UP 2016 Civil Law Reviewer

2016

University of the Philippines College of Law Bar Reviewer

2ND WEEK

CIVIL LAW

UP Law Bar Operations Commission 2016

UP Law Bar Operations Commission 2016

UP LAW BAR OPS 2016

TABLE OF CONTENTS PERSONS AND FAMILY RELATIONS I. EFFECT AND APPLICATION OF LAW S

1 2

A. WHEN LAWS TAKE EFFECT B. IGNORANCE OF THE LAW C. RETROACTIVITY OF LAWS D. MANDATORY OR PROHIBITORY LAWS E. WAIVER OF RIGHTS F. REPEAL OF LAWS G. JUDICIAL DECISIONS H. DUTY TO RENDER JUDGMENT I. PRESUMPTION AND APPLICABILITY OF CUSTOM J. LEGAL PERIODS K. APPLICABILITY OF PENAL LAWS L. BINDING EFFECT

2 2 2 2 3 3 3 3

II. PERSONS AND PERSONALITY

5

A. CONCEPT OF PERSON AND PERSONALITY B. COMMENCEMENT AND TERMINATION OF PERSONALITY C. DEATH D. JURIDICAL PERSONS E. RESTRICTIONS ON CIVIL CAPACITY F. DOMICILE AND RESIDENCE OF PERSON

3 4 4 4

5 6 6 7 7 11

V. RIGHTS AND OBLIGATIONS OF SPOUSES

37

A. LIVE TOGETHER B. FAMILY DOMICILE C. SUPPORT D. MANAGEMENT OF FAMILY LIFE E. EFFECT OF NEGLECT OF DUTY F. EXERCISE OF PROFESSION G. USE OF SURNAME

37 37 37 37 37 37 38

VI. PROPERTY RELATIONS OF SPOUSES

39

A. MARRIAGE SETTLEMENTS B. DONATIONS BY REASON OF MARRIAGE

39

VII. FAMILY RELATIONS

54

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

54

40

54 54 54 55 55 55 56 56 56

III. FAMILY CODE

11

A. EFFECT AND RETROACTIVITY B. REPEAL AND AMENDMENT

11 11

VIII. PATERNITY AND FILIATION

57

12

A. LEGITIMATE CHILDREN B. PROOF OF FILIATION C. ILLEGITIMATE CHILDREN D. LEGITIMATED CHILDREN

57 59 60 62

IX. ADOPTION

63

A. WHO CAN ADOPT B. WHO CAN BE ADOPTED (SEC. 8) C. PRE-ADOPTION PROCEDURES D. ADOPTION PROCEDURES E. WHO MAY NOT ADOPT/ BE ADOPTED F. RIGHTS OF AN ADOPTED CHILD G. RESCISSION OF ADOPTION H. RECTIFICATION OF SIMULATED BIRTH I. RA 8043 – THE LAW ON INTER-

63 64 65 66 67 67 68 68

IV. MARRIAGE AND PERSONAL RELATIONSHIP BETW EEN SPOUSES A. CONCEPT OF MARRIAGE B. AGREEMENTS PRIOR TO MARRIAGE C. REQUISITES C.1. KINDS OF REQUISITES AND EFFECTS OF NON-COMPLIANCE D. LAW GOVERNING VALIDITY OF MARRIAGES ABROAD E. COMMON-LAW MARRIAGES F. VOID AND VOIDABLE MARRIAGES G. THE LAW ON SEPARATION OF THE SPOUSES H. LEGAL SEPARATION

12 12 12 12 16 17 18 30 30

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COUNTRY ADOPTION

69

X. SUPPORT

70

A. WHAT IT COMPRISES B. WHO ARE OBLIGED C. SUPPORT PENDING LITIGATION ON THE STATUS OF MARRIAGE D. AMOUNT E. WHEN DEMANDABLE [ART. 203] F. OPTIONS G. ATTACHMENT

70 70

XI. PARENTAL AUTHORITY AND CUSTODY OF CHILDREN PARENTAL AUTHORITY INCLUDES [ART. 209]: TENDER YEARS PRESUMPTION: WHO ARE DISADVANTAGED CHILDREN: XII. EMANCIPATION XII. SUMMARY JUDICIAL PROCEEDINGS UNDER FC

XVII. ENTRIES IN THE CIVIL REGISTER A. CIVIL CODE ART. 413. ALL OTHER MATTERS PERTAINING TO THE REGISTRATION OF CIVIL STATUS SHALL BE GOVERNED BY SPECIAL LAWS. B. RA 9048 AS AMENDED BY RA 10172 C. RULE 108, RULES OF COURT

71 72 72 72 72

PROPERTY

72 72 73 74 75 75

A. PROCEDURAL RULES PROVIDED FOR IN THIS TITLE SHALL APPLY TO [ART. 238]: 75 B. SEPARATION IN FACT 75 C. INCIDENTS INVOLVING PARENTAL AUTHORITY 76 XIII. CARE AND EDUCATION OF CHILDREN

77

XIV. SURNAMES

78

A. SURNAMES OF CHILDREN B. WIFE AFTER AND DURING MARRIAGE C. CONFUSION AND CHANGE OF NAMES

78 78 79

XV. RULES GOVERNING PERSONS W HO ARE ABSENT

79

A. PROVISIONAL MEASURES IN CASE OF ABSENCE [ARTS. 381-383] B. DECLARATION OF ABSENCE [ARTS. 384-389] C. ADMINISTRATION OF THE PROPERTY OF THE ABSENTEE [ARTS. 387-389] D. PRESUMPTION OF DEATH [ARTS. 390392] XVI. FUNERALS

CIVIL LAW

79 81 81 82 83 ii

84 84

84 84 86

88

I. CHARACTERISTICS

89

II. CLASSIFICATION

89

A. HIDDEN TREASURE B. BASED ON MOBILITY C. BASED ON OWNERSHIP/ RIGHTSHOLDER D. BASED ON CONSUMABILITY E. BASED ON SUSCEPTIBILITY TO SUBSTITUTION F. BASED ON THE CONSTITUTION

89

III. OWNERSHIP

96

A. DEFINITION AND CONCEPT B. TYPES OF OWNERSHIP C. RIGHT IN GENERAL C.1. RIGHTS INCLUDED IN OWNERSHIP C.2. BUNDLE OF RIGHTS C.3. PROTECTING PROPERTY D. LIMITATIONS ON OWNERSHIP D.1. GENERAL LIMITATIONS D.2. SPECIFIC LIMITATIONS

