of Parental Authority upon the Property of the Children The father and the mother shall jointly exercise legal guardianship over the property of the 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. 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 ten per centum (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.

293

Art. 222 Art. 223 295 Art. 224 294

67

The petition shall be docketed as a summary special proceeding in which all incidents and issues regarding the performance of the obligations referred to in the second paragraph of this Article 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.296 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.297 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 give in whole or in part shall not be charged to the child's legitime.298 E. Suspension or Termination of Parental Authority Parental authority terminates permanently: (1) Upon the death of the parents; (2) Upon the death of the child; or (3) Upon emancipation of the child.299 Unless subsequently revived by a final judgment, parental authority also terminates: (1) Upon adoption of the child; (2) Upon appointment of a general guardian; (3) Upon judicial declaration of abandonment of the child in a case filed for the purpose;

296

Art. 225 Art. 226 298 Art. 227 299 Art. 228 297

68

(4) Upon final judgment of a competent court divesting the party concerned of parental authority; or (5) Upon judicial declaration of absence or incapacity of the person exercising parental authority.300 Parental authority is suspended upon conviction of the parent or the person exercising the same of a crime which carries 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.301 The court in an action filed for the purpose in a related case may also suspend parental authority if the parent or the person exercising the same: (1) Treats the child with excessive harshness or cruelty; (2) Gives the child corrupting orders, counsel or example; (3) Compels the child to beg; or (4) 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. lawphi1.net 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 the 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 that the cause therefor has ceased and will not be repeated.302 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.303 The person exercising substitute parental authority shall have the same authority over the person of the child as the parents. In no case shall the school administrator, teacher of individual engaged in child care exercising special parental authority inflict corporal punishment upon the child.304 300

Art. 229 Art. 230 302 Art. 231 303 Art. 232 301

69

XI. Emancipation Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of twenty-one years. Emancipation also takes place: (1) By the marriage of the minor; or (2) 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 eighteen years of age. Such emancipation shall be irrevocable.305 Emancipation for any cause shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life.306 XII. Summary Judicial Proceedings in the Family Law Until modified by the Supreme Court, the procedural rules provided for in this Title shall apply as regards separation in fact between husband and wife, abandonment by one of the other, and incidents involving parental authority.307 When a husband and wife are separated in fact, or one has abandoned the other and one of them seeks judicial authorization for a transaction where the consent of the other spouse is required by law but such consent is withheld or cannot be obtained, a verified petition may be filed in court alleging the foregoing facts. The petition shall attach the proposed deed, if any, embodying the transaction, and, if none, shall describe in detail the said transaction and state the reason why the required consent thereto cannot be secured. In any case, the final deed duly executed by the parties shall be submitted to and approved by the court.308 Claims for damages by either spouse, except costs of the proceedings, may be litigated only in a separate action.309 Jurisdiction over the petition shall, upon proof of notice to the other spouse, be exercised by the proper court authorized to hear family cases, if one exists, or in the 304

Art. 233 Art. 234, as amended by RA 6809 306 Art. 236 307 Art. 238 308 Art. 239 309 Art. 240 305

70

regional trial court or its equivalent sitting in the place where either of the spouses resides.310 Upon the filing of the petition, the court shall notify the other spouse, whose consent to the transaction is required, of said petition, ordering said spouse to show cause why the petition should not be granted, on or before the date set in said notice for the initial conference. The notice shall be accompanied by a copy of the petition and shall be served at the last known address of the spouse concerned.311 A preliminary conference shall be conducted by the judge personally without the parties being assisted by counsel. After the initial conference, if the court deems it useful, the parties may be assisted by counsel at the succeeding conferences and hearings.312 In case of non-appearance of the spouse whose consent is sought, the court shall inquire into the reasons for his failure to appear, and shall require such appearance, if possible.313 If, despite all efforts, the attendance of the non-consenting spouse is not secured, the court may proceed ex parte and render judgment as the facts and circumstances may warrant. In any case, the judge shall endeavor to protect the interests of the non-appearing spouse.314 If the petition is not resolved at the initial conference, said petition shall be decided in a summary hearing on the basis of affidavits, documentary evidence or oral testimonies at the sound discretion of the court. If testimony is needed, the court shall specify the witnesses to be heard and the subject-matter of their testimonies, directing the parties to present said witnesses.315 The judgment of the court shall be immediately final and executor.316 The petition for judicial authority to administer or encumber specific separate property of the abandoning spouse and to use the fruits or proceeds thereof for the support of the family shall also be governed by these rules.317

310

Art. 241 Art. 242 312 Art. 243. 313 Art. 244 314 Art. 245 315 Art. 246 316 Art. 247 317 Art. 248 311

71

Petitions filed under Articles 223, 225 and 235318 of this Code involving parental authority shall be verified.319 Such petitions shall be verified and filed in the proper court of the place where the child resides.320 Upon the filing of the petition, the court shall notify the parents or, in their absence or incapacity, the individuals, entities or institutions exercising parental authority over the child.321 The rules in Chapter 2 hereof shall also govern summary proceedings under this Chapter insofar as they are applicable.322 XIII. Final Provisions This Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or other laws.323 XIV. Funeral The duty and the right to make arrangements for the funeral of a relative shall be in accordance with the order established for support, under article 294.324 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.325 Every funeral shall be in keeping with the social position of the deceased.326 The funeral shall be in accordance with the expressed wishes of the deceased. In the absence of such expression, his religious beliefs or affiliation shall determine the funeral rites. In case of doubt, the form of the funeral shall be decided upon by the person obliged to make arrangements for the same, after consulting the other members of the family.327

318

supra Art. 249 320 Art. 250 321 Art. 251 322 Art. 252 323 Art. 255 324 See Reference 325 Art. 305 326 Art. 306 327 Art. 307 319

72

No human remains shall be retained, interred, disposed of or exhumed without the consent of the persons mentioned in articles 294 and 305.328 Any person who shows disrespect to the dead, or wrongfully interferes with a funeral shall be liable to the family of the deceased for damages, material and moral.329 The construction of a tombstone or mausoleum shall be deemed a part of the funeral expenses, and shall be chargeable to the conjugal partnership property, if the deceased is one of the spouses.330 XV. Use of surnames331 Legitimate and legitimated children shall principally use the surname of the father.332 An adopted child shall bear the surname of the adopter.333 A natural child acknowledged by both parents shall principally use the surname of the father. If recognized by only one of the parents, a natural child shall employ the surname of the recognizing parent.334 Natural children by legal fiction shall principally employ the surname of the

335

father.

Illegitimate children referred to in article 287 shall bear the surname of the mother.336 Children conceived before the decree annulling a voidable marriage shall principally use the surname of the father.337 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 328

Art. 308; Art. 305, supra Art. 309 330 Art. 310 331 other articles repealed by Family Code 332 Art. 364 333 Art. 365 334 Art. 366 335 Art. 367 336 Art. 368 337 Art. 369 329

73

(3) Her husband's full name, but prefixing a word indicating that she is his wife, such as "Mrs."338 In case of annulment of marriage, and the wife is the guilty party, she shall resume her maiden name and surname. If she is the innocent spouse, she may resume her maiden name and surname. However, she may choose to continue employing her former husband's surname, unless: (1) The court decrees otherwise, or (2) She or the former husband is married again to another person.339 When legal separation has been granted, the wife shall continue using her name and surname employed before the legal separation.340 A widow may use the deceased husband's surname as though he were still living, in accordance with article 370.341 In case of identity of names and surnames, the younger person shall be obliged to use such additional name or surname as will avoid confusion.342 In case of identity of names and surnames between ascendants and descendants, the word "Junior" can be used only by a son. Grandsons and other direct male descendants shall either: (1) Add a middle name or the mother's surname, or (2) Add the Roman numerals II, III, and so on.343 No person can change his name or surname without judicial authority.344 Usurpation of a name and surname may be the subject of an action for damages and other relief.345 The unauthorized or unlawful use of another person's surname gives a right of action to the latter.346

338

Art. 370 Art. 371 340 Art. 372 341 Art. 373 342 Art. 374 343 Art. 375 344 Art. 376, amended by R.A. 9048, infra 345 Art. 377 346 Art. 378 339

74

The employment of pen names or stage names is permitted, provided it is done in good faith and there is no injury to third persons. Pen names and stage names cannot be usurped.347 Except as provided in the preceding article, no person shall use different names and surnames.348 XVI. Absence If there is a doubt, as between two or more persons who are called to succeed each other, as to which of them died first, whoever alleges the death of one prior to the other, shall prove the same; in the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other.349 A marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse present has a wellfounded belief that the absent spouse was already dead. In case of disappearance where there is danger of death under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient.350 For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse. A. Provisional measures in Case of Absence When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary. This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired.351 The appointment referred to in the preceding article having been made, the judge shall take the necessary measures to safeguard the rights and interests of the absentee and 347

Art. 379 Art. 380 349 Art. 43, NCC 350 Art. 41, FC 351 Art. 381 348

75

shall specify the powers, obligations and remuneration of his representative, regulating them, according to the circumstances, by the rules concerning guardians.352 In the appointment of a representative, the spouse present shall be preferred when there is no legal separation.353 If the absentee left no spouse, or if the spouse present is a minor, any competent person may be appointed by the court. B. Declaration of Absence Two years having elapsed without any news about the absentee or since the receipt of the last news, and five years in case the absentee has left a person in charge of the administration of his property, his absence may be declared.354 The following may ask for the declaration of absence: (1) The spouse present; (2) The heirs instituted in a will, who may present an authentic copy of the same; (3) The relatives who may succeed by the law of intestacy; (4) Those who may have over the property of the absentee some right subordinated to the condition of his death.355 The judicial declaration of absence shall not take effect until six months after its publication in a newspaper of general circulation.356 An administrator of the absentee's property shall be appointed in accordance with article 383.357 The wife who is appointed as an administratrix of the husband's property cannot alienate or encumber the husband's property, or that of the conjugal partnership, without judicial authority.358 The administration shall cease in any of the following cases: (1) When the absentee appears personally or by means of an agent; (2) When the death of the absentee is proved and his testate or intestate heirs appear; 352

Art. 382 Art. 383 354 Art. 384 355 Art. 385 356 Art. 386 357 Art. 387 358 Art. 388 353

76

(3) When a third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title. In these cases the administrator shall cease in the performance of his office, and the property shall be at the disposal of those who may have a right thereto.359 C. Administration of the Property of the Absentee An administrator of the absentee's property shall be appointed in accordance with article 383.360 The wife who is appointed as an administratrix of the husband's property cannot alienate or encumber the husband's property, or that of the conjugal partnership, without judicial authority.361 The administration shall cease in any of the following cases: (1) When the absentee appears personally or by means of an agent; (2) When the death of the absentee is proved and his testate or intestate heirs appear; (3) When a third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title. In these cases the administrator shall cease in the performance of his office, and the property shall be at the disposal of those who may have a right thereto.362 D. Presumption of Death After an absence of seven years, it being unknown whether or not the absentee still lives, he shall be presumed dead for all purposes, except for those of succession. The absentee shall not be presumed dead for the purpose of opening his succession till after an absence of ten years. If he disappeared after the age of seventy-five years, an absence of five years shall be sufficient in order that his succession may be opened.363 The following shall be presumed dead for all purposes, including the division of the estate among the heirs:

359

Art. 389 Art. 387 361 Art. 388 362 Art. 389 363 Art. 390 360

77

(1) A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane; (2) A person in the armed forces who has taken part in war, and has been missing for four years; (3) A person who has been in danger of death under other circumstances and his existence has not been known for four years.364 If the absentee appears, or without appearing his existence is proved, he shall recover his property in the condition in which it may be found, and the price of any property that may have been alienated or the property acquired therewith; but he cannot claim either fruits or rents.365 XVII. Civil Registrar Acts, events and judicial decrees concerning the civil status of persons shall be recorded in the civil register.366 The following shall be entered in the civil register: (1) Births; (2) marriages; (3) deaths; (4) legal separations; (5) annulments of marriage; (6) judgments declaring marriages void from the beginning; (7) legitimations; (8) adoptions; (9) acknowledgments of natural children; (10) naturalization; (11) loss, or (12) recovery of citizenship; (13) civil interdiction; (14) judicial determination of filiation; (15) voluntary emancipation of a minor; and (16) changes of name.367

364

Art. 391 Art. 392 366 Art. 407 367 Art. 408 365

78

In cases of legal separation, adoption, naturalization and other judicial orders mentioned in the preceding article, it shall be the duty of the clerk of the court which issued the decree to ascertain whether the same has been registered, and if this has not been done, to send a copy of said decree to the civil registry of the city or municipality where the court is functioning.368 The books making up the civil register and all documents relating thereto shall be considered public documents and shall be prima facie evidence of the facts therein contained.369 Every civil registrar shall be civilly responsible for any unauthorized alteration made in any civil register, to any person suffering damage thereby. However, the civil registrar may exempt himself from such liability if he proves that he has taken every reasonable precaution to prevent the unlawful alteration.370 No entry in a civil register shall be changed or corrected, without a judicial order.371 All other matters pertaining to the registration of civil status shall be governed by special laws.372 A. RA 9048-clerical errors373 B. Rule 108, Rules of Court374 PROPERTY375 I. Characteristics 1. Utility for the satisfaction of moral and economic wants 2. Susceptibility of appropriation 3. Individuality or substantivity376

368

Art. 409 Art. 410 370 Art. 411 371 Art. 412 372 Art. 413 373 See Reference 374 ibid 375 All things which are, or may be the object of appropriation 376 that is, it can exist by itself, and not merely as a part of the whole; hence, the human hair becomes property only when it is detached from the hair 369

79

II. Classification377 (1) Immovables or real378 a) By nature – those which cannot be carried from place to place.379 i. Lands, buildings, roads and constructions (adhered to the soil).380 ii. Mines, quarries and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant. b) By incorporation – essentially movables but are attached to an immovable in a fixed manner to be an integral part thereof.381 i.

Trees, plants and growing fruits while they are attached to the land or form an integral part of an immovable. ii. Everything attached to an immovable in a fixed manner in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object.382 iii. Fertilizers actually used on a piece of land. c) By destination – essentially movables but are placed in an immovable as an added utility. i.

Statutes, reliefs painting or other objects for use or ornamentation, placed in a building or on lands, by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements.383 ii. Machinery, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or land, and which tend directly to meet the needs of such industry or works.384

377

Tests: a. Immovable - cannot be transferred from place to place. b. Movable – excluded from the enumeration of immovable and can be moved from place to place without damage thereto. c. Mixed/semi-movable - those which move by themselves (both immovable and movable in nature). 378 Art. 415 379 Pars. 1 & 8 380 The materials constituting a building which is the subject of demolition are movable. A structure which is merely superimposed, not adhered, to the soil may be considered movable. 381 Pars. 2, 3 & 7 382 Rex vinta 383 Indirect utility 384 Direct utility

80

iii. Animal houses or breeding places, in case the owner has placed or preserved them with the intention to attach them permanently to the land, and the animals in these places. iv. Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake or coast. d) By analogy - classified by express provision of law because it is regarded as united to the immovable property.385 i. Contracts for public works. ii. Servitudes. iii. Real rights over immovable property. (2) Movables386 i. General Rule: all things which can be transported from place to place without impairment of the real property to which they are fixed. ii. Exclusions: those movables susceptible of appropriation which are not included in the enumeration of immovables. iii. Special: real property which by any special provisions of law is considered as personalty. iv. In parts: forces of nature which are brought under control by science. v. Obligations387and actions388which have for their object movables389or demandable sums.390 vi. Shares of stocks or interests in juridical entities.

385

Par. 10 Art. 416 to 417 387 credits 388 replevin 389 corporeal or intangible 390 These are really personal rights because they have a definite passive subject (e.g. intellectual property). 386

81

A. Hidden Treasure391 Hidden treasure belongs to the owner of the land, building, or other property on which it is found. 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.392 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.393 B. Right of Accession The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially.394 1. Fruits To the owner belongs: (1) The natural fruits; (2) The industrial fruits; (3) The civil fruits.395 Natural fruits are the spontaneous products of the soil, and the young and other products of animals. labor.

Industrial fruits are those produced by lands of any kind through cultivation or

Civil fruits are the rents of buildings, the price of leases of lands and other property and the amount of perpetual or life annuities or other similar income.396 391

Treasure consists of money, jewels, or other precious objects which are hidden and unknown, such that their finding is a real discovery. 392 Art. 438 393 Art. 439 394 Art. 440 395 Art. 441

82

He who receives the fruits has the obligation to pay the expenses made by a third person in their production, gathering, and preservation.397 Only such as are manifest or born are considered as natural or industrial fruits. With respect to animals, it is sufficient that they are in the womb of the mother, although unborn.398 2. With respect to Immovable Property a. Builder, planter, sower on land of another in concept of owner (1) Builder, planter, sower in good faith The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548399, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.400 In the cases of the two preceding articles401, the landowner is entitled to damages from the builder, planter or sower.402 The builder, planter or sower in bad faith is entitled to reimbursement for the necessary expenses of preservation of the land.403 If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith.

396

Art. 442 Art. 443 398 Art. 444 399 See reference 400 Art. 448 401 Refers to Arts. 449 and 450, infra 402 Art. 451 403 Art. 452 397

83

It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part.404 When the landowner acted in bad faith and the builder, planter or sower proceeded in good faith, the provisions of article 447405 shall apply.406 If the materials, plants or seeds belong to a third person who has not acted in bad faith, the owner of the land shall answer subsidiarily for their value and only in the event that the one who made use of them has no property with which to pay. This provision shall not apply if the owner makes use of the right granted by article 450. If the owner of the materials, plants or seeds has been paid by the builder, planter or sower, the latter may demand from the landowner the value of the materials and labor.407 In the cases regulated in the preceding articles, good faith does not necessarily exclude negligence, which gives right to damages under article 2176.408 (2) Builder, planter, sower in bad faith He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.409 The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent.410 b. Usufructuary The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere pleasure as he may deem proper, provided he does not alter its form or substance; but he shall have no right to be indemnified therefor. He may, however, remove such improvements, should it be possible to do so without damage to the property.411

404

Art. 453 supra 406 Art. 454 407 Art. 455 408 Art. 456; see Reference for Art. 2176 409 Art. 449 410 Art. 450 411 Art. 579 405

84

3. Lands adjoining river banks a. Alluvion 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.412 b. Change of course of river413 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.414 Whenever a river, changing its course by natural causes, opens a new bed through a private estate, this bed shall become of public dominion415 c. Avulsion 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 years416 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.417 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.418

412

Art. 457 see also Water Code (PD 1067) in Reference 414 Art. 461 415 Art. 462 416 Art. 459 417 Art. 460 418 Art. 461 413

85

Whenever a river, changing its course by natural causes, opens a new bed through a private estate, this bed shall become of public dominion.419 Whenever the current of a river divides itself into branches, leaving a piece of land or part thereof isolated, the owner of the land retains his ownership. He also retains it if a portion of land is separated from the estate by the current.420 4. Islands Islands which may be formed on the seas within the jurisdiction of the Philippines, on lakes, and on navigable or floatable rivers belong to the State.421 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.422 C. By Object 1. Real or immovable423 The following are immovable property: (1) Land, buildings, roads and constructions of all kinds adhered to the soil; (2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable; (3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object; (4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements;

419

Art. 462 Art. 463 421 Art. 464 422 Art. 465 423 See Classification 420

86

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included; (7) Fertilizer actually used on a piece of land; (8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant; (9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast; (10) Contracts for public works, and servitudes and other real rights over immovable property. 2. Personal or Movable424 The following things are deemed to be personal property: (1) Those movables susceptible of appropriation which are not included in the preceding article; (2) Real property which by any special provision of law is considered as personalty; (3) Forces of nature which are brought under control by science; and (4) In general, all things which can be transported from place to place without impairment of the real property to which they are fixed. The following are also considered as 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. Movable property is either consumable or nonconsumable. To the first class belong those movables which cannot be used in a manner appropriate to their nature without their being consumed; to the second class belong all the others.

424

ibid

87

D. By Owner 1. Of public dominion It is not owned by the state but pertains to the state, which, as territorial sovereign exercises certain juridical prerogatives over such property. The ownership of such properties is in the social group, whether national, provincial or municipal. a. b. c.

For public use425 For public service426 For the development of the national wealth. 2. Of private ownership a. Patrimonial property – distinction between private property of individual persons, and of State entities Patrimonial property427 Property of the State owned by it in its private or proprietary capacity.

The state has the same rights over this kind of property as a private individual in relation to his own private property Property of private ownership This refers to all property belonging to private persons either individually or collectively and those belonging to the State and any of its political subdivisions which are patrimonial in nature.

425

e.g. roads, canals, rivers e.g. public buildings 427 Used by the political subdivision as a juridical person in its private capacity (e.g. property acquired through escheat proceedings, tax sales). It is the property which the unit has the same rights, and of which it may dispose, to the same extent as private individuals according to laws and regulations on the procedure of exercising such rights. Hence, it is subject to the principles on private properties (e.g. subject to prescription 426

88

E. By Nature 1. Consumable/non-consumable vs. Fungible/non-fungible Consumable428 – cannot be used in a manner appropriate to their nature without being consumed. Non-consumable - not consumed by use. Fungibles - belong to a common genus permitting substitution of the same kind, quantity and quality;429 Non-fungibles – specifically determined and cannot be substituted (e.g. 10 bottles of wine which I have in my room). III. Ownership A. Rights in general430 1. Bundle of rights a. Jus utendi,431fruendi,432abutendi,433vindicandi,434disponendi435(possidendi) (1) Actions to recover ownership and possession of real property (a)

Distinctions accionreivindicatoria, accioninterdictal

between accionpubliciana,

Accionreinvindicatoria436 - an action to recover real property based on ownership. Here, the object is the recovery of the dominion over the property as owner.

428

Consumable goods cannot be the subject matter of a contract of commodatum unless the purpose of the contract is not the consumption of the object as when it is merely for exhibition. 429 e.g. 10 bottles of wine 430 The right to enjoy, dispose, and recover a thing without further limitations than those established by law or the will of the owner. 431 the right to use 432 the right to enjoy the fruits 433 the right to destroy (but cannot harm others) 434 The right of action available to the owner to recover the property against the holder or possessor 435 The right to dispose, or the right to alienate, encumber, transform

89

Accionpubliciana437 - ordinary civil proceeding to recover the better right of possession, except in cases of forcible entry and unlawful detainer. The involved is not possession de facto but possession de jure. Accioninterdictal438 - summary action to recover physical or material possession only. It consists of the summary actions of: 1. Forcible entry - Action for recovery of material possession of real property when a person originally in possession was deprived thereof by force, intimidation, strategy, threat or stealth 2. Unlawful Detainer -Action for recovery of possession of any land or building by landlord, vendor, vendee, or other person against whom the possession of the same was unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract.

436

This action should be filed in case of refusal of a party to deliver possession of property due to an adverse claim of ownership. Requisites: 1.Identity of the Property 2.Plaintiff’s title to the property 437 plenary action Whenever the owner is dispossessed by any other means (e.g. possession is due to tolerance of the owner) other than FISTS, he may maintain this action to recover possession without waiting for the expiration of 1 year before commencing this suit. It may also be brought after the expiration of 1 year if no action had been instituted for forcible entry or unlawful detainer 438 Period to file action: Within 1 year after such unlawful deprivation or withholding of possession, commencing from the time of last demand (oral or written; direct or indirect) to vacate. No demand is necessary for a lessee to vacate when it is specifically provided for in the agreement. Prayer: for the restitution of possession, with damages and costs. However, the only damages that can be recovered in an Ejectment suit are the fair rental value or the reasonable compensation for the use and occupation of the real property. Other damages must be claimed in an ordinary action. The defendant, however, may set up a counterclaim for moral damages and recover it if it is within the jurisdiction of the court. Jurisdiction: MTC (summary proceedings). Whatever the amount of plaintiff’s damages will not affect the court’s jurisdiction. Issue: Physical possession. The decision in such action is res judicata in the question of possession. Sublessees are bound by the judgment rendered against the lessee in an ejectment case even if they were not made parties thereto.

90

(b) Distinction between forcible entry and unlawful detainer439 Forcible Entry

Unlawful Detainer

As to when possession became unlawful Possession of the Possession is defendant is inceptively lawful unlawful from the but becomes illegal beginning as he from the time acquires defendant possession by unlawfully Force, withholds intimidation, possession after strategy, threat the expiration or or stealth termination of his right thereto. As to the necessity of demand No previous Demand is demand for the jurisdictional if the defendant to ground is nonvacate is payment of rentals necessary or failure to comply with the lease contract As to necessity physical possession Plaintiff must prove that he was in prior physical possession of the premises until he was deprived thereof by the defendant

of proof of prior Plaintiff need not have been in prior physical possession

439

See AccionInterdictal, supra Ejectment suit: a. Can be brought by anyone of the co–owners. A co-owner may bring such an action without the necessity of joining all the other co-owners as coplaintiffs because the suit is deemed to be instituted for the benefit of all. However, if the action is for the benefit of the plaintiff alone, such that he claims the possession for himself and not for the co-ownership, the action will NOT prosper. b. Action may be brought not only against strangers but even against a co–owner. The effect of the action will be to obtain recognition of the co-ownership. The defendant cannot be excluded because he has a right to possess as a co-owner, and the plaintiff cannot recover any material or determinate part of the property. c. An adverse decision in the action is not necessarily res judicata with respect to the other co–owners not being parties to the action, but they are bound where it appears that the action was instituted in their behalf with their express or implied consent.

91

As to when the 1 year period is counted from 1 year period is 1 year period is generally counted counted from the from the date of date of last actual entry on demand or last the land letter of demand

(2) Actions for recovery of possession of movable Property Replevin - remedy when the complaint prays for the recovery of the possession of personal property. (3) Requisites for recovery of property – proof of right; identity; reliance on strength of own evidence not weakness of defendant’s claim 1. Identity of the property. 2. Strength of plaintiff’s title.440 Evidence to prove ownership: ownership may be proved by any evidence admissible in law. a. b. c. d. e.

Torrens title. Title from the Spanish Government. Patent duly registered in the Registry of Property by the grantee. Deed of sale. Long possession. 2. Distinction between real and personal rights Real Rights

1. 2. 3. 4.

no passive subject – claim against whole world object is corporeal thing441 creates juridical relations through mode & title extinguished through loss or destruction of thing

440

proof of ownership Tax declarations are not conclusive proof of ownership. However, when coupled with possession for a period sufficient for prescription, they become strong evidence of ownership. Also, the failure of a person to declare land for taxation may be admitted to show that he is not the owner thereof. 441 obligation

92

Personal Rights 1. 2. 3. 4.

Passive and active subject Object is an intangible thing442 Creates juridical relations through title Not extinguished through loss or destruction of thing Personal

Real

1.jus ad rem, a right enforceable only against a definite person or group of persons 2.right pertaining to the person to demand from another, as a definite passive subject, the fulfillment of a prestation to give, to do or not to do.

1.jus in re, a right enforceable against the whole world 2. right pertaining to a person over a specific thing, without a passive subject individually determined against whom such right may be personally enforced

B. Modes of acquiring ownership 1. original, derivative Modes acquiring ownership

of

Titles of acquiring ownership

A. Original Modes 1. Occupation 1. Condition of being without known owner 2. Work which 2. Creation, includes discovery or Intellectual invention creation B. Derivative modes 3. Law 3. Existence of required conditions 4. Tradition 4. Contract of the parties 5. Donation 5. Contract of the parties

442

specific thing

93

6. Prescription

6. Possession in the concept of owner 7. Death

7. Succession

C. Limitations 1. General limitations443 Taxation: The inherent power of the sovereign, exercised through the legislature, to impose burdens upon the subjects and objects within its jurisdiction, for the purpose of raising revenues to carry out the legitimate objects of the government. Eminent domain: No person shall be deprived of his property except by competent authority and from public use and always upon payment of just compensation. Should this requirement be not complied with, the courts shall protect and, in proper cases, restore the owner in his possession. Police power: When any property is condemned or seized by competent authority in the interest of health, safety or security, the owner thereof shall not be entitled to compensation, unless he can show that such condemnation or seizure is unjustified.444 2. Specific Limitations i. Those imposed by law such as legal easements and the requirement of legitime in succession. ii. The owner of a thing cannot make use thereof in such a manner as to injure the rights of a 3rd person.445

443

For the benefit of the state Requisites: 1 .The interest of the public in general, as distinguished from those of a particular class, requires such interference. 2. The means employed are reasonably necessary for the accomplishment of a purpose, and not unduly oppressive upon individuals. 445 sic uteretuo This is based on the police power of the State. 444

94

iii. Nuisance446 iv. State of necessity – law permits injury or destruction of things owned by another provided this is necessary to avert a greater danger447 v. Easements voluntarily imposed by owner: servitudes, mortgages imposed by contract IV. Accession448 A. Right to hidden treasure449 General rule: It belongs to the owner of the land, building or other property on which it is found. Exceptions: The finder is entitled to ½ provided: 1. Discovery was made on the property of another, or of the state or any of its political subdivisions; 2. The finding was made by chance; 3. The finder is not a co-owner of the property where it is found; 4. The finder is not a trespasser; 5. The finder is not an agent of the landowner;

It does not apply where the owner of a thing makes use of it in a lawful manner for then it cannot be said that the manner of the use is such “as to injure the rights of a third person”. 446 infra 447 with right to indemnity – vs. principle of unjust enrichment Requisites: 1. The interference is necessary. 2. The damage to another is much greater than the damage to the property. The seriousness or gravity of the danger must be much greater than the damage to the property affected or destroyed by the protective act. Danger to life is always greater than damage to property. If through an error, one believed himself to be in a state of necessity, or used excessive means, his act would be illicit, and the owner of the property can use the principle of self-help. The law does not require that the person acting in a state of necessity be free from negligence in the creation of the threatened danger 448 The right by virtue of which the owner of a thing becomes the owner of everything that it may produce or which may be inseparably united or incorporated thereto, either naturally or artificially. 449 Hidden treasure - any hidden or unknown deposit of money, jewelry or other precious objects, the lawful ownership of which does not appear.

95

6. The finder is not married under the absolute community or the conjugal partnership system (otherwise his share belongs to the community). B. General Rules: 1. Forimmovables: a. Accession discretaand continua450 Accession Discreta -the right pertaining to the owner of a thing over everything produced thereby GENERAL RULE:

To the owner belongs the natural,451 industrial,452 and civil fruits.453 EXCEPTIONS:

If the thing is: a) b) c) d)

in possession of a possessor in good faith; subject to a usufruct; leased or pledged; or in possession of an antichretic creditor

Accession Continua – the right pertaining to the owner of a thing over everything that is incorporated or attached thereto either naturally or artificially; by external forces. Artificial/industrial Building, planting or sowing GENERAL RULE–

Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon belong to the owner of the land.454

450

artificial/industrial and natural spontaneous products of the soil and the young and other products of animals 452 those produced by lands of any kind through cultivation or labor 453 rents of buildings, price of leases or lands and the amount of perpetual or life annuities or other similar income 451

96

EXCEPTION: contrary is proven

Natural Alluvion or alluvium– increment which lands abutting rivers gradually receive as a result of the current of the waters. It is the gradual deposit of sediment by the natural action of a current of fresh water (not sea water, the original identity of the deposit being lost.455 Avulsion - the accretion which takes place when the current of the river, creek or torrent segregates from an estate on its bank a known portion and transfers it to another estate, in which case, the owner of the estate to which the segregated portion belonged, retains the ownership thereof.456 Estates adjoining ponds or lagoons RULE:

The owners of estates adjoining ponds or lagoons do not acquire the land left dry by the natural decrease of the waters, or loss that inundated by them in extraordinary floods Trees uprooted/by force of river RULE:

Trees uprooted and carried away by the current of the waters belong to the owner of the land upon which they may be case, if the owners do not claim them within 6 months. If such owners claim them, they shall pay the expenses incurred in gathering or putting them in a safe place.457 Abandoned river bed/change in the course of river

454

The owner of the land must be known, otherwise no decision can be rendered on the ownership of the thing planted, built or sown until a hearing shall have been accorded to whosoever is entitled thereto. 455 To the owners of the lands adjoining the banks of rivers belong the accretions which they gradually receive from the effects of the current of the waters. 456 The owner of the estate to which the segregated portion belongs preserves his ownership of the segregated portion provided he removes (not merely claims) the same within the period of 2 years. Failure to do so would have the effect of automatically transferring ownership over it to the owner of the other estate. 457 This rule refers to uprooted trees only. If a known portion of land with trees standing thereon is carried away by the current to another land, the rule on avulsion governs.

97

RULE:

River beds which are abandoned through the natural change in the course of waters ipso facto belong to the owners whose lands are occupied by the new course in proportion to the area lost.458 New river bed without abandonment RULE:

Whenever a river, changing its course by natural causes, opens a new bed through a private estate, this bed shall become of public dominion.459 Branching of course of river RULE:

Whenever the current of a river divides itself into branches, leaving a piece of land or part thereof isolated, the owner of the land retains his ownership thereto. He also retains ownership to a portion of his land separated from the estate by the current. Formation of Islands RULES:

1. If formed on the seas within the jurisdiction of the Philippines, on lakes, or on navigable or floatable rivers:460 the island belongs to the State as part of its patrimonial property. 2. If formed in non – navigable and non – floatable rivers: 458

However, the owners of land adjoining the old bed are given preferential right to acquire the same by paying the value thereof to promote the interest of agriculture because the riparian owners of the old course/bed can better cultivate the same. The indemnification to be paid shall not exceed the value of the area occupied by the new bed. River beds are part of public domain. In this case, there is abandonment by the government of its right over the old bed. The owner of the invaded land automatically acquires ownership of the same without the necessity of any formal act on his part. “In proportion to the area lost” implies that there are two or more owners whose lands are occupied by the new bed. Therefore, if only one owner lost a portion of his land, the entire old bed should belong to him. 459 The bed of a public river or stream is of public ownership. If the river changes its course and opens a new bed, this bed becomes of public dominion even if it is on private property. The law does not make any distinction whether the river is navigable or not. 460 one which in its natural state affords a channel for useful commerce and not such as is only sufficient to float a banca or a canoe.

98

a. It belongs to the nearest riparian owner, or owner of the margin or bank nearest to it as he is considered on the best position to cultivate and develop the island. b. If the island is in the middle of the river, the island is divided longitudinally in halves. If the island formed is longer than the property of the riparian owner, the latter is deemed ipso jure to be the owner of that portion which corresponds to the length of that portion of his property along the margin of the river. c. If a single island be more distant from one margin than from the other, the owner of the nearer margin shall be the sole owner thereof. b. Accession industrial Building, planting or sowing461 Avulsion462 Rivers463 Islands464 c. Accession natural465 Accretion - the act or the process by which a riparian land generally and imperceptively receives addition made by the water to which the land is contiguous. Avulsion466 Rivers467 Islands468

461

infra ibid 463 ibid 464 ibid 465 accretion, avulsion, rivers, islands 466 ibid 467 ibid 468 ibid 462

99

2. For movables: a. Accession continua Adjunction or conjunction469 It is the union of 2 movable things belonging to different owners in such a way that they form a single object, but each one of the component things preserves its value. Commixtion or confusion470 469

Rules: 1. Adjunction in good faith: If the union took place without bad faith, the owner of the principal thing acquires the accessory, with the obligation to indemnify the owner of the accessory for its value. 2. Adjunction in bad faith: If the union took place in bad faith, the following rules shall apply: a. Bad faith on the part of owner of accessory: i. He shall lose the thing incorporated, and ii. He shall be liable for damages to the owner of the principal thing, or the payment of the price, including its sentimental value as appraised by experts. iii. The principal may demand for the delivery of a thing equal in kind and value and in all other respects to that of the principal thing, or the payment of the price, including its sentimental value as appraised by experts. b. Bad faith on the part of the owner of the principal: The owner of the accessory thing is given the option either: i. To require the owner of the principal thing to pay the value of the accessory thing, plus damages. ii. To have the accessory thing separated even if it be necessary to destroy the principal thing, plus damages. iii. The accessory may demand for the delivery of a thing equal in kind and value and in all other respects to that of the accessory thing, or the payment of the price, including its sentimental value as appraised by experts. c. Both parties in bad faith: Their respective rights are to be determined as though both acted in good faith. Sentimental value shall be duly appreciated 470 Rules: 1. Mixture by will of both the owners or by chance: a. Their rights shall first be governed by their stipulations. b. If the things mixed are of the same kind and quality, there is no conflict of rights, and the mixture can easily be divided between the 2 owners. c. If the things mixed are of different kind and quality, in the absence of a stipulation, each owner acquires a right or interest in the mixture in proportion to the value of his material as in co-ownership. 2. Mixture caused by an owner in good faith or by chance: a. Their rights shall first be governed by their stipulations. b. If the things mixed are of the same kind and quality, there is no conflict of rights, and the mixture can easily be divided between the 2 owners. c. If the things mixed are of different kind and quality, in the absence of a stipulation, each owner acquires a right or interest in the mixture in proportion to the value of his material as in co-ownership. 3. Mixture caused by an owner in bad faith:

100

Takes place when two or more things belonging to different owners are mixed or combined with the respective identities of the component parts destroyed or lost. Specification471 Takes place whenever the work of a person is done on the material of another, and such material, as a consequence of the work itself, undergoes a transformation Adjunction

Mixture

Specification

1. Involves Involves at May involve at least 2 least 2 one thing (or things things more) but form is changed 2. CoAccessory Accessory ownership follows the follows the results principal principal

The owner in bad faith not only forfeits the thing belonging to him but also becomes liable to pay indemnity for the damages caused to the other owner. 4. Mixture by both owners in bad faith: There is bad faith when the mixture is made with the knowledge and without the objection of the other owner. Accordingly, their respective rights shall be determined as though both acted in good faith. 471 Rules: 1. Worker and owner of the materials in good faith: The worker becomes the owner of the work/transformed thing but he must indemnify the owner of the material for its value. Exception: If the material is more precious or of more value than the work/transformed thing, the owner of the material may choose: a. To appropriate the new thing to himself but must pay for the value of the work or labor, or b. To demand indemnity for the material. 2. Worker in bad faith but the owner of the material in good faith: The owner of the material has the option either: a. To appropriate the work to himself without paying the maker, OR b. To demand the value of the material plus damages. 3. Owner of the materials in bad faith but the worker is in good faith: The owner of the material is in bad faith when he does not object to the employment of his materials. Accordingly, he shall lose his materials and shall have the obligation to indemnify the worker for the damages he may have suffered 4. Both owners are in bad faith: Their rights shall be determined as though both acted in good faith.

101

3. Things Things The new joined retain mixed or object retains their nature confused or preserves may either the nature of retain or the original lose their object. respective natures

b. Rules for determining the principal and accessory Tests to determine the principal:472 Adjunction: In the order of application, the principal is that: a. To which the accessory has been united as an ornament or for its use or perfection473. b. Of greater value, if they are of unequal values. c. Of greater volume, if they are of an equal value. d. Of greater merits taking into consideration all the pertinent legal provisions applicable as well as the comparative merits, utility and volume of their respective things. Mixture: Strictly speaking, there is no accession in mixture since there is neither a principal nor an accessory Specification: Labor is the principal.

472

In paintings and sculpture, writings, printed matter, engraving and lithographs, the board, metal stone, canvas, paper or parchment shall be deemed the accessory thing. 473 rule of importance and purpose

102

V. Quieting of title474 to/interest in and removal/prevention of cloud over title to/interest in real property A. Requirements: 1.

plaintiff must have a legal or equitable title to, or interest in the real property which is the subject matter of the action;

2.

there must be a cloud in such title;

3.

such cloud must be due to some instrument, record, claim, encumbrance or proceeding which is apparently valid but is in truth invalid, ineffective, voidable or unenforceable, and is prejudicial to the plaintiff’s title; and

4.

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. B. Distinction between quieting of title and removing/preventing a cloud475

Action to quiet title, strictly considered, is substantially an action to put an end to vexatious litigation in respect to the property involved. An action to remove a cloud is intended to procure the cancellation, delivery of, release of an instrument, encumbrance, or claim constituting a claim on plaintiff’s title, and which may be used to injure or vex him in the enjoyment of his title.

474

It is an equitable action in rem to determine the condition of the ownership or the rights to immovable property, and remove doubts thereon. The action to quiet title does not apply: a) to questions involving interpretation of documents b) to mere written or oral assertions of claims; EXCEPT: i) if made in a legal proceeding ii) if it is being asserted that the instrument or entry in plaintiff’s favor is not what it purports to be c) to boundary disputes d) to deeds by strangers to the title UNLESS purporting to convey the property of the plaintiff e) to instruments invalid on their face f) where the validity of the instrument involves pure questions of law 475 What is a cloud on title? It is a semblance of title, either legal or equitable, or a claim or a right in real property, appearing in some legal form which is, in fact, invalid or which would be inequitable to enforce

103

In an action to quiet title, the plaintiff asserts his own estate and declares generally that the defendant claims some estate in the land, without defining it, and avers that the claim is without foundation. In a suit to remove a cloud, plaintiff not only declares his own title, but also avers the source and nature of defendant’s claim, points out its defect, and prays that it be declared void. In an action to prevent a cloud, relief is granted if the threatened or anticipatedcloud is one which if it existed, would beremoved by suit to quiet title. C. Prescription/non-prescription of action 1. plaintiff in possession – imprescriptible 2. plaintiff not in possession – 10 years476or 30 years477 VI. Co-ownership478 A. Characteristics of co-ownership 1. In general a. Plurality of subjects. b. Unity of object or material indivision. c. Recognition of ideal or intellectual shares of co-owners which determine their rights and obligations. 2. Special rules: a. Concept of condominium (1) Condominium corporation 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. 476

ordinary extraordinary 478 the right of common dominion which two or more persons have in a spiritual part of a thing which is not physically divided. Co-ownership exists where the ownership of a thing physically undivided pertains to more than one person. 477

104

Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include transfer or conveyance of the undivided interest in the common areas or, in a proper case, the membership or shareholdings 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 persons other than Filipino citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. (2) Interest in real property479 (3) Concept of common areas, amendment GENERAL RULE:

Common areas shall remain undivided, and there shall be no judicial partition thereof: EXCEPTIONS:

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

479

See (1) Condominium Corporation, supra

105

(4) Documents to consider Master deed An enabling or master deed shall contain, among others, the following: (a) Description of the land on which the building or buildings and improvements are or are to be located; (b) Description of the building or buildings, stating the number of stories and basements, the number of units and their accessories, if any; (c) Description of the common areas and facilities; (d) A statement of the exact nature of the interest acquired or to be acquired by the purchaser in the separate units and in the common areas of the condominium project. Where title to or the appurtenant interests in the common areas is or is to be held by a condominium corporation, a statement to this effect shall be included; (e) Statement of the purposes for which the building or buildings and each of the units are intended or restricted as to use; (f) A certificate of the registered owner of the property, if he is other than those executing the master deed, as well as of all registered holders of any lien or encumbrance on the property, that they consent to the registration of the deed; (g) The following plans shall be appended to the deed as integral parts thereof: (1) A survey plan of the land included in the project, unless a survey plan of the same property had previously been filed in said office; (2) A diagrammatic floor plan of the building or buildings in the project, in sufficient detail to identify each unit, its relative location and approximate dimensions; (h) Any reasonable restriction not contrary to law, morals or public policy regarding the right of any condominium owner to alienate or dispose of his condominium. The enabling or master deed may be amended or revoked upon registration of an instrument executed by the registered owner or owners of the property and consented to by all registered holders of any lien or encumbrance on the land or building or portion thereof.480 480

Sec. 4, R.A. 4726

106

Declaration of restrictions The owner of a project shall, prior to the conveyance of any condominium therein, register a declaration of restrictions relating to such project, which restrictions shall constitute a lien upon each condominium in the project, and shall insure to and bind all condominium owners in the project. Such liens, unless otherwise provided, may be enforced by any condominium owner in the project or by the management body of such project. The Register of Deeds shall enter and annotate the declaration of restrictions upon the certificate of title covering the land included within the project, if the land is patented or registered under the Land Registration or Cadastral Acts. The declaration of restrictions shall provide for the management of the project by anyone of the following management bodies: a condominium corporation, an association of the condominium owners, a board of governors elected by condominium owners, or a management agent elected by the owners or by the board named in the declaration. It shall also provide for voting majorities quorums, notices, meeting date, and other rules governing such body or bodies.481 Articles and by-laws Any provision of the Corporation Law to the contrary notwithstanding, the by-laws of a condominium corporation shall provide that a stockholder or member shall not be entitled to demand payment of his shares or interest in those cases where such right is granted under the Corporation Law unless he consents to sell his separate interest in the project to the corporation or to any purchaser of the corporation's choice who shall also buy from the corporation the dissenting member or stockholder's interest. In case of disagreement as to price, the procedure set forth in the appropriate provision of the Corporation Law for valuation of shares shall be followed. The corporation shall have two years within which to pay for the shares or furnish a purchaser of its choice from the time of award. All expenses incurred in the liquidation of the interest of the dissenting member or stockholder shall be borne by him.482 b. Rights and obligations of condominium owner (1) Contributions/Dues For reasonable assessments to meet authorized expenditures, each condominium unit to be assessed separately for its share of such expenses in proportion (unless otherwise provided) to its owners fractional interest in any common areas.483 481

Sec. 9, ibid Sec. 17, ibid 483 Sec. 9 (d), ibid 482

107

(2) PD 957 and RA 6552 Under P.D. 957 A. Obligations and Rights of the Owner/ Developer 1) Mortgage of Subdivision Lot or Condominium Unit a) Requirements: Owner or developer must: i. secure prior written approval from the Authority (HLURB); ii. show that the proceeds of the mortgage loan inures to the development of the condominium or subdivision project iii. cause the determination of the loan value of each lot or unit covered by the mortgage; and iv. notify the buyer, if any. b) Buyer’s Option: To pay the mortgage loan of his lot or unit to acquire title thereof from the mortgage.484 2) Advertisementof the Subdivision or Condominium a) Contents: The owner must advertise only: i) real facts, and ii) in a manner that does not mislead or deceive the public.485 b) Improvements, facilities, etc. stated in the advertisement i) Nature: Constitutes sales warranties486 ii) Time of Completion: (a) Sales On the Effectivity of this Decree: Within one year from the issuance of the license of project, or other period fixed by the Authority (HLURB).487

484

Sec. 18 Sec. 19 486 ibid 487 Sec. 20 485

108

subdivision or condominium

(b) Sales Prior to this Decree: Within two years from the effectivity of this Decree, except: (i) (ii)

if extended by the Authority (HLURB), if adequate performance bond in accordance with Sec. 6 of this Decree is filed.488

3) Alteration of the Approved Subdivision Plan and/or of Representations in Advertisement: Requirements: The owner or developer must: (a) secure approval of the Authority (HLURB), and (b) written conformity or consent of the duly organized homeowners association, or in its absence, by the majority of the lot buyers in the subdivision.489 4) Non-Forfeiture of Payments by the Owner or Developer a) If the failure of the subdivision or condominium buyer to pay installment is caused by the failure of the owner or developer to develop the subdivision or condominium according to the approved plan and within time limit, the buyer shall be reimbursed with legal interest and amortization interest, but excluding delinquency interest.490 b) If such failure is due to other causes, Republic Act No. 6552 which took effect on August 26, 1976, but prior to such date, the buyer is entitled to refund based on installments paid after the effectivity of the law in the absence of contrary stipulation. 491 5) Issuance of Title to the Buyer by the Owner or Developer a) Time: Upon the full payment of the lot or unit. b) Chargeable Fee: The owner or developer can only charge from the buyer fee for the registration of the Deed of Sale to the Register of Deeds. c) If the lot or unit is mortgaged, the owner or developer should redeem the lot or unit within six months from the issuance of the title.

488

Sec. 21 Sec. 22 490 Sec. 23 491 Sec. 24 489

109

6) Payment of Realty Tax and Other Charges on the Subdivision or Condominium: Rules on: a) Real Taxes: 1) Paid by owner or developer unless title is passed to the buyer. 2) Buyer who actually occupied and possessed a lot or unit is liable for taxes to the owner or developer from the year following such occupation or possession.492 b) Other Charges: 1) It cannot be collected by the owner or developer. 2) It can be collected only by a properly organized homeowners association with the consent of majority of lot or unit buyers actually residing in the subdivision or condominium project.493 7) Access to Public Offices in the Subdivisions: No owner or developer shall deny any person free access to any government office or public establishment located within the subdivision or which may be reached only by passing through the subdivision.494 8) Right of Way to Public Road It should be secured by the owner and developer of a subdivision without access to any public road or street. Such way must be developed and maintained in accordance with the requirement set forth by the government.495 9) Organization of Homeowner Association a) Formation: Initiated by the owner or developer. b) Members: buyers and residents of the project c) Purpose: for the promotion and protection of mutual interest of the buyers and residents, and for the community development496

492

Sec. 26 Sec. 27 494 Sec. 28 495 Sec. 29 496 Sec. 30 493

110

10) Mandatory Donations of Roads and Open Spaces to Local Government497 Under R.A. 6552 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 unpaid installments 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 canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent 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 installment payments made.498 In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty 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.499 Under Section 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.500 The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property.501

497

P. D. No. 1216, amending Sec. 31 of this Decree Sec. 3 499 Sec. 4 500 Sec. 5 501 Sec. 6 498

111

Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void.502 c. Grounds for partition of common areas, or dissolution of the condominium 1. Voluntary Dissolution503 Grounds: i.

Three (3) years after damage or destruction to the projects which renders material part thereof unfit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction;

ii. Damage or destruction to the project has rendered one-half or more of its units thereof untenantable and the owners holding in aggregate more than 30% interest in common areas are opposed to repair or restoration of the project; iii. The project has been in existence in excess of 50 years, that it is obsolete and uneconomic, and that owners holding in aggregate more than 30% interest in common areas are opposed to repair or restoration of the projects; iv. The project or material part thereof has been condemned or expropriated and that the project is no longer viable, or that the owners holding in aggregate more than 70% interest in common areas are opposed to the continuation of the condominium regime; v. Conditions for partition under the declaration of restrictions have been met.504 2. Involuntary Dissolution Grounds: those provided for by law on corporations.505 B. Sources of co-ownership a. The Law – as in party walls, fences and in the legal conjugal partnership. b. Contracts.

