Memory Aid in Civil Law With 2017 Updates

Memory aid in Civil Law with 2017 updates

PERSONS AND FAMILY RELATIONS I. NEW CIVIL CODE  took effect on August 30, 1950 Effectivity of laws GENERAL RULE: Laws take effect 15 days following the completion of its publication EXCEPTION: Unless otherwise provided by the law. This refers to the 15 day period and NOT to the requirement of publication. (Tanada vs. Tuvera) NOTE: 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) Ignorance of the law excuses no one  considered a CONCLUSIVE presumption and applies only to mandatory and prohibitory laws. (Consunji vs. CA)

Non-retroactivity of laws GENERAL RULE: Laws have no retroactive effect. EXCEPTIONS: (UCIPELT) 1. Unless the law otherwise provides 2. Curative statutes 3. Interpretative statutes 4. Procedural/remedial 5. Emergency laws 6. Laws creating new rights 7. Tax laws 8. Penal Laws favorable to the accused EXCEPTIONS TO THE EXCEPTIONS: 1. Ex post facto laws 2. Laws that impair obligation of contracts Acts Contrary To Law GENERAL RULE: Acts which are contrary to mandatory or prohibitory laws are void. EXCEPTIONS: 1. When the law itself authorized its validity (ex. lotto, sweepstakes) 2. When the law makes the act only voidable and not void (ex. voidable contracts where consent is vitiated) 3. When the law makes the act valid but punishes the violator (ex. marriage solemnized by a person without legal authority) Waiver of rights (Art. 6) Requisites: (EKI) 1. Existence of a right 2. Knowledge of the existence of a right 3. Intention to relinquish the right GENERAL RULE: Rights can be waived. EXCEPTIONS: 1. If the waiver is contrary to law, public order, public policy, morals or good customs (LPPMG) 2. If the waiver is prejudicial to a third party with a right recognized by law. NOTE: A stipulation requiring the recipient of a scholarship grant to waive his right to transfer to another school, unless he refunds the equivalent of his scholarship in cash is null and void. The school concerned obviously understands scholarship awards as a business scheme designed to increase the business potential of an educational institution. Thus, conceived, it is not only inconsistent with sound policy, but also with good morals. (Cui vs. Arellano University) Laws applicable (Art. 15) 1. Penal laws and laws of public security  territoriality rule governs  laws of the Philippines will govern upon ALL those who live or sojourn in it 2. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons  nationality rule applies  laws of the Philippines will govern its citizens, regardless of their residence EXCEPTION: When 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

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Memory aid in Civil Law with 2015 updates Filipino spouse shall likewise have the capacity to remarry under Philippine law. (Article 26(2) Family Code) NOTE: domiciliary rule supplants the nationality rule in cases involving stateless persons 3.

Laws on property  lex rei sitae applies  real property, as well as personal property is subject to the law of the country where it is situated

4.

Laws on forms and solemnities  lex loci celebrationis applies

Rules on Personal Law DOMICILIARY RULE Basis for determining personal law of an individual is his domicile

NATIONALITY RULE basis for determining personal law of an individual is his citizenship

LEX NATIONALII

LEX REI SITAE

Art. 15, CC Citizenship is the basis for determining the personal law applicable

Art. 16, CC Law of the place where the property is situated is the basis for determining law applicable

LEX LOCI CELEBRATIONIS Art. 17, CC Law of the place where the contract was executed is the basis for determining law applicable

Covers family rights & duties, status, condition & legal capacity

Covers both real personal property

&

Covers only the forms & solemnities (extrinsic validity)

Exception: Art. 26, par. 2 of Family Code

Exceptions: (CIAO) 1. Capacity to succeed 2. Intrinsic validity of the will 3. Amount of successional rights 4. Order of succession

Exceptions: 1. Art. 26, par. 1 of Family Code (marriage involving Filipinos solemnized abroad, when such are void in the Philippines) 2. Intrinsic validity of contracts

Renvoi Doctrine  Where the conflict rules of the forum refer to a foreign law, and the latter refers it back to the internal law, the latter (law of the forum) shall apply. NOTE: If the foreign law refers it to a third country, the said country’s laws shall govern, and is referred to as the transmission theory. Doctrine of Processual Presumption  The foreign law, whenever applicable, should be proved by the proponent thereof; otherwise, such law shall be presumed to be exactly the same as the law of the forum. Rule on Prohibitive Laws GENERAL RULE: Prohibitive laws concerning persons, their acts or property and laws which have for their object public order, public policy or good customs are not rendered ineffective by laws, judgments promulgated or conventions agreed upon in foreign country. EXCEPTION: Art. 26, par. 2 Family Code  Example: Divorce law

Human Relations 

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. (Art. 19 of NCC)

NOTE: The elements of an abuse of right under Art. 19 are: 1. There is a legal right; 2. Which is exercised in bad faith; 3. For the sole intent of prejudicing or injuring another. (Albenson Ent. Corp. vs. CA)

Memory aid in Civil Law with 2017 updates The SC in Velayo vs. Shell held the defendant liable under Art. 19 for disposing of its property (a perfectly legal act) in order to escape the reach of a creditor. Likewise, in Globe Mackay Cable and Radio Corp. vs. CA, the employer corporation was held liable for damages for an abusive manner in dismissing an employee, as well as for the inhuman treatment the latter got from them.  

Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same. (Art. 20 of NCC) Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. (ART. 21 of NCC)

NOTE: Art. 21 deals with acts contra bonus mores, and has the following elements: 1. There is an act which is legal; 2. But which is contrary to morals, customs, public order; 3. and it is done with intent to injure. Arts. 19, 20 and 21 are related to each other and, under these articles, an act which causes injury to another may be made the basis for an award of damages. There is a common element under Arts. 19 and 21, and that is, the act must be done intentional. However, Art. 20 does not distinguish, the act may be done either “willfully” or “negligently.” (Albenson Ent. Corp. vs. CA)  The SC in Pe vs. Pe, applying Art. 21 ruled that a married man had seduced a girl through an ingenious and tricky scheme, i.e. on the pretext of teaching her how to pray the rosary, to the extent of making her fall in love with him. Verily, he has committed an injury to the girl’s family in a manner contrary to morals, good customs and public policy. However, in Tanjanco vs. CA, the SC denied the award of moral damages based on the fact that for one year, from 1958-1959, the plaintiff, a woman of adult age, maintained intimate sexual relations with defendant, with repeated acts of intercourse. Such conduct is incompatible with the idea of seduction. Plainly, there is here voluntariness and mutual passion; for had the plaintiff been deceived, had she surrendered exclusively because of the deceit, artful persuasions and wiles of defendant, she would not have again yielded to his embraces, much less for one year without exacting early fulfillment of the alleged promises of marriage and would have cut short all sexual relations upon finding that defendant did not intend to fulfill his promises. Hence, no case is made under Art. 21 of Civil Code.  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)

 The obligation of cohabitation of husband and wife is not enforceable by contempt proceedings. In private relations, physical coercion is barred under the the old maxim – “Nemo potest preciso cogi ad factum.” However, the refusal of the wife to perform her wifely duties, her denial of consortium and her desertion of her husband would certainly constitute a willful infliction of injury upon her husband’s feelings in a manner which is contrary to morals, good customs and public policy for which Arts. 21 and 2210 (10) of the CC authorize an award for moral damages. (Tenchavez vs. Escano) Prejudicial Question GENERAL RULE: If both criminal and civil cases are filed in court, the criminal case takes precedence. EXCEPTION: When there is a prejudicial question or a question that arises in a case, the resolution of which is a logical antecedent of the issue involved herein, and the cognizance of which pertains to another tribunal.  Requisites (Sec. 7, Rule 111, Rules of Court) a. Previously instituted civil action involves an issue similar or intimately related to the issue raised in the subsequent criminal action, and b. The resolution of such issue determines whether or not the criminal action may proceed NOTE: The Civil Code has suppletory application in matters governed by special laws

PERSONS CIVIL PERSONALITY - aptitude of being the subject, active or passive, of rights and obligations JURIDICAL CAPACITY Fitness to be the subject of legal relations

CAPACITY TO ACT Power to do act with legal effects

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Passive Inherent Lost only through death Can exist without capacity to act

Active Merely acquired Lost through death and other causes Cannot exist without juridical capacity

Cannot be limited or restricted

Can be restricted, modified or limited (by law or public policy such as minority, bigamous marriage, incesstuous marriage, et al

THEORIES ON CAPACITY TO ACT THEORY OF GENERAL CAPACITIES Applies to natural persons

THEORY OF SPECIAL CAPACITIES Applies to juridical persons

One has the ability to do all things with legal effects except only in those specific circum-stances where the capacity to act is restrained

This limits the power of juridical persons only to those that are expressly conferred upon them or those which can be implied therefrom or incidental thereto

Natural Persons GENERAL RULE: Birth determines personality. EXCEPTION: The law considers the conceived child as born for all purposes favorable to it if born alive. Therefore, the child has a presumed personality, which has two characteristics: 1. limited; and 2. provisional/conditional (Quimiguing vs. Icao) NOTES:  The presumption as to the child’s personality applies only in cases beneficial to the child.  The concept of provisional personality CANNOT be invoked to obtain damages for and in behalf of an aborted child. (Geluz vs. CA)  Life is not synonymous with civil personality. The acquisition of civil personality is not required befor a person may be declared dead. Death is merely the cessation of life. (Continental Steel vs. Ortillano) When is a Child Considered Born? GENERAL RULE: For civil purposes, the fetus is considered born if it is alive at the time it is completely delivered from the mother’s womb. EXCEPTION: If the fetus had an intrauterine life of less than 7 months, it is not deemed born if it dies within 24 hours after its complete delivery from the maternal womb. Presumption of survivorship  Two or more persons, called to succeed each other, shall be presumed to have died at the same time, subject to the following conditions: 1. parties are heirs to one another 2. no proof as to who died first 3. with doubt as to who died first NOTE: Article 43 applies when the parties are called to succeed each other. But if the parties are not called to succeed each other, Rule 131, Sec. 3 (jj) of the Rules of Court applies. Both are to be applied only in the absence of facts. Juridical persons WHO: a. State and its political subdivisions b. Corporations, institutions and entities for public purpose or interest c. Corporations, partnership and associations for private interest HOW CREATED: For (a) and (b), by the laws creating or recognizing them; private corporations are governed by BP 68 and partnership and associations are governed by the provisions of this Code concerning partnerships. NOTE: The Roman Catholic Church is a corporation by prescription, with acknowledged juridical personality, inasmuch as it is an institution which antedated, by almost a thousand years, any other personality in Europe, and which existed when Grecian eloquence still flourished in Antioch and when idols where still worshipped in the temple of Mecca. (Barlin vs. Ramirez) The estate of a deceased person should be considered an artificial or juridical person for the purposes of the settlement and distribution of his estate which, of course, include the exercise during the

Memory aid in Civil Law with 2017 updates judicial administration thereof of those rights and the fulfillment of those obligations of his which survived after his death. (Limjoco vs. Intestate Estate of Pedro Fragrante) Cessation of Civil Personality 1. If natural persons: by death 2. If juridical persons: by termination of existence CITIZENSHIP AND DOMICILE RESIDENCE Used to indicate a PLACE OF ABODE, whether permanent or temporary

DOMICILE denotes a FIXED PERMANENT RESIDENCE, which when absent, one has the intention of returning

There can be several places of residence

There can only be ONE place of domicile

Elements of Domicile a. Physical presence in a fixed place b. Intention to remain permanently (animus manendi) Kinds of Domicile 1. Domicile of origin - received by a person at birth. 2. Domicile of choice - the place freely chosen by a person sui juris. 3. Constructive domicile - assigned to a child by law at the time of his birth.

II.FAMILY CODE 

took effect August 3, 1988

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. Its nature, consequences and incidents are fixed by law and cannot be the subject of stipulation.

Essential requisites: (LC) 1. Legal capacity of the contracting parties, who must be a male and a female 2. Consent freely given in the presence of a solemnizing officer Formal requisites: (ALM) 1. Authority of the solemnizing officer 2. Valid Marriage License 3. Marriage ceremony where the contracting parties appear before the solemnizing officer, with their personal declaration that the take each other as husband and wife in the presence of not less than two witnesses of legal age Effects: 1. Absence of essential or formal requisites  the marriage is void ab initio 2. Defect in any of the essential requisites  The is marriage voidable 3. Irregularity in any of the formal requisites  Does NOT affect the validity of the marriage BUT will hold the party responsible for such irregularity liable Persons Authorized To Solemnize Marriages: (PMJCCC) 1. priests, rabbis, and ministers of any church 2. municipal and city mayors 3. members of the judiciary 4. ship captains or air plane chiefs (only in articulo mortis) 5. commanders of military unit, in the absence of chaplain (only in articulo mortis) 6. consul generals, consuls or vice-consuls Note: Mayors may solemnize marriage per LGC Authorized Venues Of Marriage GENERAL RULE: Must be solemnized publicly, and not elsewhere, in the: 1. chambers of the judge or in open court 2. church, chapel or temple 3. office of consul-general, consul or vice-consul EXCEPTIONS: 1. marriage at the point of death (articulo mortis); 2. marriage in remote places

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marriage at a house or place designated by the parties with the written request to the solemnizing officer

Marriages Exempt From License Requirement: (MOLAR) 1. among Muslims or members of ethnic cultural communities, provided such were solemnized in accordance with their customs, rites and practices 2. solemnized outside the Phil. where NO marriage license is required by the country where they were solemnized 3. of a man and a woman who have lived together as husband and wife for at least 5 years and without legal impediment to marry each other NOTE: The 5-year period should be computed on the basis of a cohabitation as husband and wife where the only missing factor is the marriage contract to validate the union. This 5-year period should be the years immediately before the day of the marriage and it should be a period of cohabitation characterized by exclusivity - meaning no third party was involved at any time within the 5 years and continuity - that is unbroken (Ninal vs. Bayadog, GR No. 133778 March 14, 2000).

4. 5.

NOTE: In the case of Manzano vs. Sanchez (G.R. No. MTJ-00-1329, March 08, 2001), the Supreme Court laid down the requisites to avail the exemption under Article 34 of the Family Code: a. The man and woman must have been living together as husband and wife for at least five years before the marriage; b. The parties must have no legal impediment to marry each other; c. The fact of absence of legal impediment between the parties must be present at the time of marriage; d. The parties must execute an affidavit stating that they have lived together for at least five years [and are without legal impediment to marry each other; and e. The solemnizing officer must execute a sworn statement that he had ascertained the qualifications of the parties and that he had found no legal impediment to their marriage in articulo mortis in remote places

NOTE: A marriage license is valid only for 120 days from date of issue, in any part of the Philippines. Foreign Marriages  Validity of marriage: GENERAL RULE: Where one or both parties to the marriage are citizens of the Philippines, the foreign marriage is valid in this country if solemnized in accordance with the laws of the country of celebration. EXCEPTIONS: Foreign marriages shall not be recognized in the Philippines if prohibited because: (MABB-PIP) 1. contracted by a national who is below 18 years of age 2. bigamous or polygamous (except as provided for in Art. 41, FC) 3. contracted through mistake of one party as to the identity of the other 4. contracted following the annulment or declaration of nullity of a previous marriage but before partition 5. void due to psychological incapacity 6. incestuous 7. void for reasons of public policy  Validity of divorce: GENERAL RULE: A divorce validly obtained abroad by the alien spouse, capacitating him/her to remarry can allow the Filipino to remarry. EXCEPTION: The rule will not apply if the divorce was obtained by the Filipino spouse. NOTE: A Filipino wife remains the lawful wife of the Filipino husband despite a decree of divorce obtained abroad by the wife. However, if the wife is already a foreigner at the time of the divorce, she ceases to be the lawful wife of the Filipino husband. This, notwithstanding, if at the time of the marriage the wife was still a Filipino, and subsequently acquires citizenship of another country, thereby rendering her to have the legal capacity to obtain a decree of divorce, the Filipino husband remains a spouse of the former. This situation is not covered by Art. 26, par.2 which requires that, at the time of the marriage, one of the parties is already an alien. VOID MARRIAGES A. Due to absence of any of the essential requisites: (BB-LAPIS) 1. contracted by any party below 18 years of age even with parental consent 2. solemnized by any person not legally authorized to perform marriages unless one or both of the parties believed in good faith that the solemnizing officer had the legal authority to do so 3. solemnized without a license except as otherwise provided 4. bigamous or polygamous marriages 5. marriages contracted through mistake of one of the parties as to the identity of the other 6. subsequent marriages that are void under Article 53 (subsequent marriages without liquidation of the CPG/ACP of former marriage and partition) of the Family Code 7. contracted by a party who at the time of the marriage was psychologically incapacitated B. Incestuous marriages, whether the relationship be legitimate or illegitimate (Article 37):

Memory aid in Civil Law with 2017 updates 1. 2.

between ascendants & descendants of any degree between brothers & sisters whether full or half-blood

C. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Those contrary to public policy (Article 38): (SCAPS-SAKA) between collateral blood relatives whether legitimate or illegitimate up to the 4th civil degree between step-parents & step children between parents-in-law & children-in-law between the adopting parent & the adopted child between the surviving spouse of the adopting parent & the adopted child between the surviving spouse of the adopted child & the adopter between an adopted child & a legitimate child of the adopter between the adopted children of the same adopter between parties where one, with the intention to marry the other, killed the latter’s spouse, or his/her spouse.

NOTE: Under the FC, the following can now marry each other: a.Brother-in-law and sister-in-law; b. Stepbrother and stepsister; c.Guardian and ward; d. Adopted and illegitimate child of the adopter; e. Parties who have been convicted of adultery or concubinage. D. 1. 2. 3.

Void subsequent marriages without judicial declaration of nullity of previous void marriage (Article 40) without judicial declaration of presumptive death of absent spouse (Article 41) where the spouse was presumed dead, and both the present spouse and would-be spouse were in bad faith in contracting marriage (Article 44)

NOTE: Where there was failure to record in the civil registry and registry of property the judgment of annulment or of absolute nullity of the marriage, partition and distribution of the property of the spouses and the delivery of the children’s presumptive legitimes it shall not affect third persons (Articles 52-53). NOTE: Even if a marriage is void, it must be declared void first because the parties cannot decide for themselves the invalidity of their marriage. VOID Decree of nullity Never be ratified Attacked directly or collaterally Co-ownership Always void Action for declaration of nullity does not prescribe

VOIDABLE Decree of annulment Ratified by free cohabitation Attacked directly only Conjugal Partnership Valid until annulled Action prescribes

Psychological Incapacity  no exact definition but is restricted to psychological incapacity “to comply with the essential marital obligations of marriage”  involves a senseless, protracted and constant refusal to comply with the essential marital obligations by one or both of the spouses although he, she or they are physically capable of performing such obligations (Chi Ming Tsoi vs. CA) 

Essential elements: (MAVFFCCI) a. Mental condition b. Applies to a person who is maritally contracted to another c. Marriage entered into with volition d. Failure to perform or comply with the essential obligations in marriage e. Failure to perform is chronic f. Cause is psychological in nature g. Cause is serious, with juridical antecedence and must be incurable h. Incapacity results in the failure of the marriage.

JURISPRUDENTIAL GUIDELINES: (Republic vs. Molina) 1. burden of proof belongs to the plaintiff 2. root cause of the psychological incapacity must be: a. medically or clinically identified b. alleged in the complaint c. sufficiently proven by experts d. explained in the decision 3. incapacity must be existing at the time of the celebration of marriage (juridical antecedence) 4. incapacity must be permanent or incurable 5. illness is grave enough to bring about disability to assume marital obligations 6. marital obligations refer to Art. 68-71 of FC as well as Art. 220,221 and 225 of the FC 7. interpretations of the National Appellate Matrimonial Tribunal of the Catholic Church of the Philippines while not controlling should be given great respect.

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trial court must order the prosecuting attorney or fiscal and the Solicitor General to appear for the state.

JUDICIAL OF DECLARATION OF NULLITY  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. NOTES:  For purposes of remarriage, the only legally acceptable basis for declaring a previous marriage an absolute nullity is a final judgment declaring such previous marriage void, whereas, for purposes other than remarriage, other evidence is acceptable. (Domingo vs. CA)  In a case for concubinage, the accused need not present a final judgment declaring his marriage void for he can adduce evidence in the criminal case of the nullity of his marriage other than proof of a final judgment declaring his marriage void. Hence, the pendency of the civil action for nullity of marriage does not pose a prejudicial question in a criminal case for concubinage.  Parties to the marriage should not be permitted to judge for themselves its nullity, for the same must be submitted to the judgment of the competent courts and only when the nullity of the marriage is so declared can it be held as void, and so long as there is no such declaration, the presumption is that the marriage exists for all intents and purposes. Therefore, he who cohabits with a woman not his wife, before the judicial declaration of nullity of the marriage, assumes the risk of being prosecuted for concubinage. (Beltran vs. People, June 20, 2000) BIGAMOUS MARRIAGES GENERAL RULE: A marriage contracted by any person during the subsistence of a previous valid marriage shall be null and void.(Gomez vs. Lipana) EXCEPTIONS: When the following conditions concur, the subsequent bigamous marriage shall be valid: 1. absence of the other spouse must have been for four consecutive years, or two years where there was danger of death 2. well-founded belief of the present spouse that absent spouse was already dead 3. judicial declaration of presumptive death EFFECTS OF TERMINATION OF SUBSEQUENT MARRIAGE: (ICADI) 1. Children of the subsequent marriage conceived prior to its termination shall be considered legitimate; 2. The absolute community or conjugal partnership shall be dissolved and liquidated. If either spouse acted in bad faith, his/her share in the net profits shall be forfeited: a. in favor of the common children; b. if none, in favor of the children of the guilty spouse by previous marriage; or c. in default of children, in favor of the innocent spouse; 3. Donations by reason of the marriage remain valid except if the donee contracted the marriage in bad faith; 4. The innocent spouse may revoke the designation of the spouse in bad faith as the beneficiary in any insurance policy; and 5. The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate or intestate succession. NOTE: The above effects apply in voidable bigamous marriages. Except for (1), the above effects also apply to marriages which are annulled or declared void ab initio under Art. 40 of the Code. DECLARATION OF PRESUMPTIVE DEATH  Requisites: (MR-BF) 1. That the absentee spouse has been missing for 4 consecutive years or 2 consecutive years if the disappearance occurred where there is danger of death under circumstances laid down in Art.391 of the NCC 2. The present spouse wishes to remarry; 3. The present spouse has well-founded belief that the absentee is Dead; 4. The present spouse files a summary proceeding for the declaration of presumptive death. NOTE: NO NEED FOR THE DECLARATION OF PRESUMTPIVE DEATH IF SPOUSE IS ABSENT FOR 7 OR MORE CONSECUTIVE YEARS. NOTE: The present spouse must establish that he had a well-founded belief required by law that his absent wife was already dead that would sustain the issuance of a court order declaring presumptive death. In the case of RP vs. Nolasco, The SC believed that respondent Nolasco failed to conduct a search for his missing wife with such diligence as to give rise to a “well-founded belief” that she is dead. When he arrived in San Jose, Antique after learning of his wife’s departure, instead of seeking the help of local authorities or of the British embassy, he secured another seaman’s contract and went to London, a vast city of many millions of inhabitants, to look for her there. (RP vs. Nolasco) Effect of Reappearance of Absent Spouse: GENERAL RULE: The subsequent bigamous marriage under Article 41 remains valid despite reappearance of the absentee spouse. EXCEPTION: If the reappearance was made in a sworn statement recorded in the civil registry, the subsequent marriage is “automatically terminated.” EXCEPTION TO THE EXCEPTION: If there was a previous judgment annulling or declaring the first marriage a nullity, the subsequent bigamous marriage remains valid.

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VOIDABLE MARRIAGES  Grounds: (UP-FAVS) 1. Age of the party in whose behalf it is sought to have the marriage annulled was 18 years of age or over but below 21, and the marriage was solemnized without the consent of the parents, guardian or person exercising substitute parental authority over the party, in that order, and both lived together as husband and wife; 2. Unsound mind of either party 3. Fraudulent means of obtaining consent of either party 4. Vitiated consent of either party through force, intimidation or undue influence 5. Physical incapability of either party to consummate the marriage with the other, and such incapacity continues and appears to be incurable 6. Sexually-transmissible disease of either party found to be serious and appears to be incurable NOTE: Mode of ratification for Nos. 1-4 is COHABITATION. In Nos. 5 & 6, there is no ratification to speak of since the defect is permanent. The latter can be convalidated only by prescription, i.e. 5 years from the date of marriage. Specifically, in no.5, the healthy spouse may still annul the marriage within 5yrs. after celebration. Circumstances amounting to Fraud under Article 46: (SPND) 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 a Sexually transmissible disease, regardless of its nature, existing at the time of the marriage; and 4. Concealment of Drug addiction, habitual alcoholism, homosexuality or lesbianism existing at the time of the marriage. NOTES:  Misrepresentation as to character, health, rank, fortune or chastity is not a ground for annulment.  The enumeration in Article 46 is EXCLUSIVE. (Anaya vs. Palaroan) Ground (F2I2NS) Persons Who May Sue 1.Force, Injured party intimidation, or undue influence

Prescriptive Period w/in 5 years from the time the force, intimidation, or undue influence ceased

2. Fraud

Injured party

w/in 5 years from the dis-covery of fraud

3. Impotence

Injured party

4. Insanity

(a) sane spouse who has no knowledge of the insanity (b) relatives, guardians or persons ha-ving legal charge of the insane (c) insane spouse (a) parent/ legal guardian having charge of the “noconsent” party (b) ”no consent “ party Injured party

w/in 5 years after the celebration of the marriage (a) anytime before the death of either party (b) anytime before the death of either party (c) during lucid interval or after regaining sanity

5. Non- consent

6. STD

(a) anytime before the “no consent” party reaches 21 (b) w/in 5 years after reaching 21 w/in 5 years after the celebration of the marriage

NOTE: In Nos. 1, 2, 4, and 5, when cohabitation takes place after the defect ceases to exist, the prescriptive period is rendered moot and academic. Whichever comes first may convalidate the marriage: Cohabitation or Prescription. Requisites for annulment due to Impotence under Art.45(5) (CUPIN) a.Impotence exists at the time of the celebration of the marriage b. The impotence is permanent c. incurable d. The impotence is unknown to the other spouse e.The other spouse must not also be impotent Doctrine of Triennial Cohabitation  presumption that the husband is impotent should the wife still remain a virgin after 3 years of living together with her husband. Requisites for annulment due to Disease under Article 45(6) (ICSIIF) 1. Either party is inflicted with a sexually transmissible disease (STD)

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ADDITIONAL REQUIREMENTS FOR ANNULMENT OR DECLARATION OF NULLITY 1. Prosecuting attorney or fiscal should: a. Take steps to prevent collusion between the parties b. Take care that evidence is not fabricated or suppressed 2. The following must be accomplished: a. Partition and distribution of the properties of the spouses b. Delivery of the children’s presumptive legitimes c. Recording of the judgment of annulment or absolute nullity. NOTES:  There will be collusion only if the parties had arranged to make it appear that a ground existed or had been committed although it was not, or if the parties had connived to bring about a matrimonial case even in the absence of grounds therefore. (Ocampo vs. Florenciano)  A grant of annulment of marriage or legal separation by default is fraught with danger of collusion. If the defendant spouse fails to answer the complaint, the court cannot declare him or her in default but instead, should order the prosecuting attorney to determine if collusion exists between the parties. However, petitioner’s vehement opposition to the annulment proceedings negates the conclusion that collusion existed between the parties. Under these circumstances, the non-intervention of a prosecuting attorney to assure lack of collusion between the contending parties is not fatal to the validity of the proceedings in the trial court. (Tuason vs. CA, GR 116607, April 10, 1996) RULE ON DECLARATION OF ABSOLUTE NULLITY OF VOID MARRIAGES AND ANNULMENT OF VOIDABLE MARRIAGES (A.M. 00-11-01-SC)  took effect on March 15, 2003  this Rule shall govern petitions for declaration of absolute nullity of void marriages and annulment of voidable marriages under the Family Code of the Philippines.  the Rules of Court has suppletory application  for a more comprehensive discussion on the procedural aspects of the Rule, please refer to the Remedial Law Memory Aid. LEGAL SEPARATION  Grounds: (SAMBA-LIPAD) 1. repeated physical violence or grossly abusive conduct directed against the petitioner, a common child, or a child of the petitioner 2. attempt of the 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 3. attempt by the respondent against the life of the petitioner 4. final judgment sentencing the respondent to imprisonment of more than 6 years even if pardoned 5. drug addiction or habitual alcoholism of the respondent 6. lesbianism or homosexuality of the respondent 7. abandonment of the petitioner by the respondent without justifiable cause for more than 1 year 8. physical violence or moral pressure to compel petitioner to change religious or political affiliation 9. contracting by respondent of a subsequent bigamous marriage; and 10. sexual infidelity or perversion. NOTES:  Cooling-off Period – 6 months period designed to give the parties enough time to further contemplate their positions with the end in view of attaining reconciliation between them.  The enumeration in Article 55 regarding legal separation is EXCLUSIVE. (Lacson vs. San Jose-Lacson) Grounds for denial of petition: (CCCC-MP-DR) a. Condonation -NOTE: failure of the husband to look for his adulterous wife is NOT condonation to wife's adultery. (Ocampo vs. Florenciano) b. Consent c. Connivance d. Collusion e. Mutual Guilt f. Prescription g. Death of either party during the pendency of the case (Lapuz-Sy vs. Eufemio) h. Reconciliation of the spouses during the pendency of the case Effects of filing petition: a. The spouses shall be entitled to live separately from each other. b. The husband shall have no more right to have sexual intercourse with his wife. c. In the absence of an agreement between the parties, the court shall designate the husband, the wife, or a 3rd person to manage the absolute community or conjugal partnership property. Effects of decree of legal separation: a. The spouses shall be entitled to live separately from each other but the marriage bond is not severed. b. The absolute community or conjugal partnership shall be dissolved and liquidated.

Memory aid in Civil Law with 2017 updates c. d. e.

The custody of the minor children shall be awarded to the innocent spouse subject to the provisions of Art. 213 of the Code. The offending spouse shall be disqualified from inheriting from the innocent spouse by intestate succession and the provisions in favor of the offending spouse made in the will of the innocent spouse shall be revoked by operation of law. The innocent spouse may revoke the donations made by him/her in favor of the offending spouse, as well as the designation of the latter as beneficiary in any insurance policy, even if the designation be irrevocable.

Effects of Reconciliation of the Spouses: a. The legal separation proceedings, if still pending, shall thereby be terminated at whatever stage. b. The final decree of legal separation shall be set aside, but the separation of property and any forfeiture of share of the guilty spouse already effected shall subsist, unless the spouses agree to revive their former property regime. RULE ON LEGAL SEPARATION (A.M. 02-11-11-SC)  took effect on March 15, 2003  this Rule shall govern petitions for legal separation under the Family Code in the Philippines; the Rules of Court shall apply suppletorily  please refer to the Remedial Law Memory Aid for the procedural provisions of the Rule MARITAL RIGHTS AND OBLIGATIONS (JL-FORM) 1. live together 2. observe mutual love, respect & fidelity 3. render mutual help & support 4. fix the family domicile 5. joint responsibility for the support of the family 6. management of the household Exercise of Profession GENERAL RULE: Husband & wife can engage in any lawful enterprise or profession without the consent of the other. EXCEPTION: Upon objection of the other spouse only on valid, serious and moral grounds, may the former’s consent be necessary. Property Relations Between Husband & Wife  Governed by: 1. marriage settlements executed before the marriage or antenuptial agreements 2. provisions of the Family Code 3. local customs (when spouses repudiate absolute community) MARRIAGE SETTLEMENTS  It is a contract entered into by the future spouses fixing the matrimonial property regime that should govern during the existence.  1. 2. 3. 4. 5. 6.

Requisites: made before celebration of marriage in writing (even modifications) signed by the parties not prejudice third persons unless registered in the civil registry to fix terms and conditions of their property relations additional signatories a. 18-21: parents b. civil interdictees & disabled: guardian

 1. 2. 3.

Not applicable when: both spouses are aliens, even if married in the Philippines as to extrinsic validity of contracts contrary stipulation

DONATIONS BY REASON OF MARRIAGE  Requisites: (COBB) 1. made before celebration of marriage 2. in consideration of marriage 3. in favor of one or both future spouses BASES

DONATIONS PROPTER NUPTIAS

ORDINARY DONATIONS

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Formalities

Governed by the rules on ordinary Governed by rules on donations donations except that if future (Arts. 725-773, NCC) property is donated, it must conform with formalities of wills Present May be donated but up to 1/5 of No limit except that donor shall leave Property donor’s present property property enough for his support Future May be included provided donation is Cannot be included property mortis causa Grounds forArt. 86, FC Arts. 760, 764, & 765, NCC revocation

Rule on Donation Between Spouses During Marriage GENERAL RULE: VOID, either direct or indirect donation EXCEPTIONS: 1. moderate gifts on occasions of family celebrations 2. donations mortis causa NOTE: This rule also applies to common-law spouses. (Article 87, Family Code) Grounds for Revocation (VIRAL-CN) 1. marriage Not celebrated or declared Void ab initio except those made in marriage settlements 2. marriage without parental Consent 3. marriage is Annulled and donee is in bad faith 4. upon Legal separation, the donee being the guilty spouse 5. complied Resolutory condition 6. donee commits acts of Ingratitude SYSTEM OF ABSOLUTE COMMUNITY (AC)  The property regime of the spouses in the absence of a marriage settlement or when the marriage is void. This is so because it is more in keeping with Filipino culture. GENERAL RULE: Community property shall consist of all property owned by the spouses at the time of the marriage or acquired thereafter. EXCEPTIONS: (BEG) 1. property acquired before the marriage by either spouse who has legitimate descendants by a former marriage 2. property for personal and exclusive use except jewelry 3. property acquired during the marriage by gratuitous title, except when the donor, testator or grantor expressly provides otherwise NOTE: No waiver of rights allowed during the marriage except in case of judicial separation of property. The waiver must be in a public instrument. Administration of the community property GENERAL RULE: It shall belong to both spouses jointly. EXCEPTIONS: 1. In case of disagreement, husband’s decision shall prevail. 2. In case one spouse is incapacitated or unable to participate in the administration of the common properties, other spouse may assume sole powers. NOTE: These powers do not include: a. Disposition b. encumbrance NOTE: Any alienation or encumbrance is void if without the written consent of the other spouse Rule on Game of Chance  LOSS: Shall be borne by the loser-spouse and shall not be charged to the community property  WINNINGS: Shall form part of the community property Steps in Liquidation of AC: (IP-DDP) 1. Inventory a. Inventory of Community Property b. Inventory of separate property of the wife c. Inventory of separate property of the husband 2. Payment of Community Debts  First, pay out of community assets, if not enough, husband and wife are solidarily liable 3. Delivery to each spouse his/her separate property if any 4. Division of the net community assets 5. Delivery of presumptive legitimes, if any, to the children CONJUGAL PARTNERSHIP OF GAINS (CP)  It is that formed by a husband and wife whereby they place in a common fund the fruits of their separate property, and the income from their work or industry, the same to be divided between them equally (as a general rule) upon the dissolution of the marriage or the partnership.

Memory aid in Civil Law with 2017 updates

Conjugal Partnership Property: (LC2 FONT) 1. obtained from labor, industry, work or profession 2. acquired by chance 3. acquired during the marriage with conjugal funds 4. fruits of the conjugal property 5. acquired through occupation 6. net fruits of their exclusive property 7. share of either spouse in hidden treasure Exclusive Property Of Each Spouse: (OGRE) 1. that which is brought to the marriage as his/her own 2. acquired during the marriage by gratuitous title 3. acquired by right of redemption, barter or exchange with property belonging to either spouse 4. purchased with exclusive money of either spouse Rules In Cases Of Improvement Of Exclusive Property 1. Reverse Accession – if the cost of the improvement and the plus value is more than the value of the principal property at the time of the improvement, the property becomes conjugal 2. Accession – if the cost of the improvement of the plus value is equal to or less than the value of the principal property at the time of the improvement, the entire property becomes the exclusive property of the spouse. NOTE: SUBJECT TO REIMBURSEMENT. Steps In Liquidation Of CP: (DIRDO-DIP) 1. Inventory of the Conjugal Partnership of Gains assets 2. Restitution of advances made to each spouse 3. Payment of debts to each spouse 4. Payment of obligations to third parties 5. Delivery of exclusive properties 6. Payment of losses and deterioration of movables belonging to each spouse 7. Delivery of presumptive legitimes 8. Division of the net conjugal partnership properties NOTE: Property bought on installments paid partly from exclusive funds of the spouses and partly form conjugal funds: a. If full ownership was vested before the marriage – it shall belong to the buyer-spouse b. If full ownership was vested during the marriage - it shall belong to the conjugal partnership Charges Upon and Obligations Of AC and CP: 1. Support for family except for illegitimate children of either spouse; 2. Debts and obligations which must have been contracted: a. by administrator-spouse for the benefit of the family; b. by both spouses; or c. by one spouse with the consent of the other; 3. Debts and obligations without marital consent provided the family was benefited; 4. All taxes, liens, charges and expenses including major or minor repairs upon the community or conjugal property; NOTE: However, in conjugal partnership, actual use need not be proved because it is presumed. 5. All taxes and expenses for mere preservation made during the marriage upon the exclusive property of either spouse used by the family; 6. Expenses for education or self-improvement of either spouse; 7. Ante-nuptial 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 education or self-improvement; and 9. Expenses of litigation between spouses unless found to be groundless. NOTES:  The separate properties shall be solidarily and subsidiarily liable for the obligations if the community or conjugal properties are insufficient.  The absolute community property shall also be liable for ante-nuptial debts mentioned above, support of illegitimate children, and liabilities incurred by either spouse by reason of a crime or quasi-delict in case of insolvency of the exclusive property of the debtor-spouse. Payment of which shall be advanced by the absolute community property, subject to deduction from the share of the debtor-spouse.  The conjugal partnership property shall likewise be liable for the payment of the personal debts of either spouse insofar as they have redounded to the benefit of the family.  Indirect benefits that might accrue to a husband in his signing a surety or guarantee agreement not in favor of the family but in favor of his employer corporation are not the benefits that can be considered as giving a direct advantage accruing to the family. Hence, the creditors cannot go against the conjugal partnership property of the husband in satisfying the obligation subject of the surety agreement. A contrary view would put in peril the conjugal partnership property by allowing it to be given gratuitously as in cases of donation of conjugal partnership property, which is prohibited. (Ayala Investment Corp. vs. CA)

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Grounds For Termination Of Absolute Community And Conjugal Partnership: (LADS) 1. decree of legal separation 2. annulment or declaration of nullity of marriage 3. death of either spouses 4. judicial separation of property REGIME OF SEPARATION OF PROPERTY  Causes: (CLAAPS) a. petitioner’s spouse has been sentenced with a penalty which carries with it civil interdiction; b. loss of parental authority of the petitioner’s spouse as decreed by the court; c. petitioner’s spouse has been judicially declared an absentee; d. abandonment by the petitioner’s spouse and failure to comply with the obligations to the family; e. spouse granted power of administration in marriage settlement abused such power; and f. at the time of the petition, spouses are separated in fact for at least 1 year and the possibility for reconciliation is highly improbable. NOTE: The spouses contribute to the family expenses proportionately with their income and the value of their properties. However, the liability of the spouses to the creditors for family expenses is solidary. PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE Art. 147 Art. 148 Applicability 1. Without legal 1. With legal impediment to marry impediment to marry 2. Adulterous relationships 2. Void marriages due to 3. Bigamous or polygamous marriages absence of formal 4. Incestuous void marriages under Art. 37 requisite 5. Void marriages by reason of public policy under Art. 38 Salaries & Owned in equal shares Separately owned by the parties Wages Property Belongs to such party Belongs to such party Acquired provided there is proof Exclusively by that he/she acquired it by Either Party exclusive funds Property Acquired by Both Parties Presump-tion (prima facie)

Forfeiture

Governed by the rules on co-ownership

Owned by them in common in proportion to their respective contributions

Presumption of joint acquisition and equal sharing as to property acquired while they live together. When only one of the parties is in good faith, the share of the party in bad faith in the coownership shall be forfeited: a. in favor of their common children; or b. in default of or in case of waiver by any or all of the common children or their descendants, in favor of the innocent party.

No presumption of joint acquisition. When there is evidence of joint acquisition but none as to the extent of actual contribution, there is a presumption of equal sharing. If one of the parties is validly married to another, his/her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in

bad faith is not validly married to another or if both parties are in bad faith, such share shall be forfeited in the manner provided in the last paragraph of Article 147.

NOTE: Under Art. 148, 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 proportion to their respective contributions. It must be stressed that actual contribution is required by this provision, in contrast to Art. 147 which state that efforts in the care and maintenance of the family and household, are regarded as contributions to the acquisition of common property by one who has no salary or income or work or industry. If the actual contribution of the party is not proved, there will be no co-ownership and no presumption of equal shares. (Agapay vs. Palang). Hence, mere cohabitation without proof of contribution will not result in a co-ownership. (Tumlos vs. Fernandez). THE FAMILY  Basic social institution which public policy cherishes and protect hence, no suit between members of the family shall prosper unless the compromise between the parties have failed FAMILY RELATIONS INCLUDE:

Memory aid in Civil Law with 2017 updates 1. 2. 3. 4.

between husband and wife between parents and children among ascendants and descendants among brothers and sisters whether full or half-blood

FAMILY HOME GENERAL RULE: The family home is exempt from execution, forced sale or attachment. EXCEPTIONS: (PLMN) 1. debts incurred prior to constitution 2. debts due to laborers, mechanics, architects, builders, material men and others who have rendered service or furnished materials for the construction of the building 3. debts secured by mortgages 4. non-payment of taxes  1. 2. 3. 4. 5. 6.

Guidelines: deemed constituted from time of actual occupation as a family residence must be owned by person constituting it must be permanent rule applies to valid and voidable and even to common-law spouses under Articles 147 and 148 continues despite death of one or more spouses or unmarried head of the family for 10 years, or as long as a minor beneficiary lives can constitute one (1) family home only

PATERNITY AND FILIATION Rule on Children Conceived as a Result of Artificial Insemination  Status is legitimate child, provided both husband and wife authorized or ratified the insemination in a written instrument which they executed and signed before the birth of the child Legitimate Children GENERAL RULE: Only those who are conceived or born during a valid marriage EXCEPTIONS: (CAVALAC) Those children who are 1. Conceived as a result of artificial insemination 2. Born of a voidable marriage before decree of annulment 3. Conceived or born before judgment of annulment or absolute nullity under Art. 36 has become final & executory 4. Conceived or born of subsequent marriage under Art. 53 5. Of mothers who may have declared against its legitimacy or was sentenced as an adultress 6. Legally adopted 7. Legitimated, conceived and born outside of wedlock of parents without impediment at the time of conception and had subsequently married Illegitimate Children GENERAL RULE: Those conceived and born outside a valid marriage are illegitimate. EXCEPTIONS: Children who are: 1. born of marriages which are void ab initio such as bigamous and incestuous marriages and marriage was declared void for being contrary to law and public policy 2. of voidable marriages born after the decree of annulment Rules on Impugning Legitimacy A. Grounds (PBA) 1. physical impossibility of the husband to have sexual intercourse with his wife within the 1 st 120 days of the 300 days immediately preceding the child’s birth, due to: a. physical incapacity of the husband; b. husband and the wife were living separately; or c. serious illness of the husband which absolutely prevented sexual intercourse 2. biological or scientific proof that the child could not have been that of the husband; and 3. written authorization or ratification of either parent for artificial insemination was obtained through mistake, fraud, violence, intimidation or undue influence. B. Prescriptive periods 1. one year, from knowledge of birth or recording in the civil register, if husband or heirs lives in the SAME city/municipality 2. two years, if resides in the Phils. 3. three years, if abroad C. Parties GENERAL RULE: Only the husband may impugn EXCEPTION: The heirs, if the husband dies before the end of the prescription of the action, or after filing complaint, or child was born after death

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Memory aid in Civil Law with 2015 updates NOTE: The question of legitimacy cannot be collaterally attacked, it can be impugned only in a direct action. Rule on the Status of Children born after 300 days following Termination of Marriage A. Requisites (TS-WBN) 1. first marriage terminated 2. mother contracted subsequent marriage 3. subsequent marriage was contracted within 300 days after termination of previous marriage 4. child was born 5. no evidence as to status of child B. Rules as to whom the child belongs 1. to first marriage, if child was born before the lapse of 180 days after celebration of 2 nd marriage provided born within 300 days after termination of the 1st marriage. 2. to second marriage, if child was born after 180 days following celebration of 2 nd marriage whether born within 300 days after termination of 1st marriage or afterwards. Proof of Filiation GENERAL RULE: Filiation of legitimate (or illegitimate) children is established by any of the following: 1. The record of birth appearing in the civil registrar or a final judgment 2. An admission of legitimate (or illegitimate) filiation in a public document or a private handwritten instrument and signed by the parent concerned. EXCEPTION: In the absence of any of the foregoing evidence, such legitimate or illegitimate filiation shall be proved by: 1. Open and continuous possession of the status of a legitimate or illegitimate child; 2. Any other means allowed by the Rules of Court and special laws. NOTES:  Continuous does not mean that the concession of status shall continue forever but only that it shall not be of an intermittent character while it is continuous. The possession of such status means that the father has treated the child as his own, directly and not through others, spontaneously and without concealment though without publicity. There must be a showing of permanent intention of the supposed father to consider the child as his own by continuous and clear manifestation of paternal affection and care. (Mendoza vs. CA). The paternal affection and care must not be attributed to pure charity. “Such acts must be of such a nature that they reveal not only the conviction of paternity, but also the apparent desire to have and treat the child as such in all relations in society and in life, not accidentally, but continuously.” (Jison vs. CA)  The SC in Lim vs. CA, ruled that petitioner was the father of his illegitimate children because the evidences convincingly show this. Hence, it was the petitioner who paid the bills for the hospitalization of the mother when she gave birth. He was the one who caused the registration of the name of the child using his surname in the birth certificate. He also wrote handwritten letters to the mother and the child stating his promise “to be a loving and caring husband and father to both of you.” There were also pictures of the petitioner on various occasions cuddling the child.  In view of the fact that filiation may be proved by “any means allowed by the Rules of Court and special laws” this may consist of baptismal certificate, a judicial admission, a family bible in which his name has been entered, common reputation respecting his pedigree, admission by silence, the testimony of witnesses and such other kinds of proof admissible under Rule 130 of RC. (Mendoza vs. CA) For a baptismal certificate to be proof of filiation under the Rules of Court, it must be shown that the father therein participated in the preparation of the same. A birth certificate not signed by the alleged father indicated in said certificate is not competent evidence of paternity. (Fernandez vs. CA)  Proof of filiation of petitioners to the late Enrique Baluyut is not sufficient to confer upon them any hereditary right in the estate of the deceased. What is necessary to be established by an illegitimate not natural child in order that he may be entitled to successional rights under Art 887 of NCC, is not the fact of his bare filiation but a filiation acknowledged by the putative parent.(Baluyut vs. Baluyut) Rights of the Children LEGITIMATE Use of father & mother’s surname

ILLEGITIMATE Use of mother‘s surname NOTE: However, RA 9255 amended Article 176, FC

Receive support from parents

Receive support according to FC

Entitled to the legitime & other successional rights

Legitime is ½ of the legitime of a legitimate child

R.A. No. 9255  An Act Allowing Illegitimate Children to use the surname of their Father, amending for the purpose Article 176 of EO No. 209, otherwise known as the "FAMILY CODE OF THE PHILIPPINES":  Approved February 24, 2004 Illegitimate children may use the surname of their father if: 1. their filiation has been expressly recognized by the father through the record of birth appearing in the civil register, or

Memory aid in Civil Law with 2017 updates 2.

when an admission in a public document or private handwritten instrument is made by the father

LEGITIMATION  Requisites: (NIM) a. The child is illegitimate b. The parents at the time of the child’s conception are not disqualified from marrying each other c. There is a valid marriage subsequent to the child’s birth ADOPTION A. Domestic Adoption Act of 1998 (R.A. NO. 8552) Who may adopt: (LPG-CANE) 1. Filipino Citizen: a. of legal age b. in a position to support and care for his/her children in keeping with the means of the family c. good moral character d. in possession of full civil capacity or legal rights e. at least 16 years older than the adoptee, except when: 1) adopter is the biological parent of the adoptee 2) adopter is the spouse of the adoptee’s parent f. has not been convicted of any crime involving moral turpitude g. emotionally and psychologically capable of caring for children 2.

Alien: a. same qualifications as a Filipino b. country has diplomatic relations with the Phil. c. has been living in the Phil. for at least three (3) continuous years prior to the application for adoption and maintains such residence until the adoption decree is entered, except when 1) former Filipino citizen who seeks to adopt a relative within the 4 th degree of consanguinity or affinity 2) one who seeks to adopt the legitimate or illegitimate child of his/her Filipino spouse 3) one who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a relative within the 4th degree of consanguinity or affinity of the Filipino spouse d. certified to have legal capacity to adopt by his/her diplomatic or consular office e. certified by said office that his government allows the adoptee to enter his/her country as his/her adopted child

3.

Guardian – with respect to the ward after termination of the guardianship and clearance of his/her financial accountabilities

Pre-Adoption Services  the DSWD shall provide for the following services: a. counselling services for the biological parents, prospective adoptive parents and prospective adoptee b. exhaust all efforts to locate the biological parents, if unkown Rule on Adoption by Spouses GENERAL RULE: The husband and the wife shall JOINTLY adopt. EXCEPTIONS: 1. one spouse seeks to adopt the legitimate child of the other 2. one spouse seeks to adopt his/her own illegitimate child 3. the spouses are legally separated Who may be adopted: 1. any person below 18 years of age who has been voluntarily committed to the DSWD under P.D. 603 or judicially declared available for adoption 2. legitimate stepchild 3. illegitimate stepchild 4. qualified adult, who, prior to the adoption, has been consistently considered by the adopter as his/her own child since minority; 5. child whose adoption has been previously rescinded 6. child whose biological or adoptive parents have died, provided that no proceedings shall be initiated within 6 months from the time of death of said parents Consent in Adoption (BAILAS) The WRITTEN CONSENT to the adoption is required in the following cases: 1. the adoptee, if 10 years of age or over 2. biological parents or government instrumentality 3. the legitimate/adopted children, 10 years old or over, of the adopter and adoptee 4. the illegitimate children, 10 years old or over, of the adopter if living with the adopter and the latter's spouse 5. spouse of the adopter and adoptee

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Memory aid in Civil Law with 2015 updates Effectivity of Decree of Adoption  a decree of adoption shall be effective as of the date the original petition was filed. It applies also in case the petitioner(s) dies before the issuance of the decree of adoption to protect the interest of the adoptee. NOTE: Where the petition for adoption was granted after the child had shot and killed a girl, the SC did not consider the retroactive effect to the decree of adoption so as to impose a liability upon the adopting parents accruing at the time when the adopting parents had no actual or physical custody over the adopted child. Retroactive effect may perhaps be given to the granting of the petition for adoption where such is essential to permit the accrual of some benefit or advantage in favor of the adopted child. To hold that parental authority had been retroactively lodged in the adopting parents so as to burden them with liability for a tortious act that they could not have foreseen and which they could have prevented would be unfair and unconscionable. (Tamargo vs. CA 209 S 518) Effects of Adoption: (SAL) 1. Severance of legal ties between the biological parents and the adoptee and the same shall be vested in the adopters. EXCEPTION: if the biological parent is the spouse of the adopter 2. Adoptee shall be considered as a legitimate child of the adopter(s) for all intents and purposes. 3. In legal or intestate succession, the adoptee and the adopter(s) shall have reciprocal rights of succession without distinction from legitimate filiation. However, if there is a will, the rules on testamentary succession shall be followed. Rescission of Adoption  Grounds: (ASAR) 1. attempt on the life of the adoptee 2. sexual assault or violence 3. abandonment and failure to comply with parental obligations 4. repeated physical or verbal maltreatment by the adopter NOTES:  Only the adoptee is given the right to rescind the decree of adoption  The adopter can NOT rescind the decree of the adoption but he or she may disinherit the adoptee.  Effects: a.Parental authority of adoptee’s biological parents or legal custody of DSWD shall be restored if adoptee is still a minor or incapacitated. b. Reciprocal rights and obligations of the adopter(s) and the adoptee to each other shall be extinguished. c.The amended certificate of birth of the adoptee shall be cancelled and its original shall be restored. d. Succession rights shall revert to its status prior to the adoption, but vested rights shall not be affected. B. Inter-Country Adoption Act of 1995 (R.A. No. 8043) Inter-Country Adoption  The socio-legal process of adopting a Filipino child by a foreigner or a Filipino citizen permanently residing abroad where the petition is filed, the supervised trial custody is undertaken, and the decree of adoption is issued outside the Philippines. Who may be adopted: a. Only a “legally-free child” may be the subject of inter-country adoption NOTE: “Legally-free Child” - a child who has been voluntarily or involuntarily committed to the DSWD of the Philippines, in accordance with the Child Youth and Welfare Code. b. No child shall be matched to a foreign adoptive family unless it is satisfactorily shown that the child cannot be adopted locally. Who may adopt:  Any alien or Filipino citizen permanently residing abroad may file an application for inter-country adoption of a Filipino child if he/she: 1. is at least 27 years of age and at least 16 years older than the child to be adopted, at the time of the application unless the adopter is the parent by nature of the child to be adopted or the spouse of such parent 2. if married, his/her spouse must jointly file for the adoption 3. has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and has undergone the appropriate counselling from an accredited counsellor in his/her country 4. has not been convicted of a crime involving moral turpitude 5. is eligible to adopt under his/her national law 6. 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 7. agrees to uphold the basic rights of the child as embodied under Philippine laws, the U.N. Convention on the Rights of a Child, and to abide by the rules and regulations issued to implement the InterCountry Adoption Act 8. comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption is allowed under his/her national laws

Memory aid in Civil Law with 2017 updates 9.

possesses all the qualifications and none of the disqualifications under the Inter-Country Adoption Act and other applicable Philippine laws

Inter-Country Adoption Board  acts as the central authority in matters relating to inter-country adoption.  The Board shall ensure that all possibilities for the adoption of the child under the Family Code have been exhausted and that inter-country adoption is in the best interest of the child. Trial Custody:  6 months from the time of placement 1. starts upon actual physical transfer of the child to the applicant who, as actual custodian, shall exercise substitute parental authority over the person of the child. 2. the adopting parent(s) shall submit to the governmental agency or authorized and accredited agency, which shall in turn transmit a copy to the Board, a progress report of the child’s adjustment. NOTES:  If the pre-adoptive relationship is found unsatisfactory by the child or the applicant or both, or if the foreign adoption agency finds that the continued placement of the child is not in the child’s best interest, said relationship shall be suspended by the Board and the foreign adoption agency shall arrange for the child’s temporary care.  If a satisfactory pre-adoptive relationship is formed between the applicant and the child, the Board shall submit the written consent to the adoption to the foreign adoption agency within 30 days after receipt of the latter’s request.  A copy of the final decree of adoption of the child, including certificate of citizenship/naturalization whenever applicable, shall be transmitted by the foreign adoption agency to the Board within 1 month after its issuance. NOTE: For a comprehensive discussion of the procedural aspects of adoption, please refer to A.M. No. 0206-02-SC or the Remedial Law Memory Aid SUPPORT  everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation in keeping with the financial capacity of the family Kinds: (LJC) 1. Legal – that which is required or given by law 2. Judicial – required by the court to be given whether pendente lite or in a final judgment 3. Conventional – given by agreement Characteristics: (PIN-ERV) 1. Personal 2. Intransmissible 3. Not subject to waiver or compensation 4. Exempt from attachment or execution 5. Reciprocal on the part of those who are by law bound to support each other 6. Variable Persons obliged to support each other: 1. 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 5. legitimate brothers and sisters whether full or half-blood NOTE: Support shall be in proportion to the resources or means of the giver and to the necessities of the recipient. Order of liability if several persons are obliged to give support: 1. spouse 2. descendants in the nearest degree 3. ascendants in the nearest degree 4. brothers and sisters NOTES:  When the obligation to give support falls upon 2 or more persons payment shall be divided between them in proportion to the resources of each, but in case of urgent need and special circumstances, the court may order one of them to furnish the support provisionally subject to the right to claim from the other obligors the share due them  When two or more recipients at the same time claim for support and the obligor does not have sufficient means to satisfy all claims: a. the order of liability provided by law shall be followed b. if the concurrent obligees should be the spouse and child subject to parental authority, the child shall be preferred

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Memory aid in Civil Law with 2015 updates

PARENTAL AUTHORITY (PA) Rules as to the exercise of PA: 1. The father and the mother shall JOINTLY exercise parental authority over the persons of their common children. In case of disagreement, the father’s decision shall prevail UNLESS there is a judicial order to the contrary 2. If the child is illegitimate, parental authority is with the mother. Parental Preference Rule  the natural parents, who are of good character and who can reasonably provide for the child are ordinarily entitled to custody as against all persons Rule in case of legal separation of parents:  parental authority is exercised by the parent designated by the court. GENERAL RULE: No child under 7 years of age shall be separated from the mother. EXCEPTION: When the court finds compelling reason to order otherwise. NOTE: Paramount consideration in matters of custody of a child is the welfare and well-being of the child. (Tonog vs. CA) Persons Exercising Substitute PA: 1. surviving grandparent 2. oldest brother or sister over 21 years of age unless unfit or disqualified 3. actual custodian unless unfit or disqualified Persons Exercising Special PA: 1. school 2. administrators and teachers 3. individual, entity or institution engaged in child care NOTES:  Parental authority and responsibility are inalienable and may not be transferred and renounced except in cases authorized by law.  Parents may exercise parental authority over their child’s property Kinds of Properties of a Minor ADVENTITIOUS 1. earned or acquired by the child through his work or industry by onerous or gratuitous title 2. owned by the child 3. child is also the usufructuary, but the child’s use of the property shall be secondary to the collective daily needs of the family 4. property administered by the parents Termination of PA PERMANENT 1. death of the parents 2. death of the child 3. emancipation of the child 4. subjected child to sexual abuse

PROFECTITIOUS 1. property given by the parents to the child for the latter to administer 2. owned by the parents 3. parents are the usufructuary 4. property administered by the child TEMPORARY 1. adoption of the child 2. appointment of a general guardian 3. judicial declaration of abandonment 4. final judgment divesting the parents of parental authority 5. judicial declaration of absence or inca-pacity of the parents exercising parental authority over the child

Grounds for suspension of PA (CHOBAN) 1. conviction of a crime with the penalty of civil interdiction 2. harsh or cruel treatment against the child 3. orders, counsel and example which are corrupting, given by the person exercising authority 4. begging is compelled of the child 5. acts of lasciviousness, allowed for the child to be subjected to, or himself subjects the child to 6. negligence, which is culpable, committed by the person exercising authority FUNERALS GENERAL GUIDELINES 1. duty and right to make arrangement in funerals in accordance with Article 199, FC 2. the funeral shall be in keeping with the social position of the deceased 3. the funeral shall be in accordance with the expressed wishes of the deceased a. in the absence of the expressed wishes, his religious beliefs or affiliation shall determine b. in case of doubt, the persons in Article 199, FC shall decide 4. any person who disrepects the dead or allows the same shall be liable for damages

Memory aid in Civil Law with 2017 updates Grounds for Change of First Name or Nickname under R.A. No. 9048 (An act authorizing City or Municipal Civil Registrar or the Consul General to Correct a Clerical or Typographical Error in an Entry and/or Change of First Name or Nickname in the Civil Registrar Without need of a Judicial Order, Amending for this Purpose Articles 376 and 412 of the Civil Code)) 1. The petitioner finds the first name or nickname to be ridiculous, tainted with dishonour or extremely difficult to write or pronounce 2. The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that first name or nickname in the community 3. The change will avoid confusion NOTE: Please refer to Remedial Law Memory Aid for a comprehensive discussion of the procedural aspects of change of name. ABSENCE DECLARATION OF ABSENCE WITHOUT ADMINISTRATOR

WITH ADMINISTRATOR

2 years from the lapse of time without news about the absentee or since the receipt of the last news

5 years from the lapse of time without news about the absentee or since the receipt of the last news

PRESUMPTION OF DEATH ORDINARY ABSENCE

EXTRAORDINARY/ QUALIFIED ABSENCE

a. 7 YEARS, person presumed dead for all purposes except for those of opening succession (No need for a declaration of presumptive death) Note amended by Art. 41FC) b. 10 YEARS, person presumed dead for purposes of opening succession except if he disappeared after the age of 75, in which case, a period of 5 years is sufficient c. 4 YEARS, person presumed dead for purposes of remarriage of the spouse present (requires declaration of presumptuive death)

For all purposes including those of opening succession, a period of 4 YEARS, and for purposes of remarriage of the spouse present, a period of 2 YEARS, is sufficient under the following circumstances: a. person on board a vessel lost during a sea voyage or an aeroplane which is missing; period is counted from the loss of the vessel or aeroplane b. person in the armed forces who has taken part in war c. person in danger of death under other circumstances and his existence has not been known

NOTES on RA 7610: 1. Children are not to be prosecuted as child prostitutes hence not to be called child prostitutes but shall be regarded as children exploited in prostitution. 2. Vagrancy has been decriminalized. SUMMARY PROCEEDINGS UNDER THE FAMILY CODE Art. 41. Declaration of presumptive death. Art. 51. Petition for the delivery of presumptive legitime. Art. 69. The fixing of the family home. Art. 73. In case of disagreement in the practice of profession of the spouses. Art. 96. In case of disagreement in the administration of property. Art. 124. Issues involving the administration and enjoyment of the conjugal partnership. Art. 217. Parental authority over foundlings, abandoned neglected or abused children and other children similarly situated. Art. 223. Petition for an order providing for disciplinary measures over the child. Art. 225. Issues over legal guardianship over the property of the unemancipated common child. Art. 239. Petition for 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.