96 96 96

IV. ACCESSION

101

A. CLASSIFICATION OF ACCESSION A.1. WITH RESPECT TO IMMOVABLES A.2. WITH RESPECT TO MOVABLE PROPERTY

101

V. QUIETING OF TITLE

109

A. IN GENERAL B. PURPOSE

109 109

93 95 95 95

96 96 96 98 98 99

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C. NATURE: QUASI IN REM D. JUSTIFICATIONS TO BRING AN ACTION TO QUIET TITLE E. THE ACTION TO QUIET TITLE DOES NOT APPLY F. REQUIREMENTS G. QUIETING OF TITLE V. REMOVAL OF CLOUD H. PRESCRIPTION

109

VI. CO-OWNERSHIP

111

A. REQUISITES B. WHAT GOVERNS CO-OWNERSHIP C. CHARACTERISTICS OF COOWNERSHIP D. SOURCES OF CO-OWNERSHIP D.1. LAW D.2. CONTRACT D.3. INTESTATE SUCCESSION D.4. TESTAMENTARY DISPOSITION OR DONATION INTER VIVOS D.5. BY FORTUITOUS EVENT OR BY CHANCE D.6. BY OCCUPANCY E. RIGHTS OF CO-OWNERS E.1. RIGHT TO SHARE IN THE BENEFITS AS WELL AS THE CHARGES [NCC 485] E.2. RIGHT TO USE THE THING OWNED IN COMMON [NCC 486] E.3. RIGHT TO BRING AN ORDER IN EJECTMENT [NCC 487] E.4. RIGHT TO COMPEL OTHER COOWNERS TO CONTRIBUTE TO THE EXPENSES OF PRESERVATION AND TO THE TAXES [NCC 488] E.5. RIGHT TO REPAIR [NCC 489] E.6. RIGHT TO OPPOSE ALTERATIONS E.7. RIGHT TO FULL OWNERSHIP OF HIS PART AND OF THE FRUITS AND BENEFITS PERTAINING THERETO [NCC 493] E.8. RIGHT TO PARTITION [NCC 494] E.9. RIGHT TO REDEMPTION [NCC 1619] E. 10. RIGHT TO PROTEST AGAINST

111 111

CIVIL LAW

ACTS OF MAJORITY WHICH ARE PREJUDICIAL TO MINORITY [NCC 492(3)] F. IMPLICATIONS OF CO-OWNER’S RIGHT OVER HIS IDEAL SHARE G. RULES G.1. ON RENUNCIATION OF SHARE (DIFFERENT FROM RENUNCIATION OF COOWNERSHIP) G.2. REPAIRS FOR PRESERVATION G.3. EMBELLISHMENTS OR IMPROVEMENTS H. TERMINATION OR EXTINGUISHMENT H.1. TOTAL DESTRUCTION OF THING OR LOSS OF THE PROPERTY CO-OWNED H.2. MERGER OF ALL INTERESTS IN ONE PERSON H.3. ACQUISITIVE PRESCRIPTION H.4. PARTITION OR DIVISION

109 109 109 110 110

111 112 112 112 113 113 113 113 113 113 113 113

113 114 114

114 114 114 114 iii

114 114 115

115 115 115 115 115 115 116 116 116

VII. POSSESSION

117

A. CONCEPT OF POSSESSION B. ESSENTIAL REQUISITES OF POSSESSION C. DEGREES OF POSSESSION D. CASES OF POSSESSION D.1. POSSESSION FOR ONESELF, OR POSSESSION EXERCISED IN ONE’S OWN NAME AND POSSESSION IN THE NAME OF ANOTHER [NCC 524] D.2. POSSESSION IN THE CONCEPT OF AN OWNER, AND POSSESSION IN THE CONCEPT OF A HOLDER WITH THE OWNERSHIP BELONGING TO ANOTHER [NCC 525] D.3. POSSESSION IN GOOD FAITH AND POSSESSION IN BAD FAITH [NCC 526] POSSESSOR IN GOOD FAITH E. ACQUISITION OF POSSESSION E.1. WAYS OF ACQUIRING POSSESSION [NCC 531] E.2. BY WHOM MAY POSSESSION BE ACQUIRED [NCC 532]

117 117 118 118

118

118 119 119 120 120 120

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F. WHAT DO NOT AFFECT POSSESSION [NCC 537] G. EFFECTS OF POSSESSION G.1. RIGHTS OF A POSSESSOR IN GOOD FAITH G.2. OBLIGATIONS OF A POSSESSOR IN GOOD FAITH G.3. RIGHTS OF A POSSESSOR IN BAD FAITH G.4. OBLIGATIONS OF A POSSESSOR IN BAD FAITH G.5. RIGHT TO BE PROTECTED IN HIS POSSESSION [NCC 539] H. REIMBURSEMENT FOR EXPENSES – POSSESSOR IN GOOD/BAD FAITH [NCC 546-552] H.1. NECESSARY EXPENSES H.2. USEFUL EXPENSES H.3. EXPENSES FOR LUXURY I. LOSS OR UNLAWFUL DEPRIVATION OF A MOVABLE PROPERTY I.1. POSSESSION OF MOVABLE ACQUIRED IN GOOD FAITH (IN CONCEPT OF OWNER) IS EQUIVALENT TO TITLE [NCC 559] REQUISITES OF TITLE I.2. PERIOD TO RECOVER [NCC 1140, 1132, 1133] I.3. FINDER OF LOST MOVABLE [NCC 719-720] J. EFFECTS OF POSSESSION IN THE CONCEPT OF AN OWNER K. LOSS/TERMINATION OF POSSESSION [NCC 555] K.1. ABANDONMENT K.2. ASSIGNMENT, EITHER GRATUITOUS OR ONEROUS K.3. POSSESSION BY ANOTHER L. RULES FOR LOSS OF MOVABLES M. KINDS OF ANIMALS