502

Sec. 7 Action for dissolution under Rule 104 of the Rules of Court. 504 Sec. 8, P.D. 4726 505 Sec. 12, ibid 503

112

c. Succession – when a person dies intestate, leaving his properties undivided to several heirs, who become co-owners of the inheritance. d. Fortuitous event or chance – as in cases of commixtion and confusion caused by accident or chance, and of hidden treasure accidentally discovered by a stranger on the land of another. e. Occupancy – when 2 persons catch a wild beast or gather forest products. C. Rights of co-owners 1. Distinction between right to property owned in common and full ownership over his/her ideal share Rights of each co-owner as to the thing owned in common: a) To use the thing owned in common506 b) To share in the benefits and charges in proportion to the interest of each.507 c) To the benefits of prescription: prescription by one co-owner benefits all. d) Repairs and taxes: to compel the others to share in the expenses of preservation even if incurred without prior notice.508 e) Alterations: to oppose alterations made without the consent of all, even if beneficial.509 f) To protest against seriously prejudicial decisions of the majority g) Legal redemption: to be exercised within 30 days from written notice of sale of an undivided share of another co-owner to a stranger h) To defend the co-ownership’s interest in court i) To demand partition at any time Rights as to the ideal share of each co-owner: a) Each has full ownership of his part and of his share of the fruits and benefits b) Right to substitute another person its enjoyment, except when personal rights are involved 506

Limitations: i. use according to the purpose for which it was intended ii. interest of the co-ownership must not be prejudiced iii. other co-owners must not be prevented from using it according to their own rights 507 Any stipulation to the contrary is void. 508 The co-owner being compelled may exempt himself from the payment of taxes and expenses by renouncing his share equivalent to such taxes and expenses. The value of the property at the time of the renunciation will be the basis of the portion to be renounced. 509 Alteration is an act by virtue of which a co-owner changes the thing from the state in which the others believe it should remain, or withdraws it from the use to which they desire it to be intended. Expenses to improve or embellish are decided by the majority

113

c) Right to alienate, dispose or encumber d) Right to renounce part of his interest to reimburse necessary expenses incurred by another co-owner e) Transactions entered into by each co-owner only affect his ideal share. 2. Right to oppose acts of alteration510 To oppose alterations made without the consent of all, even if beneficial. 3. Right to partition511 GENERAL RULE:

Partition is demandable by any of the co-owners as a matter of right at any time. EXCEPTIONS:

i. When there is a stipulation against it; but not to exceed 10 years. ii. When the condition of indivision is imposed by the donor or testator; but not to exceed 20 years. iii. When the legal nature of the community prevents partition. iv. When partition would render the thing unserviceable. v. When partition is prohibited by law vi. When another co-owner has possessed the property as exclusive owner for a period sufficient to acquire it by prescription. 4. Right to contributions for expenses512 Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes in proportion to their interest therein. 510

Alteration is an act by virtue of which a co-owner changes the thing from the state in which the others believe it should remain, or withdraws it from the use to which they desire it to be intended. Expenses to improve or embellish are decided by the majority 511 The division between 2 or more persons of real or personal property which they own in common so that each may enjoy and possess his sole estate to the exclusion of and without interference from others 512 necessary expenses, taxes Expenses of preservation (necessary expenses) include all those which, if not made, would endanger the existence of the thing or reduce its value or productivity. They do not imply an improvement or increase. There is no other remedy available against the co-owner who refuses to pay his share in the expenses of preservation except an action to compel him to contribute such share. Failure to contribute does not amount to a renunciation of any portion of share in the co-ownership. The co-owner in default cannot be compelled to renounce his share therein. Renunciation is a voluntary and free act.

114

5. Waiver513 Any one of the co-owners may exempt himself from this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and taxes. 6. Right to redemption of co-owners share Legal redemption: to be exercised within 30 days from written notice of sale of an undivided share of another co-owner to a stranger D. Termination/extinguishment514 It has for its purpose the separation, division and assignment of the thing held in common among those to whom it may belong; the thing itself may be divided, or its value. After partition, the portion belonging to each co-owner has been identified and localized, so that co-ownership, in its real sense, no longer exists. 1. Effects of partition Partition shall not prejudice third persons who do not intervene in the partition After partition, there should be mutual accounting of benefits, reimbursements, payment of damages due to negligence or fraud, liability for defects of title and quality of portion assigned to each.515 Part allotted to a co-owner at partition will be deemed to be possessed by such coowner from the time the co- ownership commenced. 513

No such waiver shall be made if it is prejudicial to the co-ownership Rules on renunciation: a.Total or partial. b.Expressly made – a tacit renunciation cannot produce any effect. c.The renunciation is in reality a case of dacion en pago; the debt of the co-owner consisting of his share in the expenses of preservation and taxes, is paid, not in money, but in an interest in property. d.Since the renunciation refers to a portion equivalent in value to the share of the renouncing co-owner in an existing debt, it is only logical that the other co-owners, who must should the debt of the renouncer in exchange for the portion being renounced, should consent thereto. e.Renunciation refers to existing debts and NOT to future expenses. f.Renunciation is a free act; a co-owner may not be compelled to renounce. g.However, waiver is not allowed if it is prejudicial to the co–ownership. 514 No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common. 515 See Art. 500

115

Heir is exclusive owner of property adjudicated to him. Co-owners reciprocally bound to each other for warranty of title and quality of part given to each (hidden defect) after partition. Obligation of warranty is proportionate to respective hereditary shares; insolvency of one makes the others liable subject to reimbursement (joint liability).516 Each former co-owner is deemed to have had exclusive possession of the part allotted to him for the entire period during which the co-possession lasted; Partition confers upon each the exclusive title over his respective share. 2. Rights against individual co-owners in case of partition517 3. Partition in case co-owners cannot agree If the co-owners cannot agree, the thing shall be sold and its proceeds distributed to the co-owners.518 VII. Possession519 A. Characteristics Possession is characterized by two (2) relations: 1. The possessor’s relation to the property itself; and 2. the possessor’s relation to the world.

516

Under Art. 1093 See Effects of 1. partition, supra

517

518

Art. 498

The sale of the property held in common referred to in the above article is resorted to when (1) the right to partition the property among the co-owners is invoked by any of them but because of the nature of the property, it cannot be subdivided or its subdivision [See Article 495 of the New Civil Code] would prejudice the interests of the co-owners (See Section 5 of Rule 69 of the Revised Rules of Court) and (2) the co-owners are not in agreement as to who among them shall be allotted or assigned the entire property upon reimbursement of the shares of the other co-owners (Marina Reyes, et al. vs. Hon. Alfredo Concepcion, et al., G.R. No. 56550, Oct. 1, 1990 The sale may be public or private, and the purchaser may be a co-owner or a third person. 519 The holding of a thing or enjoyment of a right

116

B. Acquisition of Possession Possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and legal formalities established for acquiring such right.520 C. Effects of Possession 1. Possessor in Good Faith A possessor in good faith is entitled to the fruits received before the possession is legally interrupted. Natural and industrial fruits are considered received from the time they are gathered or severed. Civil fruits are deemed to accrue daily and belong to the possessor in good faith in that proportion.521 He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing. faith.522

Mistake upon a doubtful or difficult question of law may be the basis of good

Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.523 a. Right to pending fruits If at the time the good faith ceases, there should be any natural or industrial fruits, the possessor shall have a right to a part of the expenses of cultivation, and to a part of the net harvest, both in proportion to the time of the possession. The charges shall be divided on the same basis by the two possessors.

520

Art. 531 Art. 544 522 Art. 526 523 Art. 527 521

117

The owner of the thing may, should he so desire, give the possessor in good faith the right to finish the cultivation and gathering of the growing fruits, as an indemnity for his part of the expenses of cultivation and the net proceeds; the possessor in good faith who for any reason whatever should refuse to accept this concession, shall lose the right to be indemnified in any other manner.524 b. Right to be reimbursed (1) Necessary and useful expenses Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.525 If the useful improvements can be removed without damage to the principal thing, the possessor in good faith may remove them, unless the person who recovers the possession exercises the option under paragraph 2 of the preceding article. (2) Expenses for pure luxury Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended.526 2. Possessor in Bad Faith He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.527 The possessor in bad faith shall reimburse the fruits received and those which the legitimate possessor could have received, and shall have a right only to the expenses mentioned in paragraph 1 of article 546528 and in article 443.529 The expenses incurred in 524

Art. 545 Art. 546 526 Art. 548 527 Art. 449 528 supra 525

118

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.530 A possessor in good faith shall not be liable for the deterioration or loss of the thing possessed, except in cases in which it is proved that he has acted with fraudulent intent or negligence, after the judicial summons.531 A possessor in bad faith shall be liable for deterioration or loss in every case, even if caused by a fortuitous event. D. Loss or Unlawful Deprivation of a Movable The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.532 If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. Nothing in this Title, however, shall affect: xxx (3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special laws533 1. Period to Recover The ownership of movables prescribes through uninterrupted possession for four years in good faith. 529

See Reference Art. 549 531 Art. 552 532 Art. 559 533 Art. 1505 (3) 530

119

The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition. With regard to the right of the owner to recover personal property lost or of which he has been illegally deprived, as well as with respect to movables acquired in a public sale, fair, or market, or from a merchant's store the provisions of articles 559 and 1505 of this Code shall be observed.534 Movables possessed through a crime can never be acquired through prescription by the offender.535 Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years.536 Actions to recover movables shall prescribe eight years from the time the possession thereof is lost, unless the possessor has acquired the ownership by prescription for a less period, according to articles 1132, and without prejudice to the provisions of articles 559, 1505, and 1133.537 2. Finder of Lost Movable Whoever finds a movable, which is not treasure, must return it to its previous possessor. If the latter is unknown, the finder shall immediately deposit it with the mayor of the city or municipality where the finding has taken place. The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems best. If the movable cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at public auction eight days after the publication. Six months from the publication having elapsed without the owner having appeared, the thing found, or its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may be, to reimburse the expenses.538 If the owner should appear in time, he shall be obliged to pay, as a reward to the finder, one-tenth of the sum or of the price of the thing found.539 534

Art. 1132 Art. 1133 536 Art. 1134 537 Art. 1140 538 Art. 719 535

120

3. Distinguished from voidable title Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title.540 E. In concept of owner, holder, in one’s own name, in name of another541 a) In the concept of owner – possessor of the thing or right , by his actions, is considered or is believed by other people as the owner, regardless of the good or bad faith of the possessor b)

In the concept of holder – possessor holds it merely to keep or enjoy it, the ownership pertaining to another person; possessor acknowledges in another a superior right which he believes to be ownership.

c) In one’s own name – where possessor claims the thing for himself d) In the name of another – for whom the thing is held by the possessor F. Rights of the possessor 1. Right to be respected in his possession; if disturbed – protected by means established by law; spoliation 2. Possession acquired and enjoyed in concept of owner can serve as title for acquisitive prescription a. Possession has to be in concept of owner, public, peaceful and uninterrupted b. Title short of ownership 3. Person in concept of owner has in his favor the legal presumption of just title542 4. Possession of real property presumes that movables are included

539

Art. 720 Art. 1506 541 None of these holders assert a claim of ownership in himself over the thing but they may be considered as possessors in the concept of owner, or under claim of ownership, with respect to the right they respectively exercise over the thing. 542 prima facie 540

121

5. Co-possessors deemed to have exclusively possessed part which may be allotted to him; interruption in whole or in part shall be to the prejudice of all 6. Possessor in good faith entitled to fruits received before possession is legally interrupted543 7. Possessor in good faith entitled to part of net harvest and part of expenses of cultivation if there are natural or industrial fruits544; owner has option to require possessor to finish cultivation and gathering of fruits and give net proceeds as indemnity for his part of expenses; if possessor in good faith refuses – barred from indemnification in other manner 8. Possessor has right to be indemnified for necessary expenses whether in good faith or in bad faith; Possessor in good faith has right of retention over thing unless necessary expenses paid by owner 9. Possessor in good faith has right to be reimbursed for useful expenses with right of retention; owner has option of paying expenses or paying the increase in value of property which thing acquired by reason of useful expenses 10. Possessor in good faith may remove improvements if can be done w/o damage to principal thing- unless owner exercises option of paying; possessor in bad faith not entitled. 11. Possessor in good faith and bad faith may not be entitled to payment for luxurious expense but may remove them provided principal is not injured – provided owner does not refund the amount expended 12. Improvements caused by nature or time to inure to the benefit of person who has succeeded in recovering possession 13. Wild animals possessed while in one’s control; domesticated – possessed if they retain habit of returning back home 14. One who recovers, according to law, possession unjustly lost is deemed to have enjoyed it w/o interruption

543 544

natural and industrial – gathered or severed; civil – accrue daily proportionate to time of possession

122

G. Loss/termination A possessor may lose his possession: (1) By the abandonment of the thing;545 (2) By an assignment546 made to another either by onerous or gratuitous title; (3) By the destruction or total loss of the thing547, or because it goes out of commerce; (4) By the possession of another, subject to the provisions of article 537548, if the new possession has lasted longer than one year549. But the real right of possession is not lost till after the lapse of ten years.550 (5) by recovery by lawful owner or possessor551 VIII. Usufruct A. Characteristics 1. it is a real right; 2. it is of temporary duration; 3. it is transmissible; 4. it may be constituted on real or personal property, consummable or non – consummable, tangible or intangible, the ownership of which is vested on another B. Classification 1.

As to whether or not impairment of object is allowed: - normal;

545

the voluntary renunciation of all rights which a person has over a thing thereby allowing a third person to acquire ownership or possession thereof by means of occupancy; By voluntary abandonment, thing becomes without an owner or possessor and is converted into res nullius and may thus be acquired by a third person by occupation; Abandonment which converts the thing into res nullius, ownership of which may be acquired by occupation can hardly apply to land, as to which said mode of acquisition is not available 546 the complete transmission of the thing or right to another by any lawful manner; -the effect is that he who was the owner or possessor is no longer so 547 a thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown, or cannot be recovered 548 see Reference 549 this refers to possession de facto and not de jure 550 Art. 555 551 recovered in an reivindicatory action or in an action to recover the better right of possession

123

- abnormal 2.

As to origin: - legal; - voluntary; - mixed

3.

As to number of usufructuaries: - simple; - multiple which may either be : -simultaneous; -successive

4.

As to terms or conditions: - pure; - with a term or period; - conditional

5. 6.

As to quality or kind of object: - of things; - of rights As to quantity or extent of object - total; - partial

7.

as to extent of owner’s patrimony; - universal; - particular C. Rights and obligations of usufructuary Rights of usufructuary:

1. Right to civil, natural & industrial fruits of property 2. Right to hidden treasure as stranger 3. Right to transfer usufructuary rights – gratuitous or onerous; but is co-terminus with term of usufruct; fruits proportionate at duration of usufruct; but can’t do acts of ownership such as alienation or conveyance except when property is:

124

a. b. c.

consumable intended for sale appraised when delivered; if not appraised & consumable – return same quality552

4. Right not exempt from execution and can be sold at public auction by owner 5. Naked owner still have rights but w/o prejudice to usufructuary; may still exercise act of ownership –bring action to preserve 6. Right to fruits growing at time usufruct begins; growing fruits at termination of usufruct belongs to owner 7. Right to necessary expenses from cultivation at end of usufruct 8. Right to enjoy accessions & servitudes in its favor & all benefits inherent therein 9. Right to make use of dead trunks of fruit bearing trees & shrubs or those uprooted/cut by accident but obliged to plant anew 10. Right of usufructuary of woodland – ordinary cutting as owner does habitually or custom of place; cannot cut down trees unless it is for the restoration of improvement of things in usufruct – must notify owner first 11. Right to leave dead, uprooted trees at the disposal of owner with right to demand that owner should clear & remove them – if caused by calamity or extraordinary event – impossible to replace them 12. Right to oblige owner to give authority & furnish him proofs if usufruct is extended to recover real property or real right 13. Right to necessary expenses 14. Right to introduce useful & luxurious expenses but with no obligation of reimbursement on part of owner; may remove improvement if can be done w/o damage 15. Right to set-off improvements against damages he made against the property 16. Right to administer when property is co-owned; if co-ownership cease – usufruct of part allotted to co-owner belongs to usufructuary – not affected

552

mutuum

125

17. Right to demand the increase in value of property if owner did not spend for extraordinary repairs when urgent & necessary for preservation of thing Obligations of usufructuary553 1. Pay expenses to 3rd persons for cultivation & production at beginning of usufruct; whose who have right to fruits should reimburse expenses incurred 2. Generally, usufructuary has no liability when due to wear & tear, thing deteriorates, obliged to return in that state; except when there is fraud or negligence, then he shall be liable 3. Before entering into usufructuary: a) b)

Notice of inventory of property (appraisal of movables & description) Posting of security554

4. Take care of property as a good father of family 5. Obliged to make ordinary repairs – wear & tear due to natural use of thing and are indispensable for preservation; owner may make them at expense of usufructuary – during existence of usufruct 6. Obliged to make expenses due to his fault; cannot escape by renouncing usufruct 7. Pay legal interest from extraordinary expenses made by owner 8. Payment of expenses, charges & taxes affecting fruits 9. Payment of interest on amount paid by owner charges on capital 10. Obliged to notify owner of act of 3rd person prejudicial to rights of ownership – he is liable if he does not do so for damages – as if it was caused through his own fault 11. Expenses, cost & liabilities in suits brought with regard to usufructuary – borne by usufructuary

553

Arts. 583-602 1. not applicable to parents who are usufructuary of children except when 2nd marriage contracted 2. excused – allowed by owner, not required by law or no one will be injured

554

126

D. Rights of the owner 1. 2. 3. 4.

Alienate thing Can’t alter form or substance Can’t do anything prejudicial to usufructuary Construct any works Y make any improvement provided it does not diminish value or usufruct or prejudice right of usufructuary E. Extinction/termination

1. 2. 3. 4. 5. 6. 7. 8.

Death of the usufructuary; Expiration of period or fulfillment of condition; Merger; Renunciation; Loss of the thing; Termination of right of owner; Prescription; Other causes – such as emancipation of the child555

IX. Easements An easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. The immovable in favor of which the easement is established is called the dominant estate; that which is subject thereto, the servient estate.556 Easements may be continuous or discontinuous, apparent or nonapparent. Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man. Discontinuous easements are those which are used at intervals and depend upon the acts of man. 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. Nonapparent easements are those which show no external indication of their existence.557 555

Art. 603 A usufruct is not extinguished by bad use of the thing in usufruct 556 Art. 613

127

Easements are also positive or negative. A positive easement is one which imposes upon the owner of the servient estate the obligation of allowing something to be done or of doing it himself, and a negative easement, that which prohibits the owner of the servient estate from doing something which he could lawfully do if the easement did not exist.558 A. Characteristics a) It is a real right but will affect third persons only when duly registered b) It is enjoyed over another immovable, never on one’s own property c) It involves two neighboring estates (in case of real easements) d) It is inseparable from the estate to which it is attached, and, therefore, cannot be alienated independently of the estate e) It is indivisible for it is not affected by the division of the estate between two or more persons f) It is a right limited by the needs of the dominant owner or estate, without possession g) It cannot consist in the doing of an act unless the act is accessory in relation to a real easement h) It is a limitation on the servient owner’s rights of ownership for the benefit of the dominant owner; and, therefore, it is not presumed. B. Classification 1. Legal easements559 a. Right of way560

557

Art. 615 Art. 616 559 they are easements imposed by law and which have for their object either public use or the interest of private persons 560 Requisites: 1. Claimant must be an owner of enclosed immovable or one with real right 2. There must be no adequate outlet to a public highway 3. Right of way must be absolutely necessary 4. Isolation must not be due to the claimant’s own act 5. Easement must be established at the point least prejudicial to the servient estate 6. Payment of proper indemnity Special cause of extinction: the opening of a public road, or joining the dominant tenement to another with exit on a public road. The extinction in NOT automatic. There must be a demand for extinction coupled with tender of indemnity by the servient owner. 558

128

The right granted to the owner of an estate which is surrounded by other estates belonging to other persons and without an adequate outlet to a public highway to demand that he be allowed a passageway throughout such neighboring estates after payment of proper indemnity. 2. Voluntary easements561 Constituted by the will of the parties or of a testator. The owner possessing capacity to encumber property may constitute voluntary servitude. If there are various owners, all must consent; but consent once given is not revocable. a. Effect of Zoning ordinance The existence of a zoning ordinance is immaterial. The ordinance might be repealed at any time; and if so repealed, this prohibition would not be enforceable against new purchasers of the land, who may be ignorant thereof.562 C. Modes of Acquiring Easements 1. Compulsory easements Continuous and apparent easements are acquired either by virtue of a title or by prescription of ten years.563 In order to acquire by prescription the easements referred to in the preceding article, 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.564 Continuous nonapparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of a title.565

561

Art. 688; see Reference see In re: Petition for cancellation of condition annotated on Transfer certificate of title no. 54417, Quezon city, Dra. Rafaela v. Trias, vs. Gregorio Araneta, Inc., G.R. No. L-20786, October 30, 1965 563 Art. 620 564 Art. 621 565 Art. 622 562

129

The absence of a document or proof showing the origin of an easement which cannot be acquired by prescription may be cured by a deed of recognition by the owner of the servient estate or by a final judgment.566 The existence of an apparent sign of easement between two 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 estates is divided, the contrary should be provided in the title of conveyance of either of them, or the sign aforesaid should be removed before the execution of the deed. This provision shall also apply in case of the division of a thing owned in common by two or more persons.567 2. Easement of light and view When the distances in article 670568 are not observed, the owner of a wall which is not party wall, adjoining a tenement or piece of land belonging to another, can make in it openings to admit light at the height of the ceiling joints or immediately under the ceiling, and of the size of thirty centimeters square, and, in every case, with an iron grating imbedded in the wall and with a wire screen. Nevertheless, the owner of the tenement or property adjoining the wall in which the openings are made can close them should he acquire part-ownership thereof, if there be no stipulation to the contrary. He can also obstruct them by constructing a building on his land or by raising a wall thereon contiguous to that having such openings, unless an easement of light has been acquired.569 No windows, apertures, balconies, or other similar projections which afford a direct view upon or towards an adjoining land or tenement can be made, without leaving a distance of two meters between the wall in which they are made and such contiguous property. Neither can side or oblique views upon or towards such conterminous property be had, unless there be a distance of sixty centimeters. The nonobservance of these distances does not give rise to prescription.570

566

Art. 623 Art. 624 568 See Reference 569 Art. 669 570 Art. 670 567

130

The distance referred to in the preceding article shall be measured in cases of direct views from the outer line of the wall when the openings do not project, from the outer line of the latter when they do, and in cases of oblique view from the dividing line between the two properties.571 The provisions of article 670572 are not applicable to buildings separated by a public way or alley, which is not less than three meters wide, subject to special regulations and local ordinances.573 Whenever by any title a right has been acquired to have direct views, balconies or belvederes overlooking an adjoining property, the owner of the servient estate cannot build thereon at less than a distance of three meters to be measured in the manner provided in article 671.574 Any stipulation permitting distances less than those prescribed in article 670 is void.575 X. Nuisance A nuisance is any act, omission, establishment, business, condition of property, or anything else which: (1) Injures or endangers the health or safety of others; or (2) Annoys or offends the senses; or (3) Shocks, defies or disregards decency or morality; or (4) Obstructs or interferes with the free passage of any public highway or street, or any body of water; or (5) Hinders or impairs the use of property.576 XI. Action to Quiet Title Whenever there is a cloud on title to real property or any interest therein, by reason of any 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 may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title. An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein.577 571

Art. 671 supra 573 Art. 672 574 supra 575 Art. 673 576 Art. 694 572

131

The plaintiff must have legal or equitable title to, or interest in the real property which is the subject matter of the action. He need not be in possession of said property.578 There may also be an action to quiet title or remove a cloud therefrom when the contract, instrument or other obligation has been extinguished or has terminated, or has been barred by extinctive prescription.579 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 the plaintiff's benefit.580 The principles of the general law on the quieting of title are hereby adopted insofar as they are not in conflict with this Code.581 XII. Modes of Acquiring Ownership Ownership is acquired by occupation and by intellectual creation. Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition. They may also be acquired by means of prescription.582 A. Occupation Things appropriable by nature which are without an owner, such as animals that are the object of hunting and fishing, hidden treasure and abandoned movables, are acquired by occupation.583 B. Donation 1. Definition Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.584 577

Art. 476 Art. 477 579 Art. 478 580 Art. 479 581 Art. 480 582 Art. 712 583 Art. 713 578

132

When a person gives to another a thing or right on account of the latter's merits or of the services rendered by him to the donor, provided they do not constitute a demandable debt, or when the gift imposes upon the donee a burden which is less than the value of the thing given, there is also a donation585 Acceptance must be made during the lifetime of the donor and of the donee.586 2. Characteristics a. Extent to which donor may donate property587 A person may not donate more than he can give by will and a person may not receive by way of donation more than what the donor is allowed by law to give by will; otherwise the donation shall be inofficious and shall be reduced with regard to the excess.588 b. Reservations and reversions589 The donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, 584

Art. 725 Art. 726 586 Art. 746 587 What may be given: All or part of donor’s present property provided he reserves sufficient means for the support of the ff: a) himself b) relatives who by law are entitled to his support c) legitimes shall not be impaired when w/o reservation or if inofficious, may be reduced on petition of persons affected Except: conditional donation & donation mortis causa Except: future property 588 See Art. 752 589 1. Future property cannot be donated. 2. Present property that can be donated: a) if the donor has forced heirs: he cannot give or receive by donation more than he can give of receive by will b) if the donor has no forced heirs: donation may include all present property provided he reserves in full ownership or in usufruct: 1) the amount necessary to support him, and 2) those relatives entitled to support from him 3) property sufficient to pay the donor’s debt contracted prior to the donation. 3. Donation should not prejudice creditors 4. Donee must reserve sufficient means for his support and for his relatives which are entitled to be supported by him. 585

133

are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced in petition of any person affected.590 The donor may provide for reversion, whereby the property donated shall “go back” to the donor or some other person.591 3. Kinds a. Donation Inter Vivos592 When the donor intends that the donation shall take effect during the lifetime of the donor, though the property shall not be delivered till after the donor's death, this shall be a donation inter vivos. The fruits of the property from the time of the acceptance of the donation, shall pertain to the donee, unless the donor provides otherwise.593 b. Donation By Reason of Marriage 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.594 These donations are governed by the rules on ordinary donations established in Title III of Book III of the Civil Code, insofar as they are not modified by the following articles595 cases:

A donation by reason of marriage may be revoked by the donor in the following

(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 Article 81;596 (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; 590

A donor may donate all his present property or part thereof provided he reserves sufficient property in ownership or in usufruct for the support of himself and of all relatives who are entitled to be supported by him at the time of the perfection of the donation 591 See Art. 757 A reversion in favor of the donor may be validly established “for any case and circumstances”; If the revision is in favor of other persons, such other persons must be “living at the time of the donation 592 In case of doubt with regard to nature of donation: inter vivos 593 Art. 729 594 Art. 82, FC 595 Art. 83, ibid 596 supra

134

(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 Civil Code on donations in general597 c. Donation Mortis Causa Donations which are to take effect upon the death of the donor partake of the nature of testamentary provisions, and shall be governed by the rules established in the Title on Succession.598 d. Onerous Donation Donations with an onerous cause shall be governed by the rules on contracts and remuneratory donations by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed.599 e. Simple, modal, conditional a. simple - gratuitous b. conditional - valuable consideration is imposed but value is less than value of thing donated c. modal – imposes upon the donee a burden which is less than the value of the thing donated 4. Formalities required a. How made and accepted Donations of movable property: a. With simultaneous delivery of property donated:

597

Art. 86, ibid Art. 728 Title conveyed upon donor’s death Void if donor survives done Always revocable Must comply with the formalities required by law for the execution of wills 599 Art. 733 598

135

i. ii.

it may be oral/written – P5,000 or less; if value exceeds P5,000 – written in public or private document

b.Without simultaneous delivery: The donation and acceptance must be written in a public or private instrument, regardless of value Donation of immovable property: a. must be in a public instrument specifying the property donated and the burdens assumed by donee, regardless of value b. acceptance must be either: i. in the same instrument; or ii. in another public instrument, notified to the donor in authentic form, and noted in both deeds b. Perfection600 c. Differences between formalities for donation of real, personal properties (1) Movables The donation of a movable may be made orally or in writing. An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated. If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void.601 (2) Immovables In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. 600 601

See (a) How made and accepted, supra Art. 748

136

The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.602 5. Qualifications of donor, donee Donor: - All persons who may contract and dispose of their property Donee: 1. natural & juridical persons w/c are not especially disqualified by law 2. minors & other incapacitated a) by themselves -

if pure & simple donation if it does not require written acceptance

b) by guardian, legal representatives if needs written acceptance 1. natural guardian – not more than P50,000 2. court appointed - more than P50,000 3. conceived& unborn child, represented by person who would have been guardian if already born 6. Effects of donation/limitations a. In general Effects of donation: 1. donee may demand the delivery of the thing donated 2. donee is subrogated to the rights of the donor in the property 3. in donations propter nuptias, the donor must release the property from encumbrances, 602

Art. 749

137

except servitudes 4. donor’s warranty exists if a. b. c. d.

expressed donation is propter nuptias donation is onerous donor is in bad faith

5. when the donation is made to several donees jointly, they are entitled to equal portions, without accretion, unless the contrary is stipulated. Limitations on donation of property: 1. Future property cannot be donated. 2. Present property that can be donated: a) if the donor has forced heirs: he cannot give or receive by donation more than he can give of receive by will b) if the donor has no forced heirs: donation may include all present property provided he reserves in full ownership or in usufruct: 1) the amount necessary to support him, and 2) those relatives entitled to support from him 3) property sufficient to pay the donor’s debt contracted prior to the donation. 3. Donation should not prejudice creditors 4. Donee must reserve sufficient means for his support and for his relatives which are entitled to be supported by him. b. Double donations RULE: Priority in time, priority in right

1. If movable – one who first take possession in good faith 2. If immovable – one who recorded in registry of property in good faith - no inscription, one who first took possession in good faith - in absence thereof, one who can present oldest title

138

c. Excessive/inofficious 1. shall be reduced with regards to the excess 2. action to reduce to be filed by heirs who have right to legitimate at time of donation 3. donees/creditors of deceased donor cannot ask for reduction of donation 4. if there are 2 or more donation: recent ones shall be suppressed 5. if 2 or more donation at same time – treated equally & reduction is pro rata but donor may impose preference which must be expressly stated in donation d. Scope of amount The donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced in petition of any person affected.603 Donations cannot comprehend future property. By future property is understood anything which the donor cannot dispose of at the time of the donation.604 The provisions of article 750605 notwithstanding, no person may give or receive, by way of donation, more than he may give or receive by will. The donation shall be inofficious in all that it may exceed this limitation.606 e. In fraud of creditors There being no stipulation regarding the payment of debts, the donee shall be responsible therefor only when the donation has been made in fraud of creditors. The donation is always presumed to be in fraud of creditors, when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation.607

603

Art. 750 Art. 751 605 See Reference 606 Art. 752 607 Art. 759 604

139

7. Void Donations (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation; (2) Those made between persons found guilty of the same criminal offense, in consideration thereof; (3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donor and donee may be proved by preponderance of evidence in the same action.608 Incapacity to succeed by will shall be applicable to donations inter vivos.609 The following are incapable of succeeding: (1) The priest who heard the confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period; (2) The relatives of such priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong; (3) A guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the guardianship have been approved, even if the testator should die after the approval thereof; nevertheless, any provision made by the ward in favor of the guardian when the latter is his ascendant, descendant, brother, sister, or spouse, shall be valid; (4) Any attesting witness to the execution of a will, the spouse, parents, or children, or any one claiming under such witness, spouse, parents, or children; (5) Any physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness; (6) Individuals, associations and corporations not permitted by law to inherit.610

608

Art. 739 Art. 740 610 Art. 1027 609

140

8. Revocation611 or reduction612 a. Grounds for revocation613 i. birth, appearance, or adoption of a child; ii.. non – fulfillment of a resolutory condition imposed by the donor; iii. ingratitude of the donee614 Grounds for reduction615 i. failure of the donor to reserve sufficient means for support of himself or dependent relatives; ii. failure of the donor to reserve sufficient property to pay off his existing debts; iii. inofficiousness, that is, the donation exceeds that which the donor can give by will; b. How done Birth of child

Non-fulfillment of condition

Ingratitude

Ipso jure revocation, no need needs court action needs court action for action., court decision is merely declaratory Extent: portion which may Extent: whole portion but court Extent: Whole portion returned impair legitime of heirs may rule partial revocation only Property must be returned Property in excess Property to be returned Alienation/mortgages done prior to recording in Register of Deeds: If already sold or cannot be Alienations/mortgages imposed returned – the value must be are void unless registered with returned Register of Deeds If mortgaged – donor may 611

Prior ones are void; demand value of property when alienated and can’t be recovered or redeemed from 3rd persons

affects the whole donation and is allowed during the lifetime of the donor applies only to donation inter vivos not applicable to onerous donations 612 generally affects a portion only of the donation and is allowed during the lifetime of the donor or after his death 613 Art. 760 614 Donee commits offense against person, honor, property of donor, spouse, children under his parental authority Donee imputes to donor any criminal offense or any cat involving moral turpitude even if he should prove it unless act/crime has been committed against donee himself, spouse or children under his parental authority Donee unduly refuses to give support to donor when legally or morally bound to give support to donor 615 ibid

141

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

Fruits to be returned at filing of complainant Prescription is 4 years from Prescription is 1 year from non-fulfilment knowledge of fact and it was possible for him to bring action Action cannot be renounced Action cannot be renounced in advance Right of action transmitted to Right of action at instance of Heirs can’t file action heirs donor but may be transmitted to heirs Action extends to donee’s heirs Action does not extend to donee’s heirs

c. Effects Upon the revocation or reduction of the donation by the birth, appearance or adoption of a child, the property affected shall be returned or its value if the donee has sold the same.616 In this case, the property donated shall be returned to the donor, the alienations made by the donee and the mortgages imposed thereon by him being void, with the limitations established, with regard to third persons, by the Mortgage Law and the Land Registration laws.617 Although the donation is revoked on account of ingratitude, nevertheless, the alienations and mortgages effected before the notation of the complaint for revocation in the Registry of Property shall subsist. Later ones shall be void.618 In the case referred to in the first paragraph of the preceding article, the donor shall have a right to demand from the donee the value of property alienated which he cannot recover from third persons, or the sum for which the same has been mortgaged. The value of said property shall be fixed as of the time of the donation.619 When the donation is revoked for any of the causes stated in article 760, 620 or by reason of ingratitude, or when it is reduced because it is inofficious, the donee shall not return the fruits except from the filing of the complaint. 616

Art. 762 Art. 764, par. 2 618 Art. 766 619 Art. 767 617

142

If the revocation is based upon noncompliance with any of the conditions imposed in the donation, the donee shall return not only the property but also the fruits thereof which he may have received after having failed to fulfill the condition.621 Donations which in accordance with the provisions of article 752,622 are inofficious, bearing in mind the estimated net value of the donor's property at the time of his death, shall be reduced with regard to the excess; but this reduction shall not prevent the donations from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits. For the reduction of donations the provisions of this Chapter and of articles 911 and 912623 of this Code shall govern. d. Prescription The donation is revoked ipso jure by operation of law, “by the happening” of any of the events mentioned in article 760624; The period to bring an action is four years, and the day from which the period shall begin to run depends upon the cause for the revocation or reduction; If the donor dies within the period of prescription, the action is transmitted to his legitimate and illegitimate children and descendants; The surviving spouse and the ascendants of the donor are not included. c. Innofficious Donations Every donation inter vivos, made by a person having no children or descendants, legitimate or legitimated by subsequent marriage, or illegitimate, may be revoked or reduced as provided in the next article, by the happening of any of these events: (1) If the donor, after the donation, should have legitimate or legitimated or illegitimate children, even though they be posthumous; (2) If the child of the donor, whom the latter believed to be dead when he made the donation, should turn out to be living;

620

see reference Art. 768 622 supra 623 See Reference 624 ibid 621

143

(3) If the donor subsequently adopt a minor child.625 In the cases referred to in the preceding article, the donation shall be revoked or reduced insofar as it exceeds the portion that may be freely disposed of by will, taking into account the whole estate of the donor at the time of the birth, appearance or adoption of a child.626 Donations which in accordance with the provisions of article 752, are inofficious, bearing in mind the estimated net value of the donor's property at the time of his death, shall be reduced with regard to the excess; but this reduction shall not prevent the donations from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits. For the reduction of donations the provisions of this Chapter and of articles 911 and 912 of this Code shall govern.627 Only those who at the time of the donor's death have a right to the legitime and their heirs and successors in interest may ask for the reduction or inofficious donations. Those referred to in the preceding paragraph cannot renounce their right during the lifetime of the donor, either by express declaration, or by consenting to the donation. The donees, devisees and legatees, who are not entitled to the legitime and the creditors of the deceased can neither ask for the reduction nor avail themselves thereof.628 If, there being two or more donations, the disposable portion is not sufficient to cover all of them, those of the more recent date shall be suppressed or reduced with regard to the excess.629 Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law.630 "Decedent" is the general term applied to the person whose property is transmitted through succession, whether or not he left a will. If he left a will, he is also called the testator.631 625

Art. 760 Art. 761 627 Art. 771 628 Art. 772 629 Art. 773 630 Art. 774 631 Art. 775 626

144

d. Ingratitude The donation may also be revoked at the instance of the donor, by reason of ingratitude in the following cases: (1) If the donee should commit some offense against the person, the honor or the property of the donor, or of his wife or children under his parental authority; (2) If the donee imputes to the donor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the donee himself, his wife or children under his authority; (3) If he unduly refuses him support when the donee is legally or morally bound to give support to the donor.632 The action granted to the donor by reason of ingratitude cannot be renounced in advance. This action prescribes within one year, to be counted from the time the donor had knowledge of the fact and it was possible for him to bring the action.633 PRESCRIPTION I. Definition By prescription, one acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law.634 A. Acquisitive635 Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law.636 1. Characteristics

632

Art. 765 Art. 769 634 Art. 1106 635 one acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law. 636 Art. 1117 633

145

1. Relationship between the occupant and the land in terms of possession is capable of producing legal consequences; it is the possessor who is the actor 2. Requires possession by a claimant who is not the owner 3. Applicable to ownership and other real rights 4. Vests ownership or other real rights in the occupant 5. Results in the acquisition of ownership or other real rights in a person as well as the loss of said ownership or real rights in another 6. Can be proven under the general issue without its being affirmatively pleaded 2. Ordinary637 a. Good Faith The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership.638 b. Just title For the purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right.639 The title for prescription must be true and valid.640 3. Extraordinary The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition.641 Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith.642 4. Requisites

637

requires possession of things in good faith and with just title for the time fixed by law Art. 1127 639 Art. 1129 640 Art. 1130 641 Art. 1132, 2nd par. 642 Art. 1137 638

146

Possession has to be in the concept of an owner, public, peaceful and uninterrupted.643 Acts of possessory character executed in virtue of license or by mere tolerance of the owner shall not be available for the purposes of possession.644 Possession is interrupted for the purposes of prescription, naturally or civilly.645 Possession is naturally interrupted when through any cause it should cease for more than one year. The old possession is not revived if a new possession should be exercised by the same adverse claimant.646 If the natural interruption is for only one year or less, the time elapsed shall be counted in favor of the prescription.647 Civil interruption is produced by judicial summons to the possessor.648 Judicial summons shall be deemed not to have been issued and shall not give rise to interruption: (1) If it should be void for lack of legal solemnities; (2) If the plaintiff should desist from the complaint or should allow the proceedings to lapse; (3) If the possessor should be absolved from the complaint. In all these cases, the period of the interruption shall be counted for the prescription.649 Any express or tacit recognition which the possessor may make of the owner's right also interrupts possession.650 5. Period 643

Art. 1118 Art. 1119 645 Art. 1120 646 Art. 1121 647 Art. 1122 648 Art. 1123 649 Art. 1124 650 Art. 1125 644

147

The ownership of movables prescribes through uninterrupted possession for four years in good faith. The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition. With regard to the right of the owner to recover personal property lost or of which he has been illegally deprived, as well as with respect to movables acquired in a public sale, fair, or market, or from a merchant's store the provisions of articles 559 and 1505 651 of this Code shall be observed.652 Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years.653 In the computation of time necessary for prescription the following rules shall be observed: (1) The present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor or predecessor in interest; (2) It is presumed that the present possessor who was also the possessor at a previous time, has continued to be in possession during the intervening time, unless there is proof to the contrary; (3) The first day shall be excluded and the last day included.654 6. What cannot be acquired by acquisitive prescription Movables possesses through a crime can never be acquired through prescription by the offender655 but his successors-in-interest may claim prescription, although for purposes of computing the period of prescription, the possession by the offender may not be tacked to the successor’s possession656 Lands registered under the Torrens system cannot be acquired by prescription657but this rule can be invoked only by one under whose name658 it was registered.659 651

See Reference Art. 1132 653 Art. 1134 654 Art. 1138 655 Art. 1133 656 See Arts. 533-534 657 Alfonso vs.Jaime, L-12754, Jan. 30, 1960 652

148

B. Extinctive660 1. Characteristics 1. One does not look to the act of the possessor but to the neglect of the owner 2. Requires inaction of the owner or neglect of one with a right to bring his action 3. Applies to all kinds of rights, whether real or personal 4. Produces the extinction of rights or bars a right of action 5. Results in the loss of a real or personal right, or bars the cause of action to enforce said right 6. Should be affirmatively pleaded and proved to bar the action or claim of the adverse party 2. Requisites 1. 2. 3. 4.

capacity to acquire by prescription a thing capable of acquisition by prescription possession of thing under certain conditions lapse of time provided by law 3. Periods Movables 1. Good Faith 4 years 2. Bad Faith 8 years661

Immovables 10 years 30 years

II. No Prescription Applicable A. By Offender or under whose predecessor’s name Jocson, et al. vs. Silos,L-12998, July 25, 1960 660 rights and actions are lost through the lapse of time in the manner and under the conditions laid down by law. 661 except where the loss was due to a crime in which case, the offender can not acquire the movable by prescription, and an action to recover it from him is imprescriptible. 658 659

149

Movables possessed through a crime can never be acquired through prescription by the offender.662 B. Registered Lands – PD 1529663 C. The following rights, among others, are not extinguished by prescription: 1. Action legal to demand a right of way The owner, or any person who by virtue of a real right may cultivate or use any immovable, which is surrounded by other immovables pertaining to other persons and without adequate outlet to a public highway, is entitled to demand a right of way through the neighboring estates, after payment of the proper indemnity. Should this easement be established in such a manner that its use may be continuous for all the needs of the dominant estate, establishing a permanent passage, the indemnity shall consist of the value of the land occupied and the amount of the damage caused to the servient estate. In case the right of way is limited to the necessary passage for the cultivation of the estate surrounded by others and for the gathering of its crops through the servient estate without a permanent way, the indemnity shall consist in the payment of the damage caused by such encumbrance. This easement is not compulsory if the isolation of the immovable is due to the proprietor's own acts.664 2. To abate a nuisance665 D. Action to quiet title if plaintiff in possession If the plaintiff is in possession of the property, the action does not prescribe.666

662

Art. 1133 See reference 664 Art. 649 665 Art. 1143 666 Reason: While the owner continues to be liable to an action, proceeding or suit upon the adverse claim, he has a continuing right to be given aid by the court to ascertain and determine the nature of such claim and its effect on his title, or to assert any superior equity in his favor. He may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. 663

150

E. Void contracts The action or defense for the declaration of the inexistence of a contract does not prescribe.667 F. Action to demand partition No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned. Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement. A donor or testator may prohibit partition for a period which shall not exceed twenty years. Neither shall there be any partition when it is prohibited by law. No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership.668 1. Distinguished from laches Laches or “Stale demands Failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.

LACHES

667 668

PRESCRIPTION

Art. 1410 Art. 494

151

1. concerned with effect of delay

1. concerned with fact of delay

2. question of inequity of permitting the claim to be enforced

2. question matter of time

3. not statutory

3. statutory

4. applies in equity

4. applies at law

5. not based on a fixed time

5. based on a fixed time

or

G. Property of public dominion a. For public use669 b. For public service670 c. For the development of the national wealth. III. Prescription or Limitation of Actions A. To recover movables Actions to recover movables shall prescribe eight years from the time the possession thereof is lost, unless the possessor has acquired the ownership by prescription for a less period, according to articles 1132, and without prejudice to the provisions of articles 559, 1505, and 1133.671 B. To recover immovables Real actions over immovables prescribe after thirty years. This provision is without prejudice to what is established for the acquisition of ownership and other real rights by prescription.672

C. Other actions 669

e.g. roads, canals, rivers e.g. public buildings 671 Art. 1140; see Reference for the Articles mentioned 672 Art. 1141 670

152

A mortgage action prescribes after ten years.673 The following rights, among others specified elsewhere in this Code, are not extinguished by prescription: (1) To demand a right of way, regulated in article 649;674 (2) To bring an action to abate a public or private nuisance.675 The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment.676 The following actions must be commenced within six years: (1) Upon an oral contract; (2) Upon a quasi-contract.677 The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict; However, when the action arises from or out of any act, activity, or conduct of any public officer involving the exercise of powers or authority arising from Martial Law including the arrest, detention and/or trial of the plaintiff, the same must be brought within one (1) year.678 The following actions must be filed within one year: (1) For forcible entry and detainer; (2) For defamation.679

673

Art. 1142 See reference 675 Art. 1143 676 Art. 1144 677 Art. 1145 678 Art. 1146 679 Art. 1147 674

153

The limitations of action mentioned in articles 1140 to 1142, and 1144 to 1147 680 are without prejudice to those specified in other parts of this Code, in the Code of Commerce, and in special laws.681 All other actions whose periods are not fixed in this Code or in other laws must be brought within five years from the time the right of action accrues.682 IV. Interruption The prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.683 V. Nuisance684 A. Definition685 B. Classification 1. Public nuisance - the doing of or the failure to do something that injuriously affects safety, health, or morals of the public, or works some substantial annoyance, inconvenience, or injury to the public; 2. Private nuisance - one which violates only private rights and produces damage to but one or few persons, and cannot be said to be public 3. Mixed nuisances: a thing may be a private nuisance without being a public one or a public nuisance without being a private one C. Remedies Remedies against a public nuisance686 1. prosecution under the Penal Code or any other local ordinance; 2. civil action; 3. abatement, without judicial proceedings687 680

see Reference Art. 1148 682 Art. 1149 683 Art. 1155 684 may be both public and private in character 685 See X. Nuisance, supra 686 Art. 699 681

154

Remedies against a private nuisance (1) A civil action; or (2) Abatement, without judicial proceedings.688 Any person injured by a private nuisance may abate it by removing, or if necessary, by destroying the thing which constitutes the nuisance, without committing a breach of the peace or doing unnecessary injury. However, it is indispensable that the procedure for extrajudicial abatement of a public nuisance by a private person be followed.689 OBLIGATIONS I. Definition A juridical necessity to give, to do or not to do690, one impressed with the character of enforceability. II. Elements of an Obligation 1) an active subject:691 the possessor of a right; he in whose favor the obligation is constituted; 2) a passive subject:692 he who has the duty of giving, doing or not doing; 3) the object or prestation:693 it may consist of giving a thing, or doing or not doing a certain act694and 687

The remedies are not exclusive but cumulative; All of the may be availed of by public officers, and the last two by private persons, if the nuisance is especially injurious to the latter Role of district health officer and others with respect to public nuisance: The district health officer is charged with the duty to see to it that one or all of the remedies against a public nuisance are availed of; He shall determine whether the third remedy, a is the best remedy against a public nuisance; the remedy must be availed of only with the intervention of the district health officer; It does not necessarily follow that the failure to observe art. 702 is in itself a ground for the award for damages; Art. 702 does not empower the district officer to abate a public nuisance to the exclusion of all other authorities; The action must be commenced by the city or municipal mayor; but a private person may also file an action if the public nuisance is especially injurious to him 688 Art. 705 689 Art. 706 690 Art. 1156 691 obligee or creditor 692 obligor or debtor 693 the subject matter of the obligation 694 Requisites:

155

4) the efficient cause:695 the reason why the obligation exists III. Different Kinds of Prestations 1. To give - consists in the delivery of a movable or an immovable thing, in order to create areal right or for the use of the recipient or for its simple possession or in order to return to itsowner 2. To do - all kinds of work or services, whether mental or physical 3. Not to do - consists in abstaining from some act, includes “not to give,” both beingnegative obligations IV. Classification of Obligations 1. According to criteria of demandability: a. Pure - one w/c is not subject to a condition or a term. b. Conditional - the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.696 c. W/ a term697 2. According to plurality of objects: a. Single b. Alternative - where the debtor must perform any of the prestations698 c. Facultative - where only one thing is due but the debtor has reserved the right to substitute it w/ another699 i. it must be licit ii. it must be possible, physically &juridically iii. it must be determinate or determinable iv. it must have a possible equivalent in money 695 vinculum or juridical tie 696 Art. 1181 A past thing can never be a condition. A condition is always future and uncertain. Past event unknown to the parties.-- It is really the knowledge of the event w/c constitutes the future. It is the knowledge w/c is future and uncertain. Effect of Impossible Condition.-- It annuls the obligation w/c depends upon them. The entire juridical tie is tainted by the impossible condition. 697 see Reference 698 The characteristic of alternative obligations is that, several objects being due, the fulfillment of one is sufficient (Tolentino) 699 Art. 1206

156

3. According to Plurality of subjects: a. Joint - one in w/c each of the debtors is liable only for a proportionate part of the debt or each creditor is entitled only to a proportionate part of the credit.700 b. Solidary - one in w/c the debtor is liable for the entire obligation or each creditor is entitled to demand the whole obligation. There is only one obligation is a solidary obligation. 4. According to Performance: a. Divisible - one susceptible of partial performance. b. Indivisible - one that must be performed in one act.701 5. According to Sanctions for Breach: a. Simple b. W/ a penal clause - an accessory undertaking to assume greater liability in case of breach.702

700

there are as many obligations as there are debtors multiplied by the number of creditors. Effects of Joint Liability: 1. The demand by one creditor upon one debtor, produces the effects of default only w/ respect to the creditor who demanded and the debtor on whom the demand was made, but not w/ respect to the others; 2. The interruption of prescription by the judicial demand of one creditor upon a debtor, does not benefit the other creditors nor interrupt the prescription as to other debtors. On the same principle, a partial payment or acknowledgement made by one of several joint debtors does not stop the running of the statute of limitations as to the others; 3. The vices of each obligation arising from the personal defect of a particular debtor or creditor does not affect the obligation or rights of the others; 4. The insolvency of a debtor does not increase the responsibility of his co-debtors, nor does it authorize a creditor to demand anything from his co-creditors; 5. In the joint divisible obligation, the defense of res judicata is not extended from one debtor to another. (Manresa.) 701 General rule: Obligation is indivisible w/c means that it has to be performed in one act singly. Why? Bec.the law provides so: Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither may the debtor be required to make partial payments. xxx (Art. 1248, par. 1.) Three Exceptions to the Rule on Indivisibility: 1. When the parties so provide. (Art. 1248, par. 1.) 2. When the nature of the obligation necessarily entails performance in parts. 3. Where the law provides otherwise. 702 The purpose is to strengthen the coercive force of the obligation. When a penal clause is present, damages do not have to be proved.