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Memory aid in Civil Law with 2015 updates

PROPERTY PROPERTY  All things which are, or may be the object of appropriation  1. 2. 3.

Requisites: (USA) utility substantivity or individuality appropriability

Res nullius – things belonging to no one. Rec comunes – things belonging to all Res alipujos – things beloning to only one. I. A. 1. 2.

As to mobility of property: REAL OR IMMOVABLE PROPERTIES (Art. 415 NCC) land, buildings, roads and constructions of all kinds adhered to the soil; 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; 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; Requisites: a. made by owner b. industry or works carried on building or on land c. machines, etc must tend directly to meet needs of the industry or works d. machines, etc. must be essential and principal elements of the industry. 6. animal houses, pigeon-houses, beehives, fishponds or breeding places of similar nature, in case their owner has placed or preserved them, with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in those 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; and 10. contracts for public works, and servitudes and other real rights over immovable property  Categories: (NIDA) a) Real by nature – it cannot be carried from place to place (pars. 1 & 8, Art. 415, Civil Code) b) Real by incorporation – attached to an immovable in a fixed manner to be an integral part thereof (pars. 1-3 Art. 415, Civil Code) c) Real by destination – placed in a n immovable for the utility it gives to the activity carried thereon (pars. 4-7 and 9 Art. 415, Civil Code) d) By analogy it is so classified by express provision of law (par. 10, Art. 415, Civil Code) B. 1. 2. 3. 4. 5. 6.

PERSONAL OR MOVABLE PROPERTIES (ART. 416) those movables susceptible of appropriation which are not included in the preceding article; real property which by any special provision of law is considered as personalty; (CONTRACTS) forces of nature which are brought under control of science; in general, all things which can be transported from place to place without impairment of the real property to which they are fixed; obligations and actions which have for their object movables or demandable sums; and shares of stock of agricultural, commercial and industrial entities, although they have real estate. TESTS: a) By exclusion: movables are everything not included in Art. 415. b) By description: an object is movable if it possesses: 1) Ability to change location 2) Without substantial injury to the immovable to which it is attached.



Classification of Movables 1. consumable – cannot be utilized w/o being consumed 2. non-consumable 3. Fungible – may be replaced with another of the same kind. 4. Non-fungible

Important Doctrines/principles on immovable and movable properties: a) A Building is an immovable even if not erected by the owner of the land. The only criterion is union or incorporation with the soil. (Ladera vs. Hodges, 48 O.G. 4374).

Memory aid in Civil Law with 2017 updates b) Parties to a contract may by agreement treat as personal properties that which by nature would be real property; and it is a familiar phenomenon to see things classes as real property for purposes of taxation which on general principle might be considered personal property (Standard Oil Co. vs. Jaranillo, 44 Phil 631). c) For purposes of attachment and execution and for purposes of the Chattel Mortgage Law, ungathered products have the nature of personal property. (Sibal vs. Valdez, 50 Phil, 512). d) The human body, whether alive or dead, is neither real nor personal property, for it is not even property at all, in that it generally cannot be appropriated. Under certain conditions, the body of a person or parts thereof may be subject matter of a transaction. (See RA No. 349, RA No. 7170, RA No. 7719). e) What is the effect of temporary separation of movables from the immovables to which they have been attached? 2 Views: 1) They continue to be regarded as immovables. 2) Fact of separation determines the condition of the objects thus recovering their condition as movables. * the latter view is supported by Paras and Tolentino who maintains that the failure of the codifiers to reproduce the provision of the partidas on the matter is an indication that they did not intend the rule to continue. f) A building that is to be sold or mortgaged and which would be immediately demolished may be considered personal property and the sale or mortgage thereof would be a sale of chattel, or a chattel mortgage respectively, for the true object of the contract would be the materials. II. Property in Relation to the Person to Whom It Belongs (Art. 419-425) A. PROPERTY OF PUBLIC DOMINION  Concept: 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. 

Purpose: To serve the citizens and not the state as a juridical person.  Kinds: 1. Those intended for public use (roads, shores, bridges, parks, etc) 2. Those which are not for public use but intended for public service (ex. City halls, Airports,firetrucks, Police car) 3. Those intended for the development of the national wealth (Natural resources)



CHARACTERISTICS: 1. Outside the commerce of man 2. Inalienable. But when no longer needed for public use or service, may be declared patrimonial property. In Laurel vs. Garcia (187 SCRA 797), the Supreme Court held that “whether or not the Roppongi and related properties will eventually be sold is a policy determination where both the President and Congress must concur”. 3. Cannot be acquired by prescription 4. Not subject to attachment or execution 5. Cannot be burdened with easements NOTE: They cannot be registered under the land registration law and be the subject of a Torrens title. The character of public property is not affected by possession or even a Torrens Title in favor of private persons. (Palanca vs. Commonwealth, 69 Phil. 449).

C. PATRIMONIAL PROPERTY OF THE STATE (Article 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.) o o o

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 Rquires consent of congress before they may be alienated.

C. PROPERTY OF LOCAL GOVERNMENT UNITS (LGUs) 1. Property for public use – consist of roads, streets, squares, fountains, public waters, promenades and public works for public service paid for by the LGUs 2. Patrimonial Property – all other property possessed by LGUs without prejudice to provisions of special laws NOTE: In the case of Province of Zamboanga Del Norte vs. City of Zamboanga, the Supreme Court categorically stated that “this court is not inclined to hold that municipal property held and devoted to public service is in the same category as ordinary private property. The classification of municipal property devoted for distinctly governmental purposes as public should prevail over the Civil Code in this particular case”. Here, the Law of Municipal Corporations was considered as a special law in the context of Article 424 of the NCC.

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Memory aid in Civil Law with 2015 updates D. PROPERTY OF PRIVATE OWNERSHIP  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  Muebles or furniture generally has for its principal object the furnishing or ornamenting of a building. Note that there are exceptions to this definition and are generally not included as furniture unless the law or the individual’s declaration include them. OWNERSHIP (Art. 427 – 439) -The right to enjoy, dispose, and recover a thing without further limitations than those established by law or the will of the owner. 

Rights included (Art. 428-429): 1. Right to enjoy: (PUFA) a) to possess (jus possidendi) b) to use (jus utendi) c) to the fruits (jus fruendi) and accessions d) to abuse (jus abutendi) 2. Right to dispose: (DATE) a) to destroy b) to alienate c) to transform d) to encumber 3. Right to vindicate: (RP) a) pursuit b) recovery 4. Right to exclude: (ER) a) to enclose, fence and delimit b) to repel intrusions even with force 

 1. 2. 3. 4. 5.

Limitation on Ownership 1. general limitations for the benefit of the state (eminent domain, police power, taxation) 2. specific limitations imposed by law (servitude, easements) 3. specific limitations imposed by party transmitting ownership (will, contract) 4. limitations imposed by owner himself (voluntary servitude, mortgages, pledges) 5. inherent limitations arising from conflicts with other similar rights (contiguity of property) 6. owner cannot make use of a thing which shall injure/prejudice rights of 3rd persons (neighbors) 7. acts in state of necessity – law permits injury or destruction of things owned by another provided this is necessary to avert a greater danger (with right to indemnity – vs. principle of unjust enrichment) 8. true owner must resort to judicial process – when thing is in possession of another; law creates a disputable presumption of ownership to those in actual possession a) identify property b) show that he has better title

Characteristics: (EGEIP) Ownership is Elastic – power/s may be reduced and thereafter automatically recovered upon the cessation of the limiting rights. General – the right to make use of all the possibilities or utility of the thing owned, except those attached to other real rights existing thereon. Exclusive – there can only be one ownership over a thing at a time. There may be two or more owners but ONLY ONE ownership. Independence – It exists without necessity of any other right Perpetuity – ownership lasts as long as the thing exists. It cannot be extinguished by non user but only by adverse possession.

De Facto case of Eminent Domain  expropriation resulting from the actions of nature as in one case where land becomes part of one sea. The owner loses his property in favor of the state without any compensation. Principle of Self-Help  right of the owner or lawful possessor to exclude any person from the enjoyment and disposal of the property by the use of such force as may be necessary to repel or prevent actual or threatened unlawful physical invasion or usurpation of his property. Requisites: (RONA) 1. reasonable force 2. owner or lawful possessor is the person who will exercise 3. no delay in one’s exercise 4. actual or threatened physical invasion or usurpation

GENERAL RULE: A person cannot interfere with the right of ownership of another. EXCEPTION: Doctrine of Incomplete Privilege or State of Necessity (Article 432)  Requisites: (ID) 1. Interference necessary

Memory aid in Civil Law with 2017 updates 2.

Damage to another much greater than damage to property

LEGAL REMEDIES TO RECOVER POSSESSION OF ONE’S PROPERTY 1. Personal property: Replevin  REPLEVIN - remedy when the complaint prays for the recovery of the possession of personal property. 2.

Real Property: a. ACCION INTERDICTAL  Nature: 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. Forcible Entry As to when possession became unlawful Possession of the defendant is unlawful from the beginning as he acquires possession by Force, intimidation, strategy, threat or stealth As to the necessity of demand No previous demand for the defendant to vacate is necessary

Unlawful Detainer Possession is inceptively lawful but becomes illegal from the time defendant unlawfully withholds possession after the expiration or termination of his right thereto. Demand is jurisdictional if the ground is nonpayment of rentals or failure to comply with the lease contract

As to necessity of proof of prior physical possession Plaintiff must prove that he was in prior Plaintiff need not have been in prior physical physical possession of the premises until he possession was deprived thereof by the defendant As to when the 1 year period is counted from 1 year period is generally counted from the 1 year period is counted from the date of last date of actual entry on the land demand or last letter of demand b. ACCION PUBLICIANA  Nature: 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. c. ACCION REIVINDICATORIA  Nature: action to recover real property based on ownership. Here, the object is the recovery of the dominion over the property as owner.  Requisites: 1. Identity of the Property 2. Plaintiff’s title to the property Surface Rights  The owner of parcel of land is the owner of its surface and everything under it.  The economic utility which such space or subsoil offers to the owner of the surface sets the limit of the owner’s right to the same. HIDDEN TREASURE (Art. 439)  Definition: any hidden or unknown deposit of money, jewelry or other precious objects, the lawful ownership of which does not appear. 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; 6. The finder is not married under the absolute community or the conjugal partnership system (otherwise his share belongs to the community).

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ACCESSION (Art. 432-475) The right by virtue of which the owner of a thing becomes the owner of everything that it may produce

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Memory aid in Civil Law with 2015 updates or which may be inseparably united or incorporated thereto, either naturally or artificially. 

Classifications: 1. Accession Discreta – the right pertaining to the owner of a thing over everything produced thereby Kinds of Fruits a. natural fruits – spontaneous products of the soil and the young and other products of animals b. industrial fruits – those produced by lands of any kind through cultivation or labor c. civil fruits – rents of buildings, price of leases or lands and the amount of perpetual or life annuities or other similar income GENERAL RULE: To the owner belongs the natural, industrial, and civil fruits. EXCEPTIONS: If the thing is: (PULA) a) in possession of a possessor in good faith; b) subject to a usufruct; c) leased or pledged; or d) in possession of an antichretic creditor 2. Accession Continua – the right pertaining to the owner of a thing over everything that is incorporated or attached thereto either naturally or artificially; by external forces. a. With respect to real property i. accession industrial  building, planting or sowing ii. accession natural  alluvium, avulsion, change of river course, and formation of islands b. With respect to personal property i. adjunction or conjuction- the union of two things belonging to different owners. ii. commixtion or confusion- Union of materials where the components lose their identity. COMMIXTION: MIXTURE OF SOLIDS; CONFUCION: MIXTURE OF LIQUIDS iii. specification- It is the transformation of another’s material by the application of labor. The material becomes a thing of different kind. Basic Principles: (GONE BAD) 1. He who is in good faith may be held responsible but will not be penalized. 2. To the owner of a thing belongs the extension or increase of such thing. 3. Bad faith of one party neutralizes the bad faith of the other. 4. There should be no unjust enrichment at the expense of others. 5. Bad faith involves liability for damages. 6. Accessory follows the principal. 7. Accession exists only if the incorporation is such that separation would either seriously damage the thing or diminish its value.

Right of Accession with respect to Immovable Property NOTE: See TABLES  Important Doctrines/Principles: a) Under Art 448, the landowner may not refuse both to pay for the building and to sell the land and instead seek to compel the owner of the building to remove the building from the land. He is entitled to such removal ONLY when, after having chosen to sell the land, the other party fails to pay for said land. (Ignacio vs. Hilario, 76 Phil. 605) b) Should no other arrangement be agreed upon, the owner of the land does not automatically become the owner of the improvement. (Filipinas Colleges, Inc. vs. Timbang, 106 Phil. 247) c) Article 448 is not applicable where a person constructs a house on his own land and then sells the land, not the building. (Coleongco vs. Regalado, 27 Phil 387) d) Article 448 does not apply to cases which are governed by other provisions of law such as coownership, usufruct, agency, lease. e) The provision on indemnity in Art. 448 may be applied by analogy considering that the primary intent of the law is to avoid a state of forced co-ownership especially where the parties in the main agree that Articles 448 and 546 are applicable and indemnity for the improvements may be paid although they differ as to the basis of the indemnity. (Pecson vs. CA 244 SCRA 407). ACCESSION NATURAL 1. Alluvion or alluvium – increment which lands abutting rivers gradually receive as a result of the current of the waters.  Concept: 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.

Memory aid in Civil Law with 2017 updates  Requisites: a) the deposit be gradual and imperceptible b)that it be made through the effects of the current of the water c) that the land where accretion takes place is adjacent to the banks of the river. NOTES:  The owners of the lands adjoining the banks of the river (riparian lands) shall own the accretion which they gradually receive.

  Accretion operates ipso jure. However, the additional area is not covered by a Torrens title and the riparian owner must register the additional area. 

Doctrines: a) Where the deposit is by sea water, it belongs to the state b) A gradual change of bed is also governed by the rules of alluvium (Canas vs. Tuason 5 Phil. 689)

2.

Avulsion – the transfer of a known portion of land from one tenement to another by the force of the current. The portion of land must be such that it can be identified as coming from a definite tenement.

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Requisites: a) The segregation and transfer must be caused by the current of a river, creek or torrent. b) The segregation and transfer must be sudden or abrupt c) The portion of land transported must be known or identified

NOTES:  The owner must remove the transported portion within two years to retain ownership  In case of uprooted trees, the owner retains ownership if he makes a claim within 6 months. This refers only to uprooted trees and does not include trees which remain planted on a known portion of land carried by the force of the waters. In this latter case, the trees are regarded as accessions of the land through gradual changes in the course of adjoining stream. (Payatas vs. Tuazon)  Registration under the Torrens system does not protect the riparian owner against diminution of the area of his land through gradual changes in the course of adjoining stream (Payatas vs. Tuazon). Alluvium 1. gradual and imperceptible 2. soil cannot be identified 3. belongs to the owner of the property to which it is attached 4. merely an attach-ment

Avulsion 1. sudden or abrupt process 2. identifiable and verifiable 3. belongs to the owner from whose property it was detached 4. detachment followed by attachment

3. 

Change of course of rivers Requisites: a) There must be a natural change in the course of the waters of the river b) The change must be abrupt or sudden NOTES:  Once the river bed has been abandoned, the owners of the invaded land become owners of the abandoned bed to the extent provided by this article. No positive act is needed on their part, as it is subject thereto ipso jure from the moment the mode of acquisition becomes evident.  It does not apply to cases where the river simply dries up because there are no persons whose lands are occupied by the waters of the river. 4. 

Formation of Islands RULES ON OWNERSHIP a. If formed by the sea: 1) within territorial waters - State 2) outside territorial waters – to the first occupant b. If formed in lakes, or navigable or floatable rivers - State c. If formed on non-navigable or non-floatable rivers: 1) if nearer to one margin or bank – to the nearer reparian owner 2) if equidistant from both banks- to the reparian owners, by halves. NOTE: There is no accession when islands are formed by the branching of a river; the owner retains ownership of the isolated piece of land.

Right of Accession with respect to movable property 

Basic Principle: Accession exists only if separation is not feasible. Otherwise, separation may be demanded.

 KINDS (accession continua as to movables): 1. Adjunction  the union of two things belonging to different owners, in such a manner that they cannot be separated without injury, thereby forming a single object.  Requisites

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Memory aid in Civil Law with 2015 updates a)the two things must belong to different owners b) that they form a single object, or that their separation would impair their nature Kinds: a. inclusion or engraftment b. soldadura or soldering c. escritura or writing d. pintura or painting e. tejido or weaving Tests to determine principal: a. the “rule of importance and purpose b. that of greater value c. that of greater volume d. that of greater merits

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

 a)

Rules: Adjunction in good faith by either owner: GENERAL RULE: accessory follows the principal. EXCEPTIONS if the accessory is much more precious than the principal, the owner of the accessory may demand the separation even if the principal suffers some injury

b)

Adjunction in bad faith by the owner of the principal  option of the owner of the accessory: i) to recover the value plus damages ii) to demand separation plus damages

c)

Adjunction in bad faith by the owner of the accessory i) he loses the accessory ii) he is liable for damages 

When separation of things allowed: a. separation without injury b. accessory is more precious than the principal c. owner of the principal acted in bad faith

2. Mixture  Union of materials where the components lose their identity.  Kinds: a. Commixtion – mixture of solids b. Confusion – mixture of liquids 

Rules: a. By the will of both owners or by accident: each owner acquires an interest in proportion to the value of his material b. By one owner in good faith: apply rule(a) c. By one owner in bad faith: i) he loses all his rights to his own material ii) he is liable for damages

3. 

Specification It is the transformation of another’s material by the application of labor. The material becomes a thing of different kind. Labor is the principal



Rules: a) Owner of the principal (worker) in good faith: i) maker acquires the new thing ii) he must indemnify the owner of the material EXCEPTION: if the material is more valuable than the resulting thing, the owner of the material has the option: 1) to acquire the work, indemnifying for the labor, or 2) to demand indemnity for the material b) owner of the principal (worker) in bad faith: the owner of the material has the option: i) to acquire the result without indemnity ii) to demand indemnity for the material plus damages c) Owner of the material in bad faith i) he loses the material ii) he is liable for damages



Adjunction

Specification Mixture Involves at least 2 things

1. Involves at least 2 things 2.

Accessory

follows

the

Co-ownership results

May involve one thing (or more) but form is changed Accessory follows the principal

Memory aid in Civil Law with 2017 updates

principal 3. Things joined retain their nature

Things mixed or confused may either retain or lose their respective natures

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

QUIETING OF TITLE  It is an equitable action quasi in rem to determine the condition of the ownership or the rights to immovable property, and remove doubts thereon.  Requisites: 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. 

Prescriptive Period: 1. plaintiff in possession – imprescriptible 2. plaintiff not in possession – 10 (ordinary) or 30 years (extraordinary) Action to quiet title PURPOSE to put an end to troublesome litigation in respect to the property involved NATURE OF THE ACTION remedial action involving a present adverse claim



Action to remove a cloud on title to remove a possible foundation for a future hostile claim Preventive action to prevent a future cloud on the title

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

Ruinous Buildings and Trees in Danger of Falling:  As to buildings – the owners is obliged to demolish or execute necessary work to prevent the building from falling. Should he fail to do so, the authorities shall order its demolition at the expense of the owner, or take measures to insure public safety.  The complainant must show that his property is adjacent to the dangerous construction, or must have to pass by necessity in the immediate vicinity.  The owner is responsible for damages to others due to lack of necessary repairs. However, if the damage is caused by defects in the construction, then the builder is responsible for the damages.

 

CO-OWNERSHIP (Art. 484-501) Definition: the right of common dominion which two or more persons have in a spiritual part of a thing which is not physically divided. Concept: co-ownership exists where the ownership of a thing physically undivided pertains to more than one person.



Characteristics: a)plurality of subjects (the co-owners) b)there is a single object which is not materially divided c) there is no mutual representation by the co-owners d)it exist for the common enjoyment of the co-owners e) it has no distinct legal personality f) it is governed first of all by the contract of the parties; otherwise, by special legal provisions, and in default of such provisions, by the provisions of Title III on co-ownership



Sources: 1. Law 2. Contract

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Memory aid in Civil Law with 2015 updates 3. 4. 5. 6.

Chance Occupation Succession Testamentary disposition or donation inter vivos Co-ownership

 1.

Partnership

1. Can be created without the formalities of a contract 2. Has no juridical or legal personality 3. Purpose is collective enjoyment of the thing 4. Co-owner can dispose of his shares without the consent of the others with the transferee automatically becoming a co-owner 5. There is no mutual representation

1. Can be created only by contract, express or implied

6. Distribution of profits must be proportional to the respective interests of the co-owners

6. Distribution of profits is subject to the stipulation of the parties

7. A co-ownership is not dissolved by the death or incapacity of a co-owner

7. Death or incapacity dissolves the partnership

8. no public instrument needed even if real property is the object of the co-ownership

8. May be made in any form except when real property is contributed

9. An agreement to keep the thing undivided for a period of more than 10 years is void

9. There may be agreement as to a definite term without limit set by law

2. Has juridical personality distinct from the partners 3. Purpose is to obtain profits 4. A partner, unless authorized cannot dispose of his share and substitute another as a partner in his place 5. A partner can generally bind the partnership

Rules: Rights of each co-owner as to the thing owned in common: USBRAP-LDP a) To use the thing owned in common  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 b) To share in the benefits and charges in proportion to the interest of each. NOTE: Any stipulation to the contrary is void. 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. NOTE: 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. e)

Alterations: to oppose alterations made without the consent of all, even if beneficial. NOTES:  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

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 Partition is 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 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.

Memory aid in Civil Law with 2017 updates iii. iv. v. vi.

When the legal nature of the community prevents partition. When partition would render the thing unserviceable. When partition is prohibited by law When another co-owner has possessed the property as exclusive owner for a period sufficient to acquire it by prescription. Note: an oral partition is valid. 2.

The following questions are governed by the majority of interests: a) Management  Minority may appeal to the court against the majority’s decision if the same is seriously prejudicial. b) Enjoyment c) Improvement or embellishment

3. a) b) c) d) e)

Rights as to the ideal share of each co-owner: Each has full ownership of his part and of his share of the fruits and benefits Right to substitute another person its enjoyment, EXCEPT when personal rights are involved Right to alienate, dispose or encumber Right to renounce part of his interest to reimburse necessary expenses incurred by another co-owner Transactions entered into by each co-owner only affect his ideal share.

EXTINGUISHMENT OF CO-OWNERSHIP (CALSTEP) 1. consolidation or merger in one co-owner 2. acquisitive prescription in favor of a third person or a co-owner who repudiates the co-ownership 3. loss or destruction of property co-owned 4. sale of property co-owned 5. termination of period agreed upon by the co-owners 6. expropriation 7. judicial or extra-judicial partition CONDOMINIUM ACT (R.A. NO. 4726) CONDOMINIUM  Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas. 

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.

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. Sec. 8. Where several persons own condominiums in a condominium project, an action may be brought by one or more such persons for partition thereof by sale of the entire project, as if the owners of all of the condominiums in such project were co-owners of the entire project in the same proportion as their interests in the common areas: Provided, however, That a partition shall be made only upon a showing: (a) That three years after damage or destruction to the project which renders material part thereof unit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction, or

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Memory aid in Civil Law with 2015 updates (b) That damage or destruction to the project has rendered one-half or more of the units therein untenantable and that condominium owners holding in aggregate more than thirty percent interest in the common areas are opposed to repair or restoration of the project; or (c) That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project; or (d) That the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the condominium owners holding in aggregate more than seventy percent interest in the common areas are opposed to continuation of the condominium regime after expropriation or condemnation of a material portion thereof; or (e) That the conditions for such partition by sale set forth in the declaration of restrictions, duly registered in accordance with the terms of this Act, have been met.



WATERS Classification a) Waters public per se (water is the principal; the bed follows the character of the water (See Arts. 502 [1] and 502 [2]) b) Waters public or private according to their bed (water is accessory to bed) c) Waters public by special provision



POSSESSION Concept: the material holding or control of a thing or the enjoyment of a right.

 1. 2. 3.

Requisites: occupancy, apprehension, or taking deliberate intention to possess by virtue of ones own right

 1. 2. 3. 4.

Degrees: possession without any title whatsoever possession with juridical title possession with just title sufficient to transfer ownership possession with a title in fee simple

Classes: a) In one’s own name – where possessor claims the thing for himself b) In the name of another – for whom the thing is held by the possessor c) 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 d) 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. NOTE: 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. e)

In good faith – possessor is not aware that there is in his title or mode of acquisition a defect that invalidates it  Requisites: 1. Ostensible title or mode of acquisition 2. Vice or defect in the title 3. Possessor is ignorant of the vice or defect and must have an honest belief that the thing belongs to him NOTE: Gross and inexcusable ignorance of the law may not be the basis of good faith, but possible, excusable ignorance may be such basis. (Kasilag vs Roque, 69 PHIL 217) f)

In bad faith – possessor is aware of the invalidating defect in his own title.

NOTES:  Only personal knowledge of the flaw in one’s title or mode of acquisition can make him a possessor in bad faith. It is not transmissible even to an heir.  Possession in good faith ceases from the moment defects in his title are made known to the possessor. This interruption of good faith may take place at the date of summons or that of the answer if the date of summons does not appear. However, there is a contrary view that the date of summons may be insufficient to convince the possessor that his title is defective.  1. 2.

Presumptions in favor of possessor: of good faith of continuity of initial good faith

Memory aid in Civil Law with 2017 updates 3. 4. 5. 6.

of enjoyment in the same character in which possession was acquired until the contrary is proved of non-interruption in favor of the present possessor of continuous possession by the one who recovers possession of which he was wrongfully deprived of extension of possession of real property to all movables contained therein

 Object of possession: GENERAL RULE: All things and rights susceptible of being appropriated EXCEPTIONS: 1. Res communes 2. Property of public dominion 3. Discontinuous servitudes 4. Non-apparent servitudes Acquisition of possession:  Manner 1. Material occupancy of the thing 2. Subjection to the action of our will 3. Proper acts and legal formalities established for acquiring such right. Conflicts between several claimants: GENERAL RULE: Possession cannot be recognized in two different personalities except in case of copossession when there is no conflict 

Criteria in case of dispute: 1. present/actual possessor shall be preferred 2. if there are two possessors, the one longer in possession 3. if the dates of possession are the same, the one with a title 4. if all the above are equal, the fact of possession shall be judicially determined, and in the meantime, the thing shall be placed in judicial deposit Subject a. Fruits gathered

Possessor in good faith a. to possessor

Possessor in bad faith a. to owner

b. Cultivation Expenses of gathered fruits c. Fruits pending and charges d. Production expenses of pending fruits

b. not reimbursed to possessor

b. reimbursed to possessor

c. prorated according to time

c. to owner

d. indemnity pro rata to possessor (owner’s option) i. in money, or ii. by allowing full cultivation and gathering of all fruits e. reimbursed to possessor; retention f. reimbursed to possessor (owner’s option) i. initial cost ii. plus value  may remove if no reimbursement, and no damage is caused to the principal by the removal g. reimburse- ment at owner’s option: i. removal if no injury, or ii. cost without removal h. taxes and charges i. charged to owner ii. charged to possessor iii. prorated i. no reimbursement

d. no indemnity

j. only if acting with fraudulent intent or negligence, after summons k. to owner or lawful possessor

j. liable in every case

e. Necessary expenses f.. Useful expenses

g. Ornamental expenses

h. Taxes and charges i. on capital ii. on fruits iii. charges i. Improvements no longer existing j. Liability for accidental loss or deterioration k. Improvements due to time or nature M. Loss due to caso frortuito

Not liable

e. reimbursed to possessor; no retention f. no reimbursement

g. owner’s option: i. removal, or ii. value at time of recovery h. taxes and charges i. charged to owner ii. charged to owner iii. to owner i. no reimbursement

k. to owner possessor Liable

or

lawful

Doctrine of Constructive Possession – one who has material possession of a part of a property is deemed to have possession of the whole property.

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Memory aid in Civil Law with 2015 updates Possession of movables  Possession of movables in good faith is equivalent to title.  Requisites: a) possession is in good faith b) the owner has voluntarily parted with the possession of the thing c) possessor is in the concept of owner One who has lost or has been unlawfully deprived of it , may recover it from whomsoever possesses it, ordinarily, without reimbursement.  a) b) c)

Doctrines: owner of the thing must prove (1) ownership of the thing and (2) loss or unlawful deprivation; or bad faith of the possessor Where the owner acts negligently or voluntarily parts with the thing owned, he cannot recover it from the possessor The owner may recover the movable in case of loss or involuntary deprivation; but must reimburse the price paid if possessor acquired the thing in good faith and at a public sale.

Loss of possession: 1. By the will of the possessor a) Abandonment b) Transfer or conveyance 2. Against the will of the possessor a) Eminent domain b) Acquisitive prescription c) Judicial decree in favor of better right d) Possession of another for more than one year NOTE: this refers to possession de facto where the possessor loses the right to a summary action; but he may still bring action publiciana or reivindicatoria e)

By reason of the object i. destruction or total loss of the things ii. withdrawal from commerce

USUFRUCT  gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.  Characteristics: a. Real right b. Of temporary duration c. To derive all advantages from the thing due to normal exploitation d. may be constituted on real or personal property, consumable or non-consumable, tangible or intangible, the ownership of which is vested in another e. transmissible GENERAL RULE: Usufructuary is bound to preserve the form and substance of the thing in usufruct. EXCEPTION: Abnormal usufruct whereby the law or the will of the parties may allow the modification of the substance of the thing. Usufruct 1. Always a real right 2. Person creating the usufruct should be the owner or his duly authorized agent 3. May be created by law, by contract, by will of the testator, or by prescription

Lease 1. Generally a personal right 2. Lessor may not be the owner

4. As a rule, usufruct covers all the fruits and all the uses and benefits of the entire property 5. Involves a more or less passive owner who allows the usufructuary to enjoy the object given in usufruct 6. Pays for ordinary repairs and taxes on the fruits

4.Lease generally refers to uses only

Special Usufructs a) of pension or income (Art 570) b) of property owned in common (Art. 582) c) of cattle (livestock) (Art. 591) d) on vineyards and woodlands (Art. 575-576) e) on a right of action (Art. 578) f) on mortgaged property (Art. 600) g) over the entire patrimony (Art. 598)

3. Generally created by contract

5. Lease involves a more active owner or lessor who makes the lessee to enjoy 6. Lessee is not generally under obligation to undertake repairs or pay taxes

Memory aid in Civil Law with 2017 updates h) over things which gradually deteriorate (Art. 573) i) of consumable property (Art 574) (Normal usufruct – if the same thing is to be returned; abnormal – if a substitute may be returned) Rights of the Usufructuary 1. As to the thing and its fruits a. To receive and benefit from the fruits b. To enjoy any increase through accessions and servitudes c. To the half of the hidden treasure he accidentally finds d. To lease the thing, generally, for the same or shorter period as the usufruct. e. To improve the thing without altering its form and substance f. Right to set-off the improvements he may have made on the property against any damage to the same g. To retain the thing until he is reimbursed for advances for extraordinary expenses and taxes on the capital (possessory lien) h. To collect reimbursements from the owner for indispensable extraordinary repairs, taxes on the capital he advanced, and damages caused to him. i. To remove improvements made by him if the same will not injure the property 2.

As to the usufruct itself a. To mortgage the right of usufruct except parental usufruct b. To alienate the usufruct

Obligations of the usufructuary: 1. Before exercising the usufruct: a. To make an inventory of the property (with description and appraisal of the property) b. To give a bond, EXCEPT 1) when no prejudice would result 2) when the usufruct is reserved by the donor or parents 3) in cases of caucion juratoria where the usufructuary, being unable to file the required bond or security, files a verified petition in the proper court asking for the delivery of the house and furniture necessary for himself and his family without any bond or security.  takes an oath to take care of the things and restore them  property cannot be alienated or encumbered or leased because this would mean that the usufructuary does not need it. NOTE:  If no one will be injured, the posting of a bond and the making of an inventory may be be excused. 

Effects of failure to post bond: a. owner shall have the following options: i. receivership of realty, sale of movables, deposit of securities, or investment of money; OR ii. retention of the property as administrator b. the net product shall be delivered to the usufructuary c. usufructuary cannot collect credits due or make investments of the capital without the consent of the owner or of the court until the bond is given.

2. During the usufruct: a. To take care of the property b. To replace with the young thereof animals that die or are lost in certain cases when the usufruct is constituted on flock or herd of livestock c. To make ordinary repairs d. To notify the owner of urgent extra-ordinary repairs e. To permit works and improvements by the naked owner not prejudicial to the usufruct f. To pay annual taxes and charges on the fruits g. To pay interest on taxes on capital paid by the naked owner h. To pay debts when the usufruct is constituted on the whole patrimony i. To secure the naked owner’s or court’s approval to collect credits in certain cases j. To notify the owner of any prejudicial act committed by third persons k. To pay for court expenses and costs regarding usufruct. 3. At the termination of the usufruct: a. To return the thing in usufruct to the owner unless there is a right of retention b. To pay legal interest on the amount spent by the owner for extraordinary repairs or taxes on the capital c. To indemnify the owner for any losses due to his negligence or of his transferees Extinguishment of Usufruct: (PT2DERM) 1. Prescription 2. Termination of right of the person constituting the usufruct

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Memory aid in Civil Law with 2015 updates 3. 4. 5. 6. 7.

Total loss of the thing Death of the usufructuary, unless contrary intention appears Expiration of the period or fulfillment of the resolutory condition Renunciation of the usufructuary Merger of the usufruct and ownership in the same person

EASEMENT OR SERVITUDE EASEMENT OR SERVITUDE – is an encumbrance imposed upon an immovable for the benefit of a community or one or more persons or for the benefit of another immovable belonging to a different owner.



Concept: it is a real right, constituted on the corporeal immovable property of another, by virtue of which the owner of the latter has to refrain from doing or must allow something to be done on his property, for the benefit of another person or tenement.



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



Classification: 1. As to its exercise: a) Continuous Easements – those the use of which is, or may be, incessant without the intervention of any act of man b) Discontinuous Easements – those which are used at intervals and depend upon the acts of man 2. As to the indication of their existence: a) Apparent Easements – those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same b) Non-apparent Easements – those which show no external indication of their existence 3. As to duty of servient owner a) Positive – the servient owner must allow something to be done in his property or do it himself. These are called servitudes of intrusion and or/service” b) Negative – the servient owner must refrain from doing something which he could lawfully do if the easement did not exist Easement 1. Real right, whether registered or not

Lease Real right only when it is registered, or when its subject matter is real property and the duration exceeds one year

2. Imposed only on real property 3. There is a limited right to the use of real property of another but without the right of possession

May involve either real or personal Limited right to both the possession and use of another’s property

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Easement 1. Imposed only on real property 2. Limited to particular or specific use of the servient estate

Usufruct May involve either real or personal property Includes all the uses and the fruits of the property

3. A non-possessory immovable

Involves a right of possession in an immovable or immovable

right

over

an

4. Not extinguished by the death of the dominant owner

Extinguished usufructuary

by

the

death

of



Modes of

the

Acquisition: (PDFAT) 1. by prescription of 10 years (continuous and apparent easements) 2. by deed of recognition 3. by final judgment 4. by apparent sign established by the owner of two adjoining estates 5. by title Dominant Owner  Rights 1. To exercise all the rights necessary for the use of the easement 2. To make on the servient estate all the works necessary for the use and preservation of the servitude 3. To renounce the easement if he desires to exempt himself from contribution to necessary expenses 4. To ask for mandatory injunction to prevent impairment of his use of the easement 

Obligations: 1. Cannot render the easement or render it more burdensome 2. Notify the servient owner of works necessary for the use and preservation of the servitude 3. Choose the most convenient time and manner in making the necessary works as to cause the least inconvenience to the servient owner 4. Contribute to the necessary expenses if there are several dominant estates

Servient Owner  Rights: 1. To retain ownership and possession of the servient estate 2. To make use of the easement, unless there is agreement to the contrary 3. To change the place or manner of the easement, provided it be equally convenient 

Obligations: 1. Cannot impair the use of the easement 2. Contribute to the necessary expenses in case he uses the easement, unless there is an agreement to the contrary

Extinguishment of Easements: (REMAIN BREW) 1. Redemption agreed upon 2. Expiration of the term or fulfillment of the resolutory condition 3. Merger of ownership of the dominant and servient estate 4. Annulment of the title to the servitude 5. Permanent Impossibility to use the easement 6. Non-user for 10 years a. discontinuous: counted from the day they ceased to be used b. continuous: counted from the day an act adverse to the exercise takes place 7. Bad condition - when either or both estates fall into such a condition that the easement could not be used 8. Resolution of the right to create the servitude, i.e. in case of pacto de retro, when the property is redeemed 9. Expropriation of the servient estate 10. Waiver by the dominant owner EASEMENT FOR WATERING CATTLE  This is really a combined easement for drawing of water and right of way  Requisites: a) must be imposed for reasons of public use b) must be in favor of a town or village c) indemnity must be paid EASEMENT OF AQUEDUCT  The right arising from a forced easement by virtue of which the owner of an estate who desires to avail himself of water for the use of said estate may make such waters pass through the intermediate estate with the obligation of indemnifying the owner of the same and also the owner of the estate to which the water may filter or flow.

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Memory aid in Civil Law with 2015 updates

 

Character: apparent and continuous Requisites: a) dominant owner must prove that he has the capacity to dispose of the water b) that the water is sufficient for the intended use c) that the course is most convenient, and least onerous to the 3rd person d) payment of indemnity

RIGHT OF WAY  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 (Art. 649-656 NCC)  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  it is the needs of the dominant property which ultimately determine the width of the passage, and these needs may vary from time to time (Encarnacion vs. CA, 195 SCRA 72).  Special cause of extinction: the opening of a public road, or joining the dominant tenement to another with exit on a public road. NOTES: 1. 2. 3.

the extinction is NOT automatic. There must be a demand for extinction coupled with tender of indemnity by the servient owner. Cannot be acquired by prescription because it is not continuous. Railroad tracts signifies that the easement of right of way is apparent but nevertheless remains discontinuous.

PARTY WALL  a common wall which separates 2 estates built by common agreement at the dividing line such that it occupies a portion of both estates on equal parts. Party Wall 1. Shares of parties cannot be physically segregated but they can be physically identified 2. No limitation as to use of the party wall for exclusive benefit of a party 3. Owner may free himself from contributing to the cost of repairs and construction of a party wall by renouncing all his rights thereto

Co-ownership Shares of the co-owners can be divided and separated physically but before such division, a co-owner cannot point to any definite portion of the property as belonging to him None of the co-owners may use the community property for his exclusive benefit Partial renunciation is allowed



Presumptions of existence (juris tantum): 1. in adjoining walls of buildings, up to common elevation 2. in dividing walls of gardens and yards (urban) 3. in dividing fences, walls and live hedges of rural tenements 4. in ditches or drains between tenements



Rebuttal of presumption: 1. title 2. by contrary proof: 3. by signs contrary to the existence of the servitude (Arts. 660 & 661) NOTE: if the signs are contradictory, they cancel each other



Rights of part owners: 1. to make use of the wall in proportion to their respective interests, resting buildings on it or inserting beams up to one-half of the wall’s thickness 2. to increase the height of the wall a. at his expense b. upon payment of proper indemnity c. to acquire half interest in any increase of thickness or height, paying a proportionate share in the cost of the work and of the land covered by the increase



Obligations of each part-owners: 1. to contribute proportionately to the repair and maintenance unless he renounces his part-ownership 2. if one part owner raises the height of the wall, he must: a. bear the cost of maintenance of the additions b. bear the increased expenses of preservation c. bear the cost of construction d. give additional land, if necessary, to thicken the wall

Memory aid in Civil Law with 2017 updates LIGHT AND VIEW 1. Easement of Light (jus luminum) - right to admit light from the neighboring estate by virtue of the opening of a window or the making of certain openings.  Requisites: a. opening must not be greater than 30 centimeters squared, made on the ceiling or on the wall; and b. there must be an iron grating 2. Easement of view (jus prospectus) – the right to make openings or windows, to enjoy the view through the estate of another and the power to prevent all constructions or work which would obstruct such view or make the same difficult. It necessarily includes easement of light Restrictions on openings in one’s own wall when contiguous (less than 2m) to another’s tenement: 1. it cannot exceed 1 foot sq. (30 cm each side) 2. openings must be at the height of the joists, near the ceiling (Choco vs. Santamaria, 21 Phil 132) 3. the abutting owner may: a. close the openings if the wall becomes a party wall b. block the light by building or erecting his own wall unless a servitude is acquired by title or prescription c. ask for the reduction of the opening to the proper size Restrictions as to views 1. Direct views: the distance of 2 METERS between the wall and the boundary must be observed 2. Oblique views: (walls perpendicular or at an angle to the boundary line) must not be less than 60cm from the boundary line to the nearest edge of the window NOTE: Any stipulation permitting lesser distances is void. Modes of acquisition 1. by title 2. by prescription a. positive – counted from the time of the opening of the window, if it is through a party wall b. negative – counted from the formal prohibition on the servient owner. NOTE: mere non-observance of distances prescribed by Art. 670 without formal prohibition, does not give rise to prescription VOLUNTARY EASEMENTS  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  Voluntary easements are established in favor of: 1. predial servitudes: a. for the owner of the dominant estate b. for any other person having any juridical relation with the dominant estate, if the owner ratifies it. 2. personal servitudes: for anyone capacitated to accept. NUISANCE  Any act, omission, establishment, business or condition of property or anything else which: (ISAHO) 1. Injures/endangers the health or safety of others; 2. Shocks, defies or disregards decency or morality; 3. Annoys or offends the senses; 4. Hinders or impairs the use of property; or 5. Obstructs or interferes with the free passage to any public highway or street, or body of water. 

Classes: 1. Per se – nuisance at all times and under all circumstances regardless of location and surrounding. May be abated extra-judicially. 2. Per accidens – nuisance by reason of circumstances, location, or surroundings. Subject to judicial abatement. 3. Public – affects the community or a considerable number of persons. 4. Private – affects only a person or a small number of persons.

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. Note: an artificial body of water such as a swimmibng pool or water tank or other that imitates nature are not attractive nuisance.

Remedies against public nuisance: (PCE) 1. Prosecution under the RPC or local ordinance 2. Civil Action 3. Extrajudicial Abatement

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Remedies against private nuisance: (CE) 1. Civil Action 2. Extrajudicial Abatement Extrajudicial Abatement  Requisites: 1. nuisance must be specially injurious to the person affected; 2. no breach of peace or unnecessary injury must be committed; 3. prior demand; 4. prior demand has been rejected; 5. approval by district health officer and assistance of local police; and 6. value of destruction does not exceed P3,000. Notes: 1. 2.

a nuisance that is not a nuisance per se cannot be abated without judicial order. the MMDA has no authority to declare a property nuisance. Only the courts can.

THEORY OF MODE AND TITLE 

MODE is the specific cause which gives rise to ownership, as the result of the presence of a special condition of things, of the aptitude and intent of persons, and of compliance with the conditions established by law. This is the proximate cause of the acquisition.



TITLE is the juridical justification for the acquisition or a transfer of ownership or other real right. This is the remote cause of the acquisition.

DIFFERENT MODES (and TITLES) of ACQUIRING OWNERSHIP Modes of acquiring ownership

Titles of acquiring ownership A. Original Modes 1. Occupation 1. Condition of being without known owner 2. Work which includes Intellectual creation 2. Creation, discovery or invention B. Derivative modes 3. Law 3. Existence of required conditions 4. Tradition (delivery) 4. Contract of the parties 5. Donation 5. Contract of the parties 6. Prescription 6. Possession in the concept of owner 7. Succession 7. Death OCCUPATION  a mode of acquiring ownership by the seizure of things corporeal which have no owner, with the intention of acquiring them, and according the rules laid down by law. 

Requisites: 1. there must be seizure of a thing 2. the thing seized must be corporeal personal property 3. the thing must be susceptible of appropriation by nature 4. the thing must be without an owner 5. there must be an intention to appropriate



Specific instances: 1. hunting and fishing 2. finding of movables which do not have an owner 3. finding of abandoned movables 4. finding of hidden treasure 5. catching of swarm of bees that has escaped from its owner, under certain conditions 6. catching of domesticated animals that have escaped from their owners, under certain conditions 7. catching of pigeons without fraud or artifice 8. transfer of fish to another breeding place without fraud or artifice

Note: Lands cannot be acquired by occupation although occupation may give rise to acquisition by prescription. TRADITION/DELIVERY  a mode of acquiring ownership as a consequence of certain contracts, by virtue of which, the object is placed in the control and possession of the transferee, actually or constructively.

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

Kinds: 1. Real Tradition - actual delivery 2. Constructive Tradition a. traditio symbolica – parties make use of a token or symbol to represent the thing delivered b. traditio longa manu – by mere consent of the parties if the thing sold cannot be transferred to the possession of the vendee at the time of the sale c. traditio brevi manu – when the vendee already has possession of the thing sold by virtue of another title (Lessee purchased the leased property) d. traditio constitutum possessorium – when the vendor continues in possession of the thing sold not as owner but in some other capacity. (lessor sold proerty but leased it from new owner.) 3. Quasi-tradition – exercise of the right of the grantee with the consent of the grantor 4. Tradicion por ministerio de la ley – delivery by operation of law 6. Tradition by public instrument



Requisites: 1. right transmitted should have previously existed in the patrimony of the grantor 2. transmission should be by just title 3. grantor and grantee should have intention and capacity to transmit and acquire 4. transmission should be manifested by some act which should be physical, symbolical or legal

DONATION Donation - an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it 

Requisites: CIDA 1. donor must have capacity to make the donation 2. he must have donative intent (animus donandi) 3. there must be delivery 4. donee must accept or consent to the donation



Essential features/elements of a true donation: a) Alienation of property by the donor during his lifetime, which is accepted b) Irrevocability by the donor c) Intention to benefit the donee (animus donandi) d) Consequent impoverishment of the donor (diminution of his assets)

 1.

Classification: As to effectivity: a. inter vivos b. mortis causa c. propter nuptias As to perfection/extinguishment: a. pure b. with a condition c. with a term As to consideration: a. simple - gratuitous b. remuneratory or compensatory – made on account of donee’s merits c. modal – imposes upon the donee a burden which is less than the value of the thing donated

2.

3.

Donation Inter Vivos 1. Takes effect independently of the donor’s death

Donation Mortis Causa Takes effect upon the death of the donor

2. Title conveyed to the donee before the donor’s death 3. Valid if donor survives donee 4. Generally irrevo-cable during donor’s lifetime

Title conveyed upon donor’s death

5. Must comply with the formalities required by Arts. 748 and 749 of the Code

Must comply with the formalities required by law for the execution of wills

Void if donor survives donee Always revocable

Donations prohibited by law: 1. Made by persons guilty of adultery or concubinage at the time of donation; 2. Made between persons found guilty of the same criminal offense in consideration thereof; 3. Made to a public officer or his/her spouse, descendants or ascendants in consideration of his/her office; 4. Made to the priest who heard the confession of the donor during the latter’s last illness, or the minister of the gospel who extended spiritual aid to him during the same period;

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Memory aid in Civil Law with 2015 updates Made to relatives of such priest, etc. within the 4th degree, or to the church to which such priest belongs; Made by a ward to the guardian before the approval of accounts; Made to an attesting witness to the execution of donation, if there is any, or to the spouse, parents, or children, or anyone claiming under them. 8. Made to a physician, surgeon, nurse, health officer or druggist who took care of the donor during his/her last illness; 9. Made by individuals, associations or corporations not permitted by law to make donations; and 10. Made by spouses to each other during the marriage or to persons of whom the other spouse is a presumptive heir. 11. Donations in fraud of creditors 12. inofficious donations 5. 6. 7.

Forms of donations: 1. Donations of movable property: a. With simultaneous delivery of property donated: i. it may be oral/written – P5,000 or less; ii. 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 2.

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

NOTE: Expression of gratitude to the donor without express acceptance was held a sufficient acceptance (Cuevas vs Cuevas)

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 or 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. EFFECTS OF DONATION (Art. 754 NCC) 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, except servitudes 4. donor’s warranty exists if a. expressed b. donation is propter nuptias c. donation is onerous d. 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 Payment of the donor’s debt by the donee 1. If there is express stipulation: the donee is to pay only debts contracted before the donation, if not otherwise specified; but the donee answers only up to the value of the property donated, if no stipulation is made to the contrary 2. If there is no stipulation: the donee is answerable for the debts of the donor only in case of fraud against creditors. ACTS OF INGRATITUDE 1. If the donee should commit some offense against the person, honor or 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 act has been committed against the donee himself, his wife or children under his authority 3. Refusal to support the donor PRESCRIPTION

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 1.

Kinds: Acquisitive prescription - one acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law. a. Ordinary acquisitive prescription: requires possession of things in good faith and with just title for the time fixed by law b. Extraordinary acquisitive prescription: acquisition of ownership and other real rights without need of title or of good faith or any other condition  Requisites: 1) capacity to acquire by prescription 2) a thing capable of acquisition by prescription 3) possession of thing under certain conditions 4) lapse of time provided by law

2.

Extinctive Prescription – rights and actions are lost through the lapse of time in the manner and under the conditions laid down by law. Acquisitive prescription 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

Extinctive prescription 1. one does not look to the act of the possessor but to the neglect of 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

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. can be proven under the general issue without its being affirmatively pleaded

6. should be affirmatively pleaded and proved to bar the action or claim of the adverse party

2. requires inaction of the owner or neglect of one with a right to bring his action

Period of Prescription Movables 1. Good Faith 4 years 2. Bad Faith 8 years

Immovables 10 years 30 years

Rules on Computation of Period: 1. The present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor or predecessor 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 Persons Against Whom Prescription runs: 1. Minors and other incapacitated persons who have parents, guardians or other legal representatives 2. Absentees who have administrators 3. Persons living abroad who have managers or administrators 4. Juridical persons, except the state and its subdivision Persons against whom prescription does NOT run: 1. Between husband and wife, even though there be separation of property agreed upon in the marriage settlements or by judicial decree. 2. Between parents and children, during the minority or insanity of the latter 3. Between guardian and ward during the continuance of the guardianship Prescriptive Period

Actions

Prescriptive period

Actions

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a) Imprescriptible

 to declare an inexistent or void contract  to quiet title  to demand a right of way  to bring an action for abatement of public nuisance  to demand partition in coownership  to enforce a trust  probate of a will  to recover possession of a registered land under the Land Registration Act by the registered owner

g) 4 YEARS

 action to revoke donations due to non-compliance of conditions  action to rescind partition of deceased’s estate on account of lesion  action to claim rescission of contracts  annulment of contracts for vice of consent  actions upon a quasi-delict  action to revoke or reduce donations based on birth, appearance or adoption of a child  actions upon an injury to the rights of the plaintiff (not arising from contract)

b) 30 YEARS

 real actions over immovables (but not foreclosure) without prejudice to the acquisition of ownership or real rights by acquisitive prescription

h) 3 YEARS

 actions under the eight hour labor law  actions to recover losses in gambling money claims as a consequence of employeremployee relationship  action to impugn legitimacy of a child if the husband or his heirs reside abroad

c) 10 YEARS

 actions upon a written contract  actions upon an obligation created by law  actions upon a judgment from the time judgment becomes final  actions among co-heirs to enforce warranty against eviction in partition  Mortgage action

i) 2 YEARS

 action to impugn legitimacy of a child if the husband or his heirs are not residing in the city or municipality of birth

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d) 8 YEARS

 action to recover movables without prejudice to acquisition of title for a shorter period or to the possessors title under Arts. 559, 1505 and 1133

j) 1 YEAR

 action to impugn legitimacy of a child if the husband or his heirs are residing in the city or municipality of birth  forcible entry and unlawful detainer  Defamation  Revocation of donation on the ground of ingratitude  Rescission or for damages if immovable is sold with an apparent burdens or servitude  action for warranty of solvency in assignment of credits  actions for loss or damage to goods under the COGSA

e) 6 YEARS

 actions upon an oral (verbal) contract  actions upon a quasi-contract

k) 6 MONTHS

 actions for warranty against hidden defects or encumbrances over the thing sold

f) 5 YEARS

 action for annulment of marriages (except on the ground of insanity) and for legal separation counted from the occurrence of the cause  actions against the co-heirs for warranty of solvency the debtor in credits assigned in partition  action for the declaration of the incapacity of an heir (devisee or legatee) to succeed)  all other actions whose periods are not fixed by law, counted from the time the right of action accrues

l) 40 DAYS

 redhibitory action based on faults or defects of animals

WILLS AND SUCCESSION

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Memory aid in Civil Law with 2015 updates SUCCESSION  A mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law. (Art. 774) Kinds: 1. 2. 3. 4.

Testamentary or Testacy (by will); Legal or intestacy (by operation of law based on the decedent’s presumed will); Mixed (Partly Testamentary and Legal); and Partition inter vivos (to a certain degree).

Elements: 1. DECEDENT (subjective element) 2. SUCCESSORS (subjective element) 3. Heirs - those who are called to the whole or to an aliquot portion of the inheritance either by will or by operation of law i. Voluntary – those instituted by the testator in his will, to succeed to the inheritance or the portion thereof of which the testator can freely dispose. ii. Compulsory or Forced – those who succeed by force of law to some portion of the inheritance, in an amount predetermined by law, known as the legitime. iii. Legal or Intestate – those who succeed to the estate of the decedent who dies without a valid will, or to the portion of such estate not disposed of by will. 3. Devisees or legatees - persons to whom gifts of real or personal property are respectively given by virtue of a will NOTE: The distinctions between heirs and devisees/legatees are significant in these cases: a. Preterition (pretermission) b. Imperfect disinheritance c. After-acquired properties d. Acceptance or non-repudiation of the successional rights. 4.

5.

DEATH OF THE DECEDENT (casual element) a. Moment when rights to succeed are transmitted (Art 777) b. However, a person may be “presumed” dead for the purpose of opening his succession (see rules on presumptive death). In this case, succession is only of provisional character because there is always the chance that the absentee may still be alive. Inheritance (objective element);

NOTE: Whatever may be the time when actual transmission takes place, succession takes place in any event at the moment of the decedent’s death. (Lorenzo vs. Posadas 64 Phil 353) SUCCESSION - Refers to the legal mode by which inheritance is transmitted to the persons entitled to it. “Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law.” (Art. 774 NCC) INHERITANCE - Refers to the universality or entirety of the property, rights and obligations of a person who died Inheritance includes: 1. PROPERTY, RIGHTS AND OBLIGATIONS NOT EXTINGUISHED BY DEATH General rules on rights and obligations extinguished by his death a. Rights which are purely personal are by their nature and purpose intransmissible for they are extinguished by death (e.g. those relating to civil personality, family rights, discharge of office). b. Rights which are patrimonial or relating to property are generally part of inheritance as they are not extinguished by death. c. Rights of obligations are by nature transmissible and may constitute part of inheritance both with respect to the rights of the creditor and as regards to the obligations of the debtor. 2.

ALL WHICH HAVE ACCRUED THERETO SINCE THE OPENING OF SUCCESSION (Article 781 Civil Code)

I. TESTAMENTARY SUCCESSION A. CONCEPT WILL - an act whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of his estate to take effect after his death (Art. 783) NOTE: Thus, a document that does not purport to dispose of one’s estate either by the institution of heirs or designation of devisees/legatees or, indirectly, by effecting a disinheritance, is not to be governed by the law on testamentary succession but by some other applicable laws.

Memory aid in Civil Law with 2017 updates Kinds of Wills: 1. Notarial or ordinary 2. Holographic Characteristics of a Will: 1. UNILATERAL 2. STRICTLY PERSONAL ACT - The disposition of property is solely dependent upon the testator. NOTE: Code) 1. 2. 3.

The following acts MAY NOT be left to the discretion of a third person: (Article 785, 787 Civil duration or efficacy of the designation of heirs, devisees or legatees; determination of the portions which they are to take, when referred to by name; and determination of whether or not the testamentary disposition is to be operative.