C.3. BY OBJECT OF USUFRUCT C.4. BY THE EXTENT OF THE USUFRUCT D. RIGHTS AND OBLIGATIONS OF USUFRUCTUARY D.1. RIGHTS AS TO THE THING AND ITS FRUITS D.2. RIGHTS AS TO THE LEGAL RIGHT OF USUFRUCT ITSELF D.3. OBLIGATIONS AT THE BEGINNING OF THE USUFRUCT OR BEFORE EXERCISING THE USUFRUCT D.4. DURING THE USUFRUCT D.5. AT THE TIME OF THE TERMINATION OF THE USUFRUCT E. SPECIAL CASES OF USUFRUCT E.1. USUFRUCT OVER A PENSION OR A PERIODICAL INCOME [NCC 570] E.2. USUFRUCT OF PROPERTY OWNED IN COMMON [NCC 582] E.3. USUFRUCT CONSTITUTED ON A FLOCK OR HERD OF LIVESTOCK [NCC 591] E.4. USUFRUCT OVER FRUIT BEARING TREES AND SHRUBS AND WOODLANDS [NCC 575-577] E.5. USUFRUCT ON A RIGHT OF ACTION TO RECOVER PROPERTY [NCC 578] E.6. USUFRUCT ON MORTGAGED PROPERTY [NCC 600] E.7. USUFRUCT OVER AN ENTIRE PATRIMONY [NCC 598] E.8. USUFRUCT OVER DETERIORABLE PROPERTY E.9. USUFRUCT OVER CONSUMABLE PROPERTY [NCC 574] F. RIGHTS OF THE OWNER F.1. AT THE BEGINNING OF THE USUFRUCT F.2. DURING THE USUFRUCT G. EXTINGUISHMENT/ TERMINATION [NCC 603] G.1. DEATH OF USUFRUCTUARY G.2. EXPIRATION OF PERIOD OR FULFILLMENT OF RESOLUTORY CONDITION IMPOSED

120 121 121 122 122 122 122 122 123 123 123 123 124

124 124 125 125 125 127 127 127 127 127 127

VIII. USUFRUCT

128

A. OBJECTS OF USUFRUCT B. CHARACTERISTICS C. CLASSIFICATION C.1. BY ORIGIN C.2. BY PERSON ENJOYING THE RIGHT OF USUFRUCT

128 128 128 128

CIVIL LAW

129 iv

129 130 130 130 133

133 135 136 136 136 136 137 137 137 137 137 138 138 138 138 138 139 139

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ONUSUFRUCT BY PERSON CONSTITUTING USUFRUCT G.3. MERGER OF RIGHTS OF USUFRUCT AND NAKED OWNERSHIP IN ONE PERSON G.4. RENUNCIATION OF USUFRUCT G.5. EXTINCTION OR LOSS OF PROPERTY [NCC 608] G.6. TERMINATION OF THE RIGHT OF PERSON CONSTITUTING THE USUFRUCT G.7. PRESCRIPTION H. CONDITIONS NOT AFFECTING USUFRUCT H.1. EXPRORPIATION OF THING IN USUFRUCT [NCC 609] H.2. BAD USE OF THING IN USUFRUCT [NCC 610]

139 139 140 140 140 141 141 141 141

IX. EASEMENT

142

A. CHARACTERISTICS B. CLASSIFICATION B.1. AS TO RECIPIENT OF BENEFITS B.2. AS TO CAUSE OR ORIGIN B.3. AS TO ITS EXERCISE [NCC 615] B.4. AS INDICATION OF ITS EXISTENCE [NCC 615] B.5. BY THE OBJECT OR OBLIGATION IMPOSED [NCC 616] C. GENERAL RULES D. RELEVANCE OF CLASSIFICATIONS D.1. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY PRESCRIPTION D.2. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY TITLE D.3. DETERMINES HOW TO COMPUTE THE PRESCRIPTIVE PERIOD [NCC 621] D.4. DETERMINES HOW EASEMENT IS LOST BY PRESCRIPTION [NCC 631 (2)] E. CREATION E.1. BY TITLE OR BY SOMETHING EQUIVALENT TO A TITLE E.2. BY LAW (LEGAL EASEMENTS) E.3. BY WILL OF THE OWNERS

142 143 143 143 144 144 144 144 144 144 144 145 145 145 145 146 v

CIVIL LAW

(VOLUNTARY EASEMENTS) E.4. BY PRESCRIPTION F. LEGAL EASEMENTS G. VOLUNTARY EASEMENTS H. RIGHTS AND OBLIGATIONS OF OWNERS OF DOMINANT AND SERVIENT ESTATES H.1. RIGHTS OF DOMINANT ESTATE OWNER H.2. OBLIGATIONS OF DOMINANT ESTATE OWNER H.3. RIGHTS OF THE SERVIENT ESTATE OWNER H.4. OBLIGATIONS OF SERVIENT ESTATE OWNER I. EXTINGUISHMENT OF EASEMENTS I.1. MERGER I.2. BY A NON-USER FOR 10 YEARS I.3. BY IMPOSSIBILITY OF USE I.4. EXPIRATION OF THE TERM OR FULFILLMENT OF RESOLUTORY CONDITION I.5. RENUNCIATION OF THE OWNER OF THE DOMINANT ESTATE I.6. OTHER CAUSES NOT MENTION IN NCC 631 J. KINDS OF PRIVATE LEGAL EASEMENTS J.1. THOSE ESTABLISHED FOR THE USE OF WATERS OR RELATING TO WATERS J.2. RIGHT OF WAY J.3. PARTY WALL J.4. EASEMENT OF LIGHT AND VIEW J.5. DRAINAGE OF BUILDINGS J.6. INTERMEDIATE DISTANCES J.7. LATERAL AND SUBJACENT SUPPORT

146 146 146 146

X. NUISANCE

158

A. NUISANCE V. TRESPASS B. NUISANCE V. NEGLIGENCE C. CLASSES C.1. ACCORDING TO NATURE C.2. ACCORDING TO SCOPE OF INJURIOUS EFFECTS D. DOCTRINE OF ATTRACTIVE NUISANCE E. LIABILITY IN CASE OF NUISANCE