157

V. Sources of Obligations703 A. A single act or omission can give rise to different causes of action It is a source of obligation because of the provision in Article 100 of the Revised code that “every person criminally liable is also civilly liable.”704 B. Natural Obligations705 They are real obligations to which the law denies an action, but which the debtor may perform voluntarily. Examples of natural obligations enumerated under the Civil Code: 1. Performance after the civil obligation has prescribed; 2. Reimbursement of a third person for a debt that has prescribed; 3. Restitution by minor after annulment of contract; 4. Delivery by minor of money or fungible thing in fulfillment of obligation; 5. Performance after action to enforce civil obligation has failed; 6. Payment by heir of debt exceeding value of property inherited; and 7. Payment of legacy after will have been declared void. C. Extra-contractual Obligations706 1. Quasi-contract707 - That juridical relation resulting from a lawful, voluntary and unilateral act, and which has for its purpose, the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another

703

Obligations arise from: (1) Law (2) Contracts (3) Quasi-contracts (4) Acts or omissions punished by law and (5) Quasi-delicts. 704 Nolledo, Jose N., The Philippine Law on Obligations and Contracts Explained, 1980 Ed., p. 2 705 a. Based not on positive law but on equity and natural law b. Do not grant such right of action to enforce their performance 706 Arts. 2142 to 2194 707 obligation ex quasi-contractu

158

2 kinds: a. Negotiorumgestio - unauthorized management708 b. Solutioindebiti - undue payment 709 2. Quasi-delict/torts710 - It is a fault or act of negligence ( or omission of care ) which causes damage to another, there being no pre-existing contractual relations between the parties.711 VI. Nature and Effect of obligations A. Obligation to give712 1. A determinate or specific thing When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170,713 may compel the debtor to make the delivery.714 The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned.715 2. An indeterminate or generic thing If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.716

This takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority 709 This takes place when something is received when there is no right to demand it, and it was unduly delivered thru mistake 710 obligation ex quasi-delicto or ex quasi maleficio 711 Elements: a) There must be fault or negligence attributable to the person charged b) There must be damage or injury c) There must be a direct relation of cause and effect between the fault or negligence on the one hand and the damage or injury on the other hand ( proximate cause ) 712 Three Accessory Obligations: 1. To take care of the thing w/ the diligence of a good father of a family until actual delivery.(Art. 1163) 2. To deliver the fruits to the creditor (fruits produced after obligation to deliver arises).(Art. 1164) 3. To deliver accessions and accessories(Art. 1166) 713 See reference 714 Art. 1165, 1st par. 715 Art. 1166 716 Art. 1165 , 2nd par. 708

159

B. Obligation to do or not to do In Obligations to do If a person is obliged to do something, it must be done as promised, and it cannot be substituted by another act or forbearance against the obligee’s will717. If the obligor fails to do it, the same shall be executed at his cost718albeit he may not be compelled to do so personally or by himself. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone.719 In Obligations not to do When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense.720 C. Breaches of obligations 1. Complete failure to perform Debtor is unable to comply with his obligation because of fortuitous event.721 2. Default, delay or mora722 – no default unless creditors makes a demand GENERAL RULE:

There must be a demand (judicial or extra-judicial) before delay may be incurred. EXCEPTIONS:

1. 2. 3. 4.

obligation or law expressly so declares time is of the essence of the contract demand is useless as when obligor has rendered beyond his power to perform there is acknowledgment of default

717

see Art. 1244 see Chavez vs. Gonzales, 32 SCRA 547 719 Art. 1167 720 see Art. 1168; Cui vs. Chan, 41 Phil. 523 721 debtor is not liable for damages 722 Non-fulfillment of the obligation with respect to time 718

160

In reciprocal obligations, one party incurs in delay from the moment the other party fulfills his obligation, while he himself does not comply or is not ready to comply in a proper manner with what is incumbent upon him.723 a. Mora solvendi Delay of the debtor to perform his obligation. It may be: a. Ex re – obligation is to give b. Ex persona – obligation is to do724 b. Mora accipiendi Delay of the creditor to accept the delivery of the thing w/c is the object of the obligation c. Compesatiomorae Delay of the parties or obligors in reciprocal obligation 3. Fraud in the performance of obligation725 a. Waiver of future fraud is void Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.726

723

see Art. 1169 The general rule is that fulfillment by both parties should be simultaneous except when different dates for the performance of obligation is fixed by the parties. Demand is still necessary if their respective obligations are to be performed on separate dates. 724 There can be delay only in positive obligations (to give/to do). There can be no delay in negative obligations (not to give/not to do). 725 Deliberate and intentional evasion of the fulfillment of an obligation 726 Art. 1171 Future fraud cannot be waived because it would result to illusory obligation.

161

4. Negligence (culpa)727 in the performance of obligation a. Diligence normally required is ordinary diligence or diligence of a good father of a family; exceptions: common carriers requiring extraordinary diligence The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.728 The hotel-keeper is liable for the vehicles, animals and articles which have been introduced or placed in the annexes of the hotel.729 The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him.730 The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force.731 The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel.732 5. Contravention of the tenor of obligation The faithful observance of an obligation according to its tenor is mandated by law; an unexcused failure thereof renders the obligor liable for losses and damages caused thereby.733 727

Omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place Negligence can be waived unless the nature of the obligation or public policy requires extraordinary diligence as in common carrier. 728 Art. 1998 729 Art. 1999 730 Art. 2000 731 Art. 2001 732 Art. 2002 733 see Art. 1170

162

6. Legal excuse for breach of obligation – fortuitous event; requisites Fortuitous event734 An event which could not be foreseen or which though foreseen was inevitable. Requisites: 1. cause is independent of the will of the debtor735 2. the event must be unforeseeable or unavoidable 3. occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner 4. debtor must be free from any participation in the aggravation of the injury resulting to the creditor736 D. Remedies available to creditor in cases of breach 1. Specific Performance737 When what is to be delivered is a determinate thing, the creditor, in addition to theright granted him by Art 1170 (indemnification for damages), may compel the debtor to make thedelivery.738 a. Substituted performance by a third person on obligation to deliver generic thing and in obligation to do, unless a purely personal act

734

General Rule: No liability in case of fortuitous event. Exceptions: 1. When expressly declared by law (e.g. Article 552(2), 1165(3), 1268, 1942, 2147, 2148 and 2159 of the Civil Code.) 2. When expressly declared by stipulation or contract 3. When the nature of the obligation requires the assumption of risk 4 When the obligor is in default or has promised to deliver the same thing to 2 or more persons who do not have the same interest [Article 1165(3)]. 735 It must not only be the proximate cause but it must be the ONLY and SOLE CAUSE. 736 Lasam vs. Smith, 45 Phil. 657 737 in obligation to give specific thing 738 Art. 1165, par 1; see also ROC Rule 39, Sec 10

163

In obligation to give generic thing If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.739 In obligation to do If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation.Furthermore, it may be decreed that what has been done poorly be undone.740 2. Rescission741 The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.742 The injured party may choose between the fulfillment and the rescission of the obligation,743 with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

739

Art 1165, Par 2 Delivery of anything belonging to the species stipulated will be sufficient. Debtor cannot avoid obligation by paying damages if the creditor insists on the performance. 740 Art. 1167 The court has no discretion to merely award damages to the creditor when the act can be done in spite of the refusal or failure of debtor to do so. EXCEPTION: Imposition of personal force or coercion upon the debtor to comply with his obligation tantamount to involuntary servitude and imprisonment for debt 741 resolution in reciprocal obligations Only applies to reciprocal obligations, where there is “reciprocity” between the parties i.e. creditor debtor relations arise from the same cause or “identity of cause”. Reciprocal obligations have a “TACIT RESOLUTORY CONDITION 742 Power to rescind: Pertains to the injured party, party who did not perform not entitled to insist upon the performance of the contract by the defendant or recover damages by reason of his own breach Rights of injured party subordinated to the rights of a 3 rd person to whom bad faith is not imputable Not absolute, not permitted in casual/slight breach, may only be claimed in substantial breach (Song Fo v. Hawaiian Philippines) Rescission requires judicial approval to produce legal effect EXCEPTION: object is not yet delivered AND obligation has not yet been performed If the obligation has not yet been performed: extrajudicial declaration of party willing to perform would suffice; can refuse to perform if the other party is not yet ready to comply If the injured party has already performed: cannot extrajudicially rescind IF the other party opposes the rescission (otherwise, rescission produces legal effect). In the case the other party impugns rescission, the court comes in either to: a. Declare the rescission as properly made b. Give a period to the debtor in which to perform

164

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385744 and 1388745 and the Mortgage Law.746 In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages.747 3. Damages, in any event In case of breach of the obligation,748 exclusive or in addition to specific performance. 4. Subsidiary remedies of creditors a. Accionsubrogatoria749 Action which the creditor may exercise in place of the negligent debtor in order to preserve orrecover for the patrimony of the debtor the product of such action, and then obtain therefrom thesatisfaction of his own credit.750

743

The remedy is alternative. Party seeking rescission can only elect one between fulfillment and rescission. There can be no partial performance and partial rescission. 744 See Reference 745 ibid 746 Art. 1191 747 Art. 1192 748 Art. 1170; See Reference Recoverable damages include any and all damages that a human being may suffer. Responsibility for damages is indivisible 749 An action against the debtor’s debtor 750 subrogatory action; See Art. 1177 Previous approval of court is not necessary Plaintiff entitled only to so much as is needed to satisfy his credit, any balance shall pertain to the debtor Patrimony of the debtor (includes both present and future property) is liable for the obligations he may contract by being a legal guaranty in favor of his creditors. Hence, he cannot maliciously reduce such guaranty

165

b. Accionpauliana751 Creditors have the right to set aside or revoke acts which the debtor may have done todefraud them. All acts of the debtor which reduce his patrimony in fraud of his creditors, whether bygratuitous or onerous title, can be revoked by this action. c. Acciondirecta752 Right of the lessor to go directly to sublessee for unpaid rents of the lessee.753 Right of the laborers or persons who furnish materials for a piece of work undertaken by a contractor to go directly to the owner for any unpaid claims due to the contractor.754 VII. Kinds of civil obligations A. Pure Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once.755 Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of article 1197.756 B. Conditional In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.757 751

rescissory action An action to rescind contracts entered into by the debtor in fraud of creditors ( Arts. 1177, last sentence and 1381, par. 3, See Reference Payments of pre-existing obligations already due, whether natural or civil, cannot be impugned by an accionpauliana 752 Arts. 1652, 1608, 1729 & 1893; see reference 753 See Art. 1652 754 See Art. 1729 755 Art. 1179 756 Art. 1180 757 Art. 1181

166

1. Suspensive condition758 - wherein the happening of the event gives birth to an obligation 2. Resolutory condition759 - wherein the happening of the event will extinguish the obligation 3. Potestative, casual or mixed Potestative Condition - one w/c depends solely on the will of either one party.760 Casual Condition - one where the condition is made to depend upon a third person or upon chance.761 Mixed Condition - one w/c depends partly upon the will of one of the parties and partly on either chance or the will of a third person a. Obligations subject to potestativesuspensive conditions are void When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code.762 4. Effect of the happening of suspensive condition The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. When the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with.763

758

condition precedent condition subsequent 760 e.g., "I will give you my plantation in Davao provided you reside in Davao permanently." 761 e.g., "I will give you my land in Pampanga if you will pass the bar exams this year." 762 Art. 1182 763 Art. 1187 759

167

Resolutory condition – no retroactivity Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event.764 In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.765 5. Effect of loss of specific thing or deterioration or improvement of specific thing before suspensive condition; if this occurs in resolutory condition in obligation to do or not to do When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; (2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered; (3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor; (4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case; (5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.766 As for the obligations to do and not to do, the provisions of the second paragraph of article 1187767 shall be observed as regards the effect of the extinguishment of the obligation.768

764

Article 1179, par. 2 Art. 1181 766 Art. 1189 767 supra 768 Art. 1190, par. 3 765

168

C. Obligation with a period or a term769 Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section.770 1. Suspensive period; effect if suspensive period is for the benefit of both debtor and of creditor, unless given in favor of one of them; if given to debtor alone, debtor losses benefit of period in any of the five cases in Art. 1198 – obligation retroact to the day of its constitution Suspensive period -

the obligation has already arisen except that it is not yet demandable

If the term is for the benefit of the creditor The creditor can demand performance anytime; but the debtor cannot insist on payment before the period. If the term is for the benefit of the debtor The creditor cannot demand performance anytime; but the debtor can insist on performance anytime.771

769

General rule: If a period is attached in an obligation, the presumption is that it is for the benefit of both parties. The consequence is that the creditor cannot compel the performance before the arrival of the term; the debtor cannot compel acceptance before the arrival of the term. 770 Art. 1193 771 Illustrations: "I promise to pay within 60 days." This is a term for the benefit of the debtor. "I promise to pay Clara the sum of P100,000 on or before Oct. 31, 1996." This is a term for the benefit of the debtor.

169

The debtor shall lose every right to make use of the period: (1) After the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; (2) He does not furnish to the creditor the guaranties or securities which he has promised; (3) By his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; (4) Debtor violates any undertaking, in consideration of which the creditor agreed to the period; (5) Debtor attempts to abscond772 2. Resolutory period Obligations with a resolutory period take effect at once,but terminate upon arrival of the day certain.773 3. Definite or indefinite period a. Instances when courts may fix the period If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the duration of the period when it depends upon the will of the debtor. In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.774 b. Creditor must ask court to set the period, before he can demand payment

772

Art. 1198 in diem, or resolutory 774 Art. 1197 773

170

D. Alternative or Facultative775 1. Difference between alternative and facultative obligations776 As to contents of the obligation: In the alternative, there are various prestations all of w/c constitute parts of the obligation; while in facultative, only the principal prestation constitutes the obligation, the accessory being only a means to facilitate payment. As to nullity: In alternative obligations, the nullity of one prestation does not invalidate the obligation, w/c is still in force w/ respect to those w/c have no vice; while in facultative, the nullity of the principal prestation invalidates the obligation and the creditor cannot demand the substitute even when this is valid. As to choice: In alternative, the right to choose may be given to the creditor; while in facultative, only the debtor can choose the substitute prestation. As to effect of loss: In alternative, only the impossibility of all the prestations due w/o fault of the debtor extinguishes the obligation; while in facultative, the impossibility of the principal prestation is sufficient to extinguish the obligation, even if the substitute is possible.777 2. Effect of loss of specific things or impossibility of performance of alternative, through fault of debtor/creditor or through fortuitous events If the choice is debtor's a. When only one prestation is left (whether or not the the rest of the prestations have been lost through fortuitous event or through the fault of the debtor), the debtor may perform the one that is left.778 b. If the choice is limited through the creditor's own acts, the debtor can ask for resolution plus damages.779 c. If everything is lost through the debtor's fault, the latter is liable to indemnify the creditor for damages.780 775

Art. 1199. A person alternatively bound by different prestations shall completely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking. 776 Facultative obligations always involve choice by the debtor. In theory, it is easy to distinguish a facultative obligation from an alternative one. But in practice, it is difficult to distinguish the two. You just have to find out what the parties really intended (Balane) 777 IV Tolentino 778 Art. 1202 779 Art. 1203 780 Art. 1204

171

d. If some things are lost through the debtor's fault, the debtor can still choose from those remaining. e. If all are lost through fortuitous event, the obligation is extinguished. f. If all prestations but one are lost through fortuitous event, and the remaining prestation was lost through the debtor's fault, the latter is liable to indemnify the creditor for damages. g. If all but one are lost through the fault of the debor and the last one was lost through through fortuitous event, the obligation is extinguished. Choice is the creditor's a. If one or some are lost through fortuitous event, the creditor may choose from those remaining.781 b. If one or some are lost through the debtor's fault, the creditor has choice from the remainder or the value of the things lost plus damages.782 c. If all are lost through the debtor's fault, the choice of the creditor shall fall upon the price of any of them, w/ indemnity for damages.783 d. If some are lost through the creditor's fault, the creditor may choose from the remainder. e. If all are lost through fortuitous event, the obligation is extinguished. f. If all are lost through the creditor's fault, the obligation is extinguished. VIII. Joint and Solidary obligation A. Joint (divisible) obligation 1. Concurrence of two or more creditors and or two or more debtors a. Joint obligation is presumed, unless otherwise indicated by the law or nature of obligation

781

Art. 1205 (1) Art. 1205 (2) 783 Art. 1205 (3) 782

172

The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.784 b. Obligation presumed to be divided into as many equal shares as there are creditors or debtors The credit or debt or deemed divided into as many shares as there are creditors or debtors to each other, each resulting credit or debt being considered distinct from one another.785 c. Each credit is distinct from one another, therefore a joint debtor cannot be required to pay for the share of another with debtor, although he may pay if he wants to If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share.786 d. Insolvency of a joint debtor, others not liable for his share787 B. Joint Indivisible Obligation 1. Obligation cannot be performed in parts but debtors are bound jointly Generally, obligations are indivisible since the integrity of the obligations requires their payment or performance completely.788 2. In case of failure of one joint debtor to perform his part (share), there is default but only debtor guilty shall be liable for damages A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. The debtors who may have 784

Art. 1207 see Art. 1208 786 Art. 1209 787 ibid 788 Arts.1233 and 1248. 785

173

been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists.789 C. Solidary obligation 1. Anyone of the solidary creditors may collect or demand payment of whole obligation; there is mutual agency among solidary debtors The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him.790 Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of article 1219. The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them.791 2. Any of the solidary debtor may be required to pay the whole obligation; there is mutual guaranty among solidary debtors The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.792 Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.

789

Art. 1224 Art. 1214 791 Art. 1215 792 Art. 1216 790

174

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.793 A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible.794 3. Each one of solidary creditors may do whatever maybe useful to the others, but not anything prejudicial to them; however, any novation, compensation, confusion or remission of debt executed by any solidary creditor shall extinguish the obligation without prejudice to his liability for the shares of the other solidary creditors Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter.795 D. Divisible and Indivisible For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible. However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties. In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each particular case.796 E. Obligations with a Penal Clause In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation 793

Art. 1217 Art. 1222 795 Art. 1222 796 Art. 1225 794

175

to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.797 Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. 798 The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.799 The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the principal obligation carries with it that of the penal clause.800 IX. Extinguishment of Obligations A. Payment The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. 801 Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.802 Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which requires the debtor's consent. But the payment is in any case valid as to the creditor who has accepted it803 797

Art. 1226 Art. 1228 799 Art. 1229 800 Art. 1230 801 Art. 1236 802 Art. 1237 803 Art. 1238 798

176

1. Dation in payment Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.804 2. Form of payment The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In the meantime, the action derived from the original obligation shall be held in the abeyance.805 3. Extraordinary inflation or deflation In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.806 4. Application of payment807 He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due. If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract.808

804

Art. 1245 Dation in payment is governed by the law on sales because it is as if the creditor is now the vendee,and the debtor becomes now the vendor. 805 Art. 1249 806 Art. 1250 807 the designation of a debt which is being paid by the debtor who has several obligations of the same kind in favor of the creditor to whom the payment is made (quoting Tolentino.) 808 Art. 1252

177

If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.809 When the payment cannot be applied in accordance with the preceding rules, or if application cannot be inferred from other circumstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied. If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately.810 5. Tender of Payment and Consignation If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. Consignation alone shall produce the same effect in the following cases: (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a receipt; (4) When two or more persons claim the same right to collect; (5) When the title of the obligation has been lost.811 In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation. The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.812 Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof.813

809

Art. 1253 Art. 1254 811 Art.1256 812 Art. 1257 813 Art. 1258 810

178

The expenses of consignation, when properly made, shall be charged against the creditor.814 Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force.815 If, the consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall be released.816 B. Loss of Determinate Thing Due or Impossibility or difficulty of performance An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay. When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk.817 The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.818 When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.819

814

Art. 1259 Art. 1260 816 Art. 1261 817 Art. 1262 818 Art. 1266 819 Art. 1267 815

179

C. Condonation or Remission of Debt820 1. Express – Formality of Donation – Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly. One and the other kind shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation.821 2. Implied The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action which the former had against the latter. If in order to nullify this waiver it should be claimed to be inofficious, the debtor and his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt.822 Whenever the private document in which the debt appears is found in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved.823 It is presumed that the accessory obligation of pledge has been remitted when the thing pledged, after its delivery to the creditor, is found in the possession of the debtor, or of a third person who owns the thing.824 D. Confusion

820

an act of liberality by virtue of w/c, w/o receiving any equivalent, the creditor renounces enforcement of an obligation w/c is extinguished in whole or in part. Four (4) requisites: 1. Debt that is existing. You can remit a debt even before it is due. 2. Renunciation must be gratuitous. If renunciation is for a consideration, the mode of extinguishment may be something else. It may be novation, compromise of dacion en pago. 3. Acceptance by the debtor 4. Capacity of the parties. The form of donation must be observed. If the condonation involves movables, apply Art. 748. If it involves immovables, apply Art. 749. But note that the creditor may just refuse to collect (w/o observing any form.) In this case, the obligation will be extinguished not by virtue of condonation but by waiver under Art. 6. 821 Art. 1270 822 Art. 1271 823 Art. 1272 824 Art. 1274

180

The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person.825 E. Compensation 1. Kinds Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.826 In order that compensation may be proper, it is necessary: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.827 a. Legal compensation Compensation takes place by operation of law, even though the debts may be payable at different places, but there shall be an indemnity for expenses of exchange or transportation to the place of payment.828 Compensation shall not be proper when one of the debts arises from a depositum or from the obligations of a depositary or of a bailee in commodatum. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title, without prejudice to the provisions of paragraph 2 of article 301.829 Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense.830 825

Art. 1275 Art. 1278 827 Art. 1279 828 Art. 1286 829 Art. 1287 826

181

If a person should have against him several debts which are susceptible of compensation, the rules on the application of payments shall apply to the order of the compensation.831 When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.832 b. Agreement The parties may agree upon the compensation of debts which are not yet due.833 c. Voluntary834 d. Judicial If one of the parties to a suit over an obligation has a claim for damages against the other, the former may set it off by proving his right to said damages and the amount thereof.835 e. Facultative Takes place when compensation is claimable by only one of the parties but not of the other.836 2. Obligations not compensable Compensation shall not be proper when one of the debts arises from a depositumor from the obligations of a depositary or of a bailee in commodatum. Neither can compensation be set up against a creditor who has a claim for support due by gratuitous title, without prejudice to the provisions of paragraph 2 of article 301.837 Neither shall there be compensation if one of the debts consists in civil liability arising from a penal offense.838 830

Art. 1288 Art. 1289 832 Art. 1290 833 Art. 1282 834 See (b) Agreement 835 Art. 1283 836 e.g., Arts. 1287, 1288 837 Art. 1287 838 Art. 1288 831

182

F. Novation Obligations may be modified by: (1) Changing their object or principal conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the rights of the creditor.839 In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.840 Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237.841 If the substitution is without the knowledge or against the will of the debtor, the new debtor's insolvency or non-fulfillment of the obligations shall not give rise to any liability on the part of the original debtor.842 The insolvency of the new debtor, who has been proposed by the original debtor and accepted by the creditor, shall not revive the action of the latter against the original obligor, except when said insolvency was already existing and of public knowledge, or known to the debtor, when the delegated his debt.843 When the principal obligation is extinguished in consequence of a novation, accessory obligations may subsist only insofar as they may benefit third persons who did not give their consent.844 If the new obligation is void, the original one shall subsist, unless the parties intended that the former relation should be extinguished in any event.845

839

Art. 1291 Art. 1292 841 Art. 1293 842 Art. 1294 843 Art. 1295 844 Art. 1296 845 Art. 1297 840

183

The novation is void if the original obligation was void, except when annulment may be claimed only by the debtor or when ratification validates acts which are voidable.846 If the original obligation was subject to a suspensive or resolutory condition, the new obligation shall be under the same condition, unless it is otherwise stipulated.847 Subrogation of a third person in the rights of the creditor is either legal or conventional. The former is not presumed, except in cases expressly mentioned in this Code; the latter must be clearly established in order that it may take effect.848 Conventional subrogation of a third person requires the consent of the original parties and of the third person.849 It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge; (2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor; (3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share.850 Subrogation transfers to the persons subrogated the credit with all the rights thereto appertaining, either against the debtor or against third person, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation.851 A creditor, to whom partial payment has been made, may exercise his right for the remainder, and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit.852

846

Art. 1298 Art. 1299 848 Art. 1300 849 Art. 1301 850 Art. 1302 851 Art. 1303 852 Art. 1304 847

184

CONTRACTS I. Essential Requisites There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established.853 II. Kinds of Contracts A. Consensual - perfected by mere consent and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which, according to their nature may be in keeping with good faith, usage and law. B. Real - like deposit, pledge and commodatum requires delivery of object for perfection. C. Formal or Solemn – Requires compliance with certain formalities prescribed by law, such prescribed form being an essential element 1. Donations The donation of a movable may be made orally or in writing. An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated. If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void.854 In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.

853 854

Art. 1381 Art. 748

185

The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.855 2. Partnership where real property contributed A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary.856 A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.857 3. Antichresis The amount of the principal and of the interest shall be specified in writing; otherwise, the contract of antichresis shall be void.858 4. Agency to sell real property or an interest therein 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.859 5. Stipulation to charge interest No interest shall be due unless it has been expressly stipulated in writing.860 6. Stipulation limiting common carrier’s duty of extraordinary diligence to ordinary diligence A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:

855

Art. 749 Art. 1771 857 Art. 1773 858 Art. 2134 859 Art. 1874 860 Art. 1956 856

186

(1) In writing, signed by the shipper or owner; (2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy.861 7. Chattel mortgage By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage.862 8. Sale of large cattle The sale of large cattle is governed by special law863 which requires that the same be in a public instrument. No person, partnership, association, corporation or entity shall engage in the business of buy and sell of large cattle without first securing a permit for the said purpose from the Provincial Commander of the province where it shall conduct such business and the city/municipal treasurer of the place of residence of such person, partnership, association, corporation or entity. The permit shall only be valid in such province.864 III. Formality Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable. In such cases, the right of the parties stated in the following article cannot be exercised.865 If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract.866

861

Art. 1744 Art. 2140 863 Act No. 1147 864 Sec. 5, P.D. 533 865 Art. 1356 866 Art. 1357 862

187

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 articles 1403, No. 2, and 1405; (2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; (3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; (4) The cession of actions or rights proceeding from an act appearing in a public document. All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by articles, 1403, No. 2 and 1405.867 IV. Defective Contracts A. Rescissible Contracts868 The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation 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;

867

Art. 1358 Contracts validly agreed upon but, by reason of lesion or economic prejudice may be rescinded in cases established by law. 868

188

(5) All other contracts specially declared by law to be subject to rescission.869 (6) Payments made in a state of insolvency on account of obligations not yet enforceable 1. Difference with Rescission (resolution) The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.870 Rescission Article 1191

in

Rescission Proper in Article 1381

1. It is a principal action retaliatory in character. 2. The only ground is non-performance of one’s obligation/s or what is incumbent upon him. 3. It applies only to reciprocal obligation

1. It is a subsidiary remedy.

4. Only a party to the contract may demand fulfillment or seek the rescission of the contract. 5. Court may fix a period or grant extension of time for the fulfillment of the obligation. 6. Its purpose is to cancel the contract.

869 870

2. There are 5 grounds to rescind. Non-performance by the other party is not important. 3. It applies to both unilateral and reciprocal obligations. 4. Even a 3rd person who is prejudiced by the contract may demand the rescission of the contract. 5. Court cannot grant extension of time for fulfillment of the obligation. 6. Its purpose is to seek reparation for

Art. 1381 Art. 1191

189

the damage or injury caused, thus allowing partial rescission of the contract.

B. Voidable Contracts871 Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable.872 The incapacity declared in article 1327 is subject to the modifications determined by law, and is understood to be without prejudice to special disqualifications established in the laws.873 A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.874 In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. A simple mistake of account shall give rise to its correction.875 871

Art. 1409 Those in which all of the essential elements for validity are present, although the element of consent is vitiated either by lack of capacity of one of the contracting parties or by VIMFU. What contracts are voidable: 1. Those where one of the parties is incapable of giving consent to a contract 2. Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud 3. By loss of the thing which is the object of the contract through fraud or fault of the person who is entitled to annul the contract. Ratification Requisites: a. there must be knowledge of the reason which renders the contract voidable b. such reason must have ceased and c. the injured party must have executed an act which expressly or impliedly conveys an intention to waive his right If the object is lost through fortuitous event, the contract can still be annulled, but the person obliged to return the same can be held liable only for the value of the thing at the time of Art. 1409 872 Art. 1328 873 Art. 1329 874 Art. 1330

190

When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.876 There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.877 Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent.878 There is violence when in order to wrest consent, serious or irresistible force is employed. There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent. To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind. A threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent.879 Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract.880 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.881

875

Art. 1331 Art. 1332 877 Art. 1333 878 Art. 1334 879 Art. 1335 880 Art. 1336 881 Art. 1337 876

191

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.882 Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.883 The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent.884 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.885 Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual.886 Misrepresentation made in good faith is not fraudulent but may constitute error.887 In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. Incidental fraud only obliges the person employing it to pay damages.888 The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.889 The action for annulment shall be brought within four years. 882

Art. 1338 Art. 1339 884 Art. 1340 885 Art. 1341 886 Art. 1342 887 Art. 1343 888 Art. 1344 889 Art. 1390 883

192

This period shall begin: In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases. In case of mistake or fraud, from the time of the discovery of the same. And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases.890 Ratification extinguishes the action to annul a voidable contract.891 Ratification may be effected expressly or tacitly. It is understood that 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.892 Ratification may be effected by the guardian of the incapacitated person.893 Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment.894 Ratification cleanses the contract from all its defects from the moment it was constituted.895 The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract.896 An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law.

890

Art. 1391 Art. 1392 892 Art. 1393 893 Art. 1394 894 Art. 1395 895 Art. 1396 896 Art. 1397 891

193

In obligations to render service, the value thereof shall be the basis for damages.897 When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.898 Whenever the person obliged by the decree of annulment to return the thing can not do so because it has been lost through his fault, he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date.899 The action for annulment of contracts shall be extinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings. If the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff.900 As long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him.901

897

Art. 1398 Art. 1399 899 Art. 1400 900 Art. 1401 901 Art. 1402 898

194

C. Unenforceable Contracts902 The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or 902

Those which cannot be enforced by proper action in court unless they are ratified What contracts are unenforceable 1. those entered into in the name of another by one without or acting in excess of authority; 2. those where both parties are incapable of giving consent; and 3. those which do not comply with the Statute of Frauds Agreements within the scope of the Statute of Frauds (exclusive list): 1. Agreements not to be performed within one year from the making thereof; 2. Special promise to answer for the debt, default or miscarriage of another; This does not refer to the original or independent promise of the debtor to his own creditor. It refers rather to a collateral promise. 3. Agreement in consideration of marriage other than a mutual promise to marry; 4. Agreement for the sale of goods, etc. at a price not less than P500.00; 5. Contracts of lease for a period longer than one year; 6. Agreements for the sale of real property or interest therein; and 7. Representation as to the credit of a third person. The contracts/agreements under the Statute of Frauds require that the same be evidenced by some note, memorandum or writing, subscribed by the party charged or by his agent, otherwise, the said contracts shall be unenforceable. The statute of frauds applies only to executory contracts, not to those that are partially or completely fulfilled. Ratification of contracts in violation of the Statute of Frauds 1. Failure to object to the presentation of oral evidence to prove such contracts 2. Acceptance of benefits under these contracts

195

pay at the time some part of the purchase money; but auction and entry is made by the auctioneer in his sales sale, of the amount and kind of property sold, terms of purchasers and person on whose account the sale is memorandum;

when a sale is made by book, at the time of the sale, price, names of the made, it is a sufficient

(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein; ( f ) A representation as to the credit of a third person. (3) Those where both parties are incapable of giving consent to a contract.903 Unauthorized contracts are governed by article 1317 and the principles of agency in Title X of this Book.904 Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefit under them.905 When a contract is enforceable under the Statute of Frauds, and a public document is necessary for its registration in the Registry of Deeds, the parties may avail themselves of the right under Article 1357.906 In a contract where both parties are incapable of giving consent, express or implied, ratification by the parent, or guardian, as the case may be, of one of the contracting parties shall give the contract the same effect as if only one of them were incapacitated. If ratification is made by the parents or guardians, as the case may be, of both contracting parties, the contract shall be validated from the inception. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party.907

903

Art. 1403 Art. 1404 905 Art. 1405 904

906 907

Art. 1406 Art. 1407

196

D. Void Contracts908 The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.909 An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.910 1. Pactumcommissorium The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.911 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.912 908

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 contract itself is prohibited or declared void by law. 909 Art. 1409 910 Art. 1346 911 Art. 1390

197

2. Pactum de non alienando A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.913 3. Pactumleonina A stipulation which excludes one or more partners from any share in the profits or losses is void.914 Comparative table of defective contracts VOID

VOIDABLE

RESCISSIBLE

UNENFORCEABLE

1. Defect is caused by lack of essential elements or illegality

Defect is caused by vice of consent

Defect is caused by injury/ damage either to one of the parties of to a 3rd person

Defect is caused by lack of form, authority, or capacity of both parties not cured by prescription

2. Do not, as a general rule produce any legal effect

Valid and enforceable until they are annulled by a competent court

Valid and enforceable until they are rescinded by a competent court

Cannot be enforced by a proper action in court

3. Action for the declaration or nullity or inexistence or defense of nullity or inexistence does not prescribe

Action for annulment or defense of annulability may prescribe

Action for rescission may prescribe

Corresponding action for recovery, if there was total or partial performance of the unenforceable contract under No. 1 or 3 of Article 1403 may prescribe

4. Not cured prescription

Cured by prescription

Cured by prescription

Not cured prescription

5. Cannot be ratified

Can be ratified

Need not be ratified

Can be ratified

6. Assailed not only by a contracting party but even by a third person whose interest is directly affected

Assailed only by contracting party

Assailed not only by a contracting party but even by a third person who is prejudiced or damaged by the contract

Assailed only by a contracting party

7. Assailed directly

Assailed

Assailed directly only

Assailed

by

directly

a

or

912

Art. 2088 Art. 2130 914 Art. 1799 913

198

by

directly or

or collaterally

collaterally

collaterally

199

V. Effect of Contracts Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.915 SALES916 I. Introduction A. Definition of Sales By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional.917 Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.918 B. Essential Requisites of a Contract of Sale Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. 915

Art. 1311 A nominate contract whereby 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. Delivery and payment in a contract of sale are so interrelated and intertwined with each other that without delivery of the goods there is no corresponding obligation to pay. The two complement each other. It is clear that the two elements cannot be dissociated, for the contract of purchase and sale is essentially a bilateral contract, as it gives rise to reciprocal obligations. (PioBarretto Sons, Inc. vs. CompaniaMaritima, 62 SCRA 167). Neither is the delivery of the thing bought nor the payment of the price necessary for the perfection of the contract of sale. Being consensual, it is perfected by mere consent. 917 Art. 1458 918 Art. 1470 916

200

Nothing in this Title, however, shall affect: (1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; (2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction; (3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special laws.919 C. Stages of Contract of Sale 1. 2. 3.

negotiation perfection – by mere consent; performance may be demanded (specific performance) consummation D. Obligations Created

When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery.920 E. Characteristics of a Contract of Sale Principal - can stand on its own; unlike accessory contract Consensual - meeting of minds makes a perfect contract of sale but needs delivery to consummate. 3. Bilateral - imposes obligation on both parties921 4. Nominate - law gave it a name 5. Commutative - with valuable consideration922 1. 2.

919

Art. 1505 Art. 1165 921 obligation of seller – transfer ownership & deliver obligation of buyer – pay price Consequence: power to rescind is implied in bilateral contracts 922 Test: subjective – as long as parties believe in all honesty that he is receiving equal value then it complies with the test & would not be deemed a donation; but must not be absurd. Inadequacy of price or aleatory character not sufficient ground to cancel contract of sale; inadequacy can show vitiation of consent & sale may be annulled based on vice but not on inadequacy 920

201

6. 7.

Onerous - with valuable consideration Title & not a mode – title gives rise to an obligation to transfer; it is a mode w/c actually transfers ownership F. Sale is Title and Not Mode

The contract of sale by itself is not a mode of acquiring ownership. The contact transfers no real rights; it merely causes certain obligations to arise. G. Sale Distinguished From Other Contracts Donation Donation is gratuitous; sale is onerous Donation is formal contract; sale is consensual Donation is governed by law on donation; sale is governed by law on sales Barter923 In barter, the consideration is the giving of a thing; in sale, it is giving of money as payment Both are governed by law on sales; both are species of the genus sales If consideration consists party in money & partly by thing – look at manifest intention; if intention is not clear924: a. value of thing is equal or less than amount of money – sale b. value of thing is more than amount of money – barter Contract for piece of work925 Test: a. contract for delivery of an article which the vendor in the ordinary course of business manufactures or procures for general market (whether on hand or not) – sale b. goods are to be manufactured specially for a customer and upon special order and not for the general market – contract for piece of work. Agency to sell 923

The only point difference between contract of sale and barter is in the element which is present in sale but not in barter, namely: price certain in money or its equivalent 924 Art. 1468 925 Art. 1467 main factor in decision of the SC: essence of why parties enter into it: a. essence is object – contract of sale b. essence is service – contract for piece of work

202

In sale, buyer pays for price of object; in agency to sell, agent not obliged to pay for price, merely obliged to deliver price received from buyer. In sale, buyer becomes owner of thing; in agency; principal remains owner even if object delivered to agent In sale, seller warrants; in agency, agent assumes no risk/liability as long as within the authority given In sale, not unilaterally revocable; in agency, may be revoked unilaterally because fiduciary & even if revoked w/o ground In sale, seller receives profit; in agency, agent not allowed to profit Agency is a personal contract; sale is a real contract (to give) – rescission is not available in agency Dacion en pago Dacion: contract where property is alienated to satisfy/extinguish obligation to pay debt In dacion:novates creditor-debtor relationship into seller-buyer In dacion: delivery is required (real contract) Lease In sale: obligation to absolutely transfer ownership of thing; in lease: use of thing is for a specified period only with an obligation to return In sale: consideration is price; in lease: consideration is rent In sale: seller needs to be owner of thing to transfer ownership; in lease: lessor need not be owner Lease with option to buy: really a contract of sale but designated as lease in name only; it is a sale by installments

Contract for Piece of Work

Sale

203

1. The thing transferred is one not in existence and which never would have existed but for the order of the party desiring to acquire it

1. The thing transferred is one which would have existed and would have been the subject of sale to some other person, even if the order had not been given

2. The services dominate the contract even though there is a sale of goods involved

2. The primary objective of the contract is a sale of the manufactured item; it is a sale of goods even though the item is manufactured by labor furnished by the seller and upon previous order of the customer

3. Not within the Statute of Frauds

Sale

Dation in Payment

1.

1. Pre-existing credit

No pre-existing credit 2. Obligations are created 3. Consideration on the part of the seller is the price; on the part of the buyer is the acquisition of the object

1. Greater freedom in determining the price

2. Buyer still has to pay the price

3. Within the Statute of Frauds

Conditional Sale

Sale

Agency to sell

1. Buyer receives the goods as owner

1. Agent receives the goods as goods of the principal who retains his ownership over them 2. Agent delivers the price which in turn he got from his buyer 3. Agent can return the goods in case he is unable to sell the same to a third person 4. Agent makes no warranty for which he assumes personal liability as long as he acts within his authority and in the name of the seller 5. Agent in dealing with the thing received, must act and is bound according to the instructions of the principal

2. Buyer pays the price 3. Buyer, as a general rule, cannot return the object sold 4. Seller warrants the thing sold

5. Buyer can deal with the thing sold as he pleases being the owner

2. Obligations are extinguished 3. Consideration of the debtor is the extinguishment of the debt; on the part of the creditor, it is the acquisition of the object offered in lieu of the original credit 1. Less Freedom in determining the price 2.

The payment is received by the debtor before the contract is perfected.

Contract Sell

to

As to reservation of title to the subject property In both cases the seller may reserve the title to the subject property until fulfillment of the suspensive condition i.e. full payment of the price As to effect of fulfillment of suspensive condition 1. Upon fulfillment of 1. Upon the suspensive fulfillment of the condition, the suspensive contract of sale is condition, which thereby perfected, is the full such that if there had payment of the been previous delivery purchase price, of the subject ownership will property to the buyer, not ownership thereto automatically automatically transfer to the transfers to the buyer although buyer by operation the property may of law without any have been further act by the previously seller. delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.

204

As to effect of sale of the subject property to 3rd persons 1. Constructive /actual knowledge on the part of the 2nd buyer of the defect in the seller’s title renders him not a registrant in good faith. Such second buyer cannot defeat the first buyer’s title. Ratio: Fulfilment of the suspensive conditions affects the seller’s title to the property and previous delivery of the property automatically transfers ownership/title to the buyer.

1. Third person buying the property despite fulfilment of the suspensive condition cannot be deemed a buyer in bad faith and prospective buyer cannot seek the relief of reconveyance of property. Exception: If There was no previous sale of the property.

H. Contract of Sale/Contract to Sell Contract to sell926 A bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer binds himself to sell the said property exclusively to the prospective buyer upon fulfilment of the condition agreed upon, that is, full payment of the purchase price. Contract of Sale927 Contract of Sale

Contract to Sell

1. Title passes to the buyer upon delivery of the thing sold

1. Ownership is reserved in the seller and is not to pass until full payment of the purchase price 2. Full payment is a

2. Non-payment of the price is a negative resolutory 926

positive suspensive condition,

Absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period, the transaction is an absolute contract of sale and not a contract to sell. (Dignos vs. CA [1988]) 927 See I.A. Definition of Sales, supra

205

condition and the remedy of the seller is to exact fulfilment or to rescind the contract

3. Vendor loses and cannot recover ownership of the thing sold and delivered until the contract of sale is resolved and set aside

thefailure of which

is not a breach – casual or serious but simply prevents the obligation of the vendor to convey title from having binding force 3. Title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract

II. Parties to a Contract of Sale A. Capacity of parties All persons who are authorized in this Code to obligate themselves, may enter into a contract of sale, saving the modifications contained in the following articles. Where necessaries are those sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefor. Necessaries are those referred to in article 290.928 The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation of property under article 191.929 The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration;

928 929

Art. 1489 Art. 1490

206

(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 an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession; (6) Any others specially disqualified by law. The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations.930 B. Absolute incapacity The following cannot give consent to a contract: (1) Unemancipated minors; (2) Insane or demented persons, and deaf-mutes who do not know how to write931 The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract.932 When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him.933 C. Relative incapacity: Married Persons The husband and the wife cannot cannot sell property to each other, except: (1) When separation of property was agreed upon in the marriage settlements: or (2) When there has been a judicial separation of property between the spouses.934

930

Art. 1491 Art. 1327 932 Art. 1397 933 Art. 1399 934 Art. 1490 931

207

D. Special disqualifications The prohibitions in the two preceding articles are applicable to sales in legal redemption, compromises and renunciations.935 III. Subject Matter A. Requisites of a valid subject matter The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.936 A thing is determinate when it is particularly designated or physical segregated from all others of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties.937 Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void.938 The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen.939 The sole owner of a thing may sell an undivided interest therein.940 In the case of fungible goods, there may be a sale of an undivided share of a specific mass, though the seller purports to sell and the buyer to buy a definite number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass, and though the number, weight or measure of the goods in the mass is undetermined. By such a sale the buyer becomes owner in common of such a share of the 935

Art. 1492 Art. 1459 937 Art. 1460 938 Art. 1461 939 Art. 1462 940 Art. 1463 936

208

mass as the number, weight or measure bought bears to the number, weight or measure of the mass. If the mass contains less than the number, weight or measure bought, the buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency from goods of the same kind and quality, unless a contrary intent appears.941 Things subject to a resolutory condition may be the object of the contract of sale.942 B. Particular kinds 1. Generic things943 2. Future Goods944 3. Sale of undivided interest or share945 4. Sale of things in litigation946 5. Things subject to a resolutory condition947 IV. Obligations of the Seller to Transfer Ownership A. Sale by a person not the owner at time of delivery The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods." There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen.948 Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. Nothing in this Title, however, shall affect: (1) The provisions of any factors' act, recording laws, or any other provision of law enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; (2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent jurisdiction;

941

Art. 1464 Art. 1465 943 see Arts. 1246 & 1409 944 Art. 1462 945 Arts. 1463 & 1464 946 Arts. 1381 & 1385 947 Art. 1465 948 Art. 1462 942

209

(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of Commerce and special laws.949 The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.950 1. Exceptions B. Sale by a person having a voidable title Where the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title.951 The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.952 V. Price953 A. Meaning of price In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons. Should such person or persons be unable or unwilling to fix it, the contract shall be inefficacious, unless the parties subsequently agree upon the price. price.

If the third person or persons acted in bad faith or by mistake, the courts may fix the

Where such third person or persons are prevented from fixing the price or terms by fault of the seller or the buyer, the party not in fault may have such remedies against the party in fault as are allowed the seller or the buyer, as the case may be.954 949

Art. 1505 Art. 1459 951 Art. 1506 952 Art. 559 953 The sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to by him. 954 Art. 1469 950

210

Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.955 If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.956 The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain.957 The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected.958 Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, 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 on the circumstances of each particular case.959 B. Requisites for a valid price 1. Must be real960 2. Must be in money or its equivalent 955

Art. 1470 Art. 1471 957 Art. 1472 958 Art. 1473 959 Art. 1474 960 Real 1. When price stated is one intended by parties If fictitious: no intention with respect to price - VOID If False/simulated: what appears in contract is not the true price a. Valid if there is true consideration b. Void but if none (because it is fictitious) 2. Valuable When not valuable – Void When contract is onerous, presumed to have valuable consideration Nominal consideration w/c is common law concept does not apply (P1.00) Gross inadequacy of price in ordinary sale does not render contract void unless it is shocking to conscience of man. Except: a. Judicial sale Shocking to conscience of man Higher price can be obtained at re-sale b. Rescissible contracts due to lesion c. Sales with right to repurchase (raises presumption of equitable mortgage) – Remedy is reformation 956

211

3. Must be certain or ascertainable961 at the time of the perfection of the contract 4. Manner of payment provided for C. How price is determined962 It is not necessary that the certainty of the price be actual or determined at the time of the execution of the contract. The price is certain in the following cases: 1. If the parties have fixed or agreed upon a definite amount;963 2. If it be certain with reference to another thing certain 3. If the determination of the price is left to the judgment of a specified person or persons even before such determination 4. In the cases provided under Art. 1472 NCC964

D. Inadequacy of price965 961

1.Sufficient that it is fixed with reference to another thing certain That thing will have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market provided said amount be certain 2. Determination be left to judgment of specified person/s If contract states that price is to be determined by 3rd party, contract is already perfected (there is just a suspensive condition – actual fixing of price) 3rd party fixes price in bad faith or mistake – court remedy can be made 3rd party is unable or unwilling to fix price – parties have no cause of action Reason: a. suspensive condition does not happen yet – courts have no jurisdiction b. enforceable contract have not yet arisen – court with no jurisdiction to create contract between parties Result: inefficacious When price can not be determined in accordance with any of the preceding rules, contract of sale is inefficacious However, when SM delivered, buyer must pay reasonable rice therefore – court can fix price 962 Effect of Failure to determine price: 1. Where contract executory The contract is inefficacious 2. Where the thing has been delivered to and appropriated by the buyer The buyer must pay a reasonable price therefore 963 The fixing of the price can never be left to the discretion of one of the contracting parties. However if the price fixed by one of the parties is accepted by the other, the sale is perfected. 964 Article 1472. The price of securities, grain, liquids, and other things shall also be considered certain, when the price fixed is that which the thing sold would have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market, provided said amount be certain.