NOTE: However, the following acts MAY be entrusted to a third person: (Article 786 Civil Code) a. distribution of specific property or sums of money that he may leave in general to specified classes or causes; and b. designation of the persons, institutions or establishments to which such property or sums are to be given or applied. 3. FREE AND VOLUNTARY ACT – Any vice affecting the testamentary freedom can cause the disallowance of the will. 4. FORMAL AND SOLEMN ACT – The formalities are essential for the validity of the will. 5. ACT MORTIS CAUSA 6. AMBULATORY AND REVOCABLE DURING THE TESTATOR’S LIFETIME 7. INDIVIDUAL ACT – Two or more persons cannot make a single joint will, either for their reciprocal benefit or for another person. However, separate or individually executed wills, although containing reciprocal provisions (mutual wills), are not prohibited, subject to the rule on disposicion captatoria. 8. DISPOSITION OF PROPERTY B. INTERPRETATION OF WILLS (ARTS. 788-792) 1) The testator’s intent (animus testandi), as well as giving effect to such intent, is primordial. It is sometimes said that the supreme law in succession is the intent of the testator. All rules of construction are designed to ascertain and give effect to that intention. It is only when the intention of the testator is contrary to law, morals, or public policy that it cannot be given effect. 2) In case of doubt, that interpretation by which the disposition is to be operative shall be preferred. That construction is to be adopted which will sustain and uphold the will in all its parts, if it can be done consistently with the established rules of law. Kinds of Ambiguities: (Article 786) 1. LATENT OR INTRINSIC AMBIGUITIES – that which does not appear on the face of the will and is discovered only by extrinsic evidence. 2. PATENT OR EXTRINSIC AMBIGUITIES ¬ that which appears on the face of the will itself NOTES: 1. There is no distinction between patent and latent ambiguities, in so far as the admissibility of parol or extrinsic evidence to aid testamentary disposition is concerned. 2. Extrinsic evidence to explain ambiguities in a will cannot include oral declarations of the testator as to his intention. 3. The validity of a will as to its form depends upon the observance of law in force at the time it is made. (Art. 795). 4. If a law different from the law in force at the time of the execution of the will goes into effect before or after the death of the testator, such a law shall not affect the validity of the will, provided that such will was duly executed In accordance with the formalities prescribed by law in force at the time it was made. AFTER-ACQUIRED PROPERTY (Art. 793) Gen. Rule: Property acquired during the period between the execution of the will and the death of the testator is NOT included among the property disposed of. Exception: When a contrary intention expressly appears in the will NOTE: This rule applies only to legacies and devises and not to institution of heirs. C. TESTAMENTARY CAPACITY – refers to the ability as well as the power to make a will. - must be present at the time of the execution of the will. Requisites: 1. At least 18 years of age 2. Of sound mind, i.e., the ability to know: a. the nature of the estate to be disposed of; b. the proper objects of his bounty; and c. the character of the testamentary act. NOTE: The law presumes that the testator is of sound mind, UNLESS:

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Memory aid in Civil Law with 2015 updates 1. 2. 3.

he, one month or less, before making his will, was publicly known to be insane; or was under guardianship at the time of making his will. (Torres and Lopez de Bueno vs. Lopez 48 Phil 772) In both cases, the burden of proving sanity is cast upon proponents of the will.

Effect of Certain Infirmities: 1. mere senility or infirmity of old age does not necessarily imply that a person lacks testamentary capacity; 2. physical infirmity or disease is not inconsistent with testamentary capacity; 3. persons suffering from idiocy (those congenitally deficient in intellect), imbecility (those who are mentally deficient as a result of disease), and senile dementia (peculiar decay of the mental faculties whereby the person afflicted is reduced to second childhood) do not possess the necessary mental capacity to make a will; 4. an insane delusion which will render one incapable of making a will may be defined as a belief in things which do not exist, and which no rational mind would believe to exist; 5. f the insane delusion touches to subject matter of the will, testamentary disposition is void. 6. a deaf-mute and blind person can make a will (i.e. Art. 807-808). A blind man with a sound and disposing mind can make a holographic will. 7. an intoxicated person or person under the influence of drugs may make a will as there is no complete loss of understanding. Exception: where the testator has used intoxicating liquor or drugs excessively to such an extent as to impair his mind, so that at the time the will is executed, he does not know the extent and value of his property, or the names of persons who are the natural objects of his bounty, the instrument thus executed will be denied probate for lack of testamentary capacity. D. FORMALITIES OF WILLS (EXTRINSIC VALIDITY) COMMON FORMALITIES 1. Every will must be in writing; and 2. Executed in a language or dialect known to the testator. SPECIAL FORMALITIES I. NOTARIAL OR ORDINARY WILL a. SUBSCRIPTION – made at the end thereof by the testator himself or by the testator's name written by some other person in his presence and by his express direction; b. Subscription refers to the manual act of testator and also of his instrumental witnesses of affixing their signature to the instrument. c. ATTESTATION AND SUBSCRIPTION - (evidenced by an “attestation clause”) by 3 or more credible witnesses in the presence of the testator and of one another; d. Attestation consists in the act of witnesses of witnessing the execution of the will in order to see and take note mentally that such will has been executed in accordance with requirements prescribed by law. ATTESTATION 1. an act of the senses 2. mental act 3. purpose is to render available proof during probate of will

SUBSCRIPTION 1. an act of the hand 2. mechanical act 3. purpose is identification

MARGINAL SIGNATURES – affixed by the testator or the person requested by him to write his name and the instrumental witnesses of the will on each and every page thereof, except the last, on the left margin; Exceptions to the rule that all of the pages of the will shall have to be signed on the left margin by the testator and witnesses:: a. in the last page, when the will consists of two or more pages; b. when the will consists of only one page; c. when the will consists of two pages, the first of which contains all the testamentary dispositions and is signed at the bottom by the testator and the witnesses and the second contains only the attestation clause duly signed at the bottom by the witnesses. Note: The inadvertent failure of one witness to affix his signature to one page of a testament, due to the simultaneous lifting of two pages in the course of signing, is not per se sufficient to justify denial of probate (Icasiano vs. Icasiano II SCRA 422). PAGE NUMBERINGS – Written correlatively in letters placed on the upper part of each page; NOTE: This is not necessary when all of the dispositive parts of a will are written on one sheet only. ACKNOWLEDGMENT – Done before a notary public by the testator and the instrumental witnesses.

Memory aid in Civil Law with 2017 updates NOTE: The notary public before whom the will was acknowledged cannot be considered as the third instrumental witness since he cannot acknowledge before himself his having signed the will. If the third witness were the notary public himself, he would have to avow, assent, or admit his having signed the will in front of himself. To allow such would have the effect of having only two attesting witnesses to the will which would be in contravention of Arts. 805 and 806. (Cruz vs. Villasor 54 SCRA 31) MANNER OF SIGNING: 1) The use of any signature, marks or design intended by the testator to authenticate renders the will sufficiently signed by the testator. 2) A signature by mark will be sufficient even if at the time of placing it, the testator knew how to write and is able to do so. 3) It is sufficiently signed by writing his initials, or his first name, or he may use even an assumed name. 4) A complete signature is not essential to the validity of a will, provided the part of the name written was affixed to the instrument with intent to execute it as a will. ATTESTATION CLAUSE - memorandum or record of facts wherein the witnesses certify that the will has been executed before them, and that it has been executed in accordance with the formalities prescribed by law.  Absence of this clause will render the will a nullity. It must state the following ESSENTIAL FACTS: the number of pages used upon which the will is written; 1) HOWEVER, even if number of pages is omitted in the AC BUT if there is an acknowledgment clause which states the number of pages or the will itself mentioned such number of pages, it may still be considered valid applying the Liberal Interpretation of the law. (Tabuada vs. Rosal) 2) the fact that the testator signed the will and every page thereof, or caused some other person to write his name, under his express direction, in the presence of the instrumental witnesses; 3) When the testator expressly caused another to sign the former’s name, this fact must be recited in the attestation clause. Otherwise, the will is fatally defective. (Garcia vs. Lacuesta 90 Phil 489) 4) that the witnesses witnessed and signed the will and all the pages thereof in the presence of the testator and of one another. TEST OF PRESENCE: Not whether they actually saw each other sign, but whether they might have seen each other sign had they chosen to do so considering their mental and physical condition and position with relation to each other at the moment of inscription of each signature. (Jaboneta vs. Gustilo) 1) In the case of an ordinary or attested will, its attestation clause need not be written in a language or dialect known to the testator since it does not form part of the testamentary disposition. 2) The language used in the attestation clause likewise need not even be known to the attesting witnesses. Art. 805 merely requires that, in such a case, the attestation clause shall be interpreted to said witnesses. (Caneda vs. CA 222 SCRA 781) Effects of defects or imperfections in the Attestation Clause: 1) If the defect of the attestation clause goes into the very essence of the clause itself or consists in the omission of one, some, or all of the essential facts, and such omission cannot be cured by an examination of the will itself, the defect is substantial in character, as a consequence of which the will is invalidated. 2) However, In the absence of bad faith, forgery, 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 Art. 805 (formal requirements). This is known as the DOCTRINE OF LIBERAL INTERPRETATION (Art. 809) Purposes of requiring witness to attest and to subscribe to a will: 1) identification of the instrument 2) protection of the testator from fraud and deception 3) the ascertainment of the testamentary capacity of the testator. NOTE: Certain points to consider (Tolentino) 1) Mere knowledge by testator that another is signing, and acquiescing in it, there being no express direction, is NOT sufficient. 2) Not required that the name of the person who writes the testator’s name should also appear on the will; enough that testator’s name is written. 3) If the required numbers of attesting witness are competent, the fact that an additional witness, who was incompetent also attested to the will, cannot impair the validity. 4) Immaterial in what order the acts are performed provided the signature or acknowledgment by the testator and the attestation of the witnesses be accomplished in one occasion, and as part of one transaction.

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Memory aid in Civil Law with 2015 updates 5) The law refers to page and not to sheet or leaf or folio, so every page used in the will should be signed on the left margin. 6) An attestation clause need be signed ONLY by the witnesses and not by the testator as it is a declaration made by the witnesses. 7) date of will: a) ordinary will: not an essential part; b) holographic will: an essential part. c) Failure or error to state the place of execution will not invalidate the will. d) Signing of a will by the testator and witnesses and acknowledgment before a notary public, need not be a single act. e) Testamentary capacity must also exist at the time of acknowledgment. ADDITIONAL REQUIREMENTS FOR SPECIAL CASES 1. Deaf or deaf-mute testator: a) personal reading of the will, if able to do so; OR b) if not possible, designation of 2 persons to read the will and communicate to him, in some practicable manner, the contents thereof. (Article 807) 2. Blind testator:  Double-reading requirement: a) first, by one of the subscribing witnesses, AND b) second, by the notary public before whom the will is acknowledged. (Article 808) 

Art. 808 applies not only to blind testators but also to those who, for one reason or another are incapable of reading their wills (e.g. poor, defective or blurred vision).



In a case where the testator did not read the final draft of the will, but the lawyer who drafted the document, read the same aloud in the presence of the testator, 3 witnesses, and notary public, the Court held that the formal imperfections should be brushed aside when the spirit behind the law was served though the letter was not. (Alvarado vs. Gaviola 226 SCRA 347)

WITNESS TO NOTARIAL WILLS (ARTS. 820 & 821) Requirements: 1) of sound mind; 2) able to read and write; 3) not blind, deaf or dumb; 4) at least 18 years of age; 5) domiciled in the Philippines; 6) has not been convicted of falsification of a document, perjury, or false testimony NOTE: 1. A witness need not know the contents of the will, and need not be shown to have had a good standing in the community where he lives. Also, the acknowledging notary public cannot be one of the 3 minimum numbers of witnesses. 2.

Interested witness

3.

A witness to a will who is incapacitated from succeeding from the testator by reason of a devise/legacy or other testamentary disposition therein in his favor, or in favor of his spouse, parent, or child. However, his competence as a witness subsists.

II. HOLOGRAPHIC WILL (Article 810) 1. entirely written by the hand of the testator; 2. entirely dated by the hand of the testator; and 3. entirely signed by the hand of the testator. NOTE: The law exacts literal compliance with these requirements. HENCE, THE DOCTRINE OF LIBERAL INTERPRETATION CANNOT BE APPLIED.  Nevertheless, the Court held in a case that as a general rule, the “date” in a holographic will should include the day, month, and year of its execution. However, when there is no appearance of fraud, bad faith, undue influence and pressure and the authenticity of the will is established and the only issue is whether or not the date “FEB./61” appearing on the will is a valid compliance with Art. 810, probate of the holographic will should be allowed under the principle of substantial compliance. (In the matter of Intestate Estate of Andres de Jesus and Bibiana Roxas de Jesus, 134 SCRA 245) Rule in case of insertion, cancellation, erasure or alteration:  Testator must authenticate the same by his FULL SIGNATURE. (Article 814) NOTE: In the case of Kalaw vs. Relova (134 SCRA 241), the holographic will in dispute had only one substantial provision, which was altered by substituting the original heir with another, but which alteration did not carry the requisite of full authentication by the full signature of the testator, the effect must be that

Memory aid in Civil Law with 2017 updates the entire will is voided or revoked for the simple reason that nothing remains in the will after that which could remain valid. Effects of words written by another and inserted in the words written by the testator: 1. If the insertion was made after the execution of the will, but without the consent of the testator, such insertion is considered as not written, because the validity of the will cannot be defeated by the malice or caprice of third person. 2. If the insertion after the execution of the will was with the consent of the testator, the will remains valid but the insertion is void. 3. If the insertion after the execution is validated by the testator by his signature thereon, then the insertion becomes part of the will, and the entire will becomes void, because of failure to comply with the requirement that it must be wholly written by the testator. 4. If the insertion made by a third person is made contemporaneous to the execution of the will, then the will is void because it is not written entirely by the testator. Probate of Holographic Will 1. If UNCONTESTED, requires that at least 1 witness who knows the handwriting and signature of the testator explicitly declare that the will and signature are in the handwriting of the testator; if no witness, expert testimony may be resorted to. 2. If CONTESTED, requires at least 3 of such credible witnesses, if none expert witness. NOTE: a) Where the testator himself petitions for the probate of his holographic will and no contest is file, the fact that he affirms that the holographic will and the signature are in his own handwriting, shall be sufficient evidence thereof. If the holographic will is contested, the burden of disproving the genuineness and due execution thereof shall be on the contestant. b) A photostatic or xerox copy of a lost or destroyed holographic will may be admitted because the authenticity of the handwriting of the deceased can be determined by the probate court, as comparison can be made with the standard writings of the testator. (Rodelas vs. Aranza, 119 SCRA 16) GOVERNING LAW ON FORMALITIES 1. As to time: The validity of a will as to its form depends upon the observance of the law in force at the time it is made. Its intrinsic validity, however, is judged at the time of the decedent’s death by the law of his nationality. 2. As to place: a. Filipino testator executing a will in the Philippines: Philippine law b. Filipino testator executing a will outside of the Philippines: either i. The law of the country in which it is executed; or ii. The law of the Philippines. c. Alien testator executing a will in the Philippines: either i. The law of the Philippines; or ii. he law of the country of which he is a citizen or subject. d. Alien testator executing a will outside of the Philippines: either i. The law of the place where it is executed; or ii. The law of the place in which he resides; or iii. The law of his country; or iv. The law of the Philippines. Aspects of the will governed by National Law of the Decedent (Article 1039 and Article 16 Civil Code) 1. Order of succession 2. Amount of successional rights 3. Intrinsic validity 4. Capacity to succeed Joint will – a single testamentary instrument which contains the wills of two or more persons, jointly executed by them, either for their reciprocal benefit or for the benefit of a third person --will of 2 or more persons is made in the same instrument and is jointly signed by them. This is a VOID WILL. Mutual wills – wills executed pursuant to an agreement between two or more persons to dispose of their property in a particular manner, each in consideration of the other --separate wills of 2 persons, which are reciprocal in their provisions. Reciprocal wills- wills in which the testators name each other as beneficiaries under similar testamentary plans NOTE: A will that is both joint and mutual is one executed jointly by two or more persons, the provisions of which are reciprocal and which shows on its face that the devises are made in consideration of the other. Such is prohibited.

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Memory aid in Civil Law with 2015 updates

Reasons: 1. will is purely personal and unilateral act 2. contrary to the revocable character of a will 3. may expose the testator to undue influence, and may even induce one of the testators to kill the other. NOTE: Joint wills executed by Filipinos in a foreign country shall not be valid in the Philippines, even though authorized by the foreign country in which they may have been executed (Article 819 Civil Code). This prohibition is applicable only in joint wills executed by Filipinos in a foreign country; it does NOT APPLY to joint wills executed by aliens. CODICIL AND INCORPORATION BY REFERENCE CODICIL A supplement or addition to a will, made after the execution of a will and annexed to be taken as a part thereof, by which any disposition made in the original will is explained, added to, or altered. (Article 825) NOTE: To be effective, it must be executed as in the case of a will. Its execution has the effect of republishing the will as modified. INCORPORATION BY REFERENCE (ART 827) 1. Contemplates only lists of properties, books of accounts, and inventories. 2. Provisions which are in the nature of testamentary dispositions must be contained in the will itself. Requisites for a valid incorporation by reference: (ART 827) 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.

REVOCATION OF WILLS AND TESTAMENTARY DISPOSITIONS REVOCATION  An act of the mind, terminating the potential capacity of the will to operate at the death of the testator, manifested by some outward or visible act or sign, symbolic thereof. Such right to revoke a will cannot be waived or restricted. LAWS WHICH GOVERN REVOCATION (ART 829) 1. If the revocation takes place in the Philippines, whether the testator is domiciled in the Philippines or in some other country, it is valid when it is in accordance with the laws of the Philippines 2. If the revocation takes place outside the Philippines, by a testator who is domiciled in the Philippines, it is valid when it is in accordance with the laws of the Philippines 3. Revocation done outside the Philippines, by a testator who does not have his domicile in this country, is valid when it is done according to the: a. laws of the place where the will was made, or b. laws of the place in which the testator had his domicile at the time of revocation; MODES OF REVOCATION (ART 830) 1. By implication of law: a. legal separation revokes testamentary provisions in favor of the offending spouse; b. preterition revokes the institution of heir; c. judicial action for recovery of debt revokes a legacy of credit/remission of debt; d. transformation, alienation, or loss of bequeathed property revokes a legacy of such property; e. act of unworthiness by an heir, devisee/legatee revokes testamentary provisions in his favor; f. if both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio and testamentary dispositions made by one in favor of the other are revoked by operation of law (Art. 44, Family Code); and g. void ab initio or annulled marriages revoke testamentary dispositions made by one spouse in favor of the other (Art. 50, Family Code). 2. By some will, codicil, or other writing, executed as provided in case of wills, which may either be: a. Express – when there is a revocatory clause expressly revoking the previous will or a part thereof b. Implied – when the provisions thereof are partially or entirely inconsistent with those of the previous will

Memory aid in Civil Law with 2017 updates NOTE: While express revocation may be effected by a subsequent will, or a codicil, or a nontestamentary writing executed as provided in case of wills, implied revocation may be effected only by either a subsequent will, or a codicil. 3. By burning, tearing, cancelling, or obliterating the will. Requisites: a. testamentary capacity at the time of performing the act of destruction; b. intent to revoke (animus revocandi); c. actual physical act of destruction; d. completion of the subjective phase; and e. performed by the testator himself or by some other person in his presence and express direction (THE LIST IS EXCLUSIVE.) NOTE: The act of revocation is a personal act of the testator. He cannot delegate to an agent the authority to do the act for him. Another person, however, may be selected by him as an instrument and directed to do the revocatory acts in his presence. A destruction not accomplished in the testator’s presence is an ineffective revocation of the will. DOCTRINE OF PRESUMED REVOCATION a. Whenever it is established that the testator had in his possession or had ready access to the will, but upon his death it cannot be found or located, the presumption arises that it must have been revoked by him by an overt act. b.

Where it is shown that the will was in custody of the testator after its execution, and subsequently, it was found among the testator’s effects after his death in such a state of mutilation, cancellation or obliteration as represents a sufficient act of revocation, it will be presumed in the absence of evidence to the contrary, that such act was performed by the testator with the intention of revoking the will.

DOCTRINE OF DEPENDENT RELATIVE REVOCATION (ART 832) a. revocation subject to a condition does not revoke a will unless and until the condition occurs . Thus, where a testator “revokes” a will with the proven intention that he would execute another will, his failure to validly make a latter will would permit the allowance of the earlier will. b.

Where the act of destruction is connected with the making of another will so as fairly to raise the inference that the testator meant the revocation of the old to depend upon the efficacy of the new disposition intended to be substituted, the revocation will be conditional and dependent upon the efficacy of the new disposition; and if for any reason, the new will intended to be made as a substitute is inoperative, the revocation fails and the original will remains in full force (Vda. De Molo vs. Molo 90 Phil 37).

RATIO: THE LAW PRESUMES THE DECEDENT PREFER TESTACY OVER INTESTACY! Revocation by mistake A revocation of a will based on a false cause or an illegal cause is null and void. Thus, where a testator by a codicil or later will, expressly grounding such revocation on the assumption of fact which turns out to be false, as where it is stated that the legatees/devisees named therein are dead, when in fact, they are living, the revocation does not take effect. Notes: 1. Revocation takes effect immediately under the principle of instanter although the will takes effect after the death of the testator. 2. An expressly revoked will cannot be revived by the revocation of the expressly revoking will. 3. The revocation of an impliedly revoking will shall revive the impliedly revoked will. 4. The disallowance of an expressly revoking will shall revived the expressly revoked will under the principle of dependent relative revocation. 5. The destruction of the only copy of a holographic will expressly revoking an earlier notarial will shall revive the expressly revoked notarial will as if it were not revoked at all. REPUBLICATION AND REVIVAL OF WILLS REPUBLICATION a. The act of the testator whereby he reproduces in a subsequent will (express) the dispositions contained in a previous will which is void as to its form, or he executes a codicil (constructive) to his will. b. Its purpose is to cure the will of its formal defects. NOTES: a. To republish a will void as to its form, all the dispositions must be reproduced or copied in the new or subsequent will; b. To republish a will valid as to its form but already revoked the execution of a codicil which makes reference to the revoked will is sufficient. Effects of Republication by virtue of a Codicil:

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Memory aid in Civil Law with 2015 updates a. b. c.

Codicil revives the previous will The old will is republished as of the date of the codicil— makes it speak, as it were, from the new and later date. A will republished by a codicil is governed by a statute enacted to the execution of the will, but which was operative when the codicil was executed.

REPUBLICATION 1. Takes place by an act of the testator 2. Corrects extrinsic and intrinsic defects.

REVIVAL 1. Takes place by operation of law. 2. Restores a revoked will

REVIVAL  The restoration to validity of a will previously revoked by operation of law (implied revocation). PRINCIPLE OF INSTANTER  The express revocation of the first will renders it void because the revocatory clause of the second will, not being testamentary in character, operates to revoke the previous will instantly upon the execution of the will containing it. NOTE: In implied revocation, the first will is not instantly revoked by the second will because the inconsistent testamentary dispositions of the latter do not take effect immediately but only after the death of the testator. ALLOWANCE AND DISALLOWANCE OF WILLS PROBATE a. A special proceeding mandatorily required for the purpose of establishing the validity of a will. b. The statute of limitations is not applicable to probate of wills. Questions determinable by the probate court: (ICE) 1. identity of the will; 2. testamentary capacity of the testator at the time of the execution of the will; and 3. due execution of the will.  GENERAL RULE: In probate proceeding, the court’s area of inquiry is limited to an examination of, and resolution on the extrinsic validity if the will, the due execution thereof, the testatrix’s testamentary capacity and the compliance with the requisites or solemnities prescribed by law. The probate court cannot inquire into the intrinsic validity of testamentary provisions.  EXCEPTION: Practical considerations, e.g. when the will is intrinsically void on its face.  In Nuguid vs Nuguid (17 SCRA 449), the Supreme Court held that, if the case were to be remanded for probate of the will, nothing will be gained. On the contrary, this litigation would be protracted. And for aught that appears in the record, in the event of probate or if the court rejects the will, probability exists that the case will come up once again before us on the same issue of the intrinsic validity or nullity of the will. RESULT: waste of time, effort, expense, plus added anxiety.  In Nepomuceno vs CA (139 SCRA 207), the Court ruled that “the court can inquire as to the intrinsic validity of the will because there was an express statement that the beneficiary was a mistress. NOTES:  Criminal action will not lie against the forger of a will which had been duly admitted to probate by a court of competent jurisdiction. (Mercado vs. Santos 66 Phil. 215)  The fact that the will has been allowed without opposition and the order allowing the same has become final and executory is not a bar to the presentation of a codicil, provided it complies with all the formalities for executing a will. It is not necessary that the will and codicil be probated together as the codicil may be concealed by an interested party. They may be probated one after the other. (Macam vs. Gatmaitan 60 Phil 358)  When a will is declared void because it has not been executed in accordance with the formalities required by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with a clause in the defective will, the payment is effective and irrevocable (Article 1430, NCC; Natural Obligations). Grounds for Disallowance of a Will (ART 839) 1. Formalities required by law have not been complied with; 2. Testator was insane, or otherwise incapable of making a will, at the time of its execution; 3. Will was executed through force or under duress, or the influence of fear, or threats; 4. Will was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person; 5. Signature of the testator was procured by fraud; 6. 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. NOTE: GROUNDS ARE EXCLUSIVE.

Memory aid in Civil Law with 2017 updates Notes: 1. Fair arguments, persuasion, appeal to emotions, and entreaties which, without fraud or deceit or actual coercion, compulsion or restraint do not constitute undue influence sufficient to invalidate a will. (Barreto vs. Reyes 98 Phil 996) 2. Burden is on the person challenging the will to show that such influence was exerted at the time of its execution. 3. To make a case of UNDUE INFLUENCE, the free agency of the testator must be shown to have been destroyed; but to establish a ground of contest based on FRAUD, free agency of the testator need not be shown to have been destroyed. 4. Allegations of fraud and undue influence are mutually repugnant and exclude each other; their joining as grounds for opposing probate shows absence of definite evidence against the validity of the will (Icasiano vs. Icasiano 11 SCRA 422)

REVOCATION

DISALLOWANCE

1. voluntary act of the testator. 2. with or without cause. 3. may be partial or total.

1. given by judicial decree. 2. must always be for a legal cause. 3. always total except: when the ground of fraud or influence for example affects only certain portions of the will.

I. INSTITUTION OF HEIRS (ARTS. 840-856) INSTITUTION 1. An act by virtue of which a testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligations. (Art 840) 2. The proper test in order to determine the validity of an institution of heir is the possibility of finally ascertaining the identity of the instituted heir by intrinsic or extrinsic evidence. PRESUMPTIONS 1. Presumption of Equality – Heirs instituted without designation of shares shall inherit in equal parts. This is limited only to the case where all of the heirs are of the same class or juridical condition, and where there are compulsory heirs among the heirs instituted, it should be applied only to the disposable free portion. 2. Presumption of Individuality – When the testator institutes some heirs individually and others collectively, those collectively designated shall be considered as individually instituted, unless it clearly appears that the intention of the testator was otherwise. 3. Presumption of Simultaneity – when the testator calls to the succession a person and his children, they are all deemed to have been instituted simultaneously and not successively. INSTITUTION BASED ON A FALSE CAUSE (Article 850) GENERAL RULE: The statement of a false cause for the institution of an heir shall be considered as not written.  Reason: Generosity of the testator is the real cause of the testamentary disposition. EXCEPTION: If it appears from the face of the will that the testator would not have made the institution had he known the falsity of the cause.  Example: Where the person instituted is a total stranger to the testator, it is obvious that the real cause of the testamentary disposition is not the generosity of the testator but the fact itself which turned out to be false. REQUISITES FOR THE ANNULMENT OF INSTITUTION OF HEIRS: 1. cause of institution of heirs must be stated in will; 2. cause must be shown to be false; 3. it must appear from the face of the will that the testator would not have made the institution had he known the falsity of the cause.  Where the one-sentence will institutes the petitioner as the sole, universal heir and preterits the parents of the testatrix, and it contains no specific legacies or bequests, such universal institution of petitioner, by itself, is void. Intestate succession ensues. (Nuguid vs. Nuguid, et al. 17 SCRA 449) PRETERITION (ART. 854)  Omission in the testator’s will of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator. Requisites: 1. The heir omitted must be a compulsory heir in the direct line; 2. The omission must be complete and total in character; and 3. The compulsory heir omitted must survive the testator. There is no total omission when:

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Memory aid in Civil Law with 2015 updates a. A devise/legacy has been given to the heir by the testator b. A donation inter vivos has been previously given to the heir by the testator; or c. Anything is left from the inheritance which the heir may get by way of intestacy. NOTE: In the above cases, the remedy of the heir is completion of legitime under Art. 906, in case the value of the property received is less than the value of the legitime. Effects of Preterition: 1. It annuls the institution of heir; 2. The devises and legacies are valid insofar as they are not inofficious; and 3. If the omitted compulsory heir should die before the testator, the institution shall be effectual, without prejudice to the right of representation. NOTE: In case of omission without preterition, the rule in Art. 855 should be followed. The suggested alternate phrasing of Dr. Tolentino to the said article is: “The share of the compulsory heir omitted in a will must be first 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 heirs given to them by will.” Notes: 1. Where the deceased left no descendants, legitimate or illegitimate, but she left forced heirs in the direct ascending line—her parents, and her holographic will does not explicitly disinherit them but simply omits them altogether, the case is one of preterition of parents, not a case of ineffective disinheritance. (Nuguid vs. Nuguid 17 SCRA 449) 2.

Preterition of the surviving spouse (SS) does not entirely annul the institution of the heir since SS is not a compulsory heir in the direct line. However, since Article 842 protects the legitime of the SS, the institution is partially annulled by reducing the rights of the instituted heir to the extent necessary to cover the legitime of SS. (Tolentino)

EFFECT OF PREDECEASE --an heir who dies before the testator shall transmit no right to his own heirs (rule is absolute with respect to a voluntary heir) --what is transmitted to the representatives of compulsory heir is his right to the legitime and not to the free portion EFFECT OF INCAPACITY --A voluntary heir who is incapacitated to succeed from testator shall transmit no right to his own heirs. --compulsory heir may be represented, but only with respect to his legitime EFFECT OF REPUDIATION --whether voluntary or compulsory, the heir who repudiates his inheritance cannot transmit any right to his own heirs. SUBSTITUTION OF HEIRS (ARTS 857-870) SUBSTITUTION  The act by which the testator designates the person or persons to take the place of the heir or heirs first instituted (Tolentino). It may be considered as a subsidiary and conditional institution. Kinds: 1. Simple or Common (that which takes place when the testator designates one or more persons to substitute the heirs/s instituted in case such heir/s should die before him, or should not wish, or should be incapacitated to accept the inheritance) 2. Brief or Compendious: brief (there are two or more persons designated by the testator to substitute for only one heir), compendious (one heir is designated to take the place of two or more heirs) Instances when substitution takes place: a. instituted heir predeceases the testator; b. incapacity of the instituted heir to succeed from the testator; and c. repudiation of the inheritance. Effect of substitution: General rule: once the substitution has taken place, the substitute shall not only take over the share that would have passed to the instituted heir, but he shall be subject to the same charges and conditions imposed upon such instituted heir. Exceptions: (1) When the testator has expressly to the contrary; (2) When the charges or conditions are personally applicable only to the heir instituted. Fideicommissary Requisites: a. First heir (fiduciary) called to the succession.

Memory aid in Civil Law with 2017 updates b. An obligation clearly imposed upon such first heir to preserve the property and to transmit it to the second heir. c. Second heir (fideicommissary) to whom the property is transmitted by the first heir.  Without the obligation clearly imposing upon the first heir the preservation of the property and its transmission to the second heir, there is no fideicommissary substitution (Rabadilla vs. CA 334 SCRA 522) NOTE: Pending transmission of property, the fiduciary is entitled to all the rights of a usufructuary, although the fideicommissary is entitled to all the rights of a naked owner. Limitations: a. Substitution must not go beyond one degree from the heir originally instituted. b. “Degree” means degree of relationship. c. Fiduciary and fideicommissary must be living at the time of the death of the testator. d. Substitution must not burden the legitime of compulsory heirs. e. Substitution must be made expressly. A fideicommissary substitution is void if the first heir is not related in the 1st degree to the second heir (Ramirez vs. Vda. De Ramirez 111 SCRA 704) CONDITIONAL, MODAL TESTAMENTARY DISPOSITIONS, AND TESTAMENTARY DISPOSITIONS WITH A TERM (ART 871-885)  GENERAL RULE: The institution of an heir may be made 1) conditionally, 2) for a term, or 3) for a certain purpose or cause (modal). Conditions, terms, and modes however, are not presumed; they must be clearly expressed in the will. The condition must fairly appear from the language of the will. Otherwise, it is not binding.

 LIMITATIONS: 1. The testator cannot impose any charge, burden, encumbrance, condition, or substitution whatsoever upon the legitime of compulsory heirs. 2. Impossible conditions and those contrary to law or good customs are presumed to have been imposed erroneously or through oversight, thus, are considered as not imposed. 3. An absolute condition not to contract a first marriage is always void and will be considered as not written. 4. An absolute condition not to contract a subsequent marriage is generally void, unless imposed upon a widow or widower by the deceased spouse or by the latter’s ascendants or descendants. Even so, however, the legitime of the surviving spouse cannot be impaired.  An absolute condition not to contract marriage when validly imposed is resolutory in character. Consequently, if the testator institutes his wife as heir subject to the condition that she will never marry again, she immediately acquires a right to the inheritance upon the death of testator, but if she violates the condition by contracting a 2nd marriage, she loses her right to said inheritance. NOTE: However, the following relative conditions regarding marriage have been considered as valid and binding: a. generic condition to contract marriage; b. specific condition to contract marriage with a determinate person; and c. specific condition not to contract marriage with a determinate person. 5. Any disposition made upon the condition that the heir shall make some provisions in his will in favor of the testator or of any other person shall be void (disposicion captatoria). 6. 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 the law on succession. Kinds of Conditions 1. Potestative Condition – depends exclusively upon the will of the heir, devisee, or legatee, and must be performed by him personally. 2. Causal Condition –depends upon the will of the heir, devisee, or legatee, but upon the will of a third person. 3. Mixed – depends jointly upon the will of the heir, devisee, or legatee and upon chance and/or will of a third person. Fulfillment of Conditions: 1. Potestative Conditions must be fulfilled after the death of the testator (except when it has already been fulfilled and is of such nature that it cannot be repeated); 2. Causal or mixed conditions may be fulfilled either before or after such death, unless the testator has provided otherwise.

MODAL INSTITUTION (INSTITUCION SUB MODO)  Attachment by the testator to an institution of heir, or to a devise or legacy, of a statement of the: a. object of the institution;

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Memory aid in Civil Law with 2015 updates b. application of the property left by testator; or c. charge imposed by him. NOTES:  When in doubt as to whether there is a condition or merely a mode, consider the same as mode.  When in doubt as to whether there is a mode or merely a suggestion, consider same only as a suggestion.  The ‘condition’ suspends but does not obligate; the ‘mode’ obligates but does not suspend (for he who inherits with a mode is already an heir; one who inherits conditionally is not yet an heir) DOCTRINE of CONSTRUCTIVE FULFILLMENT: When without the fault of the fault of the heir, an institucion sub modo 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. NOTE:  If the condition is casual, the doctrine is not applicable since the fulfillment of the event which constitutes the condition is independent of the will of the heir, devisee/legatee. If the condition is potestative or mixed, the doctrine is applicable. LEGITIMES (ARTS 886 – 914) LEGITIME 1. 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. 2.

The course of action to enforce a legitime accrues upon the death of the donor-decedent since it is only then that the net estate may be ascertained and on which basis, the legitime may be determined. (Imperial vs. CA 316 SCRA 313)

NOTE: One half of the estate is always reserved for the primary or secondary compulsory heirs. The other half is what is termed under the NCC as the “free portion” from which the legitime of the concurring compulsory heirs are taken. This “free portion” is different from the “disposable free portion” over which the testator has testamentary control. The “disposable free portion” is that which remains after the legitime has been covered. COMPULSORY HEIRS (CH)  Those for whom the legitime is reserved by law, and who succeed whether the testator likes it or not. They cannot be deprived by the testator of their legitime except by disinheritance properly effected. Kinds of Compulsory Heirs: 1. Primary – those who have precedence over and exclude other CH. E.g. LCD. 2. Secondary – those who succeed only in the absence of the primary CH. E.g. LPA or IP. 3. Concurring – those who succeed together with the primary or secondary CH. E.g. ICD and SS. If the testator is a LEGITIMATE person 1. Legitimate children descendants (LCD)

and

If the testator is an ILLEGITIMATE person 1. Legitimate children descendants (LCD)

2. In default of the foregoing, legitimate parents and ascendants (LPA)

1.

3.

3. In default of the foregoing, illegitimate parents only (IP)

Surviving spouse (SS)

4. Illegitimate descendants (ICD)

children

and

4.

Illegitimate children descendants (ICD)

and and

Surviving spouse (SS)

NOTES:  See Sections 17 & 18 of R.A. 8552.  By force of the Family Code, adopted children are deemed legitimate children of the adopters.  By force of the Family Code, IC without distinction and so long as their filiation is duly established or proved in accordance with law, are each entitled to 1/2 of the legitime of a LC, thus abrogating the 5:4 ratio between “natural” and “non-natural” IC. RULES: 1. Direct descending line a. Rule of preference between lines b. Rule of proximity c. Right of representation ad infinitum in case of predecease, incapacity, or disinheritance (LC: LD only; IC: both LD and ID)

Memory aid in Civil Law with 2017 updates d. 2. 3.

If all the LC repudiate their legitime, the next generation of LD succeed in their own right

Direct ascending line a. Rule of division by lines b. Rule of equal division Non-impairment of legitime

TABLE OF LEGITIMES SURVIVOR LC

LEGITIME ½

SS 1 LC SS 2 or more LC SS LC IC LC SS IC

½ ½ ¼ ½ equal to 1 LC ½ ½ of 1 LC ½ ¼ ½ of 1 LC

LPA

½

LPA IC LPA SS LPA SS IC IC SS IC SS

½ ¼ ½ ¼ ½ 1/8 ¼ ½ 1/3 1/3 ½

IP

½

NOTES Divide by the # of LC, whether they survive alone or with concurring CH. Note: share of SS to be taken from free portion. Note: share of SS to be taken from free portion.

All the concurring CH get from the half free portion, the share of the SS having preference over that of the IC, whose share may suffer reduction pro rata because there is no preference among themselves. Whether they survive alone or with concurring CH. IC succeed in the ¼ in equal shares.

Divide equally among the IC. 1/3 if marriage is in articulo mortis and deceased spouse dies within 3 mos. after the marriage. ½ if been living together for at least 5 years 0 if spouse gave reason for legal separation

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IP Any child

-excludedIt depends

Children inherit in the amounts established in the foregoing rules.

IP SS

¼ ¼

Only the parents of IC are included. Grandparents and other ascendants are excluded.

STEPS IN DETERMINING THE LEGITIME OF COMPULSORY HEIRS: 1. Determination of the gross value of the estate at the time of the death of the testator; 2. Determination of all debts and charges which are chargeable against the estate; 3. Determination of the net value of the estate by deducting all the debts and charges from the gross value of the estate; 4. Collation or addition of the value of all donations inter vivos to the net value of the estate; 5. Determination of the amount of the legitime from the total thus found; 6. Imputation of the value of all donations inter vivos made to compulsory heirs against their legitime and of the value of all donations inter vivos made to strangers against the disposable free portion and restoration to the hereditary estate if the donation is inofficious; and 7. Distribution of the residue of the estate in accordance with the will of the testator COLLATION 1. Fictitious mathematical process of adding the value of the thing donated to the net value of the hereditary estate (Art. 908 and Arts. 1061-1077). 2. Act of charging or imputing such value against the legitime of the compulsory heir to whom the thing was donated (Arts. 1061-1077). 3. Actual act of restoring to the hereditary estate that part of the donation which is inofficious in order not to impair the legitime of compulsory heirs. RESERVA TRONCAL (ART 891)  The reservation by virtue of which an ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another ascendant or a brother or sister, is obliged to reserve such property for the benefit of relatives who are within the 3rd degree and who belong to the line from which such property came.  It constitutes as an exception to both the system of legitime and the order of intestate succession. Purposes: 1. To reserve certain property in favor of certain persons; 2. To prevent persons outside a family from acquiring, by some chance or accident, property which otherwise would have remained with the said family; 3. To maintain a separation between paternal and maternal lines. NOTE: Considering the rationale for reserva troncal which is to ultimately revert ownership of property that originally belongs to a line of relatives but which by force of law passes to a different line, the reserva would have no reason to arise where the ascendants who acquire the property themselves belong to the line of relatives from which the property was, in turn, acquired by the descendant. Requisites: 1. The property should have been acquired by operation of law by an ascendant (reservista) from his descendant (propositus) upon the death of the latter. 2. The property should have been previously acquired by gratuitous title by the descendant (propositus) from another ascendant or from a brother or sister (originator). 3. The descendant (propositus) should have died without any legitimate issue in the direct descending line who could inherit from him. Personal elements: 1. Originator – the ascendant, or brother or sister from whom the propositus had acquired the property by gratuitous title (e.g. donation, remission, testate or intestate succession); 2. Propositus – the descendant who died and from whose death the reservista in turn had acquired the property by operation of law (e.g. by way of legitime or intestate succession). The so-called “arbiter of the fate of the reserva troncal.” 3.Reservista – the ascendant, not belonging to the line from which the property came (Justice Vitug) that is the only compulsory heir and is obliged to reserve the property. NOTE: Dr. Tolentino is of the view that even if the reservista and the originator belong to the same line, there is still an obligation to reserve. 4.Reservatarios – the relatives of the propositus within the 3rd degree and who belong to the line from which the property came and for whose benefit the reservation is constituted. They must be related by blood not only to the propositus but also to the originator. NOTE: All personal elements must be joined by bonds of legitimate relationship.

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NOTE: In determining the right of the reservatarios over the reservable property, there are 2 events to consider: 1. Death of propositus: all qualified reservatarios acquire an inchoate right. Reservista owns the property subject to a resolutory condition. 2. Death of reservista: surviving reservatarios acquire a perfect right. NOTE: The NCC did not provide for the rules on how the reservatarios would succeed to the reservista. However, the following rules on intestacy have been consistently applied: a. Rule of preference between lines b. Rule of proximity c. Right of representation (provided that the representative is a relative of the descendant- propositus within 3rd degree, and that he belongs to the line from which the reservable property came) d. “Full blood/double share” rule in Art. 1006  Property subject to reservation: must be the same property which the reservista had acquired by operation of law from propositus upon the death of the latter and which the latter, in turn had acquired by gratuitous title during his lifetime from another ascendant, brother/sister. Obligations of Reservista: (1) To make an inventory of all reservable property; (2) To appraise value of all reservable movable property; (3) To annotate in Registry of property the reservable character of all reservable immovable property; (4) To secure by mortgage (a) restitution of movables not alienated, (b) payment of damages caused by his fault or negligence, (c) return of price received for movables alienated and (d) payment of value of immovable alienated.  A reservatorio may dispose of his expentancy to the reservable property during pendency of the reserve in its uncertain and conditional form. If he dies before the reservista, he has not transmitted anything, but if he survives such reservista, the transmission shall become effective.  A will may prevent the constitution of a reserva. In case of testate succession, only the legitime passes by operation of law. The propositus may, by will, opt to give the legitime of his ascendant without giving to the latter properties he had acquired by gratuitous title from another ascendant, or brother or sister. In such case, a reserva troncal is avoided. However, if the ascendant was not disentitled in the will to receive such properties, the reserva minima rule (proportional reserva) should be followed. The rule holds that all property passing to the reservista must be considered as passing partly by operation of law and partly by will of the propositus. Thus, one half of the properties acquired by gratuitous title should be reservable, and the other half should be free. Causes for Extinguishment of Reserva Troncal: 1. Death of reservatarios; 2. Death of all relatives of propositus within the 3rd degree who belong to the line from which the property came; 3. Loss of the reservable property for causes not due to the fault or negligence of the reservista. 4. Waiver or renunciation by the reservatarios; 5. Prescription of the right of the reservatarios, when the reservista holds the property adversely against them in the concept of an absolute owner; 6. Registration by the reservista of the property as free property under the Land Registration Act M. DISINHERITANCE (ART 915 – 923)  A testamentary disposition by which a person is deprived of, or excluded from, the inheritance to which he has a right.  A disinheritance properly effected totally excludes the disinherited heir from the inheritance. The disinherited heir is deprived not only of the legitime but also of such part of the free portion that would have passed to him by a previous will (which is revoked, as inconsistent with, the subsequent disinheritance) or by intestate succession. Requisites: 1. Effected only through a valid will; 2. For a cause expressly stated by law; 3. Cause must be stated in the will itself; 4. Cause must be certain and true; 5. Unconditional; 6. Total; and 7. The heir disinherited must be designated in such a manner that there can be no doubt as to his identity. Effects of Disinheritance: 1. Deprivation of the compulsory heir who is disinherited of any participation in the inheritance including the legitime. 2. The children/descendants of the person disinherited shall take his or her place and shall preserve the rights of compulsory heirs with respect to the legitime.

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The disinherited parent shall not have the usufruct or administration of the property which constitutes the legitime.

IMPERFECT DISINHERITANCE  A disinheritance which does not have one or more of the essential requisites for its validity.  Effects: 1. If testator had made disposition of the entire estate: annulment of the testamentary dispositions only in so far as they prejudice the legitime of the person disinherited; does not affect the dispositions of the testator with respect to the free portion. 2. If testator did not dispose of the free portion: compulsory heir is given all that he is entitled to receive as if the disinheritance has not been made, without prejudice to lawful dispositions made by the testator in favor of others. 3. Devises, legacies and other testamentary dispositions shall be valid to such extent as will not impair the legitime. PRETERITION

DISINHERITANCE

1. deprivation of a compulsory heir of his legitime is tacit

1. deprivation of a compulsory heir of his legitime is express.

2. may be voluntary but the law presumes that it is involuntary

2. always voluntary.

3. law presumes that there has been merely an oversight or mistake on the part of the testator.

3. done with a legal cause.

4. omitted heir gets not only his legitime but also his share in the free portion not disposed of by way of legacies/ devises.

4. if disinheritance is not lawful, compulsory heir is merely restored to his legitime.

Common Causes for Disinheritance of children or descendants, parents or ascendants, and spouse: 1. When the heir has been found guilty of an attempt against the life of the testator, his/her descendants or ascendants, and spouse in case of children and parents; 2. When the heir has accused the testator of a crime for which the law prescribes imprisonment for 6 years or more, if the accusation has been found groundless; 3. When the heir by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made; 4. Refusal without justifiable cause to support the testator who disinherits such heir. Peculiar Causes for Disinheritance 1. Children/Descendants: a. When the child/descendant has been convicted of adultery or concubinage with the spouse of the testator; b. Maltreatment of the testator by word or deed by the child/descendant; c. When the child/descendant leads a dishonorable or disgraceful life; Conviction of a crime which carries with it a penalty of civil interdiction. 2.

Parents/Ascendants: a. When the parents have abandoned their children or induced their daughters to live a corrupt or immoral life, or attempted against their virtue; b. When the parent/ascendant has been convicted of adultery or concubinage with the spouse of the testator; c. Loss of parental authority for causes specified in the Code; and d. Attempt by one of the parents against the life of the other, unless there has been reconciliation between them. 3. Spouse: a. When the spouse has given cause for legal separation; When the spouse has given grounds for the loss of parental authority. Revocation of Disinheritance: 1. Reconciliation; 2. Subsequent institution of the disinherited heir; and 3. Nullity of the will which contains the disinheritance. NOTE: Once disinheritance has been revoked or rendered ineffectual, it cannot be renewed except for causes subsequent to the revocation or based on new grounds. RECONCILIATION  It is the resumption of genuine cordial relationship between the testator and the disinherited heir, approximating that which prevailed before the testator learned of the cause for disinheritance, reciprocally manifested by their actions subsequent to the act of disinheritance.

Memory aid in Civil Law with 2017 updates 

A subsequent reconciliation between the offender and the offended person deprives the latter of the right to disinherit, and renders ineffectual any disinheritance that may have been made. (Art. 922)

NOTES:  Mere civility which may characterize their relationship, a conduct that is naturally expected of every decent person, is not enough.  In order to be effective, the testator must pardon the disinherited heir. Such pardon must specifically refer to the heir and to the acts causing the disinheritance. The heir must accept the pardon.  No particular form is required. It may be made expressly or tacitly. NOTE: Where the cause for disinheritance is likewise a ground for unworthiness to succeed, what is the effect of a subsequent reconciliation upon the heir’s capacity to succeed? 1. If disinheritance has been made: Rule on reconciliation applies. The disinheritance becomes ineffective. 2. If disinheritance has not been made: Rule on reconciliation does not apply. The heir continues to be incapacitated to succeed unless pardoned by the testator under Art. 1033. The law effects the disinheritance. N. LEGACIES AND DEVISES (ARTS. 924 – 959) Persons charged with legacies and devises: (1) compulsory heir; (2) voluntary heir; (3) legatee or devisee; (4) estate NOTES:  If the will is silent with regard to the person who shall pay or deliver the legacy/devise, there is a presumption that such legacy or devise constitutes a charge against the decedent’s estate.  Since legacies and devises are to be taken from the disposable free portion of the estate, thus, the provisions on institution of heirs are generally applicable to them.

STATUS OF PROPERTY GIVEN BY LEGACY/DEVISE 1. Belonging to the testator at the time of the execution of the will until his death

EFFECT ON THE LEGACY/DEVISE Effective

2. Belonging to the testator at the time of the execution of the will but alienated in favor of a 3rd person

Revoked

3. Belonging to the testator at the time of the execution of the will but alienated in favor of the legatee/devisee gratuitously

No revocation. There is a clear intention to comply with legacy or devise.

4. Belonging to the testator at the time of the execution of the will but alienated in favor of the legatee or devisee onerously

Legatee/devisee can demand reimbursement from the heir or estate

5. Not belonging to the testator at the time the will is executed but he has ordered that the thing be acquired in order that it be given to the legatee/devisee 6. Not belonging to the testator at the time the will is executed and the testator erroneously believed that the thing pertained to him 7. Not belonging to the testator at the time the will is executed but afterwards becomes his by whatever title 8. Already belonged to the legatee/devisee at the time of the execution of the will even though another person may have interest therein

Effective

Void Effective

Ineffective

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ART. 911 ART. 950 9.Order Already belonged to the legatee or devisee of preference: (LIPO) Order of preference: (RPSESO) at the time of the execution of the will even Ineffective though it may have been subsequently alienated by him 1. Legitime of compulsory heirs 1. Remuneratory L/D 2. Donations inter vivos 2.Preferential L/D 3. Preferential or devices 3.L forLegatee/devisee support 10.Testator had legacies knowledge that the thing can claim nothing 4. All otherbelonged legacies to or adevices pro 4.L education bequeathed third person and forby virtue of the legacy/devise 5.L/D of a specific, determinate thing the rata legatee/devisee acquired the property gratuitously after the execution of the will which forms a part of the estate All others pro rata Application: Application: 11.Testator had knowledge that the thing Legatee/devisee can demand (1) When belonged the reduction is necessary there are no from compulsory heirsor bequeathed to a third person and(1) the When reimbursement the heir to preserve the legitime of and the entire estate is distributed by the legatee/devisee acquired the property by estate compulsory onerous title heirs from impairment testator as legacies or devises; or whether there are IMPERFECT DISINHERITANCE donations inter vivos or not; or (2) When, the legitimemay has 1. Thealthough, person disinherited been preserved by the testator be any compulsory heir himself there are donations inter vivos. 2. Always express

PRETERITION (2) When there are compulsory heirs but already been 1.their Thelegitime person has omitted must be provided a for by theheir testator and there compulsory in the direct line are no donations inter vivos. 2. Always implied

3.Always intentional

3. May be unintentional

intentional

or

4. Effect: Partial annulment of institution of heirs

4. Effect: Total annulment of institution of heirs

NOTES:  In case of reduction in the above cases, the inverse order of payment should be followed.  When the question of reduction is exclusively among legatees and devisees themselves, Article 950 governs; but when there is a conflict between compulsory heirs and devisees and legatees, Article 911 applies. GROUNDS FOR REVOCATION OF LEGACIES AND DEVISES (ART 957) 1. Testator transforms the thing bequeathed in such a manner that it does not retain either the form or the denomination it had.

Memory aid in Civil Law with 2017 updates 2. 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 alienated. Except: when the thing should again belong to the testator after alienation. 3. Thing bequeathed is totally lost during the lifetime of the testator, or after his death without the heirs fault 4. Other causes: nullity of the will; noncompliance with suspensive conditions affecting the bequests; sale of the thing to pay the debts of the deceased during the settlement of his estate. NOTE: LIST IS NOT EXCLUSIVE

II. LEGAL OR INTESTATE SUCCESSION  That which is effected by operation of law in the absence or default of a will. CAUSES OF INTESTACY 1. If a person dies without a will, or with a void will, or one which has subsequently lost its validity; 2. Absence of an institution of heir; 3. Partial institution of heir. In such case, intestacy takes place as to the undisposed portion (mixed succession); 4. Non-fulfillment of suspensive condition attached to the institution of heir; 5. Predecease of the instituted heir; 6. Repudiation by the instituted heir; 7. Incapacity of instituted heir; 8. Preterition. Intestacy may be total or partial depending on whether or not there are legacies/devises; 9. Fulfillment of resolutory condition; 10. Expiration of term or period of institution; 11. Non-compliance or impossibility of compliance with the will. NOTE: In all cases where there has been an institution of heir, follow the I.S.R.A.I. order of Justice Paras. If the Institution fails, Substitution occurs. If there is no substitute, the right of Representation applies in the direct descending line to the legitime if the vacancy is caused by predecease, incapacity, or disinheritance. The right of Accretion applies to the free portion when the requisites in Art. 1016 are present. If there is no substitute, and the right of Representation or Accretion does not apply, the rules on Intestate succession shall take over. A. RULES 1. Rule of Preference between lines  Those in the direct descending line shall exclude those in the direct ascending and collateral lines, and those in the direct ascending line shall, in turn, exclude those in the collateral line. 2. Rule of Proximity  The relative nearest in degree excludes the more distant ones, saving the right of representation when it properly takes place.  This rule is subject to the rule of preference between lines. 3. Rule of Equal Division  Relatives in the same degree shall inherit in equal shares.  EXCEPTIONS: a) Division in the ascending line (between paternal and maternal grandparents); b) Division among brothers and sisters, some of whom are of the full and others of half blood; and c) Division In cases where the right of representation takes place. NOTE: This rule is subject to the rule of preference between lines. 4. Rule of Barrier between the legitimate family and the illegitimate family  The illegitimate family cannot inherit by intestate succession from the legitimate family and vice-versa. 5. Rule of Double Share for full blood collaterals  When full and half-blood brothers or sisters, nephews or nieces, survive, the full blood shall take a portion in the inheritance double that of the half-blood. NOTE: In case of a disposition made in general terms under Article 959, only the Rule of Proximity applies. B. RELATIONSHIP (ARTS. 963 – 969) 1. Number of generations determines proximity. 2. Each generation forms a degree. 3. A series of degrees forms a line. 4. A line may be direct or collateral. A direct line is that constituted by the series of degrees among ascendants and descendants (ascending and descending).

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Memory aid in Civil Law with 2015 updates 5. 6. 7.

A collateral line is that constituted by the series of degrees among persons who are not ascendants or descendants, but who come from a common ancestor. Full blood: same father and mother; half blood: only one of either parent is the same. In adoption, the legal filiation is personal and exists only between the adopter and the adopted. The adopted is deemed a legitimate child of the adopter (AP), but still remains as an intestate heir of his natural parents and other blood relatives.

C. RIGHT OF REPRESENTATION (RR) (ARTS. 970 – 977)  A right created by fiction of law, by virtue of which the representative is raised to the place and degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited. The representative is called to the succession by the law not by the person represented. He succeeds the one whom the person represented would have succeeded. NOTES:  In the direct line, representation takes place ad infinitum in the direct descending line, never in the ascending.  In the collateral line, representation takes place only in favor of the children of brothers or sisters (nephews and nieces), whether of the full or half-blood, and only if they concur with at least 1 uncle or aunt. 1.Testamentary Succession a) When a compulsory heir in the direct descending line had predeceased the testator and was survived by his children or descendants. b) When a compulsory heir in the direct descending line is excluded from the inheritance due to incapacity or unworthiness and he has children or descendants. c) When a compulsory heir in the direct descending line is disinherited and he has children or descendants; representation covers only the legitime. d) A legatee/devisee who died after the death of the testator may be represented by his heirs. Note: There is no representation for those who repudiates! 2.Intestate Succession a) When a legal heir in the direct descending line had predeceased the decedent and was survived by his children or descendants. b) When a legal heir in the direct descending line is excluded from the inheritance due to incapacity or unworthiness and he has children or descendants. c) When brothers or sisters had predeceased the decedent and they had children or descendants. d) When illegitimate children represent their illegitimate parents who already died in the estate of their grandparents. e) When nephews and nieces inherit together with their uncles and aunts in representation of their deceased parents who are the brothers or sisters of said uncles and aunts. D. INTESTATE OR LEGAL HEIRS  Those who are called by law to the succession either in the absence of a will or of qualified heirs, and who are deemed called based on the presumed will of the decedent. REGULAR ORDER OF SUCCESSION (Decedent is a legitimate person): 1. Legitimate children or descendants (LCD) 2. Legitimate parents or ascendants (LPA) 3. Illegitimate children or descendants (ICD) 4. Surviving spouse (SS) 5. Brothers and sisters, nephews and nieces (BS/NN) 6. Other collateral relatives within the 5th degree (C5) 7. State IRREGULAR ORDER OF SUCCESSION (Decedent is an illegitimate person): 1. Legitimate children or descendants (LCD) 2. Illegitimate children or descendants (ICD) 3. Illegitimate parents (IP) 4. Surviving spouse (SS) 5. Brothers and sisters, nephews and nieces (BS/NN) 6. State ORDER OF CONCURRENCE 1. LCD, ICD, and SS 2. LPA, ICD, and SS 3. ICD and SS 4. SS and IP 5. BS/NN and SS 6. C5 (alone) 7. State (alone)

Memory aid in Civil Law with 2017 updates

TABLE OF INTESTATE SHARES SURVIVOR Any class alone

INTESTATE SHARE Entire estate

1 LC SS 2 or more LC SS LPA SS LPA SS IC IP SS

½ ½ Consider SS as 1 LC, then divide estate by total number. ½ ½ ½ 1/4 1/4 ½ ½ (The law is silent. Apply concurrence theory.) ½ ½ First, satisfy legitimes. Estate would be insufficient. Reduction must be made according to the rules on legitimes. The legitimes of LCD and SS shall always be first satisfied in preference to the ICD. First, satisfy legitimes. There would be an excess in the estate. Distribute such excess in the proportion 1:2:2, in accordance with the concurrence theory.

SS BS/NN 1 LC (1/2) SS (1/4) IC (1/4) 2 or more LC SS IC

CARDINAL PRINCIPLES OF INTESTATE SUCCESSION (Justice Paras) 1. Even if there is an order of intestate succession, the Compulsory Heirs (CH) are never excluded. The Civil Code follows the concurrence theory, not the exclusion theory. 2. Right of Representation (RR) in the collateral line occurs only in intestate succession, never in testamentary succession because a voluntary heir cannot be represented (collateral relatives are not CH). 3. The intestate shares are either equal to or greater than the legitime. GENERAL RULE: Grandchildren always inherit by RR, provided representation is proper. EXCEPTION: Whenever all the children repudiate, the grandchildren inherit in their own right because RR would not be proper. 4. Nephews and nieces inherit either by RR or in their Own Right (OR). a. RR: when they concur with aunts and uncles (provided that RR is proper) b. OR: when they do not concur with aunts and uncles. 5. ICD of legitimates cannot represent because of the barrier, but both the ICD and LCD of illegitimates can. 6. There can be reserva troncal in intestate succession. 7. A renouncer can represent, but cannot be represented. 8. A person who cannot represent a near relative cannot also represent a relative farther in degree. III. MIXED SUCCESSION OR PARTIAL INTESTACY 

Succession that is effected partly by will and partly by operation of law.