158 159 159 159

147 147 147 148 148 148 148 149 149 149 149 149 150 150 151 153 155 157 157 158

159 160 160

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E.1 WHO ARE LIABLE E.2. LIABILITY OF CREATOR OF NUISANCE E.3. LIABILITY OF TRANSFEREES E.4. NATURE OF LIABILITY E.5. RIGHT TO RECOVER DAMAGES F. REGULATION OF NUISANCES F.1. PUBLIC NUISANCE F.2. PRIVATE NUISANCE XI. MODES OF ACQUIRING OWNERSHIP AND OTHER REAL RIGHTS A. OCCUPATION A.1. REQUISITES A.2. KINDS A.3. SPECIAL RULES [NCC 716] B. DONATION B.1. OTHER INSTANCES CONSIDERED AS DONATION B.2. NATURE B.3. REQUISITES B.4. WHAT MAY BE DONATED B.5. WHAT MAY NOT BE DONATED C. KINDS OF DONATIONS C.1. AS TO ITS TAKING EFFECT C.2. AS TO CAUSE OR CONSIDERATION D. FORMALITIES REQUIRED D.1. HOW MADE AND ACCEPTED D.2. PERFECTION D.3. QUALIFICATIONS OF DONORS AND DONEES E. EFFECTS OF DONATION / LIMITATIONS E.1. IN GENERAL E.2. SPECIAL PROVISIONS F. VOID DONATIONS [NCC 739740, 1027] F.1. THOSE MADE BETWEEN PERSONS WHO WERE GUILTY OF ADULTERY OR CONCUBINAGE AT THE TIME OF THE DONATION F.2. THOSE MADE BETWEEN PERSONS FOUND GUILTY OF THE SAME CRIMINAL OFFENSE, IN CONSIDERATION THEREOF F.3. THOSE MADE TO A PUBLIC OFFICER OR HIS WIFE,

160

CIVIL LAW

DESCENDANTS AND ASCENDANTS, BY REASON OF HIS OFFICE F.4. THOSE MADE TO PERSONS INCAPACITATED TO SUCCEED BY WILL. [NCC 1027] G. REVOCATION V. REDUCTION G.1. GROUNDS FOR REDUCTION G.2. REVOCATION H. TRADITION H.1. REQUISITES H.2. PURPOSE H.3. KINDS

160 160 160 161 161 161 162

163 163 163 164 164 165 165 165 165 165 165 166 166 167 168 168 168 168 170 170 170 172

172 172 172 173 177 177 177 177

XII. PRESCRIPTION

178

A. RATIONALE B. KINDS OF PRESCRIPTION B.1. ACQUISITIVE PRESCRIPTION B.2. EXTINCTIVE PRESCRIPTION C. NO PRESCRIPTION APPLICABLE C.1. BY OFFENDER C.2. REGISTERED LANDS C.3. RIGHTS NOT EXTINGUISHED BY PRESCRIPTION [NCC 1143] C.4. ACTION TO QUIET TITLE IF PLAINTIFF IS IN POSSESSION C.5. VOID CONTRACTS C.6. ACTION TO DEMAND PARTITION C.7. PROPERTY OF PUBLIC DOMINION C.8. PRESCRIPTION DISTINGUISHED FROM LACHES D. PRESCRIPTION OR LIMITATION OF ACTIONS D.1. TO RECOVER MOVABLE PROPERTIES D.2. TO RECOVER IMMOVABLES D.3. OTHER ACTIONS

178 178 178 179

OBLIGATIONS

172

172

I. OBLIGATIONS

179 179 179 180 180 180 180 180 180 180 180 181 181 183 184

A. DEFINITION 184 A.1. ELEMENTS OF AN OBLIGATION 184 A.2. DIFFERENT KINDS OF PRESTATIONS 184

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B. CLASSIFICATION OF OBLIGATIONS II. NATURE AND EFFECT OF OBLIGATIONS A. OBLIGATION “TO GIVE” B. OBLIGATION “TO DO” OR “NOT TO DO” C. BREACH C.1. COMPLETE FAILURE TO PERFORM C.2. DEFAULT, DELAY, OR MORA C.3. FRAUD (DOLO) IN THE PERFORMANCE OF THE OBLIGATION C.4. NEGLIGENCE (CULPA) IN THE PERFORMANCE OF THE OBLIGATION C.5. CONTRAVENTION OF THE TENOR OF THE OBLIGATION D. LEGAL EXCUSE FOR BREACH E. REMEDIES AVAILABLE IN CASE OF BREACH E.1. ACTION FOR SPECIFIC PERFORMANCE (IN OBLIGATION TO GIVE SPECIFIC THING) E.2. ACTION FOR SUBSTITUTED PERFORMANCE (IN OBLIGATION TO GIVE GENERIC THING) E.3. RESCISSION (RESOLUTION IN RECIPROCAL OBLIGATIONS) E.4. DAMAGES, IN ANY EVENT E.5. SUBSIDIARY REMEDIES OF CREDITORS

184

OBLIGATIONS E. DIVISIBLE AND INDIVISIBLE OBLIGATIONS F. OBLIGATIONS WITH A PENAL CLAUSE

187 187 188 188 189 189 191 192 193 193 194 194 195

209 211

A. PRINCIPAL CHARACTERISTICS OF CONTRACTS (MARCO) A. 1. MUTUALITY A.2. AUTONOMY (ALSO FREEDOM TO CONTRACT) A.3. RELATIVITY A.4. CONSENSUAL A.5. OBLIGATORY FORCE B. ELEMENTS OF CONTRACTS C. CLASSIFICATION OF CONTRACTS D. STAGES OF A CONTRACT E. ESSENTIAL REQUISITES A. CONSENT B. OBJECT OF CONTRACTS C. CAUSE OF CONTRACTS

199 199 199 199 200 200 202

III. FORM OF CONTRACTS vii

208

A. JOINT OBLIGATIONS B. SOLIDARY OBLIGATIONS

I. GENERAL PROVISIONS

196

207

209

CONTRACTS

195 196

205

IV. JOINT AND SOLIDARY OBLIGATIONS

V. EXTINGUISHMENT OF OBLIGATIONS A. PAYMENT OR PERFORMANCE A.1 APPLICATION OF PAYMENTS A.2. DATION IN PAYMENT A.3. PAYMENT BY CESSION A.4. TENDER OF PAYMENT AND CONSIGNATION B. LOSS OF THE THING DUE OR IMPOSSIBILITY OR DIFFICULTY OF PERFORMANCE C. CONDONATION D. CONFUSION OR MERGER OF RIGHTS E. COMPENSATION F. NOVATION