212

Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.966 Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract.967 E. When no price agreed Where the price cannot be determined in accordance with the preceding articles, or in any other manner, the contract is inefficacious. However, 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 on the circumstances of each particular case.968 F. Manner of payment must be agreed upon Deemed to be an essential requisite because it is part of the presentation of the contract. Integral part of concept of price If there is failure to meet minds as regards term of payment: cash basis Must be certain or at least ascertainable Effect if absent: no contract situation

965

Effect of Gross Inadequacy of Price: 1. Voluntary sales General rule: Mere inadequacy of the price does not affect validity of the sale. A valuable consideration, however small or nominal, if given or stipulated in good faith is, in the absence of fraud, sufficient.(Rodriguez vs. CA, 207 SCRA 553) Future inheritance cannot be sold. Exceptions: a. Where low price indicates vice of consent, sale may be annulled; or contract is presumed to be an equitable mortgage b. Where the price is so low as to be “shocking to conscience”, sale may be set aside. 2. Involuntary or Forced sales General rule: Mere inadequacy of the price is not a sufficient ground for the cancellation of the sale if property is real. Exceptions: a. Where the price is so low as to be shocking to the moral conscience, judicial sale of personal property will be set aside b. In the event of a resale, a better price can be obtained The validity of the sale is not necessarily affected where the law gives to the owner the right to redeem, upon the theory that the lesser the price, the easier it is for the owner to effect redemption. 966 Art. 1355 967 Art. 1470 968 Art. 1474

213

G. Earnest money969 vs. option money Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.970 Earnest money

Option money

1. Title passes to the buyer upon delivery of the thing sold

1. Ownership is reserved to the seller and is not to pass until full payment 2. In case of non-payment, there can be action for specific performance

2. In case of non-payment, an action for specific performance or for rescission can be filed by the injured party 3. Part of the purchase price 4. When given, the buyer is bound to pay the balance 5. Given when there is already a sale

3. Money given as a distinct consideration for an option contract 4. The would-be buyer is not required to buy 5. Applies to a sale not yet perfected

VI. Formation of Contract of Sale971 A. Preparatory A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. or “Arras” is something of value to show that the buyer was really in earnest, and given to the seller to bind the bargain. It is considered as: a) part of the purchase price b) proof of perfection of the contract It shall be deducted from the total price. Old concept: subject to forfeiture when BUYER backs out New concept: can not be forfeited – part of purchase price; must be restored Qualification: if old concept is stipulated – valid Presumption of perfection of contract of sale and such earnest money as part of purchase price is disputable 970 Art. 1482 971 3 Stages in life of a contract of sale 1. Policitacion/negotiation Stage – offer is floated, acceptance is floated but they do not meet; time parties indicate their interest but no concurrence of offer & acceptance 2. Perfection – concurrence of all requisites; meeting of the minds 3. Consummation – parties perform their respective undertakings 969

214

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price.972 1. Offer 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. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.973 2. Option Contract974 When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.975 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 promisor if the promise is supported by a consideration distinct from the price.976 3. Right of First Refusal It is a right of first priority all things and conditions being equal; there should be identity of the terms and conditions to be offered to the optionee and all other prospective buyers, with optionee to enjoy the right of first priority. A deed of sale executed in favor of a third party who cannot be deemed a purchaser in good faith, and which is in violation of the of the right of first refusal granted to the optionee is NOT voidable under the Statute of

972

Art. 1479 Art. 1475 974 A contract granting a privilege in one person, for which he has paid a consideration, which gives him the right to buy certain merchandise, at anytime within the agreed period, at a fixed price. An option without consideration is void and the effect is the same as if there was no option However, in Sanchez vs. Rigos (1972), even though the option was not supported by a consideration, the moment it was accepted, a perfected contract of sale resulted, applying Art. 1324 of the NCC. In view of the ruling of the Supreme Court, the only importance of the consideration for an option is that the option cannot be withdrawn by the grantor after acceptance. In an option to buy, the party who has an option may validly and effectively exercise his right by merely notifying the owner of the former’s decision to buy and expressing his readiness to pay the stipulated price. 975 Art. 1324 976 Art. 1479 973

215

Frauds, such contract is valid BUT rescissible under Article 1380 to 1381(3) of the New Civil Code.977 The basis of the right of first refusal must be the current offer to sell of the seller or offer to purchase of any prospective buyer. Only after the optionee fails to exercise its right of first priority under the same terms and within the period contemplated could the owner validly offer to sell the property to a third person, again, under the same terms as offered to the optionee.978 OPTION CONTRACT & RIGHT OF FIRST REFUSAL DISTINGUISHED OPTION CONTRACT Principal contract; stands on its own Needs separate consideration Subject matter & price must be valid Not conditional Not subject to specific performance

RIGHT OF FIRST REFUSAL Accessory; can not stand on its own Does not need separate consideration There must be subject matter but price not important Conditional Subject to specific performance

4. Mutual Promise to Buy and Sell979 One party accepts the other’s promise to buy and the latter, the former’s promise to sell a determinate thing for a price certain It is reciprocally demandable It requires no consideration distinct from the selling price B. Perfection980 Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.981 977

Guzman Bocaling& Co. vs. Bonnavie; Riviera Filipina, Inc vs. CA et.al. GR No. 117355, April 5, 2002 Paranaque Kings Enterprises, Inc. vs. CA GR No. 111538, February 26, 1997 979 This is as good as a perfected sale. No title of dominion is transferred as yet, the parties being given only the right to demand fulfillment or damages 980 Sale is a consensual contract, hence, delivery and payment are not essential for its perfection GENERAL RULE: It is perfected at the moment there is meeting of the minds upon a determinate thing (object), and a certain price (consideration), even if neither is delivered. A choice between rescission and fulfilment, with damages in either case) EXCEPTION: When the sale is subject to a suspensive condition by virtue of law or stipulation. The terms and conditions of payment are merely accidental, not essential elements of the contract of sale except where the parties themselves stipulate that in addition to the subject-matter and the price, they are essential or material to the contract. 981 Meeting of Minds: 1. Offer – certain 2. Acceptance – absolute 978

216

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made.982 Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer.983 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.984 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. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.985 C. Formalities of the Contract The following contracts are unenforceable, unless they are ratified: (1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; (2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party Qualified acceptance – merely a counter-offer which needs to be absolutely accepted to give rise to perfected contract of sale Business ads are mere invitations to make an offer except when it appears to be otherwise Acceptance by letter/telegram – binds only at time it came to knowledge of SELLER; prior thereto – offer may still be withdrawn Must be exact terms to be considered absolute When deviations allowed: a. anything that refers to price is material b. small items are insignificant, does not make acceptable unconditional When sale is subject to suspensive condition, no perfected contract of sale yet; becomes perfected only upon happening of condition In sales at auction, perfected when auctioneer announces its perfection by the fall of the hammer or in other customary manner may impose terms under bidder may retract his bid; owner of property sold at auction may impose terms under w/c the auction will proceed & it shall be binding w/n the bidders are aware Place of perfection: where the meeting of minds happen; when acceptance sent by mail, perfection is deemed where the offer is made Performance has nothing to do with perfection stage 982 Art. 1319 983 Art. 1325 984 Art. 1326 985 Art. 1475

217

charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: (a) An agreement that by its terms is not to be performed within a year from the making thereof; (b) A special promise to answer for the debt, default, or miscarriage of another; (c) An agreement made in consideration of marriage, other than a mutual promise to marry; (d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; (e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;986 VII. Transfer of Ownership A. Manner of Transfer The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.987 The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.988 The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee.989 When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept.990 986

Art. 1403 Art. 1477 988 Art. 1496 989 Art. 1497 990 Art. 1498 987

218

The delivery of movable property may likewise be made by the mere consent or agreement of the contracting parties, if the thing sold cannot be transferred to the possession of the vendee at the time of the sale, or if the latter already had it in his possession for any other reason.991 There may also be tradition constitutumpossessorium.992 With respect to incorporeal property, the provisions of the first paragraph of article 1498 shall govern. In any other case wherein said provisions are not applicable, the placing of the titles of ownership in the possession of the vendee or the use by the vendee of his rights, with the vendor's consent, shall be understood as a delivery.993 B. When delivery does not transfer title Instances where Seller is still the Owner despite Delivery: 1. Sale on trial, approval or satisfaction 2. Contrary intention appears by the term of the contract; 3. Implied reservation of ownership994 order;

a. If under the bill of lading, the goods are deliverable to seller or agent or their

b. If the bill of lading, although stating that the goods are to be delivered to the buyer or his agent, is kept by the seller or his agent; c. When the buyer, although the goods are deliverable to order of buyer, and although the bill of lading is given to him, does not honor the bill of exchange sent along with it. C. Kinds of delivery 1. 2.

Actual or real – placing the thing under the control and possession of the buyer. Legal or constructive995 – delivery is represented by other signs or acts indicative thereof a. delivery by the execution of a public instrument.996 b. traditio symbolica - to effect delivery, the parties make use of a token or symbol to represent the thing delivered

991

Art. 1499 Art. 1500 993 Art. 1501 994 Article 1503 995 Three things before ownership may be transferred: 1 The seller must have control over the thing 2. The buyer must be put under control 3. There must be the intention to deliver the thing for purposes of ownership 996 Gives rise only to a prima facie presumption of delivery which is destroyed when actual delivery is not effected because of a legal impediment (Ten Forty Realty vs. Cruz, 10 Sept. 2003) 992

219

c. traditio longa manu – seller pointing out to the buyer the things which are transferred, which at the time must be in sight. d. traditio brevi manu – buyer simply continues in possession of the thing but under title of ownership. e. traditio constitutum possessorium – seller continues in possession but under a different title other than ownership. 3.

Quasi-tradition – delivery of rights, credits or incorporeal property, made by: a. placing titles of ownership in the hands of buyer b. allowing buyer to make use of rights

4.

Tradition by operation of law D. Double Sales997

If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it 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 faith998. E. Property Registration Decree 1. Requisites for registration of deed of sale in good faith No deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, 997

Requisites: VOCS 1. two or more transactions must constitute valid sales; 2. they must pertain exactly to the same object or subject matter; 3. they must be bought from the same or immediate seller; AND 4. two or more buyers who are at odds over the rightful ownership of the subject matter must represent conflicting interests. Rules of preference: 1. Personal Property a. first possessor in good faith 2. Real Property a. first registrant in good faith b. first possessor in good faith c. person with oldest title in good faith 998 Art. 1544 To be entitled to priority, the second buyer must not only show prior recording of his deed but must have acted in good faith, without knowledge of the existence of another alienation by the vendor to another

220

unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies. (a) The Register of Deeds for each province or city shall keep a Primary Entry Book and a Registration Book. The Primary Entry Book shall contain, among other particulars, the entry number, the names of the parties, the nature of the document, the date, hour and minute it was presented and received. The recording of the deed and other instruments relating to unregistered lands shall be effected by any of annotation on the space provided therefor in the Registration Book, after the same shall have been entered in the Primary Entry Book. (b) If, on the face of the instrument, it appears that it is sufficient in law, the Register of Deeds shall forthwith record the instrument in the manner provided herein. In case the Register of Deeds refuses its administration to record, said official shall advise the party in interest in writing of the ground or grounds for his refusal, and the latter may appeal the matter to the Commissioner of Land Registration in accordance with the provisions of Section 117 of this Decree. It shall be understood that any recording made under this section shall be without prejudice to a third party with a better right. (c) After recording on the Record Book, the Register of Deeds shall endorse among other things, upon the original of the recorded instruments, the file number and the date as well as the hour and minute when the document was received for recording as shown in the Primary Entry Book, returning to the registrant or person in interest the duplicate of the instrument, with appropriate annotation, certifying that he has recorded the instrument after reserving one copy thereof to be furnished the provincial or city assessor as required by existing law. (d) Tax sale, attachment and levy, notice of lispendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the form sufficient in law, shall likewise be admissible to record under this section.999 2. Accompanied by vendors duplicate certificate of title, payment of capital gains tax, and documentary tax registration fees (e) For the services to be rendered by the Register of Deeds under this section, he shall collect the same amount of fees prescribed for similar services for the registration of deeds or instruments concerning registered lands.1000 VIII. Risk of Loss A. General rule When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition:

999

Sec. 113, P.D. 1529 ibid

1000

221

(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; (2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered; (3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor; (4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case; (5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.1001 In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation.1002 B. When loss occurred before perfection Seller bears the loss. C. When loss occurred at time of perfection1003 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. 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.1004 Where the parties purport a sale of specific goods, and the goods without the knowledge of the seller have perished in part or have wholly or in a material part so deteriorated in quality as to be substantially changed in character, the buyer may at his option treat the sale: (1) As avoided; or (2) As valid in all of the existing goods or in so much thereof as have not deteriorated, and as binding the buyer to pay the agreed price for the goods in which the ownership will pass, if the sale was divisible.1005 1001

Art. 1189 Art. 1263 1003 Contract is void or inexistent. 1004 Art. 1493 1002

222

D. When loss occurred after perfection but before delivery1006 General rule: Who bears the risk of loss is governed by the stipulations in the contract Exceptions: when object sold consists of fungible goods for a price fixed according to weight, number or measure 2. seller is guilty of fraud, negligence, default or violation of contractual terms 3. object sold is generic1007 1.

E. When ownership is transferred1008 Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not, except that:

1005

Art. 1494 In the absence of any stipulation: First view: Buyer bears the loss as an exception to the rule of res perit domino. Contrary view: Where the ownership is transferred by delivery, as in our code, the application of the axiom res perit domino, imposes the risk of loss upon the vendor; hence, if the thing is lost by fortuitous event before delivery, the vendor suffers the loss and cannot recover the price from the vendee (Commentaries and Jurisprudence on the Civil Code of the Philippines, Tolentino) 1007 Civil Code of the Philippines, Paras.This view conforms with Manresa’s view. Buyer would have been the one to profit from the thing had it not been lost or destroyed. 1008 Transfer of ownership General rule: While a contract of sale is consensual, ownership of the thing sold is acquired only upon its delivery, actual or constructive, to the buyer. (Daus vs. Sps. De Leon, 16 June 2003) This is true even if the purchase has been made on credit. Payment of the purchase price is not essential to the transfer of ownership, as long as the property sold has been delivered. (Sampaguita Pictures, Inc vs. Jalwindor Manufacturers, Inc. 93 SCRA 420) Nonpayment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. (EDCA Publishing and Distributing Corp. vs. Santos, 184 SCRA 614) Exceptions: 1. Contrary stipulation or Pactumreservatidominii (contractual reservation of title) – a stipulation, usually in sales by installment, whereby, despite delivery of the property sold, ownership remains with the seller until full payment of the price is made. 2. Contract to sell 3. Contract of insurance – a perfected contract of sale, even without delivery, vests in the vendee an equitable title, an existing interest over the goods sufficient to be the subject of insurance 1006

223

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery; (2) Where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault.1009 IX. Documents of Title A. Definition "Document of title to goods" includes any bill of lading, dock warrant, "quedan," or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, goods represented by such document.1010 B. Purpose of documents of title 1. evidence of existence & possession of goods described therein 2. medium by which seller is able to transfer possession of goods C. Negotiable documents of title1011 Those by the terms of which the bailee undertakes to deliver the goods to thebearer and those by the terms of which the bailee undertakes to deliver the goods to the order of a specified person. May be negotiated by delivery or indorsement. D. Non-negotiable documents of title Those by the terms of which the goods covered are deliverable to a specifiedperson E. Warranties of seller of documents of title 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: 1009

Art. 1504 Art. 1636 1011 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 ( Art. 1507) 1010

224

(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.1012 F. Rules on levy/garnishment of goods A person to whom a document of title has been transferred, but not negotiated, acquires thereby, as against the transferor, the title to the goods, subject to the terms of any agreement with the transferor. If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document. Prior to the notification to such bailee by the transferor or transferee of a nonnegotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor.1013 If goods are delivered to a bailee by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner and a negotiable document of title is issued for them they cannot thereafter, while in possession of such bailee, be attached by garnishment or otherwise or be levied under an execution unless the document be first surrendered to the bailee or its negotiation enjoined. The bailee shall in no case be compelled to deliver up the actual possession of the goods until the document is surrendered to him or impounded by the court.1014 A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts of appropriate jurisdiction by injunction and otherwise in attaching such document or in satisfying the claim by means thereof as is allowed at law or in equity in regard to property which cannot readily be attached or levied upon by ordinary legal process.1015

1012

Art. 1516 Art. 1514 1014 Art. 1519 1015 Art. 1520 1013

225

X. Remedies of an Unpaid Seller A. Definition of unpaid seller The seller of goods is deemed to be an unpaid seller within the meaning of this Title: (1) When the whole of the price has not been paid or tendered; (2) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise. In articles 1525 to 1535 the term "seller" includes an agent of the 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, or any other person who is in the position of a seller.1016 B. Remedies of unpaid seller In case of movables 1. Ordinary Remedies a. Movables in General – Failure of the vendee to appear to receive delivery or, having appeared, failure to tender the price at the same time, unless, a longer period for its payment has been stipulated -

action to rescind the sale1017

b. Sale of Goods – 2.

action for the price1018 action for damages1019

Unpaid Seller1020

1016

Art. 1525 Art. 1593 1018 Art. 1595 1019 Art. 1596 1020 Types: a. The seller of the goods who has not been paid or to whom the price has not been tendered b. The seller of the goods, in case a bill of exchange or other negotiable instrument has been received as conditional payment, AND the condition on which it was received has been broken by reason of the dishonor of the instrument, insolvency of the buyer or otherwise. 1017

226

Remedies: 1. 2. 3. 4. 5. 6.

Possessory lien over the goods Right of stoppage in transituafter he has parted with the possession of the goods and the buyer becomes insolvent Special Right of resale Special Right to rescind the sale Action for the price Action for damages

3. Remedies of vendor in sale of personal property by installments1021 Remedies: 1. 2. 3.

Specific performance upon vendee’s failure to pay1022 Rescission of the sale if vendee shall have failed to pay two or more installments1023 Foreclosure of the chattel mortgage on the thing sold if vendee shall have failed to pay two or more installments. In this case, there shall be no further action against the purchaser to recover unpaid balance of the price.1024

1021

Article 1484 or Recto Law Apply likewise to contracts purporting to be leases of personal property with option to buy Does not apply to a sale: 1. Payable on straight terms (partly in cash and partly in one term) 2. Of Real property Requisites: 1. Contract of sale 2. Personal property 3. Payable in installments 4. In the case of the second and third remedies, that there has been a failure to pay two or more installments 1022 Does not bar full recovery for judgment secured may be executed on all personal and real properties of the buyer which are not exempt from execution (Palma v. CA.) 1023 Nature of the remedy – which requires mutual restitution – bars further action on the purchase price (Nonato vs. IAC.) General rule: Cancellation of sale requires mutual restitution, that is all partial payments of price or rents must be returned Exceptions: 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 circumstan-ces (Article 1486). 1024 Further recovery barred only from the time of actual sale at public auction conducted pursuant to foreclosure (Macondray vs. Tan.) Other chattels given as security cannot be foreclosed if they are not subject of the installment sale (Ridad vs. Filipinas investment and Finance Corp. GR 39806, Jan. 28, 1983) If the vendor assigns his right to a financing company, the latter may be regarded as a collecting agency of the vendor and cannot therefore recover any deficiency from the vendee (Zayas vs. Luneta Motors Co.) When the vendor assigns his credit to another person, the latter is likewise bound by the same law. Accordingly, when the assignee forecloses on the mortgage, there can be no further recovery of the deficiency and the vendor-mortgagee is deemed to have renounced any right thereto (Borbon II vs. Servicewide Specialist, Inc. 258SCRA658)

227

In case of immovable: 1. Ordinary Remedies a. In case of anticipatory breach – -

rescission1025

b. Failure to pay the purchase price – -

rescission upon judicial or notarial demand for rescission1026 the vendee may pay, even after the expiration of the period, as long as no demand for rescission has been made upon him

XI. Performance of Contract A. Delivery of thing sold 1. Sale of Movables Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts or retains the goods so delivered, knowing that the seller is not going to perform the contract in full, he must pay for them at the contract rate. If, however, the buyer has used or disposed of the goods delivered before he knows that the seller is not going to perform his contract in full, the buyer shall not be liable for more than the fair value to him of the goods so received. Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest. If the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate. Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest. However, Article 1484(3) does not bar one to whom the vendor has assigned on with a recourse basis his credit against the vendee from recovering from the vendor the assigned credit in full although the vendor may have no right of recovery against the vendee for the deficiency (Filipinas Invest. & Finance Corp. vs. Vitug, Jr. 28SCRA658) Remedies are alternative and exclusive 1025 Article 1591 1026 Article 1592 Does not apply to: 1) Sale on installment of real estate 2) Contract to sell 3) Conditional sale 4) Cases covered by RA 6552: Realty Installment buyer protection act

228

In the preceding two paragraphs, if the subject matter is indivisible, the buyer may reject the whole of the goods. The provisions of this article are subject to any usage of trade, special agreement, or course of dealing between the parties.1027 The vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract. All the fruits shall pertain to the vendee from the day on which the contract was perfected.1028 Any injury to or benefit from the thing sold, after the contract has been perfected, from the moment of the perfection of the contract to the time of delivery, shall be governed by articles 1163 to 1165, and 1262. This rule shall apply to the sale of fungible things, made independently and for a single price, or without consideration of their weight, number, or measure. Should fungible things be sold for a price fixed according to weight, number, or measure, the risk shall not be imputed to the vendee until they have been weighed, counted, or measured and delivered, unless the latter has incurred in delay.1029 2. Sale of Immovables The obligation to deliver the thing sold includes that of placing in the control of the vendee all that is mentioned in the contract, in conformity with the following rules: If the sale of real estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all that may have been stated in the contract; but, should this be not possible, the vendee 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. The same shall be done, even when the area is the same, if any part of the immovable is not of the quality specified in the contract. The rescission, in this case, shall only take place at the will of the vendee, when the inferior value of the thing sold exceeds one-tenth of the price agreed upon.

1027

Art. 1522 Art. 1537 1029 Art. 1480 1028

229

Nevertheless, if the vendee would not have bought the immovable had he known of its smaller area of inferior quality, he may rescind the sale.1030 The actions arising from articles 1539 and 1542 shall prescribe in six months, counted from the day of delivery.1031 3. Inspections and Acceptance A. Right of inspection The buyer is entitled to examine the goods to decide whether he will become the owner, and until the examination is completed or waived, he is under NO obligation to accept them. He may however waive this right by simply refusing to inspect the goods, taking them as they are or by any other similar act.1032 B. Manifestation of Acceptance The buyer is deemed to have accepted thegoods when: 1. he intimates to the seller that the has accepted them 2. the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller 3. after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. Exercise of acts of ownership over the goods is a manifestation of acceptance, such as making useof them as owner, making alterations in the goods or subjecting it to the process ofmanufacture. EXCEPTION:

Buyer’s right to make atest of goods, but only if necessary, to enable him to determine whether to accept or reject the goods

C. Breach of warranty

1030

Art. 1539 Art. 1543 1032 See Art. 1584 1031

230

The purpose of the notice of breach of warranty is to PROTECT the seller against belated damage claims which would prevent the seller from making an adequate and proper investigation of his alleged liability.1033 Acceptance of delivery means an assent to become owner of the goods on the part of the buyer, but not an assent that the goods fulfill the description and terms of the contract. D. Refusal to accept Unless otherwise agreed, when the goods are delivered to the buyer and he has a right to refuse toaccept them, he need not return them. It issufficient that the buyer notifies the seller that he refuses to accept the goods, and thereafter, the former becomes the depository of the rejected goods.1034 However, where title already passed to thebuyer and there was a breach of warranty, the buyer may rescind the contract by returning oroffering to return the goods to the seller and recover the price which had been paid. B. Payment of price When may be exercised: 1. Where the ownership has passed to the buyer and he wrongfully neglects or refuses to pay for the price 2. Where the price is payable on a day certain and he wrongfully neglects or refuses to pay for the price, irrespective of the delivery or transfer of title 3. Where the goods cannot readily be resold for a reasonable price and the buyer wrongfully refuses to accept them even before the ownership of the goods has passed, if Article 1596 is inapplicable. XII. Warranties A. Express warranties Where one party expressly promised thatthe contingency or some act fixed by the contract shall be performed, like a promise that the goods are of a certain kind and character or that certain state of facts would exist, thepromise constitutes a warranty, and failure of which gives rise to an action for its breach. 1. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale

1033 1034

See Art. 1586 See Arts. 1587 to 89

231

2. natural tendency of affirmation or promise is to induce buyer to purchase subject matter 3. buyer purchases the subject matter relying thereon1035 B. Implied warranties 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 and peaceful possession of the thing; (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. This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest.1036 C. Effects of warranties Where there is a breach of warranty by the seller, the buyer may, at his election: (1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price; (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty; (3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty; (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of article 1191. Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or 1035 1036

when breached, seller is liable for damages Art. 1547

232

to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price. Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure the payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by article 1526. (5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.1037 D. Effects of waivers Parties may increase or diminish implied warranty against eviction; but effect depends on good faith or bad faith on the part of the seller. 1. seller in bad faith & there is waiver against eviction – null & void 2. buyer without knowledge of a particular risk made general renunciation of warranty – not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction) 3. buyer with knowledge of risk of eviction assumed its consequences & made a waiver – vendor not liable1038

E. Buyer’s options in case of breach of warranty Where there is a breach of warranty by the seller, the buyer may, at his election: 1037

Art. 1599 applicable only to waiver of warranty against eviction When goods delivered to buyer he cannot rescind sale if he knew of the breach of warranty when he accepted goods without protest if he fails to return or offer to return goods to seller in substantially as good condition as they were at time ownership was transferred When goods deteriorated, buyer can still return them in that condition if such is due to breach or warranty 1038

233

(1) Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in diminution or extinction of the price; (2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty; (3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty; (4) Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return them or offer to return them to the seller and recover the price or any part thereof which has been paid. When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can thereafter be granted, without prejudice to the provisions of the second paragraph of article 1191. Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning or offering to return the goods to the seller and rescinding the sale. Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after an offer to return the goods in exchange for repayment of the price. Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure the payment of any portion of the price which has been paid, and with the remedies for the enforcement of such lien allowed to an unpaid seller by article 1526. (5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.1039 XIII. Breach of Contract A. Remedies of the Seller 1039

Art. 1599

234

Actions for breach of the contract of sale of goods shall be governed particularly by the provisions of this Chapter, and as to matters not specifically provided for herein, by other applicable provisions of this Title.1040 In the preceding articles in this Title governing the sale of goods, unless the context or subject matter otherwise requires: (1) "Document of title to goods" includes any bill of lading, dock warrant, "quedan," or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, goods represented by such document. "Goods" includes all chattels personal but not things in action or money of legal tender in the Philippines. The term includes growing fruits or crops. "Order" relating to documents of title means an order by indorsement on the documents. "Quality of goods" includes their state or condition. "Specific goods" means goods identified and agreed upon at the time a contract of sale is made. An antecedent or pre-existing claim, whether for money or not, constitutes "value" where goods or documents of title are taken either in satisfaction thereof or as security therefor. (2) A person is insolvent within the meaning of this Title who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due, whether insolvency proceedings have been commenced or not. (3) Goods are in a "deliverable state" within the meaning of this Title when they are in such a state that the buyer would, under the contract, be bound to take delivery of them.1041

1. Sale of Movables B. Recto Law: Sale of Movables on Installment 1040 1041

Art. 1594 Art. 1636

235

The Recto law1042provides for remedies of a seller in contracts of sale of personal property by installment, as follows: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.1043 The preceding article 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.1044 In the case referred to in the two 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.1045 1. Sale of Immovables a. PD 957 Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate.1046 Failure to pay installments. The rights of the buyer in the event of this failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552. Where the transaction or contract was entered into prior to the effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting buyer shall be entitled to the

1042

Installment Sales Law Art. 1484 1044 Art. 1485 1045 Art. 1486 1046 Sec. 23 1043

236

corresponding refund based on the installments paid after the effectivity of the law in the absence of any provision in the contract to the contrary.1047 b. Maceda Law1048 It covers sales on installments of residential real estate and financing of such acquisitions. Where the buyer has paid at least two (2) years of installment, the buyer is entitled to the following rights in case he defaults in payments of succeeding installments: 1) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is fixed at the rate of one month grace period for every one year of installments. 2) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to the 50% of the total payment made every year but not to exceed 90% of the total payments made. Where the buyer has paid less than two years, he shall be entitled to a grace period of 60 days from the date the installment became due. If he fails to pay the installments 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. C. Remedies of the Buyer 1. Sale of Movable When seller fails to deliver, buyer may seek specific performance without giving seller option to retain goods on payment of damages. 2. Sale of Immovables If disturbed in possession or with reasonable grounds to fear disturbance i. Suspend payment In case of subdivision or condo projects: If real estate developer fails to comply with obligations according to approved plan: i. Rescind ii. Suspend payment until seller complies 1047

Sec. 24 Sale of Immovables on Installment

1048

237

XIV. Extinguishment of the Sale A. Causes Obligations are extinguished: (1) By payment or performance; (2) By the loss of the thing due; (3) By the condonation or remission of the debt; (4) By the confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By novation. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code.1049 Sales are extinguished by the same causes as all other obligations, by those stated in the preceding articles of this Title, and by conventional or legal redemption.1050 B. Conventional redemption Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of article 1616 and other stipulations which may have been agreed upon.1051 C. Equitable mortgage cases:

The contract shall be presumed to be an equitable mortgage, in any of the following

(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.

1049

Art. 1231 Art. 1600 1051 Art. 1601 1050

238

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.1052 In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.1053 The provisions of article 1602 shall also apply to a contract purporting to be an absolute sale.1054 D. Distinguish from option to buy cases:

The contract shall be presumed to be an equitable mortgage, in any of the following

(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. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.1055 E. Period of redemption The right referred to in article 1601,1056 in the absence of an express agreement, shall last four years from the date of the contract. Should there be an agreement, the period cannot exceed ten years.

1052

Art. 1602 Art. 1603 1054 Art. 1604 1055 Art. 1602 1056 supra 1053

239

However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase.1057 F. Exercise of the right to redeem The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition: (1) The expenses of the contract, and any other legitimate payments made by reason of the sale; (2) The necessary and useful expenses made on the thing sold.1058 G. Legal redemption 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.1059 H. Age redemption1060 XV. The Law on Sale of Subdivision and Condominium1061 XVI. The Condominium Act1062 SUCCESSION I. General Provisions Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law.1063 In this Title, "decedent" is the general term applied to the person whose property is transmitted through succession, whether or not he left a will. If he left a will, he is also called the testator.1064 1057

Art. 1606 Art. 1616 1059 Art. 1619 1060 ibid 1061 PD 957, see Reference 1062 RA 4726, ibid 1063 Art. 774 1064 Art. 775 1058

240

The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death.1065 The rights to the succession are transmitted from the moment of the death of the decedent.1066 Succession may be: (1) Testamentary; (2) Legal or intestate; or (3) Mixed.1067 Testamentary succession is that which results from the designation of an heir, made in a will executed in the form prescribed by law.1068 Mixed succession is that effected partly by will and partly by operation of law.1069 A. Definition/What is transmitted The inheritance of a person includes not only the property and the transmissible rights and obligations existing at the time of his death, but also those which have accrued thereto since the opening of the succession.1070 B. Succession occurs at the moment of death1071 C. Kinds of Successors – Heirs, Devisees, Legatees – An heir is a person called to the succession either by the provision of a will or by operation of law. Devisees and legatees are persons to whom gifts of real and personal property are respectively given by virtue of a will.1072

II. Testamentary Succession 1065

Art. 776 Art. 777 1067 Art. 778 1068 Art. 779 1069 Art. 780 1070 Art. 781; see also Arts. 774 & 776, General Provisions, supra 1071 Art. 777, supra 1072 Art. 782 1066

241

A. Wills 1. In General a. Definition and characteristics A will is an act whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of this estate, to take effect after his death.1073 The testator may not make a testamentary disposition in such manner that another person has to determine whether or not it is to be operative.1074 (1) Personal Act; Non-delegability of will-making; exception The making of a will is a strictly personal act; it cannot be left in whole or in part to the discretion of a third person, or accomplished through the instrumentality of an agent or attorney.1075 The duration or efficacy of the designation of heirs, devisees or legatees, or the determination of the portions which they are to take, when referred to by name, cannot be left to the discretion of a third person.1076 The testator may entrust to a third person the distribution of specific property or sums of money that he may leave in general to specified classes or causes, and also the designation of the persons, institutions or establishments to which such property or sums are to be given or applied.1077 (2) Rules of Construction and Interpretation/Law Governing Formal Validity If a testamentary disposition admits of different interpretations, in case of doubt, that interpretation by which the disposition is to be operative shall be preferred.1078 When there is an imperfect description, or when no person or property exactly answers the description, mistakes and omissions must be corrected, if the error appears from the context of the will or from extrinsic evidence, excluding the oral declarations of the testator as to his intention; and when an uncertainty arises upon the face of the will, as to the application of any of its provisions, the testator's intention is to be ascertained from the

1073

Art. 783 Art. 787 1075 Art. 784 1076 Art. 785 1077 Art. 786 1078 Art. 788 1074

242

words of the will, taking into consideration the circumstances under which it was made, excluding such oral declarations.1079 The words of a will are to be taken in their ordinary and grammatical sense, unless a clear intention to use them in another sense can be gathered, and that other can be ascertained. Technical words in a will are to be taken in their technical sense, unless the context clearly indicates a contrary intention, or unless it satisfactorily appears that the will was drawn solely by the testator, and that he was unacquainted with such technical sense.1080 The words of a will are to receive an interpretation which will give to every expression some effect, rather than one which will render any of the expressions inoperative; and of two modes of interpreting a will, that is to be preferred which will prevent intestacy.1081 The invalidity of one of several dispositions contained in a will does not result in the invalidity of the other dispositions, unless it is to be presumed that the testator would not have made such other dispositions if the first invalid disposition had not been made.1082 Property acquired after the making of a will shall only pass thereby, as if the testator had possessed it at the time of making the will, should it expressly appear by the will that such was his intention.1083 Every devise or legacy shall cover all the interest which the testator could device or bequeath in the property disposed of, unless it clearly appears from the will that he intended to convey a less interest.1084 The validity of a will as to its form depends upon the observance of the law in force at the time it is made.1085 2. Testamentary Capacity1086 and Intent a. Age Requirement All persons who are not expressly prohibited by law may make a will.1087

1079

Art. 789 Art. 790 1081 Art. 791 1082 Art. 792 1083 Art. 793 1084 Art. 794 1085 Art. 795 1086 Testamentary capacity: 1. All persons who are not expressly prohibited by law 2. 18 years old and above 3. Of sound mind, at the time of its execution 1087 Art. 796 1080

243

Persons of either sex under eighteen years of age cannot make a will.1088 b. Soundness of Mind; Presumptions In order to make a will it is essential that the testator be of sound mind at the time of its execution.1089 To be of sound mind, it is not necessary that the testator be in full possession of all his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause. It shall be sufficient if the testator was able at the time of making the will to know the nature of the estate to be disposed of, the proper objects of his bounty, and the character of the testamentary act.1090 The law presumes that every person is of sound mind, in the absence of proof to the contrary. The burden of proof that the testator was not of sound mind at the time of making his dispositions is on the person who opposes the probate of the will; but if the testator, one month, or less, before making his will was publicly known to be insane, the person who maintains the validity of the will must prove that the testator made it during a lucid interval.1091 Supervening incapacity does not invalidate an effective will, nor is the will of an incapable validated by the supervening of capacity.1092 A married woman may make a will without the consent of her husband, and without the authority of the court.1093 A married woman may dispose by will of all her separate property as well as her share of the conjugal partnership or absolute community property.1094 3. Form a. Formal Validity Rules The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed. 1088

Art. 797 Art. 798 1090 Art. 799 1091 Art. 800 1092 Art. 801 1093 Art. 802 1094 Art. 803 1089

244

When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by Philippine laws shall be observed in their execution. 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.1095 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.1096 The will of an alien who is abroad produces effect in the Philippines if made with the formalities prescribed by the law of the place in which he resides, or according to the formalities observed in his country, or in conformity with those which this Code prescribes.1097 A will made in the Philippines by a citizen or subject of another country, which is executed in accordance with the law of the country of which he is a citizen or subject, and which might be proved and allowed by the law of his own country, shall have the same effect as if executed according to the laws of the Philippines.1098 Wills, prohibited by the preceding article, executed by Filipinos in a foreign country shall not be valid in the Philippines, even though authorized by the laws of the country where they may have been executed.1099 (1) See Law Governing Substantive Validity Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad.1100 Real property as well as personal property is subject to the law of the country where it is stipulated.1101 Capacity to succeed is governed by the law of the nation of the decedent.1102

1095

Art. 17 Art. 815 1097 Art. 816 1098 Art. 817 1099 Art. 819 1100 Art. 15 1101 Art. 16 1102 Art. 1039 1096

245

b. Common requirements (1) In Writing (2) Language/Dialect Requirement Every will must be in writing and executed in a language or dialect known to the testator.1103 c. Notarial Wills (1) Arts. 805-806 Requisites for valid notarial will: 1. In writing 2. In a language or dialect known to the testator 3. Subscribed at the end by the testator himself or by the testator’s name written by some other person in his presence, and by his express direction 4. Attested & subscribed by three or more credible witnesses in the presence of the testator and of one another 5. Each and every page, except the last, must be signed by the testator or by the person requested by him to write his name, and by the instrumental witnesses of the will, on the left margin 6. Each and every page of the will must be numbered correlatively in letters placed on the upper part of each page 7. It must contain an attestation clause, stating the following: a. The number of pages used upon which the will is written b. The fact that the testator signed the will and every page, or caused some other person to write his name, under his express direction, in the presence of the instrumental witnesses c. All the instrumental witnesses witnessed and signed the will and all its pages in the presence of the testator and of one another 8. It must be acknowledged before a notary public by the testator and the witnesses

1103

Art. 804

246

(2) Special rules for handicapped testators If the testator be deaf or a deaf-mute: 1. Testator must personally read the will, if able to do so; 2. Otherwise, he shall designate two persons to read it and communicate to him, in some practicable manner, its contents.1104 If the testator be blind: The will shall be read to the testator twice – 1. Once by one of the subscribing witnesses 2. Once by the notary public before whom the will is acknowledged.1105 (3) Substantial Compliance In the absence of bad faith, forgery, or fraud, or undue and improper pressure and influence, defects and imperfections in the form of attestation or in the language used therein shall not render the will invalid if it is proved that the will was in fact executed and attested in substantial compliance with all the requirements of article 805.1106 (4) Requisites Any person of sound mind and of the age of eighteen years or more, and not blind, deaf or dumb, and able to read and write, may be a witness to the execution of a will mentioned in article 805 of this Code.1107 The following are disqualified from being witnesses to a will: (1) Any person not domiciled in the Philippines; (2) Those who have been convicted of falsification of a document, perjury or false testimony.1108

1104

Art. 807 Art. 808 1106 Art. 809 1107 Art. 820 Qualifications of witnesses to a notarial will: 1. Of sound mind 2. Of the age of 18 years or more 3. Not blind, deaf or dumb 4. Able to read and write 5. Domiciled in the Philippines 6. Have not been convicted of falsification of a document, perjury or false testimony 1108 Art. 821 1105

247

If the witnesses attesting the execution of a will are competent at the time of attesting, their becoming subsequently incompetent shall not prevent the allowance of the will.1109 If a person attests the execution of a will, to whom or to whose spouse, or parent, or child, a devise or legacy is given by such will, such devise or legacy shall, so far only as concerns such person, or spouse, or parent, or child of such person, or any one claiming under such person or spouse, or parent, or child, be void, unless there are three other competent witnesses to such will. However, such person so attesting shall be admitted as a witness as if such devise or legacy had not been made or given.1110 A mere charge on the estate of the testator for the payment of debts due at the time of the testator's death does not prevent his creditors from being competent witnesses to his will.1111 d. Holographic Wills (1) Requirements A person may execute a holographic will which must be entirely written, dated, and signed by the hand of the testator himself. It is subject to no other form, and may be made in or out of the Philippines, and need not be witnessed.1112 In holographic wills, the dispositions of the testator written below his signature must be dated and signed by him in order to make them valid as testamentary dispositions.1113 When a number of dispositions appearing in a holographic will are signed without being dated, and the last disposition has a signature and a date, such date validates the dispositions preceding it, whatever be the time of prior dispositions.1114 (2) Witnesses Required for Probate In the probate of a holographic will, it shall be necessary that at least one witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator. If the will is contested, at least three of such witnesses shall be required. In the absence of any competent witness referred to in the preceding paragraph, and if the court deem it necessary, expert testimony may be resorted to.1115

1109

Art. 822 Art. 823 1111 Art. 824 1112 Art. 810 1113 Art. 812 1114 Art. 813 1115 Art. 811 1110

248

(3) Alterations, Requirements In case of any insertion, cancellation, erasure or alteration in a holographic will, the testator must authenticate the same by his full signature.1116 e. Joint Wills Two or more persons cannot make a will jointly, or in the same instrument, either for their reciprocal benefit or for the benefit of a third person.1117 Wills, prohibited by the preceding article, executed by Filipinos in a foreign country shall not be valid in the Philippines, even though authorized by the laws of the country where they may have been executed.1118 4. Codicils, Definition and Formal Requirements A codicil is supplement or addition to a will, made after the execution of a will and annexed to be taken as a part thereof, by which disposition made in the original will is explained, added to, or altered.1119 In order that a codicil may be effective, it shall be executed as in the case of a will.1120 5. Incorporate by Reference Requisites: 1. the document or paper referred to in the will must be in existence at the time of the execution of the will 2. the will must clearly describe and identify the same, stating among other things the number of pages thereof 3. it must be identified by clear and satisfactory proof as the document or paper referred to therein 4. it must be signed by the testator and the witnesses on each and every page, except in case of voluminous books of account or inventories

1116

Art. 814 Art. 818 1118 Art. 819 1119 Art. 825 1120 Art. 826 1117

249

6. Revocation; kinds A will may be revoked by the testator at any time before his death. Any waiver or restriction of this right is void.1121 A revocation 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 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.1122 No will shall be revoked except in the following cases: (1) 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, torn, 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.1123 Subsequent wills which do not revoke the previous ones in an express manner, annul only such dispositions in the prior wills as are inconsistent with or contrary to those contained in the later wills.1124 A revocation made in a subsequent will shall take effect, even if the new will should become inoperative by reason of the incapacity of the heirs, devisees or legatees designated therein, or by their renunciation.1125 A revocation of a will based on a false cause or an illegal cause is null and void1126. The recognition of an illegitimate child does not lose its legal effect, even though the will wherein it was made should be revoked.1127

1121

Art. 828 Art. 829 1123 Art. 830 1124 Art. 831 1125 Art. 832 1126 Art. 833 1127 Art. 834 1122

250

7. Allowance and Disallowance of Wills a. Probate Requirement No will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court. The testator himself may, during his lifetime, petition the court having jurisdiction for the allowance of his will. In such case, the pertinent provisions of the Rules of Court for the allowance of wills after the testator's a death shall govern. The Supreme Court shall formulate such additional Rules of Court as may be necessary for the allowance of wills on petition of the testator. 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.1128 (1) Issues to be Resolved in Probate Proceedings The will shall be disallowed in any of the following cases: (1) If the formalities required by law have not been complied with; (2) If the testator was insane, or otherwise mentally incapable of making a will, at the time of its execution; (3) If it was executed through force or under duress, or the influence of fear, or threats; (4) If it was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person; (5) If the signature of the testator was procured by fraud; (6) If the testator acted by mistake or did not intend that the instrument he signed should be his will at the time of affixing his signature thereto.1129 (a) Exceptions – when practical considerations demand the intrinsic validity of the will be resolved

1128 1129

Art. 838 Art. 839

251

(2) Effect of Final Decree of Probate, Res Judicata on Formal Validity A final judgment rendered on a petition for the probate of a will is binding upon the whole world;1130 and public policy and sound practice demand that at the risk of occasional errors judgment of courts should become final at some definite date fixed by law. b. Grounds for Denying Probate1131 B. Institution of Heirs 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.1132 A will shall be valid even though it should not contain an institution of an heir, or such institution should not comprise the entire estate, and even though the person so instituted should not accept the inheritance or should be incapacitated to succeed. In such cases the testamentary dispositions made in accordance with law shall be complied with and the remainder of the estate shall pass to the legal heirs.1133 One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor of any person having capacity to succeed. One who has compulsory heirs may dispose of his estate provided he does not contravene the provisions of this Code with regard to the legitime of said heirs.1134 The testator shall designate the heir by his name and surname, and when there are two persons having the same names, he shall indicate some circumstance by which the instituted heir may be known. Even though the testator may have omitted the name of the heir, should he designate him in such manner that there can be no doubt as to who has been instituted, the institution shall be valid.1135 An error in the name, surname, or circumstances of the heir shall not vitiate the institution when it is possible, in any other manner, to know with certainty the person instituted.

1130

Manalo vs. Paredes, 47 Phil. 938; In re Estates of Johnson, 39 Phil. 156 See Art. 839, supra 1132 Art. 840 1133 Art. 841 1134 Art. 842 1135 Art. 843 1131

252

If among persons having the same names and surnames, there is a similarity of circumstances in such a way that, even with the use of other proof, the person instituted cannot be identified, none of them shall be an heir.1136 Every disposition in favor of an unknown person shall be void, unless by some event or circumstance his identity becomes certain. However, a disposition in favor of a definite class or group of persons shall be valid.1137 Heirs instituted without designation of shares shall inherit in equal parts.1138 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.1139 If the testator should institute his brothers and sisters, and he has some of full blood and others of half blood, the inheritance shall be distributed equally unless a different intention appears.1140 When the testator calls to the succession a person and his children they are all deemed to have been instituted simultaneously and not successively.1141 The statement of a false cause for the institution of an heir shall be considered as not written, unless it appears from the will that the testator would not have made such institution if he had known the falsity of such cause.1142 If the testator has instituted only one heir, and the institution is limited to an aliquot part of the inheritance, legal succession takes place with respect to the remainder of the estate. The same rule applies if the testator has instituted several heirs, each being limited to an aliquot part, and all the parts do not cover the whole inheritance.1143 If it was the intention of the testator that the instituted heirs should become sole heirs to the whole estate, or the whole free portion, as the case may be, and each of them has been instituted to an aliquot part of the inheritance and their aliquot parts together do not cover the whole inheritance, or the whole free portion, each part shall be increased proportionally.1144 1136

Art. 844 Art. 845 1138 Art. 846 1139 Art. 847 1140 Art. 848 1141 Art. 849 1142 Art. 850 1143 Art. 851 1144 Art. 852 1137

253

If each of the instituted heirs has been given an aliquot part of the inheritance, and the parts together exceed the whole inheritance, or the whole free portion, as the case may be, each part shall be reduced proportionally.1145 The share of a child or descendant omitted in a will must first be taken from the part of the estate not disposed of by the will, if any; if that is not sufficient, so much as may be necessary must be taken proportionally from the shares of the other compulsory heirs.1146 A voluntary heir who dies before the testator transmits nothing to his heirs. A compulsory heir who dies before the testator, a person incapacitated to succeed, and one who renounces the inheritance, shall transmit no right to his own heirs except in cases expressly provided for in this Code.1147 1. Preterition – Definition, Requisites and Effects The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation.1148 2. Concept1149 3. Compulsory Heirs in the Direct Line1150 4. Preterition vs. Disposition less than Legitime/Donation Inter Vivos Any compulsory heir to whom the testator has left by any title less than the legitime belonging to him may demand that the same be fully satisfied.1151 Testamentary dispositions that impair or diminish the legitime of the compulsory heirs shall be reduced on petition of the same, insofar as they may be inofficious or excessive.1152

1145

Art. 853 Art. 855 1147 Art. 856 1148 Art. 854 1149 ibid 1150 see E. Legitime, infra 1151 Art. 906 1152 Art. 907 1146

254

To determine the legitime, the value of the property left at the death of the testator shall be considered, deducting all debts and charges, which shall not include those imposed in the will. To the net value of the hereditary estate, shall be added the value of all donations by the testator that are subject to collation, at the time he made them.1153 Donations given to children shall be charged to their legitime. Donations made to strangers shall be charged to that part of the estate of which the testator could have disposed by his last will. Insofar as they may be inofficious or may exceed the disposable portion, they shall be reduced according to the rules established by this Code.1154 Donations which an illegitimate child may have received during the lifetime of his father or mother, shall be charged to his legitime. Should they exceed the portion that can be freely disposed of, they shall be reduced in the manner prescribed by this Code.1155 After the legitime has been determined in accordance with the three preceding articles, the reduction shall be made as follows: (1) Donations shall be respected as long as the legitime can be covered, reducing or annulling, if necessary, the devises or legacies made in the will; (2) The reduction of the devises or legacies shall be pro rata, without any distinction whatever. If the testator has directed that a certain devise or legacy be paid in preference to others, it shall not suffer any reduction until the latter have been applied in full to the payment of the legitime. (3) If the devise or legacy consists of a usufruct or life annuity, whose value may be considered greater than that of the disposable portion, the compulsory heirs may choose between complying with the testamentary provision and delivering to the devisee or legatee the part of the inheritance of which the testator could freely dispose.1156 If the devise subject to reduction should consist of real property, which cannot be conveniently divided, it shall go to the devisee if the reduction does not absorb one-half of its value; and in a contrary case, to the compulsory heirs; but the former and the latter shall reimburse each other in cash for what respectively belongs to them.

1153

Art. 908 Art. 909 1155 Art. 910 1156 Art. 911 1154

255

The devisee who is entitled to a legitime may retain the entire property, provided its value does not exceed that of the disposable portion and of the share pertaining to him as legitime.1157 If the heirs or devisees do not choose to avail themselves of the right granted by the preceding article, any heir or devisee who did not have such right may exercise it; should the latter not make use of it, the property shall be sold at public auction at the instance of any one of the interested parties.1158 The testator may devise and bequeath the free portion as he may deem fit.1159 A compulsory heir may, in consequence of disinheritance, be deprived of his legitime, for causes expressly stated by law.1160 Disinheritance can be effected only through a will wherein the legal cause therefor shall be specified.1161 The burden of proving the truth of the cause for disinheritance shall rest upon the other heirs of the testator, if the disinherited heir should deny it.1162 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 set forth in this Code, shall annul the institution of heirs insofar as it may prejudice the person disinherited; but the devises and legacies and other testamentary dispositions shall be valid to such extent as will not impair the legitime.1163 5. Effects of Preterition, devisees only entitled to completion of legitime1164 C. Substitution of Heirs If heirs instituted in unequal shares should be reciprocally substituted, the substitute shall acquire the share of the heir who dies, renounces, or is incapacitated, unless it clearly appears that the intention of the testator was otherwise. If there are more than one substitute, they shall have the same share in the substitution as in the institution.1165 The substitute shall be subject to the same charges and conditions imposed upon the instituted heir, unless and testator has expressly provided the contrary, or the charges or conditions are personally applicable only to the heir instituted.1166 1157

Art. 912 Art. 913 1159 Art. 914 1160 Art. 915 1161 Art. 916 1162 Art. 917 1163 Art. 918 1164 See 1. Preterition, etc., supra 1165 Art. 861 1166 Art. 862 1158

256

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 upon the fiduciary the absolute obligation to deliver the property to a second heir; (2) Provisions which contain a perpetual prohibition to alienate, and even a temporary one, beyond the limit fixed in article 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.1167 The nullity of the fideicommissary substitution does not prejudice the validity of the institution of the heirs first designated; the fideicommissary clause shall simply be considered as not written.1168 The dispositions of the testator declaring all or part of the estate inalienable for more than twenty years are void.1169 1. Definition Substitution is the appointment of another heir so that he may enter into the inheritance in default of the heir originally instituted.1170 2. Kinds Substitution of heirs may be: (1) Simple or common; (2) Brief or compendious; (3) Reciprocal; or (4) Fideicommissary.1171 The testator may designate one or more persons to substitute the heir or heirs instituted in case such heir or heirs should die before him, or should not wish, or should be incapacitated to accept the inheritance. 1167

Art. 867 Art. 868 1169 Art. 870 1170 Art. 857 1171 Art. 858 1168

257

A simple substitution, without a statement of the cases to which it refers, shall comprise the three mentioned in the preceding paragraph, unless the testator has otherwise provided.1172 Two or more persons may be substituted for one; and one person for two or more heirs.1173 3. Simple Substitution1174 4. Fideicommissary Substitution1175 A fideicommissary substitution by virtue of which 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, shall be valid and shall take effect, provided such substitution does not go beyond one degree 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.1176 A fideicommissary substitution can never burden the legitime.1177 valid.