RULES:

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Memory aid in Civil Law with 2015 updates 1. 2.

3. 4.

The law of legitimes must be brought into operation in partial intestacy, because the testamentary dispositions can affect only the disposable free portion but never the legitimes. If among the concurring intestate heirs there are compulsory heirs, whose legal or intestate portions exceed their respective legitimes, then the amount of the testamentary disposition must be deducted from the disposable free portion, to be borne by all the intestate heirs in the proportions that they are entitled to receive from such disposable free portion as intestate heirs. If the intestate share of a compulsory heir is equal to his legitime, then the amount of the testamentary disposition must be deducted only from the intestate shares of the others, in the proportions stated above. If the testamentary dispositions consume the entire disposable free portion, then the intestate heirs who are compulsory heirs will get only their legitime, and those who are not compulsory heirs will get nothing.

IV. PROVISIONS COMMON TO TESTAMENTARY AND INTESTATE SUCCESSIONS A. RIGHT OF ACCRETION (A) (ARTS 1015 – 1023)  A right by virtue of which, when two or more persons are called to the same inheritance, devise or legacy, the part assigned to one who renounce or cannot receive his share, or who died before testator, is added or incorporated to that of his co-heirs, co-devisees, or co-legatees.  A right based on the presumed will of the deceased that he prefers to give certain properties to certain individuals, rather than to his legal heirs. Requisites: 1. 2 or more persons must have been called to the same inheritance, legacy or devise, or to the same portion thereof, pro indiviso; and 2. there must be a vacancy in the inheritance, legacy or devise (caused by predecease, incapacity, repudiation, nonfulfillment of suspensive condition or void or ineffective testamentary dispositions.) EFFECTS of PREDECEASE, INCAPACITY, DISINHERITANCE, or REPUDIATION in both TESTAMENTARY and INTESTATE SUCCESSION CAUSE VACANCY

OF

TESTAMENTARY SUCCESSION Legitime Free Portion

INTESTATE SUCCES-SION (IS)

1. RR 2. IS 1.RR 2.IS

1. A 2. IS 1. A 2. IS

1. RR 2. IS 1.RR 2.IS

Disinheritance

1.RR 2.IS

_

_

Repudiation

IS

A

A

Predecease Incapacity

Summary: (A) In testamentary succession: (1) Legitime: (a) In case of predecease of an heir, there is representation if there are children or descendants; if none, the others inherit in their own right. (b) In case of incapacity, results are the same as in predecease. (c) In case of disinheritance, results are the same as in predecease. (d) In case of repudiation by an heir, the others inherit in their own right. (2) Disposable free portion: Accretion takes place when requisites are present; but if such requisites are not present, the others inherit in their own right. (B) In intestate succession: (1) In case of predecease, there is representation if there are children or descendants; if none, the others inherit in their own right. (2) In case of incapacity, results are the same as in predecease. (3) In case of repudiation, there is always accretion. B. CAPACITY TO SUCCEED BY WILL OR BY INTESTACY (ARTS. 1024 – 1040) Requisites:

Memory aid in Civil Law with 2017 updates 1. The heir, legatee/devisee must be living or in existence at the moment the succession opens; and 2. He must not be incapacitated or disqualified by law to succeed. THE FOLLOWING ARE INCAPABLE OF SUCCEEDING: A. Based on Undue Influence or Interest: (PIGRAP) 1. 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. Individuals, associations and corporations not permitted by law to inherit; 3. Guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the 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. Relatives of such priest or minister of the gospel within the 4th degree, the church, order, chapter, community, organization or institution to which such priest or minister may belong; 5. Attesting witness to the execution of a will, the spouse, parents or children, or any one claiming under such witness, spouse, parents or children; and 6. Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness. B. Based on Morality or Public Policy (ART 739) 1. Those made in favor of a person with whom the testator was guilty of adultery or concubinage at the time of the making of the will. 2. Those made in consideration of a crime of which both the testator and the beneficiary have been found guilty. 3. Those made in favor of a public officer or his spouse, descendants and ascendants, by reason of his public office C. Based on Acts of Unworthiness (A4F3P) 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/her spouse, descendants or ascendants; 3. Any person who has accused the testator of a crime for which the law prescribes imprisonment for 6 years or more, if the accusation has been found groundless; 4. Any person convicted of adultery or concubinage with the spouse of the testator; 5. 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; 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 falsifies or forges a supposed will of the decedent; and 8. 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. NOTE: The moment the testator uses one of the acts of unworthiness as a cause for disinheritance, he thereby submits it to the rules on disinheritance. Thus, reconciliation renders the disinheritance ineffective.

PARDON OF ACTS OF UNWORTHINESS EXPRESS 1. made by the execution of a document or any writing in which the decedent condones the cause of incapacity

IMPLIED 1. effected when testator makes a will instituting the unworthy heir with knowledge of the cause of incapacity

2. cannot be revoked

2. revoked when the testator revokes the will or the institution

C. ACCEPTANCE AND REPUDIATION OF INHERITANCE (ARTS. 1041 – 1057) Characteristics: (VIR) 1. Voluntary and free 2. Irrevocable, except if there is vitiation of consent or an unknown will appears 3. Retroactive Requisites: 1. certainty of the death of the decedent 2. certainty of the right to the inheritance

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Memory aid in Civil Law with 2015 updates Acceptance vs. Repudiation: (1) Acceptance involves the confirmation of transmission of successional rights, while repudiation renders such transmission ineffective. (2) Repudiation is equivalent to an act of disposition and alienation. (3) The publicity required for repudiation is necessary for the protection of other heirs and also of creditors. Form of Acceptance 1. Express Acceptance – one made in a public or private document. 2. Tacit Acceptance – one resulting from acts by which the intention to accept is necessarily implied or which one would have no right to do except in the capacity of an heir Tacit acceptance is presumed from certain acts of the heir as: 1. When heir sells, donates, or assigns his right. 2. When heir renounces it for the benefit of one or more heirs. 3. When renunciation is in favor of all heirs indiscriminately for consideration 4. Other acts of tacit acceptance a. heir demands partition of the inheritance b. heir alienates some objects of the inheritance c. Under Art 1057, failure to signify acceptance or repudiation within 30 days after an order of distribution by the probate court.  REPUDIATION must be made in a public instrument (acknowledged before a notary public) or authentic document (equivalent of an indubitable writing or a writing whose authenticity is admitted or proved) or by petition presented to the court having jurisdiction over the testamentary or intestate proceeding.

 Reason for formality: Law considers that the act of repudiation is more solemn than the act of acceptance and that repudiation produces a more violent and disturbing consequences.  Heir in two capacities: An heir who is such by will and by law, and he repudiates the inheritance as a testamentary heir, will be considered to have repudiated the inheritance as a legal heir. But when an heir repudiates as a legal heir, he may later on accept as a testamentary heir. D. COLLATION (ARTS. 1061-1077)  Every compulsory heir, who succeeds with other compulsory heirs must bring into the mass of the estate any property or right which he may 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 partition. (Art. 1061)  An act of returning or restoring to the common mass of the estate, either actually or fictitiously, any property which a person may have received from the decedent during the latter’s lifetime, but which is understood for legal purposes as an advance from inheritance. OPERATIONS RELATED TO COLLATION 1. Collation ¬¬– adding to the mass of the hereditary estate the value of the donation or gratuitous disposition 2. Imputing or Charging ¬¬¬¬– crediting the donation as an advance on the legitime (if the donee is a compulsory heir) or on the free portion (if the donee is a stranger) 3. Reduction – determining to what extent the donation will remain and to what extent it is excessive or inofficious. 4. Restitution ¬¬– return or payment of the excess to the mass of hereditary estate. Persons obliged to collate 1.  GENERAL RULE: compulsory heirs  EXCEPTIONS: a. When the testator should have so expressly provided; and b. When the compulsory heir should have repudiated his inheritance 2. Grandchildren who survive with their uncles, aunts, or 1st cousins, and inherit by right of representation. NOTE: Grandchildren may inherit from grandparent in their own right (i.e. heirs next in degree) and not by right of representation if their parent repudiates the inheritance of the grandparent, as no living person can be represented except in cases of disinheritance and incapacity. In such case grandchildren are not obliged to bring to collation what their parent has received gratuitously from their grandparent) What to collate: 1. Any property or right received by gratuitous title during the testator’s lifetime 2. All that they may have received from the decedent during his lifetime 3. All that their parents would have brought to collation if alive Properties not subject to collation (2nd concept):

Memory aid in Civil Law with 2017 updates 1. Absolutely no collation (all concepts): a. Expenses for support, education (elementary and secondary only), medical attendance, even in extraordinary illness, apprenticeship, ordinary equipment, or customary gifts (Art. 1067). 2. Generally not imputable to legitime: a. Expenses incurred by parents in giving their children professional, vocational or other career unless the parents so provide, or unless they impair the legitime. b. Wedding gifts by parents and ascendants consisting of jewelry, clothing, and outfit except when they exceed 1/10 of the sum disposable by will. E. PARTITION AND DISTRIBUTION OF ESTATE (ARTS. 1078 – 1105)  It is the separation, division and assignment of a thing held in common among those to whom it may belong. It includes every act which is intended to put an end to indivision among co-heirs, and legatees or devisees, although it should purport to be a sale, exchange, compromise, or any other transaction. It is not subject to any form. Who may effect partition: 1. decedent himself during his lifetime by an act inter vivos or by will; 2. heirs themselves; 3. competent court; 4. 3rd person designated by the decedent. Who can demand partition: 1. compulsory heir; 2. voluntary heir; 3. legatee or devisee; 4. any person who has acquired interest in the estate. When partition cannot be demanded: (PAPU) 1. when expressly prohibited by the testator himself for a period not exceeding 20 years; 2. when the co-heirs agreed that the estate shall not be divided for a period not exceeding 10 years, renewable for another 10 years; 3. when prohibited by law; 4. when to partition the estate would render it unserviceable for the use for which it is intended. Prohibition to Partition 1. The prohibition to partition for a period not exceeding 20 years can be imposed on the legitime. 2. If the prohibition to partition is for more than 20 years, the excess is void. 3. Even if a prohibition is imposed, the heirs by mutual agreement can still make the partition. PARTITION INTER VIVOS (ART 1080)  It is one that merely allocates specific items or pieces of property on the basis of the pro-indiviso shares fixed by law or given under the will to heirs or successors. NOTE: Partition is not itself a mode of acquiring ownership, nor a title therefore. This partition, being predicated on succession, necessitates relationship to the decedent (in case of intestacy) or a will duly probated (in case of testacy). A partition inter vivos made in favor of intestate heirs could be operative. Dispositions, however, to non-intestate heirs may suffer an impediment unless based on a valid will, except perhaps when such dispositions are intended to take effect during the life of the testator and the formalities of donations are properly complied with. EFFECTS OF INCLUSION OF INTRUDER IN PARTITION: 1. Between a true heir and several mistaken heirs – partition is VOID. 2. Between several true heirs and a mistaken heir – transmission to mistaken heir is VOID. 3. Through error or mistake, share of true heir is allotted to mistaken heir – partition shall not be rescinded unless there is bad faith or fraud on the part of the other persons interested, but the latter shall be proportionately obliged to pay the true heir of his share NOTE: partition with respect to the mistaken heir is VOID. A VOID WILL MAY BE A VALID PARTITION: 1. If the will was in fact a partition; and 2. If the beneficiaries in the void will were legal heirs.

Private International Law or Conflict of Laws  That part of the Municipal Law of a State which directs its courts and Administrative agencies, when confronted with a legal problem involving a foreign element, whether or not they should apply a foreign law or foreign laws. Elements: (1) Conflict of Laws is part of the municipal law of the State; (2) There is a directive to courts and administrative agencies; (3) There is a legal problem involving a foreign element; and (4) There is either an application or non-application of a foreign law or foreign laws.

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Memory aid in Civil Law with 2015 updates Nature of Conflicts Rules: It is a part of the national law of every state. NOTE: A factual situation that cuts across territorial lines and is affected by diverse laws of two or more States is said to contain a foreign element.  Functions: 1. To provide rules in deciding cases where either the parties, events or transactions are linked to more than one state jurisdiction; 2. To promote stability and uniformity of remedies / solutions regardless of place of suit. PRIVATE International Law As to nature or character 1. International in National, municipal character as it or local in character applies in the international sphere As to sources 2. Custom, treaty Generally derived and general from the internal law principles of law of each state; except recognized by any conflict of laws civilized nations and question which is juridical decisions governed by a treaty and teachings of the (e.g. Hague most highly Convention on the qualified publicists Conflicts of law relating to the Form of Testamentary Dispositions) most highly Hague Convention qualified publicists on the Conflicts of law relating to the Form of Testamentary Dispositions) As to applicability 3. Governs rights Deals with rights and obligations of and obligations of States and their private individuals relationships among and their private themselves transactions which involve a foreign element As to persons involved 4. Governs only Governs individuals states and or corporations internationally recognized organizations As to transactions 5. Recognizes trans- Assumes control actions in which over transactions sovereign States are strictly private in interested nature As to remedies 6. In case of All remedies are violation of provided by International Law, municipal laws of the State may resort the State, such as to diplomatic resort to courts and protest, negotiation, administrative arbitration or tribunals adjudication by filing cases before international tribunals or may even resort to use of force or go to war  1. 2. 3. 4. 5.

Sources: Civil Codes of different countries Constitution which contains principles on nationality and comity Special statues (E.g. Corporation Code, General Banking Law, etc.) Treaties and International conventions Treatises, commentaries and studies of learned jurists

Memory aid in Civil Law with 2017 updates 6. 7.

Judicial decisions International customs

JURISDICTION I. JURISDICTION OVER THE PERSON  Acquired by the voluntary appearance of a party and his submission to authority or by service of summons. 1. Jurisdiction over the person of the plaintiff is acquired from the moment he invokes the aid of the court and voluntarily submits himself by institution of the suit through proper pleadings. 2. Jurisdiction over the person of the defendant is acquired through: a. voluntary appearance or b. personal or substituted service of summons (section 6 and 7 Rule 14 of the Revised Rules of Court) II. JURISDICTION OVER PROPERTY  Results either from the seizure of property under a legal process or from the institution of legal proceedings wherein the court’s power over the property is recognized and made effective.  This kind of jurisdiction is referred to as in rem jurisdiction in contrast to in personam jurisdiction  Another form of jurisdiction is quasi in rem which affects only the interests of particular persons in the thing. NOTE: Summons by publication is authorized in three cases: 1. If the action is in rem, or 2. quasi in rem, or 3. involves the personal status of the plaintiff Where the suit is in personam, jurisdiction over the defendant must be acquired by voluntary appearance or by personal/substituted service of summons. However, service by publication may be allowed in accordance with Sec 14, Rule 14 of Revised Rules of Court (defendant whose identity or whereabouts are unknown). Minimum Contacts Test and Fundamental Fairness Test  Due process requires only that in order to subject a defendant to a judgment in personam, if he is not present within the territory of the forum he should have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.  In both in rem and quasi-in rem, all that due process requires is that defendant be given adequate notice and opportunity to be heard which are met by service of summons by publication. Long-arm Statutes  Statutes which specify the kinds of contacts upon which jurisdiction will be asserted over a defendant outside of state territory. III. JURISDICTION OVER THE SUBJECT MATTER  The test of jurisdiction is whether or not the law vests upon the tribunal the power to enter upon the inquiry. WAYS OF DISPOSING OF CONFLICTS CASES: 1. Dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction pursuant to the doctrine of forum non conveniens; or 2. Assume jurisdiction over the case and apply the law of the forum; or 3. Assume jurisdiction over the case and apply foreign law.  Theory of Comity – the application of foreign legal systems in cases involving foreign element is proper because their non-application would constitute a disregard of foreign sovereignties, a lack of comity towards foreign states. Principle of forum non conveniens  A court may resist imposition upon its jurisdiction even when jurisdiction is authorized by law. The reason given for refusal to assume jurisdiction is that to do so would prove inconvenient for the forum.  1. a. b. c. d. e. 2. a. b.

In sustaining a plea of forum of non conveniens, public and private interests should be weighed: Private Interest of the litigant Ease of access to source of proof Availability of compulsory process for attendance of unwilling witnesses Cost of obtaining and attendance of willing witnesses Possibility of viewing the premises if appropriate Other practical problems that make trial of the case easy, expeditious and inexpensive Public Interest Administrative difficulties encountered when courts’ dockets are clogged Appropriateness of having the trial in a court familiar with the applicable state law.

GENERAL RULE: No rule of Private International Law would be violated if the courts should decide to dispose of all cases, whether domestic or conflicts cases, according to the internal law of the forum EXCEPTION: Where a foreign, sovereign, diplomatic official, or public vessel or property of another State is involved, or where a State has, by treaty, accepted limitations upon its jurisdiction over certain persons or things. INSTANCES JUSTIFYING THE APPLICATION OF INTERNAL LAW TO CONFLICTS CASES: 1. Where application of internal law is decreed;

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Memory aid in Civil Law with 2015 updates 2. Where there is failure to plead and prove foreign law; 3. Where a case involves any of the exceptions to the application of foreign law: a) When the enforcement of the foreign law would run counter to an important public policy of the forum; b) Where the application of the foreign law would infringe good morality; c) Where the foreign law is penal in nature; d) Where the foreign law is procedural in nature; e) When the question involves immovable property of the forum; f) Where the foreign law is fiscal or administrative in nature; g) Where the application of foreign law would involve injustice or injury to the citizens or residents of the forum; and h) Where the application of foreign law would endanger the vital interests of the State.

CHOICE OF LAW APPROACHES TO CHOICE OF LAW A. Traditional or Single-aspect method  theories which have traditionally concentra-ted on one element of a situation in order to connect a case to a particular legal community 1. Vested Rights Theory o Rights acquired in one country must be recognized and legally protected in other countries. The forum will not apply before a law but will simply recognize the right vested by said law. 2. Local Law Theory o In conflict problems, the court does not enforce a foreign law but a right created by its own law by treating a case as a purely domestic case that does not involve a foreign element. 3. Cavers' Principle of Preference o Choice of law should be determined by considerations of justice and social expediency and should not be the result of mechanical application of the rule or principle of selection. B. Modern or Multi-aspect method  approach where all the important factors of the case both territorial and non-territorial, are analyzed and the applicable law is arrived at by “rationally elaborating and applying the policies and purposes underlying the particular legal rules that come in question as well as the needs of the interstate or international intercourse.” 1. Place of the Most Significant Relationship  Adopts an approach which identifies a plura-lity of factors that must be considered in the light of choice of law principles. 2. Interest Analysis  Urges the resolution of conflict problems by looking at the policy behind the laws of the involved states and the interests each state had in applying its own law. 3. Comparative impairment  Calls for subordination of the state objective which would be least impaired. 4. Functional Analysis  Looks into the general policies of the states (beyond those reflected in its substantive laws) and to policies or values relating to effective and harmonious intercourse between states 5. Choice-influencing Considerations  Courts will prefer rules of law, whether they are forum law or another state’s law as long as they make “good socioeconomic sense for the time the court speaks” and are sound in view of present day conditions.  These are five major choice-influencing considerations which would lead the courts to the choiceof-law decisions in a given case: a. predictability of results; b. maintenance of interstate and international order; c. simplification of judicial task; d. application of better rule law; and e. advancement of forums interests. 6. Convenient Theory (forum conveniens)  the application of a foreign law in such a convenient forum, which implies a susbstantial connection with a given conflict problem “must be analytically understood as an exception from the basic rule calling for the application of the lex fori”. TEST FACTORS OR POINTS OF CONTACT  Circumstances which may serve as the possible test for the determination of applicable law  The most important of these points are the following: 1. The nationality of a person, his domicile, his residence, his place of sojourn, or his origin. 2. The seat of legal or juridical person, such as a corporation. 3. The situs of a thing, that is the place where the thing is, or is deemed to be situated. In particular, the lex situs is decisive when real rights are involved. 4. The place where an act has been done, the locus actus, such as the place where a contract has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly important in contracts and torts.

Memory aid in Civil Law with 2017 updates 5. The place where the act is intended to come into effect, the place of performance of contractual duties, or the place where the power of attorney is to be exercised 6. The intention of the contracting parties as to the law that should govern the agreement, the lex loci intentionis 7. The place where judicial and administrative proceedings are instituted or done. The lex fori – the law of the forum – because matters of procedure not going to the substance of the claim involved are governed by it; and because lex fori applies whenever the content of the otherwise applicable law is excluded from application in a given case for the reason that it falls under one of the exceptions to the application of the foreign law 8. The flag of the ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or owner as such. It also covers contractual relationships, particularly contracts of affreightment NOTE: The Philippines follows the Single-aspect method and our conflicts rules are mostly found in the Civil Code (Article 15, 16, 17). These rules specify the geographical location from where the governing law is found, consistent with the traditional approach to choice of law. The difficulty in following these territorially rigid rules is the inherent rigidity and unjust decisions that may result in its application. To avoid these, courts have resorted to characterization and renvoi which operate as “escape devices” CHARACTERIZATION  The process by which a court at the beginning of the choice of law process assigns a disputed question to the proper area in substantive law. Three stages in Characterization: 1. The problem of classification 2. The characterization of the “point of contact” or the “connecting factor” 3. The extent of the application of the law that is chosen as applicable to the conflicts case  2 Types of Characterization: 1. Subject Matter Characterization – calls for the classification of a factual situation into a legal category. 2. Substance-Procedure Dichotomy – directs to what extent the court will apply foreign law. NOTE: If issue is substantive, apply foreign law, but if procedural, forum law. I. a. b.

Statute of Frauds Substantive - if the words of the law relate to forbidding the obligation. Procedural - if the law forbids the enforcement of the obligation.\

II. Statute of Limitations and Borrowing Statutes 1. Statute of limitations a. Substantive - when the limitation was directed to the newly created liability specifically to warrant a qualification of the right (specificity test). b. Procedural - if it operates to bar only the legal remedy without impairing the substantive right involved.

2. Borrowing statute  directs the state of the forum to apply the foreign statute of limitations to the pending claims based on a foreign law NOTE: the characterization of a statute of limitation into procedural or substantive becomes irrelevant when the country of the forum has a borrowing statute. It has the practical effect of treating the foreign statute of limitation as one of substance. Depecage  The phenomenon where the different aspects of the case involving a foreign element may be governed by different systems of law.  Allows the other relevant interests of the parties to be addressed; permits the courts to arrive at a functionally sound result without rejecting the methodology of the traditional approach PROOF OF FOREIGN LAW 1. By pleading and proof a. Written law i. By official publication ii. Copy attested by officer having legal custody plus a certificate with seal from secretary of embassy, legation, consul general, consul, vice consul, consular agent or any officer in the foreign service of the Philippines stationed in the foreign country to the effect that said officer has custody (Section 24 Rule 132 of the Revised Rules of Court) b. Unwritten law – by testimony of experts or writings of jurists 2. Judicial Notice (when the laws are already within the actual knowledge of the court, such as when they are well and generally known or they have been actually ruled upon in other cases before it and none of the parties concerned claim otherwise PCIB vs. Escolin 56SCRA266) 3. To conclude that the parties who fail to introduce proof as to the content of a foreign law acquiesce to the application of the forum law.

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Memory aid in Civil Law with 2015 updates  proceeds from the theory that the basic law is the law of the forum and when the claimed applicable foreign law is not proved, then the court has no reason to displace the basic law 4. Presumption that the foreign law is the same as the law of the forum (Doctrine of Processual Presumption)

PERSONAL LAW  The law which governs persons, legal condition, capacity, civil status, etc. NOTE: Personal law governs a person wherever he goes. The personal law of an individual is either his national law or the law of his place of domicile.

A. Nationality Law Theory  The Philippines adheres to the nationality law theory. Article 15 of the Civil Code provides that Laws relating to family rights and duties, or to the status, condition, and legal capacity of persons are binding upon Filipino citizens, even though living abroad.  It is for each State to determine who are its nationals (Hague Convention). Thus, the Philippine Constitution enumerates those who are citizens of the Philippines.  Problems in Applying the Nationality Principle 1. Dual or Multiple Citizenship  This arises from the concurrent application of jus soli and jus sanguinis a. In matters of status, he is usually considered by the forum as exclusively its own national, his additional foreign nationality is disregarded b. In case the litigation arises in a third country, the law most consistently applied is that of the country of which the person is not only a national but where he also has his domicile or habitual residence, or in the absence thereof, his residence. NOTE: Hague Convention on Conflict of Nationality Laws formulated the following principle in Article 5: “… a third state shall, of the nationalities which any such person possesses, recognize exclusively in its territory either the nationality of the country of which he is habitually and principally resident, or the nationality of the country with which in the circumstances he appears to be in fact most closely connected.” 2. Statelessness  Stateless persons are generally subject to the law of their domicile or habitual residence, and in default thereof, to the law of their temporary residence.  A person may become stateless by the following means: a. Deprived of his citizenship for any cause, such as commission of a crime; b. Renounciation of one’s nationality by certain acts, express or implied; c. Voluntary release from his original state; d. If born in a country which recognizes only the principle of jus sanguinis of parents whose law recognizes only the principle of jus soli. NOTE: Convention on the Reduction of Statelessness adopted in 1961 mandates that the jus sanguini country grant its nationality to a person born within its territory if he would otherwise be stateless, and the jus soli country to extend its nationality to a person who would otherwise be considered stateless when one of his parents is a citizen of the contracting state. B. Domiciliary Theory  The individual’s private rights, condition, status, and capacity are determined by his physical location. NOTE: The forum determines domicile according to its own standards. General Rules on Domicile: 1. No person shall be without domicile 2. A person cannot have 2 simultaneous domiciles. 3. Every natural person, as long as he is free and sui juris, may change his domicile at pleasure. 4. Domicile once acquired is retained unless a new one is gained. 5. The presumption is in favor of the continuance of domicile. The burden of proof is on the one who alleges that a change of domicile has taken place. 6. To acquire a domicile a fresh domicile, residence and intention must concur; to retain an existing domicile, either residence there or intention to remain must be present; to abandon a domicile, residence in a new place and intention to abandon the old place must concur Legal Classification of Domicile 1. Domicile of origin  Person’s domicile at birth  Legitimate child’s domicile of origin is that of his father and an illegitimate child’s is that of his mother  Upon emancipation, the child may acquire a domicile of choice

Memory aid in Civil Law with 2017 updates 2. Constructive Domicile  a domicile assigned by operation of law to persons legally incapable of choosing their own domicile (e.g. minors, mentally disabled) 3. Domicile of Choice (voluntary domicile)  place freely chosen by a person sui juris  to acquire domicile of choice, there must be a concurrence of physical presence in the new place and unqualified intention to make that place one’s home. PERSONAL STATUS & CAPACITY  In the determination of status and capacity of persons, our Civil Code follows the nationality principle when dealing with Filipinos.  When dealing with aliens, it depends on which principle their country follows but if the alien is in the Philippines, the nationality theory is applied by implication. RENVOI  A procedure whereby a legal matter presented is referred by the conflict of laws rules of the forum to a foreign state, the conflict of laws rule of which, in turn refers the matter back to the law of the forum (remission) or a third state (transmission).  It literally means a “referring back” 4 WAYS OF TREATING THE RENVOI PROBLEM 1. Rejection  If the conflicts rules of the forum refer the case to the law of another state, it is deemed to mean only the internal law of that state. Thus, the court will apply the foreign law. 2. Acceptance  If the conflicts rules of the forum refer the case to the law of another state, it is deemed to include the totality of the foreign law (internal law and conflicts of laws rules). Thus, the court will recognize the referral back and apply local law. 3. Mutual Desistment Theory  The forum court upon reference to another state’s law sees that such law is limited in application to its own nationals domiciled in its territory and has no provision for application to nationals domiciled outside of the territory. Hence, the local court will apply local law.  This has the same result as the acceptance of the renvoi doctrine but the process used by the forum court is to desist applying the foreign law 4. Foreign Court Theory  Forum court assumes the same position that the foreign court would take if the case is litigated in the foreign state. Double Renvoi  It is that which occurs when the local court, in adopting the foreign court theory, discovers that the foreign court accepts the renvoi. Transmission  It is the process of applying the law of a foreign state through the law of a second foreign state. CHOICE OF LAW PROBLEMS I. FAMILY RELATIONS  Under the New Civil Code, questions of family rights, duties, status, conditions and capacity are governed by lex nationalii. A. MARRIAGE 1. Extrinsic validity - governed by lex loci celebrationis. GENERAL RULE: a. All states recognize as valid those marriages celebrated in foreign countries if they comply with the formalities prescribed therein (Hague Convention). b. The forms and solemnities of contracts, wills and other public instruments, shall be governed by the laws of the country in which they were executed (Article 17 Civil Code). c. 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 (Article 26 Family Code). EXCEPTIONS: The following are void marriages in the Philippines even if valid in the foreign country where celebrated: a. When either or both parties are below 18 years of age even with parental consent; b. Bigamous and polygamous marriages; c. Mistake as to identity of a contracting party; d. A subsequent marriage performed without recording in the Civil Registry the judgment of annulment or declaration of nullity, partition and distribution of properties and the delivery of the children’s presumptive legitimes; e. Marriages where either spouse is psychologically incapacitated; f. Incestuous marriages; and

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Memory aid in Civil Law with 2015 updates g.

Void marriages by reason of public policy.

NOTE: These exceptions put into issue the capacity of the parties to enter into the marriage and therefore relate to the substantive requirement for marriage. Since the personal law of the parties, e.g., the national law of Filipinos, governs the questions of intrinsic validity of marriages between the Filipinos abroad, the above enumerations are exceptions to lex loci celebrationis precisely because they are controlled by lex nationalii Rules on Extrinsic Validity of certain situations: 1. Proxy marriages GENERAL RULE: where permitted by the law of the place where the proxy participates in the marriage ceremony, are entitled to recognition in countries adhering to lex loci celebrationis rule, at least insofar as formal validity is concerned. NOTE: Internal Philippine law does not sanction proxy marriages, it is doubtful whether this will be recognized here. 2. Common law marriages GENERAL RULE: if valid in the State where the parties cohabitated while holding themselves out as man and wife, it is given recognition in sister States which do not permit this informal method of entering into the marital status NOTE: common law marriages are not recognized under the Philippine internal law 3. Marriage on board a vessel on High seas  since nation whose flag the ship is flying has jurisdiction over the ship, the rule is that compliance with this law is required for a marriage to be validly contracted 4. Consular marriages  for states, including the Philippines (Article 10 Family Code), which authorize their consular or diplomatic agents in foreign countries to solemnize marriages in accordance with their domestic laws  marriage performed by a consular and diplomatic agent empowered by the sending state to officiate marriage is valid in the receiving state only if the latter has agreed to his acting in that capacity. 2. Intrinsic validity - controlled by the parties’ personal laws (either domiciliary or nationality). Effects of Marriage 1. Personal relations between the spouses  governed by the national law of the parties NOTE: if the spouses have different nationalities, generally the national law of the husband may prevail as long as said law is not contrary to law, customs and good morals of the forum. 2. Property relations between the spouses  The Hague Convention declares that the governing law on matrimonial property regime is: a. The internal law designated by the spouses before the marriage b. In the absence thereof, the internal law of the state in which the spouses fix their 1st habitual residence  Philippine Rule on property relations:  In the absence of a contrary stipulation in the marriage settlements, 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.  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 their extrinsic validity. (Article 80 Family Code) Doctrine of Immutability of Matrimonial Property Regime  That the change of the nationality on the part of the husband or the wife or of both does not affect the original property regime EXCEPT when the law of the original nationality itself changes the marital regime hence, the property regime has to change accordingly. B. DIVORCE AND SEPARATION  Hague convention provides that the granting of divorce or separation must comply with the national law of the spouses and the law of the place where the application for divorce is made.  Grounds for divorce are dictated by lex fori. GENERAL RULE: We only observe relative divorce (legal separation) in the Philippines. Divorce decrees obtained by Filipinos abroad have no validity and no effects thereof are recognized in this jurisdiction. EXCEPTION: 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 (Article 26, Family Code). C. ANNULMENT AND DECLARATION OF NULLITY 1. For states that follow the traditional approach – grounds would follow lex loci celebrationis. 2. For states that are policy-centered - applicable law is the law of the state of marital domicile.

Memory aid in Civil Law with 2017 updates D. PARENTAL RELATIONS Determination of Legitimacy of a Child  Legitimacy of the child is governed by the personal law of the parents (either domiciliary or nationality). Philippine rule:  The legitimacy of the child is governed by the national law of the parents.  If parents belong to different nationalities, legitimacy of the child is governed by the national law of the father.  Personal law of the illegitimate child is the mother’s personal law. NOTE: However, in the case of Tecson vs. COMELEC, Ronald Allan Kelly Poe and Fornier (GR No. 161434, March 3, 2004), the Supreme Court held that providing neither conditions nor distinctions, the 1935 Constitutions states that among the citizens of the Philippines are those whose fathers are citizens of the Philippines. The 1935 Constitution confers citizenship to all persons whose fathers are Filipino citizens regardless of whether the children are legitimate or illegitimate. 

If the child is later legitimated, personal law of the child follows that of the father.

Parental Authority over the Child  Personal law of the father controls the rights and duties of parents and children NOTE: Reference to the personal law of the father may result in joint exercise of parental authority by father and mother (e.g. Article 221 Family Code). Father’s personal law could grant parental authority to the mother of the illegitimate children (e.g. Article176 Family Code) E. ADOPTION  Under the Domestic Adoption Act of 1998, an alien may adopt provided that he is: 1. of legal age, 2. in possession of full civil capacity and legal rights, 3. of good moral character, 4. no conviction of any crime involving moral turpitude, 5. emotionally and psychologically capable of caring for children, 6. at least sixteen years older than the adoptee, 7. in a position to support and care for his children, 8. his country has diplomatic relations with the Philippines, 9. residence in the Philippines for at least three continuous years prior to the filing of the application for adoption and maintains such residence until the adoption decree is entered, 10. certificate of legal capacity to adopt in his country to be issued by his diplomatic or consular office, and 11. his government allows the adoptee to enter his country as his adopted son/daughter  The requirement on residency and certificate of qualification to adopt may be waived for the following: a. a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or b. one who seeks to adopt the legitimate son/daughter of his/her Filipino spouse; or c. 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.  The requirement of sixteen years difference between the adopter and the adoptee is not applicable if the adopter is: i. the biological parent of the adoptee ii. the spouse of the adoptee’s parent  Inter-Country Adoption  A socio-legal process of adopting a Filipino child by a foreigner or a Filipino citizen permanently residing abroad where the petition is filed, the supervised trial custody is undertaken, and the decree of adoption is issued outside the Philippines.

II. PROPERTY A. CONTROLLING LAW 1. Immovable property – governed by lex situs. 2. Movable property – may be governed by: a. lex domicilii – law of the owner’s domicile. b. lex situs - the law of the place where the property is located. c. lex loci actus – law of the place where the transaction is completed. d. proper law – law of the state which has the most real connection with the transfer. Philippine Rule:  Real property as well as personal property is subject to the law of the country where it is situated (lex situs). (Article 16 Civil Code).

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Memory aid in Civil Law with 2015 updates  Rationale for lex situs or lex rei sitae rule: the property being physically part of the country should be subject to the laws thereof. B. CAPACITY TO TRANSFER OR ACQUIRE PROPERTY  governed by lex situs. C. EXTRINSIC AND INTRINSIC VALIDITY OF CONVEYANCES GENERAL RULE: Governed by lex situs. EXCEPTIONS: 1. Where the transaction does not affect transfer of title or ownership of the land  proper law of the transaction will govern, which may be lex intentionis or lex voluntatis. 2. When real property is offered by way of security for the performance of an obligation: a. Mortgage of the land is governed by lex situs b. Loan contract is governed by rules of ordinary contracts. 3. Testate or intestate succession or capacity to succeed – governed by the national law of the decedent. 4. Under a policy centered approach, when the situs of the movable at the time of the transfer was insignificant or accidental. 5. When the issue involves consideration other than the validity and effect of the transfer – the court may look into the law of another state which has a real interest in applying its law. D. SPECIAL TYPES OF MOVABLE PROPERTY 1. Choses in possession (tangible physical objects) GENERAL RULE: governed by the law of the place where the property is located at the time of transaction determines the creation and the transfer of interests (lex situs)  Rules governing different kinds of transfers: a. voluntary transfers of interests in chattels (other than assignment for the benefit of creditors) – validity and effect of conveyance as between the parties are determined by the local law of the State which, with respect to the particular issue, has the most significant relationship to the parties. b. acquisitions of title by operation of law (e.g. acquisition by prescription or adverse possession, validity and priority of attachments, levies of execution, statutory liens) – governed by lex situs  Rules governing goods in transitu: a. Seizure and arrest – Where the owner’s creditor’s seize the goods in transit, the result is that the transport is discontinued and a temporary resting place is thereby created. On the law of this place will depend on whether the seizure was lawful or whether he has acquired a lien, pledge, privilege, or a similar right or what pertains to that right. b. Disposition of goods – questions arising from transactions involving movables in transit may be resolved by law of any place having substantial connection with the transaction which will uphold its validity. The owner is thus permitted to choose between several legal systems: 1. Law of the temporary resting place (e.g. interim port) 2. Lex loci actus 3. Law of the place of destination 4. Law of the last real situs of goods  Rules governing Means of Transport: a. in case of sea going vessels – the law of the flag ; or b. as in states consisting of several countries (e.g.United Kingdom) – the place of registry. 2. Choses in action (intangible movables) a. Debts i. Voluntary transfer or assignment of choses in action - there are 3 theories as to the law which should govern: a) Law of the domicile of the owner b) Law of the place where the assignment was executed c) Law of the place where the debt is recoverable ii. Involuntary transfer of choses in action (e.g. garnishment) - governed by the law of the state where jurisdiction is effectively exercisable against the garnishee. NOTE: Jurisdiction to which the garnishee is amenable is the jurisdiction of the country where the debt can be recovered, i.e., in any country in which the debtor is present or can be served effectively with process. b. Negotiable instrument – governed by the law of the place indicated in the instrument or place of delivery. c. Corporate shares – as against the corporation and third persons, the transfer or assignment are governed by the law of the place of incorporation. d. Goodwill - governed by the law of principal place of business. III. CONTRACTS A. Extrinsic validity – governed by lex loci celebrationis. B. Intrinsic validity – there are 3 possible laws that govern: a. law of the place where the contract is made or lex loci contractus b. law of the place of performance or lex loci solutionis

Memory aid in Civil Law with 2017 updates c.

law intended by the parties or lex loci intentionis

Philippine rule:  The contracting parties may establish such stipulations, clauses, terms, conditions as they may deem convenient provided that they are not contrary to law, morals, good customs, public order, or public policy (Article 1306 Civil Code) NOTE: Hence, when the parties stipulate that the contract be governed by the specific law, such will be recognized (lex loci intentionis) subject to the limitation that it is not against the law, morals and public policy of the forum.  In the absence of an effective choice of law, express or implied, the contract will be governed, with respect to the particular issue involved, by the law which has the closest and most substantial connection with the transaction and the parties C. Capacity to enter into contracts –determined by the personal laws of the contracting parties (either nationality or domiciliary) D. Choice of law issues in Conflicts Contract Cases 1. Choice of Forum Clause  parties may stipulate on the venue of the suit in case of litigation concerning the contract. However, a case arising from a contract will be litigated in the forum chosen by the parties if the choice of forum clause specifically identifies it as the only venue.  when there is no fraud or overreaching, and there is no showing that the choice-of –forum clause would be unreasonable and unjust, the clause must be given effect. 2. Contracts with Arbitration Clause  In the Philippines, the provisions of the Civil Code on arbitration and the arbitration law RA 876 embodies a clear legislative policy in favor of settling controversies by a method considered more expeditious, less expensive and with greater chance in some cases for substantial justice.  Many courts apply to arbitration agreements the law of whatever place the parties have designated as governing, thus sustaining their agreement to arbitrate. 3. Adhesion Contracts  Adhesion contracts are not entirely prohibited. The one who agrees to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.  When there is no proof of arbitrariness, abuse of power, or gross negligence, the contract or stipulation will be enforced. Such contract is valid if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.  When there is an oppressive use of superior bargaining power, a Philippine court may be justified in refusing to apply the contract or a stipulation thereof on the ground that there is no real arm’s-length transaction between the contracting parties. 4. Special Contracts a. Sale or Barter of goods – governed by lex situs. b. Simple loan granted by financial institutions – law of the permanent place of business. c. Loan granted by a private individual or where subject matter of loan is personal – law where the loan was obtained. d. Pledge, Chattel mortgage, antichresis – lex situs. e. Transportation by Sea: i. Philippine ports to Foreign ports – law of the country of destination ii. Foreign ports to Philippine ports  Civil Code – primary law  Code of Commerce  Carriage of Goods by Sea Act f. International Air Transportation – governed by the Warsaw Convention NOTES:  Convention applies to all international carriage of person, baggage or goods performed by aircraft for hire. It does not apply to carriage of mail and postal packages.  liability of carrier for loss destruction and deterioration of goods transported to the Philippines from a foreign country is governed primarily by the Civil Code and not by Warsaw Convention.  the limit of liability for baggage lost is $1,000 and for death of passenger is at $100,000 (Alitalia vs. IAC and Pablo 192SCRA9)  period of responsibility includes the time during which baggage or goods are in the charge of the carrier, whether in an airport or in any place, whatsoever.  It does not operate as an exclusive enumeration of instances when a carrier shall be liable for breach of contract or as an absolute limit of the extent of liability nor does it regulate or exclude liability for other breaches of contract by the carrier, misconduct of its employees, or for some particular or exceptional type of damage.   limits of liability shall not apply if it is proved that the damage resulted from an act or omission of the carrier his servants or agents done with intent to cause damage or recklessly and with knowledge that damage would probably result, provided that it is proved that the servant or agent is acting within the scope of the employment.  suits may be prosecuted in any of the following places at the option of the plaintiff-passenger: 1. court of the domicile of the carrier

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Memory aid in Civil Law with 2015 updates 2. court of the principal place of business of the carrier 3. court where the carrier has a place of business through which the contract was made 4. court of the place of destination  the action will prescribe if it is not brought within two years from the: 1. date of arrival at the destination 2. date on which the aircraft ought to have arrived 3. date on which the transportation stopped NOTE: the method of counting the period of limitation is determined by the law of the forum (lex fori)  With respect to transportation by successive carriers:  each of the carrier who accepts the passengers or baggage shall be subject to the rules set out in the convention and shall be deemed as one of the contracting parties insofar as the contract deals with that part of the transportation which is performed under his supervision.  the passenger or representative can take action only against the carrier who performed the transportation during which the accident or delay occurred, unless by express agreement the first carrier has assumed the responsibility for the entire journey.  as regards baggage or goods, the passenger or consignor shall have a right of action against the first carrier, and the passenger or consignee shall have the right of action against the last carrier. Furthermore, each may take an action against the carrier who performed the transportation during which the loss, damage or delay took place. These carriers shall be jointly and severally liable to the passenger, or to the consignor or consignee.  In cases where the convention does not apply, the Second Restatement holds that the validity of the contract of carriage as well as the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state from which the passenger departs or the goods are dispatched, unless with respect to the particular issue, some other State has a more significant relationship to the contract and to the parties. IV. WILLS AND ADMINISTRATION OF ESTATES 1. Law governing the Extrinsic validity of wills: a) testator is a Filipino i. will is executed in the Philippines – Philippine law ii. will is executed in a foreign country  Lex loci celebrationis – governed by the laws of the country in which will is executed; or  Philippine law b) testator is an Alien i. will is executed in the Philippines  Philippine law; or  National law of the testator ii. will is executed in a foreign country  National law of the testator; or  Law of Domicile; or  Lex loci celebrationis; or  Philippine law NOTE: Joint wills executed by Filipinos whether in the Philippines or abroad, even though authorized by the foreign country in which they may have been executed, shall not be valid in the Philippines (Article 819 Civil Code).  This prohibition does not apply to joint wills executed by aliens, hence a joint will executed by aliens in a state where such will is valid shall be considered as valid in the Philippines. As to joint wills executed by aliens in the Philippines, although the law is silent, it has been suggested that in accordance with the express policy of Article 819 of the Civil Code, said will should not be probated if it affects the heirs in the Philippines. 2. Intrinsic validity of wills – governed by the national law of the person whose will is under consideration. 3. Interpretation of wills – governed by the decedent’s national law 4. Revocation of wills  If the revocation takes place in the Philippines, whether the testator is domiciled in the Philippines or in some other country, it is valid when it is in accordance with the laws of the Philippines  If the revocation takes place outside the Philippines, by a testator who is domiciled in the Philippines, it is valid when it is in accordance with the laws of the Philippines  Revocation done outside the Philippines, by a testator who does not have his domicile in this country, is valid when it is done according to the: c. law of the place where the will was made, or d. law of the place in which the testator had his domicile at the time of revocation; 5. Probate of wills – being procedural in character, the law of the forum governs procedural matters. 6. Administration of Estates – Philippine law and procedure follow the main principle of territorialism. The axiom is that the law of the domicile governs distribution but the law of the State appointing the administrator or executor governs administration. Hence, administration is governed by the law of the state where the administration takes place or lex fori. NOTE: The Administration extends only to the assets of the decedent found within the state or country where it was granted so that an administrator appointed in one state has no power over the property in

Memory aid in Civil Law with 2017 updates another state or country. To administer the property situated in a foreign state, the administrator must be reappointed, or a new one named in that state. V. TORTS Lex loci delicti comissi or law of the place where the alleged tort was committed will govern. Concepts of Place of Wrong 1. Place of injury (common-law concept) – looks to the place where the last event necessary to make an actor liable for an alleged tort occurs. 2. Place of conduct – view the situs of torts as the place where the tortuous act was committed. Obligation theory The tortuous act gives rise to an obligation, which is transitory and follows the person committing the tortuous act and may be enforced wherever he may be found. Theory of Most Significant Relationship An action for tort may be filed in the country where it has the most significant relationship. In determining the state which has the most significant relationship, the following factors are to be taken into account: 1. Place where the injury occurred 2. Place of conduct 3. Domicile, residence, nationality, place of incorporation and place of business 4. Place where relationship between the parties is centered Conditions for the Enforcement of Tort Claims 1. The foreign tort is based on a civil action and not on a crime; 2. The foreign tort is not contrary to the public policy of the forum; and 3. The judicial machinery of the forum is adequate to satisfy the claim. Philippine rule on foreign torts:  There is no governing specific statutory law but courts may give due course on the theory of vested rights or most significant relationship provided that there are minimum contacts and the defendant can be served with summons. VI. CRIMES GENERAL RULE: Lex loci delicti or the law of the place where the crime was committed will govern since it determines the specific law by which the criminal is to be penalized and at the same time designates the state that has jurisdiction to punish him. EXCEPTIONS: 1. crimes committed by state officials, diplomatic representatives and officials of recognized international organizations. NOTE: This is based on the theory of state immunity from suits 2. crimes committed on board a foreign vessel even if within the territorial waters of the coastal state, as long as the effect of such crime does not affect the peace and order of the coastal state 3. Crimes which, although committed by Philippine nationals abroad are punishable under the local law pursuant to the protective principle of criminal jurisdiction (i.e. Article 2 of the Philippine Revised Penal Code) VII. BUSINESS ASSOCIATIONS 1. Corporation/Partnership Personal law GENERAL RULE: Personal law is the law of the state where it was incorporated or formed. EXCEPTIONS: a. Constitutional and Statutory Restrictions (Art. XII) b. Control test during war – courts may pierce the veil of corporate identity and look into the nationality of stockholders to determine citizenship of the corporation Domicile or residence of foreign corporations  when not fixed by the law creating them, it shall be understood to be the place where their legal representation is or where they exercise their principal functions. NOTE: A foreign corporation granted license to operate in the Philippines acquires domicile here. Jurisdiction over Foreign Corporations  with the consent of the state a foreign corporation will be recognized and will be allowed to transact business in any state which gives it consent. This consent doctrine is established in section 125, 126, 127, and 128 of the Corporation Code of the Philippines NOTE: all foreign corporations lawfully doing business here in the Philippines shall be bound by all laws rules and regulations applicable to domestic corporations except provisions for the creation, formation, organization or dissolution of corporations or those which fix the relations the relations, liabilities, responsibilities or duties of stockholders, members or officers of the corporation to each other. NOTE: service of summons upon foreign corporations doing business in the Philippines may be made on: 1. Its resident agent;

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Memory aid in Civil Law with 2015 updates 2. 3. 4.

In the absence thereof, process will be served on the government official designated by law or any of its officers or agent within the Philippines; and on any officer or agent of said corporation in the Philippines serving summons through diplomatic channels

Right of a Foreign Corporation to bring suit GENERAL RULE: No foreign Corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under the Philippine laws (Section 133 Corporation Code). Hence, acquisition by a foreign Corporation of a license to transact business in the Philippines is an essential prerequisite for the filing of suits before courts. EXCEPTIONS: 1. Isolated transactions 2. Action to protect trademark, trade name, goodwill, patent or for unfair competition 3. Agreements fully transacted outside the Philippines 4. Petition filed is merely a corollary defense in a suit against it Effect of Failure to Secure a license to Transact Business The foreign corporation which does business in the Philippines without a license has no right to sue in the Philippines, but can still be sued. Although the contracts entered into may be valid as between the parties, it may not be enforced in the Philippine courts. 2. Trusts  When the trust contains an express choice of law provision, that law shall be applied. In the absence of express provision, the courts will deem controlling the law that will sustain the validity of the trust. FOREIGN JUDGMENTS Foreign judgment  Decisions rendered outside the forum and encompasses judgments, decrees and orders of courts of foreign countries. Recognition of foreign judgment  Passive act of giving effect to a judgment of another forum without necessarily filing an action in the forum giving effect to the judgment. Enforcement of foreign judgment  A foreign judgment is enforced when, in addition to being recognized, a party is given affirmative relief to which the judgment entitles him and it necessarily requires the filing of an action. Requisites for Recognition or Enforcement: 1. The foreign judgment was rendered by a judicial or quasi-judicial tribunal which had jurisdiction over the parties and the case; 2. Judgment must be valid under the laws of the court that rendered it; 3. Judgment must be final and executory to constitute res judicata in another action; 4. State where the foreign judgment was obtained allows recognition or enforcement of Philippine judgments; 5. Judgment must be for a fixed sum of money; 6. Foreign judgment must not be contrary to the public policy or good morals of the country where it is to be enforced; and 7. Judgment must not have been obtained by fraud, collusion, mistake of fact or law. Philippine rule: The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: (a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing; and (b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title. In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact (Rule 39, Sec. 48 of the 1997 Rules of Civil Procedure).

PARTNERSHIP PARTNERSHIP (Art. 1767) 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.

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 

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])

FORM OF PARTNERSHIP CONTRACT 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 instrument (Art. 1771). b. An inventory of the property contributed is made, signed by the parties and attached to the public instrument. (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 Mabolo Agad and Co., 23 SCRA 1223[1968]) 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. Requisites: 1. intention to create a partnership 2. common fund obtained from the contributions 3. joint interest in the profits Essential Features: 1. there must be a valid contract; 2. the parties must have legal capacity to enter into the contract; NOTE: With regard to number 2 (legal capacity of contracting parties), individuals not legally incapacitated to contract and partnerships may enter into a contract of partnership. With respect to corporations, the court held in Aurbach vs. Sanitary Wares Manufacturing Corporation 180 SCRA 130 [1989] that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others. A joint venture has been generally understood to mean an organization formed for some temporary purpose. There is nothing against one corporation being represented by a natural or juridical person in a suit in court, for the true rule is that “although a corporation has no power to enter a partnership, it may nevertheless enter into a joint venture with another where the nature of that venture is in line with the business authorized by the charter. (JM Tuazon and Co., Inc vs. Bolanos 95 PHIL 106 [1954]) 3.

There must be mutual contribution of money, property and industry to a common fund.

NOTE: A partnership of a civil nature was formed because Gatchalian & Co. put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win as they did in fact in the amount of P50,000. (Gatchalian vs. CIR 67 PHIL 666 [1939]) Where the father sold his rights over 2 parcels of land to his 4 children so they can build their residences, but the latter after 1 year sold them and paid the capital gains, they should not be treated to have formed an unregistered partnership and taxed corporate income tax on the sale and on dividend income tax on their shares of the profits from the sale. (Obillos Jr. vs. CIR [1985]) 4. 5.

the object must be lawful; and the primary purpose must be to obtain profits Partnership 1. Creation Always created by a contract, either express or implied 2. Juridical personality Has a juridical personality separate and distinct from that of each partner 3. Purpose Realization of profits

Co-ownership Generally created by law, but may exist even without a contract Has no juridical personality

Common enjoyment of a thing or right; does not necessarily involve sharing of profits

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4. Duration No limitation upon the duration is set by law

An agreement to keep the thing undivided for more than 10 years is not allowed

5. Transfer of interests A partner may not dispose of his individual interest in the partnership so as to make the assignee a partner without unanimous consent 6. Power to act with third persons In the absence of stipulation to the contrary, a partner may bind the partnership 7. Dissolution Death or incapacity of a partner results in the dissolution of partnership 8. Agency or representation As a rule, there is mutual agency

9. Profits May be stipulated upon

10. Form May be in any from except when real property is contributed (here a public instrument is required) KEY: CNJ – PMERET2 - FPG Partnership 1. Creation Created by mere agreement of the parties 2. Number of incorporators May be organized by at least two persons

A co-owner can dispose of his share without the consent of the others

A co-owner cannot represent the co-ownership Death or incapacity of a coowner does not necessarily dissolve the co-ownership As a rule, there is no mutual representation (although it is enough for a co-owner to bring an action for ejectment against a stranger) Must always depend upon proportionate shares and any stipulation to the contrary is VOID (Art.485) No public instrument is needed even if real property is the object of the co-ownership

Corporation Created by law or by operation of law Requires at least five incorporators (except a corporation sole)

3. Commencement of juridical personality Acquires juridical personality from Acquires juridical personality from the moment of execution of the the date of issuance of the certificate contract of partnership of incorporation by the Securities and Exchange Commission 4. Powers Partnership may exercise any Corporation can exercise only the power authorized by the partners powers expressly granted by law or (provided it is not contrary to law, implied from those granted or morals, good customs, public order, incident to its existence public policy) 5. Management When management is not agreed upon, every partner is an agent of the partnership 6. Effect of mismanagement A partner as such can sue a copartner who mismanages

The power to do business and manage its affairs is vested in the board of directors or trustees The suit against a member of the board of directors or trustees who mismanages must be in the name of the corporation

7. Right of succession Partnership has no right of Corporation has right of succession succession 8. Extent of liability to third persons Partners are liable personally and Stockholders are liable only to the subsidiarily (sometimes solidarily) extent of the shares subscribed by

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for partnership debts to third persons 9. Transferability of interest Partner cannot transfer his interest in the partnership so as to make the transferee a partner without the unanimous consent of all the existing partners because the partnership is based on the principle of delectus personarum 10. Term of existence partnership may be established for any period of time stipulated by the partners

them Stockholder has generally the right to transfer his shares without prior consent of the other stockholders because corporation is not based on this principle

corporation may not be formed for a term in excess of 50 years extendible to not more than 50 years in any one instance

11. Firm name limited partnership is required by law to add the word “Ltd.” To its name

corporation may adopt any name provided it is not the same as or similar to any registered firm name

12. Dissolution may be dissolved at any time by any or all of the partners

can only be dissolved with the consent of the State

13. Governing Law governed by the contract and the Civil Code

governed by the Corporation Code

JOINT VENTURE  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  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. NOTE: Under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking. Hence, a joint venture may be treated like any other contract, innominate in nature to be regulated and governed primarily by the stipulations of the parties thereto and suppletorily by the general provisions of the Civil Code on obligations and contracts, by rules governing the most analogous contracts (e.g. law on partnership), and by the customs of the place. Other Similar Contracts 1. Collaboration- the act of working together in a joint project. 2. Association- act of a number of persons uniting together for some special purpose or business. RULES TO DETERMINE EXISTENCE OF PARTNERSHIP (ART 1769) 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 co-owners 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. 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. CLASSIFICATION OF PARTNERSHIP 1. as to object:

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Memory aid in Civil Law with 2015 updates a) universal partnership i. universal partnership of all present property ii. universal partnership of profits b) particular partnership 2.

as to liability of partners: a) general partnership b) limited partnership

3.

as to duration: a) partnership at will b) partnership with a fixed period

4.

as to legality of existence: a) de jure partnership b) de facto partnership

5.

as to representation to others: a) ordinary or real partnership b) ostensible or partnership by estoppel

6.

as to publicity: a) secret partnership b) notorious or open partnership

7.

as to purpose: a) commercial or trading b) professional or non-trading

UNIVERSAL PARTNERSHIP 1. A universal partnership of all present property is one 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.  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. NOTE: 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. 2. A universal partnership of profits is one which 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.  Movable or immovable property which each of the partners may possess at the time of the celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing to the partnership. NOTE: 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. PARTNERSHIP A particular partnership is 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 A 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.

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PARTNERSHIP AT WILL A partnership wherein no time is specified and is not formed for a particular undertaking or venture and which may be terminated at anytime by mutual agreement of the partners, or by the will of anyone partner alone; or one for a fixed term or particular undertaking but has been continued by the partners after termination of such term or particular undertaking without express agreement. PARTNERSHIP WITH A FIXED TERM A partnership wherein the term for which the partnership is to exist is fixed or agreed upon or one formed for a particular undertaking, and upon the expiration of the term or completion or the particular enterprise, the partnership is dissolved, unless continued by the partners. OTHER KINDS OF PARTNERSHIP 1. De Jure Partnership- one which has complied will all the legal requirements for its establishment. 2. De Facto Partnership- one which has failed to comply with all the legal requirements for its establishment. 3. Ordinary or real partnership- one which actually exists among the partners and also as to third persons. 4. Ostensible partnership or partnership de facto- one which in reality is not a partnership, but is considered a partnership only in relation to those who, by their conduct or admission, are precluded to deny or disprove its existence. 5. Secret partnership- one wherein the existence of certain persons as partners is not avowed or made known to the public by any of the partners. 6. Open or notorious partnership- one whose existence is avowed or made known to the public by the members of the firm. 7. Commercial or trading partnership- one formed for the transaction of business. 8. Professional or non-trading partnership- one formed for the exercise of a profession. CLASSIFICATION OF PARTNERS 1. as to CONTRIBUTION: a) Capitalist partner- one who contributes money or property to the common fund. b) Industrial partner- one who contributes only his industry or personal service. Note: do not share in the lossess. 2.

as to LIABILITY: a) General partner- one whose liability to third persons extends to his separate property, he may either be a capitalist or industrial partner. b) Limited partner- one whose liability to third persons is limited to his capital contribution.

3.

as to MANAGEMENT: a) Managing partner- one who manages the business or affairs of the partnership; he may be appointed in the articles of partnership or after constitution of the partnership. b) Silent partner- one who does not take any active part in the business although he may be known to be a partner. c) Liquidating partner- one who takes charge of the winding up of the partnership affairs upon dissolution.