III. KINDS OF CIVIL OBLIGATIONS 199 A. PURE OBLIGATIONS B. CONDITIONAL OBLIGATIONS B.1. KINDS OF CONDITIONS B.2. DOCTRINE OF CONSTRUCTIVE FULFILLMENT OF SUSPENSIVE CONDITIONS B.3. PRINCIPLE OF RETROACTIVITY IN SUSPENSIVE CONDITIONS B.4. EFFECTS OF THE HAPPENING OF SUSPENSIVE CONDITIONS C. OBLIGATIONS WITH A PERIOD OR TERM D. ALTERNATIVE OR FACULTATIVE

CIVIL LAW

215 215 217 218 218 219 220 222 223 223 225 229 230 230 230 230 231 233 233 233 233 234 234 234 241 241 243

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A. KINDS OF FORMALITIES REQUIRED BY LAW A.1. FOR THE VALIDITY OF CONTRACTS (AD ESENTIA / AD SOLIMNITATEM/ SOLEMN CONTRACTS) A.2. FOR THE PURPOSE OF PROVING THE EXISTENCE OF THE CONTRACT (AD PROBATIONEM/ STATUTE OF FRAUDS) A.3. FOR THE EFFECTIVITY OF THE CONTRACT AGAINST THIRD PERSONS IV. REFORMATION OF INSTRUMENTS A. CASES WHERE REFORMATION IS PROPER A.1. MISTAKE A.2. FRAUD A.3. INEQUITABLE CONDUCT A.4. ACCIDENT A.5. SEVERE PACTO DE RETRO / RELATIVE SIMULATION B. WHO MAY ASK FOR REFORMATION [ART. 1368] C. CASES WHERE REFORMATION IS NOT PROPER

CIVIL LAW

B. VOIDABLE CONTRACTS CHARACTERISTICS OF VOIDABLE CONTRACTS: RATIFICATION C. UNENFORCEABLE CONTRACT D. VOID OR INEXISTENT CONTRACTS

254

VII. NATURAL OBLIGATIONS

261

244

VIII. ESTOPPEL

263

244

IX. TRUSTS

264

A. GOVERNING RULES B. PARTIES [ART. 1440] C. KINDS OF TRUST C.1. EXPRESS TRUST C.2. IMPLIED TRUST C.3. CONSTRUCTIVE TRUST

264 264 264 264 265 266

243

243

245 246 247 247 247 247 247

SALES I. DEFINITION AND ESSENTIAL REQUISITES A. DEFINITION OF SALES B. ESSENTIAL REQUISITES OF A CONTRACT OF SALE B.1. ESSENTIAL ELEMENTS OF A VALID CONTRACT OF SALE B.2. NON-ESSENTIAL ELEMENTS OF A CONTRACT OF SALE C. STAGES OF CONTRACT OF SALE D. OBLIGATIONS CREATED NATURE OF OBLIGATIONS CREATED PER DEFINITION IN ART.1458 E. CHARACTERISTICS OF A CONTRACT OF SALE F. SALE DISTINGUISHED FROM OTHER CONTRACTS F.1. DONATION F.2. BARTER F.3. CONTRACT FOR A PIECE OF WORK F.4. DACION EN PAGO F.5. CONTRACT TO SELL F.6. AGENCY TO SELL F.7. LEASE G. KINDS OF CONTRACT OF SALE

247 247 247

V. INTERPRETATION OF CONTRACT

248

A. RULES ON DOUBTS [ART. 1378] B. FROM RULE 123, RULES OF COURT

249 249

VI. DEFECTIVE CONTRACTS

250

A. RESCISSIBLE CONTRACTS A.1. RESCISSION A.2. CHARACTERISTICS OF RESCISSIBLE CONTRACTS: A.3. DISTINGUISHED FROM RESCISSION/RESOLUTION UNDER ART. 1191 A.4. REQUISITES OF A VALID RESCISSION [ART. 1381-1383, 1385, 1389]

250 250 251 251 251 viii

255 256 256 258

267 268 268 268 268 268 269 269 269 269 270 270 270 270 270 271 271 271 271

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II. PARTIES TO A CONTRACT OF SALE

272

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

272 272

III. SUBJECT MATTER

274

A. REQUISITES OF A VALID SUBJECT MATTER A.1. MUST BE LICIT A.2. EXISTING, FUTURE, CONTINGENT A.3.DETERMINATE OR DETERMINABLE IV. OBLIGATIONS OF THE SELLER A. OBLIGATIONS OF THE VENDOR IN GENERAL B. WHEN SELLER IS NOT THE OWNER C. SALE BY PERSON HAVING A VOIDABLE TITLE

272 272 273 273 273 274

274 274 275

A. PREPARATORY B. PERFECTION C. CONSUMMATION

280 282 282

VII. TRANSFER OF OWNERSHIP

284

A. MANNER OF TRANSFER GENERAL CONCEPTS B. CONCEPT OF DELIVERY B.1. REQUISITES B.2. WHAT TO DELIVER B.3. WHERE TO DELIVER B.4. WHEN TO DELIVER C. WHEN DELIVERY DOES NOT TRANSFER TITLE D. KINDS OF DELIVERY D.1. ACTUAL DELIVERY D.2. CONSTRUCTIVE DELIVERY E. DOUBLE SALES F. PROPERTY REGISTRATION DECREE

284 284 284 284 284 285 285 285 286 286 286 287 288

276

VIII. RISK OF LOSS & DETERIORATION

276

A. RES PERIT DOMINO B. PRIOR TO PERFECTION OF CONTRACT C. AT TIME OF PERFECTION D. AFTER PERFECTION BUT BEFORE DELIVERY D.1.LOSS D.2. DETERIORATION E. AFTER DELIVERY

290

IX. DOCUMENTS OF TITLE

291

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

291

276 276 277

V. PRICE

277

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

277

VI. FORMATION OF CONTRACT OF SALE

CIVIL LAW

277 278 278 279 279 279 280 ix

290

290 290 290 290 290 290

291 291 291 291 292 292

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X. REMEDIES OF AN UNPAID SELLER A. DEFINITION OF UNPAID SELLER B. JUDICIAL REMEDIES OF UNPAID SELLER C. ALTERNATIVE REMEDIES OF THE UNPAID SELLER UNDER RECTO LAW XI. PERFORMANCE OF CONTRACT