Every fideicommissary substitution must be expressly made in order that it may be

The fiduciary shall be obliged to deliver the inheritance to the second heir, without other deductions than those which arise from legitimate expenses, credits and improvements, save in the case where the testator has provided otherwise.1178 The second heir shall acquire a right to the succession from the time of the testator's death, even though he should die before the fiduciary. The right of the second heir shall pass to his heirs.1179 A provision whereby the testator leaves to a person the whole or part of the inheritance, and to another the usufruct, shall be valid. If he gives the usufruct to various persons, not simultaneously, but successively, the provisions of article 863 shall apply.1180

1172

Art. 859 Art. 860 1174 See Art. 859, supra 1175 Requisites for a fideicommissary substitution: 1. A fiduciary or first heir instituted entrusted with the obligation to preserve and to transmit to a fideicommissary substitute or second heir the whole or part of the inheritance 2. Such substitution must not go beyond one degree from the heir originally instituted 3. The fiduciary or first heir and the second heir are living at the time of the death of the testator 4. The fideicommissary substitution must be expressly made 5. The fideicommissary substitution is imposed on the free portion of the estate and never on the legitime 1176 Art. 863 1177 Art. 864 1178 Art. 865 1179 Art. 866 1173

258

D. Conditional Testamentary Dispositions and Testamentary Dispositions with a Term The institution of an heir may be made conditionally, or for a certain purpose or

1181

cause.

The testator cannot impose any charge, condition, or substitution whatsoever upon the legitimes prescribed in this Code. Should he do so, the same shall be considered as not imposed.1182 Impossible conditions and those contrary to law or good customs shall be considered as not imposed and shall in no manner prejudice the heir, even if the testator should otherwise provide.1183 An absolute condition not to contract a first or subsequent marriage shall be considered as not written unless such condition has been imposed on the widow or widower by the deceased spouse, or by the latter's ascendants or descendants. Nevertheless, the right of usufruct, or an allowance or some personal prestation may be devised or bequeathed to any person for the time during which he or she should remain unmarried or in widowhood.1184 Any disposition made upon the condition that the heir shall make some provision in his will in favor of the testator or of any other person shall be void.1185 Any purely potestative condition imposed upon an heir must be fulfilled by him as soon as he learns of the testator's death. This rule shall not apply when the condition, already complied with, cannot be fulfilled again.1186 If the condition is casual or mixed, it shall be sufficient if it happen or be fulfilled at any time before or after the death of the testator, unless he has provided otherwise. Should it have existed or should it have been fulfilled at the time the will was executed and the testator was unaware thereof, it shall be deemed as complied with. If he had knowledge thereof, the condition shall be considered fulfilled only when it is of such a nature that it can no longer exist or be complied with again.1187 1180

Art. 869 Art. 871 1182 Art. 872 1183 Art. 873 1184 Art. 874 1185 Art. 875 1186 Art. 876 1187 Art. 877 1181

259

A disposition with a suspensive term does not prevent the instituted heir from acquiring his rights and transmitting them to his heirs even before the arrival of the term.1188 If the potestative condition imposed upon the heir is negative, or consists in not doing or not giving something, he shall comply by giving a security that he will not do or give that which has been prohibited by the testator, and that in case of contravention he will return whatever he may have received, together with its fruits and interests.1189 If the heir be instituted under a suspensive condition or term, the estate shall be placed under administration until the condition is fulfilled, or until it becomes certain that it cannot be fulfilled, or until the arrival of the term. The same shall be done if the heir does not give the security required in the preceding article.1190 The appointment of the administrator of the estate mentioned in the preceding article, as well as the manner of the administration and the rights and obligations of the administrator shall be governed by the Rules of Court.1191 The statement of the object of the institution, or the application of the property left by the testator, or the charge imposed by him, shall not be considered as a condition unless it appears that such was his intention. That which has been left in this manner may be claimed at once provided that the instituted heir or his heirs give security for compliance with the wishes of the testator and for the return of anything he or they may receive, together with its fruits and interests, if he or they should disregard this obligation.1192 When without the fault of the heir, an institution referred to in the preceding article cannot take effect in the exact manner stated by the testator, it shall be complied with in a manner most analogous to and in conformity with his wishes. If the person interested in the condition should prevent its fulfillment, without the fault of the heir, the condition shall be deemed to have been complied with.1193 Conditions imposed by the testator upon the heirs shall be governed by the rules established for conditional obligations in all matters not provided for by this Section.1194

1188

Art. 878 Art. 879 1190 Art. 880 1191 Art. 881 1192 Art. 882 1193 Art. 883 1194 Art. 884 1189

260

The designation of the day or time when the effects of the institution of an heir shall commence or cease shall be valid. In both cases, the legal heir shall be considered as called to the succession until the arrival of the period or its expiration. But in the first case he shall not enter into possession of the property until after having given sufficient security, with the intervention of the instituted heir.1195 E. Legitime 1. Definition 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.1196 2. Compulsory Heirs1197 and Various Combinations 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 ascendants, with respect to their legitimate children and descendants; (3) The widow or widower; (4) Acknowledged natural children, and natural children by legal fiction; (5) Other illegitimate children referred to in article 287. Compulsory heirs mentioned in Nos. 3, 4, and 5 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.

1195

Art. 885 Art. 886 1197 Classes of compulsory heirs: 1.Primary – those who have precedence over and exclude other compulsory heirs a. Legitimate children and descendants (legitimate), with respect to their legitimate parents and ascendants 2.Secondary – those who succeed only in the absence of the primary heirs a. Legitimate parents and ascendants (legitimate), with respect to their legitimate children and descendants 3.Concurring – those who succeed together with the primary or the secondary compulsory heirs a. Widow or widower (legitimate) b. Illegitimate children and descendants (legitimate or illegitimate) 1196

261

The father or mother of illegitimate children of the three classes mentioned, shall inherit from them in the manner and to the extent established by this Code.1198 The legitime of legitimate children and descendants consists of one-half of the hereditary estate of the father and of the mother. The latter may freely dispose of the remaining half, subject to the rights of illegitimate children and of the surviving spouse as hereinafter provided.1199 The legitime of legitimate parents or ascendants consists of one-half of the hereditary estates of their children and descendants. The children or descendants may freely dispose of the other half, subject to the rights of illegitimate children and of the surviving spouse as hereinafter provided.1200 The legitime reserved for the legitimate parents shall be divided between them equally; if one of the parents should have died, the whole shall pass to the survivor. If the testator leaves neither father nor mother, but is survived by ascendants of equal degree of the paternal and maternal lines, the legitime shall be divided equally between both lines. If the ascendants should be of different degrees, it shall pertain entirely to the ones nearest in degree of either line.1201 If only one legitimate child or descendant of the deceased survives, the widow or widower shall be entitled to one-fourth of the hereditary estate. In case of a legal separation, the surviving spouse may inherit if it was the deceased who had given cause for the same. If there are two or more legitimate children or descendants, the surviving spouse shall be entitled to a portion equal to the legitime of each of the legitimate children or descendants. In both cases, the legitime of the surviving spouse shall be taken from the portion that can be freely disposed of by the testator.1202 If the testator leaves no legitimate descendants, but leaves legitimate ascendants, the surviving spouse shall have a right to one-fourth of the hereditary estate. This fourth shall be taken from the free portion of the estate.1203

1198

Art. 887 Art. 888 1200 Art. 889 1201 Art. 890 1202 Art. 892 1203 Art. 893 1199

262

If the testator leaves illegitimate children, the surviving spouse shall be entitled to one-third of the hereditary estate of the deceased and the illegitimate children to another third. The remaining third shall be at the free disposal of the testator.1204 The legitime of each of the acknowledged natural children and each of the natural children by legal fiction shall consist of one-half of the legitime of each of the legitimate children or descendants. The legitime of an illegitimate child who is neither an acknowledged natural, nor a natural child by legal fiction, shall be equal in every case to four-fifths of the legitime of an acknowledged natural child. 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.1205 Illegitimate children who may survive with legitimate parents or ascendants of the deceased shall be entitled to one-fourth of the hereditary estate to be taken from the portion at the free disposal of the testator.1206 When the widow or widower survives with legitimate children or descendants, and acknowledged natural children, or natural children by legal fiction, such surviving spouse shall be entitled to a portion equal to the legitime of each of the legitimate children which must be taken from that part of the estate which the testator can freely dispose of.1207 If the widow or widower survives with legitimate children or descendants, and with illegitimate children other than acknowledged natural, or natural children by legal fiction, the share of the surviving spouse shall be the same as that provided in the preceding article.1208 When the widow or widower survives with legitimate parents or ascendants and with illegitimate children, such surviving spouse shall be entitled to one-eighth of the hereditary estate of the deceased which must be taken from the free portion, and the illegitimate children shall be entitled to one-fourth of the estate which shall be taken also from the disposable portion. The testator may freely dispose of the remaining one-eighth of the estate.1209 If the only survivor is the widow or widower, she or he shall be entitled to one-half of the hereditary estate of the deceased spouse, and the testator may freely dispose of the other half. 1204

Art. 894 Art. 895 1206 Art. 896 1207 Art. 897 1208 Art. 898 1209 Art. 899 1205

263

If the marriage between the surviving spouse and the testator was solemnized in articulo mortis, and the testator died within three months from the time of the marriage, the legitime of the surviving spouse as the sole heir shall be one-third of the hereditary estate, except when they have been living as husband and wife for more than five years. In the latter case, the legitime of the surviving spouse shall be that specified in the preceding paragraph.1210 When the testator dies leaving illegitimate children and no other compulsory heirs, such illegitimate children shall have a right to one-half of the hereditary estate of the deceased. The other half shall be at the free disposal of the testator.1211 The rights of illegitimate children set forth in the preceding articles are transmitted upon their death to their descendants, whether legitimate or illegitimate.1212 The legitime of the parents who have an illegitimate child, when such child leaves neither legitimate descendants, nor a surviving spouse, nor illegitimate children, is one-half of the hereditary estate of such illegitimate child. If only legitimate or illegitimate children are left, the parents are not entitled to any legitime whatsoever. If only the widow or widower survives with parents of the illegitimate child, the legitime of the parents is one-fourth of the hereditary estate of the child, and that of the surviving spouse also one-fourth of the estate.1213 SUMMARY OF LEGITIMES OF COMPULSORY HEIRS: Surviving relatives

Legitimate Surviving children & spouse descendants Legitimate children ½ (divided by alone the # of children) 1 legitimate child ½ ¼ surviving spouse Legitimate children Surviving spouse Legitimate children Illegitimate children

Illegitimate children

½ (divided by Same as the no. of share @ legit children) child ½ ½ of the share of @ legit child

1210

Art. 900 Art. 901 1212 Art. 902 1213 Art. 903 1211

264

Legitimate Illegitimate parents & parents ascendants

1 legitimate child ½ surviving spouse illegitimate children

¼ (preferred)

½ of the share of @ legit child

2 or more ½ (divided by Same as the ½ of the share legitimate children no. of share of @ of @ legit surviving spouse children) legit child child Illegitimate children Legitimate parents alone Legitimate parents Illegitimate children Legitimate parents and Surviving spouse

½ ¼ ¼

Legitimate parents Surviving spouse Illegitimate children Illegitimate children alone

1/8

Illegitimate children Surviving spouse Surviving spouse alone

1/3

Illegitimate parents alone Illegitimate parents Surviving spouse

½ ½

¼

½

½ (divided by no. of children) 1/3 (divided by no. of children)

½ or 1/3 if marriage in articulo mortis ½ ¼

¼

The testator cannot deprive his compulsory heirs of their legitime, except in cases expressly specified by law. Neither can he impose upon the same any burden, encumbrance, condition, or substitution of any kind whatsoever.1214 Every renunciation or compromise as regards a future legitime between the person owing it and his compulsory heirs is void, and the latter may claim the same upon the death

1214

Art. 904

265

of the former; but they must bring to collation whatever they may have received by virtue of the renunciation or compromise.1215 Any compulsory heir to whom the testator has left by any title less than the legitime belonging to him may demand that the same be fully satisfied.1216 Testamentary dispositions that impair or diminish the legitime of the compulsory heirs shall be reduced on petition of the same, insofar as they may be inofficious or excessive.1217 To determine the legitime, the value of the property left at the death of the testator shall be considered, deducting all debts and charges, which shall not include those imposed in the will. To the net value of the hereditary estate, shall be added the value of all donations by the testator that are subject to collation, at the time he made them.1218 Donations given to children shall be charged to their legitime. Donations made to strangers shall be charged to that part of the estate of which the testator could have disposed by his last will. Insofar as they may be inofficious or may exceed the disposable portion, they shall be reduced according to the rules established by this Code.1219 Donations which an illegitimate child may have received during the lifetime of his father or mother, shall be charged to his legitime. Should they exceed the portion that can be freely disposed of, they shall be reduced in the manner prescribed by this Code.1220 After the legitime has been determined in accordance with the three preceding articles, the reduction shall be made as follows: (1) Donations shall be respected as long as the legitime can be covered, reducing or annulling, if necessary, the devises or legacies made in the will; (2) The reduction of the devises or legacies shall be pro rata, without any distinction whatever.

1215

Art. 905 Art. 906 1217 Art. 907 1218 Art. 908 1219 Art. 909 1220 Art. 910 1216

266

If the testator has directed that a certain devise or legacy be paid in preference to others, it shall not suffer any reduction until the latter have been applied in full to the payment of the legitime. (3) If the devise or legacy consists of a usufruct or life annuity, whose value may be considered greater than that of the disposable portion, the compulsory heirs may choose between complying with the testamentary provision and delivering to the devisee or legatee the part of the inheritance of which the testator could freely dispose.1221 If the devise subject to reduction should consist of real property, which cannot be conveniently divided, it shall go to the devisee if the reduction does not absorb one-half of its value; and in a contrary case, to the compulsory heirs; but the former and the latter shall reimburse each other in cash for what respectively belongs to them. The devisee who is entitled to a legitime may retain the entire property, provided its value does not exceed that of the disposable portion and of the share pertaining to him as legitime.1222 If the heirs or devisees do not choose to avail themselves of the right granted by the preceding article, any heir or devisee who did not have such right may exercise it; should the latter not make use of it, the property shall be sold at public auction at the instance of any one of the interested parties.1223 The testator may devise and bequeath the free portion as he may deem fit.1224 3. ReservaTroncal1225 The ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another ascendant, or a brother or sister, is obliged to reserve such property as he may have acquired by operation of law for the benefit of relatives who are within the third degree and who belong to the line from which said property came.

1221

Art. 911 Art. 912 1223 Art. 913 1224 Art. 914 1225 Requisites 1) that the property was acquired by a descendant from an ascendant or from a brother or sister by gratuitous title 2) that said descendant died without an issue 3) that the property is inherited by another ascendant by operation of law 4) that there are relatives within the 3rd degree belonging to the line from which said property came 1222

267

4. Disinheritance1226 a. Disinheritance for cause The following shall be sufficient causes for the disinheritance of children and descendants, legitimate as well as illegitimate: (1) When a child or descendant has been found guilty of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; (2) When a child or descendant has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless; (3) When a child or descendant has been convicted of adultery or concubinage with the spouse of the testator; (4) When a child or descendant by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made; (5) A refusal without justifiable cause to support the parent or ascendant who disinherits such child or descendant; (6) Maltreatment of the testator by word or deed, by the child or descendant; (7) When a child or descendant leads a dishonorable or disgraceful life; (8) Conviction of a crime which carries with it the penalty of civil interdiction.1227 Summary of causes of disinheritance: GROUNDS FOR DISINHERITANCE

1

CHILDREN/ DESCENDANTS

Guilty/convicted of * attempt against life of testator/spouse/

PARENTS/ ASCENDANTS

SPOUSE

UNWORTHINESS

*

*

*

1226

It is the act by which the testator, for just cause, deprives a compulsory heir of his right to the legitime. Requisites for a valid disinheritance: 1. Heir disinherited must be designated by name or in such a manner as to leave no room for doubt as to who is intended 2. It must be for a cause designated by law 3. It must be made in valid will 4. It must be made expressly, stating the cause in the will itself 5. The cause must be certain and true, and must be proved by the interested heir if the person disinherited should deny it 6 .It must unconditional 7. It must be total 1227 Art. 919

268

ascendant/descendant 2

Accused * testator/decedent of crime punishable by imprisonment of more than 6 years, found groundless, false

*

*

*

3

Causes * testator/decedent to make will or change one by fraud, violence, intimidation, or undue influence

*

*

*

4

Unjustified refusal to * support testator

*

*

5

Convicted of adultery * or concubinage with spouse of testator/decedent

*

*

6

Maltreatment of * testator by word and deed

7

Leading dishonorable disgraceful life

8

Conviction of crime * which carries penalty of civil interdiction

9

Abandonment of children or inducing children to live corrupt and immoral life or attempted against virtue

*

*

10

Loss of authority

parental

*

11

Attempt by one parent against life of the other UNLESS there is reconciliation

*

a * or

269

*

between parents 12

Spouses given cause for legal separation

*

13

Failure to report violent death of decedent within one month, unless authorities have already taken action

*

14

Force, violence, intimidation or undue influence to prevent another from making a will or revoking one already made or who supplants or alters the latter’s will

*

15

Falsifies or forges a supposed will of the decedent

*

(1) Reconciliation A subsequent reconciliation between the offender and the offended person deprives the latter of the right to disinherit, and renders ineffectual any disinheritance that may have been made.1228 (2) Rights of descendants of person disinherited The children and descendants of the person disinherited shall take his or her place and shall preserve the rights of compulsory heirs with respect to the legitime; but the disinherited parent shall not have the usufruct or administration of the property which constitutes the legitime.1229 b. Disinheritance without cause 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 set forth in this Code, shall annul the institution of heirs insofar as it may prejudice the person disinherited; but the devises

1228 1229

Art. 922 Art. 923

270

and legacies and other testamentary dispositions shall be valid to such extent as will not impair the legitime.1230 1. Legacies and Devisees All things and rights which are within the commerce of man be bequeathed or devised.1231 A testator may charge with legacies and devises not only his compulsory heirs but also the legatees and devisees. The latter shall be liable for the charge only to the extent of the value of the legacy or the devise received by them. The compulsory heirs shall not be liable for the charge beyond the amount of the free portion given them.1232 bound.

When the testator charges one of the heirs with a legacy or devise, he alone shall be

Should he not charge anyone in particular, all shall be liable in the same proportion in which they may inherit.1233 If two or more heirs take possession of the estate, they shall be solidarily liable for the loss or destruction of a thing devised or bequeathed, even though only one of them should have been negligent.1234 The heir who is bound to deliver the legacy or devise shall be liable in case of eviction, if the thing is indeterminate and is indicated only by its kind.1235 If the testator, heir, or legatee owns only a part of, or an interest in the thing bequeathed, the legacy or devise shall be understood limited to such part or interest, unless the testator expressly declares that he gives the thing in its entirety.1236 The legacy or devise of a thing belonging to another person is void, if the testator erroneously believed that the thing pertained to him. But if the thing bequeathed, though not belonging to the testator when he made the will, afterwards becomes his, by whatever title, the disposition shall take effect.1237 If the testator orders that a thing belonging to another be acquired in order that it be given to a legatee or devisee, the heir upon whom the obligation is imposed or the estate 1230

Art. 918 Art. 924 1232 Art. 925 1233 Art. 926 1234 Art. 927 1235 Art. 928 1236 Art. 929 1237 Art. 930 1231

271

must acquire it and give the same to the legatee or devisee; but if the owner of the thing refuses to alienate the same, or demands an excessive price therefor, the heir or the estate shall only be obliged to give the just value of the thing.1238 The legacy or devise of a thing which at the time of the execution of the will already belonged to the legatee or devisee shall be ineffective, even though another person may have some interest therein. If the testator expressly orders that the thing be freed from such interest or encumbrance, the legacy or devise shall be valid to that extent.1239 If the thing bequeathed belonged to the legatee or devisee at the time of the execution of the will, the legacy or devise shall be without effect, even though it may have subsequently alienated by him. If the legatee or devisee acquires it gratuitously after such time, he can claim nothing by virtue of the legacy or devise; but if it has been acquired by onerous title he can demand reimbursement from the heir or the estate.1240 If the testator should bequeath or devise something pledged or mortgaged to secure a recoverable debt before the execution of the will, the estate is obliged to pay the debt, unless the contrary intention appears. The same rule applies when the thing is pledged or mortgaged after the execution of the will. Any other charge, perpetual or temporary, with which the thing bequeathed is burdened, passes with it to the legatee or devisee.1241 The legacy of a credit against a third person or of the remission or release of a debt of the legatee shall be effective only as regards that part of the credit or debt existing at the time of the death of the testator. In the first case, the estate shall comply with the legacy by assigning to the legatee all rights of action it may have against the debtor. In the second case, by giving the legatee an acquittance, should he request one. In both cases, the legacy shall comprise all interests on the credit or debt which may be due the testator at the time of his death.1242

1238

Art. 931 Art. 932 1240 Art. 933 1241 Art. 934 1242 Art. 935 1239

272

The legacy referred to in the preceding article shall lapse if the testator, after having made it, should bring an action against the debtor for the payment of his debt, even if such payment should not have been effected at the time of his death. The legacy to the debtor of the thing pledged by him is understood to discharge only the right of pledge.1243 A generic legacy of release or remission of debts comprises those existing at the time of the execution of the will, but not subsequent ones.1244 A legacy or devise made to a creditor shall not be applied to his credit, unless the testator so expressly declares. In the latter case, the creditor shall have the right to collect the excess, if any, of the credit or of the legacy or devise.1245 If the testator orders the payment of what he believes he owes but does not in fact owe, the disposition shall be considered as not written. If as regards a specified debt more than the amount thereof is ordered paid, the excess is not due, unless a contrary intention appears. The foregoing provisions are without prejudice to the fulfillment of natural obligations.1246 In alternative legacies or devises, the choice is presumed to be left to the heir upon whom the obligation to give the legacy or devise may be imposed, or the executor or administrator of the estate if no particular heir is so obliged. If the heir, legatee or devisee, who may have been given the choice, dies before making it, this right shall pass to the respective heirs. Once made, the choice is irrevocable. In the alternative legacies or devises, except as herein provided, the provisions of this Code regulating obligations of the same kind shall be observed, save such modifications as may appear from the intention expressed by the testator.1247 A legacy of generic personal property shall be valid even if there be no things of the same kind in the estate.

1243

Art. 936 Art. 937 1245 Art. 938 1246 Art. 939 1247 Art. 940 1244

273

A devise of indeterminate real property shall be valid only if there be immovable property of its kind in the estate. The right of choice shall belong to the executor or administrator who shall comply with the legacy by the delivery of a thing which is neither of inferior nor of superior quality.1248 Whenever the testator expressly leaves the right of choice to the heir, or to the legatee or devisee, the former may give or the latter may choose whichever he may prefer.1249 If the heir, legatee or devisee cannot make the choice, in case it has been granted him, his right shall pass to his heirs; but a choice once made shall be irrevocable. 1250 A legacy for education lasts until the legatee is of age, or beyond the age of majority in order that the legatee may finish some professional, vocational or general course, provided he pursues his course diligently. A legacy for support lasts during the lifetime of the legatee, if the testator has not otherwise provided. If the testator has not fixed the amount of such legacies, it shall be fixed in accordance with the social standing and the circumstances of the legatee and the value of the estate. If the testator or during his lifetime used to give the legatee a certain sum of money or other things by way of support, the same amount shall be deemed bequeathed, unless it be markedly disproportionate to the value of the estate.1251 If a periodical pension, or a certain annual, monthly, or weekly amount is bequeathed, the legatee may petition the court for the first installment upon the death of the testator, and for the following ones which shall be due at the beginning of each period; such payment shall not be returned, even though the legatee should die before the expiration of the period which has commenced.1252 If the thing bequeathed should be subject to a usufruct, the legatee or devisee shall respect such right until it is legally extinguished.1253 The legatee or devisee acquires a right to the pure and simple legacies or devises from the death of the testator, and transmits it to his heirs.1254 1248

Art. 941 Art. 942 1250 Art. 943 1251 Art. 944 1252 Art. 945 1253 Art. 946 1254 Art. 947 1249

274

If the legacy or devise is of a specific and determinate thing pertaining to the testator, the legatee or devisee acquires the ownership thereof upon the death of the testator, as well as any growing fruits, or unborn offspring of animals, or uncollected income; but not the income which was due and unpaid before the latter's death. From the moment of the testator's death, the thing bequeathed shall be at the risk of the legatee or devisee, who shall, therefore, bear its loss or deterioration, and shall be benefited by its increase or improvement, without prejudice to the responsibility of the executor or administrator.1255 If the bequest should not be of a specific and determinate thing, but is generic or of quantity, its fruits and interests from the time of the death of the testator shall pertain to the legatee or devisee if the testator has expressly so ordered.1256 If the estate should not be sufficient to cover all the legacies or devises, their payment shall be made in the following order: (1) Remuneratory legacies or devises; (2) Legacies or devises declared by the testator to be preferential; (3) Legacies for support; (4) Legacies for education; (5) Legacies or devises of a specific, determinate thing which forms a part of the estate; (6) All others pro rata.1257 The thing bequeathed shall be delivered with all its accessories and accessories and in the condition in which it may be upon the death of the testator.1258 The heir, charged with a legacy or devise, or the executor or administrator of the estate, must deliver the very thing bequeathed if he is able to do so and cannot discharge this obligation by paying its value. Legacies of money must be paid in cash, even though the heir or the estate may not have any. The expenses necessary for the delivery of the thing bequeathed shall be for the account of the heir or the estate, but without prejudice to the legitime.1259 The legatee or devisee cannot take possession of the thing bequeathed upon his own authority, but shall request its delivery and possession of the heir charged with the legacy or

1255

Art. 948 Art. 949 1257 Art. 950 1258 Art. 951 1259 Art. 952 1256

275

devise, or of the executor or administrator of the estate should he be authorized by the court to deliver it.1260 The legatee or devisee cannot accept a part of the legacy or devise and repudiate the other, if the latter be onerous. Should he die before having accepted the legacy or devise, leaving several heirs, some of the latter may accept and the others may repudiate the share respectively belonging to them in the legacy or devise.1261 The legatee or devisee of two legacies or devises, one of which is onerous, cannot renounce the onerous one and accept the other. If both are onerous or gratuitous, he shall be free to accept or renounce both, or to renounce either. But if the testator intended that the two legacies or devises should be inseparable from each other, the legatee or devisee must either accept or renounce both. Any compulsory heir who is at the same time a legatee or devisee may waive the inheritance and accept the legacy or devise, or renounce the latter and accept the former, or waive or accept both.1262 If the legatee or devisee cannot or is unwilling to accept the legacy or devise, or if the legacy or devise for any reason should become ineffective, it shall be merged into the mass of the estate, except in cases of substitution and of the right of accretion.1263 The legacy or devise shall be without effect: (1) If the testator transforms the thing bequeathed in such a manner that it does not retain either the form or the denomination it had; (2) If the testator by any title or for any cause alienates the thing bequeathed or any part thereof, it being understood that in the latter case the legacy or devise shall be without effect only with respect to the part thus alienated. If after the alienation the thing should again belong to the testator, even if it be by reason of nullity of the contract, the legacy or devise shall not thereafter be valid, unless the reacquisition shall have been effected by virtue of the exercise of the right of repurchase; (3) If the thing bequeathed is totally lost during the lifetime of the testator, or after his death without the heir's fault. Nevertheless, the person obliged to pay the legacy or devise shall be liable for eviction if the thing bequeathed should not have been determinate as to its kind, in accordance with the provisions of article 928.1264

1260

Art. 953 Art. 954 1262 Art. 955 1263 Art. 956 1264 Art. 957 1261

276

A mistake as to the name of the thing bequeathed or devised, is of no consequence, if it is possible to identify the thing which the testator intended to bequeath or devise.1265 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.1266 III. Legal or Intestate Succession A. General Provisions Legal or intestate succession takes place:1267 (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 this Code.1268 In default of testamentary heirs, the law vests the inheritance, in accordance with the rules hereinafter set forth, in the legitimate and illegitimate relatives of the deceased, in the surviving spouse, and in the State.1269

1265

Art. 958 Art. 959 1267 Causes for legal or intestate succession: 1. If a person dies without a will 2 .If a person dies with a void will 3. If a person dies with a will which has subsequently lost its validity 4. When the will does not institute an heir to, or dispose of all the property belonging to the testator (legal succession shall take place only with respect to the property of which the testator has not disposed) 5. If the suspensive condition attached to the institution of the heir does not happen or is not fulfilled 6. If the heir dies before the testator, 7. If the heir repudiates the inheritance, there being no substitution, and no right of accretion takes place 8. When the heir instituted is incapable of succeeding, except in cases provided in the Code Fundamental underlying principles in legal or intestate succession: 1. Rule of Proximity – the relative nearest in degree excludes the farther one 2. Rule of Equal Division – the relatives who are in the same degree shall inherit in equal shares 1268 Art. 960 1269 Art. 961 1266

277

In every inheritance, the relative nearest in degree excludes the more distant ones, saving the right of representation when it properly takes place. Relatives in the same degree shall inherit in equal shares, subject to the provisions of article 1006 with respect to relatives of the full and half blood, and of article 987, paragraph 2, concerning division between the paternal and maternal lines.1270 1. Relationship Proximity of relationship is determined by the number of generations. Each generation forms a degree.1271 A series of degrees forms a line, 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 is that constituted by the series of degrees among persons who are not ascendants and descendants, but who come from a common ancestor.1272 The direct line is 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.1273 In the line, as many degrees are counted as there are generations or persons, excluding the progenitor. In the direct line, ascent is made to the common ancestor. Thus, the child is one degree removed from the parent, two from the grandfather, and three from the greatgrandparent. In the collateral line, ascent is made to the common ancestor and then descent is made to the person with whom the computation is to be made. Thus, a person is two degrees removed from his brother, three from his uncle, who is the brother of his father, four from his first cousin, and so forth.1274 Full blood relationship is that existing between persons who have the same father and the same mother.

1270

Art. 962 Art. 963 1272 Art. 964 1273 Art. 965 1274 Art. 966 1271

278

Half-blood relationship is that existing between persons who have the same father, but not the same mother, or the same mother, but not the same father.1275 If there are several relatives of the same degree, and one or some of them are unwilling or incapacitated to succeed, his portion shall accrue to the others of the same degree, save the right of representation when it should take place.1276 If the inheritance should be repudiated by the nearest relative, should there be one only, or by all the nearest relatives called by law to succeed, should there be several, those of the following degree shall inherit in their own right and cannot represent the person or persons repudiating the inheritance.1277 2. Right of Representation 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.1278 The representative is called to the succession by the law and not by the person represented. The representative does not succeed the person represented but the one whom the person represented would have succeeded.1279 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.1280 In order that representation may take place, it is necessary that the representative himself be capable of succeeding the decedent.1281 Whenever there is succession by representation, the division of the estate shall be made per stirpes, in such manner that the representative or representatives shall not inherit more than what the person they represent would inherit, if he were living or could inherit.1282 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.1283 1275

Art. 967 Art. 968 1277 Art. 969 1278 Art. 970 1279 Art. 971 1280 Art. 972 1281 Art. 973 1282 Art. 974 1283 Art. 975 1276

279

A person may represent him whose inheritance he has renounced.1284 Heirs who repudiate their share may not be represented.1285 B. Order of Intestate Succession Succession pertains, in the first place, to the descending direct line.1286 Legitimate children and their descendants succeed the parents and other ascendants, without distinction as to sex or age, and even if they should come from different marriages. An adopted child succeeds to the property of the adopting parents in the same manner as a legitimate child.1287 The children of the deceased shall always inherit from him in their own right, dividing the inheritance in equal shares.1288 Should children of the deceased and descendants of other children who are dead, survive, the former shall inherit in their own right, and the latter by right of representation.1289 The grandchildren and other descendants shall inherit by right of representation, and if any one of them should have died, leaving several heirs, the portion pertaining to him shall be divided among the latter in equal portions.1290 If illegitimate children survive with legitimate children, the shares of the former shall be in the proportions prescribed by article 895.1291 In case of the death of an adopted child, leaving no children or descendants, his parents and relatives by consanguinity and not by adoption, shall be his legal heirs.1292 In default of legitimate children and descendants of the deceased, his parents and ascendants shall inherit from him, to the exclusion of collateral relatives.1293 The father and mother, if living, shall inherit in equal shares.

1284

Art. 976 Art. 977 1286 Art. 978 1287 Art. 979 1288 Art. 980 1289 Art. 981 1290 Art. 982 1291 Art. 983 1292 Art. 984 1293 Art. 985 1285

280

Should one only of them survive, he or she shall succeed to the entire estate of the child.1294 In default of the father and mother, the ascendants nearest in degree shall inherit. Should there be more than one of equal degree belonging to the same line they shall divide the inheritance per capita; should they be of different lines but of equal degree, onehalf shall go to the paternal and the other half to the maternal ascendants. In each line the division shall be made per capita.1295 In the absence of legitimate descendants or ascendants, the illegitimate children shall succeed to the entire estate of the deceased.1296 If, together with illegitimate children, there should survive descendants of another illegitimate child who is dead, the former shall succeed in their own right and the latter by right of representation.1297 The hereditary rights granted by the two preceding articles to illegitimate children shall be transmitted upon their death to their descendants, who shall inherit by right of representation from their deceased grandparent.1298 If legitimate ascendants are left, the illegitimate children shall divide the inheritance with them, taking one-half of the estate, whatever be the number of the ascendants or of the illegitimate children.1299 An illegitimate child has no right to inherit abintestato from the legitimate children and relatives of his father or mother; nor shall such children or relatives inherit in the same manner from the illegitimate child.1300 If an illegitimate child should die without issue, either legitimate or illegitimate, his father or mother shall succeed to his entire estate; and if the child's filiation is duly proved as to both parents, who are both living, they shall inherit from him share and share alike.1301 In default of the father or mother, an illegitimate child shall be succeeded by his or her surviving spouse who shall be entitled to the entire estate. If the widow or widower should survive with brothers and sisters, nephews and nieces, she or he shall inherit one-half of the estate, and the latter the other half.1302 1294

Art. 986 Art. 987 1296 Art. 988 1297 Art. 989 1298 Art. 990 1299 Art. 991 1300 Art. 992 1301 Art. 993 1302 Art. 994 1295

281

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 sisters, nephews and nieces, should there be any, under article 1001.1303 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 children.1304 When the widow or widower survives with legitimate parents or ascendants, the surviving spouse shall be entitled to one-half of the estate, and the legitimate parents or ascendants to the other half.1305 If a widow or widower survives with illegitimate children, such widow or widower shall be entitled to one-half of the inheritance, and the illegitimate children or their descendants, whether legitimate or illegitimate, to the other half.1306 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.1307 If legitimate ascendants, the surviving spouse, and illegitimate children are left, the ascendants shall be entitled to one-half of the inheritance, and the other half shall be divided between the surviving spouse and the illegitimate children so that such widow or widower shall have one-fourth of the estate, and the illegitimate children the other fourth.1308 Should brothers and sisters or their children survive with the widow or widower, the latter shall be entitled to one-half of the inheritance and the brothers and sisters or their children to the other half.1309 In case of a legal separation, if the surviving spouse gave cause for the separation, he or she shall not have any of the rights granted in the preceding articles.1310 If there are no descendants, ascendants, illegitimate children, or a surviving spouse, the collateral relatives shall succeed to the entire estate of the deceased in accordance with the following articles.1311

1303

Art. 995 Art. 996 1305 Art. 997 1306 Art. 998 1307 Art. 999 1308 Art. 1000 1309 Art. 1001 1310 Art. 1002 1311 Art. 1003 1304

282

Should the only survivors be brothers and sisters of the full blood, they shall inherit in equal shares.1312 Should brothers and sisters survive together with nephews and nieces, who are the children of the descendant's brothers and sisters of the full blood, the former shall inherit per capita, and the latter per stirpes.1313 Should brother and sisters of the full blood survive together with brothers and sisters of the half blood, the former shall be entitled to a share double that of the latter.1314 In case brothers and sisters of the half blood, some on the father's andsome on the mother's side, are the only survivors, all shall inherit in equal shares without distinction as to the origin of the property.1315 Children of brothers and sisters of the half-blood shall succeed per capita or per stirpes, in accordance with the rules laid down for brothers and sisters of the full blood.1316 Should there be neither brothers nor sisters nor children of brothers or sisters, the other collateral relatives shall succeed to the estate. The latter shall succeed without distinction of lines or preference among them by reason of relationship by the whole blood.1317 The right to inherit abintestato shall not extend beyond the fifth degree of relationship in the collateral line.1318 In default of persons entitled to succeed in accordance with the provisions of the preceding Sections, the State shall inherit the whole estate.1319 ORDER OF LEGAL OR INTESTATE SUCCESSION: 1 2

LEGITIMATE CHILD Legitimate child legitimate descendants

ILLEGITIMATE CHILD ADOPTED CHILD and legitimate child and legitimate legitimate child and legitimate descendants descendants

Legitimate parents legitimate ascendants

and illegitimate children and illegitimate legitimate or illegitimate legitimate descendants descendants

1312

Art. 1004 Art. 1005 1314 Art. 1006 1315 Art. 1007 1316 Art. 1008 1317 Art. 1009 1318 Art. 1010 1319 Art. 1011 1313

283

children and or illegitimate

3 4

Illegitimate children and illegitimate parents legitimate or illegitimate descendants Surviving spouse surviving spouse

legitimate or illegitimate parents and legitimate ascendants, adoptive parents surviving spouse

5

Legitimate siblings, nephews, illegitimate siblings, nephews, siblings, nephews, nieces nieces nieces

6

Legitimate collateral relatives

7

State

State

State

CONCURRENCE IN LEGAL OR INTESTATE SUCCESSION INTESTATE HEIR EXCLUDES EXCLUDED BY Legitimate children and Ascendants, collaterals No one Legitimate descendants and state

CONCURS WITH Surviving spouse Illegitimate children

Illegitimate children Illegitimate parents, No one and Descendants collaterals and state

Surviving spouse Legitimate children and legitimate parents Illegitimate children and surviving spouse

Legitimate parents and Collaterals and state legitimate ascendants Illegitimate parents Surviving spouse

Siblings, nieces

Legitimate children

Collaterals and state

Legitimate children and Surviving spouse illegitimate children Collaterals other than No one Legitimate children siblings, nephews and Illegitimate children nieces Legitimate parents and Illegitimate parents

nephews All other collaterals and Legitimate children, Surviving spouse state illegitimate children, Legitimate parents and illegitimate parents

Other collaterals within Collateral remoter in Legitimate children 5th degree degree and state Illegitimate children Legitimate parents Illegitimate parents and Surviving spouse

Collaterals in the same degree

State

No one

No one

Everyone

284

A MORE DETAILED SUMMARY OF INTESTATE SHARES: 1. Legitimate children and legitimate descendants alone INTESTATE HEIR

SHARE AS LEGITIME

Legitimate children

½

SHARE AS DISPOSAL ½

TOTAL

½

½

FREE TOTAL SHARE 1

INTESTATE

1

2. One legitimate child and surviving spouse INTESTATE HEIR

SHARE AS LEGITIME

SHARE AS DISPOSAL

FREE TOTAL SHARE ½

INTESTATE

Legitimate child

½

Surviving spouse

¼

¼

½

TOTAL

¾

¼

1

SHARE AS FREE DISPOSAL Remaining portion of estate after paying legitimes

TOTAL INTESTATE SHARE Whole estate divided equally between total number of children plus the surviving spouse

3. Legitimate children and surviving spouse INTESTATE HEIR

SHARE AS LEGITIME

Legitimate children

½

Surviving spouse

Same as share of @ Legitimes to be divided No. of children plus the legitimate child equally between total surviving spouse (see no. of children plus the above) surviving spouse

TOTAL

Varies on children

no.

of Varies on children

no.

of 1

4. Legitimate children and illegitimate children INTESTATE HEIR

SHARE AS LEGITIME

SHARE AS DISPOSAL

Legitimate children

½

Remaining portion of Whole estate divided estate after paying by the ratio of 2:1 for legitimes each legitimate child as compared to the illegitimate child

Illegitimate children

½

share

of

FREE TOTAL SHARE

INTESTATE

@ Legitimes to be divided 1 for @ illegitimate 285

legitimate child

TOTAL

Varies on children

by the ratio of 2 for @ child provided that legitimate child, 1 for legitimes wouldn’t be @ illegitimate child impaired no.

of Varies on children

no.

of

5. One legitimate child, illegitimate child, and surviving spouse INTESTATE HEIR

SHARE AS LEGITIME

SHARE AS FREE DISPOSAL Remaining portion of estate after paying legitimes to be divided by the ratio of 2:1 for @ legitimate child and @ illegitimate child, respectively

TOTAL INTESTATE SHARE Whole estate divided by the ratio of 2 @ legitimate child

Legitimate child

½

Illegitimate child

½ share of legitimate child

Surviving spouse

¼

TOTAL

Varies depending on Varies depending on 1 no. of illegitimate no. of illegitimate children children

@ 1 for @ illegitimate 1 for @ illegitimate child (see above) child Same share as legitimate child

a Legitimes wouldn’t be impaired

6. Legitimate children, illegitimate children and surviving spouse INTESTATE HEIR

SHARE AS LEGITIME

SHARE AS FREE DISPOSAL Remaining portion of estate, if any after paying legitimes to be divided by the ratio of 2 for @ legitimate child

Legitimate children

½

Illegitimate children

½ share of @ legit 1 for @ illegitimate 1 for @ illegitimate child child (see above) child (see above)

Surviving spouse

¼

TOTAL

Varies depending on Varies depending on 1 no. of illegitimate no. of illegitimate children children

Same share as a legitimate child, provided legitimes are not impaired

286

TOTAL INTESTATE SHARE Whole estate divided by the ratio of 2:1 for @ legitimate child and illegitimate child respectively

Same share as a legitimate child, provided legitimes are not impaired

7. Legitimate parents alone INTESTATE HEIR

SHARE AS LEGITIME

Legitimate parents TOTAL

½ ½

SHARE AS DISPOSAL ½ ½

FREE TOTAL SHARE 1 1

INTESTATE

SHARE AS DISPOSAL

FREE TOTAL SHARE ½ ½

INTESTATE

8. Legitimate parents and illegitimate children INTESTATE HEIR

SHARE AS LEGITIME

Legitimate parents Illegitimate children

½ ¼

¼

TOTAL

¾

¼

1

9. Legitimate parents and surviving spouse INTESTATE HEIR

SHARE AS LEGITIME

SHARE AS DISPOSAL

FREE TOTAL SHARE ½

Legitimate parents

½

Surviving spouse

¼

¼

½

TOTAL

¾

¼

1

INTESTATE

10. Legitimate parents, surviving spouse and illegitimate children INTESTATE HEIR

SHARE AS LEGITIME

Legitimate parents

½

Surviving spouse

1/8

Illegitimate children

¼

TOTAL

7/8

SHARE AS DISPOSAL 1/8

FREE TOTAL SHARE ½

INTESTATE

¼ ¼

1/8

1

11. Illegitimate children alone INTESTATE HEIR

SHARE AS LEGITIME

Illegitimate alone TOTAL

½

children ½

SHARE AS DISPOSAL ½ ½

287

FREE TOTAL SHARE 1 1

INTESTATE

12. Illegitimate children and surviving spouse INTESTATE HEIR

SHARE AS LEGITIME

Illegitimate children

1/3

SHARE AS DISPOSAL 1/6

FREE TOTAL SHARE ½

Surviving spouse

1/3

1/6

½

TOTAL

2/3

1/3

1

INTESTATE HEIR

SHARE AS LEGITIME

Surviving spouse

½ or 1/3

SHARE AS DISPOSAL ½ or 1/3

TOTAL

½ or 1/3

½ or 1/3

INTESTATE

13. Surviving spouse FREE TOTAL SHARE 1

INTESTATE

1

14. Illegitimate parents alone INTESTATE HEIR

SHARE AS LEGITIME

Illegitimate parents

½

SHARE AS DISPOSAL ½

TOTAL

½

½

FREE TOTAL SHARE 1

INTESTATE

1

15. Illegitimate parents and surviving spouse INTESTATE HEIR

SHARE AS LEGITIME

Illegitimate parents

¼

SHARE AS DISPOSAL ¼

FREE TOTAL SHARE ½

Surviving spouse

¼

¼

½

TOTAL

½

½

1

INTESTATE

16. Siblings, nephews and nieces alone INTESTATE HEIR

SHARE AS LEGITIME

Siblings, nieces TOTAL

½

SHARE AS DISPOSAL ½

nephews, ½

½

288

FREE TOTAL SHARE 1 1

INTESTATE

17. Surviving spouse, siblings, nephews and nieces INTESTATE HEIR

SHARE AS LEGITIME

Surviving spouse

½

Siblings, nieces TOTAL

SHARE AS DISPOSAL

nephews, ½

FREE TOTAL SHARE ½

½

½

½

1

INTESTATE

In order that the State may take possession of the property mentioned in the preceding article, the pertinent provisions of the Rules of Court must be observed.1320 After the payment of debts and charges, the personal property shall be assigned to the municipality or city where the deceased last resided in the Philippines, and the real estate to the municipalities or cities, respectively, in which the same is situated. If the deceased never resided in the Philippines, the whole estate shall be assigned to the respective municipalities or cities where the same is located. Such estate shall be for the benefit of public schools, and public charitable institutions and centers, in such municipalities or cities. The court shall distribute the estate as the respective needs of each beneficiary may warrant. The court, at the instance of an interested party, or on its own motion, may order the establishment of a permanent trust, so that only the income from the property shall be used.1321 If a person legally entitled to the estate of the deceased appears and files a claim hereto with the court within five years from the date the property was delivered to the State, such person shall be entitled to the possession of the same, or if sold, the municipality or city shall be accountable to him for such part of the proceeds as may not have been lawfully spent.1322 IV. Provisions Common to Testate and Intestate Succession Property left by will is not deemed subject to collation, if the testator has not otherwise provided, but the legitime shall in any case remain unimpaired.1323 When the grandchildren, who survive with their uncles, aunts, or cousins, inherit from their grandparents in representation of their father or mother, they shall bring to

1320

Art. 1012 Art. 1013 1322 Art. 1014 1323 Art. 1063 1321

289

collation all that their parents, if alive, would have been obliged to bring, even though such grandchildren have not inherited the property. They shall also bring to collation all that they may have received from the decedent during his lifetime, unless the testator has provided otherwise, in which case his wishes must be respected, if the legitime of the co-heirs is not prejudiced.1324 Parents are not obliged to bring to collation in the inheritance of their ascendants any property which may have been donated by the latter to their children.1325 Neither shall donations to the spouse of the child be brought to collation; but if they have been given by the parent to the spouses jointly, the child shall be obliged to bring to collation one-half of the thing donated.1326 Expenses for support, education, medical attendance, even in extraordinary illness, apprenticeship, ordinary equipment, or customary gifts are not subject to collation.1327 Expenses incurred by the parents in giving their children a professional, vocational or other career shall not be brought to collation unless the parents so provide, or unless they impair the legitime; but when their collation is required, the sum which the child would have spent if he had lived in the house and company of his parents shall be deducted therefrom.1328 Any sums paid by a parent in satisfaction of the debts of his children, election expenses, fines, and similar expenses shall be brought to collation.1329 Wedding gifts by parents and ascendants consisting of jewelry, clothing, and outfit, shall not be reduced as inofficious except insofar as they may exceed one-tenth of the sum which is disposable by will.1330 The same things donated are not to be brought to collation and partition, but only their value at the time of the donation, even though their just value may not then have been assessed. Their subsequent increase or deterioration and even their total loss or destruction, be it accidental or culpable, shall be for the benefit or account and risk of the donee.1331

1324

Art. 1064 Art. 1065 1326 Art. 1066 1327 Art. 1067 1328 Art. 1068 1329 Art. 1069 1330 Art. 1070 1331 Art. 1071 1325

290

In the collation of a donation made by both parents, one-half shall be brought to the inheritance of the father, and the other half, to that of the mother. That given by one alone shall be brought to collation in his or her inheritance.1332 The donee's share of the estate shall be reduced by an amount equal to that already received by him; and his co-heirs shall receive an equivalent, as much as possible, in property of the same nature, class and quality.1333 Should the provisions of the preceding article be impracticable, if the property donated was immovable, the co-heirs shall be entitled to receive its equivalent in cash or securities, at the rate of quotation; and should there be neither cash or marketable securities in the estate, so much of the other property as may be necessary shall be sold at public auction. If the property donated was movable, the co-heirs shall only have a right to select an equivalent of other personal property of the inheritance at its just price.1334 The fruits and interest of the property subject to collation shall not pertain to the estate except from the day on which the succession is opened. For the purpose of ascertaining their amount, the fruits and interest of the property of the estate of the same kind and quality as that subject to collation shall be made the standard of assessment.1335 The co-heirs are bound to reimburse to the donee the necessary expenses which he has incurred for the preservation of the property donated to him, though they may not have augmented its value. The donee who collates in kind an immovable which has been given to him must be reimbursed by his co-heirs for the improvements which have increased the value of the property, and which exist at the time the partition if effected. As to works made on the estate for the mere pleasure of the donee, no reimbursement is due him for them; he has, however, the right to remove them, if he can do so without injuring the estate.1336 Should any question arise among the co-heirs upon the obligation to bring to collation or as to the things which are subject to collation, the distribution of the estate shall not be interrupted for this reason, provided adequate security is given.1337

1332

Art. 1072 Art. 1073 1334 Art. 1074 1335 Art. 1075 1336 Art. 1076 1337 Art. 1077 1333

291

A. Right of Accretion 1. Definition and Requisites Accretion is a right by virtue of which, when two or more persons are called to the same inheritance, devise or legacy, the part assigned to the one who renounces or cannot receive his share, or who died before the testator, is added or incorporated to that of his coheirs, co-devisees, or co-legatees.1338 In order that the right of accretion may take place in a testamentary succession, it shall be necessary: (1) That two or more persons be called to the same inheritance, or to the same portion thereof, pro indiviso; and (2) That one of the persons thus called die before the testator, or renounce the inheritance, or be incapacitated to receive it.1339 The words "one-half for each" or "in equal shares" or any others which, though designating an aliquot part, do not identify it by such description as shall make each heir the exclusive owner of determinate property, shall not exclude the right of accretion. In case of money or fungible goods, if the share of each heir is not earmarked, there shall be a right of accretion.1340 In legal succession the share of the person who repudiates the inheritance shall always accrue to his co-heirs.1341 The heirs to whom the portion goes by the right of accretion take it in the same proportion that they inherit.1342 The heirs to whom the inheritance accrues shall succeed to all the rights and obligations which the heir who renounced or could not receive it would have had.1343 Among the compulsory heirs the right of accretion shall take place only when the free portion is left to two or more of them, or to any one of them and to a stranger. Should the part repudiated be the legitime, the other co-heirs shall succeed to it in their own right, and not by the right of accretion.1344 1338