4.

Miscellaneous: a) Ostensible partner- one who takes active part and known to the public as a partner in the business, whether or not he has actual interest in the firm. b) Secret partner- one who takes active part in the business by is not known to be a partner by outside parties nor held out as a partner by the other partners. c) Dormant partner- one who does not take active part in the business and is not known or held out as partner.

KEY: CP2L Capitalist Partner 1. as to contribution contributes money or property

Industrial Partner contributes his industry (mental or physical)

2. as to prohibition to engage in other business Cannot generally engage in the same or similar enterprise as that of his firm 3. as to profits 1. shares in the profits according to agreement thereon; 2. if none, pro rata to his contribution

cannot engage in any business for himself

receives a just and equitable share

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4. as to losses 1. first, the stipulation as to losses; 2. if none, the agreement as to profits; 3. if none, pro rata to contribution

exempted as to losses (as between partners); but is liable to third persons, without prejudice to reimbursement from the capitalist partners

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 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. III. 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. Note: 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) 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.

IV. 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. V. 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. Requisites for the application of the rule: 1) There exists two debts, one where the collecting partner is creditor, the other, where the partnership is creditor. 2) Both debts are demandable 3) The partner who collects is authorized to manage and actually manages the partnership. VI. 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. 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. VII. Obligation of Partner for Damages to Partnership 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.

Memory aid in Civil Law with 2017 updates VIII. 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. IX. 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. RIGHTS OF A PARTNER: 1. Property rights of a partner a) His rights in the specific partnership property b) His interest in the partnership c) His right to participate in the management 2. Right to reimbursement for amounts advanced to the partnership and to indemnification for risks in consequence of management 3. Right to associate with another person in his share 4. Right of access and inspection of partnership books 5. Right to true and full information of all things affecting the partnership 6. Right to a formal account of partnership affairs under certain circumstances NOTE: The ten year period to demand an accounting by a partner begins at the dissolution of the partnership. 7. Right to have partnership dissolved under certain conditions. RULES FOR DISTRIBUTION OF PROFITS AND LOSSES 1. Distribution of profits a) According to their agreement (but not inequitously to defeat Art.1799) b) If none, 1) Share of capitalist partner shall be in proportion to his capital contribution 2) Industrial partner shall receive such share as may be just and equitable under the circumstances 2. Distribution of losses a) According to their agreement as to losses (but not inequitously to defeat Art.1799) b) If none, according to their agreement as to profits c) If none, in proportion to his capital contribution, but the purely industrial partner shall not be liable for the losses GENERAL RULE: A stipulation excluding a partner from any share in the profits or losses is VOID (Pactum Leonina) (Article 1799) EXCEPTION: Article 1797(2) excludes an industrial partner from losses. Thus, a stipulation excluding an industrial partner from losses is VALID, but he is NOT exempted from liability insofar as third persons are concerned. NOTE: In general, LIABILITY refers to responsibility towards third persons, and LOSSES refers to responsibility as among partners CONTRACT OF SUB-PARTNERSHIP  One formed between a member of a partnership and a third person for a division of profits owing to him from the partnership enterprise.  It is a partnership within a partnership distinct and separate from the main or principal partnership. NOTE: In the absence of unanimous consent of all the partners, a sub-partner does not become a member of the partnership. Hence, a sub-partner does not acquire the rights of a partner nor is he liable for its debts PROPERTY RIGHTS OF A PARTNER 1. Right to specific partnership property  contemplates tangible property  The specific partnership property belongs to the partnership as a separate juridical personality. The partners have no actual interest in it until after dissolution.  equal right with other partners to possess specific partnership property for partnership purposes  not assignable, except in connection with the assignment of rights of all partners in the same property  not subject to attachment or execution, except on a claim against the partnership  not subject to legal support NOTE: Any immovable property or an interest therein may be acquired in the partnership name. The title so acquired may be conveyed only in the partnership name subject to the provisions of Article 1819 of the Civil Code. 2.  

Interest in the partnership share in the profits and surplus A partner actually owns his respective share.

Effects of conveyance by a partner of his interest in the partnership

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conveyance of his whole interest –partnership may either remain or be dissolved assignee does not necessarily become a partner assignee cannot interfere in the management or administration of the partnership business or affairs assignee cannot demand information, accounting and inspection of the partnership books

Remedies of separate judgment creditor of a partner  Application for a charging order after securing judgment on his credit to subject the interest of the debtor partner with payment of unsatisfied amount of the judgment debt Redemption of interest charged 1. General partnership a) with separate property of a partner; or b) with partnership property, with the consent of all the partners whose interests are not so charged or sold 2. Limited partnership (interest of limited partner) a) with separate property of any general partner but NOT with partnership property 3. Right to participate in the management MANAGEMENT OF PARTNERSHIP 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 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 OBLIGATIONS OF PARTNERS TO THIRD PERSONS I. Liability for contractual obligations (ART 1816) 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. acting partner has in fact no authority and ii. the third person knows that the acting partner has no authority b) Acts of Strict Dominion or Ownership (acts which are not apparently for carrying on in the usual way the business of the partnership) GENERAL RULE: Act does not bind the partnership. EXCEPTION: Partnership is bound if: i. the act is authorized by all the partners; or ii. they have abandoned the business c) Acts in contravention of a restriction on authority

Memory aid in Civil Law with 2017 updates i. Partnership is not liable to third persons having actual or presumptive knowledge of the restrictions II. Liability arising from partner’s tort (ART 1822) or Breach of Trust (ART 1823) 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 partnership (Article 1822) 2. Where one partner, acting within the scope of his apparent authority, receives money or property of a third person and misapplies it (Article 1823) 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 partnership (Article 1823) NOTE: All partners are solidarily liable with the partnership for any penalty or damage arising from a partnership tort or breach of trust III. 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 LIABILITY OF STOCKHOLDERS IN A DEFECTIVELY FORMED CORPORATION  It is ordinarily held that persons who attempt but fail to form a corporation and carry on business under the corporate name occupy the position of partners inter se. Thus where persons associate themselves together under articles to purchase property to carry on a business, and their organization is so defective as to come short of creating a corporation within the statute, they become in legal effect partners interse.  Exception: One who takes no part except to subscribe for stock in a proposed corporation, which was never legally formed, does not become a partner with other subscribers who engage in business under the name of the pretended corporation, so as to be liable as such in an action for settlement of the alleged partnership and contribution. (Pioneer Insurance & Surety Corporation vs. Court of Appeals, 175 SCRA 668 [1989].) PRINCIPLE OF DELECTUS PERSONARUM  A rule inherent in every partnership wherein no one can become a member of the partnership without the consent of all the partners. NOTE: This element of delectus personae is true only in case of a general partner, but NOT as regards a limited partner. MUTUAL AGENCY  Partnership is a contract of “mutual agency”, each partner acting as a principal on his own behalf, and as an agent of his co-partners and the partnership. Requisites When A Partner Binds The Partnership 1. when he is expressly or impliedly authorized 2. when he acts in behalf and in the name of the partnership PARTNERSHIP BY ESTOPPEL  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 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. (Art 1825) NOTE: Art. 1825 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 has given credit to the actual or apparent partnership DISSOLUTION  Change in the relation of the partners caused by any partner ceasing to be associated in carrying on the business. (Article 1828)  It is the point in time when the partners cease to carry on the business together. It represents the demise of a partnership. NOTE: The dissolution of a partnership must not be understood in the absolute and strict sense so that at the termination of the object for which it was created the partnership is extinguished. (Testate of Mota vs. Serra, 47 PHIL 464, 1926.) Dissolution does not automatically result in the termination of the legal personality of the partnership, nor the relations of the partners among themselves who remain as co-partners until the partnership is terminated. Note: Assignment of interest to a non-partner will not dissolve the partnership. WINDING UP

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

Process of settling the partnership business or affairs after dissolution.

TERMINATION  Point in time when all partnership affairs are wound up or completed and is the end of the partnership life. CAUSES OF DISSOLUTION 1. Extrajudicial dissolution (ART 1830) - the parties may agree to expand the grounds provided under Art 1830 but NOT to delimit them. The causes enumerated are as follows: 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 dissolves the partnership. e. By the death of any partner; f. By the insolvency of any partner or the partnership; g. By the civil interdiction of any partner; 2.

Judicial dissolution (ART 1831) - 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. On application by or for any partner, the court shall decree a dissolution whenever: a. A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind; b. A partner becomes in any other way incapable of performing his part of the partnership contract; c. A partner has been guilty of such conduct as tend to affect prejudicially the carrying on of the business; d. 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. e. The business of the partnership can only be carried on in a loss; f. Other circumstances render a dissolution equitable. On application of the purchaser of a partner’s interest under Article 1813 or 1814: a. After the termination of the specified term or particular undertaking; b. At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued.

EFFECTS OF DISSOLUTION A. As to partner’s authority to act for the partnership GENERAL RULE: Dissolution terminates all authority of any partner to act for the partnership EXCEPTIONS: 1. Acts necessary to wind up partnership affairs 2. Acts necessary to complete transactions begun but not then finished Note: Thus, dissolution terminates the ACTUAL authority of a partner to undertake NEW business for the partnership QUALIFICATIONS TO THE GENERAL RULE: 1. With respect to the partners (in so far as partners themselves are concerned) a) Dissolution is not by act, insolvency or death of a partner: General Rule applies. Hence, dissolution terminates the ACTUAL authority of a partner to undertake NEW business for the partnership b) Dissolution is by act, insolvency or death of a partner: GENERAL RULE: Authority of partners inter se to act for the partnership is NOT deemed terminated. Thus, each partner is liable to his co-partners for his share of any liability created by any partner acting for the partnership as if the partnership has not been dissolved EXCEPTIONS: 1) The cause of dissolution is the ACT of a partner and the acting partner had KNOWLEDGE of such dissolution 2) The cause of dissolution is the DEATH or INSOLVENCY of a partner and the acting partner had KNOWLEDGE or NOTICE of such dissolution

Memory aid in Civil Law with 2017 updates 2.

With respect to persons not partners (third persons) a) When partnership is bound to third persons after dissolution 1) Act appropriate for winding up partnership affairs 2) Act appropriate for completing unfinished transactions 3) Completely NEW transaction which would bind the partnership if dissolution had not taken place provided: the other party is in good faith, meaning: i. Previous creditor (had previously extended credit) AND he had NO KNOWLEDGE or NOTICE of the dissolution, OR ii. NOT a previous creditor AND the fact of dissolution had not been published in a newspaper of general circulation b) When partnership is NOT bound to third persons after dissolution 1) Where partnership was dissolved because it was unlawful to carry on the business, except when the act is for winding up 2) Where the acting partner in the transaction has become insolvent 3) Where the partner is unauthorized to wind up, except if the transaction is with third persons in good faith (under the same circumstances as defined above) 4) Where act is NOT appropriate for winding up partnership affairs or for completing unfinished transactions 5) completely NEW transaction which would bind the partnership if dissolution had not taken place with third persons in bad faith

B. As to partner’s existing liability GENERAL RULE: Dissolution does not automatically discharge the existing liability of any partner EXCEPTION: A partner may be relieved from all existing liabilities upon dissolution ONLY by an agreement between: 1. Partner concerned 2. Other partners 3. Partnership creditors Note: The consent of the partnership creditors and the other partners to the novation may be implied from their conduct. RIGHTS OF A PARTNER UPON DISSOLUTION 1. Where dissolution is NOT in contravention of the partnership agreement a) To have partnership property applied to discharge partnership liabilities b) To receive in cash his share of the surplus 2. Where dissolution is in contravention of the partnership agreement a) Rights of a partner who has not caused the dissolution wrongfully 1) To have partnership property applied to discharge partnership liabilities 2) To receive in cash his share of the surplus 3) To be indemnified for damages caused by the partner guilty of the wrongful dissolution 4) To continue the business in the same name during the agreed term of the partnership, by themselves or jointly with others 5) To possess partnership property should they decide to continue the business b) Rights of a partner who has wrongfully caused the dissolution 1) If the business is not continued by the other partners i. To have partnership property applied to discharge partnership liabilities ii. To receive in cash his share of the surplus less damages caused by his wrongful dissolution 2) If the business is continued i. To have the value of his interest in the partnership at the time of the dissolution, surplus less damages caused by his wrongful dissolution to his co-partners, ascertained and paid in cash or secured by a bond approved by the court; AND ii. To be released from all existing and future liabilities NOTE: The value of the goodwill of the business is not considered in ascertaining the value of the interest of the guilty partners. RIGHTS OF A PARTNER WHERE PARTNERSHIP CONTRACT IS RESCINDED ON THE GROUND OF FRAUD OR MISREPRESENTATION (NOTE: The following are the rights of the partner entitled to rescind) 1. Right of LIEN on, or RETENTION of, the surplus of partnership property after satisfying partnership liabilities for any sum of money paid or contributed by him 2. Right of SUBROGATION in place of the partnership creditors after payment of partnership liabilities; and 3. Right of INDEMNIFICATION by the guilty partner against all debts and liabilities of the partnership MANNER OF WINDING UP 1. Extrajudicial – by the partners themselves without the intervention of the court 2. Judicial – under the control and direction of the court upon proper cause shown by any partner, his legal representative or his assignee PERSONS AUTHORIZED TO WIND UP 1. partners designated by the agreement 2. in the absence of such agreement, all partners who have not wrongfully dissolved the partnership 3. legal representative of last surviving partner not insolvent ORDER OF PAYMENT IN WINDING UP

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Memory aid in Civil Law with 2015 updates 1.

2.

General Partnership (ART 1839 (2)) a) those owing to creditors other than partners b) those owing to partners other than for capital or profits c) those owing to partners in respect of capital d) those owing to partners in respect of profits Limited Partnership (ART 1863) a) those owing to creditors, except those to limited partners on account of their contribution, and to general partners b) those owing to limited partners in respect of their share of the profits and other compensation by way of income c) those owing to limited partners in respect of their capital contributions d) those owing to general partners other than for capital and profits e) those owing to general partners in respect of profits f) those owing to general partners in respect of capital

DOCTRINE OF MARSHALLING OF ASSETS (Article 1839(8)) 1. Partnership creditors have preference in partnership assets 2. Separate or individual creditors have preference in separate or individual properties 3. Anything left from either goes to the other PARTNER’S LIEN  Right of every partner to have the partnership property applied to discharge partnership liabilities AND to have the surplus assets, if any, distributed in cash to the respective partners, after deducting what may be due to the partnership from them as partners. 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 partnership debts. NOTE: 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. Characteristics of Limited Partnership 1. Limited partnership is formed by substantial compliance in good faith with the statutory requirements 2. One or more general partners control the business and are personally liable to creditors 3. One or more limited partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond the amount of their capital contributions 4. The limited partners may ask for the return of their capital contributions under the conditions prescribed by law 5. The partnership debts are paid out of the common fund and the individual properties of the general partners Limited Partner/Partnership 1. Extent of liability Limited partner’s liability extends only to his capital contribution

General Partner/ Partnership General partner is personally liable for partnership obligations

2. Right to participate in the management of partnership Limited partner has no share in the management of a limited partnership and renders himself liable to partnership creditors as a general partner if he takes part in the control of the business 3. Contribution Limited partner must contribute cash or property to the partnership but not services

General partners have an equal right in the management of the business (when the manner of management has not been agreed upon) General partner may contribute money, property or industry to the partnership

4. Proper party to proceedings by or against the partnership Limited partner is not a proper party to proceedings by or against a partnership Unless: 1. he is also a general partner, or 2. where the object of the proceeding is to enforce a limited partner’s right against or liability to the partnership

General partner is the proper party to proceedings by or against a partnership

Memory aid in Civil Law with 2017 updates

5. Transferability of interest Limited partner’s interest is freely assignable, with assignee acquiring all the rights of the limited partner subject to certain qualifications

General partner’s interest in the partnership may not be assigned as to make the assignee a new partner without the consent of the other partners, although he may associate a third person with him in his share

6. Inclusion of partner’s name in the firm name As a general rule, name of a limited partner must not appear in the firm name

Name of a general partner may appear in the firm name

7. Prohibition to engage in other business No such prohibition in the case of a limited partner who is considered a mere contributor to the partnership

General partner is prohibited from engaging in a business which is of the SAME kind of business in which the partnership is engaged, if he is a capitalist partner, or in ANY of business for himself if he is an industrial partner

8. Effect of retirement, death, insanity or insolvency Retirement, death, insanity or insolvency of a limited partner does not dissolve the partnership for his executor or administrator shall have the rights of a limited partner for the purpose of selling his estate 9. Creation Limited partnership is created by the members after substantial compliance in good faith with the requirements set forth by law

10. Members of the partnership Composed of one or more general partners and one or more limited partners

Retirement, death, insanity or insolvency of a general partner dissolves the partnership

General partnership, as a general rule, may be constituted in any form by contract or conduct of the partnership

Composed only of general partners

11. Firm name Firm name must be followed by the word No such requirement Limited 12. Rules governing dissolution and winding up Governed by Art. 1839 Governed by Art. 1863 ESSENTIAL REQUIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP 1. A certificate or articles of limited partnership which states the matters enumerated in Article 1844, which must be signed and sworn; 2. Such certificate must be filed for record in the Office of the Securities and Exchange Commission. NOTE: 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.)

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Memory aid in Civil Law with 2015 updates CONTENTS OF THE CERTIFICATE OR ARTICLES OF LIMITED PARTNERSHIP 1. Name of the partnership, adding thereto the word “limited;” 2. Character of the business; 3. Location of the principal place of business; 4. Name and place of residence of each member, general and limited partners being respectively designated; 5. Term for which the partnership is to exist; 6. Amount of cash and description of and the agree value of the other property contributed by each limited partner; 7. Additional contributions to be made by each limited partner and the times at which or events on the happening of which they shall be made; 8. Time, if agreed upon, when to contribution of each limited partner is to be returned; 9. Share in the profits or other compensation by way of income which each limited partner shall receive by reason of his contribution; 10. Right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms and conditions of the substitution; 11. Right, if given, of the partners to admit additional partners; 12. Right, if given, of one or more of the limited partners to priority over other limited partners, as to contributions or as to compensation by way of income, and the nature of such priority; 13. Right, if given, of the remaining general partner or partners to continue the business on the death, retirement, civil interdiction, insanity or insolvency of a general partner; and 14. Right, if given, of a limited partner to demand and receive property other than cash in return of his contribution. LIABILITY FOR FALSE STATEMENT IN CERTIFICATE Any partner to the certificate containing a false statement is liable to one who suffers loss by reliance on such certificate provided the following requisites are present: 1. He knew the statement to be false at the time he signed the certificate, or subsequently having sufficient time to cancel or amend it or file a petition for its cancellation or amendment, he failed to do so; 2. The person seeking to enforce liability has relied upon the false statement in transacting business with the partnership; 3. The person suffered a loss as a result of reliance upon such false statement. MANAGEMENT OF LIMITED PARTNERSHIP  A general partner in a limited partnership is vested with the entire control of the firm’s business and has all the rights and powers and is subject to all the liabilities and restrictions of a partner in a general partnership.  A general partner in a limited partnership however has no authority, without written consent or ratification of all limited partners, to: 1. Do any act in contravention of the certificate; 2. Do any act which would make it impossible to carry on the ordinary business of the partnership; 3. Confess judgment against the partnership; 4. Possess partnership property, or assign their rights in specific partnership property, for other that a partnership purpose; 5. Admit a person as a general partner; 6. Admit a person as a limited partner, unless the right to do so is given in the certificate 7. Continue the business with the partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right to do so is given in the certificate.  A limited partner is liable as a general partner for the firm’s obligations if he takes part or interferes in the management of the business. RIGHTS OF A LIMITED PARTNER KEY: BIF2AR2 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 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 their for the return of the contribution or for the dissolution of the partnership

Memory aid in Civil Law with 2017 updates c)

The certificate is cancelled or so amended as to set forth the withdrawal or reduction

LIABILITIES OF A LIMITED PARTNER 1. Liability for unpaid contribution a) For the difference between his contribution as actually made and that stated in the certificate as having been made; AND b) For any unpaid contribution which he has agreed in the certificate to make in the future at the time and the conditions stated in the certificate 2. Liability as trustee a) Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned; AND b) Money or other property wrongfully paid or conveyed to him on account of his contribution NOTE: These liabilities can be waived or compromised only by consent of all the members; but a waiver or compromise shall NOT affect the right of a creditor of a partnership who extended credit or whose claim arose after the filling and before the cancellation or amendment of the certificate, to enforce such liabilities. SUBSTITUTED LIMITED PARTNER  A person admitted to all the rights of a limited partner who has died of has assigned his interest in the partnership. GENERAL RULE: He has all, the rights and powers, and is subject to all the restrictions and liabilities of his assignor. EXCEPTION: Those liabilities which he was ignorant at the time he became a limited partner AND which could not be ascertained from the certificate. REQUISITES IN ORDER THAT THE ASSIGNEE MAY BECOME A SUBSTITUTED LIMITED PARTNER 1. All the members must consent to the assignee becoming a substituted limited partner, OR the limited partner, being empowered by the certificate must give the assignee the right to become a limited partner 2. The certificate must be amended in accordance with Art.1865 3. The certificate as amended must be registered in the Securities and Exchange Commission ALLOWABLE TRANSACTIONS OF A LIMITED PARTNER  Being merely a contributor to the partnership is not prohibited from: 1. granting loans to the partnership 2. transacting other business with the partnership 3. receiving a pro rata share of the partnership assets with the general creditors if he is NOT also a general partner NOTE: In transacting a business with the partnership as a non-member, the limited partner is considered a non-partner creditor PROHIBITED TRANSACTIONS OF A LIMITED PARTNER 1. receiving or holding as collateral security any partnership property; or 2. receiving any payment, conveyance, or release from liability if it will prejudice the partnership creditors NOTES:  Violation of the prohibition will give rise to the presumption that it has been made to defraud partnership creditors  The prohibition is NOT ABSOLUTE, there is no such prohibition if the partnership assets are sufficient to discharge partnership liabilities to persons not claiming as general or limited partners.

AGENCY CONTRACT 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. (Article 1868) 

The parties to the contract are: 1. Principal- one whom the agent represents and from whom he derives authority; he is the person represented. 2. Agent- one who acts for and represents another; he is the person acting in a representative capacity. AGENCY

LEASE OF SERVICES

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1. Principle of representation is applied.

1. Principle of employment is applied.

2. Extinguished at will of the principal. 3. Agent exercise discretionary power to attain an end for which he was appointed.

2. Concurrence of parties is necessary. 3. Employee exercise ministerial functions only.

4. Preparatory Contract

4. Principal Contract

AGENCY TO SELL 1. Agent receives the goods as the goods of the principal.

SALE 1. The buyer receives goods as owner

2. Agent delivers the proceeds of the sale 3. Agent can return the object in case he is unable to sell the same

2. Buyer pays the price.

4. Bound to act according to the instructions of his principal.

4. The buyer can deal with the thing as he please being the owner.

3. the buyer, as a rule, cannot return the object sold

PURPOSE OF AGENCY  The purpose of agency is to extend the personality of the principal through the facility of the agent. It enables the activity of man which is naturally limited in its exercise by the impositions of his physiological conditions to be legally extended by permitting him to be constructively present in many different places and to perform diverse juridical acts and carry on many different activities through another when physical presence is impossible or inadvisable at the same time. (11 Manresa 434) ELEMENTS OF AGENCY A. Consent  Any person or entity having juridical capacity and capacity to act and not otherwise disqualified, may enter into an agency.  But as regards the party with whom the agent acts or contracts, the legal capacity of the principal rather than the agent, is of the greater import. B. Object  the services to be undertaken by the agent  may cover all acts pertaining to a business of the principal (general agency) or one or more specific transactions (special agency)  the extent of the agent’s authority to act, whether it be a general or a special agency, depends on how the agency is couched. C. Cause  May be onerous or gratuitous but presumed for compensation NOTE: The agent may not be deprived of his right to compensation by an unjustified revocation of the agency KINDS OF AGENCY 1. as to manner of creation a) express- one where the agent has been actually authorized by the principal, either orally or in writing; b) implied- 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. 2. as to its character a) gratuitous- one where the agent receives no compensation for his services. b) compensated or onerous- one where the agent receives compensation for his services. 3. as to extent of business covered a) general- one which comprises all the business of the principal; b) special- one which comprises one or more specific transactions. 4. as to authority conferred a) couched in general terms- one which is created in general terms and is deemed to comprise only acts of administration;

Memory aid in Civil Law with 2017 updates b) couched in specific terms- one authorizing only the performance of a specific act or acts. 5. as to its nature and effects a) ostensible or representative- one where the agent acts in the name and in representation of the principal. b) simple or commission- one where the agent acts in his own name but for the account of the principal. ACTS WHICH MAY BE DELEGATED TO AN AGENT GENERAL RULE: What a man may do in person, he may do thru another. EXCEPTIONS: 1. Personal acts- if personal performance is required the doing of an act by a person on behalf of another does not constitute performance by the latter. a) Voting during an election; b) Making a will; c) Making statements which are required to be done under oath; d) A member of the board of directors or trustees in a corporation cannot validly act as such by proxy e) An agent cannot delegate to a sub-agent the performance of acts which he has been appointed to perform in person. 2. Criminal Acts or Acts not allowed by law- There can be no agency in the perpetration of a crime or unlawful act. Examples: a) An alien principal using an agent to acquire lands; b) Persons who, because of their position and relation with the persons under their charge or property under control, are prohibited from acquiring said property and cannot do so through an agent. FORM OF AGENCY  Agency may be express or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. (Article 1869) NOTE: In an implied agency, the principal is still bound by the acts of the agent just as in case of express agency 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 Example: Sale of a piece of land or any interest therein through an agent: NOTES:  authority to sell must be in writing; otherwise the sale is VOID (Art.1874)  the sale itself should be in writing in order to be enforceable.  The authority of an agent to execute a contract of sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. ( Dizon et al. vs. CA et al., GR 124741, January 28, 2003) FORM OF ACCEPTANCE BY AGENT  Acceptance by the agent may also be express or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances Kinds of Implied Acceptance 1. Where persons are present  Acceptance may be implied if: a. principal delivers his power of attorney to the agent and b. agent receives it without any objection 2. Where persons are absent GENERAL RULE: Acceptance cannot be implied from silence of the agent EXCEPTION: 1. principal transmits his power of attorney to the agent, who receives it without any objection; 2. principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram IMPLIED ACCEPTANCE

AGENCY BY ESTOPPEL

1. De Jure Agent 2. Binds the principal for acts within the scope of his authority.

1. Not really an agent 2. Only the purported agent is liable.

RULE ON AGENCY BY ESTOPPEL

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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. (Cuison vs. CA, GR.88531, October 26, 1993)

CLASSES AND KINDS OF AGENTS 1. Universal Agent- one employed to do all acts that the principal may personally do, and which he can lawfully delegate to another the power of doing. 2. General Agent- one employed to transact all the business of the principal, or all the business of a particular kind or in a particular place, or in other words to do all acts, connected with a particular trade, business or employment. 3. Special or Particular Agent- one authorized to act in one or more specific transactions, or to do one or more specific acts, or to act upon a particular occasion. General Agent

Special Agent

1. Scope of Authority Usually authorized to do all acts connected with the business or employment in which he is engaged.

Authorized to do only acts in pursuance of particular instructions or with 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 by an act within Cannot bind his principal in a the scope of his authority although it manner beyond or outside the may be contrary to his special specific acts which he is authorized instructions to perform on behalf of the principal

4. Termination of Authority Apparent authority does not terminate by the mere revocation of his authority without notice to the third party

Mere revocation is effective to terminate the authority as to third persons because the third person has a duty to inquire

5. Construction of Instructions of Principal Statement of principal with respect Authority of agent to the agent’s authority would must be strictly pursued ordinarily regarded as advisory only SPECIAL POWER OF ATTORNEY (SPA)  An instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. NOTE: It need not be notarized; except where it is executed in a foreign country, must be certified in accordance with the Rules of Court. INSTANCES WHERE SPA IS NECESSARY (ART 1878) (PECWEM- LLB- BOCARO) 1. To make such payments as are not usually considered as acts of administration; 2. To effect novation which put an end to obligations already in existence at 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. 5.

To waive any obligation gratuitously; To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or foe a valuable consideration; 6. To make gifts, except customary ones for charity or those made to employees in the business managed by the agents; 7. To loan or borrow money, unless the latter’s act be urgent and indispensable for the preservation of the things which are under administration; 8. To lease any real property to another person for more than one year; 9. To bind the principal to render some service without compensation; 10. To bind the principal in a contract of partnership; 11. To obligate the principal as guarantor or surety;

Memory aid in Civil Law with 2017 updates 12. 13. 14. 15.

To create or convey real rights over immovable property; To accept or repudiate an inheritance; To ratify or recognize obligations contracted before the agency; Any other act of strict dominion.

NOTE: 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. NOTE: 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. (Siredy Enterprises, Inc. vs. CA, et al. GR 129039, September 27, 2002) NOTES:  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 265 SCRA 168) EFFECT OF LACK OF SPA WHERE ONE IS REQUIRED: UNENFORCEABLE When principal bound by act of agent 1. Agent must act within the scope of his authority 2. Agent must act in behalf of the principal NOTE: The limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. When a person NOT bound by act of another 1. Latter acts without or beyond the scope of his authority in the former’s name; and 2. Latter acts within the scope of his authority but in his own name (UNDISCLOSED PRINCIPAL), except when the transaction involves a thing belonging to the principal. In such case, the contract is deemed as entered between the principal and the third person. EFFECTS OF AGENT’S ACTS 1. With Authority a. in principal’s name – valid; principal is bound; agent not personally liable unless he bound himself (Article 1897) b. in his own name – Apply Article 1883; generally not binding on the principal; agent and stranger are the only parties, except regarding things belonging to the principal or when the principal ratifies the contract or derives benefit therefrom. 2. Without Authority a. in principal’s name – unauthorized and unenforceable but may be ratified, in which case, may be validated retroactively from the beginning (Article 1407) b. in his own name – valid, whether or not the subject matter belongs to the principal, provided that at the time of delivery, the “agent” can transfer legally the ownership of the thing. Otherwise, he will be held liable for breach of warranty against eviction; Article 1883 does NOT apply OCCASIONS WHEN PRINCIPAL IS BOUND BY THE ACTS OF THE AGENT BEYOND THE LATTER’S POWERS 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. Doctrine of Agency by Necessity  By virtue of the existence of an emergency, the authority of an agent is correspondingly enlarged in order to cope with the exigencies or the necessities of the moment  Requisites: 1. Real existence of an emergency 2. Inability of the agent to communicate with the principal 3. Exercise of the additional authority for the principal’s own protection 4. Adoption of fairly reasonable means, premises duly considered

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NOTE: Agency can never be created by necessity; what is created is additional authority in an agent appointed and authorized before the emergency arose. GENERAL OBLIGATIONS OF AGENT TO PRINCIPAL: 1. To act with utmost good faith and loyalty for furtherance of principal’s interests 2. To obey all lawful orders and instructions of principal within the scope of the agancy 3. To exercise reasonable care, skill and diligence SPECIFIC OBLIGATIONS OF AGENT TO PRINCIPAL 1. To carry out the agency which he has accepted 2. To answer for damages which through his performance the principal may suffer 3. To finish the business already begun on the death of the principal should delay entail any danger 4. To observe diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed 5. To advance the necessary funds should there be a stipulation to do so 6. To act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do 7. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal 8. To answer for damages if there being a conflict between his interest and those of the principal, he should prefer his own 9. Not to loan to himself if he has been authorized to lend money at interest 10. To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency 11. To distinguish goods by countermarks and designate the merchandise respectively belonging to each principal, in the case of a commission agent who handles goods of the same kind and mark, which belong to different owners 12. To be responsible in certain cases for the acts of the substitute appointed by him 13. To pay interest on funds he has applied to his own use 14. To inform the principal, where an authorized sale of credit has been made, of such sale 15. To bear the risk of collection, should he receive also on sale, a guarantee commission 16. To indemnify the principal for damages for his failure to collect the credits of his principal at the time that they become due 17. To be responsible for fraud or negligence NOTE: A stipulation exempting the agent from the obligation to render an account shall be VOID. GENERAL RULE: Knowledge of agent is knowledge of principal. EXCEPTIONS 1. Agent’s interests are adverse to those of the principal 2. Agent’s duty is not to disclose the information (confidential information) 3. Where the person claiming the benefit of the rule colludes with the agent to defraud the principal SUB-AGENT  A person to whom the agent delegates, as his agent, the performance of an act for the principal which the agent has been empowered to perform through his representative. NOTE: The agent may appoint a substitute (sub-agent) except when he has been prohibited by the principal. (ART 1892) Instances when agent shall be responsible for the acts of the substitute: 1. when he was not given the power to appoint; or 2. when he was given such power but without designating the person, and the person appointed was notoriously incompetent or insolvent. 3. in these two cases the principal may further bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. NOTE: All acts of the substitute appointed against the prohibition of the principal shall be VOID. JOINT AGENTS  Agents appointed by one or more principals under such circumstances as to induce the inference that it was the principal’s intent that all should act in conjunction in consummating the transaction for which they were appointed.  Their responsibility is JOINT; except if solidarity has been expressly stipulated.  If solidarity has been agreed upon, each agent is responsible for the: a. non-fulfillment of the agency b. fault or negligence of his fellow agents; except when the fellow agents acted beyond the scope of their authority. NOTE: innocent agent has a right later on to recover from the guilty or negligent agent (ART 1217(2)) Instances when agent may incur personal liability: 1. When the agent expressly binds himself NOTE: The individual liability of the agent can be considered a further security in favor of the creditor and does not affect or preclude the liability of the principal; both are liable 2. When agent exceeds his authority

Memory aid in Civil Law with 2017 updates 3. 4. 5.

When agent by his acts prevents performance on the part of the principal When a person acts as an agent without authority or without a principal A person who acts as an agent of an incapacitated principal unless the third party was aware of the incapacity at the time of the making of the contract

FACTOR/COMMISSION AGENT - One engaged in the purchase and sale for a principal of personal property, which for this purpose, has to be placed in his possession and at his disposal. 

If the commission agent received goods consigned to him, he is responsible for any damage or deterioration suffered by the same in the terms and conditions and as described in the consignment.

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The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal.

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A commission agent can sell on credit only with the express or implied consent of the principal. If such sale is made without authority, the principal is given two alternatives: i. He may require payment in cash, in which case any interest or benefit from the sale on credit shall belong to the agent since the principal cannot be allowed to enrich himself at the agent’s expense; ii. He may ratify the sale on credit in which case it will have all the risks and advantages to him.

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If the commission agent is authorized to sell on credit, he shall inform the principal with a statement of the names of the buyers. With such statement, the sale shall be deemed to be for cash as far as the principal is concerned.

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The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves the exercise of due diligence for that purpose.

BROKER  A middleman or intermediary who, in behalf of others and for a commission or fee, negotiates contracts/transactions relating to real or personal property. Factorage  Compensation of a factor or commission agent. Ordinary Commission  Compensation for the sale of goods which are placed in his possession or at his disposal. Guaranty Commission (Del credere)  Fee that is given in return for the risk, which the agent has to bear in the collection of credits.  An agent with a del credere commission is liable to the principal if the buyer fails to pay or is incapable of paying. GENERAL OBLIGATIONS OF PRINCIPAL TO AGENT  Duties and liabilities of the principal are primarily based upon the contract and the validity of the contract between them SPECIFIC OBLIGATIONS OF PRINCIPAL TO AGENT (CARIP) 1.

To comply with all the obligations which the agent may have contracted within the scope of his authority and in the name of the principal

2.

To advance to the agent, should the latter so request, the sums necessary for the execution of the agency

3.

To reimburse the agent for what the latter has advanced (plus interest), even if the business was not successful, provided the agent was free from fault

4.

To 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 NOTE: The agent may retain in pledge the things which are the object of the agency until the principal effects this reimbursement and pays the indemnity.

5.

To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agent’s services

LIABILITY OF PRINCIPAL FOR TORT OF AGENT RULE: The principal is civilly liable to third persons for torts of an agent committed at the principal’s direction or in the course and within the scope of the agent’s authority. Reason for liability: The rule is based upon the principle that he who does an act through another does it himself. CONDITIONS FOR RATIFICATION 1. principal must have capacity and power to ratify

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principal must have had knowledge of material facts principal must ratify the acts in its entirety act must be capable of ratification act must be done in behalf of the principal

ESTOPPEL BY PRINCIPAL Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. JOINT PRINCIPALS  Two or more persons who appoint an agent for a common transaction or undertaking.  Liability: solidarily liable to the agent for all the consequences of the agency.  Requisites of solidary liability: 1. There are two or more principals 2. The principals have all concurred in the appointment of the same agent; and 3. The agent is appointed for a common transaction or undertaking NOTE: Any one of them may revoke the agency RULES ON DOUBLE SALE BY PRINCIPAL AND AGENT 1 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 Article 1544(double sale). 2 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 is in bad faith, he alone shall be responsible. Instances when principal is not liable for the expenses incurred by the agent: 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 ensure, 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. MODES OF EXTINGUISHMENT OF AGENCY (EDWARD) 1. Expiration of the period 2. Death, civil interdiction, insanity or insolvency of the principal or of the agent 3. Withdrawal of the agent  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. 4. Accomplishment of the object or the purpose of the agency 5. Revocation 6. Dissolution of the firm or corporation, which entrusted or accepted the agency. Instances when death of principal does not terminate agency 1. If the agency has been constituted in the common interest of the principal and the agent 2. If it has been constituted in the interest of a third person who has accepted the stipulation in his favor Revocation of Agency by Principal GENERAL RULE: Agency is revocable at will of the principal, regardless of the term of the agreement. EXCEPTIONS: 1. If a bilateral contract depends upon it; 2. If it is the means of fulfilling an obligation already contracted; 3. If a partner is appointed manager of a partnership and his termination is unjustifiable; and 4. If it is created not only for the interest of the principal but also for the interest of third persons, who have accepted the stipulation in their favor Agency coupled with an interest  An agency wherein the agent has acquired some interest of his own in the execution of the authority granted to him, in addition to his mere interest in the contract of employment with the resulting gains.  The agency becomes merely a part of another obligation or agreement, or an incidental element thereof so it cannot be unilaterally revoked. NOTE: However, in Coleongco vs. Claparals (10 SCRA 577), the SC made a sweeping statement that coupled with an interest or not, the authority (agency) can certainly be revoked for a just cause. Implied Revocation may be effected: 1. By the act of the principal in appointing another agent for the same business or transaction; 2. By the act of the principal in directly managing the business entrusted to the agent; or 3. By the act the principal in subsequently granting a special power of attorney as regards the same business to another agent, where he had previously granted a general power of attorney to one agent.

TRUSTS

Memory aid in Civil Law with 2017 updates TRUST  A legal relationship between one person having an equitable ownership in property and another owning the legal title to such property. CLASSIFICATIONS 1. Effectivity - from the viewpoint of whether they become effective after the death of the trustor or during his life, it may be either: a. testamentary trusts b. trusts inter vivos (sometimes called “living trusts”) 2. Creation - from the viewpoint of the creative force bringing them into existence, it may be either: Express trust - created by the intention of the trustor or of the parties Implied trust - one which comes into being by operation of law. This may be either: 1) Resulting trust - one in which the intention to create a trust is presumed by law to exist from the transaction and facts of the case 2) Constructive trust - one imposed by law irrespective of and even contrary to the intention of the parties. It is designed to promote justice, frustrate fraud and prevent unjust enrichment. TRUST Always involves owner-ship, embracing a set of rights and duties fiduciary in character which may be created by a declaration without consideration. TRUST 1. An existing legal relationship and involves the separation of legal and equitable title

CONTRACT A legal obligation based on an undertaking supported by a consideration, which obligation may or may not be fiduciary in character.

2. The beneficiary of a trust may demand performance of the obligation without having formally accepted the benefit of the trust in public document, upon mere acquiescence in the formation of the trust and acceptance under the second paragraph of article 1311(stipulations pour autrui).

2. The donee must comply with the legal requirements in accepting donations.

DONATION There is a transfer of property as well as the disposition of both legal and equitable ownership except in cases of gifts in trust.

Persons involved in the creation of a trust: 1. Trustor - the one who intentionally creates a trust 2. Trustee - the person who holds the legal title to the trust property for the benefit of another and with certain powers and subject to certain duties 3. Beneficiary or the cestui que trust - the one who has the equitable interest in the property and enjoys the benefit of administration by the trustee. He may be a natural person or a legal entity. The trustor may establish a trust with himself as the beneficiary (usual case). ELEMENTS OF EXPRESS TRUST 1. Competent trustor and trustee; 2. Ascertainable trust res; and 3. Sufficiently certain beneficiaries. TRUST PROPERTY The concept of a trust arises from or is the result of a fiduciary relation between the trustee and the cestui que trust as regards certain property- real, personal, funds or money, choses in action held by the trustee. (Pacheco vs. Arro, 85 PHIL 505 )  The trust property is owned by two or more persons at the same time, the relation between the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other.  The trustee is not a mere agent but an owner. But his ownership is a mere matter of form rather than substance, and nominal rather than real.

RESULTING TRUST 1. Intention to create trust: The intent of the parties to create a trust is presumed or

CONSTRUCTIVE TRUST The trust is created irrespective of or even contrary to the intention of the

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implied by law from the nature of their transaction 2. Prescriptive period: The 10 year prescriptive period shall be counted from the time repudiation is made known to beneficiary. 3. Examples: Illustrated in Articles 1448, 1449, 1451, 1452, 1453

parties to promote justice, frustrate fraud and to prevent unjust enrichment. The 10 year prescriptive period shall be counted from the time that the constructive trust arises. Illustrated in Articles 1450, 1454, 1455, 1456

IMPLIED TRUST EXPRESS TRUST 1. As to creation Created by the intention of the parties 2. As to proof of trust An express trust over an immovable property or any interest therein cannot be proved by parol evidence 3. As regards repudiation of trust An express repudiation made known to the beneficiary is necessary in order that laches or acquisitive prescription may bar an action to enforce an express trust.

Come into being by operation of law. An implied trust over an immovable or any interest therein may be proved by oral evidence.

In constructive trusts, even if there is no repudiation, laches may bar an action to enforce an implied trust.

PROOF OF TRUST GENERAL RULE: trust whether express or implied may be proved by parol or oral evidence EXCEPTION: An express trust over an immovable property or any interest therein. requirement however is not for validity but only for purposes of proof.

This latter

NOTES:  Trusts cannot be established in violation of law. Trust is founded in equity such that it cannot result from a contract formed for an illegal purpose.  Neither may a trust be created for the purpose of evading a legal prohibition. Example: there cannot be a trust created for the purpose of obtaining homestead patents, in favor of a person already disqualified to obtain additional homesteads. Necessity of Acceptance to the creation and validity of trust relationship 1. Acceptance of the trustee  The acceptance of the trustee is not necessary to its existence and validity since if he declines, the courts will appoint a trustee to fill the office that he declines. (see Sec.3 Rule 98 of the Rules of Court). NOTE: But a trustee’s acceptance of the trust is necessary to charge him with the office of the trustee and the administration of the trust and to vest the legal title in him. 2. 

Acceptance of the beneficiary The acceptance by the beneficiary is essential to the creation and validity of a trust. However, such acceptance is presumed if there is no proof to the contrary and the trust does not impose any onerous condition upon the beneficiary.

Requisites for a Trustee to claim title by prescription: 1. He has performed open and unequivocal acts of repudiation 2. Such positive acts of repudiation have been made known to the beneficiary or the cestui que trust 3. The evidence thereon should be clear and convincing and 4. The period fixed by law has expired. (10 years from the time that the repudiation is made known to the beneficiary in cases of express trust or resulting trust while 10 years from the time a constructive trust arises). 

In order that a trustee may sue or be sued alone, it is essential that his trust should be express, that is a trust created by the direct and positive acts of the parties, by some writing deed or will, or by proceedings in court. Rule 3, sec 3 does not apply in cases of implied trust that is, a trust which may be inferred merely by the acts of the parties or from other circumstances. (PAL vs. Heald Lumber Co.)

Memory aid in Civil Law with 2017 updates NOTES:  the 10-year prescriptive period in case of implied trust begins to run from the date the trustee repudiates the express trust. In the case Sps. Pascual, et al. vs. CA, et al. GR 115925, August 15, 2003, it was held that repudiation takes place when the adverse party registers the land.  the 4-year prescriptive period under Article 1391 applies only if the fraud does not give rise to an implied trust, and the action is to annul a voidable contract under Article 1390. TRUST PURSUIT RULE  Equity will pursue property that is wrongfully converted by the fiduciary, or otherwise compel restitution to the beneficiary. A trust will follow the property through all changes in its state and form, provided its product or proceeds are capable of identification. IMPLIED TRUST  Are those, without being express, are deducible from the nature of the transaction as matters of intention, or which are superinduced on the transaction by operation of law, as matters of equity independently of the particular intention of the parties. KINDS OF IMPLIED TRUSTS 1. Purchase money resulting trust (Article 1448) – There is a resulting trust when property is sold, and the legal estate is granted to one party but the price is paid by another party for the purpose of having the beneficial interest of the property.  To give rise to a purchase money resulting trust, it is essential that there be: a) an actual payment of money, property or services or an equivalent, constituting valuable consideration; b) and such consideration must be furnished by the alleged beneficiary of a resulting trust. EXCEPTIONS: a) Where A pays the purchase money and title is conveyed by absolute deed to A’s child or to a person to whom A stands in loco parentis and who makes no express promise, a trust does not result, the presumption being that a gift was intended; b) Where an actual contrary intention is proved; c) Where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of fraud. (Tigno vs. Court of Appeals 280 SCRA 262 [1997])

2.

Donations made to a person but the beneficial interest is vested in another. The donee is the trustee while the designated third person is the beneficiary. (ART 1449). 3. Purchase with borrowed funds and the conveyance is made to lender to secure payment of debt. ART 1450 ) 4. Legal title to land inherited by heir placed in the name of another. (Article 1451) 5. Legal title to property purchased taken in one co-owner. (ART 1452) 6. Conveyance under a promise to hold for, or transfer to another. (ART 1453) 7. Absolute conveyance to a person to secure performance of grantor’s obligation. 8. (ART 1454) 9. Purchase of property with use of trust funds (ART 1455) 10. Acquisition of property through mistake or fraud. (ART 1456). NOTE: An action for reconveyance of a parcel of land based on an implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property. BUT, this rule applies only when the plaintiff (or person enforcing the trust) is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to property, does not prescribe. Requisites before period or prescription may start in regard to an action based on an implied trust: a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust. b) Such positive acts of repudiation have been made know to the cestui que trust; and c) Evidence thereon is clear and positive. (Vda. De Cabrera vs. Court of Appeals 267 SCRA 339 [1997].) NOTE: The enumeration is not exclusive. Other examples of implied trust: 1. The registration of land under torrens in the name of one person do not bar evidence to show it was only held in trust for another. 2. Certificate of registration of vehicle placed in the name of a person although the price was not paid by him but by another. 3. One arising from the agent’s willful violation of the trust reposed in him by the principal by buying for himself the property he was supposed to buy for the principal who designated and appointed him to negotiate with the owner.

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In consonance with the trust fund doctrine in Corporation Law, the assets of the corporation, as represented by the capital stock, are regarded as “trust fund” to be maintained unimpaired for the payment of corporate creditors.

LAND REGISTRATION LAND REGISTRATION  Purposes: 1. To quiet title to land and to stop forever any question as to the legality of said title. 2. To provide a means of publication TORRENS SYSTEM  A system for registration of land under which, upon the landowner’s application, the court may, after appropriate proceedings, direct the issuance of a certificate of title. Purposes: To avoid possible conflicts of title regarding real property, To facilitate transactions relative thereto by giving the public the right to rely upon the face of the Torrens certificate of title and to dispense with the need of inquiring further EXCEPT when the party concerned has actual knowledge of facts and circumstances that should imply a reasonably cautious man to make such further inquiry.  1. 2.

NOTE:  Registration was never intended as a means of acquiring ownership. (Republic vs. CA, 131 SCRA 539).  Registration is not equivalent to title. Under the Torrens system, registration only gives validity to the transfer or creates a lien upon the land. It was not established as a means of acquiring title to the private land because it merely confirms, but does not confer, ownership (Lu vs Manipon, 381 SCRA 788)  Lands granted under Spanish Mortgage Law which are not yet covered by certificate of title under Torrens System are considered as unregistered lands. (Sec. 3 P.D. 1529) TORRENS TITLE  Certificate of ownership issued by the Register of Deeds, naming and declaring the owner of the real property described therein, free from all liens and encumbrances except such as may be expressly noted thereon or otherwise reserved by law. 

Conclusive against the whole world, including the government and to a holder thereof in good faith, it is guaranteed to be indefeasible, unassailable, and imprescriptible.

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Title once registered cannot be impugned, altered, changed, modified, enlarged, or diminished except in some direct proceeding permitted by law.

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Probative Value: Torrens Title may be received in evidence in all courts of the Philippines, and shall be conclusive as to all matters contained therein, principally the identity of the owner of the covered land thereby.

MODES OF ACQUIRING TITLE: (PREPA2ID) 1. Public grant  based on the Public Land Acts  obtained through issuance of Spanish Gov’t. of Royal Grants and concessions to discoverers and settlers. 2. Reclamation  filling up of parts of the sea for conversion to land.  The SC has ruled that only the National Government may engage in reclamation projects. (Republic vs. CA, 299 SCRA 199; P.D. 3-A.) 3. Emancipation patent or grant  based on P.D. No. 27 (CARP of 1972)  for the purpose of ameliorating the sad plight of farmers and of releasing them from the bondage of the soil. 4. Private grant or voluntary transfer 5. Adverse possession or prescription  Adverse possession – actual possession of land in opposition to all other claimants.  Prescription – possession of land for required number of years and assertion of ownership through an interrupted actual possession of property within the period of time prescribed by law. 6. Accretion  3 Requisites for accretion:

Memory aid in Civil Law with 2017 updates

7. 8.

a) deposition of soil or sediment be gradual and imperceptible; b)result of the action of waters of the river; c) land where accretion takes place is adjacent to bank of rivers or sea coast.  Accretion does not automatically become registered. It needs new registration.  Accretions on the bank of a lake, like Laguna de Bay, belong to the owners of the estate to which they have been added, while accretion on the sea bank still belongs to the public domain, and is not available for private ownership until formally declared by the government to be no longer needed for public use. (Republic vs. Amanda vda. De Castillo, 163 SCRA 286)  Registration does not protect the riparian owner against diminution of land through accretion. If alluvium is wiped away, registration is rendered of no effect because subject is gone. Involuntary alienation  E.g. eminent domain/expropriation Descent or devise  By descent, title is acquired when an heir succeeds the deceased owner in testate or intestate.  By devise, person acquires land from one who may not be a relative, if he is named in the deceased’s will.

Administration of the Torrens System 1. Land Registration Authority (LRA)  Agency of the government charged with the execution of laws relative to the registration of lands and under executive supervision of DOJ. (Sec. 4 P.D. 1529) 

Functions of the Administrator: a. Issue decrees of registration pursuant to final judgments of the courts in land registration proceedings and cause the issuance by the Registers of Deeds of the corresponding certificates of title. b. Exercise supervision and control over all Registers of Deeds and other personnel of the Commission. c. Resolve cases elevated en consulta by or on appeal from the decision of the Register of Deeds d. Exercise executive supervision over all clerks of court and personnel of the courts with respect to the discharge of their duties and functions in relation to the registration of lands e. Implement all orders, decisions, and decrees promulgated relative to the registration of lands and issue, subject to the approval of the Secretary of Justice, all needful rules and regulations f. Verify and approve subdivision, consolidation, and consolidation-subdivision survey plans of properties titled under Act 496 and PD 1529 except those covered by PD 957. g. Acts as clerk of court in land registration proceedings

2. 

Register of Deeds (RD) The public repository of records of instruments affecting registered or unregistered lands and chattel mortgages in the province or city wherein such office is located. (Sec. 10, P.D. 1529)

Function: To immediately register an instrument presented for registration dealing with real or personal property which complies with all the requisites for registration. DOCTRINES:  The function of the Register of Deeds with reference to the registration of deeds, encumbrances, instruments and the like is ministerial in nature (Baranda vs. Gustilo, 165 SCRA 757)  The law on registration does not require that only valid instruments shall be registered. If the purpose of registration is merely to give notice, then questions regarding the effect or invalidity of instruments are expected to be decided after, not before registration. It must follow as a necessary consequence that registration must first be allowed, and validity or effect litigated afterwards. (Almirol vs. The Register of Deeds of Agusan, 22 SCRA 1152) 

Instances when RD may deny registration: 1. Where there are more than 1 copy of the owner’s duplicate certificate of title and not all such copies are presented in the Register of Deeds 2. Where the voluntary instrument bears on its face infirmity 3. Where the validity of the instrument sought to be registered is in issue in a pending court suit 4. When the document is not verified and notarized (Gallardo vs. IAC, 155 SCRA 248) Note:  A deed of sale executed in a place other than where the property is located does not affect extrinsic validity of the instrument as long as the notary public concerned has authority to acknowledge the document executed within his territorial jurisdiction.  Notarial acknowledgment attaches full faith and credit to document and vests upon it presumption of regularity. (Sales vs. CA, 211 SCRA 885, 865) Ways of Registering Title 1. Judicial  filing of petition with the regular courts  issuance of a decree by LRA  issuance of Original Certificate of Title (OCT) by Register of Deeds 2.

Administrative  filing of application at CENRO/ PENRO

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

forwarded to the Reg. Director and/or DENR for the issuance of patent and Register of Deeds for issuance of OCT

Registrable Lands: 1. Alienable public agricultural lands 2. Private lands Non-registrable lands:  Those found in Civil Code provisions dealing with non-registrable properties (e.g. property of public dominion) 

Specific kinds of non-registrable properties or lands: a. Forest or timberland, public forest, & forest reserve b. Mangrove swamps c. Mineral lands d. Foreshore land & seashore NOTE: Foreshore land is the strip of land that lies between the high and low water marks and is alternatively wet and dry according to the flow of the tide. It is part of the public domain and not susceptible of disposition except by lease (Roble vs. Arbase) e. f. g. h. i. j. k.

Navigable rivers, streams & creeks Lakes Military Reservations Watershed Grazing lands Previously titled land Alluvial deposit along river when man-made

SYSTEMS OF REGISTRATION 1. ORIGINAL REGISTRATION UNDER PD NO. 1529  NATURE: proceeding brought before the Regional Trial Court ( as a land registration court) to determine title or ownership of land on the basis of an application for registration or answer by a claimant in a cadastral registration.  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

A. REQUISITES (STEPS) IN ORDINARY LAND REGISTRATION PROCEEDINGS (P.D. 1529): (SFS-TPSFH-PIEST)  The following requisites must also be complied with in the confirmation of imperfect or incomplete title under Section 48 (b) of the Public Land Act 1. Survey of the land by the Bureau of Lands or a duly licensed private surveyor; NOTES:  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) 2. Filing of Application for Registration by the applicant; NOTES:  always at the RTC of the province, city or municipality where property is situated.  it is then indorsed to the MTC if there is no controversy over the land or its value is less than P100,000  in cases of delegated jurisdiction to the MTC, appeal is direct to the Court of Appeals  Bureau of Land must always be furnished with a copy of the petition and all pertinent documents  If land is situated between boundaries of two provinces, application must be filed: a) boundaries are not defined – in the RTC of the place where it is declared for taxation purposes; b) boundaries are defined – separate plan for each portion must be made by surveyor and a separate application for each lot must be filed with appropriate RTC. 3. 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;

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6. 7. 8.

9. 10.

11. 12. 13.

NOTES:  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 Service of Notice upon contiguous owners, occupants and those known to have interest in the property by the sheriff; Filing of Answer or Opposition to Application by any person whether named in the notice or not; Hearing of the case by the court; NOTES:  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) Promulgation of judgment by the court; 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; NOTES:  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. Entry of Decree in the Land Registration Authority; NOTE: This serves as the reckoning date to determine the 1-year period from which one can impugn the validity of the registration. Sending of copy of Decree to the corresponding Register of Deeds; and 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.

B. Persons Who May Apply for Registration: (Sec. 14, PD No. 1529) 1.

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; 2. Those who have acquired ownership of private lands by prescription under the provisions of existing laws; 3. Those who have acquired ownership of private lands or abandoned river beds by right of accession or accretion; and 4. Those who have acquired ownership of land in any other manner provided for by law. NOTES:  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) C. Persons who cannot file an application for registration 1. A public land sales applicant insofar as the land covered by his sales application is concerned. Reason: he acknowledged that he is not the owner of the land and that the same is public land. [ Palawan Agricultural and Industrial Co., Inc. vs. Dir. of Lands, 44 SCRA 15 (1972)] 2. A mortgagee or his successor in interest to the mortgage, notwithstanding the lapse of the period for the mortgagor to pay the loan secured to redeem it. Reason: such act would amount to a pactum commissorium which is against good morals and public policy. [Reyes vs. Sierra, 93 SCRA 472, 480 (1979)] 3. An antichretic creditor cannot also acquire by prescription the land surrendered to him by the debtor. Reason: His possession is not in the concept of owner. [Ramirez vs. CA, 144 SCRA 292, 301 (1996)] 4. A person or entity whose claim of ownership to land had been previously denied in a reivindicatory action. [Kidpales vs. Baguio Mining Co., 14 SCRA 913, 916, 918 (1965)] D. Amendments to application that require publication RULES:  The court may order, at any time, an application to be amended by striking out one or more of the parcels of land applied for or by a severance of the publication (Sec. 18 P.D. 1529)  Amendments to the application including joinder, substitution, or discontinuance as to the parties may be allowed by the court at any stage of the proceedings upon just and equitable terms. In such cases, publication is not necessary.  Publication and notice are necessary where the amendment to the application consists in: a. substantial change in the boundaries b. an increase in the area of the land applied for c. the inclusion of additional land NOTE:

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Memory aid in Civil Law with 2015 updates  purpose of the new publication is to give notice to all persons concerned regarding the amended application. Without a new publication, the registration court cannot acquire jurisdiction over the area covered by the original application, and the decision of the registration court would be a nullity insofar as the decision concerns the newly included land. (Benin vs. Tuason, 57 SCRA 531)  an amendment due to change of name of the applicant does not require republication [Dir. of Lands vs. IAC, 219 SCRA 399, 345 (1993)] 2. SUBSEQUENT REGISTRATION  Where incidental matters after original registration may be brought before the land registration court by way of motion or petition filed by the registered owner or a party in interest.  Rules as to the necessity and effects of registration in general a. Except a will that purports to convey or affect a registered land, the mere execution of deeds of sale, mortgages, leases or other voluntary documents serves only 2 purposes: (1) as a contract between the parties thereto and (2) as evidence of authority to the RD to register such documents b. It is only the act of registering the instrument in the Register of Deeds of the province of city where the land lies which is the operative act that conveys ownership or affects the land insofar as third persons are concerned. c. The act of registration creates a constructive notice to the whole world of such voluntary or involuntary instrument or court writ or process.  Scope of Subsequent dealings with registered land Voluntary Dealings 1. Concept Refer to deeds, instruments or documents which are results of the free and voluntary acts of the parties thereto

2. Kinds

3. Effects registration

- sale - real proper- ty mortgage - lease - pacto de retro sale -extra-judicial settlement - free patent/ homestead - powers of attorney - trusts of An innocent purchaser for value of registered land becomes the registered owner the moment he presents and files a duly notarized and valid deed of sale and the same is entered in the day book and at the same time he surrenders or presents the owner’s duplicate certificate of title covering the land sold.