293 293 294

A. DELIVERY OF THING SOLD B. PAYMENT OF PRICE XII. WARRANTIES

298

A. EXPRESS WARRANTIES B. IMPLIED WARRANTIES B.1. IMPLIED WARRANTY OF TITLE B.2. IMPLIED WARRANTY AGAINST ENCUMBRANCE/NON-APPARENT SERVITUDES B.3. IMPLIED WARRANTY AGAINST HIDDEN DEFECTS B.4. IMPLIED WARRANTY AS TO MERCHANTABLE QUALITY AND FITNESS OF GOODS B.5. IMPLIED WARRANTY AGAINST REDHIBITORY DEFECT IN THE SALE OF ANIMALS C. EFFECTS OF WARRANTIES D. EFFECTS OF WAIVERS E. BUYER’S OPTIONS IN CASE OF BREACH OF WARRANTY F. WARRANTY IN SALE OF CONSUMER GOODS

298 299 300

XIII. BREACH OF CONTRACT

304

A. GENERAL REMEDIES [ART 1191] B. REMEDIES OF THE SELLER SALE OF MOVABLES C. RECTO LAW: SALE OF MOVABLES ON INSTALLMENT – ARTS. 1484-1486 C.1. WHEN APPLICABLE

C.2. ALTERNATIVE AND EXCLUSIVE REMEDIES D. SALE OF IMMOVABLES D.1. RESCISSION FOR ANTICIPATORY BREACH D.2. SPECIFIC PERFORMANCE + DAMAGES OR RESCISSION + DAMAGES E. PD 957, SECTIONS 23 AND 24 F. MACEDA LAW (RA 6552): SALE OF IMMOVABLES ON INSTALLMENT G. REMEDIES OF THE BUYER G.1. SALE OF MOVABLES G.2. SALE OF IMMOVABLES

293

295 295 297

CIVIL LAW

300 300 301 301 301 301 302 303

304 304 304 307 307 x

307 307 307 308 308 308 309 309 310

XIV. EXTINGUISHMENT OF SALE

310

A. CAUSES B. CONVENTIONAL REDEMPTION B.1. DEFINITION B.2. PERIOD B.3. BY WHOM EXERCISED B.4. FROM WHOM TO REDEEM B.5. HOW EXERCISED B.6. EFFECT OF REDEMPTION B.7. EFFECT OF NON-REDEMPTION B.8. RIGHT TO REDEEM VS OPTION TO PURCHASE C. EQUITABLE MORTGAGE C.1. PRESUMPTION THAT A CONTRACT IS AN EQUITABLE MORTGAGE (5P-R) C.2. REQUISITES FOR PRESUMPTION OF AN EQUITABLE MORTGAGE C.3. RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE C.4. REMEDIES OF APPARENT VENDOR C.5. PERIOD OF REDEMPTION C.6. EXERCISE OF THE RIGHT TO REDEEM C.7. HOW REDEMPTION IS EXERCISED D. LEGAL REDEMPTION D.1. DEFINITION D.2. MANNER D.3. PERIOD TO REDEEM

310 310 310 310 311 311 311 311 312 312 312 312 313 313 313 313 314 314 314 314 314 314

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D.4. INSTANCES OF LEGAL REDEMPTION

315

XV. THE LAW ON SALE OF SUBDIVISION AND CONDOMINIUM (PD 957)

318

A. DEFINITIONS B. REQUIREMENTS FOR OWNERS AND DEVELOPERS B.1. REGISTRATION OF PROJECTS [SECTION 4, PD 957] B.2. REGISTRATION OF OWNER [SECTION 4, PD 957] B.3. LICENSE TO SELL [SECTION 5, PD 957] C. REQUIREMENT FOR DEALERS, BROKERS, AND SALESMEN (DBS) D. CHARACTERISTICS OF SALE OF A CONDOMINIUM OR SUBDIVISION UNIT AND SIMILAR CONTRACTS D.1. REGISTRATION OF SALE, ETC [SECTION 17, PD 957] D.2. MORTGAGES ON UNIT OR LOT BY OWNER OR DEVELOPER [SECTION 18, PD 957] D.3. ADVERTISEMENTS BY THE OWNER OR DEVELOPER [SECTION 19, PD 957] D.4. NON-FORFEITURE OF PAYMENTS (SECTION 23, PD 957) D.5. FAILURE TO PAY INSTALLMENTS [SECTION 24, PD 957] D.6. ISSUANCE OF TITLE [SECTION 25, PD 957] D.7. REALTY TAX [SECTION 26, PD 957] D.7. NO OTHER CHARGES [SECTION 27, PD 957] XVI. THE CONDOMINIUM ACT (RA 4726) A. DEFINITION OF A CONDOMINIUM [SECTION 2] B. TRANSFERS OR CONVEYANCES OF A UNIT OR AN APARTMENT, OFFICE OR STORE, OR OTHER SPACE

CIVIL LAW

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

318 318 318 318 318 319

320 320 320 320 320 320 321

SUCCESSION

321 321 321 321

xi

322

322 322

323 323 323 323

323 323

323 323 323 324

I. GENERAL PROVISIONS

325

A. DEFINITION KINDS OF SUCCESSION B. OBJECT OF SUCCESSION AND TRANSMISSION SCOPE OF INHERITANCE RULE ON TRANSMISSION RULES ON OPENING OF SUCCESSION C. SUBJECTS OF SUCCESSION

325 325 325 325 325 325 326

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II. TESTAMENTARY SUCCESSION

327

A. WILLS A.1. IN GENERAL A.2. TESTAMENTARY CAPACITY AND INTENT TIME OF DETERMINING CAPACITY REQUISITES FOR CAPACITY TO MAKE A WILL A.3. FORM A.4. CODICILS A.5. INCORPORATION BY REFERENCE A.6. REVOCATION A.7. REPUBLICATION AND REVIVAL A.8. ALLOWANCE AND DISALLOWANCE OF WILLS I. PROBATE REQUIREMENT II. GROUNDS FOR DENYING PROBATE B. INSTITUTION OF HEIR MANNER OF INSTITUTION MANNER OF DISTRIBUTION INTENT OF THE TESTATOR C. SUBSTITUTION OF HEIRS EFFECTS OF PREDECEASE OF THE FIRST HEIR/FIDUCIARY OR THE SECOND HEIR/FIDEICOMMISSARY D. TESTAMENTARY DISPOSITIONS WITH A CONDITION, A TERM, AND A MODE 3 KINDS OF TESTAMENTARY DISPOSITIONS CONDITIONAL DISPOSITIONS DISPOSITIONS WITH A TERM MODAL DISPOSITIONS E. LEGITIME COMPULSORY HEIRS AND VARIOUS COMBINATIONS SPECIFIC RULES ON LEGITIMES STEPS IN DETERMINING THE LEGITIME OF COMPULSORY HEIRS REMEDY OF A COMPULSORY HEIR IN CASE OF IMPAIRMENT OF LEGITIME RESERVA TRONCAL CONCEPT OF RESERVA TRONCAL JURIDICAL NATURE OF RIGHTS F. DISINHERITANCE F.1. DISINHERITANCE OF