Art. 1015 Art. 1016 1340 Art. 1017 1341 Art. 1018 1342 Art. 1019 1343 Art. 1020 1344 Art. 1021 1339

292

In testamentary succession, when the right of accretion does not take place, the vacant portion of the instituted heirs, if no substitute has been designated, shall pass to the legal heirs of the testator, who shall receive it with the same charges and obligations.1345 Accretion shall also take place among devisees, legatees and usufructuaries under the same conditions established for heirs.1346 B. Capacity to Succeed by Will or Intestacy Persons not incapacitated by law may succeed by will or abintestato. The provisions relating to incapacity by will are equally applicable to intestate succession.1347 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. A child already conceived at the time of the death of the decedent is capable of succeeding provided it be born later under the conditions prescribed in article 41.1348 A testamentary disposition may be made to the State, provinces, municipal corporations, private corporations, organizations, or associations for religious, scientific, cultural, educational, or charitable purposes. All other corporations or entities may succeed under a will, unless there is a provision to the contrary in their charter or the laws of their creation, and always subject to the same.1349 The prohibitions mentioned in article 739, concerning donations inter vivos shall apply to testamentary provisions.1350 Should the testator dispose of the whole or part of his property for prayers and pious works for the benefit of his soul, in general terms and without specifying its application, the executor, with the court's approval shall deliver one-half thereof or its proceeds to the church or denomination to which the testator may belong, to be used for such prayers and pious works, and the other half to the State, for the purposes mentioned in article 1013. 1351 Testamentary provisions in favor of the poor in general, without designation of particular persons or of any community, shall be deemed limited to the poor living in the 1345

Art. 1022 Art. 1023 1347 Art. 1024 1348 Art. 1025 1349 Art. 1026 1350 Art 1028 1351 Art. 1029 1346

293

domicile of the testator at the time of his death, unless it should clearly appear that his intention was otherwise. The designation of the persons who are to be considered as poor and the distribution of the property shall be made by the person appointed by the testator for the purpose; in default of such person, by the executor, and should there be no executor, by the justice of the peace, the mayor, and the municipal treasurer, who shall decide by a majority of votes all questions that may arise. In all these cases, the approval of the Court of First Instance shall be necessary. The preceding paragraph shall apply when the testator has disposed of his property in favor of the poor of a definite locality.1352 A testamentary provision in favor of a disqualified person, even though made under the guise of an onerous contract, or made through an intermediary, shall be void.1353 The cause of unworthiness shall be without effect if the testator had knowledge thereof at the time he made the will, or if, having known of them subsequently, he should condone them in writing.1354 In order to judge the capacity of the heir, devisee or legatee, his qualification at the time of the death of the decedent shall be the criterion. In cases falling under Nos. 2, 3, or 5 of article 1032, it shall be necessary to wait until final judgment is rendered, and in the case falling under No. 4, the expiration of the month allowed for the report. If the institution, devise or legacy should be conditional, the time of the compliance with the condition shall also be considered.1355 If the person excluded from the inheritance by reason of incapacity should be a child or descendant of the decedent and should have children or descendants, the latter shall acquire his right to the legitime. The person so excluded shall not enjoy the usufruct and administration of the property thus inherited by his children.1356 Alienations of hereditary property, and acts of administration performed by the excluded heir, before the judicial order of exclusion, are valid as to the third persons who

1352

Art. 1030 Art. 1031 1354 Art. 1033 1355 Art. 1034 1356 Art. 1035 1353

294

acted in good faith; but the co-heirs shall have a right to recover damages from the disqualified heir.1357 The unworthy heir who is excluded from the succession has a right to demand indemnity or any expenses incurred in the preservation of the hereditary property, and to enforce such credits as he may have against the estate.1358 Any person incapable of succession, who, disregarding the prohibition stated in the preceding articles, entered into the possession of the hereditary property, shall be obliged to return it together it its accessions. He shall be liable for all the fruits and rents he may have received, or could have received through the exercise of due diligence.1359 Capacity to succeed is governed by the law of the nation of the decedent.1360 The action for a declaration of incapacity and for the recovery of the inheritance, devise or legacy shall be brought within five years from the time the disqualified person took possession thereof. It may be brought by any one who may have an interest in the succession.1361 1. Persons Incapable of Succeeding The following are incapable of succeeding: (1) The priest who heard the confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period; (2) The relatives of such priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong; (3) A guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the guardianship have been approved, even if the testator should die after the approval thereof; nevertheless, any provision made by the ward in favor of the guardian when the latter is his ascendant, descendant, brother, sister, or spouse, shall be valid; (4) Any attesting witness to the execution of a will, the spouse, parents, or children, or any one claiming under such witness, spouse, parents, or children;

1357

Art. 1036 Art. 1037 1359 Art. 1038 1360 Art. 1039 1361 Art. 1040 1358

295

(5) Any physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness; (6) Individuals, associations and corporations not permitted by law to inherit.1362 The following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation; (2) Those made between persons found guilty of the same criminal offense, in consideration thereof; (3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donor and donee may be proved by preponderance of evidence in the same action.1363 The following are incapable of succeeding by reason of unworthiness: (1) Parents who have abandoned their children or induced their daughters to lead a corrupt or immoral life, or attempted against their virtue; (2) Any person who has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; (3) Any person who has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless; (4) Any heir of full age who, having knowledge of the violent death of the testator, should fail to report it to an officer of the law within a month, unless the authorities have already taken action; this prohibition shall not apply to cases wherein, according to law, there is no obligation to make an accusation; (5) Any person convicted of adultery or concubinage with the spouse of the testator; (6) Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made; (7) Any person who by the same means prevents another from making a will, or from revoking one already made, or who supplants, conceals, or alters the latter's will;

1362 1363

Art. 1027 Art. 739

296

(8) Any person who falsifies or forges a supposed will of the decedent.1364 2. Unworthiness vs. Disinheritance Unworthiness A person cannot succeed for reasons provided for by law.1365 Disinheritance A testamentary disposition by which a person is deprived of, or excluded from, the inheritance to which he has a right. C. Acceptance and Repudiation of the Inheritance The acceptance or repudiation of the inheritance is an act which is purely voluntary and free.1366 The effects of the acceptance or repudiation shall always retroact to the moment of the death of the decedent.1367 No person may accept or repudiate an inheritance unless he is certain of the death of the person from whom he is to inherit, and of his right to the inheritance.1368 Any person having the free disposal of his property may accept or repudiate an inheritance. Any inheritance left to minors or incapacitated persons may be accepted by their parents or guardians. Parents or guardians may repudiate the inheritance left to their wards only by judicial authorization. The right to accept an inheritance left to the poor shall belong to the persons designated by the testator to determine the beneficiaries and distribute the property, or in their default, to those mentioned in article 1030.1369 The lawful representatives of corporations, associations, institutions and entities qualified to acquire property may accept any inheritance left to the latter, but in order to repudiate it, the approval of the court shall be necessary.1370

1364

Art. 1032 supra 1366 Art. 1041 1367 Art. 1042 1368 Art. 1043 1369 Art. 1044 1370 Art. 1045 1365

297

Public official establishments can neither accept nor repudiate an inheritance without the approval of the government.1371 A married woman of age may repudiate an inheritance without the consent of her husband.1372 Deaf-mutes who can read and write may accept or repudiate the inheritance personally or through an agent. Should they not be able to read and write, the inheritance shall be accepted by their guardians. These guardians may repudiate the same with judicial approval.1373 Acceptance may be express or tacit. An express acceptance must be made in a public or private document. A tacit acceptance is one resulting from acts by which the intention to accept is necessarily implied, or which one would have no right to do except in the capacity of an heir. Acts of mere preservation or provisional administration do not imply an acceptance of the inheritance if, through such acts, the title or capacity of an heir has not been assumed.1374 An inheritance is deemed accepted: (1) If the heirs sells, donates, or assigns his right to a stranger, or to his co-heirs, or to any of them; (2) If the heir renounces the same, even though gratuitously, for the benefit of one or more of his co-heirs; (3) If he renounces it for a price in favor of all his co-heirs indiscriminately; but if this renunciation should be gratuitous, and the co-heirs in whose favor it is made are those upon whom the portion renounced should devolve by virtue of accretion, the inheritance shall not be deemed as accepted.1375 The repudiation of an inheritance shall be made in a public or authentic instrument, or by petition presented to the court having jurisdiction over the testamentary or intestate proceedings.1376

1371

Art. 1046 Art. 1047 1373 Art. 1048 1374 Art. 1049 1375 Art. 1050 1376 Art. 1051 1372

298

If the heir repudiates the inheritance to the prejudice of his own creditors, the latter may petition the court to authorize them to accept it in the name of the heir.1377 The acceptance shall benefit the creditors only to an extent sufficient to cover the amount of their credits. The excess, should there be any, shall in no case pertain to the renouncer, but shall be adjudicated to the persons to whom, in accordance with the rules established in this Code, it may belong. If the heir should die without having accepted or repudiated the inheritance his right shall be transmitted to his heirs.1378 Should there be several heirs called to the inheritance, some of them may accept and the others may repudiate it.1379 If a person, who is called to the same inheritance as an heir by will and abintestato, repudiates the inheritance in his capacity as a testamentary heir, he is understood to have repudiated it in both capacities. Should he repudiate it as an intestate heir, without knowledge of his being a testamentary heir, he may still accept it in the latter capacity.1380 The acceptance or repudiation of an inheritance, once made, is irrevocable, and cannot be impugned, except when it was made through any of the causes that vitiate consent, or when an unknown will appears.1381 Within thirty days after the court has issued an order for the distribution of the estate in accordance with the Rules of Court, the heirs, devisees and legatees shall signify to the court having jurisdiction whether they accept or repudiate the inheritance. If they do not do so within that time, they are deemed to have accepted the inheritance.1382 D. Collation To determine the legitime, the value of the property left at the death of the testator shall be considered, deducting all debts and charges, which shall not include those imposed in the will. To the net value of the hereditary estate, shall be added the value of all donations by the testator that are subject to collation, at the time he made them.1383 1377

Art. 1052 Art. 1053 1379 Art. 1054 1380 Art. 1055 1381 Art. 1056 1382 Art. 1057 1383 Art. 908 1378

299

Donations given to children shall be charged to their legitime. Donations made to strangers shall be charged to that part of the estate of which the testator could have disposed by his last will. Insofar as they may be inofficious or may exceed the disposable portion, they shall be reduced according to the rules established by this Code.1384 Donations which an illegitimate child may have received during the lifetime of his father or mother, shall be charged to his legitime. Should they exceed the portion that can be freely disposed of, they shall be reduced in the manner prescribed by this Code.1385 Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or right which he may have received from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition.1386 Collation shall not take place among compulsory heirs if the donor should have so expressly provided, or if the donee should repudiate the inheritance, unless the donation should be reduced as inofficious.1387 E. Partition and Distribution of Estate Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased.1388 A person may, by an act inter vivos or mortis causa, intrust the mere power to make the partition after his death to any person who is not one of the co-heirs. The provisions of this and of the preceding article shall be observed even should there be among the co-heirs a minor or a person subject to guardianship; but the mandatary, in such case, shall make an inventory of the property of the estate, after notifying the coheirs, the creditors, and the legatees or devisees.1389

1384

Art. 909 Art. 910 1386 Art. 1061 1387 Art. 1062 1388 Art. 1078 1389 Art. 1081 1385

300

Every act which is intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a partition, although it should purport to be a sale, and exchange, a compromise, or any other transaction.1390 Every co-heir has a right to demand the division of the estate unless the testator should have expressly forbidden its partition, in which case the period of indivision shall not exceed twenty years as provided in article 494. This power of the testator to prohibit division applies to the legitime. Even though forbidden by the testator, the co-ownership terminates when any of the causes for which partnership is dissolved takes place, or when the court finds for compelling reasons that division should be ordered, upon petition of one of the co-heirs.1391 Voluntary heirs upon whom some condition has been imposed cannot demand a partition until the condition has been fulfilled; but the other co-heirs may demand it by giving sufficient security for the rights which the former may have in case the condition should be complied with, and until it is known that the condition has not been fulfilled or can never be complied with, the partition shall be understood to be provisional.1392 In the partition of the estate, equality shall be observed as far as possible, dividing the property into lots, or assigning to each of the co-heirs things of the same nature, quality and kind.1393 Should a thing be indivisible, or would be much impaired by its being divided, it may be adjudicated to one of the heirs, provided he shall pay the others the excess in cash. Nevertheless, if any of the heirs should demand that the thing be sold at public auction and that strangers be allowed to bid, this must be done.1394 In the partition the co-heirs shall reimburse one another for the income and fruits which each one of them may have received from any property of the estate, for any useful and necessary expenses made upon such property, and for any damage thereto through malice or neglect.1395 Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor.1396

1390

Art. 1082 Art. 1083 1392 Art. 1084 1393 Art. 1085 1394 Art. 1086 1395 Art. 1087 1396 Art. 1088 1391

301

The titles of acquisition or ownership of each property shall be delivered to the coheir to whom said property has been adjudicated.1397 When the title comprises two or more pieces of land which have been assigned to two or more co-heirs, or when it covers one piece of land which has been divided between two or more co-heirs, the title shall be delivered to the one having the largest interest, and authentic copies of the title shall be furnished to the other co-heirs at the expense of the estate. If the interest of each co-heir should be the same, the oldest shall have the title.1398 After the partition has been made, the co-heirs shall be reciprocally bound to warrant the title to, and the quality of, each property adjudicated.1399 The reciprocal obligation of warranty referred to in the preceding article shall be proportionate to the respective hereditary shares of the co-heirs, but if any one of them should be insolvent, the other co-heirs shall be liable for his part in the same proportion, deducting the part corresponding to the one who should be indemnified. Those who pay for the insolvent heir shall have a right of action against him for reimbursement, should his financial condition improve.1400 An action to enforce the warranty among heirs must be brought within ten years from the date the right of action accrues.1401 If a credit should be assigned as collectible, the co-heirs shall not be liable for the subsequent insolvency of the debtor of the estate, but only for his insolvency at the time the partition is made. The warranty of the solvency of the debtor can only be enforced during the five years following the partition. Co-heirs do not warrant bad debts, if so known to, and accepted by, the distributee. But if such debts are not assigned to a co-heir, and should be collected, in whole or in part, the amount collected shall be distributed proportionately among the heirs.1402 The obligation of warranty among co-heirs shall cease in the following cases: (1) When the testator himself has made the partition, unless it appears, or it may be reasonably presumed, that his intention was otherwise, but the legitime shall always remain unimpaired;

1397

Art. 1089 Art. 1090 1399 Art. 1092 1400 Art. 1093 1401 Art. 1094 1402 Art. 1095 1398

302

(2) When it has been so expressly stipulated in the agreement of partition, unless there has been bad faith; (3) When the eviction is due to a cause subsequent to the partition, or has been caused by the fault of the distributee of the property.1403 A partition, judicial or extra-judicial, may also be rescinded on account of lesion, when any one of the co-heirs received things whose value is less, by at least one-fourth, than the share to which he is entitled, considering the value of the things at the time they were adjudicated.1404 The partition made by the testator cannot be impugned on the ground of lesion, except when the legitime of the compulsory heirs is thereby prejudiced, or when it appears or may reasonably be presumed, that the intention of the testator was otherwise.1405 The heir who is sued shall have the option of indemnifying the plaintiff for the loss, or consenting to a new partition. Indemnity may be made by payment in cash or by the delivery of a thing of the same kind and quality as that awarded to the plaintiff. If a new partition is made, it shall affect neither those who have not been prejudiced nor those have not received more than their just share.1406 An heir who has alienated the whole or a considerable part of the real property adjudicated to him cannot maintain an action for rescission on the ground of lesion, but he shall have a right to be indemnified in cash.1407 The omission of one or more objects or securities of the inheritance shall not cause the rescission of the partition on the ground of lesion, but the partition shall be completed by the distribution of the objects or securities which have been omitted.1408 1. Partition Partition, in general, is the separation, division and assignment of a thing held in common among those to whom it may belong. The thing itself may be divided, or its value.1409

1403

Art. 1096 Art. 1098 1405 Art. 1099 1406 Art. 1101 1407 Art. 1102 1408 Art. 1103 1409 Art. 1079 1404

303

Should a person make partition of his estate by an act inter vivos, or by will, such partition shall be respected, insofar as it does not prejudice the legitime of the compulsory heirs. A parent who, in the interest of his or her family, desires to keep any agricultural, industrial, or manufacturing enterprise intact, may avail himself of the right granted him in this article, by ordering that the legitime of the other children to whom the property is not assigned, be paid in cash.1410 3. Effects of Partition A partition legally made confers upon each heir the exclusive ownership of the property adjudicated to him.1411 A partition may be rescinded or annulled for the same causes as contracts.1412 The action for rescission on account of lesion shall prescribe after four years from the time the partition was made.1413 A partition made with preterition of any of the compulsory heirs shall not be rescinded, unless it be proved that there was bad faith or fraud on the part of the other persons interested; but the latter shall be proportionately obliged to pay to the person omitted the share which belongs to him.1414 A partition which includes a person believed to be an heir, but who is not, shall be void only with respect to such person.1415

1410

Art. 1080 Art. 1091 1412 Art. 1097 1413 Art. 1100 1414 Art. 1104 1415 Art. 1105 1411

304

PARTNERSHIP I. Contract of partnership1416 A. Definition By the contract of partnership two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. B. Elements 1. consensual; 2. there must be a contribution of money, property or industry to a common fund; 3. the subject must be a lawful one; 4. there must be an intention of dividing the profit among the partners; 5. there must be a desire to formulate an active union1417 ; 6. a new personality, that of the firm – must arise, distinct from the separate personality of each of the members C. Rules to determine existence1418 1. General rule: Persons who are not partners as to each other are not partners as to third persons. Exception: partnership by estoppel 2. Co-ownership of a property does not itself establish a partnership, even though the coowners share in the profits derived from the incident of joint ownership. 3. Sharing of gross returns alone does not indicate a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived. 1416

A partnership has a juridical personality which is separate and distinct from that of the partners. A partnership may sue and be sued in its name or by its duly authorized representatives. A managing partner of the partnership may execute all acts of administration including the right to sue debtors of the partnership in the case of their failure to pay their obligation when it becomes demandable. (Tai Tong Chuache& Co. vs. Insurance Commission 158 SCRA 336 [1988]) 1417 affectiosocietatis 1418 Art. 1769

305

4. Receipt of share in the profits is a strong presumptive evidence of partnership. However, no such inference will be drawn if such profits were received in payment: (a) as a debt by installments or otherwise; (b) as wages of an employee or rent to a landlord; (c)as an annuity to a widow or representative of a deceased partner; (d)as interest on a loan, though the amount of payment vary with the profits of the business; and (e)as the consideration for the sale of a goodwill of a business or other property by installments or otherwise. D. How partnership is formed General rule: No special form is required for the validity or existence of the contract of partnership. Exceptions: 1. Where immovable property or real rights are contributed, the partnership contract shall be void unless: a. It is reduced to writing in a public instrument1419 . b. An inventory of the property contributed is made, signed by the parties and attached to the public instrument.1420 2. Where the contract is by its terms not to be performed within a year from the making thereof, such partnership contract is covered by the statute of frauds and thus requires a written agreement to be enforceable. 3. Where the contract of partnership has a capital of 3,000 pesos or more, in money or property, it shall appear in a public instrument and must be recorded in the Office of the Securities and Exchange Commission. However, a partnership has a juridical personality even in case of failure to comply with this requirement. E. Partnership term Unlimited in the sense that no time limit is fixed by law; may be agreed upon.1421 1419

Art. 1771 Art.1773 A partnership contract which states that the partnership is established to operate a fishpond is not rendered void because no inventory of the fishpond was made (where it did not clearly appear in the articles of partnership that the real property had been contributed by anyone of the partners). (Agad vs. Mabolo and MaboloAgad and Co., 23 SCRA 1223[1968]) 1421 expressly or impliedly 1420

306

F. Universal vs. Particular; General vs. Limited Universal partnership of all present property1422 - wherein the partners contribute all the property which actually belong 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. Universal partnership of profits1423- comprises all that the partners may acquire by their industry or work during the existence of the partnership and the usufruct of movable or immovable property which each of the partners may posses at the time of the celebration of the contract. Particular partnership - one which has for its object determinate things, their use and fruits, or a specific undertaking, or the exercise of a profession or vocation. General partnership - consisting of general partners who are liable pro rata and subsidiarily and sometimes solidarily with their separate property for partnership debts. Limited partnership - one formed by two or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for the obligations of the partnership. G. Partnership by estoppel1424 Arises when a person, by words spoken or written or by conduct, represents himself or consents to another representing him to anyone, as partner in an existing partnership, or 1422

In a universal partnership of all present property, the property which belongs to each of the partners at the time of the constitution of the partnership, becomes the common property of all the partners, as well as the profits which they may acquire therewith. A stipulation for the common enjoyment of any other profits may also be made; but the properties which the partners may acquire subsequently by inheritance, legacy or donation cannot be included in such stipulation, except the fruits thereof. Where the articles of partnership do not specify the nature of the universal partnership, whether it is one of “present property” or of “profits” only, it will be presumed that the parties intended merely a partnership of profits. Future properties cannot be contributed. Thus, property subsequently acquired by (1) inheritance, (2) legacy or (3) donation cannot be included by stipulation except the fruits thereof 1423 Movable or immovable property which each of the partners may posses at the time of the celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing to the partnership. Persons who are prohibited from giving each other any donation or advantage cannot enter into a universal partnership. (Art. 739, Art. 87, Family Code) Profits acquired by their partners through chance (i.e. lottery) without employment of any physical or intellectual efforts are not included. 1424 Elements to establish liability as a partner on ground of estoppel: 1.Defendant represented himself as partner/represented by others as such and not denied/refuted by defendant 2.Plaintiff relied on such representation 3.Statement of defendant not refuted

307

with one or more persons not actual partners; he is liable to any such person to whom such representation has been made, who has, on the faith of such representation given credit to the actual or apparent partnership.1425 Liabilities in estoppel All partners consented to representation No existing partnership & all those represented consented; Not all partners of existing partnership consents representation No existing partnership & not all represented consented; None of partners in existing partnership consented

Partnership is liable Person who represented to himself & all those who made representation liable prorata/jointly Person who represented himself liable & those who made/consented to representation separately liable

H. Partnership v. Joint Venture Joint Venture1426 It is hardly distinguishable from partnership, since their elements are similar, i.e. community of interest in the business, sharing of profits and losses, and a mutual right of control. The main distinction in common law jurisdiction is that partnership contemplates a general business with some degree of continuity, while joint venture is formed for the execution of a single transaction and is thus of temporary nature I. Professional partnership Partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business.

1425

Art 1825 It does not create a partnership as between the alleged partners. A contract, express or implied is essential to the creation of partnership. The law considers them partners and the association as a partnership insofar as it is favorable to third persons. However, partnership liability is created only in favor of persons who on the faith of such representation given credit to the actual or apparent partnership 1426 In Kilosbayan, Incorporated vs. Guingona, Jr 232 SCRA 110 [1994], the court defined a joint venture as an association of persons or companies jointly undertaking some commercial enterprise; generally all contribute assets and share risks. Its requisites are: a. A community of interest in the performance of the subject matter; b. A right to direct and govern the policy in connection therewith; c. Duty to share profits and losses.

308

J. Management1427 I. When the manner of management has been provided for in the partnership agreement A.When a managing partner has been appointed 1) Appointment in the articles of partnership a. Power is irrevocable without just or lawful cause i. to remove him for just cause, vote of partners representing controlling interest is necessary ii. to remove him without just cause or for an unjust cause, there must be unanimity including his own vote b. Extent of power i. if he acts in good faith, he may do all acts of administration, despite opposition of his partners ii.

if in bad faith, he cannot. 2) Appointment other than in the articles of partnership

a. Power to act may be revoked at any time, with or without just cause b. Extent of power: as long as he remains manager, he can perform all acts of administration, but if others oppose and he persists, he can be removed B. When two or more managing partners have been entrusted with the management of partnership 1) Without specification of their respective duties and without stipulation requiring unanimity of action GENERAL RULE: Each managing partner may execute all acts of administration EXCEPTION:If any of the managing partners should oppose,

a) Decision of the majority of the managing partners shall prevail b) In case of a tie, decision of the partners representing the controlling interest shall prevail 2) With stipulation requiring unanimity of action

1427

Arts. 1800-1803

309

GENERAL RULE: Unanimous consent of all the managing partners shall be

necessary for the validity of the acts and absence or inability of any managing partner cannot be alleged EXCEPTION:When there is an imminent danger of grave or irreparable injury to the partnership, partner may act alone without the consent of the partner who is absent or under disability II. When manner of management has not been agreed upon a) All partners shall be considered managers and agents b) Unanimous consent required for alteration of immovable property II. Rights and obligations of partnership The partnership can, in general: a) enter into contracts b) acquire and possess property of all kinds c)incur obligations d) bring civil and criminal actions e) be adjudged insolvent even if the individual members be each financially solvent f) bear risk of loss1428 g) reimburse1429 h) operate under firm name1430 i) bound by partner’s admission1431 Partnership bears the risk: when what is contributed is a fungible thing, thing which can’t be kept without deteriorating, if the thing was contributed to be sold, and contributions are appraised in the inventory (Art. 1795, CC) 1429 3 obligations of the partnership: 1. refund disbursements with legal interest 2. answer for obligations contracted in good faith in the partnership’s interest 3. answer for risks (Art. 1796, CC) Partner = agent. Being a mere agent, he isn’t personally liable as long as he’s not at fault (Art. 1912, CC) and acted within the scope of his authority. But unlike an ordinary agent, the paying partner doesn’t have the right of retention if he isn’t paid. 1430 Required: every partnership shall operate under a firm name (Art. 1815, CC) to distinguish the partnership from other entities & from the individual partners. Non-members whose names were used: don’t have the rights of a partner but are liable to 3rd persons without notice as partners (Art. 1815, CC). They become partners by estoppel (PNB v. Lo). Use of deceased partner’s name in law firm: permissible as long as it’s indicated in the firm’s communications that the partner is deceased (Rule 3.02, CPR) Other rules: 1. a person continuing the partnership after a dissolution uses the firm name/name of deceased partner as part of the name: deceased partner’s individual property isn’t liable for debts contracted (Art. 1840, CC) 2. the limited partner’s surname shall not appear in the firm name unless a. it’s also the surname of a general partner b. before the limited partner became such, the business had been carried on under a name in which his surname appeared (Art. 1846, CC) 1428

310

j) bound by notice to partner1432 k) liable for wrongful act of partner1433 III. Rights and obligations of partners among themselves I. Obligation with respect to contribution of property a) To contribute what had been promised b) To answer for eviction in case the partnership is deprived of determinate property contributed c) To answer to the partnership for the fruits of the property the contribution of which is delayed, from the date they should have been contributed to the time of actual delivery d) To preserve the property with the diligence of a good father of a family pending delivery to the partnership e) To indemnify the partners for any damages caused to it by the retention of the same or by delay in its contribution. II. Obligations with respect to contribution of money and money converted to personal use a) To contribute on the date due the amount he has undertaken to contribute to the partnership b) To reimburse any amount he may have taken from the partnership coffers and converted to his own personal use c) To pay the agreed or legal interest, if he fails to pay his contribution on time or in case he takes any amount from the common fund and converted to his own personal use

1431

Requisites to be admissible against the partnership: 1. it must be connected with partnership affairs 2. it’s within the scope of the partner’s authority (Art. 1820, CC) as may be just and equitable under the circumstances according to capital contribution. 3. Purely industrial partner not liable for losses Exception: when a partner makes admissions for himself only without purporting to act for the partnership Admission by a former partner not admissible in evidence against the partnership. (Congco vs. Trillana) 1432 Notice to the firm: 1. Notice to a partner while already a partner 2. Knowledge is acquired by a partner who’s acting in a particular matter, WON a partner at the time as long as he still remembers the partnership matter 3. The partner who acquired it has reason to believe that it be the subject of the business, and could’ve communicated it to the acting partner (Art. 1821, CC) 1433 Extent of liability for wrongful acts, omissions of a partner: firm is liable to the same extent as the partner (Art. 1822, CC). Misapplication of money/property resulting in losses: if loss is suffered by the 3rd person who delivered the money/property, the partnership is solidarily liable with the misappropriating partner (Art. 1823, CC).

311

d) To indemnify the partnership for the damages caused to it by the delay in the contribution or the conversion of any sum for his personal benefit. Obligation Not to Engage in Other Business for Himself 1. Industrial partner- cannot engage in any business for himself unless the partnership expressly permits him to do so. The other partners have the remedy of either excluding the erring partner from the firm or of availing themselves of the benefits which he may have obtained.1434 2. Capitalist partner- The prohibition extends only to any operation which is of the same kind of business in which the partnership is engaged unless there is a stipulation to the contrary. Obligation to Contribute Additional Capital As a general rule, a capitalist partner is not bound to contribute to the partnership more than what he agreed to contribute but in case of an imminent loss of the business, and there is no agreement to the contrary, he is under obligation to contribute an additional share to save the venture. If he refuses to contribute, he shall be obliged to sell his interest in the partnership to other partners. Obligation of Managing Partner who Collects Debt Where a person is separately indebted to the partnership and to the managing partner at the same time, any sum received by the managing partner shall be applied to the two credits in proportion to their amounts, except where he received it entirely for the account of the partnership, in which case the whole sum shall be applied to the partnership credit only. Obligation of Partner Who Receives Share in Partnership Credit A partner who receives, in whole or in part, his share in the partnership, when the others have not collected theirs, shall be obliged, if the debtor should thereafter become insolvent, to bring to the partnership capital what he received even though he may have given receipt for his share only.1435 Obligation of Partner for Damages to Partnership 1434

The prohibition is absolute and applies whether the industrial partner is to engage in the same business in which the partnership is engaged or in any kind of business. It is clear that the reason for the prohibition exists in both cases, which is to prevent any conflict of interest between the industrial partner and the partnership and to insure faithful compliance by said partner with his prestation (Evangelista & Co. vs. Abad Santos, 51 SCRA 416, 1973) 1435 Requisites for application of rule: 1) A partner has received, in whole or in part, his share in the partnership credit 2) The other partners have not collected their shares. 3) The partnership debtor has become insolvent.

312

Every partner is responsible to the partnership for damages suffered by it through his fault. He cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. Duty to Render Information Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner of any partner under legal disability. Obligation to account for any benefit and hold as trustee unauthorized personal profits Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, liquidation of the partnership or form any use by him of its property. IV. Obligations of partnership/partners to third persons Liability for contractual obligations1436 1. All partners, including industrial partners, are personally liable with all their property. Their individual liability is pro rata and subsidiary, unless otherwise stipulated 2. Liability of partnership for acts of partners a) Acts for apparently carrying on in the usual way the business of the partnership GENERAL RULE: Act binds the partnership. EXCEPTION: Partnership is not bound if:

i. ii.

acting partner has in fact no authority and the third person knows that the acting partner has no authority b) Acts of Strict Dominion or Ownership1437 GENERAL RULE: Act does not bind the partnership. EXCEPTION: Partnership is bound if:

i. 1436 1437

the act is authorized by all the partners; or

ART 1816 acts which are not apparently for carrying on in the usual way the business of the partnership

313

ii.

they have abandoned the business c) Acts in contravention of a restriction on authority Partnership is not liable to third persons having actual or presumptive knowledge of the restrictions Liability arising from partner’s tort or Breach of Trust 1. Where, by any wrongful act or omission of any partner acting in the ordinary course of business of the partnership or with authority of his co-partners, loss or injury is caused to any person, not being a partner in the partnership1438 2. Where one partner, acting within the scope of his apparent authority, receives money or property of a third person and misapplies it1439 3. Where the partnership, in the course of its business, receives money or property and it is misapplied by any partner while it is in the custody of the partnership1440

V. Dissolution Change in the relation of the partners caused by any partner ceasing to be associated in carrying on the business.1441 It is the point in time when the partners cease to carry on the business together. It represents the demise of a partnership. Causes of Dissolution: 1. Extrajudicial dissolution - the parties may agree to expand the grounds provided under Art 1830 but not to delimit them. The causes enumerated are as follows:

1438

Art. 1822 Art. 1823 1440 Ibid Criminal liability of partnership: Partnership liability does not extend to criminal liability where the wrongdoing is regarded as individual in character. But where the crime is statutory, especially when it involves a fine rather than imprisonment, criminal liability may be imposed All partners are solidarily liable with the partnership for any penalty or damage arising from a partnership tort or breach of trust 1441 Art. 1828 1439

314

a. Without violation of the agreement between the partners i. By the termination of the definite term or particular undertaking specified in the agreement; ii. By the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified; iii. By the express will of all the partners who have not assigned their interest or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking; iv. By the expulsion of any partner from the business bona fide in accordance with such power conferred by the agreement between the partners; b. In contravention of the agreement between the partners, where the circumstances do nor permit a dissolution under any other provision of this article by the express will of any partner at any time. c. By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership. d. When a specific thing, a partner had promised to contribute, perishes before its delivery. Or where the partner only contributed the use or enjoyment of the thing and has reserved ownership thereof, its loss, before or after delivery e. dissolves the partnership. f. By the death of any partner; g. By the insolvency of any partner or the partnership; h. By the civil interdiction of any partner; 2. Judicial dissolution - when so decreed by the court, the presiding judge may place the partnership under receivership and direct an accounting to be made towards winding up the partnership affairs.1442 On application by or for any partner, the court shall decree a dissolution whenever: i.

A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind;

ii. A partner becomes in any other way incapable of performing his part of the partnership contract;

1442

Art 1831

315

iii. A partner has been guilty of such conduct as tend to affect prejudicially the carrying on of the business; iv. A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him. v. The business of the partnership can only be carried on in a loss; vi. Other circumstances render a dissolution equitable. On application of the purchaser of a partner’s interest:1443 i. After the termination of the specified term or particular undertaking; ii. At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued. VI. Limited partnership1444 A. Definition One formed by two or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for the obligations of the partnership. B. How limited partnership is formed/amended1445

1443

under Art. 1813 or 1814 The Supreme Court, declared a firm to be a general partnership in a case where it appears that the inclusion of “Ltd.” (limited) in the firm was only a subterfuge resorted to by the partners in order to evade liability for possible losses, while assuming their enjoyment of advantages to be derived from the relation. Jo Chung Cang vs. Pacific Commercial Co. 45 PHIL 142 [1923]). In other words if the parties intended a general partnership, they are general partners although their purpose is to avoid the creation of such a relation. 1445 A strict compliance with the legal requirements is not necessary. It is sufficient that there is substantial compliance in good faith. If there is no substantial compliance, the partnership becomes a general partnership as far as third persons are concerned, in which all the members are liable as general partners. (Jo Chung Cang vs. Pacific Commercial Co., 45 PHIL 142 [1923].) However, a firm which fails to substantially comply with the formal requirements of a limited partnership is a general partnership only as to its relations to third persons. The firm is a limited partnership, subject to all rules applicable to such partnership; and as between the partners they are bound by their agreement; and that all the limited partner’s relations to his co-partners and their obligations to him growing out of the relation remain unimpaired. As to third persons or creditors guilty of estoppel, the firm shall not be treated as a general partnership despite lack of substantial compliance to the requirements of a limited partnership. If creditors deal with the firm as a limited partnership, they will be estopped from insisting that there is no such partnership, or that the terms of the partnership were not sufficiently stated in the notice of its formation. (40 Am. Jur. 476.) 1444

316

Formation: 1. Certificate of articles of the limited partnership must state the ff. matters: a. b. c. d. e. f. g. h. i. j. k.

Name of partnership + word "ltd." Character of business Location of principal place of business Name/place of residence of members Term for partnership is to exist Amount of cash/value of property contributed Additional contributions Time agreed upon to return contribution of limited partner Sharing of profits/other compensation Right of limited partner (if given) to substitute an assignee Right to admit additional partners

2. Such certificate must be filed for record in the Office of the Securities and Exchange Commission. Amendment: a. b. c. d. e.

Change in name of partnership, amount/character of contribution of ltd. partner Substitution of limited partner Admission of additional limited partner Admission of general partner Death, insolvency, insanity, civil interdiction of general partner & business is continued f. Change in character of business g. False/erroneous statement in certificate h. Change in time as stated in the certificate for dissolution of partnership/return of contribution i. Time is fixed for dissolution of partnership. Return of contribution if no orig. time specified j. Change in other statement in certificate C. Rights and obligations of a limited partner Rights of a limited partner 1. To have the partnership books kept at the principal place of business of the partnership 2. To inspect, at a reasonable hour, partnership books and copy any of them 3. To demand true and full information of the things affecting the partnership 4. To demand a formal account of the partnership affairs whenever circumstances render it just and reasonable 5. To ask for dissolution and winding up by decree of court 6. To receive a share in the profits or other compensation by way of income 317

provided: that the partnership assets are in excess of partnership liabilities after such payment 7. To receive the return of his contribution provided: a) All the liabilities of the partnership have been paid OR the partnership assets are sufficient to pay partnership liabilities b) The consent of all the members (general and limited partners) has been obtained EXCEPTION:

When the return of the contribution may be rightfully demanded: 1) On the dissolution of the partnership 2) Upon the arrival of the date specified in the certificate for the return 3) After he has given 6 months’ notice in writing to all other partners, if no time is specified in the certificate there for the return of the contribution or for the dissolution of the partnership c) The certificate is cancelled or so amended as to set forth the withdrawal or reduction AGENCY1446 I. Definition of agency A contract whereby a person (agent) binds himself to render some service or to do something in representation or on behalf of another (principal), with the consent or authority of the latter.1447 II. Powers An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management.1448

General rule: There are no formal requirements governing the appointment of an agent. The agent’s authority may be oral or written. It may be in a public or private writing. Exception: When the law requires a specific form 1447 Art. 1868 1448 Art. 1877 1446

318

Special powers of attorney are necessary in the following cases: (1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; (4) To waive any obligation gratuitously; (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion.1449

1449

Art. 1878 SPA to sell does not include the power to mortgage; and vice versa. SPA to mortgage includes the power to allow the extrajudicial foreclosure of the mortgaged property. SPA to compromise does not authorize submission to arbitration SPA for an agent to institute any action in court to eject all persons in the principal’s lots so that the principal could take material possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this is protective of the rights and interests of the principal in the property, does not grant any power to the agent to sell the subject property nor a portion thereof. (Cosmic Lumber Corp vs. CA

319

A. To bind principal1450 The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.1451 If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal's ratification.1452 If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware.1453 So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent.1454 A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agent's acts.1455 A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them.1456 B. Exception If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.

1450

General Rule: The principal is not bound by the acts of the agent beyond his limited powers. Exceptions: 1. Where the principal’s acts have contributed to deceive the third person in good faith; 2. Where the limitations upon the power created by him could not have been known by the third person; 3. Where the principal has placed in the hands of the agent instruments signed by him in blank (Strong vs. Gutierrez Repide 6 PHIL 680 [1906]) 4. Where the principal has ratified the acts of the agent. 1451 Art. 1897 1452 Art. 1898 1453 Art. 1899 1454 Art. 1900 1455 Art. 1901 1456 Art. 1902

320

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.1457 III. Express vs. Implied Agency Express- one where the agent has been actually authorized by the principal, either orally or in writing; Implied1458- one which is implied from the i. acts of the principal- from his silence or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf without authority. ii. Acts of the agent- when he carries out the agency, or from his silence or inaction according to the circumstances. IV. Agency by estoppel One who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person in good faith, and in the honest belief that he is what he appears to be.1459 Implied acceptance 1. De Jure Agent

Agency by estoppel 1. Not really an agent 2. Binds the 2. Only the principal for acts purported agent is within the scope liable. of his authority.

V. General vs. Special Agency General- one which comprises all the business of the principal; Special- one which comprises one or more specific transactions

1457

Art. 1883 the principal is still bound by the acts of the agent just as in case of express agency 1459 Cuison vs. CA, GR.88531, October 26, 1993 1458

321

General Agent

Special Agent

1. Scope of Authority Authorized to Usually authorized do only acts in to do all acts pursuance of connected with the particular business or instructions or employment in with which he is engaged. restrictions necessarily implied from the acts to be done 2. Continuity Conducts a series of transactions involving a continuity of service.

Usually involves a single transaction or a series of transactions not involving continuity 3. Extent by which agent may bind principal Binds his principal Cannot bind by an act within the his principal in scope of his a manner authority although it beyond or may be contrary to outside the his special specific acts instructions which he is authorized to perform on behalf of the principal 4. Termination of Authority Apparent authority Mere does not terminate revocation is by the mere effective to revocation of his terminate the authority without authority as to notice to the third third persons party because the third person has a duty to inquire 322

5. Construction of Instructions of Principal Statement of Authority of agent principal with must be strictly respect to the pursued agent’s authority would ordinarily regarded as advisory only

VI. Agency couched in general terms One which is created in general terms and is deemed to comprise only acts of administration VII. Agency requiring special power of attorney The scope of the agent’s authority is what appears in the written terms of the power of attorney. While third persons are bound to inquire into the extent or scope of the agent’s authority, they are not required to go beyond the terms of the written power of attorney. Third persons cannot be adversely affected by an understanding between the principal and his agent as to the limits of the latter’s authority. In the same way, third persons need not concern themselves with instructions given by the principal to his agent outside the written power of attorney.1460 VIII. Agency by operation of law The concept is essentially one of estoppel and has been explained in this manner: "The principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing. The question in every case is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in question.1461

1460

Siredy Enterprises, Inc. vs. CA, et al. GR 129039, September 27, 2002 A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney or the instructions as regards the agency; except private or secret orders. 1461 Irving v. Doctors Hospital of Lake Worth, Inc., 415 So. 2d 55 (1982), quoting Arthur v. St. Peters Hospital, 169 N.J. 575, 405 A. 2d 443 (1979) Agency by estoppel is defined as "one created by operation of law and established by proof of such acts of the principal as reasonably lead third persons to the conclusion of its existence. Arises where principal by negligence in failing to supervise agent’s affairs, allows agent to exercise powers not granted to him, thus justifying others in believing the agent possesses requisite authority

323

IX. Rights and Obligations of Principal The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.1462 When the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.1463 The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Should the agent have advanced them, the principal must reimburse him therefor, even if the business or undertaking was not successful, provided the agent is free from all fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made.1464 The principal must also indemnify the agent for all the damages which the execution of the agency may have caused the latter, without fault or negligence on his part.1465 The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles.1466 If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency.1467 When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of article 1544.1468

1462

Art. 1910 Art. 1911 1464 Art. 1912 1465 Art. 1913 1466 Art. 1914 1467 Art. 1915 1468 Art. 1916 1463

324

In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible.1469 The principal is not liable for the expenses incurred by the agent in the following cases: (1) If the agent acted in contravention of the principal's instructions, unless the latter should wish to avail himself of the benefits derived from the contract; (2) When the expenses were due to the fault of the agent; (3) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof; (4) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum.1470 X. Irrevocable agency An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.1471 The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. 1472 The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation.1473 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.1474

1469 1470

Art. 1918 Art. 1927 1472 Art. 1928 1473 Art. 1929 1474 Art. 1930 1471

325

XI. Modes of extinguishment 1. 2. 3. 4. 5. 6.

Expiration of the period Death, civil interdiction, insanity or insolvency of the principal or of the agent Withdrawal of the agent1475 Accomplishment of the object or the purpose of the agency Revocation Dissolution of the firm or corporation, which entrusted or accepted the agency COMPROMISE

I. Definition A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.1476 II. Void Compromise No compromise upon the following questions shall be valid: (1) The civil status of persons; (2) The validity of a marriage or a legal separation; (3) Any ground for legal separation; (4) Future support; (5) The jurisdiction of courts; (6) Future legitime1477 III. Effect 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.1478 If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.1479

1475

Agent may withdraw by giving notice to the principal, but must indemnify the principal for damages that he may suffer by reason of such withdrawal. 1476 Art. 2028 1477 Art. 2035 1478 Art. 2037 1479 Art. 2041

326

CREDIT TRANSACTIONS I. Loan A. Commodatum1480 vs. Mutuum1481 Commodatum – when the bailor (lender) delivers to the bailee (borrower) a nonconsumable thing so that the latter may use it for a certain time and return the identical thing. Simple loan or mutuum – where the lender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality. Commodatum

Mutuum

1. Object Non-consumable

Consumable

2. Cause Gratuitous

May or may not be gratuitous

3. Purpose Use or temporary Consumption possession

4. Subject Matter Real or personal Only property property

personal

5. Ownership of the thing Retained by bailor

the Passes to the debtor

6. Thing to be returned Exact thing loaned

Equal amount of the same kind and quality

1480

Kinds: a. Ordinary Commodatum – use by the borrower of the thing is for a certain period of time b. Precarium- one whereby the bailor may demand the thing loaned at will and it exists in the following cases: i. neither the duration nor purpose of the contract is stipulated ii. the use of the thing is merely tolerated by the owner 1481 A contract whereby one party delivers to another, money or other consumable thing with the understanding that the same amount of the same kind and quality shall be paid. (Art. 1953) The mere issuance of the checks does not result in the perfection of the contract of loan. The Civil Code provides that the delivery of bills of exchange and mercantile documents, such as checks, shall produce the effect of payment only when they have been encashed (Gerales vs. CA 218 SCRA 638). It is only after the checks have produced the effect of payment that the contract of loan may be deemed perfected. The obligation is “to pay” and not to return because the consumption of the thing loaned is the distinguishing character of the contract of mutuum from that of commodatum. No estafa is committed by a person who refuses to pay his debt or denies its existence.

327

7. Who bears risk of loss Bailor

Debtor

8. When to return In case of urgent Only after the need, even before expiration of the the expiration of term the term

B. Obligations of Bailor and Bailee Obligations of the Bailee: 1. To pay for the ordinary expenses for the use and preservation of the thing loaned.1482 2. To be liable for the loss of the thing even if it should be through a fortuitous event in the following cases: a. when he keeps it longer than the period stipulated, or after the accomplishment of its use b. when he lends or leases it to third persons who are not members of his household c. when the thing loaned has been delivered with appraisal of its value d. when, being able to save either of the thing borrowed or his own things, he chose to save the latter; or e. when the baileedevoted the thing for any purpose different from that for which it has been loaned1483 3. To be liable for the deterioration of thing loaned (a) if expressly stipulated; (b) if guilty of fault or negligence; or (c) if he devotes the thing to any purpose different from that for which it has been loaned 4. To pay for extraordinary expenses arising from the actual use of the thing by the bailee, which shall be borne equally by both the bailor and the bailee, even though the bailee acted without fault, unless there is a stipulation to the contrary1484 5. To return the thing loaned1485 1482

Art. 1941 Art. 1942 1484 Art. 1949, par. 2 1485 The bailee has no right to retain the thing loaned as security for claims he has against the bailor even for extraordinary expenses except for a claim for damages suffered because of the flaws of the thing loaned. However, the bailee’s right extends no further than retention of the thing loaned until he is reimbursed for the damages suffered by him. He cannot lawfully sell the thing to satisfy such damages without court’s approval. 1483

328

Obligations of the bailor:1486 1. To respect the duration of the loan GENERAL RULE:

Allow the bailee the use of the thing loaned for the duration of the period stipulated or until the accomplishment of the purpose for which the commodatum was instituted. EXCEPTIONS:

a. In case of urgent needin which case bailee may demand its return or temporary use; b. The bailor may demand immediate return of the thing if the bailee commits any act of ingratitude specified in Art. 765. 2. To refund to the bailee extraordinary expenses for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notification cannot be awaited without danger. 3. To be liable to the bailee for damages for known hidden flaws.1487 C. Interest and the suspension of Usury Law General rule: Unpaid interest shall not earn interest. Exceptions: 1. when judicially demanded 2. when there is an express stipulation (must be in writing in view of Art. 1956)

In case there are two or more bailees, their obligation shall be solidary. Arts. 1946 – 1952 1487 Requisites: a. There is flaw or defect in the thing loaned; b. The flaw or defect is hidden; c. The bailor is aware thereof; d. He does not advise the bailee of the same; and e. The bailee suffers damages by reason of said flaw or defect If the above requisites concur, the bailee has the right of retention for damages. The bailor cannot exempt himself from the payment of expenses or damages by abandoning the thing to the 1486

329

Guidelines for the application of proper interest rates: 1. If there is stipulation: that rate shall be applied 2. The following are the rules of thumb for the application/imposition of interest rates: a) When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. b) With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: i.