Involuntary Dealings 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. - attachment - mandamus - sale on execution of judgement or sales for taxes - adverse claims - notice of lis pendens

Entry thereof in the day book of the Register of Deeds is sufficient notice to all persons even if the owner’s duplicate certificate of title is not presented to the Register of Deeds.

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Rules and Doctrines: 1. Voluntary Dealings  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.  Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefore and the law will in no way oblige him to go behind the certificate to determine the condition of the property. Even if a decree in a registration proceeding is infected with nullity, still, an innocent purchaser for value relying on a Torrens title issued in pursuance thereof is protected (Cruz vs. CA & Suzara, 281 SCRA 491)  Although generally a forged or fraudulent deed is a nullity and conveys no title, however, there are instances when such a fraudulent document may become the root of a valid title. One such instance is where the certificate of title was already transferred from the name of the true owner to the forger, and while it remained that way, the land was subsequently sold to an innocent purchaser. (Fule vs Legare)  In the case of Tomas vs. Tomas (GR No. L-36897) the Supreme Court ruled that above rule cannot be applied where the owner still holds a valid and existing certificate of title covering the same property because the law protects the lawful holder of a registered title over the transfer of a vendor, bereft of any transmissible right  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. [Centeno vs 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); 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 lis pendens; 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) 2. 

Involuntary Dealings 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 lis pendens



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) Formal requisites of an adverse claim for purposes of registration: a) adverse claimant must state the following in writing: 1) his alleged right or interest 2) how and under whom such alleged right or interest is acquired 3) the description of the land in which the right or interest is claimed 4) the certificate of title number b) such statement must be signed and sworn to before a notary public c) claimant shall state his residence or place to which all notices may be served upon him 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 (Sajonas vs CA, [GR No. 102377, July 5, 1996) notice of lis pendens 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 Marasigan vs IAC. 152 SCRA 253).

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Memory aid in Civil Law with 2015 updates Notice of lis pendens is proper in the following cases: 1. to recover possession of real estate 2. to quiet title thereto 3. to remove clouds upon the title thereof 4. for partition, and 5. any other proceeding of any kind in court directly affecting the title to the land or the use of occupation thereof or the building thereon. When notice of lis pendens inapplicable: (PAPAL) 1. proceedings for the recovery of money judgments 2. attachments 3. proceedings on the probate of wills 4. administration of the estate of deceased persons 5. levies on execution 6. Foreclosure NOTE: notice of lis pendens may be cancelled in the following cases before final judgment upon order of the court: 1. when it is shown that the notice is for the purpose of molesting the adverse party 2. when it is shown that it is not necessary to protect the right of the party who caused the registration thereof 3. where the evidence so far presented by the plaintiff does not bear out the main allegations of the complaint 4. where the continuances of the trial are unnecessarily delaying the determination of the case to the prejudice of the defendant 5. upon verified petition of the party who caused the registration thereof 6. it is deemed cancelled after final judgment in favor of defendant, or other disposition of the action such as to terminate all rights of the plaintiff to property involved. JUDICIAL CONFIRMATION OF IMPERFECT OR INCOMPLETE TITLE  Applicants: 1. Filipino citizens who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of public domain under a bona fide claim of acquisition since June 12, 1945 or prior thereto or since time immemorial (CA No. 141, Section 48, as amended by PD No. 1073, Sec. 4). 2. Filipino citizens who by themselves or their predecessors-in-interest have been, prior to the effectivity of PD 1073 on January 25, 1977, in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, for at least 30 years, or at least since January 24, 1947 (RA No. 1942). 3. Private corporations or associations which had acquired lands from Filipino citizens who had possessed the same in the manner and for the length of time indicated in paragraphs 1 and 2 above 4. Natural-born citizens of the Philippines who have lost their citizenship and who has the legal capacity to enter into a contract under Philippine laws may be a transferee of private land up to a maximum area of 5,000 sq,m, in case of urban land or 3 hectares in case of rural land to be used by him for business or other purposes. (Section 5, RA No. 8179) NOTE: When the conditions set by law are complied with, the possessor of the land, by operation of law, acquires a right to a grant, a government grant, without the necessity of a certificate of the title being issued. The law, as presently phrased, requires that possession of lands of the public domain must be from June 12, 1945 or earlier, for the same to be acquired through judicial confirmation of imperfect title. (Republic vs Doldol. 295 SCRA 359)  1. 2. 



Applicant Must Prove: That the land is alienable and disposable land of public domain; and That they have been in open, continuous, exclusive, and notorious possession and occupation of the land for the length of time and in the manner and concept provided by law. Extended period for filing of application: Section 1, RA No. 9176 provides in part that “The time to be fixed in the entire archipelago for the filing of applications under this chapter shall not extend beyond 31 December 2020. Provided that the area applied for does not exceed twelve (12) hectares.” Section 3 of RA No. 7196 provides that “All pending applications filed before the effectivity of this amendatory act shall be treated as having been filed in accordance with the provisions of this Act.”

Filing of Application (Extent of Jurisdiction)

GENERAL RULE: Application for land registration shall be filed with the RTC of the province or city where the land is situated. DOCTRINES:  PD No. 1529 has eliminated the distinction between the general jurisdiction vested in the RTC and the limited jurisdiction conferred upon it by the former law when acting merely as land registration court. Aimed at avoiding multiplicity of suits, the change has simplified registration proceedings by conferring

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

upon the regional trial courts the authority to act not only on original applications but also those filed after original registration, with power to hear and determine all questions arising upon such applications or petitions. (Averia vs. Caguioa. 146 SCRA 459 ; Ignacio vs CA 246 SCRA 242) The issues raised before the RTC sitting as a land registration or cadastral court involved substantial or controversial matters and, consequently, beyond said court’s jurisdiction. The issues may be resolved only by a court of general jurisdiction. Thus, petitions under Secs. 75 and 108 of PD 1529 can be taken cognizance of by the RTC sitting as a land registration or cadastral court but relief under said sections can only be granted if there is unanimity among the parties, or that there is no adverse claim or serious objection on the part of any party in interest; otherwise, the case becomes controversial and should be threshed out in an ordinary case or in the case where the incident properly belongs. ( Tagaytay-Taal vs. CA. 273 SCRA 182)

 EXCEPTION: Delegated Jurisdiction of the MTC to hear and determine cadastral or land registration cases covering lots where there is no controversy or opposition, or contested lots, the value of which does not exceed P100,000.00 Publication, Mailing, and Posting Requirements: (PMP) - compliance is mandatory and jurisdictional [Republic vs. Marasigan, 198 SCRA 219 (1991)]

1.  

Publication of notice of initial hearing Official Gazette and newspaper of general circulation (Sec. 23, P.D. 1529) Purposes: a. To confer jurisdiction over the land applied for upon the court b. To charge the whole world with knowledge of the application of the land involved NOTE: If it is later shown that the decree of registration had included land or lands not included in the original application as published, then the registration proceedings and the decree of registration must be declared null and void insofar – but only insofar- as the land not included in the publication is concerned. This is so because the court did not acquire jurisdiction over the land not included in the publication- the publication being the basis of the jurisdiction of the court. (Benin vs. Tuason. 57 SCRA 531)  If difference is not so substantial as it would not affect the identity of the land, republication is not necessary.  If the amendment of the survey plan during the registration proceedings does not involve an addition, but on the contrary, a reduction of the original area that was published, no new publication is required. [Republic vs. CA, 71 SCRA 665 (1996)]  Publication alone in newspaper of general circulation would not suffice to confer jurisdiction to RTC. It must be published in the Official Gazette in order that jurisdiction to court be conferred. 2.  

Mailing Mailing of the Notice of Hearing Administrator of Land Registration Authority shall cause a copy of the notice of initial hearing of the application to be mailed to the following: a) Every person named in the notice whose address is known b) Secretary of DPWH, Provincial Governor, and Mayor of the municipality or city, as the case may be, in which the land lies, if applicant requests to have the line of a public way or road determined c) Secretary of DAR, Solicitor General, Director of Land Management, Director of Mines and/or Director of Fisheries and Aquatic Resources, as the case may be, if the land borders on a river, navigable stream or shore, or on an arm of the sea where a river or harbor line has been established, or on a lake, or if it otherwise appears from the application that a tenant-farmer or the national government may have a claim adverse to the applicant.

c) Posting  Posting of the copy of the Notice of Hearing is a duty of the Sheriff which must be made at least 14 days before date of initial hearing, in conspicuous places. NOTE: Certification of the Administrator of LRA and of the Sheriff concerned to the effect that the notice of initial hearing, as required by law, has been complied with shall be filed in the case before the date of initial hearing, and shall be conclusive proof of such fact (Secion 24, P.D. 1529). NOTE: Service of Notice upon contiguous owners:  indispensable  lack of service constitutes “extrinsic fraud” Answer or Opposition  oppositor to an application need not be named in the notice of initial hearing.  adverse claimants must set forth in their answer all their objections to the application and must claim an interest to the property applied for, based on a right of dominion or some other real right independent of, and not at all subordinate, to the rights of the government.

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Memory aid in Civil Law with 2015 updates The following may be proper oppositors: 1. a homesteader who have not yet been issued his title but who had fulfilled all the conditions required by law to entitle him to a patent; 2. a purchaser of friar land before the issuance of the patent to him; and 3. persons who claim to be in possession of a tract of public land and have applied with the Bureau of Lands for its purchase.

Evidence  The applicant must prove: 1. that the land applied for has been declassified from the forest or timber zone and is a public agricultural land, is alienable and disposable, or otherwise capable of registration. NOTE: Specific evidence a) Presidential proclamation b) Executive Order c) Administrative Order issued by the Secretary of DENR d) Bureau of Forest Development Land Classification Map e) Certification by Director of Forestry f) Investigation reports of Bureau of Lands investigator g) Legislative act or by statute 2. The identity of the land NOTE: Proof of Identity of land a) Survey plan in general b) Tracing cloth plan and blue print copies of plan c) Technical description of the land d) Tax declarations e) Boundaries and area 3. Possession and occupation of the land for the length of time and in the manner required by law Effect of Possession General Rule: Open, exclusive and undisputed possession of alienable public land for the period prescribed by law creates the legal fiction whereby the land, upon completion of the requisite period ipso jure and without need of judicial or other sanctions, ceases to be public land and becomes private property.  The present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor or predecessor-in-interest (Article 1138, Civil Code)  Tacking of possession is allowed only when there is privity of contract or relationship between the previous and present possessors [South City Homes, Inc. vs. Republic, 185 SCRA 700 (1990)] Insufficient proofs of possession: a) mere casual cultivation of portions of the land by claimant. Reason: possession is not exclusive and notorious so as to give rise to a presumptive grant from the State (Republic vs. Vera, 120 SCRA 210; Director of Lands vs. Reyes 68 SCRA 177) b) tax declaration of land sought to be registered which is not in the name of applicant but in the name of deceased parents of an oppositor. Reason: possession of applicant is not completely adverse or open, nor it is truly in the concept of an owner. (Sunga vs. De Guzman, 90 SCRA 618); c) holding of property by mere tolerance of the owner. Reason: holder is not in the concept of owner and possessory acts no matter how long do not start the running of the period of prescription. (Ordoñez vs. CA, 188 SCRA 109); d) where applicants tacked their possession to that of their predecessor-in-interest but they did not present him as witness or when no proofs of what acts of ownership and cultivation were performed by the predecessor (Dir. of Lands vs. Datu, 115 SCRA 25) e) mere failure of Fiscal representing the State to cross-examine the applicant on the claimed possession [Republic vs. Lee, 197 SCRA 1320 (1991)]; f) possession of other persons in the land applied for impugns the excusive quality of the applicant’s possession (Dir. of Lands vs. CA and Salazar, 133 SCRA 701) NOTE: Proof of private ownership a. Spanish title, impending cases NOTE: Although Spanish titles are now inadmissible and ineffective as proof of ownership in land registration proceedings filed after Aug. 16, 1976, so that all lands granted under the Spanish mortgage law system of registration which are not yet covered by a certificate of title issued under the Torrens system are deemed as unregistered land, there are still cases in court which particularly involve possessory information titles b.

Tax declarations and tax payments NOTES:  While tax declarations and real estate tax receipts are not conclusive evidence of ownership, if presented as documentary evidence coupled with proof of actual possession for the period required by law of the land, they are evidences of ownership. (Heirs of Maningding vs CA 276 SCRA).

Memory aid in Civil Law with 2017 updates Moreover, even if belatedly declared for taxation purposes, it does not negate possession especially if there is no other claimant of the land (RP vs CA and Divinaflor 349 SCRA)  Where the taxes for 31 years, 1946 to 1976, were paid only in 1976, a few months prior to filing of the application, such payment does not constitute sufficient proof that applicant has bona fide claim of ownership during those years prior to filing of the application [Republic vs. CA, 131 SCRA 140 (1984)] Mere failure of the owner of the land to pay the realty tax thereon does not warrant a conclusion that there was abandonment of his right to the property (Reyes vs. Sierra, 93 SCRA 472) c.

Presidential issuances and Legislative acts NOTES:  constitutive of a “fee simple” title or absolute title in favor of the grantee (Republic rep. by Mindanao Medical Center vs. CA, 73 SCRA 146)  a law or statute which ceded or transferred in full ownership a reserve area in favor of a gov’t. institution thereby effectively transferred ownership to transferee. [Int’l Hardwood and Veneer Co. of the Phils. vs. U.P., 200 SCRA 554 (1991)]

d.

Other kind of proof 1. Testimonial evidence (i.e. accretion is on a land adjacent to a river. Any evidence that accretion was formed through human intervention negates the claim [Binalay vs. Manalo, 195 SCRA 374 (1991)]; 2. Deeds of sale;

Proofs insufficient to establish private right or ownership: a) compromise agreement among parties to a land registration case where they have rights and interest over the land and allocated portions thereof to each of them; NOTE: assent of Dir. Of Lands and Dir. of Forest Management to compromise agreement did not and could not supply the absence of evidence of title required of the applicant [Republic vs. Sayo, 191 SCRA 71 (1990)] b) decision in an estate proceeding of a predecessor-in-interest of an applicant which involves a property over which the decedent has no transmissible right, and in other cases where issue of ownership was not definitely passed upon (Dir. of Lands vs. IAC, 195 SCRA 38); c) survey plan of an inalienable land. NOTE: Such plan does not convert such land into alienable land, much less private property [Republic vs. CA, 154 SCRA 476 (1987)] HEARING, JUDGMENT, AND POST JUDGMENT INCIDENTS IN ORDINARY LAND REGISTRATION A. Hearing  The court may: 1. hear the parties and their evidence; or NOTE: In the exercise of delegated jurisdiction, the MTC can no longer appoint commissioners 2. refer the case or any part thereof to a referee or commissioner. NOTE: While referee can receive evidence and objections, it has no power to rule on the case. Its main duty is to receive evidence and submit its findings and recommendations to the court. NOTE: Muniments of title: instruments or written evidences which applicant holds or possesses to enable him to substantiate and prove title to his estate. B. Judgment  2 duties of the court: 1. Render judgment, declare the same final, and cause the decision’s entry; and 2. Order the LRA to issue decree of registration. Doctrines  Only claimed property or a portion thereof can be adjudicated. If the applicant asserts ownership to and submits evidence only for a portion of a lot, the inclusion of the portion not claimed by the applicant is void and of no effect for a land registration court has no jurisdiction to decree a lot to a person who put no claim to it and who never asserted any right of ownership over it (Almarza vs Arguelles 156 SCRA 718).  A land registration court has no jurisdiction to adjudge a land to a person who has never asserted any right of ownership thereof (Caragay-Layno vs. CA, 133 SCRA 718)  The court may reverse its decision even after the LRA has already issued the decree of registration (Gomez vs CA 168 SCRA 503). NOTE: The judgment becomes final upon the lapse of 15 days counted from receipt of notice of the judgment. However, notwithstanding the lapse of the 15-day period from receipt of judgment by the parties, the court continues to retain control over the case until the expiration of 1 year after the entry of decree of registration by the LRA. C. Post-Judgment Incidents a. Writ of possession

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Memory aid in Civil Law with 2015 updates GENERAL RULE: The judgment adjudicating ownership to the successful applicant impliedly carries with it the delivery of possession if he is deprived, since the right of possession is inherent in that of ownership EXCEPTIONS: 1. A writ of possession does not lie in a land registration case against a person who entered the property after issuance of the final decree and who had not been a party in the case 2. A writ of possession cannot be issued in a petition for reconstitution of allegedly lost or destroyed certificate of title. b. Writ of demolition - a complement of the writ of possession, without which the latter would be ineffective ( Lucero vs. Loot 25 SCRA 678) DECREE OF REGISTRATION  This is the decree issued by the LRA pursuant to the order of the court. As such, the decree has been considered as the ‘condensed form’ of the court’s judgment.  The decree of registration binds the land, quiets title thereto, subject only to such exceptions or liens as may be provided by law. It is conclusive upon all persons including the national government and all branches thereof, whether mentioned by name in the application or notice, the same being included in the general description “To All Whom It May Concern.” And such conclusiveness does not cease to exist when the title is transferred to a successor. (Melgar vs. Pagayon. 21 SCRA 841)  The duty of the land registration officials to issue the decree of registration is ministerial in the sense that they act under the orders of the court and the decree must be in conformity with the court judgment and with the data found in the record. However, if they are in doubt upon any point in relation to the preparation and issuance of the decree, they are duty bound to refer the matter to the court. They act in this respect, as officials of the court. The administrator is thus not legally obligated to issue the decree where, upon his verification, he finds that subject land has already been decreed and titled in another’s name. (Ramos vs. Rodriguez, 244 SCRA 418) Contents: (Sec. 31 P.D. 1529) a. Date, hour and minute of its entry b. It shall state whether the owner is married or unmarried, and if married, the name of spouse: provided that if the land is conjugal property, the decree shall be issued in the name of both spouses c. If the owner is under disability, the nature of such disability, and if a minor, his age d. Description of the land and shall set forth the estate of the owner, and also, in such manner as to show their relative priorities, all particular estates, mortgages, easements, liens, attachments, and other encumbrances e. Other matters to be determined in pursuance of law 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 Administrator (Sec. 39, PD No. 1529)  It takes effect upon the date of entry thereof, and the land covered thereby becomes registered land on that date  Registration does not vest title. It is merely evidence of such title over a particular property. And a Torrens certificate is the best evidence of ownership over registered land. (Villanueva vs. CA, 198 SCRA 472; Chavez vs. PEA & Amari Coast Bay Dev’t. Corp., 384 SCRA 153)  However, simple possession of a certificate of title does not necessarily make the holder thereof a true owner of all the property described therein, such as when title includes by mistake or oversight, land which can no longer be registered under the Torrens system, as when the same land has already been registered and an earlier certificate for the same land is in existence. (Caragay-Layno vs. CA, 133 SCRA 718)  In determining whether a property belongs to the conjugal partnership or paraphernal property of one of the spouses, it is important to note in whose name or names the title is registered. This is so because the certificate of the title does not establish the time of the acquisition of the property. It only confirms a pre existing title. (Ponce de Leon vs Rehabilitation Finance Corp., 36 SCRA 289) Attributes and Limitations on certificates of title and registered lands: 1. Free from liens and encumbrances  Claims and liens of whatever character existing against the land prior to the issuance of the certificate of title are cut off by such certificate and the certificate so issued binds the whole world, including the government. EXCEPTIONS: a. Those noted on the certificate b. Liens claims or rights arising or existing under the laws and the Constitution, which are not by law required to appear of record in the Register of Deeds in order to be valid c. Unpaid real estate taxes levied and assessed within 2 years immediately preceding the acquisition of the right over the land by an innocent purchaser for value d. Any public highway, or private way established or recognized by law, or any government irrigation canal or lateral thereof, if the certificate of title does not state the boundaries of such highway or irrigation canal or lateral thereof have been determined

Memory aid in Civil Law with 2017 updates e.

Any disposition of the property or limitation on the use thereof pursuant to P.D. 27 or any other law or regulations on agrarian reform.

2. Incontrovertible and indefeasible GENERAL RULE: Upon expiration of 1 year from and after the entry of the decree of registration in the LRA, the decree and the corresponding certificate of title becomes incontrovertible and indefeasible. EXCEPTIONS: a. If previous valid title of the same land exists b. When land covered is not capable of registration c. When acquisition of certificate is attended by fraud 3. Registered land not subject to prescription  Thus, even adverse, notorious and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title. (JM Tuason and Co. Inc. vs. CA, 93 SCRA 146)  The fact that title to land was lost does not mean that the land ceased to be registered land before the reconstitution of its title. It cannot perforce be acquired by prescription. (Rivera vs. CA, 244 SCRA 218)

3.

CERTIFICATE OF TITLE NOT SUBJECT TO COLLATERAL ATTACK  Sec 48. P.D. 1529 “A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. General Incidents of Registered Land 

Registered land or the owners thereof are not relieved from the following: a. From any rights incident to the relation of husband and wife, landlord and tenant b. From liability to attachment or levy on execution c. From liability to any lien of any description established by law on the land and buildings thereon, or in the interest of the owner in such land or building d. From any right or liability that may arise due to change of the law of descent e. From the rights of partition between co-owners f. From the right of government to take the land by eminent domain g. From liability to be recovered by an assignee in insolvency or trustee or bankruptcy under the laws relative to preferences h. From any other rights or liabilities created by law and applicable to unregistered land

CADASTRAL REGISTRATION 

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

NOTE: 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.  Procedure: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Notice of cadastral survey published once in OG and posted in conspicuous place; copy furnished mayor and barangay captain Notice of date of survey by BLM and posting in bulletin board of the municipal building of the municipality or bario, and shall mark the boundaries of the lands by monuments set up in proper places thereon Cadastral survey Filing of petition Publication, mailing, and posting NOTE: Publication of Notice of Initial Hearing to be published twice in successive issues of the Official Gazette Filing of Answer Hearing of the case Decision Issuance of Decree and Certificate of Title

Actions taken by the Cadastral court of the trial: 1. Judgment or decision which adjudicates ownership of the land involved in favor of one or more claimants. This is the decree of the court. 2. Declaration by the court that the decree is final and its order for the issuance of the Certificate of Title by the LRA 3. Registration of the decree by the LRA and issuance of the corresponding Certificate of Title

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Memory aid in Civil Law with 2015 updates Doctrine: The Cadastral court is not limited to merely adjudication of ownership in favor of one or more claimants. If there are no successful claimants, the property is declared public land. Additionally, while the court has no jurisdiction to adjudicate lands already covered by a Certificate of Title, it is nonetheless true that this rule only applies where there exists no serious controversy as to the certificate’s authenticity vis-àvis the land covered therein. (Republic vs Vera 120 SCRA 210; Widows and Orphans Assoc., Inc. vs CA 201 SCRA 165.) P.D. No. 1529

CADASTRAL 1. Nature of Registration Voluntary Compulsory 2. Applicant Landowner Director of Lands 3. Lands Covered Usually involves private land; it may also refer all classes of lands are included to public agricultural lands if the object of the action is confirmation of an imperfect title 4. Parties Applicant and opponent Landowners must come to court as claimants of their own lands 5. Purpose Petitioner comes to court to confirm his title Government asks the court to settle and and seeks the registration of the land in his adjudicate the title of the land name 6. Person who Requests the Survey Landowner Government 7. Effect of Judgment No adverse claim; if the applicant fails to prove if none of the applicants can prove that he is his title, his application may be dismissed entitled to the land, the same shall be declared without prejudice (no res judicata) public (res judicata) REMEDIES OF AGGRIEVED PARTY IN REGISTRATION PROCEEDINGS 1. 

 2.  

 3.  

New Trial Grounds: (Section1 Rule 37,Rules of Court) 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 Period of filing: within the 15-day period for perfecting an appeal Relief from Judgment 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. Period of filing: within 60 days after the petitioner learns of the judgment, order, or proceeding and not more than 6 months after such judgment or order was entered or such proceeding was taken. Appeal 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.

4. 

Petition for Review (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. NOTE: It is a petition for REVIEW OF JUDGEMENT 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. 

Grounds for review of the decree: a) actual or extrinsic fraud – refers to any fraudulent act of the successful party in a litigation which is committed outside the trial of a case against the defeated party, his agents, attorneys or witnesses, whereby defeated party is prevented from presenting full and fairly his side. b)fatal infirmity in the decision for want of due process (Tiongco vs, De la Merced, 58, SCRA 89); c) lack of jurisdiction of the court



Requisites for REVIEW OF THE DECREE: a. petitioner has a real and dominical right b. he has been deprived thereof

Memory aid in Civil Law with 2017 updates c. d. e. 5.   

through fraud (actual/extrinsic) petition is filed within one year from issuance of the decree the property has not yet passed to an innocent purchaser for value

Action for Reconveyance 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. (Esconde vs Borlongay, 152 SCRA 603)

Grounds for Reconveyance and corresponding period of prescription

6.  

Grounds

Prescriptive Period

1. Fraud

 4 years from the discovery of the fraud (deemed to have taken place from the issuance of the original certificate of title)

2.Implied or constructive trust

 10 years from the date of the issuance of the OCT or TCT  the above rule does not apply where the person enforcing the trust is in actual possession of the property because he is in effect seeking to quiet title to the same which is imprescriptible

3. Express trust

 not barred by prescription

4. Void Contract

 imprescriptible

Action for Damages May be resorted to when a petition for review and an action for reconveyance is no longer possible because the property has passed to an innocent purchaser for value and in good faith. an ordinary action for damages prescribes in ten (10) years after the issuance of the Torrens title over the property.

7. 

Action for Compensation from Assurance Fund Requisites: a) The aggrieved party or the suitor sustained loss or damage, or is deprived of land or any estate or interest therein; b) Such loss, damage or deprivation 1) was occasioned by the bringing of the land under the operation of the Torrens system, or 2) arose after original registration of land c) The loss, damage or deprivation was due to: 1) fraud, or 2) any error, omission, mistake or misdescription in any certificate of title or in any entry or memorandum in the registration book d) There was no negligence on his part e) He is barred or precluded under the provisions of PD 1529 or under the provision of any law from bringing an action for the recovery of such land or the estate or interest therein; f) The action has not prescribed.



must be instituted within a period of 6 years from the time the right to bring such action first occurredwhich is the date of issue of the certificate of title.

8. 

Cancellation Suits Where two certificates are issued to different persons covering the same land, the title earlier in date must prevail The latter title should be declared null and void and ordered cancelled.

 9. 

Annulment of judgment May only be availed of when the ordinary remedies of new trial, petition for relief, or other appropriate remedies are no longer available through no fault of petitioner (Linzag vs. Court of Appeals, 291 SCRA 304)

10. QUIETING OF TITLE

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

 

An action that is brought to remove clouds on the 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. (Art. 476 Civil Code) It is an ordinary civil remedy [Sy, Sr. vs. IAC, 162 SCRA 130 (1988)] Aside from the registered owner, a person who has an equitable right or interest in the property may likewise file such action (Mamadsul vs. Moson, 190 SCRA 82, 89)

11. CRIMINAL ACTION  State may criminally prosecute for perjury the party who obtains registration through fraud, such as by stating false assertions in the sworn answer required of applicants in cadastral proceedings (People vs. Cainglet, 16 SCRA 749) LAND PATENTS 

Kinds:

1. Homestead Patent

To Whom Granted  to any Filipino citizen over the age of 18 years or head of a family

2. Free Patent

 to any natural born citizen of the Phils.

3. Sales Patent

 citizens of the Phils. of lawful age or such citizens not of lawful age who is head of a family may purchase public agricultural land of not more than 12 hectares

4. Special Patents

 to Non-Christian Filipinos under Sec. 84 of the Public Land Act.

Requirements  does not own more than 24 hectares of land in the Phils. or has not had the benefit of any gratuitous allotment of more than 24 hectares  must have resided continuously for at least 1 year in the municipality where the land is situated  must have cultivated at least 1/5 of the land applied for  does not own more than 12 hectares of land  has conti-nuously occupied and cultivated, either by himself or his predecessors-in- interest tract/s of agricultural public land subject to disposition  to have at least 1/5 of the land broken and cultivated within 5 years from the date of the award  shall have established actual occupancy, cultivation and improvement of at least 1/5 of the land until the date of such final payment  Secretary of the DILG shall certify that the majority of the non-Christian inhabitants of any given reservation have advanced sufficiently in civilization

NOTE: when a free patent title is issued to an applicant and the sea water moves toward the estate of the title holder, the invaded property becomes part of the foreshore land. The land under the Torrens system reverts to the public domain and the title is annulled. (Republic vs CA and Josefina Morato, 281 SCRA) Restriction on Alienation/Encumbrance of Lands titled Pursuant to Patents: 1. Lands acquired under free patent or homestead patent is prohibited, except if in favor of the government, 5 years from and after the issuance of the patent or grant (RP vs Heirs of Felipe Alejaga, Sr., 939 SCRA 361) 2. Transfer or conveyance of any homestead after 5 years and before 25 years after issuance of title without the approval of the Secretary of DENR Actions against improper, illegal issuance of patents 1. Reversion suits  The objective is the cancellation of the certificate of title and the consequential reversion of the land covered thereby to the State. Grounds for reversion: a. Violation of Sections 118, 120, 121 and 122 of the Public Land Act (eg. Alienation or sale of homestead executed within the 5 year prohibitory period) b. When land patented and titled is not capable of registration c. Failure of the grantee to comply with conditions imposed by law to entitle him to a patent or grant d. When area is an expanded area (see Republic vs. Heir of Villa Abrille, 71 SCRA 57) e. When the land is acquired in violation of the Constitution; eg. Land acquired by an alien may be reverted to the State.

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NOTE: indefeasibility of title, prescription, laches and estoppel do not bar reversion suits 2. Cancellation Suits  it is the aggrieved private party that institutes the action [Agne vs. Dir. of Lands, 181 SCRA 793 (1990)] 3.

Action for Reconveyance (see discussion on page 16)

RECONSTITUTION OF CERTIFICATE OF TITLE 

Meaning: The restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition, under the custody of Register of Deeds.



Purpose: to have the same reproduced, after proper proceedings, in the same form they were when the loss or destruction occurred. (Heirs of Pedro Pinote vs. Dulay, 187 SCRA 12)

 Kinds: 1) Judicial - partakes the nature of a land registration proceeding in rem. 2) Administrative - may be availed of only in case of: a. Substantial loss or destruction of the original land titles due to fire, flood, or other force majeure as determined by the Administrator of the Land Registration Authority; b. The number of certificates of title lost or damaged should be at least 10% of the total number in the possession of the Office of the Register of Deeds; c. in no case shall the number of certificates of title lost or damaged be less than P500; and d. Petitioner must have the duplicate copy of the certificate of title. (RA 6732) NOTE: The law provides for retroactive application thereof to cases 15 years immediately preceding 1989. NOTE: When the duplicate title of the landowner is lost, the proper petition is not reconstitution of title, but one filed with the court for issuance of new title in lieu of the lost copy. Sources for Judicial Reconstitution of Title: 1. For OCT (in the following order): a. Owner’s duplicate of the certificate of title b. Co-owner’s, mortgagee’s or lessee’s duplicate of said certificate c. Certified copy of such certificate, previously issued by the Register of Deeds d. Authenticated copy of the decree of registration or patent, as the case may be, which was the basis of the certificate of title e. Deed or mortgage, lease or encumbrance containing description of property covered by the certificate of title and on file with the Registry of Deeds, or an authenticated copy thereof f. Any other document which, in the judgment of the court, is sufficient and proper basis for reconstitution. 2. For TCT a. Same as sources a), b), and c) for reconstitution of OCT b. Deed of transfer or other document containing description of property covered by transfer certificate of title and on file with the Registry of Deeds, or an authenticated copy thereof c. same as sources e) and f) for reconstitution of OCT. Sources for Administrative Reconstitution of Title 1. owner’s duplicate of the certificate of title 2. co-owner’s, mortgagee’s, or lessee’s duplicate of said certificate Publication, Mailing and Posting in petitions for reconstitution of title  Rules: a. Notice thereof shall be published twice in successive issues of the Official Gazette b. Must be posted on the main entrance of the provincial building and of the municipal building of the municipality or city where the land is situated c. to be sent by registered to every person named in said notice NOTE: The above requirements are mandatory and jurisdictional (Metropolitan Waterworks and Sewerage System vs. Sison, 124 SCRA 394) OTHER PETITIONS/TRANSACTIONS AFTER ORIGINAL REGISTRATION 1. Amendment and alteration of Certificate of Title  Grounds: a. When registered interests of any description, whether vested, contingent, or inchoate have terminated and ceased b. When new interests have arisen or been created which do not appear upon the certificate c. When any error, omission, or mistake was made in entering a certificate or any memorandum thereon or on any duplicate certificate d. When the name of any person on the certificate has been changed e. When the registered owner has been married, or, registered as married, the marriage has terminated and no right or interest of heirs or creditors will thereby be affected

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Memory aid in Civil Law with 2015 updates f. g.

When a corporation, which owned registered land and has been dissolved, has not conveyed the same within 3 years after its dissolution When there is a reasonable ground for the amendment or alteration of title.

NOTE: The court has no jurisdiction or authority to reopen the judgment or decree of registration; nor impair the title or other interest of a purchaser holding a certificate for value and in good faith, or his heirs and assigns, without his or their written consent. After due hearing, the court may only: a. Order the entry or cancellation of a new certificate b. Order the entry or cancellation of a memorandum upon a certificate, or c. Grant any other relief upon such terms and conditions as it may consider proper (Secs. 107 and 108, PD 1529) 2. Surrender of withheld duplicate certificate of title  Grounds: a. When it is necessary to issue a new certificate of title pursuant to any involuntary instrument which divests the title of the registered owner against his consent b. Where a voluntary instrument cannot be registered by reason of the refusal or failure of the holder to surrender the owner’s duplicate certificate of title; and c. Where the owner’s duplicate certificate is not presented for amendment or alteration pursuant to a court order 3. Replacement of lost duplicate certificate of title  “due notice under oath shall be sent by the owner or by someone in his behalf to the Register of Deeds of the province of city where the land lies as soon as the loss or theft is discovered.” ( Section 109, PD 1529)  Petition for replacement should be filed with the RTC of the province or city where the land lies.  Notice to Solicitor General by petitioner is not imposed by law but it is the Register of Deeds who should request for representation by the Solicitor General (Republic vs. CA, 317 SCRA 504)  A proceeding where the certificate of title was not in fact lost or destroyed is null and void for lack of jurisdiction and the newly issued duplicate is also null and void. (New Durawood Co., Inc. vs. CA, 253 SCRA 740)

CREDIT TRANSACTIONS CREDIT TRANSACTIONS  All transactions involving the purchase or loan of goods, services, or money in the present with a promise to pay or deliver in the future Contracts of security Types: 1. Secured transactions or contracts of real security - supported by a collateral or an encumbrance of property 2. Unsecured transactions or contracts of personal security - supported only by a promise or personal commitment of another such as a guarantor or surety Security  Something given, deposited, or serving as a means to ensure fulfilment or enforcement of an obligation or of protecting some interest in property 

Types of Security a. personal – when an individual becomes surety or guarantor b. real or property – when a mortgage, pledge, antichresis, charge or lien or other device used to have property held, out of which the person to be made secure can be compensated for loss

Bailment  The delivery of property of one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed and the property returned or duly accounted for when the special purpose is accomplished or kept until the bailor claims it.  1. 2.

Parties: bailor - the giver; one who delivers property bailee- the recipient; one who receives the custody or possession of the thing thus delivered

Memory aid in Civil Law with 2017 updates

LOAN (Articles 1933 – 1961) 

A contract



wherein one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. (Art 1933)

Characteristics: 1. Real Contract – delivery of the thing loaned is necessary for the perfection of the contract NOTE: An accepted promise to make a future loan is a consensual contract, and therefore binding upon the parties but it is only after delivery, will the real contract of loan arise. (Art 1934) 2.

Unilateral Contract - once the subject matter has been delivered, it creates obligations on the part of only one of the parties (i.e. borrower).

 1.

Kinds: Commodatum – when the bailor (lender) delivers to the bailee (borrower) a non-consumable thing so that the latter may use it for a certain time and return the identical thing.

Kinds of commodatum: a. Ordinary Commodatum – 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 2.

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 Key: COPS-LOTR 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 personal property property 5. Ownership of the thing Retained by the Passes to the debtor bailor 6. Thing to be returned Exact thing loaned Equal amount of the same kind and quality 7. Who bears risk of loss Bailor Debtor 8. When to return In case of urgent Only after the need, even before the expiration of the expiration of the term term Loan Delivery by one party and the receipt of other party of a given sum of money or other consumable thing upon an agreement, express or implied, to repay the same.

Credit Ability of a person to borrow money or things by virtue of the trust or confidence reposed by the lender that he will pay what he promised.

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Loan 1. Interest taken at the expiration of the credit 2. Always on a double name paper (two signatures appear with both parties held liable for payment)

Credit Interest is taken in advance Always on a single name paper (i.e. promissory note with no indorse-ment other than the maker)

COMMODATUM (Articles 1935 – 1952)  Nature: 1.

PURPOSE: Bailee in commodatum acquires the temporary use of the thing but not its fruits (unless stipulated as an incidental part of the contract).(Art 1935)  Use must be temporary, otherwise the contract may be a deposit.

2.

CAUSE: Essentially gratuitous; it ceases to be a commodatum if any compensation is to be paid by the borrower who acquires the use, in such case there arises a lease contract.  Similar to a donation in that it confers a benefit to the recipient. The presumption is that the bailor has loaned the thing for having no need therefor.

3.

SUBJECT MATTER: Generally non-consumable whether real or personal but if the consumable goods are not for consumption as when they are merely for exhibition, consumable goods may be the subject of the commodatum. (Art 1936)

4.

Bailor need not be the owner of the thing owned (Art. 1938) since by the loan, ownership does not pass to the borrower.  A mere lessee or usufructuary may lend but the borrower or bailee himself may not lend nor lease the thing loaned to him to a third person (Art 1932[2])

5.

Purely Personal (Art 1939):  Death of either party terminates the contract unless by stipulation, the commodatum is transmitted to the heirs of either or both parties.  Bailee can neither lend nor lease the object of the contract to a third person.

NOTE:Use of the thing loaned may extend to members of the bailee’s household except: a. contrary stipulation; b. nature of the thing forbids such use Obligations of the Bailee: (Arts 1941 – 1945) 1. To pay for the ordinary expenses for the use and preservation of the thing loaned. (Art 1941) 2. To be liable for the loss of the thing even if it should be through a fortuitous event in the following cases: (KLAS D) 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 bailee devoted the thing for any purpose different from that for which it has been loaned (Art 1942) 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 contrary (Art 1949 par 2) 5. To return the thing loaned  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. NOTES:  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.  In case there are two or more bailees, their obligation shall be solidary. Obligations of the bailor (Art 1946 – Art 1952): 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:

Memory aid in Civil Law with 2017 updates a. In case of urgent need in 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.  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 NOTES:  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 bailee.

SIMPLE LOAN OR MUTUUM (Art 1953 – 1961) 

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)

NOTES:  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. Simple Loan/Mutuum

Rent

1. Delivery of money or some consumable thing with a promise to pay an equivalent of the same kind and quality

Delivery of some non-consumable thing in order that the other may use it during a certain period and return it to the former.

2. There is a transfer of ownership of the thing delivered

There is no transfer of ownership of the thing delivered

3. Relationship between the parties is that of obligorobligee

Relationship is that of a landlord and tenant

4. Creditor receives payment for his loan

Owner of the property rented receives compensation or price either in money, provisions, chattels, or labor from the occupant thereof in return for its use (Tolentino vs Gonzales, 50 Phil 558 1927)

Loan

Sale

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1.

Real contract

2. Generally unilateral because only borrower has obligations

Consensual contract Bilateral reciprocal

and

NOTE: If the property is “sold”, but the real intent is only to give the object as security for a debt – as when the “price” is comparatively small – there really is a contract of loan with an “equitable mortgage.”

Commodatum/ Mutuum

 1.

2.

Barter

1. Subject matter is money or fungible things

Subject matter is nonfungible, (non consumable) things

2. In commodatum, the bailee is bound to return the identical thing borrowed when the time has expired or purpose served

The thing with equivalent value is given in return for what has been received

3. Mutuum may be gratuitous and commodatum is always gratuitous

Onerous, actually a mutual sale

Form of Payment (Art 1955): If the thing loaned is money - payment must be made in the currency stipulated, if it is possible; otherwise it is payable in the currency which is legal tender in the Philippines and in case of extraordinary inflation or deflation, the basisi of payment shall be the value of the currency at the time of the creation of the obligation If what was loaned is a fungible thing other than money - the borrower is under obligation to pay the lender another thing of the same kind, quality and quantity. In case it is impossible to do so, the borrower shall pay its value at the time of the perfection of the loan.

Interest  The compensation allowed by law or fixed by the parties for the loan or forbearance of money, goods or credits  Requisites for Demandability: (ELI) 1. must be expressly stipulated Exceptions: a. indemnity for damages b. interest accruing from unpaid interest 2. must be lawful 3. must be in writing Compound Interest 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) 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 quasidelicts 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:

Memory aid in Civil Law with 2017 updates i.

When the obligation breached consists of payment of a sum of money (loan or forbearance of money), 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 rate (i.e. 12% per annum) computed from default. NOTE: The interest due shall itself earn legal interest from the time it is judicially demanded ii. In other cases, the rate of interest shall be six percent (6%) per annum. NOTE: 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. 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. (Eastern Shipping Lines vs. CA, July 12, 1994) NOTES:  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 non-performance of the contract. As they are distinct claims, they may be demanded separately. (Sentinel Insurance Co., Inc. vs CA, 182 SCRA 517)  Central Bank Circular No. 905 (Dec. 10, 1982) removed the Usury Law ceiling on interest rates for secured and unsecured loans, regardless of maturity. Validity of unconscionable interest rate in a loan Supreme Court in Sps. Solangon vs. Jose Salazar, G.R. No. 125944, June 29, 2001, 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 parties (citing Lim Law vs. Olympic Sawmill Co., 129 SCRA 439). But the Supreme Court said 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 (citing Almeda vs. CA, 256 SCRS 292). In Medel vs. CA, 299 SCRA 481, 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 morals, (contra bonos mores). It was reduced to 12% per annum in consonant with justice and fair play. DEPOSIT (Articles 1962 – 2009) 

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.

Characteristics: 1. Real Contract - contract is perfected by the delivery of the subject matter. 2. Unilateral (gratutitous deposit) - only the depositary has an obligation. 3. Bilateral (onerous deposit) - gives rise to obligations on the part of both the depositary and depositor. Deposit Principal purpose is safekeeping or custody

Mutuum 1. Purpose Principal purpose is consumption

2. When to Return Depositor can demand the return of the The lender must wait until the expiration subject matter at will of the period granted to the debtor

Subject matter may be movable or immovable property

3. Subject Matter Subject matter is only money or other fungible thing

4. Relationship Relationship is that of lender (creditor) and Relationship is that of depositor and borrower (debtor). depositary. 5. Compensation There can be compensation of credits. NO compensation of things deposited with each other (except by mutual agreement).

Deposit 1. Purpose is Safekeeping

Commodatum 1. Purpose is the transfer of the use

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2. May be gratuitous

2. Essentially and always gratuitous

3. Movable/corporeal things only in case of extrajudicial deposit

3. Both movable and immovable may be the object

 Kinds of Deposit: 1. Judicial (Sequestration) –takes place when an attachment or seizure of property in litigation is ordered. 2.

Extra-judicial a. Voluntary – 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. (Arts 1968 – 1995) b. Necessary – one made in compliance with a legal obligation, or on the occasion of any calamity, or by travellers in hotels and inns (Arts 1996 - 2004), or by travellers with common carriers (Art 1734 – 1735). NOTE: 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.

Judicial

Extra-judicial 1. Creation Will of the parties or contract

Will of the court

2. Purpose Security or to insure the right of a party to Custody and safekeeping property or to recover in case of favorable judgment

Movables or immovables, but generally immovables

3. Subject Matter Movables only

4. Cause May be compen-sated or not, but generally gratuitous

Always onerous

5. When must the thing be returned Upon order of the court or when litigation is Upon demand of depositor ended Person who has a right

6. In whose behalf it is held Depositor or third person designated

GENERAL RULE: Contract of deposit is gratuitous (Art 1965) EXCEPTIONS: 1. when there is contrary stipulation 2. depositary is engaged in business of storing goods 3. property saved from destruction without knowledge of the owner NOTES:  Article 1966 does not embrace incorporeal property, such as rights and actions, for it follows the person of the owner, wherever he goes.  A contract for the rent of safety deposit boxes is not an ordinary contract of lease of things but a special kind of deposit; hence, it is not to be strictly governed by the provisions on deposit. The relation between a bank and its customer is that of a bailor and bailee. (CA Agro vs CA, 219 SCRA 426) Obligations of the Depositary (Art 1972 –1991): 1. 2.

To keep the thing safely (Art 1972)  Exercise over the thing deposited the same diligence as he would exercise over his property To return the thing (Art 1972)  Person to whom the thing must be returned: a. Depositor, to his heirs and successors, or the person who may have been designated in the contract

Memory aid in Civil Law with 2017 updates b. If the depositary is capacitated - he is subject to all the obligations of a depositary whether or not the depositor is capacitated. If the depositor is incapacitated, the depositary must return the property to the legal representative of the incapacitated or to the depositor himself if he should acquire capacity (Art 1970). c. If the depositor is capacitated and the depositary is incapacitated - the latter does not incur the obligation of a depositary but he is liable: i..to return the thing deposited while still in his possession; ii.to pay the depositor the amount which he may have benefited himself with the thing or its price subject to the right of any third person who acquired the thing in good faith (Art 1971) 

Time of return: a. Upon demand even though a specified period or time for such return may have been fixed except when the thing is judicially attached while in the depositary’s possession or should he have been notified of the opposition of a third person to the return or the removal of the thing deposited. (Art 1998) b. If deposit gratuitous, the depositary may return the thing deposited notwithstanding that a period has been fixed for the deposit if justifiable reasons exists for its return. c. If the deposit is for a valuable consideration, the depositary has no right to return the thing deposited before the expiration of the time designated even if he should suffer inconvenience as a consequence.(Art 1989)

 3.

4. 5. 6.

What to return: product, accessories, and accessions of the thing deposited (Art 1983) Not to deposit the thing with a third person unless authorized by express stipulation (Art 1973)  The depositor is liable for the loss of the thing deposited under Article 1973 if: a. he transfers the deposit with a third person without authority although there is no negligence on his part and the third person; b. he deposits the thing with a third person who is manifestly careless or unfit although authorized even in the absence of negligence; or c. the thing is lost through the negligence of his employees whether the latter are manifestly careless or not. If the thing deposited should earn interest (Art 1975): a. to collect interest and the capital itself as it fall due b. to take steps to preserve its value and rights corresponding to it Not to commingle things deposited if so stipulated (Art 1976) Not to make use of the thing deposited unless authorized (Art 1977) GENERAL RULE: Deposit is for safekeeping of the subject matter and not for use. The unauthorized use by the depositary would make him liable for damages. EXCEPTIONS: 1. When the preservation of the thing deposited requires its use 2. When authorized by the depositor NOTE: The permission to use is NOT presumed except when such use is necessary for the preservation of the thing deposited.

Effect if permission to use is given (Art 1978): 1. If thing deposited is non-consumable, the contract loses the character of a deposit and acquires that of a commodatum despite the fact that the parties may have denominated it as a deposit, unless safekeeping is still the principal purpose. 2. If thing deposited consists of money/consumable things, the contract is converted into a simple loan or mutuum unless safekeeping is still the principal purpose in which case it is called an irregular deposit. Example: bank deposits are irregular deposits in nature but governed by law on loans. 7. When the thing deposited is delivered sealed and closed : a. to return the thing deposited in the same condition b. to pay for damages should the seal or lock be broken through his fault, which is presumed unless proved otherwise c. to keep the secret of the deposit when the seal or lock is broken with or without his fault (Art 1981) NOTE: The depositary is authorized to open the thing deposited which is closed and sealed when (Art 1982): i. there is presumed authority (i.e. when the key has been delivered to him or the instructions of the depositor cannot be done without opening it) ii.necessity 8. To change the way of the deposit if under the circumstances, the depositary may reasonably presume that the depositor would consent to the change if he knew of the facts of the situation, provided, that the former notifies the depositor thereof and wait for his decision, unless delay would cause danger 9. To pay interest on sums converted to personal use if the deposit consists of money (Art 1983) 10. To be liable for loss through fortuitous event (SUDA): (Art 1979): a. if stipulated b. if he uses the thing without the depositor's permission c. if he delays its return d. if he allows others to use it, even though he himself may have been authorized to use the same NOTES:

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 Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. (Art 1980)

 The general rule is that a bank can compensate or set off the deposit in its hands for the payment of any indebtedness to it on the part of the depositor. In true deposit, compensation is not allowed. Irregular deposit

Mutuum

1. The consumable thing deposited may be demanded at will by the depositor

1. Lender is bound by the provisions of the contract and cannot demand restitution until the time for payment, as provided in the contract, has arisen

2. The only benefit is that which accrues to the depositor

2. Essential cause for the transaction is the necessity of the borrower

3. The irregular depositor has a preference over other creditors with respect to the thing deposited

3. Common creditors enjoy no preference in the distribution of the debtor’s property

Rule when there are two or more depositors (Art 1985): 1. If thing deposited is divisible and depositors are not solidary: Each depositor can demand only his proportionate share thereto. 2. If obligation is solidary or if thing is not divisible: Rules on active solidarity shall apply, i.e. each one of the solidary depositors may do whatever may be useful to the others but not anything which may be prejudicial to the latter, (Art. 1212) and the depositary may return the thing to anyone of the solidary depositors unless a demand, judicial or extrajudicial, for its return has been made by one of them in which case, delivery should be made to him (Art. 1214). 3. Return to one of depositors stipulated. The depositary is bound to return it only to the person designated although he has not made any demand for its return. NOTES:  The depositary may retain the thing in pledge until full payment of what may be due him by reason of the deposit (Art 1994).  The depositor’s heir who in good faith may have sold the thing which he did not know was deposited, shall only be bound to return the price he may have received or to assign his right of action against the buyer in case the price has not been paid him (Art 1991). Obligations of the Depositor (Art 1992 – 1995): 1.

2.

To pay expenses for preservation a. If the deposit is gratuitous, the depositor is obliged to reimburse the depositary for expenses incurred for the preservation of the thing deposited (Art 1992) b. If the deposit is for valuable consideration, expenses for preservation are borne by the depositary unless there is a contrary stipulation To pay loses incurred by the depositary due to the character of the thing deposited

GENERAL RULE: The depositor shall reimburse the depositary for any loss arising from the character of the thing deposited. EXCEPTIONS: 1. at the time of the deposit, the depositor was not aware of the dangerous character of the thing 2. when depositor was not expected to know the dangerous character of the thing 3. when the depositor notified the depository of the same 4. the depositary was aware of it without advice from the depositor Extinguishment of Voluntary Deposit (Art 1995) 1. Loss or destruction of the thing deposited 2. In case of gratuitous deposit, upon the death of either the depositor or the depositary 3. Other causes, such as return of the thing, novation, merger, expiration of the term fulfilment of the resolutory condition, etc (Art 1231) Necessary Deposits 1. Made in compliance with a legal obligation

Memory aid in Civil Law with 2017 updates 2. Made on the occasion of any calamity such as fire, storm, flood, pillage, shipwreck or other similar events (deposito miserable) 3. Made by travellers in hotels and inns or by travellers with common carrier Deposit by Travellers in hotels and inns:  The keepers of hotels or inns shall be responsible as depositaries for the deposit of effects made by travellers provided: a. Notice was given to them or to their employees of the effects brought by the guest; and b. The guests take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. NOTES:  Liability extends to vehicles, animals and articles which have been introduced or placed in the annexes of the hotel.  Liability shall EXCLUDE losses which proceed from force majeure. The act of a thief or robber is not deemed force majeure unless done with the use of arms or irresistible force.  The hotel-keeper cannot free himself from the responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation to such effect shall be void.  Notice is necessary only for suing civil liability but not in criminal liability. GUARANTY (Articles 2047 – 2084)



A contract whereby a person (guarantor) binds himself to the creditor to fulfil the obligation of the principal debtor in case the latter fail to do so.

 1.

Classification of Guaranty: In the Broad sense: a. Personal - the guaranty is the credit given by the person who guarantees the fulfilment of the principal obligation. b. Real - the guaranty is the property, movable or immovable.

2.

As to its Origin a. Conventional - agreed upon by the parties. b. Legal - one imposed by virtue of a provision of a law. c. Judicial - one which is required by a court to guarantee the eventual right of one of the parties in a case. As to Consideration a. Gratuitous - the guarantor does not receive any price or remuneration for acting as such. b. Onerous - the guarantor receives valuable consideration. As to the Person guaranteed a. Single - one constituted solely to guarantee or secure performance by the debtor of the principal obligation. b. Double or sub-guaranty - one constituted to secure the fulfilment by the guarantor of a prior guaranty. As to Scope and Extent a. Definite - the guaranty is limited to the principal obligation only, or to a specific portion thereof. b. Indefinite or simple - one which not only includes the principal obligation but also all its accessories including judicial costs

3. 4.

5.

SURETYSHIP A contract whereby a person (surety) binds himself solidarily with the principal debtor A relation which exists where one person (principal) has undertaken an obligation and another person (surety) is also under a direct and primary obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, the second rather than the first should perform (Agro Conglomerates, Inc. vs. CA, 348 SCRA 450) NOTES:  The reference in Article 2047 to solidary obligations does not mean that suretyship is withdrawn from the applicable provisions governing guaranty. A surety is almost the same as a solidary debtor, except that he himself is a principal debtor.  In suretyship, there is but one contract, and the surety is bound by the same agreement which binds the principal. A surety is usually bound with the principal by the same instrument, executed at the same time and upon the same consideration (Palmares vs CA, 288 SCRA 422)  It is not for the obligee to see to it that the principal debtor pays the debt or fulfill the contract, but for the surety to see to it that the principal debtor pays or performs (Paramount Insurance Corp vs CA, 310 SCRA 377)  

Nature of Surety’s undertaking: 1. Liability is contractual and accessory but direct

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Memory aid in Civil Law with 2015 updates NOTE: He directly, primarily and equally binds himself with the principal as original promisor, although he possesses no direct or personal interest over the latter’s obligation, nor does he receive any benefits therefrom. (PNB vs CA, 198 SCRA 767) 2. Liability limited by the terms of the contract. NOTE: It cannot be extended by implication beyond the terms of the contract (PNB vs CA, 198 SCRA 767) 3. Liability arises only if principal debtor is held liable. NOTES:  The creditor may sue separately or together the principal debtor and the surety. Where there are several sureties, the obligee may proceed against any one of them.  In the absence of collusion, the surety is bound by a judgment against the principal even though he was not a party to the proceedings. The nature of its undertaking makes it privy to all proceedings against its principal (Finman General Assurance Corp. vs. Salik, 188 SCRA 740) 4. Surety is not entitled to the benefit of exhaustion NOTE: He assumes a solidary liability for the fulfilment of the principal obligation (Towers Assurance Corp vs. Ororama Supermart, 80 SCRA 262) as an original promissory and debtor from the beginning. 5. Undertaking is to creditor and not to debtor. NOTE: The surety makes no covenant or agreement with the principal that it will fulfil the obligation guaranteed for the benefit of the principal. Such a promise is not implied by law either; and this is true even where under the contract the creditor is given the right to sue the principal, or the latter and the surety at the same time. (Arranz vs. Manila Fidelity & Surety Co., Inc., 101 Phil. 272) 6. Surety is not entitled to notice of principal’s default NOTE: The creditor owes no duty of active diligence to take care of the interest of the surety and the surety is bound to take notice of the principal’s default and to perform the obligation. He cannot complain that the creditor has not notified him in the absence of a special agreement to that effect. (Palmares vs CA, 288 SCRA 422) 7. Prior demand by the creditor upon principal is not required NOTE: As soon as the principal is in default, the surety likewise is in default. 8. Surety is not exonerated by neglect of creditor to sue principal Characteristics of Guaranty and Suretyship: 1. Accessory - It is indispensable condition for its existence that there must be a principal obligation. NOTES:  Guaranty may be constituted to guarantee the performance of a voidable or unenforceable contract. It may also guarantee a natural obligation. (Art 2052)  The guarantor cannot bind himself for more than the principal debtor and even if he does, his liability shall be reduced to the limits of that of the debtor. 2. Subsidiary and Conditional - takes effect only in case the principal debtor fails in his obligation.

4. 5. 6.

NOTES:  The guarantor cannot bind himself for more than the principal debtor and even if he does, his liability shall be reduced to the limits of that of the debtor. But a guarantor may bind himself for less than that of the principal (Art 2054)  A guaranty may be given as security for future debts, the amount of which is not yet known; there can be no claim against the guarantor until the debt is liquidated. A conditional obligation may also be secured. (Art 2053) Unilateral - may be entered even w/o the intervention of the principal debtor, in which case Art. 1236 and 1237 shall apply and it gives rise only to a duty on the part of the guarantor in relation to the creditor and not vice versa. Nominate Consensual It is a contract between the guarantor/surety and creditor.

7.

NOTES:  Acceptance of guaranty by creditor and notice thereof to guarantor:  In declaring that guaranty must be express, the law refers solely and exclusively to the obligation of the guarantor because it is he alone who binds himself by his acceptance. With respect to the creditor, no such requirement is needed because he binds himself to nothing.  However, when there is merely an offer of a guaranty, or merely a conditional guaranty, in the sense that it requires action by the creditor before the obligation becomes fixed, it does not become binding until it is accepted and until notice of such acceptance by the creditor is given to, or acquired by, the guarantor, or until he has notice or knowledge that the creditor has performed the condition and intends to act upon the guaranty.  But in any case, the creditor is not precluded from waiving the requirement of notice.  The consideration of the guaranty is the same as the consideration of the principal obligation.  The creditor may proceed against the guarantor although he has no right of action against the principal debtor. Not presumed. It must be expressed and reduced in writing.

3.

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8. 9.

NOTE: A power of attorney to loan money does not authorize the agent to make the principal liable as a surety for the payment of the debt of a third person. (BPI vs. Coster, 47 Phil. 594) Falls under the Statute of Frauds since it is a “special promise to answer for the debt, default or miscarriage of another”. Strictly interpreted against the creditor and in favor of the guarantor/surety and is not to be extended beyond its terms or specified limits. (Magdalena Estates, Inc. vs Rodriguez, 18 SCRA 967) The rule of strictissimi juris commonly pertains to an accommodation surety because the latter acts without motive of pecuniary gain and hence, should be protected against unjust pecuniary impoverishment by imposing on the principal, duties akin to those of a fiduciary.