327 327

CIVIL LAW

CHILDREN AND DESCENDANTS F.2. DISINHERITANCE OF PARENTS AND ASCENDANTS F.3. DISINHERITANCE OF A SPOUSE MODES OF REVOCATION OF DISINHERITANCE G. LEGACIES AND DEVISES

329 329 329 329 334

III. LEGAL OR INTESTATE SUCCESSION

334 334 335

A. GENERAL PROVISIONS B. ORDER OF INTESTATE SUCCESSION RULES OF EXCLUSION AND CONCURRENCE IN INTESTATE SHARES OUTLINE OF INTESTATE SHARES

335 335 336 336 337 337 337 339

IV. PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION A. RIGHT OF ACCRETION BASIS B. CAPACITY TO SUCCEED BY WILL OR INTESTACY C. ACCEPTANCE AND REPUDIATION OF THE INHERITANCE D. COLLATION E. PARTITION AND DISTRIBUTION OF ESTATE E.1. IN GENERAL JUDICIAL VS. EXTRAJUDICIAL PARTITION E.2. EFFECTS OF PARTITION E.3. RESCISSION AND NULLIFICATION OF PARTITION

340 340 340 340 341 341 341

346 346 346 347 348 351 351 354 355 355

357 357 357 358 359 361 362 362 362 363 364

341 342

AGENCY

344

I. DEFINITION OF AGENCY

367

344 344 344 345 345

A. AS A TYPE OF CONTRACT A.1. ELEMENTS (STATUTORY): A.2. ELEMENTS (JURISPRUDENTIAL) A.3. BEING A CONTRACT, IT MUST ALSO COMPLY WITH ART. 1318 B. AS A LEGAL RELATIONSHIP

367 367

xii

366

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C. EFFECTS OF AGENCY

367

II. KINDS OF AGENCY

368

A. GENERAL AGENCY B. SPECIAL AGENCY C. AGENCY COUCHED IN GENERAL TERMS D. AGENCY REQUIRING SPECIAL POWER OF ATTORNEY E. AGENCY BY OPERATION OF LAW

368 368

CIVIL LAW

368 370

A.2. ADVANCE OR REIMBURSE SUMS NECESSARY A.3. INDEMNIFY THE AGENT FOR INJURY A.4. COMPENSATE THE AGENT B. LIABILITY OF THE PRINCIPAL B.1. IN GENERAL B.2. BE SOLIDARILY LIABLE B.3. IF THE CONTRACT INVOLVES THINGS BELONGING TO THE PRINCIPAL

III. EXPRESS VS IMPLIED AGENCY

370

VII. MODES OF EXTINGUISHMENT

A. EXPRESS B. IMPLIED

370 370

IV. AGENCY BY ESTOPPEL

372

A. BASED ON STATUTE B. REQUISITES

372 372

V. POWERS

373

A. RIGHTS OF AGENTS B. OBLIGATIONS OF AGENTS B.1. ACT WITHIN SCOPE OF AUTHORITY B.2. ACT IN ACCORDANCE WITH INSTRUCTIONS B.3. CARRY OUT THE AGENCY B.4. ADVANCE FUNDS B.5. PREFER THE PRINCIPAL’S INTEREST OVER HIS OWN B.6. RENDER ACCOUNT/DELIVER B.7. PAY INTEREST B.8. LIABILITY FOR FRAUD/NEGLIGENCE C. LIABILITY OF AGENTS C.1. WHEN SOLIDARY C.2. WHEN PERSONAL

373 375

VI. RIGHTS AND OBLIGATIONS OF PRINCIPAL A. OBLIGATIONS A.1. COMPLY WITH THE OBLIGATIONS CONTRACTED BY THE AGENT

368

A. IN GENERAL B. REVOCATION B.1. IN GENERAL B.2. WHEN REVOCATION IS NOT BINDING ON THIRD PERSONS B.3. APPOINTMENT OF NEW AGENT B.4. DIRECT MANAGEMENT BY THE PRINCIPAL B.5. SPECIAL AUTHORITY REVOKES THE GENERAL AUTHORITY WHERE A SPECIAL MATTER IS INVOLVED B.6. WHEN AGENCY CANNOT BE REVOKED C. WITHDRAWAL BY THE AGENT D. DEATH, CIVIL INTERDICTION, INSANITY OR INSOLVENCY D.1. IN GENERAL D.2. EXCEPTIONS D.3. DEATH OF AGENT E. DISSOLUTION / ACCOMPLISHMENT / EXPIRATION

375 376 376 376 377 378 378 378 378 378 378

PARTNERSHIP

379 379 379 xiii

380 380 381 381 381 381 381 383 383 383 383 383 384 384

384 384 384 385 385 385 385 385 386

I. CONTRACT OF PARTNERSHIP

387

A. ELEMENTS B. ESSENTIAL FEATURES B.1. LAWFUL PURPOSE B.2. COMMON BENEFIT B.3. JURIDICAL PERSONALITY C. PARTIES D. OBJECT

387 387 387 387 388 388 388

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D.1. OBJECT OF UNIVERSAL PARTNERSHIP D.2. OBJECT OF PARTICULAR PARTNERSHIP D.3. EFFECT OF UNLAWFUL OBJECT E. FORM F. DURATION F.1. COMMENCEMENT F.2. TERM F.3. EXTENSION G.RULES TO DETERMINE EXISTENCE H. KINDS OF PARTNERSHIPS H.1. AS TO THE LEGALITY OF ITS EXISTENCE H.2. AS TO ITS OBJECT H.3. AS TO ITS DURATION H.4. AS TO THE LIABILITY OF THE PARTNERS H.5. AS TO ITS PUBLICITY H.6. AS TO ITS PURPOSE I. KINDS OF PARTNERS J. PARTNERSHIP, DISTINGUISHED FROM OTHER CONTRACTS