When the obligation breached consists of payment of a sum of money,1488 the interest shall be that which is stipulated or agreed upon by the parties. In absence of an agreement, the rate shall be the legal rate1489computed from default.1490

ii. In other cases, the rate of interest shall be six percent (6%) per annum.1491 iii. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph i or ii above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.1492 Central Bank Circular No. 416 fixing the rate of interest at 12% per annum deals with loans, forbearance of any money, goods or credits and judgments involving such loans, or forbearance in the absence of express agreement to such rate Interest as indemnity for damages is payable only in case of default or nonperformance of the contract. As they are distinct claims, they may be demanded separately.1493 Validity of unconscionable interest rate in a loan: The Supreme Court in Sps. Solangon vs. Jose Salazar,1494 said that since the usury law had been repealed by CB Cir. No. 905 there is no more maximum rate of interest and the rate will just depend on the mutual agreement of the parties1495. But the Supreme Court said 1488

loan or forbearance of money i.e. 12% per annum 1490 The interest due shall itself earn legal interest from the time it is judicially demanded 1491 No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. When the demand cannot be established, the interest shall begin to run only from the date of the judgment of the court is made. 1492 Eastern Shipping Lines vs. CA, July 12, 1994 1493 Sentinel Insurance Co., Inc. vs CA, 182 SCRA 517 1494 G.R. No. 125944, June 29, 2001 1495 citing Lim Law vs. Olympic Sawmill Co., 129 SCRA 439 1489

330

that nothing in said circular grants lenders carta blanche authority to raise interest rates to level which will either enslave their borrowers or lead to a hemorrhaging of their assets 1496. In Medel vs. CA,1497, it was ruled that while stipulated interest of 5.5% per month on a loan is usurious pursuant to CB Circular No. 905, the same must be equitably reduced for being iniquitous, unconscionable and exorbitant. It is contrary to morals1498. It was reduced to 12% per annum in consonant with justice and fair play. II. Deposit1499 A. Voluntary deposit1500 One wherein the delivery is made by the will of the depositor or by two or more persons each of whom believes himself entitled to the thing deposited.1501 B. Necessary deposit1502 One made in compliance with a legal obligation, or on the occasion of any calamity, or by travellers in hotels and inns1503, or by travellers with common carriers1504. C. Judicial deposit1505 When an attachment or seizure of property in litigation is ordered. Judicial

Extra-judicial

1. Creation Will of the court

Will of the parties or contract

2. Purpose Security or to insure Custody the right of a party safekeeping to property or to recover in case of favorable judgment

and

3. Subject Matter 1496

citing Almeda vs. CA, 256 SCRA 292) 299 SCRA 481 1498 contra bonos mores 1499 A contract constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. The chief difference between a voluntary deposit and a necessary deposit is that in the former, the depositor has a complete freedom in choosing the depositary, whereas in the latter, there is lack of free choice in the depositor. 1500 Extra-judicial 1501 Arts. 1968 – 1995 1502 Extra-judicial 1503 Arts. 1996 - 2004 1504 Arts. 1734 – 1735 1505 Sequestration 1497

331

Movables or Movables only immovables, but generally immovables

4. Cause Always onerous

May be compensated or not, but generally gratuitous

5. When must the thing be returned Upon order of the Upon demand of court or when depositor litigation is ended

6. In whose behalf it is held Person who has a Depositor or third right person designated

III. Guaranty and Suretyship A. Nature and extent of guaranty A contract whereby a person (guarantor) binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter fail to do so. Extent of Guarantor’s liability1506: 1. Where the guaranty definite: It is limited in whole or in part to the principal debt, to the exclusion of accessories. 2. Where guaranty indefinite or simple: It shall comprise not only the principal obligation, but also all its accessories, including the judicial costs, provided with respect to the latter, that the guarantor shall only be liable for those costs incurred after he has been judicially required to pay. Guaranty

Suretyship

1. Liability depends upon an independent agreement to pay the obligation if primary debtor fails to do so

1. Surety assumes liability as regular party to the undertaking

2. Collateral taking

2. Surety is original promisor

an

3. Surety primarily liable

is

under-

3. Guarantor secondarily liable

1506

is

Art. 2055

332

1. Guarantor binds himself to pay if the principal CANNOT PAY

4. Surety undertakes to pay if the principal DOES NOT PAY

5. Insurer of solvency of debtor

5. Insurer of the debt

6. Guarantor can avail of the benefit of excussion and division in case creditor proceeds against him

6. Surety cannot avail of the benefit of excussion and division

B. Effects of guaranty When there are two or more guarantors of the same debtor and for the same debt, the one among them who has paid may demand of each of the others the share which is proportionally owing from him. If any of the guarantors should be insolvent, his share shall be borne by the others, including the payer, in the same proportion. The provisions of this article shall not be applicable, unless the payment has been made by virtue of a judicial demand or unless the principal debtor is insolvent.1507 In the case of the preceding article, the co-guarantors may set up against the one who paid, the same defenses which would have pertained to the principal debtor against the creditor, and which are not purely personal to the debtor.1508 A sub-guarantor, in case of the insolvency of the guarantor for whom he bound himself, is responsible to the co-guarantors in the same terms as the guarantor.1509 C. Extinguishment of guaranty 1. Release 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 granted1510; 2. If the creditor voluntarily accepts immovable or other properties in payment of the debt, even if he should afterwards lose the same through eviction or conveyance of property1511 ; 3. Whenever by some act of the creditor, the guarantors even though they are solidarily liable cannot be subrogated to the rights, mortgages and preferences of the former1512; 1507

Art. 2073 Art. 2074 1509 Art. 2075 1510 Art. 2078 1511 Art. 2077 1508

333

4. For the same causes as all other obligations1513; 5. When the principal obligation is extinguished; 6. Extension granted to the debtor by the creditor without the consent of the guarantor1514 D. Legal and judicial bonds1515 Judicial bonds constitute merely a special class of contracts of guaranty by the fact that they are given “in virtue… of a judicial order.” If the person required to give a legal or judicial bond should not be able to do so, a pledge or mortgage sufficient to cover the obligation shall admitted in lieu thereof1516 IV. Pledge A. Definition A contract wherein the debtor delivers to the creditor or to a third person a movable or document evidencing incorporeal rights for the purpose of securing fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions. B. Kinds 1. Conventional /Voluntary– created by contract 2. Legal– created by operation of law1517 C. Essential requirements 1. Secures the fulfillment of a principal obligation; 2. Pledgor, mortgagor, antichretic debtor must be the absolute owner of the thing pledged or mortgaged;1518 and

1512

Art. 2080 Art. 1231 1514 Art. 2079 1515 Bond An undertaking that is sufficiently secured, and not cash or currency Bondsman A surety offered in virtue of a provision of law or a judicial order. He must have the qualifications required of a guarantor and in special laws like the Rules of Court.(Art. 2082) 1516 Art 2083 1517 examples: Art. 546, 1731 and 1914 NCC 1513

334

3. Pledgor, mortgagor, antichretic debtor must have free disposal of their property, or be legally authorized for such purpose. 4. Possession of the thing pledged must be transferred to the creditor or a third person by agreement1519; 5. It can only cover movable property and incorporeal rights evidenced by documents of title and the instruments proving the right pledged shall be delivered to the creditor, and if negotiable must be endorsed;1520 and 6. The description of the thing pledged and the date must appear in a public instrument to bind third persons, but not for the validity of the contract.1521 D. Obligations of pledge Obligations of pledgor: 1. To advise the pledgee of the flaws of the thing1522 2. Not to demand the return of the thing until after full payment of the debt, including interest due thereon and expenses incurred for its preservation1523 Obligations of pledgee: 1. Take care of the thing with the diligence of a good father of a family1524 2. Not to use thing unless authorized or by the owner or its preservation requires its use 1525 3. Not to deposit the thing with a 3rd person unless so stipulated1526 4. Responsibility for acts of agents and employees as regards the thing1527 5. To advise pledgor of danger to the thing1528 6. To advise pledgor of the result of the public auction1529

1518

The reason being that in anticipation of a possible foreclosure sale in case of default which is still a sale, the rule is that the seller must be the owner of the thing sold (Cavite Development Bank vs. Lim, 324 SCRA 346) 1519 Art. 2093 1520 Art. 2094 1521 Art. 2096 1522 Art. 2101 1523 Art. 2105 1524 Art. 2099 1525 Art. 2104 1526 Art. 2100 1527 ibid 1528 Art. 2107 1529 Art. 2116

335

E. Rights of pledgor 1. To demand return in case of reasonable grounds to fear destruction or impairment of the thing without the pledgee’s fault, subject to the duty of replacement1530 2. To bid and be preferred at the public auction1531 3. To alienate the thing pledged provided the pledgee consents to the sale1532 4. To ask that the thing pledged be deposited1533 F. Perfection In addition to the requisites prescribed in article 2085, it is necessary, in order to constitute the contract of pledge, that the thing pledged be placed in the possession of the creditor, or of a third person by common agreement.1534 A pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument.1535 G. Foreclosure The creditor to whom the credit has not been satisfied in due time, may proceed before a Notary Public to the sale of the thing pledged. This sale shall be made at a public auction, and with notification to the debtor and the owner of the thing pledged in a proper case, stating the amount for which the public sale is to be held. If at the first auction the thing is not sold, a second one with the same formalities shall be held; and if at the second auction there is no sale either, the creditor may appropriate the thing pledged. In this case he shall be obliged to give an acquittance for his entire claim.1536 The sale of the thing 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 recover the deficiency, notwithstanding any stipulation to the contrary.1537

1530

ibid Art. 2113 1532 Art. 2097 1533 Arts. 2104 & 2106 1534 Art. 2093 1535 Art. 2096 1536 Art. 2112 1537 Art. 2115 1531

336

H. Pledge by Operation of Law Pledges created by operation of law, such as those referred to in articles 546, 1731, and 19941538, are governed by the foregoing articles on the possession, care and sale of the thing as well as on the termination of the pledge. However, after payment of the debt and expenses, the remainder of the price of the sale shall be delivered to the obligor.1539 A thing under a pledge by operation of law may be sold only after demand 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.1540 I. Distinguished from Chattel Mortgage 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 vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.1541 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.1542 V. Real Mortgage A. Definition and characteristics A contract whereby the debtor secures to the creditor the fulfilment of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated.

1538

See Reference Art. 2121 1540 Art. 2122 1541 Art. 1484 1542 Art. 2140 1539

337

Characteristics: 1. Real 2. Accessory - its consideration is that of the principal contract from which it receives life. 3. Subsidiary 4. Unilateral – it creates only an obligation on the part of the creditor who must free the property from the encumbrance once the obligation is fulfilled. B. Essential requisites 1. It can cover only immovable property and alienable real rights imposed upon immovables1543; 3. It must appear in a public instrument1544; and 4. Registration in the registry of property is necessary to bind third persons, but not for the validity of the contract1545. C. Foreclosure The remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation to secure that for which the mortgage was given. Pledge 1. Constituted on movables 2. Property is delivered to pledgee or by common consent to a third person 3. Not valid against third persons unless a description of the thing pledged and date of pledge appear in a public instrument

Real mortgage 1. Constituted on immovables 2. Delivery is not necessary

3. Not valid against third persons unless registered

1543

Art. 2124 Art. 2125 1545 Art. 2125 1544

338

VI. Antichresis A. Definition and characteristics A contract whereby the creditor acquires the right to receive the fruits of an immovable of the debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal of his credit (Art 2132) Characteristics: 1. Accessory contract – it secures the performance of a principal obligation 2. Formal contract – it must be in a specified form to be valid, i.e., “in writing.” (Art 2134) B. Obligations of antichretic creditor 1. To pay taxes and charges on the estate, including necessary expenses1546 2. To apply all the fruits, after receiving them, to the payment of interest, if owing, and thereafter to the principal 3. To render an account of the fruits to the debtor 4. To bear the expenses necessary for its preservation and repair Antichresis Pledge 1. Refers to real 1. Refers to property personal property 2. Perfected by 2. Perfected by mere consent delivery of the thing pledged 3. Consensual 3. Real Contract contract Antichresis Real Mortgage 1. Property is 1. Debtor usually delivered to creditor retains possession of the property 2. Creditor acquires 2. Creditor does not only the right to have any right to receive the fruits of receive the fruits; the property, hence, but the mortgage it does not produce creates a real right a real right over the property 3. The creditor, 3. The creditor has unless there is no such obligation stipulation to the contrary, is obliged 1546

Creditor may avoid said obligation by: a. compelling debtor to reacquire enjoyment of the property or b. by stipulation to the contrary

339

to pay the taxes and charges upon the estate 4. It is expressly 4. There is no such stipulated that the obligation on part of creditor given mortgagee possession of the property shall apply all the fruits thereof to the payment of interest, if owing, and thereafter to the principal Subject matter of both is real property

VII. Chattel Mortgage A. Definition and characteristics A contract by virtue of which personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation1547. Characteristics 1. Accessory contract – it is for the purpose of securing the performance of a principal obligation 2. Formal contract – registration in the Chattel Mortgage Register is indispensable for its validity 3. Unilateral contract – it produces only obligations on the part of the creditor to free the thing from the encumbrance on fulfillment of the obligation. B. Registration The registration of the chattel mortgage is an effective and binding notice to other creditors of its existence and creates a real right or a lien which, being recorded, follows the chattel wherever it goes. The registration gives the mortgagee symbolical possession1548.

1547

Art. 2140 Northern Motors, Inc. vs. Coquia, 68 SCRA 374 Effect of failure to register chattel mortgage in the chattel mortgage registry: Article 2140 makes the recording in the Chattel Mortgage Register an essential requisite but if the instrument is not recorded, the mortgage is nevertheless binding between the parties. But the person in whose favor the law establishes a mortgage has no other right than to demand the execution and the recording of the document. 1548

340

Chattel Mortgage Pledge 1. Delivery of the 1. Delivery of the personal property to thing pledged is the mortgage is not necessary necessary 2. registration in the 2. registration not Chattel Mortgage necessary to be valid Registry is necessary for its validity 3. If property is 3. Debtor is not foreclosed, the excess entitled to excess over the amount unless otherwise due goes to the agreed or except in debtor case of legal pledge 4. If there is deficiency 4. If there is after foreclosure, deficiency, creditor is creditor is entitled not entitled to to recover the recover deficiency from the notwithstanding any debtor, except under stipulation to the Art. 1484 contrary Subject matter of both is movable property

VIII. Quasi-Contracts A. NegotiorumGestio Arises whenever a person voluntarily takes charge of the agency or management of the business or property of another without any power or authority from the latter. B. SolutioIndebiti Arises whenever a person unduly delivers a thing through mistake to another who has no right to demand it.

341

IX. Concurrence and Preference of Credits1549 A. Meaning of concurrence and preference Concurrence of Credits Possession by two or more creditors of equal rights or privileges over the same property or all of the property of the debtor Preference of Credits Right held by a creditor to be preferred in the payment of his claim above others out of the debtor’s assets B. Preferred Credits on Specific Movables With reference to specific movable property of the debtor, the following claims or liens shall be preferred: (1) Duties, taxes and fees due thereon to the State or any subdivision thereof; (2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them; (3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity; neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally; (4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value thereof; (5) Credits for the making, repair, safekeeping or preservation of personal property, on the movable thus made, repaired, kept or possessed; 1549

The rules on preference of credits apply only when two or more creditors have separate and distinct claims against the same debtor who has insufficient property. Preference creates no lien on property, and, therefore, gives no interest in property, specific or general, to the preferred creditor but a preference in application of the proceeds after the sale. (Molina vs. Somes, 31 Phil. 76) The preferential right of credit attains significance only after the properties of the debtor have been inventoried and liquidated, and the claims held by his various creditors have been established. (DBP vs. NLRC, 183 SCRA 328)

342

(6) Claims for laborers' wages, on the goods manufactured or the work done; (7) For expenses of salvage, upon the goods salvaged; (8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest; (9) Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses, until their delivery and for thirty days thereafter; (10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests; (11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested; (12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased and on the fruits of the same, but not on money or instruments of credit; (13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon the price of the sale. In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully taken, the creditor may demand them from any possessor, within thirty days from the unlawful seizure. C. Exempt Property 1. Present property – those provided under Arts. 155 and 205 of the Family Code,1550 Sec. 13, Rule 39 of the Rules of Court,1551 and Sec. 118 of the PublicLand Act1552 2. Future property – a debtor who obtains a discharge from his debts on account of his insolvency, is not liable for the unsatisfied claims of his creditors with said property subject to certain exceptions expressly provided by law.1553 3. Property under legal custody and those owned by municipal corporations necessary for governmental purposes

1550

See Reference ibid 1552 ibid 1553 Secs. 68, 69, The Insolvency Law [Act No. 1956] 1551

343

D. Classification of credits With reference to specific movable property of the debtor, the following claims or liens shall be preferred: (1) Duties, taxes and fees due thereon to the State or any subdivision thereof; (2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them; (3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity; neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally; (4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value thereof; (5) Credits for the making, repair, safekeeping or preservation of personal property, on the movable thus made, repaired, kept or possessed; (6) Claims for laborers' wages, on the goods manufactured or the work done; (7) For expenses of salvage, upon the goods salvaged; (8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest; (9) Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses, until their delivery and for thirty days thereafter; (10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests; (11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested; (12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased and on the fruits of the same, but not on money or instruments of credit; (13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon the price of the sale. 344

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.1554 With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right: (1) Taxes due upon the land or building; (2) For the unpaid price of real property sold, upon the immovable sold; (3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; (4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works; (5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged; (6) Expenses for the preservation or improvement of real property when the law authorizes reimbursement, upon the immovable preserved or improved; (7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits; (8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided; (9) Claims of donors or real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; (10) Credits of insurers, upon the property insured, for the insurance premium for two years.1555 The claims or credits enumerated in the two preceding articles shall be considered as mortgages or pledges of real or personal property, or liens within the purview of legal provisions governing insolvency. Taxes mentioned in No. 1, article 2241, and No. 1, article 2242, shall first be satisfied.1556 With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named: 1554

Art. 2241 Art. 2242 1556 Art. 2243 1555

345

(1) Proper funeral expenses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court; (2) Credits for services rendered the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency; (3) Expenses during the last illness of the debtor or of his or her spouse and children under his or her parental authority, if they have no property of their own; (4) Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment; (5) Credits and advancements made to the debtor for support of himself or herself, and family, during the last year preceding the insolvency; (6) Support during the insolvency proceedings, and for three months thereafter; (7) Fines and civil indemnification arising from a criminal offense; (8) Legal expenses, and expenses incurred in the administration of the insolvent's estate for the common interest of the creditors, when properly authorized and approved by the court; (9) Taxes and assessments due the national government, other than those mentioned in articles 2241, No. 1, and 2242, No. 1;1557 (10) Taxes and assessments due any province, other than those referred to in articles 2241, No. 1, and 2242, No. 1;1558 (11) Taxes and assessments due any city or municipality, other than those indicated in articles 2241, No. 1, and 2242, No. 1;1559 (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.1560

1557

supra ibid 1559 ibid 1560 Art. 2244 1558

346

Credits of any other kind or class, or by any other right or title not comprised in the four preceding articles, shall enjoy no preference.1561 E. Order of preference of credits Those credits which enjoy preference with respect to specific movables, exclude all others to the extent of the value of the personal property to which the preference refers.1562 If there are two or more credits with respect to the same specific movable property, they shall be satisfied pro rata, after the payment of duties, taxes and fees due the State or any subdivision thereof.1563 Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the extent of the value of the immovable or real right to which the preference refers.1564 If there are two or more credits with respect to the same specific real property or real rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the immovable property or real right.1565 The excess, if any, after the payment of the credits which enjoy preference with respect to specific property, real or personal, shall be added to the free property which the debtor may have, for the payment of the other credits.1566 Those credits which do not enjoy any preference with respect to specific property, and those which enjoy preference, as to the amount not paid, shall be satisfied according to the following rules: (1) In the order established in article 2244;1567 (2) Common credits referred to in article 22451568 shall be paid pro rata regardless of dates.1569

1561

Art. 2245 Art. 2246 1563 Art. 2247 1564 Art. 2248 1565 Art. 2249 1566 Art. 2250 1567 supra 1568 ibid 1569 Art. 2251 1562

347

X. Insolvency Law A. Definition of insolvency The relative condition of man’s assets and liabilities that the former, if all made immediately available, would not be sufficient to discharge the latter.1570 B. Suspension of payments Proceedings for suspension of payments seek the postponement of the debts of a debtor who possesses sufficient property to cover his debts, but foresees the impossibility of meeting them when they respectively fall due.1571The debtor has sufficient properties in value to meet his debts but there is not enough cash; thus, he cannot pay his debts as they fall due. He can ask for the suspension of payments of his debts for a given period within which to convert some of his properties to cash so that he can pay his debts. C. Voluntary insolvency The situation of a debtor who, having debts exceeding P1,000 cannot discharge all of them with all of his existing assets, and who, as a consequence, voluntarily goes to court to have himself declared as an insolvent so that his assets may be equitably distributed among his creditors. D. Involuntary insolvency Instituted by three (3) or more resident creditors for an individual debtor whose credits aggregating not less than P1,000 accrued in the Philippines against a debtor who has committed any of the acts of insolvency. LEASE I. 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.1572 II. Lease of work or services 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 relations of principal and agent does not exist between them.1573 1570

Philippine Commercial Law by C. Villanueva, 1998 Ed., p.729 Sec. 2 1572 Art. 1643 1573 Art. 1644 1571

348

III. Lease of rural and urban lands A. Qualified persons Those not covered within the scope as provided for under Articles 1490 and 1491 of the Civil Code.1574 B. Registration Every lease of real estate may be recorded in the Registry of Property. Unless a lease is recorded, it shall not be binding upon third persons.1575 C. Prohibitions The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary.1576 IV. Rights and obligations of lessor and lessee When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing leased, in whole or in part, without prejudice to his responsibility for the performance of the contract toward the lessor.1577 Without prejudice to his obligation toward the sublessor, 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.1578 The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extra-judicial demand by the lessor. Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor's claim is concerned, unless said payments were effected in virtue of the custom of the place.1579

1574

See Art. 1646 Art. 1648 1576 Art. 1649 1577 Art. 1650 1578 Art. 1651 1579 Art. 1652 1575

349

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 all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary; (3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.1580 If the thing leased is totally destroyed by a fortuitous event, the lease is extinguished. If the destruction is partial, the lessee may choose between a proportional reduction of the rent and a rescission of the lease.1581 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.1582 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) To pay expenses for the deed of lease.1583 The lessee may suspend the payment of the rent in case the lessor fails to make the necessary repairs or to maintain the lessee in peaceful and adequate enjoyment of the property leased.1584 If the lessor or the lessee should not comply with the obligations set forth in articles 1654 and 1657,1585 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.1586 If a dwelling place or any other building intended for human habitation is in such a condition that its use brings imminent and serious danger to life or health, the lessee may 1580

Art. 1654 Art. 1655 1582 Art. 1656 1583 Art. 1657 1584 Art. 1658 1585 supra 1586 Art. 1659 1581

350

terminate the lease at once by notifying the lessor, even if at the time the contract was perfected the former knew of the dangerous condition or waived the right to rescind the lease on account of this condition.1587 If during the lease it should become necessary to make some urgent repairs upon the thing leased, which cannot be deferred until the termination of the lease, the lessee is obliged to tolerate the work, although it may be very annoying to him, and although during the same, he may be deprived of a part of the premises. If the repairs last more than forty days the rent shall be reduced in proportion to the time - including the first forty days - and the part of the property of which the lessee has been deprived. When the work is of such a nature that the portion which the lessee and his family need for their dwelling becomes uninhabitable, he may rescind the contract if the main purpose of the lease is to provide a dwelling place for the lessee.1588 The lessee is obliged to bring to the knowledge of the proprietor, within the shortest possible time, every usurpation or untoward act which any third person may have committed or may be openly preparing to carry out upon the thing leased. He is also obliged to advise the owner, with the same urgency, of the need of all repairs included in No. 2 of article 1654.1589 In both cases the lessee shall be liable for the damages which, through his negligence, may be suffered by the proprietor. If the lessor fails to make urgent repairs, the lessee, in order to avoid an imminent danger, may order the repairs at the lessor's cost.1590 The lessee shall return the thing leased, upon the termination of the lease, as he received it, save what has been lost or impaired by the lapse of time, or by ordinary wear and tear, or from an inevitable cause.1591 In the absence of a statement concerning the condition of the thing at the time the lease was constituted, the law presumes that the lessee received it in good condition, unless there is proof to the contrary.1592

1587

Art. 1660 Art. 1662 1589 supra 1590 Art. 1663 1591 Art. 1665 1592 Art. 1666 1588

351

The lessee is responsible for the deterioration or loss of the thing leased, unless he proves that it took place without his fault. This burden of proof on the lessee does not apply when the destruction is due to earthquake, flood, storm or other natural calamity.1593 The lessee is liable for any deterioration caused by members of his household and by guests and visitors.1594 The bailor shall refund the extraordinary expenses during the contract for the preservation of the thing loaned, provided the bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply to the notification cannot be awaited without danger. If the extraordinary expenses arise on the occasion of the actual use of the thing by the bailee, even though he acted without fault, they shall be borne equally by both the bailor and the bailee, unless there is a stipulation to the contrary.1595 V. Special rules for lease of rural/urban lands The lessee shall have no right to a reduction of the rent on account of the sterility of the land leased, or by reason of the loss of fruits due to ordinary fortuitous events; but he shall have such right in case of the loss of more than one-half of the fruits through extraordinary and unforeseen fortuitous events, save always when there is a specific stipulation to the contrary. Extraordinary fortuitous events are understood to be: fire, war, pestilence, unusual flood, locusts, earthquake, or others which are uncommon, and which the contracting parties could not have reasonably foreseen.1596 Neither does the lessee have any right to a reduction of the rent if the fruits are lost after they have been separated from their stalk, root or trunk.1597 The lease of a piece of rural land, when its duration has not been fixed, is understood to have been 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 or more years have to elapse for the purpose.1598 The outgoing lessee shall allow the incoming lessee or the lessor the use of the premises and other means necessary for the preparatory labor for the following year; and, reciprocally, the incoming lessee or the lessor is under obligation to permit the outgoing 1593

Art. 1667 Art. 1668 1595 Art. 1949 1596 Art. 1680 1597 Art. 1681 1598 Art. 1682 1594

352

lessee to do whatever may be necessary for the gathering or harvesting and utilization of the fruits, all in accordance with the custom of the place.1599 Land tenancy on shares shall be governed by special laws, the stipulations of the parties, the provisions on partnership and by the customs of the place.1600 The tenant on shares cannot be ejected except in cases specified by law.1601 VI. Household service Household service shall always be reasonably compensated. Any stipulation that household service is without compensation shall be void. Such compensation shall be in addition to the house helper's lodging, food, and medical attendance.1602 The head of the family shall furnish, free of charge, to the house helper, suitable and sanitary quarters as well as adequate food and medical attendance.1603 If the house helper is under the age of eighteen years, the head of the family shall give an opportunity to the house helper for at least elementary education. The cost of such education shall be a part of the house helper's compensation, unless there is a stipulation to the contrary.1604 No contract for household service shall last for more than two years. However, such contract may be renewed from year to year.1605 The house helper's clothes shall be subject to stipulation. However, any contract for household service shall be void if thereby the house helper cannot afford to acquire suitable clothing.1606 The head of the family shall treat the house helper in a just and humane manner. In no case shall physical violence be used upon the house helper.1607 House helpers shall not be required to work more than ten hours a day. Every house helper shall be allowed four days' vacation each month, with pay.1608

1599

Art. 1683 Art. 1684 1601 Art. 1685 1602 Art. 1689 1603 Art. 1690 1604 Art. 1691 1605 Art. 1692 1606 Art. 1693 1607 Art. 1694 1608 Art. 1695 1600

353

In case of death of the house helper, the head of the family shall bear the funeral expenses if the house helper has no relatives in the place where the head of the family lives, with sufficient means therefor.1609 If the period for household service is fixed neither the head of the family nor the house helper may terminate the contract before the expiration of the term, except for a just cause. If the house helper is unjustly dismissed, he shall be paid the compensation already earned plus that for fifteen days by way of indemnity. If the house helper leaves without justifiable reason, he shall forfeit any salary due him and unpaid, for not exceeding fifteen days.1610 If the duration of the household service is not determined either by stipulation or by the nature of the service, the head of the family or the house helper may give notice to put an end to the service relation, according to the following rules: (1) If the compensation is paid by the day, notice may be given on any day that the service shall end at the close of the following day; (2) If the compensation is paid by the week, notice may be given, at the latest on the first business day of the week, that the service shall be terminated at the end of the seventh day from the beginning of the week; (3) If the compensation is paid by the month, notice may be given, at the latest, on the fifth day of the month, that the service shall cease at the end of the month.1611 Upon the extinguishment of the service relation, the house helper may demand from the head of the family a written statement on the nature and duration of the service and the efficiency and conduct of the house helper.1612 VII. Contract of labor A. Obligation in case of death/injury of laborers Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee's own notorious negligence, or voluntary act, or drunkenness, the employer shall

1609

Art. 1696 Art. 1697 1611 Art. 1698 1612 Art. 1699 1610

354

not be liable for compensation. When the employee's lack of due care contributed to his death or injury, the compensation shall be equitably reduced. 1613 If the death or injury is due to the negligence of a fellow worker, the latter and the employer shall be solidarily liable for compensation. If a fellow worker's intentional or malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiff's fellow worker.1614 VIII. Contract for piece of work By the contract for a piece of work 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 also furnish the material.1615 If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale.1616 The contract shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Should the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contract fails or refuses to comply with this obligation, the employer may have the defect removed or another work executed, at the contractor's cost.1617 An agreement waiving or limiting the contractor's liability for any defect in the work is void if the contractor acted fraudulently.1618 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.1619 The contractor who has undertaken to put only his work or skill, cannot claim any compensation if the work should be destroyed before its delivery, unless there has been delay in receiving it, or if the destruction was caused by the poor quality of the material,

1613

Art. 1711 Article 1712 1615 Art. 1713 1616 Art. 1714 1617 Art. 1715 1618 Art. 1716 1619 Art. 1717 1614

355

provided this fact was communicated in due time to the owner. If the material is lost through a fortuitous event, the contract is extinguished.1620 Acceptance of the work by the employer relieves the contractor of liability for any defect in the work, unless: (1) The defect is hidden and the employer is not, by his special knowledge, expected to recognize the same; or (2) The employer expressly reserves his rights against the contractor by reason of the defect.1621 The price or compensation shall be paid at the time and place of delivery of the work, unless there is a stipulation to the contrary. If the work is to be delivered partially, the price or compensation for each part having been fixed, the sum shall be paid at the time and place of delivery, in the absence if stipulation.1622 If, in the execution of the work, an act of the employer is required, and he incurs in delay or fails to perform the act, the contractor is entitled to a reasonable compensation. The amount of the compensation is computed, on the one hand, by the duration of the delay and the amount of the compensation stipulated, and on the other hand, by what the contractor has saved in expenses by reason of the delay or is able to earn by a different employment of his time and industry.1623 If the work cannot be completed on account of a defect in the material furnished by the employer, or because of orders from the employer, without any fault on the part of the contractor, the latter has a right to an equitable part of the compensation proportionally to the work done, and reimbursement for proper expenses made.1624 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.1625

1620

Art. 1718 Art. 1719 1622 Art. 1720 1623 Art. 1721 1624 Art. 1722 1625 Art. 1723 1621

356

Acceptance of the building, after completion, does not imply waiver of any of the cause of action by reason of any defect mentioned in the preceding paragraph. The action must be brought within ten years following the collapse of the building. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications, provided: (1) Such change has been authorized by the proprietor in writing; and (2) The additional price to be paid to the contractor has been determined in writing by both parties.1626 The owner may withdraw at will from the construction of the work, although it may have been commenced, indemnifying the contractor for all the latter's expenses, work, and the usefulness which the owner may obtain therefrom, and damages.1627 When a piece of work has been entrusted to a person by reason of his personal qualifications, the contract is rescinded upon his death. In this case the proprietor shall pay the heirs of the contractor in proportion to the price agreed upon, the value of the part of the work done, and of the materials prepared, provided the latter yield him some benefit. The same rule shall apply if the contractor cannot finish the work due to circumstances beyond his control.1628 The contractor is responsible for the work done by persons employed by him.1629 The contractor is liable for all the claims of laborers and others employed by him, and of third persons for death or physical injuries during the construction.1630 Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. However, the following shall not prejudice the laborers, employees and furnishers of materials: (1) Payments made by the owner to the contractor before they are due; 1626

Art. 1724 Art. 1725 1628 Art. 1726 1629 Art. 1727 1630 Art. 1728 1627

357

(2) Renunciation by the contractor of any amount due him from the owner. This article is subject to the provisions of special laws.1631 If it is agreed that the work shall be accomplished to the satisfaction of the proprietor, it is understood that in case of disagreement the question shall be subject to expert judgment. If the work is subject to the approval of a third person, his decision shall be final, except in case of fraud or manifest error.1632 He who has executed work upon a movable has a right to retain it by way of pledge until he is paid.1633 LAND TITLES AND DEEDS I. Torrens System A. Concept A system for registration of land under which, upon the landowner’s application, the court may, after appropriate proceedings, direct the issuance of a certificate of title. The Torrens system does not create or vest title. It only confirms and records title already existing and vested. It does not protect a usurper from the true owner. It cannot be a shield for the commission of fraud. It does not permit one to enrich himself at the expense of another1634 Background In order to establish a system of registration by which title recorded became absolute, indefeasible and imprescriptible, Act No. 496, otherwise known as the Land Registration Act, was passed and took effect on February 1, 1903. Rights acquired under this system are guaranteed by the government which provides an assurance fund to answer for damages to be suffered by persons thru the operation of this system. This method is also known as the Torrens system of land registration. 1635 There are two (2) laws ancillary to Act No. 496. These are the Cadastral Law of February 11, 19131636and the Public Land Law of December 1, 19361637 which have been subsequently amended by later legislations. 1631

Art. 1729 Art. 1730 1633 Art. 1731 1634 Angeles vs. Samia, 66 Phil. 444 (1938) 1635 Act 496 has been amended by P.D. 1529 which was enacted on June 11, 1978 1636 Act 2259 1632

358

Presidential Decree No. 1529 was issued to cope with the growing need of updating the Land Registration Act, to codify the various other laws relative to registration of real property and real rights, and to further strengthen the Torrens system. Land Registration Act No. 496 of February 1, 1903 has not been repealed or abrogated but rather, “all laws, decrees, orders, rules and regulations or parts thereof, in conflict with any provisions of this decree are hereby repealed or modified accordingly.”1638 B. Certificate of Title This is the true copy of the decree of registration or the transcription thereof and like the decree shall also be signed by LRA Administrator1639 It takes effect upon the date of entry thereof, and the land covered thereby becomes registered land on that date. II. Regalian Doctrine A. Concept All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests, or timber, wildlife, flora and fauna, and natural resources belong to the state. With the exception of agricultural lands, all other natural resources shall not be alienated.1640 B. Effects Under the Regalian doctrine, all lands of the public domain belong to the State, which is the source of any asserted right to ownership of land. All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State.1641 C. Concept of native title, time immemorial possession Native Title - refers to pre-conquest rights to lands and domains which, as far back as memory reaches, have been held under a claim of private ownership by ICCs/IPs, have never been public lands and are thus indisputably presumed to have been held that way since before the Spanish Conquest.1642 III. Citizenship Requirement

1637

Com. Act No. 141 Sec. 20, P.D. No. 1529 1639 Sec. 39, ibid 1640 Sec. 2, Art. XII, 1987 Constitution 1641 Spouses Reyes et at. v. CA, 295 SCRA 296, September 10, 1998; Cacho v. CA, 269 SCRA 159, March 3,1997 1642 See R.A. 8371 1638

359

A. Individuals and corporations Alienable lands of the public domain: Only Filipino citizens may acquire not more than 12 hectares by purchase, homestead or grant, or lease not more than 500 hectares. Private corporations may lease not more than 1,000 hectares for 25 years renewable for another 25 years; IV. Original Registration1643 A. Who may apply 1. Under PD 1529 a. Those who, by themselves or through their predecessors-in-interest, have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier; b. Those who have acquired ownership of private lands by prescription under the provisions of existing laws; c. Those who have acquired ownership of private lands or abandoned river beds by right of accession or accretion; and d. Those who have acquired ownership of land in any other manner provided for by law. jointly.

Where the land is owned in common, all the co-owners shall file the application

Where the land has been sold under pacto de retro, the vendor a retro may file an application for the original registration of the land, provided, however, that should the period for redemption expire during the pendency of the registration proceedings and 1643

Takes place when the title to land is made of public record for the first time in the name of its lawful owner. Under the Torrens system, it refers to the registration procedure from the filing of the application to the issuance of the original certificate of title in pursuance of the decree of registration. Kinds of Original Registration 1. Voluntary – by filing with the proper court a) Under P.D. No. 1529 (Property Registration Decree) b) Under Sec. 48 of CA No. 141, Public Land Act 2. Involuntary – cadastral proceedings Compulsory registration initiated by the government, to adjudicate ownership of land Involuntary on the part of the claimants but they are compelled to substantiate their claim or interest through an answer

360

ownership to the property consolidated in the vendee a retro, the latter shall be substituted for the applicant and may continue the proceedings. A trustee on behalf of the principal may apply for original registration of any land held in trust by him, unless prohibited by the instrument creating the trust.1644 2. Under CA 141 (a) Those who prior to the transfer of sovereignty from Spain to the prior United States have applied for the purchase, composition or other form of grant of lands of the public domain under the laws and royal decrees then in force and have instituted and prosecuted the proceedings in connection therewith, but have with or without default upon their part, or for any other cause, not received title therefor, if such applicants or grantees and their heirs have occupied and cultivated said lands continuously since the filing of their applications. (b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter. (c) Members of the national cultural minorities who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of lands of the public domain suitable to agriculture, whether disposable or not, under a bona fide claim of ownership for at least 30 years shall be entitled to the rights granted in sub-section (b) hereof. 3. Under RA 8371 Individual and indigenous corporate claimants of ancestral lands which are not within ancestral domains, may have their claims officially established by filing applications for the identification and delineation of their claims with the Ancestral Domains Office. An individual or recognized head of a family or clan may file such application in his behalf or in behalf of his family or clan, respectively.1645 1644

Sec. 14 All these persons must be natural-born Filipino Citizens. However, by way of exception, juridical persons may apply for registration of leased agricultural and disposable lands not exceeding 1,000 hectares in area for a period of 25 years and renewable for not more than 25 years. (Sec. 3, Chapter XII, 1987 Constitution) Notwithstanding the prohibition in the 1973 and 1987 Constitutions against private corporations holding lands of the public domain except by lease, still a private corporation may institute confirmation proceedings under Section 48(b) of Public Land Act if, at the time of institution of the registration proceedings, the land was already private land. (Dir. of Lands vs. IAC and ACME Plywood, 146 SCRA 509) 1645 Sec. 53 (b)

361

B. Registration process and requirements Registration process 1.

Survey of the land by the Bureau of Lands or a duly licensed private surveyor;1646

2. 3.

Filing of Application for Registration by the applicant;1647 Setting of date for initial hearing by the court;

4.

Transmittal of Application and date of initial hearing together with all documents or other evidences attached thereto by the Clerk of Court to the Land Registration Authority;

5.

Publication of Notice of Filing of Application and date and place of hearing once in the Official Gazette and once in a newspaper of general circulation in the Philippines;1648

6.

Service of Notice upon contiguous owners, occupants and those known to have interest in the property by the sheriff;

7.

Filing of Answer or Opposition to Application by any person whether named in the notice or not;

8.

Hearing of the case by the court;1649

9.

Promulgation of judgment by the court;

10.

Issuance of decree or order by the court declaring the decision final and instructing the Land Registration Authority to issue a Decree of Confirmation and Registration;1650

11.

Entry of Decree in the Land Registration Authority;1651

1646

Must be drawn in a tracing cloth plan Approved ONLY by the Director of Land Management (authority of LRA to approve such plan was withdrawn by P.D. 239 dated July 9, 1983) 1647 Always at the RTC of the province, city or municipality where property is situated. 1648 it is at this point that the court acquires jurisdiction over the subject matter this is done by the Administrator who acts as the clerk of court 1649 Republication or amendment of technical description of land is necessary when there is substantial increase of the area of the land. If increase is merely minimal, no republication is needed. (Benin vs. Tuason, 57 SCRA 531) 1650 it is not the court BUT the LRA which issues the decree of confirmation and registration 1 year after issuance of decree, it becomes incontrovertible and amendments of the same will not be allowed except merely in case of clerical errors. Decree of registration may be reviewed on the ground of fraud and must be filed within 1 year from entry of the decree. 1651 This serves as the reckoning date to determine the 1-year period from which one can impugn the validity of the registration.

362

12.

Sending of copy of Decree to the corresponding Register of Deeds; and

13.

Transcription of Decree in the registration book and issuance of Owner’s Duplicate Original Certificate of Title of the applicant by the Register of Deeds upon payment of the prescribed fees. Requisites of an Application for Original Registration:

1) The application must be in writing, signed and sworn to by the applicant or by someone duly authorized in his behalf; and if there is more than one applicant, the application shall be signed and sworn to by and in behalf of each. The full name, citizenship, status, residence and post office address of the applicant must be stated therein. 2) The application must contain the description of the land; the number of parcels and location threof; the nature of title thereto; encumbrances, if any; occupants thereon; names and addresses of adjoining owners, if known; assessed value of the property, and the length of possession. 3) The application must be accompanied with a tracing cloth plan approved by the Bureau of Lands together with two (2) blue print copies of the same; three (3) copies of the technical description; three (3) copies of the surveyor’s certificate; the certificate of the last assessment of the property in quadruplicate or, if none, the affidavit of its market value; and all muniments of title in the possession of applicant or applicants. C. Remedies 1. 2. 3. 4.

New Trial1652 Relief from Judgment1653 Appeal1654 Petition for Review1655

1652

Sec.1, Rule 37,Rules of Court Grounds: a. fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded against b. newly discovered evidence c. award of excessive damages, or insufficiency of the evidence to justify the decision 1653 Nature: subsidiary remedy, i.e. may be availed only when the judgment has become final and a new trial is not available Grounds: when a judgment is entered against a party through fraud, accident, mistake, or excusable negligence, such party may file a petition in the court that rendered such judgment praying that the said judgment be set aside. 1654 Under P.D. 1529, judgments and orders in land registration cases are appealable to the Court of Appeals or to the Supreme Court in the same manner as ordinary actions Must be filed within 15 days from receipt of the judgment or final order appealed from. 1655 of a Decree Any person may file a petition for review to set aside the decree of registration on the ground that he was deprived of their opportunity to be heard in the original registration case not later than one (1) year after the entry of the decree.

363

5. Action for Reconveyance1656 6. Recovery of Damages D. Cadastral registration1657 A proceeding in rem, initiated by the filing of a petition for registration by the government, not by the persons claiming ownership of the land subject thereof, and the latter are, on the pain of losing their claim thereto, in effect compelled to go to court to make known their claim or interest therein, and to substantiate such claim or interest V. Subsequent Registration1658 A. Voluntary dealings.1659

It is a petition for review of judgment when it is filed after rendition of the decision but before the entry of the decree of registration. And it is a petition for review of the decree when it is filed within the one year period after such entry. 1656 An action seeking to transfer or reconvey the land from the registered owner to the rightful owner May be filed even after the lapse of one year from entry of the decree of registration as long as the property has not been transferred or conveyed to an innocent purchaser for value. An action for reconveyance does not aim or purport to reopen the registration proceedings and set aside the decree of registration but only to show that the person who secured the registration of the questioned property is not the real owner thereof. The action, while respecting the decree as incontrovertible, seeks to transfer or reconvey the land from the registered owner to the rightful owner. (EscondevsBorlongay, 152 SCRA 603) 1657 Here, the government does not seek the registration of land in its name. The objective of the proceeding is the adjudication of title to the lands or lots involved in said proceeding. 1658 Takes place when any deed affecting the land is made of public record after the date of its original registration.; where incidental matters after original registration may be brought before the land registration court by way of motion or petition filed by the registered owner or a party in interest. 1659 In voluntary sale of land, the registration of the instrument is the operative act that transmits or transfers title. Where there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. (Fule vs. Legare. GR No. 17951) The exception to the above rule is embodied in the case of Dela Merced vs. GSIS (365 SCRA 1) where the court ruled that “when the purchaser or mortgagee is a financing institution, the general rule that a purchaser or mortgagee of the land is not required to look further than what appears on the face of the title does not apply. Well settled is the rule that all persons dealing with property covered by Torrens certificate of title are not required to go beyond what appears on the face of the title. When there is nothing on the COT indicating any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. [Centenovs CA, 139 SCRA 545, 555 (1985)] Exceptions for applicability: 1) purchaser in bad faith [Egao vs. CA, 174 SCRA 484, 492 (1989)]; 2) sufficiently strong indications to impel closer inquiry into the location, boundaries and condition of the lot. (Francisco vs. CA 153 SCRA 330, 336, 337);

364

Refer to deeds, instruments or documents which are results of the free and voluntary acts of the parties thereto B. Involuntary dealings1660 Refer to such writ order or process issued by a court of record affecting registered land which by law should be registered to be effective, and also to such instruments which are not the willful acts of the registered owner and which may have been executed even without his knowledge or against his consent. VI. Non-Registrable Properties The following lands are not registrable by any private person in his name: 1. Those devoted to public land use such as public roads, plazas, canals, streets, rivers, banks and shores; 2. Those devoted to public service such as towns, walls and fortresses; 3. Public forests; 4. Mineral lands; and 5. Those reserved by the government for public or quasi-public purposes. The Constitution provides that all natural resources, except agricultural, commercial and industrial, residential and resettlement lands are inalienable.1661 Public forests are non-

3) where a person buys land not from the registered owner but from one whose right to the land has been merely annotated on the COT. (Quiniano vs. CA 39 SCRA 221); 4) purchaser of land the certificate of title contains a notice of lispendens; 5) purchaser with full knowledge of flaws and defects in the title.(Bernales vs. IAC 166 SCRA 519, 524; Lu vs. Manipon, 381 SCRA 788) 1660 Involuntary dealings affecting registered land which must be registered: a. attachments b. sale on execution or for taxes or for any assessment c. adverse claim d. notice of lispendens Claim or interest is adverse when: a. claimant’s right or interest in registered land is adverse to the registered owner; b. such right arose subsequent to date of original registration; c. no other provision is made in the Decree for the registration of such right or claim (Sec. 70, 1st par., P.D. 1529) An adverse claim is a notice to third persons that someone is claiming an interest on the property or has a better right than the registered owner thereof, and that any transaction regarding the disputed land is subject to the outcome of the dispute (Sajonasvs CA, [GR No. 102377, July 5, 1996) Notice of lispendens is intended to constructively advise, or warn all people who deal with the property that they so deal with it at their own risk, and whatever rights they may acquire in the property in any voluntary transaction are subject to the results of the action, and may well be inferior and subordinate to those which may be finally determined and laid down therein. (Heirs of Maria Marasiganvs IAC. 152 SCRA 253). 1661 Art. XIV, Sec. 8, New Constitution

365

alienable public lands. Possession of public forests on the part of the claimant, however long, cannot convert the same into private property1662 VII. Dealings with Unregistered Lands1663 The system of registration under the Spanish Mortgage Law is hereby discontinued and all lands recorded under said system which are not yet covered by Torrens title shall be considered as unregistered lands. Hereafter, all instruments affecting lands originally registered under the Spanish Mortgage Law may be recorded under Section 113 of this Decree, until the land shall have been brought under the operation of the Torrens system. The books of registration for unregistered lands provided under Section 194 of the Revised Administrative Code, as amended by Act No. 3344, shall continue to remain in force; provided, that all instruments dealing with unregistered lands shall henceforth be registered under Section 113 of this Decree.1664 No deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies. (a) The Register of Deeds for each province or city shall keep a Primary Entry Book and a Registration Book. The Primary Entry Book shall contain, among other particulars, the entry number, the names of the parties, the nature of the document, the date, hour and minute it was presented and received. The recording of the deed and other instruments relating to unregistered lands shall be effected by any of annotation on the space provided therefor in the Registration Book, after the same shall have been entered in the Primary Entry Book. (b) If, on the face of the instrument, it appears that it is sufficient in law, the Register of Deeds shall forthwith record the instrument in the manner provided herein. In case the Register of Deeds refuses its administration to record, said official shall advise the party in interest in writing of the ground or grounds for his refusal, and the latter may appeal the matter to the Commissioner of Land Registration in accordance with the provisions of Section 117 of this Decree. It shall be understood that any recording made under this section shall be without prejudice to a third party with a better right. (c) After recording on the Record Book, the Register of Deeds shall endorse among other things, upon the original of the recorded instruments, the file number and the date as well as the hour and minute when the document was received for recording as shown in the Primary Entry Book, returning to the registrant or person in interest the duplicate of the instrument, with appropriate annotation, certifying that he has recorded the instrument after 1662

Vano vs. Government of P.I., 41 Phil. 161 (1920) Sec. 3, P.D. 1529; also Sec. 113 16641664 Section 3, P.D. 1529 1663

366

reserving one copy thereof to be furnished the provincial or city assessor as required by existing law. (d) Tax sale, attachment and levy, notice of lispendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the form sufficient in law, shall likewise be admissible to record under this section. (e) For the services to be rendered by the Register of Deeds under this section, he shall collect the same amount of fees prescribed for similar services for the registration of deeds or instruments concerning registered lands.1665 TORTS AND DAMAGES BOOK I – TORTS1666 I. Principles A. Abuse of Right Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.1667 Elements: 1. There is a legal right or duty 2. Which is exercised in bad faith; 3. For the sole intent of prejudicing or injuring another.