NOTES:  The rule will apply only after it has been definitely ascertained that the contract is one of suretyship or guaranty. It cannot be used as an aid in determining whether a party’s undertaking is that of a surety or guarantor. (Palmares vs CA, 288 SCRA 292)  It does not apply in case of compensated sureties. 10. It is a contract which requires that the guarantor must be a person distinct form the debtor because a person cannot be the personal guarantor of himself. NOTE: However, in a real guaranty, like pledge and mortgage, a person may guarantee his own obligation with his personal or real properties. 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 under-taking

2. Surety is an original promisor

3. Guarantor is secondarily liable

3. Surety is primarily liable

4. 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

Indorsement 1. Primarily of transfer

Guaranty 1. Contract of security

2. Unless the note is promptly presented for payment at maturity and due notice of dishonor given to the indorser within a reasonable time he will be discharged absolutely from all liability thereon, whether he has suffered any actual damage or not

2. Failure in either or both of these particulars does not generally work as an absolute discharge of a guarantor’s liability, but his is discharged only to the extent of the loss which he may have suffered in consequence thereof

3. Indorser does not warrant the solvency. He is answerable on a strict compliance with the law by the holder, whether the promisor is solvent or not 4. Indorser can be sued as promisor

3. Guarantor warrants the solvency of the promisor

Guaranty A contract by which a person is bound to another for the fulfilment of a promise or engagement of a third party

4. Guarantor cannot be sued as promisor

Warranty An undertaking that the title, quality, or quantity of the subject matter of the contract is what it has been represented to be, and relates to some agreement made ordinarily by the party who makes the warranty

NOTES:  A guaranty is gratuitous, unless there is a stipulation to the contrary. The cause of the contract is the same cause which supports the obligation as to the principal debtor.

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 The peculiar nature of a guaranty or surety agreement is that is is regarded as valid despite the absence 

of any direct consideration received by the guarantor or surety either from the principal debtor or from the creditor; a consideration moving to the principal alone will suffice. It is never necessary that the guarantor or surety should receive any part or benefit, if such there be, accruing to the principal. (Willex Plastic Industries Corp. vs. CA, 256 SCRA 478)

Double or sub-guaranty (Art 2051 2nd par)  One constituted to guarantee the obligation of a guarantor Continuing guaranty (Art 2053)  One which is not limited to a single transaction but which contemplates a future course of dealings, covering a series of transactions generally for an indefinite time or until revoked. NOTES:  Prospective in operation (Diño vs CA, 216 SCRA 9)  Construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved (Diño vs CA, 216 SCRA 9)  “Future debts” may also refer to debts existing at the time of the constitution of the guaranty but the amount thereof is unknown and not to debts not yet incurred and existing at that time.  Exception to the concept of continuing guaranty is chattel mortgage. A chattel mortgage can only cover obligations existing at the time the mortgage is constituted and not those contracted subsequent to the execution thereof (The Belgian Catholic Missionaries, Inc. vs. Magallanes Press, Inc., 49 Phil 647). An exception to this is in case of stocks in department stores, drug stores, etc. (Torres vs. Limjap, 56 Phil 141). Extent of Guarantor’s liability: (Art 2055) 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. Qualifications of a guarantor: (Arts 2056-2057) 1. possesses integrity 2. capacity to bind himself 3. has sufficient property to answer for the obligation which he guarantees NOTES:  The qualifications need only be present at the time of the perfection of the contract.  The subsequent loss of the integrity or property or supervening incapacity of the guarantor would not operate to exonerate the guarantor or the eventual liability he has contracted, and the contract of guaranty continues.  However, the creditor may demand another guarantor with the proper qualifications. But he may waive it if he chooses and hold the guarantor to his bargain. Benefit of Excussion (Art 2058) 

The right by which the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the properties of the principal debtor, and has resorted to all of the legal remedies against such debtor.

NOTE:  Not applicable to a contract of suretyship (Arts 2047, par. 2; 2059[2])  Cannot even begin to take place before judgment has been obtained against the debtor (Baylon vs CA, 312 SCRA 502) When Guarantor is not entitled to the benefit of excussion: (PAIRS) 1. If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation  Not necessary that the debtor be judicially declared insolvent or bankrupt 2. When he has absconded, or cannot be sued within the Philippines unless he has left a manager or representative 3. In case of insolvency of the debtor  Must be actual 4. If the guarantor has expressly renounced it 5. If he has bound himself solidarily with the debtor

Memory aid in Civil Law with 2017 updates Other grounds: (BIPS) 6. If he is a judicial bondsman or sub-surety 7. If he fails to interpose it as a defense before judgment is rendered against him 8. If the guarantor does not set up the benefit against the creditor upon the latter’s demand for payment from him, and point out to the creditor available property to the debtor within Philippine territory, sufficient to cover the amount of the debt (Art 2060)  Demand can be made only after judgment on the debt  Demand must be actual; joining the guarantor in the suit against the principal debtor is not the demand intended by law 9. Where the pledge or mortgage has been given by him as special security

Benefit of Division (Art 2065)  

Should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all. Liability: Joint

NOTES:

 The creditor can claim from the guarantors only the shares they are respectively bound to pay except     

when solidarity is stipulated or if any of the circumstances enumerated in Article 2059 should take place. The right of contribution of guarantors who pays requires that the payment must have been made (a) in virtue of a judicial demand, or (b) because the principal debtor is insolvent (Art 2073). If any of the guarantors should be insolvent, his share shall be borne by the others including the paying guarantor in the same joint proportion following the rule in solidary obligations. The above rule shall not be applicable unless the payment has been made in virtue of a judicial demand or unless the principal debtor is insolvent. The right to contribution or reimbursement from his co-guarantors is acquired ipso jure by virtue of said payment without the need of obtaining from the creditor any prior cession of rights to such guarantor. The co-guarantors may set up against the one who paid, the same defenses which have pertained to the principal debtor against the creditor and which are not purely personal to the debtor. (Art 2074)

Procedure when creditor sues: (Art. 2062)  The creditor must sue the principal alone; the guarantor cannot be sued with his principal, much less alone except in Art. 2059. 1.

2.

Notice to guarantor of the action  The guarantor must be NOTIFIED so that he may appear, if he so desires, and set up defenses he may want to offer.  If the guarantor appears, he is still given the benefit of exhaustion even if judgment should be rendered against him and principal debtor. His voluntary appearance does not constitute a renunciation of his right to excussion (see Art. 2059(1)).  Guarantor cannot set up the defenses if he does not appear and it may no longer be possible for him to question the validity of the judgment rendered against the debtor. A guarantor is entitled to be heard before and execution can be issued against him where he is not a party in the case involving his principal (procedural due process).

Guarantor’s Right of Indemnity or Reimbursement (Art 2066) GENERAL RULE: Guaranty is a contract of indemnity. The guarantor who makes payment is entitled to be reimbursed by the principal debtor. NOTE: The indemnity consists of: (DIED) 1. Total amount of the debt – no right to demand reimbursement until he has actually paid the debt, unless by the terms of the contract, he is given the right before making payment. He cannot collect more than what he has paid. 2. Legal interest thereon from the time the payment was made known (notice of payment in effect a demand so that if the debtor does not pay immediately, he incurs in delay) to the debtor, even though it did not earn interest for the creditor. Guarantor’s right to legal interest is granted by law by virtue of the payment he has made. 3. Expenses incurred by the guarantor after having notified the debtor that payment has been demanded of him by the creditor; only those expenses that the guarantor has to satisfy in accordance with law as a consequence of the guaranty (Art. 2055) not those which depend upon his will or own acts or his fault for these are his exclusive personal responsibility and it is not just that they be shouldered by the debtor. 4. Damages if they are due in accordance with law. General rules on damages apply.

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Memory aid in Civil Law with 2015 updates EXCEPTIONS: 1. Where the guaranty is constituted without the knowledge or against the will of the principal debtor, the guarantor can recover only insofar as the payment had been beneficial to the debtor (Art. 2050). 2. Payment by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which, however, requires the debtor’s consent. But the payment is in any case valid as to the creditor who has accepted it (Art. 1238). 3. Waiver of the right to demand reimbursement.

Guarantor’s right to Subrogation (ART.2067) 

Subrogation transfers to the person subrogated, the credit with all the rights thereto appertaining either against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in conventional subrogation.

NOTE: This right of subrogation is necessary to enable the guarantor to enforce the indemnity given in Art. 2066.  It arises by operation of law upon payment by the guarantor. It is not necessary that the creditor cede to the guarantor the former’s rights against the debtor.  It is not a contractual right. The right of guarantor who has paid a debt to subrogation does not stand upon contract but upon the principles of natural justice.  The guarantor is subrogated by virtue of the payment to the rights of the creditor, not those of the debtor.  Guarantor cannot exercise the right of redemption of his principal (Urrutia & Co vs Morena and Reyes, 28 Phil 261) Effect of Payment by Guarantor 1. Without notice to debtor: (Art 2068)  The debtor may interpose against the guarantor those defenses which he could have set up against the creditor at the time the payment was made, e.g. the debtor can set up against the guarantor the defense of previous extinguishment of the obligation by payment. 2.

Before Maturity (Art 2069)  Not entitled to reimbursement unless the payment was made with the consent or has been ratified by the debtor

Effect of Repeat Payment by debtor: (Art 2070) GENERAL RULE: Before guarantor pays the creditor, he must first notify the debtor (Art. 2068). If he fails to give such notice and the debtor repeats payment, the guarantor can only collect from the creditor and guarantor has no cause of action against the debtor for the return of the amount paid by guarantor even if the creditor should become insolvent.

EXCEPTION: The guarantor can still claim reimbursement from the debtor in spite of lack of notice if the following conditions are present: (PIG) a. guarantor was prevented by fortuitous event to advise the debtor of the payment; and b. the creditor becomes insolvent; c. the guaranty is gratuitous. Right of Guarantor to proceed against debtor before payment GENERAL RULE: Guarantor has no cause of action against debtor until after the former has paid the obligation EXCEPTION: Article 2071 NOTES:  Article 2071 is applicable and available to the surety. (Manila Surety & Fidelity Co., Inc. vs Batu Construction & Co., 101 Phil 494)  Remedy of guarantor: (a) obtain release from the guaranty; or (b) demand a security that shall protect him from any proceedings by the creditor, and against the danger of insolvency of the debtor Art. 2066 Provides for the enforcement of the rights of the guarantor/surety against the debtor after he has paid the debt Gives a right of action after payment

Art. 2071 Provides for his protection before he has paid but after he has become liable Protective remedy before payment.

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Substantive right

Preliminary remedy

Extinguishment of guaranty: (RA2CE2) 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 granted (Art 2078); 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 property (Art 2077); 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 former (Art 2080); 4. For the same causes as all other obligations (Art 1231); 5. When the principal obligation is extinguished; 6. Extension granted to the debtor by the creditor without the consent of the guarantor (Art 2079) BOND  An undertaking that is sufficiently secured, and not cash or currency Bondsman (Art 2082)  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. NOTES:  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 thereof (Art 2083)  A judicial bondsman and the sub-surety are NOT entitled to the benefit of excussion because they are not mere guarantors, but sureties whose liability is primary and solidary. (Art 2084) PLEDGE, MORTGAGE AND ANTICHRESIS I. Common Elements of Pledge, Mortgage, and Antichresis (Articles 2085 – 2092) A. Essential Requisites (SOD) (Art 2085) 1. Secures the fulfillment of a principal obligation; 2. Pledgor, mortgagor, antichretic debtor must be the absolute owner of the thing pledged or mortgaged; and  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) 3. Pledgor, mortgagor, antichretic debtor must have free disposal of their property, or be legally authorized for such purpose. NOTES:  Third persons can pledge or mortgage their own property to secure the principal obligation.  It is not necessarily void simply because the accommodation pledgor or mortgagor did not benefit from the same. So long as valid consent was given, the fact that the loan was given solely for the benefit of the principal debtor would not invalidate the mortgage (GSIS vs CA, 170 SCRA 533)  The accommodation pledgor or mortgagor, without expressly assuming personal liability for such debt, is not liable for the payment of any deficiency, should the property not be sufficient to cover the debt (Bank of America vs. American Realty Corporation, 321 SCRA 659).  The accommodation pledgor or mortgagor is not solidarily bound with the principal obligor but his liability extents only to the property pledged or mortgaged. Should there be any deficiency, the creditor has recourse on the principal debtor who remains to be primarily bound.  The law grants to the accommodation pledgor or mortgagor the same rights as a guarantor and he cannot be prejudiced by any waiver of defense by the principal debtor. B. Prohibition against Pactum Commissorium (Art 2088; 2137) Pactum Commissorium  Stipulation whereby the thing pledged or mortgaged, or under antichresis shall automatically become the property of the creditor in the event of non-payment of the debt within the term fixed. Requisites: 1. There should be a pledge, mortgage, or antichresis of property by way of security for the payment of the principal obligation; and 2.

There should be a stipulation for an automatic appropriation by the creditor of the property in event

of nonpayment of the obligation within the stipulated period.

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GENERAL RULE: Pactum Commissorium is forbidden by law and is declared null and void. EXCEPTION: The pledgee may appropriate the thing pledged if after the first and second auctions, the thing is not sold. (Art 2112) NOTE: The security contract remains valid; only the prohibited stipulation is void. C. Capability to secure all kinds of obligations, i.e. pure or conditional (Art 2091) D. Indivisibility (Art 2089) GENERAL RULE: A pledge, mortgage, or antichresis is indivisible, even though the debt may be divided among the successors in interest of the debtor or of the creditor.  Their indivisibility is not affected by the fact that the debtors are jointly or not solidarily liable. Consequences of indivisibility: 1. Single thing – Every portion of the property pledged or mortgaged is answerable for the whole obligation 2. Several things – All of the several things pledged or mortgaged are liable for the totality of the debt 3. Debtor’s heir/creditor’s heir - Neither the debtor’s heir who has paid part of the debt cannot ask for proportionate extinguishment, nor creditor’s heir who received his share of the debt return the pledge or cancel the mortgage as long as the debt is not completely satisfied. EXCEPTIONS: 1. Where each one of several things guarantees a determinate portion of the credit 2. Where only a portion of the loan was released 3. Where there was failure of consideration. 4. Where there is no debtor-creditor relationship NOTES:  The mere embodiment of a real estate mortgage and a chattel mortgage in one document does not have the effect of fusing both securities into an indivisible whole.  The mortgagee, therefore, may legally foreclose the real estate mortgage extrajudicially and waive the chattel mortgage foreclosure, and maintain instead a personal action for the recovery of the unpaid balance of the credit (Phil. Bank of Commerce vs. Macadaeg, 109 Phil 981) E. When the principal obligation becomes due, the things in which the pledge, mortgage, or antichresis consists may be alienated for the payment to the creditor. (Art. 2087) NOTES:  If the debtor fails to comply with the obligation at the time it falls due, the creditor is merely entitled to move for the sale of the thing pledged or mortgaged in order to collect the amount of his claim from the proceeds.  If he wishes to secure a title to the mortgaged property, he can buy it in the foreclosure sale (Montevirgin vs. CA, 112 SCRA 641) F. Pledgor, mortgagor, antichretic debtor retains ownership of the thing given as a security

PLEDGE (Arts 2093 – 2123) 

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 fulfilment 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.

 1.

Special Requisites (in addition to the common essential requisites): Possession of the thing pledged must be transferred to the creditor or a third person by agreement (Art 2093); 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 (Art 2094); and 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 (Art 2096).

2. 3.  1. 2.

Kinds: Conventional /Voluntary – created by contract Legal – created by operation of law (examples: Art. 546, 1731 and 1914 NCC)

NOTES:  The provisions of possession, care and sale of the thing as well as on the termination of the pledge governing conventional pledges are applicable to pledges created by operation of law (Art 2121)

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 Unlike, however, in conventional pledge where the debtor is not entitled to the excess unless it is 

otherwise agreed, in legal pledge, the remainder of the price of the sale after payment of the debt and expenses, shall be delivered to the debtor. In legal pledge, there is no definite period for the payment of the principal obligation. The pledgee must make a demand for the payment of the amount due him; otherwise he cannot exercise the right of sale at public auction (Art 2122)

Characteristics: 1. Real contract – it is perfected by the delivery of the thing pledged by the debtor who is called the pledgor to the creditor who is called the pledgee, or to a third person by common agreement; 2. Accessory contract – it has no independent existence of its own; 3. Unilateral contract – it creates an obligation solely on the part of the creditor to return the thing subject thereof upon the fulfilment of the principal obligation; and 4. Subsidiary contract – the obligation incurred does not arise until the fulfilment of the principal obligation which is secured. Consideration in pledge:  Insofar as the pledgor is concerned, the cause is the principal obligation.  If the pledgor is not the debtor, the cause is the compensation stipulated for the pledge or the mere liberality of the pledgor. Extent of pledge: Unless stipulated otherwise, pledge extends to the fruits, interests or earnings of the thing. Rights and Obligations of a Pledgor Rights 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 replacement (Art 2107) 2. To bid and be preferred at the public auction (Art 2113) 3. To alienate the thing pledged provided the pledgee consents to the sale (Art 2097) 4. To ask that the thing pledged be deposited (Arts 2104 & 2106)

Obligations 1. To advise the pledgee of the flaws of the thing (Art 2101) 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 preservation (Art 2105)

Rights of the Pledgee KEY: D SBC BA2R2OPS2 1. Option to demand replacement or immediate payment of the debt in case of deception as to substance or quality (Art 2109) 2. To sell at public auction in case of reasonable grounds to fear destruction or impairment of the thing without his fault (Art 2108) 3. To bring actions pertaining to the owner (Art 2103) 4. To choose which of several things pledged shall be sold 5. To bid at the public auction (Art 2113) 6. To appropriate the thing in case of failure of the 2nd public auction (Art 2112) 7. To apply said fruits, interests or earnings to the interest, if any, then to the principal of the credit (Art 2102) 8. To retain excess value received in the public sale (Art 2115) 9. To retain the thing until after full payment of the debt (Art 2098) 10. To be reimbursed for the expenses made for the preservation of the thing pledged (Art 2099) 11. To object to the alienation of the thing 12. To possess the thing (Art 2098) 13. To sell at public auction in case of non-payment of debt at maturity (Art 2112) To choose which of the several things pledged shall be sold (Art 2119) 14. Option to demand replacement or immediate payment of the debt in case of deception as to substance or quality (Art 2109) 15. To sell at public auction in case of reasonable grounds to fear destruction or impairment of the thing without his fault (Art 2108) 16. To bring actions pertaining to the owner (Art 2103) 17. To choose which of several things pledged shall be sold 18. To bid at the public auction (Art 2113) 19. To appropriate the thing in case of failure of the 2nd public auction (Art 2112) 20. To apply said fruits, interests or earnings to the interest, if any, then to the principal of the credit (Art 2102) 21. To retain excess value received in the public sale (Art 2115)

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Memory aid in Civil Law with 2015 updates 22. 23. 24. 25. 26. 27.

To retain the thing until after full payment of the debt (Art 2098) To be reimbursed for the expenses made for the preservation of the thing pledged (Art 2099) To object to the alienation of the thing To possess the thing (Art 2098) To sell at public auction in case of non-payment of debt at maturity (Art 2112) To choose which of the several things pledged shall be sold (Art 2119)

Obligations of the Pledgee 1. 2. 3. 4. 5. 6.

KEY: CUDA3 Take care of the thing with the diligence of a good father of a family (Art 2099) Not to use thing unless authorized or by the owner or its preservation requires its use (Art 2104) Not to deposit the thing with a 3rd person unless so stipulated (Art 2100) Responsibility for acts of agents and employees as regards the thing (Art 2100) To advise pledgor of danger to the thing (Art 2107) To advise pledgor of the result of the public auction (Art 2116)

RIGHT OF PLEDGOR TO SUBSTITUTE THING PLEDGED (ART.2107)  Requisites: 1. The pledgor has reasonable grounds to fear the destruction or impairment of the thin pledged 2. There is no fault on the part of the pledgee 3. The pledgor is offering in place of the thing, another thing in pledge which is of the same kind and quality as the former 4. The pledge does not choose to exercise his right to cause the thing pledged to be sold at public auction NOTE: The pledgee’s right to have the thing pledged sold at public sale granted under the Article 2108 is superior to that given to the pledgor to substitute the thing pledged under Article 2107. Prohibition against double pledge  Property which has been lawfully pledged to one creditor cannot be pledged to another as long as the first one subsists. NOTE: Possession of a creditor of the thing pledged is an essential requisite of pledge. Extinguishment of Pledge (CRAPS) 1. For the same causes as all other obligations (Art 1231) PaLoConMeConNo 2. Return of the thing pledged by the pledgee to the pledgor (Art 2110) 3. Statement in writing by the pledgee that he renounces or abandons the pledge (Art 2111) 4. Payment of the debt (Art 2105) 5. Sale of thing pledged at public auction (Art 2115) NOTE: The possession by the debtor or owner of the thing pledged subsequent to the perfection of the pledge gives rise to a prima facie presumption that the thing has been returned and, therefore, that the pledge has been extinguished but not the principal obligation itself. (Art 2110) Requirements for sale of thing pledged at public auction: (Art 2112) 1. The debt is due and unpaid 2. Sale must be at a public auction 3. there must be notice to the pledgor and owner, stating the amount due 4. Sale must be with the intervention of a notary public Effect of sale of the thing pledged: (Art 2115) 1. 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 2. If the price of the sale is more than the amount due the creditor, the debtor is not entitled to the excess unless the contrary is provided 3. If the price of the sale is less, the creditor is not entitled to recover the deficiency even if there is a stipulation to that effect REAL ESTATE MORTGAGE (Articles 2124-2131) 

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.

Characteristics of the contract: 1. Real 2. Accessory 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. NOTES:  As an accessory contract, its consideration is that of the principal contract from which it receives life.

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 A mortgage does not involve a transfer, cession or conveyance of property but only constitutes a lien 



thereon. Until discharged, it follows the property wherever it goes and subsists notwithstanding changes of ownership. A mortgage gives the mortgagee no right or claim to the possession of the property, and therefore, a mere mortgagee has no right to eject an occupant of the property mortgaged unless the mortgage should contain some provision to that effect. The only right of a mortgagee in case of non-payment of a debt secured by mortgage would be to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. If the possession is transferred to the mortgagee, it must not expressly be for purpose of applying the fruits to the interest then to the principal of the credit, for then it would be an antichresis. It is not an essential requisite that the principal of the mortgage credit bears interest, or that the interest as compensation for the use of the principal and enjoyment of its fruits be in the form of a certain percent thereof.

Special Requisites (in addition to the common essential requisites): It can cover only immovable property and alienable real rights imposed upon immovables (Art 2124); It must appear in a public instrument (Art. 2125); and Registration in the registry of property is necessary to bind third persons, but not for the validity of the contract (Art 2125).  An order for foreclosure cannot be refused on the ground that the mortgage had not been registered provided no innocent third parties are involved. NOTE: Where a mortgage is not valid or false, the principal obligation which it guarantees is not rendered null and void. What is lost only is the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation but the mortgage deed remains as evidence or proof of a personal obligation of the debtor and the amount due to the creditor may be enforced in an ordinary personal action.  1. 2. 3.

 1. 2. 3.

Kinds: Voluntary – agreed to by the parties or constituted by the will of the owner of the property on which it is created Legal – one required by law to be executed in favour of certain persons  The persons in whose favour the law establishes a mortgage have no other right than to demand the execution and the recording of the document in which the mortgage is formalized (Art 2125 par 2) Equitable – one which, although lacking the formalities of a mortgage, shows the intention of the parties to make the property a security for a debt

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

Extent of Mortgage:  Absent express stipulation to the contrary, the mortgage includes the accessions, improvements, growing fruits and income of the property not yet received when the obligation becomes due and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use (Art 2127) Object of Mortgage:  Future property cannot be an object of a contract of mortgage (Art 2085[2]) However, a stipulation subjecting to the mortgage lien, properties (improvements) which the mortgagor may subsequently acquire install, or use in connection with real property already mortgaged belonging to the mortgagor is valid (People’s Bank and Trust Co. vs. Dahican Lumber Co., 20 SCRA 84) Special Rights: 1. Mortgagor - To alienate the mortgaged property but the mortgage shall remain attached to the property. NOTE: A stipulation forbidding the owner from alienating the immovable mortgage shall be void (Art 2130) being contrary to public policy inasmuch as the transmission of property should not be unduly impeded. Mortgagee - To claim from a 3rd person in possession of the mortgaged property the payment of the part of the credit secured by the which said third person possesses (Art 2129) NOTE: It is necessary that prior demand for payment must have been made on the debtor and the latter failed to pay (BPI vs Concepcion & Hijos, Inc., 53 Phil 906) 2.

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

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NOTES:  It denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself (DBP vs Zaragoza, 84 SCRA 668)  Foreclosure is valid where the debtor is in default in the payment of his obligation (Gobonseng, Jr. vs CA, 246 SCRA 472)  1. 2.

Kinds: Judicial – ordinary action for foreclosure under Rule 68 of the Rules of Court Extrajudicial – when mortgagee is given a special power of attorney to sell the mortgaged property by public auction, under Act No. 3135

3. Judicial foreclosure 1. There is court intervention 2. Decisions are appealable 3. Order of court cuts off all rights of the parties impleaded 4. There is equity of redemption except on banks which provides for a right of redemption 5. Period of redemption starts from the finality of the judgment until order of confirmation 6. No need for a special power of attorney in the contract of mortgage

Extrajudicial foreclosure 1. No court intervention 2. Not appealable because it is immediately executory 3. Foreclosure does not cut off right of all parties involved 4. There is right of redemption 5. Period to redeem start from date of registration of certificate of sale 6. Special power of attorney in favor of mortgagee is needed in the contract

NOTES:  A foreclosure sale retroacts to the date of registration of the mortgage and that a person who takes a mortgage in good faith and for valuable consideration, the record showing clear title to the mortgagor, will be protected against equitable claims on the title in favor of third persons, of which he had no actual or constructive notice (St. Dominic Corporation vs. IAC 151 SCRA 577).  Where there is a right to redeem, inadequacy of price is not material because the judgment debtor may reacquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the auction sale and consequently not sufficient to set aside the sale. Mere inadequacy of the price obtained at the sheriff’s sale will not be sufficient to set aside the sale unless “the price is so inadequate as to shock the conscience of the court” taking into consideration the peculiar circumstances attendant thereto. (Sulit vs. CA, 268 SCRA 441)  Should there remain a balance due to the mortgagee after applying the proceeds of the sale, the mortgagee is entitled to recover the deficiency. This rule applies both to judicial and extra-judicial foreclosure real mortgage.  The action to recover a deficiency after foreclosure prescribes after 10 years from the time the right of action accrues (Arts 1142 & 1144). Stipulation of upset price or “tipo”  It is a stipulation in a mortgage of real property of minimum price at which the property shall be sold, to become operative in the event of a foreclosure sale at public auction. It is null and void for the property must be sold to the highest bidder. Parties cannot, by agreement, contravene the law and interfere with the lawful procedure of the courts (BPI vs Yulo, 31 Phil 476) Extrajudicial foreclosure real property (Act No. 3135) 

 

The law covers only real estate mortgages. It is intended merely to regulate the extrajudicial sale of the property mortgaged if and when the mortgagee is given a special power of express authority to do so in the deed itself or in a document annexed thereto. The authority to sell is not extinguished by the death of the mortgagor (or mortgagee) as it is an essential and inseparable part of a bilateral agreement (Perez vs PNB, 17 SCRA 833). No sale can be legally made outside the province in which the property sold is situated; and in case the place within said province in which the sale is to be made is the subject of stipulation, such sale shall be made in the said place in the municipal building of the municipality in which the property or part thereof is situated.

Procedure for extrajudicial foreclosure of both real estate mortgage under Act No. 3135 and chattel mortgage under Act No. 1508 (A.M. No. 99-10-05-0, January 15, 2000) 1. Filing of application before the Executive Judge through the Clerk of Court 2. Clerk of Court will examine whether the requirement of the law have been complied with, that is, whether the notice of sale has been posted for not less than 20 days in at least three (3) public places of the municipality or city where the property is situated, and if the same is worth more than P400.00, that such notice has been published once a week for at least three (3) consecutive weeks in a newspaper of general circulation in the city of municipality

Memory aid in Civil Law with 2017 updates 3. 4. 5. 6. 7. 8. 9.

The certificate of sale must be approved by the Executive Judge Where the application concerns extrajudicial foreclosure of real mortgages in different locations covering one indebtedness, only one filing fee corresponding to such debt shall be collected The Clerk of Court shall issue certificate of payment indicating the amount of indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the description of the real estates and their respective locations The notice of sale shall be published in a newspaper of general circulation pursuant to Section 1, PD No. 1079 The application of shall be raffled among all sheriffs After the redemption period has expired, the Clerk of Court shall archive the records. No auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale shall be postponed to another date. If on the new date set forth for the sale there shall not be at least two bidders, the sale shall then proceed. The names of the bidders shall be reported to the Sheriff of the Notary Public, who conducted the sale to the Clerk of Court before the issuance of the certificate of sale.

NOTES:  The Mortgagor and Mortgagee have no right to waive the posting and publication requirements under Act. No. 3135. Notices are given to secure bidders and prevent a sacrifice of the property. Clearly, the statutory requirements of posting and publication are mandated, not for the mortgagor’s benefit, but for the public or third persons. Failure to comply with the statutory requirements as to publication of notice of auction sale constitutes a jurisdictional defect which invalidates the sale.Lack of republication of notice of foreclosure sale made subsequently after the original date renders such sale void (PNB vs. Nepomuceno Productions Inc., G.R. No. 139479. December 27, 2002).  Sec 3 of Act 3135 does not require personal or any particular notice on the mortgagor much less on his successors-in-interest where there is no contractual stipulation therefor. Hence, unless required in the mortgage contract, the lack of such notice is not a ground to set aside a foreclosure sale.  Neither does Sec 3 require posting of notice of sale on the mortgage property and the certificate of posting is not required, much less considered indispensable, for the validity of a foreclosure sale. Redemption  It is the transaction by which the mortgagor reacquires or buys back the property which may have passed under the mortgage, or divests the property of the lien which the mortgage may have created. NOTES:  A sale by the mortgagor to a third party of the mortgaged property during the period for redemption transfers only the right to redeem the property and the right to possess, use and enjoy the same during said period.  Where sale with assumption of mortgage not registered and made without the consent of the mortgagee, the buyer, thereof, was not validly substituted as debtor and, hence, had no right to redeem (Bonnevie vs. CA, 125 SCRA 122).  1.

Kinds: Equity of Redemption – right of mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage within the 90-day period from the date of the service of the order of foreclosure or even thereafter but before the confirmation of the sale. Applies to judicial foreclosure of real mortgage and chattel mortgage foreclosure.

NOTE: Redemption of the banking institutions is allowed within one year from confirmation of sale. 2.

Right of Redemption – right of mortgagor to redeem the mortgaged property within one year from the date of registration of the certificate of sale. Applies only to extrajudicial foreclosure of real mortgage.

NOTE: The right of redemption, as long as within the period prescribed, may be exercised irrespective of whether or not the mortgagee has subsequently conveyed the property to some other party (Sta. Ignacia Rural Bank, Inc. vs. CA, 230 SCRA 513) Period of Redemption 1. Extra-judicial (Act #3135) a. natural person – one year from registration of the certificate of sale with Registry of Deeds b. juridical person – same rule as natural person c. juridical person (mortgagee is bank) - three months after foreclosure or before registration of certificate of foreclosure which ever is earlier (sec. 47, of General Banking Law) 2. Judicial – before confirmation of the sale by the court NOTE: Allowing a redemption after the lapse of the statutory period, when the buyer at the foreclosure sale does not object but even consents to the redemption, will uphold the policy of the law which is to aid rather than defeat the right of redemption. There is nothing in the law which prevents a waiver of the statutory period for redemption (Ramirez vs CA, 219 SCRA 598). Amount of the redemption price: 1. Mortgagee is not a bank (Act No. 3135, in relation to Sec. 28, Rule 39 of Rules of Court)

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purchase price of the property 1% interest per month on the purchase price taxes paid and amount of purchaser’s prior lien, if any, with the same rate of interest computed from the date of registration of sale, up to the time of redemption Mortgagee is a bank (GBL 2000) a. amount due under the mortgage deed b. interest c. cost and expenses NOTE: Redemption price in this case is reduced by the income received from the property

ANTICHRESIS (Articles 2132 -2139) 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) Special Requisites (in addition to the common essential requisites): It can cover only the fruits of an immovable property; (Art 2132) Delivery of the immovable is necessary for the creditor to receive the fruits and not that the contract shall be binding; Amount of principal and interest must be specified in writing (Art. 2134); and Express agreement that debtor will give possession of the property to creditor and that the latter will apply the fruits to the interest, if any, then to the principal of his credit. (Art 2132)

 1. 2. 3. 4.

NOTE: The obligation to pay interest is not of the essence of the contract of antichresis, there being nothing in the Code to show that antichresis is only applicable to securing the payment of interest-bearing loans. On the contrary, antichresis is susceptible of guaranteeing all kinds of obligations, pure or conditional.

Antichresis 1. Refers to real property

Pledge 1. Refers to personal property

2. Perfected by mere consent

2. Perfected by delivery of the thing pledged

3. Consensual contract

3. Real Contract

Antichresis 1. Property is delivered to creditor 2. Creditor acquires only the right to receive the fruits of the property, hence, it does not produce a real right 3. The creditor, unless there is stipulation to the contrary, is obliged to pay the taxes and charges upon the estate

Real Estate Mortgage 1. Debtor usually retains possession of the property 2. Creditor does not have any right to receive the fruits; but the mortgage creates a real right over the property 3. The creditor has no such obligation

4. It is expressly stipulated that the creditor given 4. There is no such obligation on part of possession of the property shall apply all the mortgagee fruits thereof to the payment of interest, if owing, and thereafter to the principal Subject matter of both is real property

Obligations of antichretic creditor: 1

To pay taxes and charges on the estate, including necessary expenses NOTE: Creditor may avoid said obligation by: a. compelling debtor to reacquire enjoyment of the property or

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2 3 4

b. by stipulation to the contrary To apply all the fruits, after receiving them, to the payment of interest, if owing, and thereafter to the principal To render an account of the fruits to the debtor To bear the expenses necessary for its preservation and repair

Remedies of creditor in case of non-payment of debt 1. 2.

Bring an action for specific performance; or Petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of the Rules of Court.(Art 2137)

NOTES:

 The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge (Tavera vs. El Hogar Filipino, Inc., 68 Phil 712).

 A stipulation authorizing the antichretic creditor to appropriate the property upon the nonpayment of the debt within the agreed period is void (Art 2088). CHATTEL MORTGAGE (Articles 2140-2141) 

A contract by virtue of which personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation (Art 2140).

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 fulfilment of the obligation.  1. 2. 3. 4. 5.

Special Requisites (in addition to the common essential requisites): It can cover only personal or movable property in general; however, the parties may treat as personal property that which by its nature would be real property; Registration of the mortgage with the Chattel Mortgage Register where the mortgagor resides; if property is located in a different province, registration in both provinces required; Description of the property as would enable the parties or other persons to identify the same after reasonable investigation and inquiry; and Accompanied by an affidavit of good faith to bind third persons, but not for the validity of the contract. It can cover only obligations existing at the time the mortgage is constituted. NOTE: A mortgage containing a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage ( Jaca vs Davao Lumber Co., 113 SCRA 107)

Effect of registration: Creates a real right  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 possession (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 favour the law establishes a mortgage has no other right than to demand the execution and the recording of the document. Chattel Mortgage 1. Delivery of the personal property to the mortgage is not necessary

Pledge 1. Delivery of the thing pledged is necessary

2. registration in the Chattel Mortgage Registry is necessary for its validity

2. registration not necessary to be valid

3. If property is foreclosed, the excess over the amount due goes to the debtor

3. Debtor is not entitled to excess unless otherwise agreed or except in case of legal pledge

4. If there is deficiency after foreclosure, creditor is 4. If there is deficiency, creditor is not entitled to entitled to recover the deficiency from the debtor, recover notwithstanding any stipulation to the except under Art. 1484 contrary Subject matter of both is movable property

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Memory aid in Civil Law with 2015 updates Affidavit of Good Faith  Oath in a contract of chattel mortgage wherein the parties "severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purposes and that the same is a just and valid obligation and one not entered into for the purpose of fraud.” (Sec. 5, Chattel Mortgage Law) Effect of absence The special affidavit is required only for the purpose of transforming an already valid mortgage into “preferred mortgage.” Thus, it is not necessary for the validity of the chattel mortgage itself but only to give it a preferred status. In other words, its absence vitiates the mortgage only as against third persons without notice like creditors and subsequent encumbrancers. Foreclosure of Chattel Mortgage NOTES:  Foreclosure sale in chattel mortgage is by public auction under Act No. 1508, but the parties may stipulate that it be by private sale.  The mortgagee may, after thirty (30) days from the time of the condition broken, cause the mortgaged property to be sold at public auction by a public officer. The 30-day period is also a grace period for the mortgagor to discharge the mortgage obligation. After the sale of the chattel at public auction, the right of redemption is no longer available to the mortgagor (Cabral vs. Evangelista, 28 SCRA 1000). Application of proceed of sale: 1. Costs and expenses of keeping and sale 2. Payment of the obligation secured by the mortgage 3. Claims of persons holding subsequent mortgages in their order 4. The balance, if any, shall be paid to the mortgagor or person holding under him NOTES:  The creditor may maintain an action for the deficiency, except if the chattel mortgage is constituted as security for the purchase of personal property payable in instalments (Art. 1484).  The action for deficiency may be brought within ten (10) years from the time the cause of action accrues (Arts 1141 and 1142).  Only equity of redemption is available to the mortgagor; the latter can no longer redeem after the confirmation of the foreclosure sale. Right of redemption  When the condition of a chattel mortgage is broken the following may redeem: a) mortgagor; b) person holding a subsequent mortgage; or c) subsequent attaching creditor.  An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the mortgage in the same manner that the mortgagee could foreclose it.  The redemption is made by paying or delivering to the mortgagee the amount due on such mortgage and the costs, and expenses incurred by such breach of condition before the sale thereof (Sec 13, Act No. 1508). Right to possession of foreclosed property 1. Real mortgage – After the redemption period has expired, the purchaser of the property has the right to a conveyance and to be placed in possession thereof. NOTES:  Purchaser is not obliged to bring a separate suit for possession. He must invoke the aid of the courts and ask for a WRIT OF POSSESSION.  Section 7 of Act No. 3135 allows the purchaser to take possession of the foreclosed property during the period of redemption upon filing of an ex parte application and approval of a bond. 2.

Chattel mortgage – When default occurs and the creditor desires to foreclose, the creditor has the right to take the property as a preliminary step for its sale. NOTE: Where the debtor refuses to yield the property, the creditor’s remedy is to institute an action either to effect judicial foreclosure directly or to secure possession (REPLEVIN) as a preliminary to the sale contemplated in Section 14 or Act. No. 1508

CONCURRENCE AND PREFERENCE OF CREDITS (Articles 2236 – 2251)

Memory aid in Civil Law with 2017 updates 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. NOTES:  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) Preference of Credit

Lien

Applies only to claims which do not attach to specific properties

Creates a charge on a particular property

Liability of debtor’s property for his obligations GENERAL RULE: Debtor is liable with all his property, present and future, for the fulfilment of his obligations. (Art 2236)

EXEMPT PROPERTY: 1. Present property – those provided under Arts. 155 and 205 of the Family Code, Sec. 13, Rule 39 of the Rules of Court, and Sec. 118 of the Public Land Act 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. (Secs. 68, 69, The Insolvency Law [Act No. 1956]) 3. Property under legal custody and those owned by municipal corporations necessary for governmental purposes General Categories of Credit: 1. Special Preferred Credits - those listed in Arts. 2241 and 2242 shall be considered as mortgages and pledges of real or personal property or liens (Art. 2243). Hence, they are not included in the insolvent debtor's assets. NOTES:  Arts. 2241 and 2242 do not give the order of preference or priority of payment. They merely enumerate the credits which enjoy preference with respect to specific movables or immovables. With respect to the same specific movables or immovables, creditors, with the exception of the State (No. 1), merely concur.  They only find application when there is a concurrence of credits, i.e., when the same specific property of the debtor is subjected to the claims of several creditors and the value of such property is insufficient to pay in full all the creditors. In such a situation, the question of preference will arise.  Article 2242 makes no distinction between registered and unregistered vendor’s lien (No. 2). Hence, any lien of that kind enjoys the preferred credit status. Unlike the unpaid price of real property sold, mortgage credits (No. 5), in order to be given preference, should be recorded in the Registry of Property. But a recorded mortgage credit is superior to an unrecorded unpaid vendor’s lien (De Barretto vs. Villanueva, 1 SCRA 288)  The priority rule applies to credits annotated in the Registry of Property. As to credits mentioned in No. 7 of Article 2242, there is preference among the attachments or executions according to the order of the time they were levied upon the property. The pro rata rule in Article 2249 does not apply; otherwise, the result would be absurd. The preference of a credit annotated by an attachment or execution could be defeated by simply obtaining a writ of attachment or execution, no matter how much later (Manabat vs Laguna Federation of Facomas, Inc., 19 SCRA 621).  The last paragraph of Article 2241 applies only when the right of ownership in such property continues in the debtor, and, therefore, it is not applicable to cases where the debtor has parted with his ownership therein, as where he has sold the property (Peña vs. Mitchell, 9 Phil 587) 2. Ordinary Preferred Credits - those listed in Art. 2244 as amended by Art. 110 of the Labor Code. NOTES:  The provision not only enumerates the preferred credits with respect to other property, real and personal, of the debtor, but also gives their order of preference “in the order named”.

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 In contrast with Articles 2241 and 2242, Article 2244 creates no liens on determinate property which 

follow such property. What Article 2244 creates are simply rights in favour of certain creditors to have the cash and other assets of the insolvent applied in a certain sequence or order of priority. Article 2244, particularly par (14) item (1) thereof, is not applicable to obligations of the State as it is a recognized doctrine that the State is always solvent. It is inconceivable for the State to voluntarily initiate insolvency or general liquidation proceedings or to be subjected to such proceedings under its own laws.

3. Common Credits – those listed under Art. 2245, which shall be paid pro rata regardless of dates. NOTE: Ordinary Preferred and Common Credits cover only “free property” of the debtor, or those not subjected to Special Preferred Credit. Effects of Article 110 of Labor Code to Art 2244: 1. Removed the one-year limitation found in No. 2 of Art. 2244 2. Moving up the claims for unpaid wages (and other monetary claims) of laborers or workers of insolvent from second priority to first priority in the order of preference established by Art. 2244 NOTES:  In case of bankruptcy or liquidation of the employer’s business, the unpaid wages and other monetary claims of the employees shall be given first preference and shall be paid in full before the claims of the government and other creditors may be paid. The terms, “declaration” of bankruptcy, or “judicial” liquidation have been eliminated, nevertheless, according to the SC, bankruptcy or liquidation proceedings are still necessary for the operation of the preference accorded to workers under Art. 110 of the Labor Code. (DBP vs. NLRC 183 SCRA 328; RA No. 6715 Sec 10)  In case of rehabilitation, the preference of credit granted to employees under Art 110 of the Labor Code is not applicable (Rubberworld [Phils.] vs CA, 305 SCRA 722). Refectionary Credit  Indebtedness incurred in the repair or reconstruction of something previously made, such repair or reconstruction being made necessary by the deterioration or destruction of the thing as it formerly existed. ORDER OF PREFERENCE OF CREDITS  1. 2.

Arts. 2241 and 2242, jointly with Arts. 2246 to 2249 establish a two-tier order of preference: First tier – includes taxes, duties and fees due on specific movable or immovable property; Second tier – all other special preferred (non-tax) credits shall be satisfied pro-rata, out of any residual value of the specific property to which such credits relate.

NOTES:

 The pro-rata rule does not apply to credits annotated in the Registry of Property by virtue of a judicial



order, by attachments and executions, which are preferred as to “later credits”. In satisfying several credits annotated by attachments or executions, the rule is still preference according to the priority of the credits in the order of time. In order to make the pro rating provided in Art 2249 fully effective, the preferred creditors enumerated in Nos. 2 to 14 of Art 2242 must necessarily be convened, and the import of their claims ascertained. There must be first some proceeding where the claims of all the preferred creditors may be bindingly adjudicated, e.g. insolvency, settlement of decedent’s estate, or other liquidation proceedings except where there are not more than one creditor.

 Credits which do not enjoy any preference with respect to specific property because they are not among



those mentioned in Arts. 2241 and 2242 and those while included in said articles are unpaid because the value of the property to which the preference refers is less than the preferred credit or credits, shall be satisfied in the order established in Art. 2244 with reference to other real and/or personal property. Common credits or those which do not fall under Arts. 2241, 2242, and 2244 do not enjoy any preference and shall be paid pro rata regardless of dates.

S A L E S SALE  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.

Memory aid in Civil Law with 2017 updates NOTES: 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. (Pio Barretto Sons, Inc. vs. Compania Maritima, 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.

 a.

b.

c.



Elements: Essential elements – those without which, there can be no valid sale: 1. Consent or meeting of minds 2. A Determinable subject matter 3. Price certain in money or its equivalent Natural elements – inherent in the contract, and which in the absence of any contrary provision, are deemed to exist in the contract: 1. Warranty against eviction 2. Warranty against hidden defects Accidental elements – may be present or absent depending on the stipulation of the parties (e.g.: conditions, interest, penalty, time or place of payment, etc.) Characteristics: 1. Principal 2. Consensual; 3. Bilateral; 4. Nominate; 5. Commutative; In some cases, aleatory (emptio spei); 6. Onerous.

* Aleatory contract: one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event which is uncertain, or which is to occur at an indeterminate time. (Ex: Sale of sweepstakes ticket) Contract to sell  exclusive right and privilege to purchase an object.  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. NOTE: 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]) * 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. Contract of Sale 1. Title passes to the buyer upon delivery of the thing sold 2. Non-payment of the price is a negative resolutory 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

Contract to Sell 1. Ownership is reserved in the seller and is not to pass until full payment of the purchase price 2. Full payment is a positive suspensive condition, the failure 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

Conditional Sale Contract to Sell As to reservation of title to the subject property

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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 the suspensive condition, the contract of sale is thereby perfected, such that if there had been previous delivery of the subject property to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act by the seller.

1. Upon fulfillment of the suspensive condition, which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.

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.

SALES OBJECTS OF SALE Requisites: 1. THINGS: a) determinate or determinable (Arts. 1458, 1460) b) lawful (Arts 1347, 1409 [1,4] c) should not be impossible (Art. 1348) e.g. must be within the commerce of man 2. RIGHTS – must be transmissible Exceptions: -future inheritance - service Emptio rei speratae 1. Sale of an expected thing 2. Sale is subject to the condition that the thing will exist; if it does not, there is no contract

3. The uncertainty is with regard to the quantity and quality of the thing and not the existence of the thing 4. Object is a future thing

Emptio spei 1. Sale of a mere hope or expectancy that the thing will come to existence; Sale of the hope itself 2. Sale produces effect even if the thing does not come into existence, unless it is a vain hope

3. The uncertainty is with regard to the existence of the thing 4. Object is a present thing which is the hope or expectancy

NOTE: In case of doubt the presumption is in favor of emptio rei speratae which is more in keeping with the commutative character of the contract Goods which may be Object of Sale a. Existing goods – goods owned or possessed by the seller. b. Future goods – goods to be manufactured, raised or acquired by the seller after the perfection of the contract. NOTES:

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 A sale of future goods is valid only as an executory contract to be fulfilled by the acquisition and delivery of goods specified.

 While there can be sale of future property, there can generally be no donation of future property ( Article 751 Civil Code)

 Future inheritance cannot be sold.  A contract of sale or purchase of goods to be delivered at a future time, if entered into without the intention of having any goods pass from one party to another, but with an understanding that at the appointed time, the purchaser is merely to receive or pay the difference between the contract and the market prices, is illegal. Such contract falls under the definition of “futures” in which the parties merely gamble on the rise or fall in prices and is declared null and void by law. (Art. 2018, NCC) (Onapal Phil. Commodities, Inc. vs. CA [1993])  1. 2. 3.

Instances when the Civil Code recognizes sale of things not actually or already owned by the seller at the time of the sale: Sale of a thing having potential existence (Article 1461) Sale of future goods (Article 1462) Contract for the delivery at a certain price of an article which the vendor in the ordinary course of the business manufactures or procures for the general market, whether the same is on hand at the time or not (Article 1467)

Sale 1. Buyer receives the goods as owner

Agency to sell 1. Agent receives the goods as goods of the principal who retains his ownership over them

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

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

5. Agent in dealing with the thing received, must act and is bound according to the instructions of the principal

Contract for Piece of Work

Sale

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

3. Within the Statute of Frauds

Rules to determine if the contract is one of Sale or Piece of work: a. If ordered in the ordinary course of business – sale b. If manufactured specially for the customer and upon his special order, and not for the market – piece of work SCHOOLS OF THOUGHT: a) Massachusetts rule: If specifically done at the order of another, this is a contract for a piece of work. (Philippine application) b) New York rule: If thing already exists-SALE; if not-WORK c) English rule: If material is more valuable-SALE; if skill is more valuable-WORK BARTER

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

contract whereby one of the parties binds himself to give one thing in consideration of the other's promise to give another thing. NOTE: 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 NOTE: If the consideration is partly in money and partly in another thing, determine: a. The manifest intention of the parties b. If the intent is not clear, apply the following rules: 1. If the thing is more valuable than money – barter 2. If the money and the thing are of equal value – sale 3. If the thing is less valuable than money – sale Sale 1. 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 4. Greater freedom in determining the price

Dation in Payment 1. Pre-existing credit 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 4. Less Freedom in determining the price

5. Buyer still has to pay the price

5.

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

PRICE  The sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to by him.



Requisites: 1. Certainty or ascertainable at the time of perfection 2. Real, not fictitious 3. In some cases, must not be grossly inferior to the value of the thing sold. 4. Paid in money or its equivalent

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Certainty  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; NOTE: 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. 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 NCC

Effect when the price is fixed by the third person designated: GENERAL RULE: Price fixed by a third person designated by the parties is binding upon them. EXCEPTIONS: 1. When the third person acts in bad faith or by mistake 2. When the third person disregards the specific instructions or the procedure marked out by the parties Effect when the price is not fixed by the third person designated: 1. If the third person refuses or cannot fix the price, the contract shall become ineffective, unless the parties subsequently agree upon the price 2. If the third person is prevented from fixing the price by the fault of the seller or buyer, the party not in fault may obtain redress against the party in fault 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 NOTE: 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. Effect where price is simulated 1. If it is shown to have been in reality a donation or some other act or contract

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2.

The sale is void but the act or contract may be valid as a donation If not The contract is void and inexistent

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 Reasonable price – generally the market price at the time and place fixed by the contract or by law for the delivery of the goods PERFECTION OF SALE 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) NOTE: Sale is a consensual contract; Hence, delivery and payment are not essential for its perfection 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 partied themselves stipulate that in addition to the subject-matter and the price, they are essential or material to the contract. Requirements for perfection a. When parties are face to face  When an offer is accepted without conditions or qualifications NOTES:  A conditional acceptance is a counter-offer  when negotiated thru phone it is as if it is negotiated face to face b. When contract is thru correspondence or thru telegram  When the offeror receives or has knowledge of the acceptance by the offeree NOTE: If the buyer has already accepted but the seller does not know yet of the acceptance, the seller may still withdraw c. When a sale is subject to a suspensive condition  From the moment the condition is fulfilled 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 Pactum reservati dominii (a perfected conditional contract of sale OR contractual reservation of title) – a stipulation, usually in sales by installment, whereby, despite

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2. 3.

delivery of the property sold, ownership remains with the seller until full payment of the price is made. IT IS NOT A CONTRACT TO SELL. Contract to sell - a preparatory contract. Upon full payment, a contract of sale is executed. 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

RULES GOVERNING AUCTION SALES 1. Sales of separate lots by auction are separate contracts of sale. 2. Sale is perfected by the fall of the hammer 3. Seller has the right to bid in the auction, provided: a) such right was reserved b) notice was given that the sale was subject to a right to bid on behalf of the seller c) right is not prohibited by law or by stipulation 4. 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. EFFECT OF PROMISE TREATED UNDER ART. 1479 Civil Code: 1. Accepted unilateral promise to sell or buy  Only one makes the promise, this promise is accepted by the other. Example: A promises to sell to B, B accepts the promise, but does not in turn promise to buy.  does not bind the promissor even if accepted and may be withdrawn anytime. NOTE: Pending notice of its withdrawal, the accepted promise partakes the nature of an offer to sell which if accepted, results in a perfected contract of sale (Sanchez vs. Rigos 45 SCRA3 68). In other words, if the acceptance is made before withdrawal, it constitutes a binding contract of sale although the option is given without consideration.  if the promise is supported by a consideration distinct and separate from the price (option money), its acceptance will give rise to a perfected contract. 2. Bilateral promise to buy and sell  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 NOTE: 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. Policitation  An unaccepted unilateral promise to buy or sell. Even if accepted by the other party, it does not bind the promissor and maybe withdrawn anytime. This is a mere offer, and has not yet been converted into a contract. Option contract  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.

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* 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. 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 Frauds, such contract is valid BUT rescissible under Article 1380 to 1381(3) of the New Civil Code (Guzman Bocaling & Co. vs. Bonnavie; Riviera Filipina, Inc vs. CA et.al. GR No. 117355, April 5, 2002).  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 (Paraňaque Kings Enterprises, Inc. vs. CA GR No. 111538, February 26, 1997)  The lessee’s right of first option to buy the leased property in case of its sale is but a part of the bigger right to lease the said property from the lessor. The option was given to the lessee because she was the lessee of the subject property. It was a component of the consideration of the lease. The option was by no means an independent right which can be exercised by the lessee. If the lessee is barred by the contract from assigning her right to lease the subject property to any other party, the lessee is similarly barred to assign her first option to buy the leased property to another. (Bangayan et.al vs. CA and Lim GR No.123581, August 29, 1997) Earnest money – 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. Earnest money 1. Title passes to the buyer upon delivery of the thing sold

Option money 1. Ownership is reserved to the seller and is not to pass until full payment

2. In case of non-payment, an action for specific performance or for rescission can be filed by the injured party

2. In case of non-payment, there can be action for specific performance

3. Part of the purchase price

3. Money given as a distinct consideration for an option contract

4. When given, the buyer is bound to pay the balance

4. The would-be buyer is not required to buy

5. Given when there is already a sale

5. Applies to a sale not yet perfected

RULES ON RISK OF LOSS AND DETERIORATION: a. The thing sold is lost before perfection: Seller bears the loss.

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b. c.

The thing sold is lost at the time of perfection: Contract is void or inexistent. The thing sold is lost after perfection, but before delivery:

GENERAL RULE: Who bears the risk of loss is governed by the stipulations in the contract  In the absence of any stipulation: First view: Buyer bears the loss as an exception to the rule of res perit domino.  EXCEPTIONS: 1. 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 generic (Civil Code of the Philippines, Paras) NOTE: 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. 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) d.

The thing is lost after delivery: Buyer bears the loss.

Question: If one does not comply, the other need not pay? Answer: True. But this only applies when the seller is able to deliver but does not. EFFECT OF LOSS AT THE TIME OF SALE: a. Thing entirely lost at the time of perfection: Contract is void and inexistent b. Thing only partially lost: Vendee may elect between withdrawing from the contract or demanding the remaining part, paying its proportionate price Sale by description  A sale where a seller sells things as being of a certain kind, buyer merely relying on the seller’s representations or descriptions.  There is warranty that the thing sold corresponds to the representations or descriptions. Sale by sample  A sale where a small quantity of a commodity is exhibited by the seller as a fair specimen of the bulk, which is not present and as to which there is no opportunity to inspect or examine. NOTE: The mere exhibition of the sample does not necessarily make it a sale by sample. This exhibition must have been the sole basis or inducement of the sale.  There is warranty that the bulk of the commodity will correspond in kind, quality, and character with the sample exhibited. NOTE: In a sale by sample and by description, there is a two-fold warranty. RIGHTS OF BUYER: 1) Return the thing and recover the money paid, or 2) Retain the thing and sue for the breach of warranty.

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PURCHASE BY MINORS: Contract is generally voidable but in case of necessaries, “where necessaries are sold and delivered to a minor or other person without capacity to act, he must pay a reasonable price therefore. Necessaries are those in Art. 290.” FORMALITIES OF CONTRACT OF SALE

GENERAL RULE: Sale is a consensual contract and is perfected by mere consent. EXCEPTIONS: In order to be enforceable by action, the following must be in writing: 1. Sale of personal property at a price not less than P500 2. Sale of real property or an interest therein 3. Sale of property not to be performed within a year from the date thereof 4. “Applicable statute” requires that the contract of sale be in a certain form NOTE: Statute of Frauds is applicable only to executory contracts and not to contracts which are totally or partially performed.

CAPACITY TO BUY OR SELL GENERAL RULE: All persons who can bind themselves also have legal capacity to buy and sell. EXCEPTIONS: 1. Absolute incapacity (minors, demented persons, imbeciles, deaf and dumb, prodigals, civil interdictees) - party cannot bind themselves in any case. 2. Relative incapacity – incapacity exists only with reference to certain persons or a certain class of property Relative Incapacity A. Husband and wife (Art. 1490): Generally, a sale by one spouse to another is void.  The husband and wife cannot sell property to each other except: 1. When a separation of property was agreed upon by the spouses 2. When there has been a judicial separation of property under Article 134 and 135 of the Family Code B. Incapacity by reason of relation to property (Art. 1491)  The following persons cannot acquire property by purchase, even at a public auction, either in person or through the mediation of another: (GAEP-JO) 1. the guardian, with respect to the property of his ward; 2. agents, with respect to the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; 3. executor or administrator, with respect to the property of the estate under administration; 4. public officers and employees, with respect to the properties of the government, its political subdivisions, or GOCCs, that are entrusted to them; 5. judges, justices, prosecuting attorneys, clerks of courts, etc., with respect to the property in custogia legis; and 6. any other person specially disqualified by law. Examples of persons especially disqualified by law: a. Aliens who are disqualified to purchase agricultural lands b. An unpaid seller having a right of lien or having stopped the goods in transitu, who is prohibited from buying the goods either directly or indirectly in the resale of the same, at public or private sale which he may make c. The officer holding the execution, or his deputy.

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NOTE: While those disqualified under Arts. 1490 and 1491 may not become lessees (Art. 1646), still aliens may become lessees even if they cannot buy lands.  Effect of violation: a) With respect to nos. 1 to 3: the sale is VOIDABLE. Reason: only private rights, which are subject to ratification are violated NOTE: In the case of Lao vs. Genato, 137 SCRA 77, the Supreme Court found that the sale by the administrator of certain properties of the estate in order to settle the existing obligations of the estate was made to the administrator’s son for a grossly low price. Furthermore, the said sale was not submitted to the probate court for approval as mandated by the order authorizing the administrator to sell. The sale was indubitably illegal, irregular and fictitious, and the court’s approval of the assailed compromise agreement violated Article 1491 and cannot work to ratify a fictitious contract which is non-existent and void from the very beginning b) With respect to nos. 4 to 6: the sale is NULL AND VOID. Reason: violation of public policy cannot be subject to ratification OBLIGATIONS OF THE VENDOR: (WPD-TT) 1. Transfer ownership (cannot be waived) 2. Deliver the thing sold (cannot be waived) 3. Warrant against eviction and against hidden defects (can be waived or modified since warranty is not an essential element of the contract of sale) 4. Take care of the thing, pending delivery, with proper diligence (Article 1163) 5. Pay for the expenses of the deed of sale, unless there is stipulation to the contrary DELIVERY  Is a mode of acquiring ownership, as a consequence of certain contracts such as sale, by virtue of which, actually or constructively, the object is placed in the control and possession of the vendee.