B. Unjust Enrichment1668 1665

Sec. 113, Ibid An unlawful violation of private right, not created by contract, and which gives rise to an action for damages. It is an act or omission producing an injury to another, without any previous existing lawful relation of which the said act or omission may be said to be a natural outgrowth or incident. 1667 Art. 19 Contains a mere declaration of principles. The declaration is implemented by Art. 20 (Globe Mackay vs. CA) Sets certain standards which must be observed not only in the exercised of one’s rights but also in the performance of one’s duties. These standards are: 1. To act with justice 2. To give everyone his due; and 3. Observe honesty and good faith There is no hard and fast rule to determine whether or not the principle may be invoked. 1666

367

Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.1669 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.1670 Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasicontract to the end that no one shall be unjustly enriched or benefited at the expense of another.1671 C. Liability without Fault Even when an act or event causing damage to another's property was not due to the fault or negligence of the defendant, the latter shall be liable for indemnity if through the act or event he was benefited.1672 D. Acts Contrary to Law. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.1673 E. Acts Contrary to Morals Any person who wilfully causes loss or injury to another in manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.1674

II. Classification of Torts 1668

Elements of Unjust Enrichment: 1. There must be enrichment on the part of the defendant. 2. There is a concomitant injury to the plaintiff. 3. There is no just cause or legal ground for the enrichment 1669 Art. 22 1670 Art. 2154 1671 Art. 2142 1672 Art.23 1673 Art. 20 Even if the particular provision of law does not expressly provide for indemnification in case of violation, so long as there is a violation of law and damage resulting therefrom, there is liability for damages under this article. 1674 Art. 21 There is an act which may be legal but whch may be contrary to morals, good customs, public order or public policy (Albeson vs. CA)

368

A. According to manner of commission: Intentional Torts - Include conduct where the actor desires to cause the consequences of his act or believes that the consequences are substantially certain to result from it.1675 Negligent Torts - involve voluntary acts or omissions which result in injury to others without intending to cause the same or because the actor fails to exercise due care in performing such acts or omissions. Strict Liability – when the person is made liable independent of fault or negligence upon submission of proof of certain facts specified by law.1676 B. According to scope: general or specific III. The Tortfeasor A. The Direct Tortfeasor 1. Natural Persons Refer to human beings. 2. Juridical Persons (i) The State and its political subdivisions; (ii) 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; (iii) 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.1677 Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil or criminal actions, in conformity with the laws and regulations of their organization.1678

They are found in Chapter 2 of the Preliminary Title of the NCC entitled “Human Relations”. Although this chapter covers negligent acts, the torts mentioned herein are mostly intentional in nature or torts involving malice or bad faith. 1676 Strict liability tort can be committed even if reasonable care was exercised and regardless of the state of mind of the actor at that time. 1677 Art. 44 1675

369

B. Persons Made Responsible for Others 1. In General a. Quasi-delicts under Article 2180, how interpreted The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company.1679 Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company. The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.1680 The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in article 2176 shall be applicable.1681 Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody. The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.1682 1678

Art. 46 This has already been modified by Art. 221 of the Family Code to the extent that the alternative qualification of the liability of the father and the mother has been removed. Art. 221. Parents and other persons exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company and under their parental authority subject to the appropriate defenses provided by law. 1680 Liability of the employer can be established by proving the existence of an employer- he injury while performing 1681 Public officers who are guilty of tortuous conduct are personally liable for their actions. 1682 Statutory basis: if student is minor – Art. 219, FC if student is no longer a minor – Art. 2180, Civil Code Applies also to teachers of academic institutions. 1679

370

Family Code The school, its administrators and teachers, or the individual, entity or institution engaged in child are shall have special parental authority and responsibility over the minor child while under their supervision, instruction or custody. Authority and responsibility shall apply to all authorized activities whether inside or outside the premises of the school, entity or institution.1683 Those given the authority and responsibility under the preceding Article shall be principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor. The parents, judicial guardians or the persons exercising substitute parental authority over said minor shall be subsidiarily liable. The respective liabilities of those referred to in the preceding paragraph shall not apply if it is proved that they exercised the proper diligence required under the particular circumstances. All other cases not covered by this and the preceding articles shall be governed by the provisions of the Civil Code on quasi-delicts.1684

(1) Elements; definition Quasi-delict Liability attaches to the teacher-in-charge. The school itself is now solidarily liable with the teacher-in-charge. The liability extends to acts committed even outside the school so long as it is an official activity of the school. Whenever the school or teacher is being made liable, the parents and those exercising substitute parental authority are not free from liability because Art. 219 of the Family Code expressly provides that they are subsidiarily liable. Art. 2180 makes teachers and heads liable for acts of students and apprentices whether the latter are minors or not. General rule: The teacher-in-charge is liable for the acts of his students. The school and administrators are not liable. Exception: It is only the head of the school, not the teacher who is held liable where the injury is caused in a school of arts and trade. The liability of the teacher subsists whether the school is academic or non- academic. Liability is imposed only if the pupil is already in the custody of the teacher or head. The student is in the custody of the school authorities as longs as he is under the control and influence of the school and within its premises whether the semester had not yet begun or has already ended. The victim of negligence is likewise required to exercise due care in avoiding injury to himself. 1683 Art. 218 1684 Art. 219

371

Whoever by act or omission causes damage to another, there being fault or negligence is obliged to pay for the damage done.1685 Elements: (a) fault or negligence of the defendant, or some other person for whose acts he must respond; (b) damages suffered by the plaintiff; and (c) the connection of cause and effect between the fault or negligence of the defendant and the damages incurred by the plaintiff.1686 (2) Distinguished from culpa contractual and culpa criminal Culpa criminal: 1. Crimes affected the public interest. 2. Penal law punishes/ corrects the criminal act. 3. Only acts covered by Penal Law are punished 1687 4. Guilt proven beyond reasonable doubt. 5. Reservation to file separate civil action. No reservation, civil action is impliedly instituted in the criminal action. 6. Employer’s liability is subsidiary Culpa Aquiliana: 1. Only private concern. 2. Repairs the damage by indemnification. 3. Covers all acts that are faulty or negligent. 4. Preponderance of evidence. 5. No reservation – it’s independent from crime. 6. Employer’s liability is solidary1688

1685

Article 2176 Difference between Articles 218 & 2180 Art 218 School, admin, teachers engaged in child care are made expressly liable School, admin, teachers is solidary and parents are made subsidiary liable Students involved must be minor Art 2180 Teachers, head of establishment in Arts and trades are made expressly liable No such express solidary nor subsidiary liability is stated Students involved not necessarily minor 1686 Philippine Bank of Commerce v. CA, 336 Phil. 667, 675 (1997) 1687 Barredovs Garcia, 73 Phil 607; J. Bocobo, 1940 1688 Fabre Jr. vs CA, 259 SCRA 426

372

Culpa Contractual (i) Pre-existing obligation between the parties (ii) Fault or negligence is incidental to the performance of the obligation (iii) Defense of having exercised diligence of a good father of a family is not available, just like in criminal action. Applied doctrine of Respondent Superior, or Master and Servant Rule Culpa Contractual

Culpa Aquiliana

The foundation of the liability of the defendant

It is a separate source of obligation independent of contract

is the contract In breach of contract committed through the negligence of employee, the employer cannot erase his primary and direct liability by invoking exercise of diligence of a good father of a family in the selection and supervision of the employee.

In quasi-delict the presumptive responsibility for the negligence of his servants can be rebutted by proof of the exercise of due care in their selection and supervision.

Culpa Aquiliana

Crime

Only involves private concern The Civil Code by means of indemnification merely repairs the damage Includes all acts in which any kind of fault or negligence intervenes

Affect the public interest The Revised Penal Code punishes or corrects criminal act

Liability is direct and primary in quasidelict

Punished only if there is a penal law clearly covering them Liability of the employer of the actor-employee is subsidiary in crimes

b. Indirect liability for intentional acts A person who himself is not guilty of negligence is made liable for conduct of another.1689 c. Presumption of negligence on persons indirectly responsible In motor vehicle mishap , 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. It is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months. If the owner was not in the motor vehicle, the provisions of Article 2180 are applicable.1690

1689 1690

Vicarious liability Art. 2184

373

Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation.1691 There is prima facie presumption of negligence on the part of the defendant if the death or injury results from his possession of dangerous weapons or substances, such as firearms and poison, except when the possession or use thereof is indispensable in his occupation or business.1692 In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in 1733 and 1755.1693 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.1694 The head of a family that lives in a building or a part thereof, is responsible for damages caused by things thrown or falling from the same.1695 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 ten years following the collapse of the building.1696

d. Nature of liability; joint or solidary?

1691

Art. 2185 Art. 2188 1693 Art. 1756; see reference for Arts. 1733 & 1755 1694 Art. 2190 1695 Art. 2193 1696 Art. 1723 1692

374

The responsibility of two or more persons who are liable for quasi-delict is solidary.1697 2. In Particular1698 a. Parents1699 For damage caused by: a) minor children b) living in their company1700 b. Guardian For damage caused by a. minors or incapacitated persons b. under their authority c. living in their company c. Owners and Managers of Establishments and Enterprises

1697

Art. 2194 Art. 2180 1699 Father and Mother shall jointly exercise parental authority over common children. In case of disagreement, father's decision shall prevail (Art. 211) Persons liable for the act of minors other than parents. a. Those exercising substitute parental authority b. Surviving grandparents c. Oldest sibling, over 21 years old unless unfit or unqualified d. Child’s actual custodian, over 21 years old unless unfit or disqualified 1700 The basis of liability for the acts or omissions of their minor children is the parental authority that they exercise over them, except for children 18 to 21. The same foreseability test of negligence should apply to parents when they are sought to be held liable under Art. 2180, NCC The liability is not limited to parents, the same is also imposed on those exercising substitute and special parental authority, i.e., guardian. The liability is present only both under Art 2180 of the NCC and Art 221 of the Family Code if the child is living in his parents’ company. Parental authority is not the sole basis of liability. A teacher in charge is still liable for the acts of their students even if the minor student reaches the age of majority. The parents or guardians can still be held liable even if the minor is already emancipated provided that he is below 21 years of age. Parents and other persons exercising parental authority can escape liability by proving that they observed all the diligence of a good father of a family to prevent damages. (Art. 2180) The burden of proof rests on the parents and persons exercising parental authority. 1698

375

For damage caused by: a) their employees b) in the service of the branches in which they are employed, or c) on the occasion of their functions d. Employers1701 For damages caused by: a) employees and household helpers b) acting within the scope of their assigned tasks c) even if the employer is not engaged in any business or industry1702 (1) Meaning of employers Includes any person acting in the interest of an employer, directly or indirectly, but shall not include or any labor organization (otherwise , than when acting as an employer) or any one acting in the capacity of officer or agent of such labor organization. (2) Requisites (a) Employee chosen by employer or through another Employees are bound to exercise due care in the performance of their functions for the employers; absence such due care, the employee may be held liable. (b) Services rendered in accordance with orders which employer has authority to give Person for whomthe services are to beperformed controls not just theresult but also the means andmanner to achieve such end or result. (c) Illicit act of employee was on the occasion or by reason of the functions entrusted to him

1701

Defenses available to employers: a. exercise of due diligence ins election and supervision of employees b. act/omission was made outside working hours and in violation of company's rules and regulations 1702 unlike in RPC – subsidiary liability of employer attaches in case of insolvency of employer for as long as the employer is engaged in business/industry

376

The vicarious liability of the employer attaches only when the tortious conduct of the employee relates to, or is in the course of his employment (d) Presumption of negligence Presumption of negligence of theemployer is onlyjuristantum and not juris et de jure. For the presumption of negligence to operate, the negligence of the employee must first be established (3) Employer need not be engaged in business or industry As long as their employees and household helpers acted within the scope of their assigned task (4) Defense of diligence in selection and supervision It is a defense that the employer exercised proper diligence in the selection and supervision of negligent employee (5) Nature of employer’s liability The employer's liability is direct andprimary. e. State For damage caused by: a) a special agent1703 b) not when the damage has been caused by the official to whom the task done properly pertains1704 Public officers who are guilty of tortuous conduct are personally liable for their actions. f. Teachers and heads of establishments of arts and trades 1703

Two Kinds: 1. Public officials with a particular assigned tasks but is specially commissioned to do such task foreign to his usual assigned governmental function. 2. Private person – not a public official, commissioned to perform non-governmental function. A government commissioning a special person for a special task is acting thru a special agent within the meaning of Art. 2180. 1704 in which case Art. 2176 is applicable

377

For damage caused by: a) pupils and students or apprentices b) in their custody C. Joint Tortfeasors The responsibility of two or more persons who are liable for quasi-delict is solidary.1705 IV. Act of Omission and Its Modalities A. Concept of Act It is an act or omission producing an injury to another, without any previous existing lawful relation of which the said act or omission may be said to be a natural outgrowth or incident.1706 V. Proximate Cause A. Concept 1. Definition That cause which in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, without which the result would not have occurred.1707 2. Test1708 1705

Art. 2194 All the persons who command, instigate, promote, encourage, advice, countenance, cooperate in, aid, or abet the commission of a tort, or who approve of it after it is done, if done for their benefit; they are each liable as a principal, to the same extent and in the same manner as if they have performed the wrongful act themselves. 1706 An unborn child is NOT entitled to damages. But the bereaved parents may be entitled to damages, on damages inflicted directly upon them. (Geluz vs. CA, 2 SCRA 802) Defendants in tort cases can either be natural or artificial being. Corporations are civilly liable in the same manner as natural persons. Any person who has been injured by reason of a tortious conduct can sue the tortfeasor. The primary purpose of a tort action is to provide compensation to a person who was injured by the tortious conduct of the defendant. Preventive remedy is available in some cases. 1707 Primary cause remains the proximate cause even if there is an intervening cause which merely cooperated with the primary cause and which did not break the chain of causation. 1708 Tests applied in the Philippines: New Civil Code has a chapter on Damages which specifies the kind of damage for which the defendant may be held liable and the extent of damage to be awarded to the plaintiff. Cause-in-fact Tests: 1. But-for test 2. Substantial Factor test

378

a. Cause-in-fact Test It is necessary that there be proof thatdefendant's conduct is a factor incausing plaintiff's damage. b. Policy Test In determining the proximate cause of the injury, it is first necessary to determine if the defendant’s negligence was the cause-in-fact of the damage to the plaintiff.1709 If the defendant’s negligence was not the cause-in-fact, the inquiry stops. If it is, the inquiry shifts to the question of limit of the defendant’s liability.1710 3. Distinguished from Immediate Cause An immediate cause is the last event in a chain of events though not necessarily theproximate cause of what follows. 4. Distinguished from Intervening Cause An intervening cause is one which comes into active operation in producing the result after the actor’s negligent act or omission has occurred. The defendant ordinarily will not be relieved of liability by an intervening cause which could reasonably have been foreseen, nor by one which is a normal incident of the risk created. One which destroys the causal connection between the negligent act and the injury and thereby negatives liability.1711 5. Distinguished from Remote and Concurrent Remote Cause

3. NESS test Policy test: The directness approach is being applied in this jurisdiction. The definition of proximate cause which includes the element of foresight is not consistent with the express provision of the Article 2202 of the New Civil Code; a person may be held liable whether the damage to the plaintiff may be unforeseen. 1709 Cause-in-fact test 1710 Policy Test 1711 Example: The medical findings, show that the infection of the wound by tetanus was an efficient intervening cause later or between the time Javier was wounded to the time of his death. (People vs. Rellin 77 Phil 1038)

379

That cause which some independent force merely took advantage of to accomplish something not the natural effect thereof. Concurrent Causes The actor is liable even if the active and substantially simultaneous operation of the effects of a third person’s innocent, tortious or criminal act is also a substantial factor in bringing about the harm so long as the actor’s negligent conduct actively and continuously operate to bring about harm to another.1712 Where several causes producing the injury are concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons. B. Cause in Fact 1. But For The defendant’s conduct is the cause-in-fact if damage would not have resulted had there been no negligence on the part of the defendant. Conversely, defendant’s negligent conduct is not the cause in fact of the plaintiff’s damage if the accident could not have been avoided in the absence thereof. 2. Substantial Factor Test The conduct is the cause-in-fact of the damage if it was a substantial factor in producing the injuries. In order to be a substantial factor in producing the harm, the causes set in motion by the defendant must continue until the moment of the damage or at least down the setting in motion of the final active injurious force which immediately produced or preceded the damage.1713 3. Concurrent Causes The actor is liable even if the active and substantially simultaneous operation of the effects of a third person’s innocent, tortious or criminal act is also a substantial factor in bringing about the harm so long as the actor’s negligent conduct actively and continuously operate to bring about harm to another.1714 Where several causes producing the injury are concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons. 1712

Africa vs. Caltex If the defendant’s conduct was already determined to be the cause in fact of the plaintiff’s damage under the but for test, it is necessarily the cause in fact of the damage under the substantial factor test. 1714 Africa vs. Caltex 1713

380

Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination the direct and proximate cause of a single injury to a third person, and it is impossible to determine what proportion each contributed to the injury, either of them is responsible for the whole injury, even though his act alone might not have caused the entire injury; they become joint tort-feasors and are solidarily liable for the resulting damage under Article 2194 of the Civil Code. C. Legal Cause 1. Natural and Probable Consequences1715 Involves 2 things:1716 1. Causality damage would not have resultedwithout the fault or negligence of the defendant 2. Adequacy the fault of the defendant wouldnormally result in the damagesuffered by the obligee 2. Foreseeability Involves the question of probability, that is, the existence of some real likelihood of some damage and the likelihood is of such appreciable weight reasonably to induce, action to avoid it. Even if a particular injury was not foreseeable, the risk is still foreseeable if possibility of injury is foreseeable.

D. Efficient Intervening Cause1717 1715

Art. 2202, see Reference Reyes & Puno 1717 A cause is not an intervening cause if it was already in operation at the time the negligent act is committed. Foreseeable intervening causes cannot be considered sufficient intervening causes. The intervention of unforeseen and unexpected cause is not sufficient to relieve the wrongdoer from consequences of negligence if such negligence directly and proximately cooperates with the independent cause in the resulting injury. 1716

381

One which destroys the causal connection between the negligent act and the injury and thereby negatives liability. There is no efficient intervening cause if the force created by the negligent act or omission have either:

.

1. Remained active itself, or 2. Created another force which remained active until it directly caused the result, or 3. Created a new active risk of being acted upon by the active force that caused the result.1718 E. Cause vs. Condition It is no longer practicable to distinguish between cause and condition.

The defendant may be liable even if only created conditions, if the conditions resulted in harm to either person or property.1719 F. Last Clear Chance Doctrine of Last Clear Chance or Discovered Peril1720

1718

Example: The medical findings, show that the infection of the wound by tetanus was an efficient intervening cause later or between the time Javier was wounded to the time of his death (People vs. Rellin 77 Phil 1038) 1719 Examples of Dangerous Conditions: 1. Those that are inherently dangerous 2. Those where a person places a thing which is not dangerous in itself in a dangerous position. 3. Those involving products and other things which are dangerous because they are defective. 1720 Elements: a. plaintiff was in a position of danger by his own negligence b. defendant knew of such position of the plaintiff c. defendant had the least clear chance to avoid the accident by exercise of ordinary care but failed to exercise such last clear chance and d. accident occurred as proximate cause of such failure Who may invoke: plaintiff Inapplicable to: 1. joint tortfeasors 2. defendants concurrently negligent as against 3rd persons Cases when the doctrine was held inapplicable (PICCA) 1. If the plaintiff was not negligent. 2. The party charged is required to act instantaneously, and if the injury cannot be avoided by the application of all the means at hand after the peril is or should have been discovered. 3. If defendant’s negligence is a concurrent cause and which was still in operation up to the time the injury was inflicted. 4. Where the plaintiff, a passenger, filed an action against a carrier based on contract.

382

The negligence of the plaintiff does not preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff’s negligence. VI. Legal Injury A. Concept The violation or invasion of a legal right.1721 An act causing damage, which act must be not only hurtful, but wrongful. There must be damnum et injuria. B. Elements of Right 1. a legal wrong inflicted by the defendant, and 2. damage resulting to the plaintiff therefrom C. Violation of Right or Legal Injury The loss, hurt or harm which results from the injury. D. Classes of Injury 1. Injury to persons 2. Injury to property 3. Injury to relations VII. Intentional Torts A. General 1. Concept Include conduct where the actor desires to cause the consequences of his act or believes that the consequences are substantially certain to result from it. They are found in Chapter 2 of the Preliminary Title of the NCC entitled “Human Relations”. Although this chapter covers negligent acts, the torts mentioned herein are mostly intentional in nature or torts involving malice or bad faith.

5. If the actor, though negligent, was not aware of the danger or risk brought about by the prior fraud or negligent act. 1721 Black’s Law Dictionary

383

2. Classes1722 a. Interference with persons and property (1) Physical harms a. Battery b. Assault (2) Non-physical harms a. conversion, b. defamation, c. false imprisonment, d. fraud, e. malicious prosecution, f. invasion of privacy, g. trespass, and h. intentional infliction of emotional distress. b. Interference with relations The gist of the tort is an interference with one spouse’s mental attitude toward the other and the conjugal kindness of marital relations resulting in some actual conduct which materially affects it. It extends to all cases of wrongful interference in the family affairs of others whereby one spouse is induced to leave the other spouse or conduct himself or herself that the comfort of married life is destroyed. If the interference is by the parents of the spouse, malice must be proven. B. Interference with rights to persons and property 1. Intentional Physical Harms a. General (1) Concept It is an intentional infliction of a harmful or offensive bodily contactwhich offends a reasonable person’s sense of dignity or places him in apprehension of immediate bodily harm or offensive act. (2) Kinds 1722

Not so sure with this one

384

a. Physical Injuries like battery and assault b. False imprisonment c. Intentional mental stress b. Violation of persons security, physical injuries1723 (1) Battery1724 An intentional infliction of a harmful or offensive bodily contact; bodily contact is offensive if it offends a reasonable person’s sense of dignity. (2) Assault1725 Intentional conduct by one person directed at another which places the latter in apprehension of immediate bodily harm or offensive act. c. False Imprisonment1726 It is a restraint of a person in a bounded area without justification or consent.It is unlawful obstruction or deprivation of freedom from restraint of movement.1727 d. Trespass to Land (1) Concept It involves the wrongful interference with one's possessory rights in real property. (2) Elements 1. intrude without authorization and without privilege under law 2. cause something to enter another's land. e. Interference with Personal Property 1) Trespass to Chattels

1723

Art. 33, see Reference Physical injuries which resulted because of negligence or imprudence is not included in this article; they are already covered by Article 2176. 1724 Physical Injury 1725 Grave Threat Includes bodily injuries causing death. 1726 Illegal detention 1727 It applies to private as well as governmental detention.

385

The creditor possesses to himself the mortgaged property with violence and against the will of the debtor. 2) Conversion An intentional exercise of dominion andcontrol over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel.1728 2. Intentional Non-Physical Harms a. General (1) Concept (2) Kinds b. Violation of Personal Dignity Types: 1. Violation of the right of privacy 2. Interference with Family and other relations 3. Intriguing to Cause Alienation 4. Vexation and Humiliation1729 c. Infliction of emotional distress An intentional conduct of defendant that results in extreme emotional distress of plaintiff.1730

d. Violation of Privacy (1) Appropriation

1728

Elements: i. the plaintiff has clear legal ownership or right to possession of the property at the time of the conversion; ii. the defendant's conversion by a wrongful act or disposition of plaintiff's property rights; iii. there are damages resulting from the conversion 1729 Sexual Harassment falls under this category. 1730 Elements: 1. Defendant acted intentionally or recklessly; and 2. Defendant’s conduct was extreme and outrageous; and 3. Defendant’s act is the cause of the distress; and 4. Plaintiff suffers severe emotional distress as a result of defendant’s conduct

386

The unwarranted publication of a person’s name or the unauthorized use of his photograph or likeness for commercial purposes is an invasion of privacy. With respect to celebrities, however, the right of publicity is often treated as a separate right that overlaps but is distinct from the right of privacy. They treat their names and likeness as property and they want to control and profit therefrom. (2) Intrusion It is not limited to cases where the defendant physically trespassed into another’s property. It includes cases when the defendant invades one’s privacy by looking from outside.1731 GENERAL RULE:

There is no invasion of right to privacy when a journalist records photographs or writes about something that occurs in public places. EXCEPTION:

When the acts of the journalist should be to such extent that it constitutes harassment or overzealous shadowing. The freedom of the press has never been construed to accord newsmen immunity from tort or crimes committed during the course of the newsgathering. There is no intrusion when an employer investigates an employee or when the school investigates its student. (3) Public disclosure of private facts1732

Requisites: 1. Publicity is given to any private or purely personal information about a person; Example: “peeping-tom Public figure - A person, who by his accomplishments, fame or mode of living or by adopting a profession or calling which gives the public a legitimate interest in his doings, his affairs and his character. Public figures, most especially those holding responsible positions in government enjoy a more limited right to privacy compared to ordinary individuals. The interest sought to be protected is the right to be free from unwarranted publicity, from the wrongful publicizing of the private affairs and activities of an individual which are outside the realm of legitimate public concern. The publication of facts derived from the records of official proceedings which are not otherwise declared by law as confidential, cannot be considered a tortious conduct. 1731 1732

387

2. Without the latter’s consent; and 3. Regardless of whether or not such publicity constitutes a criminal offense, like libel or defamation, the circumstance that the publication was made with intent of gain or for commercial and business purposes invariably serves to aggravate the violation of the right. (4) False light in the public eye The interest to be protected in this tort is the interest of the individual in not being made to appear before the public in an objectionable false light or false position.1733 Tort of Putting Another in False Light

Defamation

1. As to gravamen of claim The gravamen of The gravamen of claim is not the claim is the reputareputational harm tional harm but rather the embarrassment of a person being made into some-thing he is not 2. As to publication The statement should Publication is be actually made in satisfied if a letter is public sent to a third person 3. As to the defamatory character of the statements Defendant may still What is published be held liable even if lowers the esteem in the statements tells which the plaintiff is something good held about the plaintiff

e. Disturbance of Peace of Mind 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;

1733

Example: Defendant was held liable for damages when he published an unauthorized biography of a famous baseball player exaggerating his feats on the baseball field, portraying him as a war hero. (Spahn vs. Messner) If the publicity given to the plaintiff is defamatory, hence an action for libel is also warranted; the action for invasion of privacy will afford an alternative remedy. May be committed by the media by distorting a news report.

388

(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.1734 f. Malicious Prosecution An action for damages brought by one against another whom a criminal prosecution, civil suit, or other legal proceeding has been instituted maliciously and without probable cause, after the termination of such prosecution, suit or proceeding in favor of the defendant therein. The gist of the action is putting legal process in force regularly, for mere purpose of vexation or injury.1735 g. Defamation1736

1734

Art. 26 Drilon vs. CA (1997) Elements: 1. The fact of the prosecution and the further fact that the defendant was himself the prosecutor; and that the action was finally terminated with an acquittal; 2. That in bringing the action, the prosecutor acted without probable cause; 3. The prosecutor was actuated or impelled by legal malice. Malice is the inexcusable intent to injure, oppress, vex, annoy or humiliate. 1736 Requisites for one to be liable for defamatory imputations: a. It must be defamatory b. It must be malicious c. It must be given publicity d. The victim must be identifiable Test in determining the defamatory character of the imputation: A charge is sufficient if the words are calculated to induce the hearers to suppose and understand that the person/s against whom they were uttered were guilty of a certain offense, or are sufficient to impeach their honesty, virtue, or reputation, or to hold the person/s up to public ridicule. Dissemination to a number of persons is not required, communication to a single individual is sufficient publication. General rule: Every defamatory imputation is presumed to be malicious, even if it be true, if no good intention or justifiable motive for making it is shown. Exceptions: 1. A private communication made by any person to another in the performance of any legal, moral or social duty; and 2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other official proceedings which are not of confidential nature, or of any statement, report, or speech delivered in said proceedings or of any other act performed by public officers in the exercise of their functions. It is not sufficient that the offended party recognized himself as the person attacked or defamed, it must be shown that at least a third person could identify him as the object of the libelous publication. In order to escape liability, the defendant may claim that the statements made are privileged. 1735

389

An invasion of the interest in reputation and good name, by communication to others which tends to diminish the esteem in which the plaintiff is held, or to excite adverse feelings or opinion against him.1737 (1) Defenses (a) Absence of elements Absence of malice1738 signifies good faith on the part of the defendant; good faith may even be based on mistake of law. (b) Privilege Two kinds: 1. Absolutely privilege – Those which are not actionable even if the author acted in bad faith. 2. Qualifiedly privilege – not actionable unless found to have been made without good intention or justifiable motive. h. Fraud or Misrepresentation1739 Elements of deceit: 1.The defendant must have made false representation to the plaintiff 2. The representation must be one of fact 3. The defendant must know that the representation is false or be reckless about whether it is false. 4. The defendant must have acted on the false representation 5. The defendant must have intended that the false representation should be acted on 6. The plaintiff must have suffered damage as a result of acting on the false representation Half-truths are likewise included; it is actionable if the withholding of that which is not stated makes that which is stated absolutely false. Misrepresentation upon a mere matter of opinion is not an actionable deceit. i. Seduction Seduction, by itself, is an act contrary to morals, good customs and public policy. 1737

Includes the crime of libel and slander. RPC considers the statement defamatory if it is an imputation of circumstance tending to cause the dishonor, discredit or contempt of natural or juridical person or to blacken the memory of one who is dead. 1738 Presence of probable cause signifies absence of malice. 1739 formerly deceit

390

The defendant is liable if he employed deceit, enticement, superior power or abuse of confidence in successfully having sexual intercourse with another even if he satisfied his lust without promising to marry the offended party. gender.

It may not even matter that the plaintiff and the defendant are of the same j. Unjust Dismissal

The right of the employer to dismiss an employee should not be confused with the manner in which the right is exercised and the effects flowing therefrom; If the dismissal was done anti-socially and oppressively, the employer should be deemed to have violated Article 1701 of the Civil Code1740 and Article 211741 NCC. An employer may be held liable for damages if the manner of dismissing is contrary to morals good customs and public policy.1742 C. Interference with relations 1. General a. Concept b. Kinds 2. Family Relations a. Alienation of affection Consists of depriving one spouse of the affection, society, companionship and comfort of the other The gist is an interference with one spouse’s mental attitude toward the other and the conjugal kindness of marital relations resulting in some actual conduct which materially affects it.

b. Loss of consortium The loss of conjugal fellowship and the impairment or destruction of sexual life. 1740

which prohibits acts of oppression by either capital or labor against the other supra 1742 Example: False imputation of misdeed to justify dismissal or any similar manner of dismissal which is done abusively. 1741

391

c. Criminal conversation (Adultery) Adultery is committed by the married woman who lies with a man not her husband, and by him who lies with her knowing that she is married, although the marriage be afterwards declared void. 3. Social Relations a. Meddling with or disturbing family relations Meddling with or disturbing the private life or family relations of another" and "similar acts", "though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief.1743 b. Intriguing to cause another to be alienated from his friends1744 4. Economic Relations a. Interference with contractual relations The existence of a contract is necessary and the breach must occur because of the alleged act of interference; No action can be maintained if the contract is void.1745 b. Unfair competition Unfair Competition in agricultural, commercial, or industrial enterprises, or in labor, through the use of force, intimidation , deceit, machination or any unjust or oppressive or highhanded method shall give rise to a right of action by a person who thereby suffers damage.1746 5. Political Relations 1743

See Art. 26 ibid 1745 Malice is not essential. Rule under Article 2201 and 2202 Civil Code 1) If in bad faith: defendant is liable for all natural and probable consequences of his act or omission, whether the same is foreseen or unforeseen. 2) If in good faith: defendant is liable only for consequences that can be foreseen 1746 Article 27 For a defendant to be liable, the plaintiff must show that the former’s conduct was purely malicious and served no legitimate purpose, or that any trade or competitive motive was absent. Cases included: a. passing off and disparagement of products b. interference c. misappropriation d. monopolies and predatory pricing 1744

392

a. Violation of right to suffrage1747 b. Violation of other political rights Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: (1) Freedom of religion; (2) Freedom of speech; (3) Freedom to write for the press or to maintain a periodical publication; (4) Freedom from arbitrary or illegal detention; (5) Freedom of suffrage; (6) The right against deprivation of property without due process of law; (7) The right to a just compensation when private property is taken for public use; (8) The right to the equal protection of the laws; (9) The right to be secure in one's person, house, papers, and effects against unreasonable searches and seizures; (10) The liberty of abode and of changing the same; (11) The privacy of communication and correspondence; (12) The right to become a member of associations or societies for purposes not contrary to law; (13) The right to take part in a peaceable assembly to petition the Government for redress of grievances; (14) The right to be free from involuntary servitude in any form; (15) The right of the accused against excessive bail; (16) The right of the accused to be heard by himself and counsel, to be informed of the nature and cause of the accusation against him, to have a speedy and public trial, to meet the witnesses face to face, and to have compulsory process to secure the attendance of witness in his behalf; (17) Freedom from being compelled to be a witness against one's self, or from being forced to confess guilt, or from being induced by a promise of immunity or reward to make such confession, except when the person confessing becomes a State witness; (18) Freedom from excessive fines, or cruel and unusual punishment, unless the same is imposed or inflicted in accordance with a statute which has not been judicially declared unconstitutional; and (19) Freedom of access to the courts. In any of the cases referred to in this article, whether or not the defendant's act or omission constitutes a criminal offense, the aggrieved party has a right to commence an entirely separate and distinct civil action for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be instituted), and may be proved by a preponderance of evidence. 1747

see b.

393

The indemnity shall include moral damages. Exemplary damages may also be adjudicated. The responsibility herein set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal Code or other penal statute 6. Defenses a. Absence of element Defendant may not avail of any of the defenses if there is an absence of element. b. Privilege 1. Consent Plaintiff gives permission, express or implied, that what would otherwise be tortious is instead privileged. 2. Self-defense and defense of others Reasonable force can be used where one reasonably believes that such force is necessary to protect oneself or a third party from immediate harm1748. 3. Necessity Allows the defendant to interfere with the property interestsof an innocent party in order to avoid a greater injury. 4. Defense of property An individual is privileged to use reasonable force to prevent a tort against her real or personal property. 5. Authority of Law Police, military, prison officials , regulatory inspectors, mental health workers, etc. engaging inconduct that otherwise would be tortuous.

c. Prescription The following actions must be instituted within four years: 1748

threatened battery

394

(1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict; However, when the action arises from or out of any act, activity, or conduct of any public officer involving the exercise of powers or authority arising from Martial Law including the arrest, detention and/or trial of the plaintiff, the same must be brought within one (1) year.1749 d. Waiver A waiver, to be valid and effective, must in the first place be couched in clear and unequivocal terms which leave no doubt as to the intention of a person to give up a right or benefit which legally pertains to him. A waiver may not casually be attributed to a person when the terms thereof do not explicitly and clearly evidence an intent to abandon a right vested in such person. For a waiver to be valid and effective, it must not be contrary to law, morals, public policy or good customs. believe this purported waiver is offensive to public policy because it dilutes the degree of care required of common carriers e. Force majeure GENERAL RULE:

It is a complete defense and a person is not liable if the cause of the damage is a fortuitous event. EXCEPTION:

It is merely a partial defense and the courts may mitigate the damages if the loss would have resulted in any event.1750 Requisites of a fortuitous event, as a defense, are: 1.The event must beunforeseen , or if foreseen,inevitable ; 2.There must be no concurrent negligence on the part of the offended party. 1749

Art. 1146 (As amended by PD No. 1755, Dec. 24, 1980) The four-year prescriptive period is reckoned from the date when the tortious act was committed. But, according to the DISCOVERY RULE: if the injury is discovered after the four-year period, the reckoning point is the date of discovery and not the date of commission of the act 1750 Art. 2215(4) No person shall be responsible for those events which cannot be foreseen, or which through foreseen were inevitable. Exception: assumption of risk

395

VIII. Negligence A. Concept Involve voluntary acts or omissions which result in injury to others without intending to cause the same or because the actor fails to exercise due care in performing such acts or omissions. The omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do.1751 B. Good Father of a Family or Reasonably Prudent Man The only standard of conduct used in the Philippines1752 A reasonable man is deemed to have knowledge of the facts that a man should be expected to know based on ordinary human experience. C. Standard of Care 1. NCC, Art. 1173 The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required.

2. Emergency Rule1753 1751

Philippine Bank of Commerce v. CA, 336 Phil. 667, 676 (1997) Art. 1173 1753 Applicable only to situations that are sudden and unexpected such as to deprive actor of all opportunity for deliberation But action must still be judged by the standard of the ordinary prudent man 1752

396

One who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence, if he fails to adopt what subsequently and upon reflection may appear to have been a better method, unless the emergency in which he finds himself is brought about by his own negligence. D. Unreasonable risk of Harm The risk is unreasonable...if the risk is of such magnitudeas to outweigh what the law regards as the utility of the act... E. Evidence The quantum of proof required is preponderance of evidence.1754 F. Presumption of Negligence 1. Legal Provisions In motor vehicle mishaps, the owner is presumed negligent if he was in the vehicle and he could have used due diligence to prevent the misfortune. It is disputably presumed that a driver was negligent if he had been found guilty of reckless driving or violating traffic regulations at least twice for the next preceding two months.1755 The driver of a motor vehicle is presumed negligent if at the time of the mishap, he was violating any traffic regulation.1756 Prima facie presumption of negligence of the defendant arises if death or injury results from his possession of dangerous weapons or substance except when such possession or use is indispensable to his occupation or business.1757 Presumption of negligence of the common carrier arises in case of loss, destruction or deterioration of the goods, or in case of death or injury of passengers except upon proof of exercise of extraordinary diligence. Absence of foreseeability An individual will nevertheless be subject to liability if the emergency was brought about by his own negligence (Valenzuela v. CA, 253 SCRA 303) 1754 Rule 133 Revised Rules of Court Exceptions: When the rules or the law provides for cases when negligence is presumed. A. Presumptions of Negligence B. Res Ipsa Loquitur 1755 Art. 2184 1756 Art. 2185 1757 Art. 2188

397

2. Res ipsa loquitur1758 “The thing or transaction speaks for itself.” It is a rule of evidence peculiar to the law of negligence which recognizes that prima facie negligence may be established in the absence of direct proof, and furnishes a substitute for specific proof of negligence. G. Defenses 1. Complete a. Absence of element (1) Due diligence Diligence required by law/contract/depends on circumstances of persons, places, things (2) Acts of public officers In the lawful exercise of their functions b. Accident or fortuitous event It is a complete defense and a person is not liable if the cause of the damage is a fortuitous event. It is merely a partial defense and the courts may mitigate the damages if the loss would have resulted in any event1759 c. Damnumabsqueinjuria1760

1758

Requisites: 1. The accident was of a kind which ordinarily does not occur in the absence of someone’s negligence; 2. The instrumentality which caused the injury was under the exclusive control and management of the person charged with negligence; and 3. The injury suffered must not have been due to any voluntary action or contribution on the part of the person injured; absence of explanation by the defendant. The doctrine is not applicable if there is direct proof of absence or presence of negligence. (S.D. Martinez, et al vs. William Van Buskirk) 1759 Art. 2215(4) A person may still be liable for a fortuitous event if such person made an assumption of risk 1760 Literal translation: Damage without injury Consequences must be borne by the injured alone

398

A principle that involves damage without injury, therefore no liability is incurred; there is no legal injury. d. Authority of law By specific provision of law. e. Assumption of risk1761 Volenti non fit injuria: One is not legally injured if he has consented to the act complained of or was willing that it should occur. There is assumption of risk if theplaintiff in advance has expresslywaived his right to recover damages for the negligent act of the defendant.1762 f. Last clear chance1763 g. Prescription The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment1764 The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict; However, when the action arises from or out of any act, activity, or conduct of any public officer involving the exercise of powers or authority arising from Martial Law

1761

Doctrine of Assumption of Risk Intentional exposure to a known danger. One who voluntarily assumed the risk of an injury from a known danger cannot recover in an action for negligence or an injury is incurred. Plaintiff’s acceptance of risk (by law/contract/nature of obligation) has erased defendant’s duty so that his negligence is not a legal wrong. Applies to all known danger. 1762 A person cannot contract away his right to recover damages resulting from negligence; the same is contrary to public policy (Pleasantville Dev't Corp vs CA ,253 SCRA 10) 1763 supra 1764 Art. 1144

399

including the arrest, detention and/or trial of the plaintiff, the same must be brought within one (1) year.1765 The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall be counted from the day they may be brought.1766 h. Waiver A person cannot contract away his right to recover damages resulting from negligence. Such waiver is contrary to public policy and cannot be allowed. However, the waiver contemplated by this prohibition is the waiver of the right to recover before the negligent act was committed. If waiver was made after the cause of action accrued, the waiver is valid and may be construed as a condonation of the obligation. i.

Double recovery

Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for the same act or omission of the defendant.1767 IX. Special Liability in Particular Activities A. General 1. Concept. B. Products Liability1768 1. Manufacturers or Processors a. Elements Defects resulting from design, manufacture, construction, assembly and erection, formulas and handling and making up, presentation or packing of their products, as well as for the insufficient or inadequate information on the use and hazards thereof Requisites: 1765

Art. 1146 Art. 1150 1767 Art. 2177 1768 law which governs the liability of manufacturers and sellers for damages resulting from defective products Based on fraud, warranty, negligence or strict liability 1766

400

1) 2) 3)

The plaintiff should allege and prove that: The product was defective; The product was manufactured by the defendant; The defective product was the cause of his injury. b. Consumer Act1769

Any Filipino or foreign manufacturer, producer, and any importer, shall be liable for redress, independently of fault, for damages caused to consumers by defects resulting from design, manufacture, construction, assembly and erection, formulas and handling and making up, presentation or packing of their products, as well as for the insufficient or inadequate information on the use and hazards thereof. A product is defective when it does not offer the safety rightfully expected of it, taking relevant circumstances into consideration, including but not limited to: a) presentation of product; b) use and hazards reasonably expected of it; c) the time it was put into circulation. A product is not considered defective because another better quality product has been placed in the market. The manufacturer, builder, producer or importer shall not be held liable when it evidences: a) that it did not place the product on the market; b) that although it did place the product on the market such product has no defect; c) that the consumer or a third party is solely at fault.1770 The tradesman/seller is likewise liable, pursuant to the preceding article when; a) it is not possible to identify the manufacturer, builder, producer or importer. b) the product is supplied, without clear identification of the manufacturer, producer, builder or importer; c) he does not adequately preserve perishable goods. The party making payment to the damaged party may exercise the right to recover a part of the whole of the payment made against the other responsible parties, in accordance with their part or responsibility in the cause of the damage effected.1771 The service supplier is liable for redress, independently of fault, for damages caused to consumers by defects relating to the rendering of the services, as well as for insufficient or inadequate information on the fruition and hazards thereof. 1769

RA 7394 Art. 97 1771 Art. 98 1770

401

The service is defective when it does not provide the safety the consumer may rightfully expect of it, taking the relevant circumstances into consideration, including but not limited to: a) the manner in which it is provided; b) the result of hazards which may reasonably be expected of it; c) the time when it was provided. A service is not considered defective because of the use or introduction of new techniques. The supplier of the services shall not be held liable when it is proven: a) that there is no defect in the service rendered; b) that the consumer or third party is solely at fault.1772 The suppliers of durable or nondurable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with the information provided on the container, packaging, labels or publicity messages/advertisement, with due regard to the variations resulting from their nature, the consumer being able to demand replacement to the imperfect parts. If the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his option: a) the replacement of the product by another of the same kind, in a perfect state of use; b) the immediate reimbursement of the amount paid, with monetary updating, without prejudice to any losses and damages; c) a proportionate price reduction. The parties may agree to reduce or increase the term specified in the immediately preceding paragraph; but such shall not be less than seven (7) nor more than one hundred and eighty (180) days. The consumer may make immediate use of the alternatives under the second paragraph of this Article when by virtue of the extent of the imperfection, the replacement of the imperfect parts may jeopardize the product quality or characteristics, thus decreasing its value. If the consumer opts for the alternative under sub-paragraph (a) of the second paragraph of this Article, and replacement of the product is not possible, it may be replaced by another of a different kind, mark or model: Provided, That any difference in price may result thereof shall be supplemented or reimbursed by the party which caused the damage, 1772

Art. 99

402

without prejudice to the provisions of the second, third and fourth paragraphs of this Article.1773 Suppliers are jointly liable for imperfections in the quantity of the product when, in due regard for variations inherent thereto, their net content is less than that indicated on the container, packaging, labeling or advertisement, the consumer having powers to demand, alternatively, at his own option: a) the proportionate price b) the supplementing of weight or measure differential; c) the replacement of the product by another of the same kind, mark or model, without said imperfections; d) the immediate reimbursement of the amount paid, with monetary updating without prejudice to losses and damages if any. The provisions of the fifth paragraph of Article 99 shall apply to this Article. The immediate supplier shall be liable if the instrument used for weighing or measuring is not gauged in accordance with official standards.1774 The service supplier is liable for any quality imperfections that render the services improper for consumption or decrease their value, and for those resulting from inconsistency with the information contained in the offer or advertisement, the consumer being entitled to demand alternatively at his option: a) the performance of the services, without any additional cost and when applicable; b) the immediate reimbursement of the amount paid, with monetary updating without prejudice to losses and damages, if any; c) a proportionate price reduction. Reperformance of services may be entrusted to duly qualified third parties, at the supplier's risk and cost. Improper services are those which prove to be inadequate for purposes reasonably expected of them and those that fail to meet the provisions of this Act regulating service rendering.1775 When services are provided for the repair of any product, the supplier shall be considered implicitly bound to use adequate, new, original replacement parts, or those that maintain the manufacturer's technical specifications unless, otherwise authorized, as regards to the latter by the consumer.1776

1773

Art. 100 Art. 101 1775 Art. 102 1776 Art. 103 1774

403

The supplier's ignorance of the quality imperfections due to inadequacy of the products and services does not exempt him from any liability.1777 The legal guarantee of product or service adequacy does not require an express instrument or contractual exoneration of the supplier being forbidden.1778 The stipulation in a contract of a clause preventing, exonerating or reducing the obligation to indemnify for damages effected, as provided for in this and in the preceding Articles, is hereby prohibited, if there is more than one person responsible for the cause of the damage, they shall be jointly liable for the redress established in the pertinent provisions of this Act. However, if the damage is caused by a component or part incorporated in the product or service, its manufacturer, builder or importer and the person who incorporated the component or part are jointly liable.1779 Any person who shall violate any provision of this Chapter or its implementing rules and regulations with respect to any consumer product which is not food, cosmetic, or hazardous substance shall upon conviction, be subject to a fine of not less than Five thousand pesos (P5,000.00) and by imprisonment of not more than one (1) year or both upon the discretion of the court. In case of juridical persons, the penalty shall be imposed upon its president, manager or head. If the offender is an alien, he shall, after payment of fine and service of sentence, be deported without further deportation proceedings.1780 C. Nuisance1781 Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefor in the same manner as the one who created it.1782 The abatement of a nuisance does not preclude the right of any person injured to recover damages for its past existence.1783 Lapse of time cannot legalize any nuisance, whether public or private.1784 The remedies against a public nuisance are: (1) A prosecution under the Penal Code or any local ordinance: or (2) A civil action; or 1777

Art. 104 Art. 105 1779 Art. 106 1780 Art. 107 1781 For definition, see Art. 694, supra 1782 Art. 696 1783 Art. 697 1784 Art. 698 1778

404

(3) Abatement, without judicial proceedings.1785 The district health officer shall take care that one or all of the remedies against a public nuisance are availed of.1786 If a civil action is brought by reason of the maintenance of a public nuisance, such action shall be commenced by the city or municipal mayor.1787 The district health officer shall determine whether or not abatement, without judicial proceedings, is the best remedy against a public nuisance.1788 A private person may file an action on account of a public nuisance, if it is specially injurious to himself. 1789 Any private person may abate a public nuisance which is specially injurious to him by removing, or if necessary, by destroying the thing which constitutes the same, without committing a breach of the peace, or doing unnecessary injury. But it is necessary: (1) That demand be first made upon the owner or possessor of the property to abate the nuisance; (2) That such demand has been rejected; (3) That the abatement be approved by the district health officer and executed with the assistance of the local police; and (4) That the value of the destruction does not exceed three thousand pesos.1790 The remedies against a private nuisance are: (1) A civil action; or (2) Abatement, without judicial proceedings.1791 Any person injured by a private nuisance may abate it by removing, or if necessary, by destroying the thing which constitutes the nuisance, without committing a breach of the peace or doing unnecessary injury. However, it is indispensable that the procedure for extrajudicial abatement of a public nuisance by a private person be followed.1792 A private person or a public official extrajudicially abating a nuisance shall be liable for damages: 1785

Art. 699 Art. 700 1787 Art. 701 1788 Art. 702 1789 Art. 703 1790 Art. 704 1791 Art. 705 1792 Art. 706 1786

405

(1) If he causes unnecessary injury; or (2) If an alleged nuisance is later declared by the courts to be not a real nuisance.1793 1. Nuisance Per Se and Nuisance Per Accidence Per se – nuisance at all times and under all circumstances regardless of location and surrounding. Per accidens – nuisance by reason of circumstances, location, or surroundings. 2. Public Nuisance and Private Nuisance Public – affects the community or a considerable number of persons. Private – affects only a person or a small number of persons. 3. Attractive Nuisance Doctrine of Attractive Nuisance: One who maintains on his premises dangerous instrumentalities or appliances of a character likely to attract children in play and who fails to exercise ordinary care to prevent children from playing therewith or resorting thereto is liable to a child of tender years who is injured thereby, even if the child is technically a trespasser in the premises. D. Violation of Constitutional Rights1794 1. Violation of Civil Liberties 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.1795 E. Violation of Rights Committed by Public Officers

1793

Art. 707 It is not necessary that the defendant should have acted with malice/bad faith to be liable. 1795 Art. 26 1794

406

Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: (1) Freedom of religion; (2) Freedom of speech; (3) Freedom to write for the press or to maintain a periodical publication; (4) Freedom from arbitrary or illegal detention; (5) Freedom of suffrage; (6) The right against deprivation of property without due process of law; (7) The right to a just compensation when private property is taken for public use; (8) The right to the equal protection of the laws; (9) The right to be secure in one's person, house, papers, and effects against unreasonable searches and seizures; (10) The liberty of abode and of changing the same; (11) The privacy of communication and correspondence; (12) The right to become a member of associations or societies for purposes not contrary to law; (13) The right to take part in a peaceable assembly to petition the Government for redress of grievances; (14) The right to be a free from involuntary servitude in any form; (15) The right of the accused against excessive bail; (16) The right of the accused to be heard by himself and counsel, to be informed of the nature and cause of the accusation against him, to have a speedy and public trial, to meet the witnesses face to face, and to have compulsory process to secure the attendance of witness in his behalf; (17) Freedom from being compelled to be a witness against one's self, or from being forced to confess guilt, or from being induced by a promise of immunity or reward to make such confession, except when the person confessing becomes a State witness; (18) Freedom from excessive fines, or cruel and unusual punishment, unless the same is imposed or inflicted in accordance with a statute which has not been judicially declared unconstitutional; and (19) Freedom of access to the courts. In any of the cases referred to in this article, whether or not the defendant's act or omission constitutes a criminal offense, the aggrieved party has a right to commence an entirely separate and distinct civil action for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be instituted), and may be proved by a preponderance of evidence. The indemnity shall include moral damages. Exemplary damages may also be adjudicated. The responsibility herein set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal Code or other penal statute.1796 1796

Art. 32

407

F. Provinces, Cities and Municipalities Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings and other public works under their control and supervision.1797 G. Owner of Motor Vehicle In motor vehicle mishap, 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. It is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months. If the owner was not in the motor vehicle, the provisions of Article 2180 are applicable.1798 H. Proprietor of Building or Structure or Thing 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.1799 Proprietors shall also be responsible for damages caused: (1) By the explosion of machinery which has not been taken cared of with due diligence, and the inflammation of explosive substances which have not been kept in a safe and adequate place; (2) By excessive smoke, which may be harmful to persons or property; (3) By the falling of trees situated at or near highways or lanes, if not caused by force majeure; (4) By emanations from tubes, canals, sewers or deposits of infectious matter, constructed without precautions suitable to the place.1800

1797

Art. 2189 Art. 2184 1799 Art. 2190 Third persons who suffered damages may proceed only against the engineer or architect or contractor if the damage referred to in Articles 2190 and 2191should be a result of any defect in construction. Nevertheless, actions for damages can still be maintained under Article 2176 for damages resulting from proprietor’s failure to exercise due care in the maintenance of his building and that he used his property in such a way that he injured the property of another. 1800 Art. 2191 1798

408

If damages referred to in Articles 2190 and 2191 1801 should be the result of any defect in the construction mentioned in Article 1723,1802 the third person suffering damages may proceed only against the engineer or architect or contractor in accordance with said article, within the period therein fixed.1803 I. Head of Family The head of a family that lives in a building or a part thereof, is responsible for damages caused by things thrown or falling from the same.1804 X. Strict Liability1805 A. Animals 1. Possessor and User of an Animal GENERAL RULE: The possessor of an animal or whoever may make use of the

same is responsible for the damages which it may cause although it may escape or be lost.

EXCEPTION: When the damage was caused by force majeure or by the person who suffered the damage.1806

B. Nuisance 1. Classes