 Delivery of the thing together with the payment of the price, marks the consummation of the 

contract of sale(PNB vs. Ling, 69 Phil. 611) In all forms of delivery, it is necessary that the act of delivery be coupled with the intention of delivering the thing. The act without the intention is insufficient. (Norkis Distributor, Inc. vs. CA, 195 SCRA 694)



Kinds: 1. Actual or real – placing the thing under the control and possession of the buyer. 2. Legal or constructive – delivery is represented by other signs or acts indicative thereof a. delivery by the execution of a public instrument. NOTE: 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) b. traditio symbolica - to effect delivery, the parties make use of a token or symbol to represent the thing delivered 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.(lessee to owner-possessor) e. traditio constitutum possessorium – seller continues in possession but under a different title other than ownership. (owner to lessee) 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

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Constructive delivery requires 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 When is the vendor not bound to deliver the thing sold: 1. If the vendee has not paid him the price 2. If no period for payment has been fixed in the contract 3. Even if a period for payment has been fixed in the contract, if the vendee has lost the right to make use of the same. Sale or return  Property is sold, but the buyer, who becomes the owner of the property on delivery, has the option to return the same to the seller instead of paying the price. NOTES:  It is a kind of sale with a condition subsequent.  The buyer must comply with the express or implied conditions attached to the return privilege; otherwise, the sale becomes absolute.  Buyer, being the owner, bears the risk of loss Sale on trial, approval, or satisfaction  A contract in the nature of an option to purchase if the goods prove to be satisfactory, the approval of the buyer being a condition precedent.

 1. 2. 3. 4. 5. 6.

Rules: title remains in the seller risk of loss remains with seller except when the buyer is at fault or has agreed to bear the loss buyer must give goods a trial, except where it is evident that it cannot perform the work period within which buyer must signify his acceptance runs only when all the parts essential for the operation of the object have been delivered. if it is stipulated that a third person must satisfy approval or satisfaction, the provision is valid, but the third person must be in good faith. If refusal to accept is not justified, seller may still sue. Generally, the sale and delivery to a buyer who is an expert on the object purchased is not a sale on approval, trial, or satisfaction.

Sale or return 1. Subject to a resolutory condition 2. Depends entirely on the will of the buyer 3. Ownership passes to the buyer on delivery and subsequent return reverts

Sale on Trial 1. Subject to a suspensive condition 2. Depends on the character or quality of the goods 3. Ownership remains in the seller until buyer signifies his approval or acceptance to the

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ownership in the seller

seller

4. Risk of loss or injury rests upon the buyer

4. Risk of loss remains with the seller

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 ownership (Article 1503) a. If under the bill of lading, the goods are deliverable to seller or agent or their order; 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; a. 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.

Transfer of ownership where goods sold delivered to carrier General Rule: Delivery to the carrier is deemed to be delivery to the buyer Exception: Where the right of possession or ownership of specific goods sold is reserved SALE OF GOODS BY A NON-OWNER GENERAL RULE: Buyer acquires no title even if in good faith and for value under the maxim Nemo dat quid non habet (“You cannot give what you do not have”). EXCEPTIONS: (SMERVS) 1. Owner is estopped or precluded by his conduct 2. When sale is made by the registered owner or apparent owner in accordance with recording or registration laws 3. Sales sanctioned by judicial or statutory authority 4. Purchases in a merchant's store, fairs or markets 5. When a person who is not the owner sells and delivers a thing, subsequently acquires title thereto (Art. 1434) 6. When the seller has a voidable title which has not been avoided at the time of the sale (Art. 1506) * “Unlawful deprivation” is no longer limited to a criminal act. There is Unlawful Deprivation where there is no valid transmission of ownership. Place of delivery of goods 1. Where there is an agreement, place of delivery is that agreed upon 2. Where there is no agreement, place of delivery determined by usage of trade 3. Where there is no agreement and no prevalent usage, place of delivery is the seller’s place 4. In any other case, place of delivery is the seller’s residence 5. In case of specific goods, which to the knowledge of the parties at the time the contract was made were in some other place, that place is the place of delivery, in the absence of agreement or usage of trade to the contrary Time of delivery of goods 1. Stipulated time 2. In the absence thereof, within a reasonable time

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NEGOTIABLE DOCUMENT OF TITLE (NDT)  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.  May be negotiated by delivery or indorsement. The document is negotiable if: 1. The goods are deliverable to the bearer; or 2. If the goods are deliverable to the order of a certain person Persons who may negotiate NDT: 1. The owner; or 2. Any person to whom the possession or custody thereof has been entrusted by the owner, if by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted or if at the time of such entrusting the document in such form that it may be negotiated by delivery. * If the holder of a negotiable document of title (deliverable to bearer) entrusts the document to a friend for deposit, but the friend betrays the trust and negotiates the document by delivering it to another who is in good faith, the said owner cannot impugn the validity of the negotiation. As between two innocent persons, he who made the loss possible shall bear the loss, without prejudice to his right to recover from the wrongdoer. RIGHTS OF PERSON TO WHOM DOCUMENT HAS BEEN NEGOTIATED: 1) The title of the person negotiating the document, over the goods covered by the document; 2) The title of the person (depositor or owner) to whose order by the terms of the document the goods were to be delivered, over such goods; 3) The direct obligation of the bailee to hold possession of the goods for him, as if the bailee had contracted to him directly NOTE; Mere transferee does not acquire directly the obligation of the bailee (in Art. 1513). To acquire it, he must notify the bailee. WHO CAN DEFEAT RIGHTS OF TRANSFEREE: 1. Creditor of transferor 2. Transferor 3. Subsequent purchaser RULES WHEN QUANTITY IS LESS THAN AGREED UPON: 1. Buyer may reject; or 2. Buyer may accept what has been delivered, at the contract rate RULES WHEN QUANTITY IS MORE THAN AGREED UPON: 1. Buyer may reject all; or 2. Buyer may accept the goods agreed upon and reject the rest; or 3. Buyer may accept all and must pay for them at the contract rate NOTE: Acceptance, even if not express may be implied when the buyer exercises acts of ownership over the excess goods.

RULES WHEN GOODS MIXED WITH GOODS OF DIFFERENT DESCRIPTION:  Buyer may accept the goods which are in accordance with the contract and reject the rest NOTE: If the subject matter is indivisible, in case of delivery of larger quantity of goods or of mixed goods, the buyer may reject the whole of the goods DELIVERY TO THE CARRIER

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GENERAL RULE: Where the seller is authorized or required to send the goods to the buyer, delivery to the carrier is delivery to the buyer. EXCEPTIONS: 1. When a contrary intention appears 2. Implied reservation of ownership under pars. 1,2,3 of Art. 1503



Kinds of Delivery to the Carrier a. C.I.F. (cost, insurance, freight) – signify that the price fixed covers not only the costs of the goods, but the expense of the freight and the insurance to be paid by the seller b. F.O.B. (free on board) – goods are to be delivered free of expense to the buyer to the point where they are F.O.B. The point of F.O.B., either at the point of shipment or the point of destination, determines when the ownership passes. NOTE: the terms C.I.F. and F.O.B. merely make rules of presumption c. C.O.D. (collect on delivery) – the carrier acts for the seller in collecting the purchase price, which the buyer must pay to obtain possession of the goods.

SELLER’S DUTY AFTER DELIVERY TO CARRIER 1. To enter on behalf of buyer into such contract reasonable under the circumstances 2. To give notice to buyer regarding necessity of insuring the goods PAYMENT OF THE PURCHASE PRICE GENERAL RULE: The seller is not bound to deliver the thing sold unless the purchase price has been paid. EXCEPTION: The seller is bound to deliver even if the price has not been paid, if a period of payment has been fixed. Sale of Real Property by Unit  Entire area stated in the contract must be delivered  When entire area could not be delivered, vendee may: 1. Enforce the contract with the corresponding decrease in price 2. Rescind the sale: a. If the lack in area is at least 1/10 than that stated or stipulated b. If the deficiency in quality specified in the contract exceeds 1/10 of the price agreed upon c. If the vendee would not have bought the immovable had he known of its smaller area of inferior quality irrespective of the extent of lack of area or quality Sale for a Lump Sum (A Cuerpo Cierto)  Vendor is obligated to deliver all the land included within the boundaries, regardless of whether the real area should be greater or smaller  Ordinarily, there can be no rescission or reduction or increase whether the area be greater or lesser, unless there is gross mistake. NOTE: The Civil Code presumes that the purchaser had in mind a particular piece of land and that he ascertained its area and quality before the contract of sale was perfected. If he did not do so, or if having done so he made no objection and consented to the transaction, he can blame no one but himself (Teran vs. Villanueva Viuda de Riosa 56 Phil 677). What is important is the delivery of all the land included in the boundaries. DOUBLE SALE (Art. 1544)  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

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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 NOTES:  Purchaser in Good Faith – one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other person in the property (Veloso vs. CA).  Registration requires actual recording; if the property was never really registered as when the registrar forgot to do so although he has been handed the document, there is no registration.  Possession is either actual or constructive since the law made no distinction (Sanchez vs. Ramos 40 Phil614)  Possession in Art.1544 includes not only material but also symbolic possession (Ten Forty Realty vs. Cruz, 10 Sept. 2003.)  Title means title because of sale, and not any other title or mode of acquiring property (Lichauco vs. Berenguer 39 Phil 642)  Hernandez vs. Katigbak Rule: When the property sold on execution is registered under Torrens, registration is the operative act that gives validity to the transfer or creates a lien on the land, and a purchaser on execution sale is not required to go behind the registry to determine the conditions of the property. Exception: Where the purchaser had knowledge, prior to or at the time of the levy, of such previous lien or encumbrance, his knowledge is equivalent to registration. CONDITION  Effect of Non-fulfillment of Condition 1. If the obligation of either party is subject to any condition and such condition is not fulfilled, such party may either: a. refuse to proceed with the contract b. proceed with the contract , waiving the performance of the condition. 2. If the condition is in the nature of a promise that it should happen, the non-performance of such condition may be treated by the other party as breach of warranty. NOTE: A distinction must be made between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. The failure to comply with the first condition would prevent the juridical relation itself from coming into existence, while failure to comply with the second merely gives the option either to refuse or proceed with the sale or to waive the condition.

 The mere fact that the second contract of sale was perfected in good faith is not sufficient if, before title passes, the second vendee acquires knowledge of the first transaction. The good faith or innocence of the posterior vendee needs to continue until his contract ripens into ownership by tradition or registration. (Palanca vs. Dir. Of Lands, 46 PHIL 149) EFFECT IF BUYER HAS ALREADY SOLD THE GOODS: General Rule: The unpaid seller’s right to lien or stoppage in transitu remains even if buyer has sold the goods.

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Except: 1) When the seller has given consent thereto, or 2) When the buyer is a purchaser in good faith for value of a negotiable document of title. WARRANTY  a statement or representation made by the seller of goods, contemporaneously and as a part of the contract of sale, having reference to the character, quality, or title of the goods, and by which he promises or undertakes to insure that certain facts are or shall be as he then represents.

 1.

Kinds: EXPRESS – any affirmation of fact or any promise by the seller relating to the thing if the natural tendency of such affirmation or promise is to induce the buyer to purchase the same and if the buyer purchases the thing relying thereon

NOTE: A mere expression of opinion, no matter how positively asserted, does not import a warranty unless the seller is an expert and his opinion was relied upon by the buyer. 2. IMPLIED - that which the law derives by implication or inference from the nature of the transaction or the relative situation or circumstances of the parties, irrespective of any intention of the seller to create it. a. Warranty against eviction b. Warranty against hidden defects c. Warranty as to Fitness and Merchantability NOTE: An implied warranty is a natural, not an essential element of a contract, and is deemed incorporated in the contract of sale. It may however, be waived or modified by express stipulation. (De Leon) There is no implied warranty as to the condition, adaptation, fitness or suitability or the quality of an article sold as a second-hand article. But such articles might be sold under such circumstances as to raise an implied warranty. * A certification issued by a vendor that a second-hand machine was in A-1 condition is an express warranty binding on the vendor. (Moles vs. IAC [1989]) A. Warranty against eviction  Warranty in which the seller guarantees that he has the right to sell the thing sold and to transfer ownership to the buyer who shall not be disturbed in his legal and peaceful possession thereof.



Elements: 1. vendee is deprived, in whole or in part, of the thing purchased; 2. the deprivation is by virtue of a final judgment; 3. the judgment is based on a prior right to the sale or an act imputable to the vendor; 4. the vendor was summoned in the suit for eviction at the instance of the vendee; AND 5. no waiver of warranty by the vendee.



Vendor's liability shall consist of: 1. Total eviction: (VICED) a. Value of the thing at the time of eviction; b. Income or fruits if he has been ordered to deliver them to the party who won the suit; c. Costs of the suit; d. Expenses of the contract; AND e. Damages and interests if the sale was in bad faith. 2. Partial eviction: a. to enforce vendor’s liability for eviction (VICED); OR b. to demand rescission of contract.

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Question: Why is rescission not a remedy in case of total eviction? Answer: Rescission contemplates that the one demanding it is able to return whatever he has received under the contract. Since the vendee can no longer restore the subject-matter of the sale to the vendor, rescission cannot be carried out. * The suit for the breach can be directed only against the immediate seller, not sellers of the seller unless such sellers had promised to warrant in favor of later buyers or unless the immediate seller has expressly assigned to the buyer his own right to sue his own seller. NOTE: The disturbance referred to in the case of eviction is a disturbance in law which requires that a person go to the courts of justice claiming the thing sold, or part thereof and invoking reasons. Mere trespass in fact does not give rise to the application of the doctrine of eviction.



Vendor’s liability is waivable but any stipulation exempting the vendor from the obligation to answer for eviction shall be void if he acted in bad faith.  Kinds of Waiver: a. Consciente – voluntarily made by the vendee without the knowledge and assumption of the risks of eviction NOTE: vendor shall pay only the value which the thing sold had at the time of eviction b. Intencionada – made by the vendee with knowledge of the risks of eviction and assumption of its consequences EFFECT: vendor not liable NOTE: Every waiver is presumed to be consciente. To consider it intencionada, it must be accompanied by some circumstance which reveals the vendor’s knowledge of the risks of eviction and his intention to submit to such consequences.

WHERE IMMOVABLE SOLD ENCUMBERED WITH NON-APPARENT BURDEN 1. Right of vendee a) recission, or b) indemnity 2. When right cannot be exercised: a) if the burden or servitude is apparent b) if the non-apparent burden or servitude is registered c) if vendee had knowledge of the encumbrance, whether it is registered or not 3. When action must be brought - within ONE YEAR from the execution of the deed of sale B. Warranty against hidden defects  Warranty in which the seller guarantees that the thing sold is free from any hidden faults or defects or any charge or encumbrance not declared or known to the buyer.



Elements: (SHENPW) 1. defect must be Serious or important; 2. it must be Hidden; 3. it must Exist at the time of the sale; 4. vendee must give Notice of the defect to the vendor within a reasonable time; 5. action for rescission or reduction of price must be brought within the proper Period (within 6 mos. from delivery of the thing or 40 days from date of delivery in case of animals); and 6. no Waiver of the warranty.



Remedies of the Vendee: a. Accion redhibitoria (rescission)

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b. Accion quanti minoris (reduction of the price) NOTES:  Hidden faults or defects pertain only to those that make the object unfit for the use for which it was intended at the time of the sale.  This warranty in Sales is applicable in Lease (Yap vs. Tiaoqui 13Phil433) Effect of loss of thing on account of hidden defects: 1. If vendor was aware of hidden defects, he shall bear the loss and vendee shall have the right to recover: (PED) a. the price paid b. expenses of the contract c. damages 2. If vendor was not aware, he shall be obliged to return: (PIE) a. price paid b. interest thereon c. expenses of the contract if paid by the vendee Effect if the cause of loss was not the hidden defect  If the thing sold had any hidden fault at the time of the sale, and should thereafter be lost by a (1) fortuitous event OR (2) through the fault of the vendee:  the vendee may demand of the vendor the price which he paid less the value of the thing at the time of its loss. NOTE: the difference between the price paid and the value of the thing at the time of its loss represents the damage suffered by the vendee and the amount which the vendor enriched himself at the expense of the vendee  If the vendor acted in bad faith:  vendor shall pay damages to the vendee C. Implied Warranties of Quality Warranty of Fitness  Warranty in which the seller guarantees that the thing sold is reasonably fit for the known particular purpose for which it was acquired by the buyer

GENERAL RULE: There is no implied warranty as to the quality or fitness for any particular purpose of goods under a contract of sale EXCEPTIONS: 1. Where the buyer, expressly or by implication manifests to the seller the particular purpose for which the goods are required 2. Where the buyer relies upon the seller’s skill or judgment Warranty of Merchantability  Warranty in which the seller guarantees, where the goods were bought by description, that they are reasonably fit for the general purpose for which they are sold  It requires identity between what is described in the contract AND what is tendered, in the sense that the latter is of such quality to have some value Instances where implied warranties are inapplicable: 1. As is and where is sale - vendor makes no warranty as to the quality or workable condition of the goods, and that the vendee takes them in the condition in which they are found and from the place where they are located. 2. Sale of second-hand articles 3. Sale by virtue of authority in fact or law

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Caveat Venditor (“Let the seller beware”): the vendor is liable to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. Caveat Emptor (“Let the buyer beware”): requires the purchaser to be aware of the supposed title of the vendor and one who buys without checking the vendor’s title takes all the risks and losses consequent to such failure. RULES IN CASE OF SALE OF ANIMALS 1. When two or more animals have been sold at the same time and the redhibitory defect is in one, or some of them but not in all, the general rule is that the redhibition will not affect the others without it. It is immaterial whether the price has been fixed for a lump sum for all the animals or for a separate price for each. 2. No warranty against hidden defects of animals sold at fairs or at public auctions, or of livestock sold as condemned. This is based on the assumption that the defects must have been clearly known to the buyer. 3. Sale of animals shall be void when: a) animals sold are suffering from contagious disease b) if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor 4. Limitation of the action: 40 days from the date of their delivery to the vendee 5. Vendor shall be liable if the animal should die within 3 days after its purchase if the disease which caused the death existed at the time of the contract OBLIGATIONS OF THE VENDEE: A. Principal Obligations: 1. To accept delivery 2. To pay the price of the thing sold in legal tender unless another mode has been agreed upon NOTE: A grace period granted the vendee in case of failure to pay the amount/s due is a right not an obligation. The grace period must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would still generally require judicial or extra-judicial demand before “default” can be said to arise (Bricktown Dev’t Corp vs. Amor Tierra Dev’t Corp. 57SCRA437) B. Other Obligations 1. To take care of the goods without the obligation to return, where the goods are delivered to the buyer and he rightfully refuses to accept

2. 3.

 1. 2.

NOTES:  The buyer in such a case is in the position of a bailee who has had goods thrust upon him without his assent. He has the obligation to take reasonable care of the goods but nothing more can be demanded of him.  The goods in the buyer’s possession under these circumstances are at the seller’s risk To be liable as a depositary if he voluntarily constituted himself as such To pay interest for the period between delivery of the thing and the payment of the price in the following cases: a. Should it have been stipulated b. Should the thing sold and delivered produce fruits or income c. Should he be in default, from the time of judicial or extra-judicial demand for the payment of the price Pertinent Rules: The vendor is not required to deliver the thing sold until the price is paid nor the vendee to pay the price before the thing is delivered in the absence of an agreement to the contrary ( Article 1524). If stipulated, the vendee is bound to accept delivery and to pay the price at the time and place designated;

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3. 4. 5.

If there is no stipulation as to the time and place of payment and delivery, the vendee is bound to pay at the time and place of delivery In the absence of stipulation as to the place of delivery, it shall be made wherever the thing might be at the moment the contract was perfected (Article 1251) If only the time for delivery has been fixed in the contract, the vendee is required to pay even before the thing is delivered to him; if only the time for payment has been fixed, the vendee is entitled to delivery even before the price is paid by him (Article 1524)

Ways of accepting goods: 1. Express acceptance 2. Implied acceptance a. When buyer does an act which only an owner can do, b. Failure to return goods after reasonable lapse of time NOTES:  The retention of goods is strong evidence that the buyer has accepted ownership of the goods.  Delivery and acceptance are two separate and distinct acts of different parties  Delivery is an act of the vendor and one of the vendor’s obligations; vendee has nothing to do with the act of delivery by the vendor  Acceptance is an obligation of the vendee; acceptance cannot be regarded as a condition to complete delivery;  seller must comply with the obligation to deliver although there is no acceptance yet by the buyer  Acceptance by the buyer may precede actual delivery; there may be actual receipt without acceptance and there may be acceptance without receipt  Unless otherwise agreed upon, acceptance of the goods by the buyer does not discharge the seller from liability for damages or other legal remedy like for breach of any promise or warranty When vendee may suspend payment of the price: 1. If he is disturbed in the possession or ownership of the thing bought 2. If he has well-grounded fear that his possession or ownership would be disturbed by a vindicatory action or foreclosure of mortgage NOTES:  If the thing sold is in the possession of the vendee and the price is already in the hands of the vendor, the sale is a consummated contract and Article 1590 is no longer applicable. Article 1590, presupposes that the price or any part thereof has not yet been paid and the contract is not yet consummated.  Under Article 1590, the vendee has no cause of action for rescission before final judgement, otherwise the vendor might become a victim of machinations between the vendee and the third person  Disturbance must be in possession and ownership of the thing acquired  If the disturbance is caused by the existence of non-apparent servitude, the remedy of the buyer is rescission, not suspension of payment. When vendee cannot suspend payment of the price even if there is disturbance in the possession or ownership of the thing sold: 1. if the vendor gives security for the return of the price in a proper case 2. if it has been stipulated that notwithstanding any such contingency, the vendee must make payment (see Article 1548 par.3) 3. if the vendor has caused the disturbance or danger to cease 4. if the disturbance is a mere act of trespass 5. if the vendee has fully paid the price

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REMEDIES FOR BREACH OF CONTRACT A. 1. 2. 3.

Remedies of the seller Action for payment of the price (Art. 1595) Action for damages for non-acceptance of the goods (Art. 1596) Action for rescission (Art. 1597)

B. Remedies of the buyer 1. Action for specific performance (Art. 1598) 2. Action for rescission or damages for breach of warranty (Art 1599) A. REMEDIES OF THE SELLER FOR BREACH OF CONTRACT  1.

IN CASE OF MOVABLES 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 sale (Art. 1593) b. Sale of Goods –  action for the price (Art. 1595)  action for damages (Art. 1596)

2.

Unpaid Seller 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.



 Remedies: 1. Possessory lien over the goods 2. Right of stoppage in transitu after he has parted with the possession of the goods and the buyer becomes insolvent 3. Special Right of resale 4. Special Right to rescind the sale 5. Action for the price 6. Action for damages 3. 





Article 1484 or Recto Law Remedies of vendor in sale of personal property by installments 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 NOTE: Apply likewise to contracts purporting to be leases of personal property with option to buy Art. 1484 does not apply to a sale: 1. Payable on straight terms (partly in cash and partly in one term)

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

2. Of Real property Remedies: 1. Specific performance upon vendee’s failure to pay NOTE: 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.) 2. Rescission of the sale if vendee shall have failed to pay two or more installments NOTES:  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). 3. 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.

NOTES:  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) NOTE: 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) NOTE: Remedies are alternative and exclusive

 1.

IN CASE OF IMMOVABLES Ordinary Remedies a. In case of anticipatory breach –  rescission (Article 1591) b. Failure to pay the purchase price –  rescission upon judicial or notarial demand for rescission (Article 1592)  the vendee may pay, even after the expiration of the period, as long as no demand for rescission has been made upon him NOTE: Article 1592 does not apply to: 1) Sale on instalment of real estate 2) Contract to sell 3) Conditional sale 4) Cases covered by RA 6552: Realty Installment buyer protection act

4. R.A. No. 6552 or Maceda Law Note: there must be a notarial or judicial notice

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 





An Act to Provide Protection to buyers of Real Estate on Installment Payments Law governing sale or financing of real estate on installment payments Requisites: 1. transactions or contracts involving the sale OR financing of real estate on installment payments, including residential condominium apartments; and 2. buyer defaults in payment of succeeding installments. Rights of the buyer: A. If Buyer has paid at least two (2) years of installments 1. The buyer must pay, without additional interest, the unpaid installments due within the total grace period earned by him. There shall be one (1) month grace period for every one (1) year of installment payments made NOTE: This right shall be exercised by the buyer ONLY once in every 5 years of the life of the contract AND its extensions. 2. Actual cancellation can only take place after 30 days from receipt by the buyer of the notice of cancellation OR demand for rescission by a notarial act AND upon full payment of the cash surrender value to the buyer (Olympia Housing vs. Panasiatic, 16 January 2003.) NOTE: The seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to 50% of the total payments made. After five (5) years of installments, there shall be an additional 5% every year but not to exceed 90% of the total payments made 3. 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 4. 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. B. If Buyer has paid less than 2 years of installments 1. The seller shall give the buyer a grace period of NOT less than 60 days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of contract by a notarial act. 2. Same No. 3 and 4 paragraph A above

NOTE: Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made Remedies of Unpaid Seller I. Possessory Lien  When may be exercised: 1. Where the goods have been sold without any stipulation as to credit 2. When the goods have been sold on credit, but the term of credit has expired 3. Where the buyer becomes insolvent  When lost: 1. Delivery of the goods to a carrier or bailee for the purpose of transmission to the buyer without reserving ownership or right of possession 2. When the buyer lawfully obtains possession of the goods 3. By waiver of the lien NOTE: Possessory lien is lost after the seller loses possession but his lien as an unpaid seller remains; hence he is still an unpaid creditor with respect to the price of specific goods sold. His preference can only be defeated by the governments claim to the specific tax on the goods themselves (Arts. 2247 and 2241).

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NOTE: The bringing of an action to recover the purchase price is not one of the ways of losing the possessory lien. An unpaid seller does not lose his lien by reason that he has obtained a money judgement or decree for the price of goods (Art. 1529, last paragraph).

II. Stoppage of goods in transitu  Requisites: 1. Seller must be unpaid 2. Buyer must be insolvent 3. Goods must be in transit 4. Seller must either: a. actually take possession of the goods sold OR b. give notice of his claim to the carrier or other person in possession 5. Seller must surrender the negotiable document of title, if any, issued by the carrier or bailee 6. Seller must bear the expenses of delivery of the goods after the exercise of the right GOODS ARE CONSIDERED IN TRANSITU: 1. after delivery to a carrier or other bailee and before the buyer or his agent takes delivery of them; and 2. If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them GOODS ARE NO LONGER CONSIDERED IN TRANSITU: 1. after delivery to the buyer or his agent in that behalf; 2. if the buyer or his agent obtains possession of the goods at a point before the destination originally fixed; 3. if the carrier or the bailee acknowledges to hold the goods on behalf of the buyer; and 4. if the carrier or bailee wrongfully refuses to deliver the goods to the buyer

 1. 2. 3. 4.

Effects of the exercise of the right The goods are no longer in transit. The contract of carriage ends; instead the carrier now becomes a mere bailee, and will be liable as such. The carrier should not deliver anymore to the buyer or the latter’s agent; otherwise he will clearly be liable for damages. The carrier must redeliver to, or according to the directions of the seller.

WAYS OF EXERCISING THE RIGHT TO STOP: 1. By taking actual possession of the goods 2. By giving notice of his claim to the carrier or bailee III. Special Right of Resale  May be exercised only when the unpaid seller has either a right of lien OR has stopped the goods in transitu AND under ANY of the following conditions: 1. Where the goods are perishable in nature 2. Where the right to resell is expressly reserved in case the buyer should make a default 3. Where the buyer delays in the payment of the price for an unreasonable time IV. Rescission  Types: 1. Special Right to Rescind Under Art. 1534 – If the seller has either the right of lien OR a right to stop the goods in transitu AND under either of 2 situations: a. Where the right to rescind on default has been expressly reserved

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2.

b. Where the buyer has been in default for an unreasonable time Under Art. 1597 (“technical rescission”)

V. Action for the 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. VI. Action for damages  When may be exercised: 1. In case of wrongful neglect or refusal by the buyer to accept or pay for the thing sold (Art. 1596 par.1) 2. In an executory contract, where the ownership in the goods has not passed, and the seller cannot maintain an action to recover the price (Art 1595) 3. If the goods are not yet identified at the time of the contract or subsequently B. REMEDIES OF THE BUYER FOR BREACH OF CONTRACT 1.  

Action for specific performance (Art. 1598) Where the seller has broken the contract to deliver specific or ascertained goods The judgment or decree may be unconditional, or upon such terms and conditions as to damages, payment of the price and otherwise as the court may deem just

2. 1. 2. 3. 4.

Remedies of buyer for breach of warranty by seller (Art. 1599): Recoupment – accept the goods and set up the seller’s breach to reduce or extinguish the price Accept the goods and maintain an action for damages for breach of warranty Refuse to accept the goods and maintain an action for damages for breach of warranty Rescind the contract by returning or offering the return of the goods, and recover the price of any part thereof NOTE: These are alternative remedies. When rescission by buyer not allowed: 1. if the buyer accepted the goods knowing of the breach of warranty without protest 2. if he fails to notify the seller within a reasonable time of his election to rescind 3. if he fails to return or offer to return the goods in substantially as good condition as they were in at the time of the transfer of ownership to him EXTINGUISHMENT OF SALE 1. Same causes as in all other obligations 2. Conventional Redemption 3. Legal Redemption

CONVENTIONAL REDEMPTION  The right which the vendor reserves to himself, to reacquire the property sold provided he returns to the vendee: b. the price of the sale;

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c. d. e. f.

expenses of the contract; any other legitimate payments made therefore and; the necessary and useful expenses made on the thing sold; and fulfills other stipulations which may have been agreed upon.

A sale with conventional redemption is deemed to be an equitable mortgage in any of the following cases: (IPERTOD) 1. Unusually Inadequate purchase price; 2. Possession by the vendor remains, as lessee or otherwise; 3. Extension of redemption period after expiration; 4. Retention by the vendee of part of the purchase price; 5. Vendor binds himself to pay the Taxes of the thing sold; 6. Any Other case where the parties really intended that the transaction should secure the payment of a debt or the performance of any obligation; or 7. When there is Doubt as to whether contract is contract of sale with right of repurchase or an equitable mortgage. Equitable Mortgage  One which lacks the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible or contrary to law (Cachola vs. CA 208SCRA496) When can there be presumption as to Equitable Mortgage? 1) Parties must have entered into a contract denominated as a contract of sale 2) The intention of the parties was to secure an existing debt by way of mortgage NOTE: In the cases referred to in Arts. 1602 and 1604, the apparent vendor may ask for the reformation of the instrument. Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. Remedy of Reformation: To correct the instrument so as to make it express the true intent of the parties. Redemption Period a. if there is an agreement: period agreed upon cannot exceed 10 years b. if no agreement as to the period: 4 years from the date of the contract c. the vendor who fails to repurchase the property within the period agreed upon may, however, exercise the right to repurchase within 30 days FROM the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right of repurchase  This refers to cases involving a transaction where one of the parties contests or denies that the true agreement is one of sale with right to repurchase; not to cases where the

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transaction is conclusively a pacto de retro sale. Example: Where a buyer a retro honestly believed that he entered merely into an Equitable Mortgage, not a pacto de retro transaction, and because of such belief he had not redeemed within the proper period. NOTE: Tender of payment is sufficient to compel redemption, but is not in itself a payment that relieves the vendor from his liability to pay the redemption price (Paez vs. Magno.) LEGAL REDEMPTION  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 (1) purchase or (2) dation in payment, or (3) by any other transaction whereby ownership is transferred by onerous title.  May be effected against movables or immovables.  It must be exercised within thirty (30) days from the notice in writing by the vendor.\ NOTE: Written notice under Article 1623 is mandatory for the right of redemption to commence (PSC vs. Sps. Valencia 19 August 2003.) BASIS OF LEGAL REDEMPTION: Not on any proprietary right, which after the sale of the property on execution, leaves the judgment debtor and vests in the purchaser, but on a bare statutory privilege to be exercised only by the persons named in the statute.

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Tender of payment is not necessary; offer to redeem is enough.

PRE-EMPTION 1. arises before sale 2. no rescission because no sale as yet exists 3. the action is directed against the prospective seller

REDEMPTION 1. arises after sale 2. there can be rescission of the original sale 3. action is directed against the buyer

Instances of legal redemption: A. Under the Civil Code (legal redemption): 1. Sale of a co-owner of his share to a stranger (Article 1620) 2. When a credit or other incorporeal right in litigation is sold (Article 1634) 3. Sale of an heir of his hereditary rights to a stranger (Article 1088) 4. Sale of adjacent rural lands not exceeding one hectare (Article 1621) 5. Sale of adjacent small urban lands bought merely for speculation (Article 1622) B. Under special laws: 1. An equity of redemption in cases of judicial foreclosures 2. A right of redemption in cases of extra-judicial foreclosures 3. Redemption of homesteads 4. Redemption in tax sales 5. Redemption by an agricultural tenant of land sold by the landowner ASSIGNMENT OF CREDIT  a contract by which the owner of a credit transfers to another his rights and actions against a third person in consideration of a price certain in money or its equivalent NOTE: Transfer of rights by assignment takes place by the perfection of the contract of assignment without the necessity of delivering the document evidencing the credit.

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

 1. 2. 3.

this rule does not apply to negotiable documents and documents of title which are governed by special laws.

Effects of Assignment: transfers the right to collect the full value of the credit, even if he paid a price less than such value transfers all the accessory rights debtor can set up against the assignee all the defenses he could have set up against the assignor

Effect of payment by the debtor after assignment of credit 1. Before Notice of the assignment  Payment to the original creditor is valid and debtor shall be released from his obligation 2. After Notice  Payment to the original creditor is not valid as against the assignee  He can be made to pay again by the assignee Warranties of the assignor of credit: a. He warrants the existence of the credit b. He warrants the legality of the credit at the perfection of the contract NOTE: There is no warranty as to the solvency of the debtor unless it is expressly stipulated OR unless the insolvency was already existing and of public knowledge at the time of the assignment NOTE: The seller of an inheritance warrants only the fact of his heirship but not the objects which make up his inheritance. Liabilities of the assignor of credit for violation of his warranties 1. Assignor in good faith  Liability is limited only to the price received and to the expenses of the contract, and any other legitimate payments by reason of the assignment 2. Assignor in bad faith  Liable not only for the payment of the price and all the expenses but also for damages Legal Redemption in Sale or Credit or other incorporeal right in litigation  Requisites: 1. There must be a sale or assignment of credit 2. There must be a pending litigation at the time of the assignment 3. The debtor must pay the assignee: a. price paid by him b. judicial cost incurred by him; AND c. interest on the price from the date of payment 4.

The right must be exercised by the debtor within 30 days from the date the assignee demands (judicially or extra-judicially) payment from him

SALE OF CREDIT OR OTHER INCORPOREAL RIGHTS IN LITIGATION GENERAL RULE: Debtor has the right of legal redemption in sale of credit or incorporeal rights in litigation EXCEPTIONS: a. Sale to a co-heir or co-owner b. Sale to a co-owner c. Sale to the possessor of property in question

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B AR TE R BARTER  contract whereby one of the parties binds himself to give one thing in consideration of the other's promise to give another thing (Article 1638) NOTE: Barter is similar to a sale with the only difference that instead of paying a price in money, another thing is given in lieu of the purchase price PERFECTION and CONSUMMATION  Perfected from the moment there is a meeting of minds upon the things promised by each party in consideration of the other



Consummated from the time of mutual delivery by the contracting parties of the things promised

NOTES:  Where the giver of the thing bartered is not the lawful owner thereof, the aggrieved party cannot be compelled to deliver the thing which he has promised and is also entitled to damages.  Where a party is evicted of the thing exchanged, the injured party is given the option, either to recover the property he has given in exchange with damages or only claim an indemnity for damages.  As to matters not provided for by the provisions on barter, the provisions on sales will apply suppletorily

BULK SALES LAW (Act No. 3952) When Sale or Transfer in Bulk:  Any sale, transfer, mortgage, or assignment: 1. Of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of business; or 2. Of all or substantially all, of the business or trade; or 3. Of all or substantially all, of the fixtures and equipment used in the business of the vendor, mortgagor, transferor or assignor (section 2) When sale or transfer in bulk not covered by Bulk Sales Law: 1. If the sale or transfer is in the ordinary course of trade and the regular prosecution of business of the vendor; 2. If it is made by one who produces and delivers a written waiver of the provisions of the Bulk Sales Act from his creditors 3. If it is made by an executor, administrator, receiver, assignee in insolvency, or public officer, acting under judicial process (Section 8); and 4. If it refers to properties exempt from attachment or execution (Rules of Court, Rule 39, Section 12) Protection Accorded to Creditors by Bulk Sales Law: 1. It requires the vendor, mortgagor, transferor or assignor to deliver to the vendee, mortgagee, or to his or its agent or representative a sworn written statement of names and addresses of all creditors to whom said vendor, etc. may have been indebted together with the amount due or to be due (Section 3) 2. It requires the vendor, mortgagor, transferor or assignor, at least 10 days before the sale, transfer, mortgage, assignment to make a full detailed inventory showing the quantity and the cost of price of goods, and to notify every creditor of the price terms and conditions of the sale, etc. (Section 5)

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Effects of False Statements in the Schedule of Creditors: 1. Without knowledge of buyer  If the statement is fair upon its face and the buyer has no knowledge of its incorrectness and nothing to put him on inquiry about it, he will be protected in its purchase  The remedy of the creditor is not against the goods but to prosecute the seller criminally 2. With knowledge or imputed knowledge of buyer  The vendee accepts it at his peril  The sale is valid only as between the vendor and the vendee but void against the creditors 3. 4.

With names of certain creditors without notice are omitted from the list  The sale is void as to such creditors, whether the omission was fraudulent or not, With respect to an innocent purchaser for a value from the original purchaser  An innocent purchaser for value from the original purchaser is protected  However if the circumstances are such as to bind the subsequent purchaser with constructive notice that the sale to the vendor (original purchaser) was fraudulent, the property will be liable in his hands to creditors of the original vendor

Effect of violation of law on Transfer: 1. As between the parties  The Bulk Sales Law does not in any way affect the validity of the transfer as between the intermediate parties thereto  A sale not in compliance with the Bulk Sales Law is valid against all persons other than the creditors. 2. As against creditors  A purchaser in violation of the law acquires no right in the property purchased as against the creditors of the seller  His status is that of a trustee or receiver for the benefit of the creditors of the seller; as such, he is responsible for the disposition of the property Remedies Available to creditors:  The proper remedy is one against the goods to subject them to the payment of the debt, such as execution, attachment, garnishment, or by a proceeding in equity  An ordinary action against the purchaser to obtain money judgement will not lie, unless the purchaser has sold or otherwise disposed of, or dealt with the property, so as to become personally liable to creditors for value of it. Acts Punished by Bulk Sales Law: 1.

Knowingly or wilfully making or delivering a statement required by the Act which does not include the names of all the creditors of the vendor, etc. with the correct amount due or to become due or which contains any false or untrue statement; and

2.

Transferring title to any stock of goods, wares, merchandise, provisions or materials sold in bulk without consideration or for nominal consideration (Section 7)

RETAIL TRADE LIBERALIZATION ACT (RA 8762) Retail Trade  Any act occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but the restrictions of this law shall not apply to the following:

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1. 2. 3. 4.

Sales by manufacturer, processor, laborer, or worker, to the general public the products manufactured, processed produced by him if his capital does not exceed P100,000; Sales by a farmer or agriculturalist selling the products of his farm Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital; provided that the restaurant is incidental to the hotel business; and Sales which are limited only to products manufactured, processed or assembled by a manufacturer through a single outlet, irrespective of capitalization

High-End or Luxury Goods  Goods which are not necessary for life maintenance and whose demand is generated in large part by the higher income groups  Shall include but not limited to: jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects NOTE: A natural-born citizen of the Philippines who has lost his citizenship but who resides in the Philippines shall be granted the same rights as Filipino citizens

Foreign Equity Participation:  Foreign-owned partnerships, associations and corporations formed and organized under the laws of the Philippines may, upon registration with SEC and DTI, or in case of Foreign-owned single proprietorship with the DTI, engage or invest in retail trade business, subject to the following categories: 1.

Category A:

 

Paid-up capital of the equivalent in Philippine Peso of: < $2,500,000 US Dollars Reserved exclusively for Filipino citizens and corporations wholly owned by citizens

2.

Category B:  Minimum paid-up capital of the equivalent in Philippine Peso of $2,500,000 US Dollars, but 60% of total equity.

3.

Category C:  Paid-up capital of the equivalent in Philippine Peso of: $7,500,000 US Dollars or more  May be wholly owned by foreigners NOTE: In no case shall the investments for establishing a store in Categories B and C be less than the equivalent in Philippine Peso of: US $830,000

4.

Category D:  Enterprises specializing in high-end or luxury products with paid-up capital of the equivalent in Philippine Peso of: $250,000 US Dollars per store  May be wholly owned by foreigners

NOTES:  Foreign investor shall be required to maintain in the Philippines the FULL amount of the prescribed minimum capital, UNLESS the foreign investor has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines  Failure to maintain the full amount of the prescribed minimum capital prior to notification of the SEC and the DTI shall subject the foreign investors to penalties or restrictions on any future trading activities/business in the Philippines

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NOTE: Foreign Investors Acquiring Shares of Stock of existing retail stores whether or not publicly listed whose net worth is in excess of the Peso equivalent of US $2,500,000 may purchase only up to the maximum of 60% of the equity thereof within the first 2 years, and thereafter, they may acquire the remaining percentage consistent with the allowable foreign participation as herein provided NOTE: All retail Trade enterprises under categories B and C in which foreign ownership exceeds 80% of equity shall offer a minimum of 30% of their equity to the public through any stock exchange in the Philippines within 8 years from the start of the operations Qualification of Foreign Retailers 1. Minimum of $200,000,000 US Dollars net worth in its parent corporation for Categories B and C and $50,000,000 net worth in its parent corporation for Categories D 2. 5 retailing branches or franchises in operation anywhere around the world unless such retailer has at least 1 store capitalized at a minimum of $25,000,000 US Dollars 3. 5-year track record in retailing; and 4. Only nationals from, or juridical entities formed or incorporated in Countries which allow to engage in retail trade in the Philippines PD 957 (SUBDIVISION AND CONDOMINIUM BUYERS’ PROTECTIVE DECREE Registration of Projects  The registered owner of a parcel of land who wishes to convert the same into a subdivision project shall submit his subdivision plan to the HOUSING AND LAND-USE REGULATORY BOARD, which shall act upon and approve the same, upon a finding that the plan complies with the Subdivision Standards' and Regulations enforceable at the time the plan is submitted. The same procedure shall be followed in the case of a plan for a condominium project except that, in addition, said Authority shall act upon and approve the plan with respect to the building or buildings included in the condominium project in accordance with the National Building Code (R.A. No. 6541).  The subdivision plan, as so approved, shall then be submitted to the Director of Lands for approval in accordance with the procedure prescribed in Section 44 of the Land Registration Act (Act No. 496, as amended by R.A. No. 440): Provided, that it case of complex subdivision plans, court approval shall no longer be required. The condominium plan as likewise so approved, shall be submitted to the Register of Deeds of the province or city in which the property lies and the same shall be acted upon subject to the conditions and in accordance with the procedure prescribed in Section 4 of the Condominium Act (R.A. No. 4726). 

National Housing authority (now Housing and Land Use Regulatory Board) has the exclusive jurisdiction to regulate the real estate trade and business.

License to sell  Such owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project. Exempt transactions  A license to sell and performance bond shall not be required in any of the following transactions: 1. Sale of a subdivision lot resulting from the partition of land among co-owners and co-heirs. 2. Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent sale of the same lot.

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3.

Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in the ordinary course of business when necessary to liquidate a bona fide debt.

Grounds for Revocation of registration certificate and license to sell of owners or dealers 1. Is insolvent; or 2. Has violated any of the provisions of this Decree or any applicable rule or regulation of the Authority, or any undertaking of his/its performance bond; or 3. Has been or is engaged or is about to engage in fraudulent transactions; or 4. Has made any misrepresentation in any prospectus, brochure, circular or other literature about the subdivision project or condominium project that has been distributed to prospective buyers; or 5. Is of bad business repute; or 6. Does not conduct his business in accordance with law or sound business principles.

LE AS E LEASE  consensual, bilateral, onerous, and commutative contract by virtue of which one person binds himself to grant temporarily the use of the thing or to render some service to another who undertakes to pay some rent.

 Kinds of Leases (From the view point of the subject matter 1. Lease of things 2. Lease of service 3. Lease of work NOTE: Since lease is consensual and is not imposed by law, only the lessor has the right to fix the rents. However, the increasing of the rent is not an absolute right on the part of the lessor. Characteristics or Requisites for Lease of Things 1. Consensual 2. Principal 3. Nominate 4. Purpose is to allow enjoyment or use of a thing (the person to enjoy is the lessee; the person allowing the enjoyment by another is the lessor 5. Subject matter must be within the commerce of man 6. Purpose to which the thing will be devoted should not be immoral 7. Onerous (there must rent or price certain) 8. Period is Temporary (not perpetual, hence, the longest period is 99 years) 9. Period is either definite or indefinite  If no term is fixed, we should apply Art.1682 (for rural leases) and Art. 1687 (for urban leases)  If the term is fixed but indefinite, the court will fix the term under the law of obligations and contracts 10. Lessor need not be the owner NOTE: A usufructuary may thus lease the premises in favor of a stranger, such lease to end at the time that the usufruct itself ends Rent



The compensation either in money, provisions, chattels, or labor, received by the lessor from the lessee.

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NOTES:  When a student boards and lodges in a dormitory, there is no contract of lease. The contract is not designated specifically in the Civil Code. It is an innominate contract. It is however, believed that the contract can be denominated as the contract of board and lodging.  There is a contract of lease when the use and enjoyment of a safety deposit box in a bank is given for a price certain. This is certainly not a contract of deposit.  A lease of personal property with option to buy (at a nominal amount) at the end of the lease can be considered a sale. LEASE 1. only use or enjoyment is transferred 2. transfer is temporary 3. lessor need not be the owner 4. the price of the object, distinguished from the rent, is usually not mentioned

SALES 1. ownership is transferred 2. transfer is permanent 3. seller must be the owner at the time the property is delivered 4. usually, the selling price is mentioned

Lease of Things 1. object of contract is a thing

Lease of Services 1. object is some work or service

2.

lessor has to deliver the thing leased

2. lessor has to perform some work or service

3. in case of breach, there can be an action for specific performance

3. in case of breach, no action for specific performance

Lease of Services (locatio operatum)

Contract for a Piece of Work (locatio operas)

1. the important object is the labor performed by the lessor 2. the result is generally not important, hence the laborer is entitled to be paid even if there is destruction of the work through fortuitous event

1.

Lease of Services It is based on employment – the lessor of services does not represent his employer nor does he execute juridical acts. Principal contract

Agency It is based on representation – agent represents his principal and enters into juridical acts.

the important object is the work done

2. the result is generally important; generally, the price is not payable until the work is completed, and said price cannot be lawfully demanded if the work is destroyed before it is finished and accepted

Preparatory contract

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Rule for Lease of Consumable Goods

GENERAL RULE: Consumable goods cannot be the subject matter of a contract of lease of things. Why? To use or enjoy hem, they will have to be consumed. This cannot be done by a lease since ownership over them is not transferred to him by the contract of lease. EXCEPTIONS: a. If they are merely exhibited b. If they are accessory to an industrial establishment RECORDING OF LEASE OF PERSONAL PROPERTY GENERAL RULE: Lease of real property is personal right

 EXCEPTIONS: Lease partakes of the nature of real right if: a. Lease of real property is more than 1 year b. Lease of real property is registered regardless of duration NOTE: Lease of personal property cannot be registered. To be binding against third persons, the parties must execute a public instrument. * Lease may be made orally, but if the lease of Real Property is for more than 1 year, it must be in writing under the Statue of Frauds. Persons Disqualified to be Lessees Because Disqualified to Buy 1. A husband and a wife cannot lease to each other their separate properties except: a. if separation of property was agreed upon b. if there has been judicial separation of property Persons referred to in Art. 1491 are disqualified because of fiduciary relationships SUBLEASE  A separate and distinct contract of lease wherein the original lessee becomes a sublessor to a sublessee.  Allowed unless expressly prohibited.  The sublessee is subsidiarily liable for any rent due. The lessor has an accion directa against the sublessee for unpaid rentals and improper use of the object.

SUBLEASE 1. there are two leases and two distinct juridical relationships although immediately connected and related to each other 2. the personality of the lessee does not disappear 3.the lessee does not transmit absolutely his rights and obligations to the sublessee 4. the sublessee, generally, does not have any direct action against the lessor

ASSIGNMENT OF LEASE 1. there is only one juridical relationship, that of the lessor and the assignee, who is converted into a lessee 2. the personality of the lessee disappears 3. the lessee transmits absolutely his rights to the assignee 4. the assignee has a direct action against the lessor

RIGHTS OF LESSOR IF SUBLEASE PROHIBITED BUT ENTERED INTO BY LESSEE: 1) Rescission and damages, or 2) Damages only (Contract will be allowed to remain in force) 3) Ejectment

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Instances when sublessee is liable to the lessor: a. All acts which refer to the use and preservation of the thing leased in the manner stipulated between the lessor and the lessee b. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. NOTE: The sublessee shall not be responsible beyond the amount of rent due from him. Accion Directa: direct action which the lessor may bring against a sublessee who misuses the subleased property. OBLIGATIONS OF THE LESSOR (DnM) a. Delivery of the object (cannot be waived) b. Making of necessary repairs c. Maintenance in peaceful and adequate possession OBLIGATIONS OF THE LESSEE (R2EN2U) a. to pay rent b. to use thing leased as a diligent father of a family, devoting it to the use stipulated c. to pay expenses for the deed of lease d. to notify the lessor of usurpation or untoward acts e. to notify the lessor of need for repairs f. to return the property leased upon termination of the lease Effect of Destruction of the Thing Leased: 1. Total destruction by a fortuitous event  Lease is extinguished 2. Partial destruction a. Proportional reduction of the rent, or b. Rescission of the lease When lessee may suspend payment of rent: 1. lessor fails to undertake necessary repairs 2. lessor fails to maintain the lessee in peaceful and adequate enjoyment of the property leased NOTE: “Suspend”- for the intervening period, the lessee does not have to pay the rent. EFFECTIVITY OF THE SUSPENSION: The right begins: a) In the case of repairs, from the time he made the demand for said repairs, and the demand went unheeded. b) In the case of eviction, from the time the final judgment for eviction becomes effective. Alternative remedies of Aggrieved party (Lessor/Lessee) in case of Non-fulfillment of duties: 1. Rescission and damages 2. Damages only, allowing the contract to remain in force – Specific Performance NOTE: Damages Recoverable in ejectment cases are the rents or the fair rental value of the premises. The following cannot be successfully claimed: 1. Profits plaintiff could have earned were it not for the possible entry or unlawful detainer 2. Material injury to the premises 3. Actual, moral, or exemplary damages Immediate termination of lease under Art. 1660 applies: 1. only to dwelling place or any other building intended for human habitation 2. even if at the time the contract was perfected, the lessee knew of the dangerous condition or waived the right to rescind on account of this condition

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Rules on Alteration of the Form of the Lease  The Lessor can alter provided there is no impairment of the use to which the thing is devoted under the terms of the lease  Alteration can also be made by the Lessee so long as the value of the property is not substantially impaired Rules in case of Urgent Repairs  The lessee is obliged to tolerate the work although it may be very annoying to him and although during the same time he may be deprived of a part of the premises 1. If repairs last for more than 40 days: Lessee cannot act for reduction of rent or rescission 2. If 40 days or more: lessee can ask for proportionate reduction NOTE: In either case, rescission may be availed of if the main purpose is to provide a dwelling place and the property becomes uninhabitable. Effects if Lessor fails to make Urgent Repairs 1. Lessee may order repairs at the lessor’s cost 2. Lessee may sue for damages 3. Lessee may suspend the payment of the rent 4. Lessee may ask for rescission, in case of substantial damage to him TRESPASS IN LEASE: 1. Trespass in fact (perturbacion de mere hecho):  physical enjoyment is reduced  Lessor will not be held liable. 2. Trespass in law (perturbacion de derecho):  A third person claims legal right to enjoy the premises  Lessor will be held liable NOTE: While the Japanese Occupation was a fortuitous event, the lessor is still not excused from his obligation to warrant peaceful legal possession. Lease is a contract that calls for prestations both reciprocal and repetitive; and the obligations of either party are not discharged at any given moment, but must be fulfilled all throughout the term of the contract. (Villaruel vs. Manila Motor Co.) Duration of Lease 1. Lease made for a determinate time or fixed Period  Lease will be for the said period and it ends on the day fixed without need of a demand 2.

If there is no fixed period A. For Rural Lands (Article 1680)  it shall be for all time necessary for the gathering of fruits which the whole estate may yield in 1 year, or which it may yield once B. For Urban Lands (Article 1687) a. If rent is paid daily: lease is from day to day b. If rent is paid weekly: lease is from week to week c. If rent is paid monthly: lease is from month to month d. If rent is paid yearly: lease is from year to year

RULES ON EXTENSION OF THE LEASE PERIOD:

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1) If a lease contract for a definite term allows lessee to extend the term, there is no necessity for lessee to notify lessor of his desire to so extend the term, unless the contrary is stipulated. 2) “May be extended” as stipulation: lessee can extend without lessor’s consent but lessee must notify lessor. 3) “May be extended for 6 years agreed upon by both parties” as stipulation: This must be interpreted in favor of the lessee. Hence, ordinarily the lessee at the end of the original period may either: a) leave the premises; or b) remain in possession 4) In co-ownership, assent of all is needed; otherwise, it is void or ineffective as against nonconsenting co-owners. 5) Where according to the terms of the contract, the lease can be extended only by the written consent of the parties thereto, no right of extension can rise without such written consent. Rule if Lessor Objects to the Lessee’s continued Possession:  Requisites: 1. Contract has expired 2. Lessee continued enjoying the thing 3. Lessor Objected to this enjoyment  If the three requisites are present, the lessee shall be considered a possessor in bad faith

IMPLIED NEW LEASE (Tacita Reconducion)  lease which arises if at the end of the contract the lessee should continue enjoying the thing leased for 15 days with the acquiescence of the lessor, unless a notice to the contrary had previously been given by either party.



Requisites: a. the term of the original contract has expired b. the lessor has not given the lessee a notice to vacate c. the lessee continued enjoying the thing leased for at least 15 days with the acquiescence of the lessor



When there is no implied new lease: 1. When before or after the expiration of the term, there is a notice to vacate given by either party. 2. When there is no definite fixed period in the original lease contract as in the case of successive renewals.



Effects: a. The period of the new lease is not that stated in the original contract but the time in Articles 1682 and 1687. b. Other terms of the original contract are revived.

NOTE: Terms that are revived are only those which are germane to the enjoyment of possession, but not those with respect to special agreements which are by nature foreign to the right of occupancy or enjoyment inherent in a contract of lease – such as an option to purchase the leased premises (Dizon vs. Magsaysay GR No. 23399, May 31,1974) Perpetual Lease  A lease contract providing that the lessee can stay in the premises for as long as he wants and for as long as he can pay the rentals and its increases.

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

This is not permissible; it is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee

NOTE: In Jespajo Realty vs. CA, 27 Sept. 2002, the SC upheld a lease contract, which provides that “the lease contract shall continue for an indefinite period provided that the lessee is up-to-date in the payment of his monthly rentals” for the contract is one with a period subject to a resolutory condition. PURCHASE OF THE LEASED PROPERTY GENERAL RULE: Purchaser of thing leased can terminate lease. EXCEPTIONS: a. lease is recorded in Registry of Property b. there is stipulation in the contract of sale that purchaser shall respect the lease c. purchaser knows the existence of the lease d. sale is fictitious e. sale is made with right of repurchase GROUNDS FOR EJECTMENT UNDER ART. 1673: (ELVU) 1. Expiration of the period agreed upon or the period under Arts. 1682 and 1687; 2. Lack of payment of the price stipulated; 3. Violation of any of the conditions agreed upon in the contract; and 4. Unauthorized use or service by the lessee of the thing leased.

  a. b.

RENTAL REFORM ACT OF 2002 (R.A. No. 9161) Effectivity: January 1, 2002. Coverage: All residential units of NCR and other highly urbanized cities, the total monthly rental for each of which does not exceed P7,500; All residential units in other areas the total monthly rental for each of which does not exceed P4,000 as of 1/1/02, without prejudice to pre-existing contracts.



Grounds for judicial ejectment: SANORE 1. Assignment of lease or subleasing of residential units including the acceptance of boarders or bedspacers without written consent of the owner or lessor; 2. Arrears in payment of rent for a total of 3 months; 3. Legitimate needs of the owner or lessor to repossess for his own use or for the use of any immediate member of his family as a residential unit, provided: a. owner or immediate member not being owner of any other available residential unit within the same city or municipality; b. lease for a definite period has expired; c. lessor has given lessee formal notice 3 months in advance; and d. owner or lessor is prohibited from leasing the residential unit or allowing its use by a third person for at least 1 year. 4. Absolute ownership by the lessee of another dwelling unit in the same city or municipality which may be lawfully used as his residence provided lessee is with formal notice 3 months in advance; 5. Need of the lessor to make necessary repairs in the leased premises which is the subject of an existing order of condemnation by appropriate authorities concerned in order to make said premises safe and habitable; and 6. Expiration of period of the lease contract. NOTE:  Except when the lease is for a definite period, the provisions of Art. 1673(1) of the Civil Code (CC), insofar as they refer to residential units, shall be suspended during the effectivity of R.A.

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

9161, but other provisions of the CC and the Rules of Court on lease contracts insofar as they are not in conflict with the provisions of R.A. No. 9161 shall apply. No increase in monthly rental by more than 10% is allowed.

TERMINATION OF THE LEASE  If made for a determinate time, it ceases upon the day fixed without the need of a demand. 1) By the expiration of the period 2) By the total loss of the thing 3) By the resolution of the right of the lessor 4) By the will of the purchaser or transferee of the thing 5) By rescission due to non-performance of the obligation of one of the parties Special Provisions for Rural Lands  Effect of loss due to fortuitous event: 1. Ordinary fortuitous event – no reduction 2. Extraordinary fortuitous event a. if more than ½ of the fruits were lost, there shall be a reduction, unless there is a stipulation to the contrary b. if ½ or less, there shall be no reduction  Lease duration: If not fixed, it shall be for all time necessary for the gathering of fruits which the whole estate may yield in 1 year, or which it may yield once. Special Provisions for Urban Lands  Repairs for which urban lessor is liable: 1. special stipulation 2. if none, custom of the place 3. in case of doubt, the repairs are chargeable against him



Lease duration: 1. If there is a fixed period, lease will be for said period. 2. If no fixed period, apply the following rules: a. If rent is paid daily: day to day b. If rent is paid weekly: week to week c. If rent is paid monthly: month to month d. If rent is paid yearly: year to year

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