B.4. RESPONSIBLE FOR DAMAGE SUFFERED BY THE PARTNERSHIP B.5. BEAR RISK OF LOSS OF SPECIFIC AND DETERMINATE THINGS B.6. SHARE IN LOSSES RULES FOR DISTRIBUTION OF PROFITS AND LOSSES B.7. ACCOUNT FOR BENEFITS B.8. LIABLE FOR PARTNERSHIP CONTRACTS B.9. SOLIDARILY LIABLE WITH THE PARTNERSHIP FOR WRONGFUL ACTS OR OMISSIONS B.10. APPLICATION OF SUMS RECEIVED

388 388 388 389 389 389 389 389 389 389 389 390 390

III. OBLIGATIONS OF THE PARTNERSHIP

390 390 390 390

A. OBLIGATION TO OPERATE UNDER A FIRM NAME B. LIABILITY OF PARTNERS FOR PARTNERSHIP CONTRACTS B.1. ACTS APPARENTLY FOR THE CARRYING ON OF USUAL BUSINESS B.2. ACTS NOT APPARENTLY FOR CARRYING ON OF THE USUAL BUSINESS B.3. ACTS OF STRICT DOMINION B.4. ACTS IN CONTRAVENTION OF A RESTRICTION C. CONVEYANCE OF PARTNERSHIP REAL PROPERTY C.1. TITLE IN PARTNERSHIP NAME C.2. TITLE IN THE NAME OF OTHER PERSONS D. LIABILITY OF THE PARTNERSHIP FOR ADMISSION BY A PARTNER E. LIABILITY IN CASE OF PARTNERSHIP BY ESTOPPEL E.1. PARTNER BY ESTOPPEL E.2. LIABILITY OF A PARTNER BY ESTOPPEL E.3. EFFECT ON EXISTING PARTNERSHIP OR OTHER PERSONS NOT ACTUAL PARTNERS E.4. NATURE OF LIABILITY

391

II. RIGHTS AND OBLIGATIONS OF THE PARTNER 393 A. RIGHTS OF PARTNERS A.1. MUTUAL AGENCY A.2 SHARE IN PROFITS A.3. RIGHT TO ASSOCIATE ANOTHER/AUTHORIZE ADMISSION A.4. ACCESS TO BOOKS AND INFORMATION A.5. FORMAL ACCOUNT A.6. PROPERTY RIGHTS A.7. CONVEYANCE OF PROPERTY IN PARTNERSHIP NAME B. OBLIGATIONS OF PARTNERS B.1. CONTRIBUTION AMOUNT OF CONTRIBUTION ADDITIONAL CAPITAL CONTRIBUTION CONTRIBUTION OF INDUSTRY B.2. ALTERATION IN IMMOVABLE PROPERTY B.3. BRING TO PARTNERSHIP CAPITAL CREDIT RECEIVED

CIVIL LAW

393 393 393 394 394 394 394 398 399 399 399 399 399 400 400 xiv

400 400 400 400 401 401 402 402 402 403 403 403 403 403 403 403 403 403 404 404 404 404 404

404 405

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

417 417 417 417 417 417 417 418 418 419 420

A. COMMODATUM A.1. KINDS OF COMMODATUM A.2. PARTIES A.3. OBLIGATIONS OF THE BAILEE A.4. OBLIGATIONS OF THE BAILOR A.5. LIABILITY FOR DETERIORATION A.6. LIABILITY FOR LOSS A.7. RIGHT OF RETENTION A.8. EXTINGUISHMENT B. MUTUUM B.1. OBLIGATIONS OF THE BORROWER B.2. INTEREST AND SUSPENSION OF USURY LAW B.3. REQUISITES FOR INTEREST TO BE CHARGEABLE B.4. ELEMENTS OF USURY

420 420 420 421 421

II. DEPOSIT

424

A. VOLUNTARY DEPOSIT A.1. EXTINGUISHMENT A.2. OBLIGATIONS OF A DEPOSITARY A.3. AUTHORITY OF DEPOSITARY A.4. OBLIGATIONS OF A DEPOSITOR A.5. AUTHORITY OF DEPOSITOR B. NECESSARY DEPOSIT B.1. KINDS OF NECESSARY

424 425

CIVIL LAW

DEPOSIT B.2. DEPOSIT BY TRAVELERS IN HOTELS AND INNS B.3. EXTENT OF LIABILITY UNDER ART.1998 B.4. WHEN HOTEL-KEEPER LIABLE B.5. WHEN HOTEL-KEEPER NOT LIABLE B.6. HOTEL-KEEPER’S RIGHT TO RETENTION C. JUDICIAL DEPOSIT C.1. NATURE AND PURPOSE C.2. DEPOSITARY OF SEQUESTERED PROPERTY C.3. APPLICABLE LAW

426

III. GUARANTY AND SURETYSHIP

427

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

422 422 422 422 422 422 422 423 423

425 425 425 425 426 xvi

426 426 426 426 426 427 427 427 427

428 430 431 431 432 434 434 434

IV. PLEDGE

435

A. CHARACTERISTICS B. KINDS C. ESSENTIAL REQUISITES D. REQUISITES FOR PERFECTION E. OBLIGATIONS OF PLEDGEE F. RIGHTS OF PLEDGOR G. FORECLOSURE G.1. REQUIREMENTS IN SALE OF THE THING PLEDGED BY A CREDITOR, IF CREDIT IS NOT PAID ON TIME G.2. EFFECTS OF THE SALE OF THE THING PLEDGED

435 435 436 436 437 437 437

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

417 417 417 417 417 417 417 418 418 419 420

A. COMMODATUM A.1. KINDS OF COMMODATUM A.2. PARTIES A.3. OBLIGATIONS OF THE BAILEE A.4. OBLIGATIONS OF THE BAILOR A.5. LIABILITY FOR DETERIORATION A.6. LIABILITY FOR LOSS A.7. RIGHT OF RETENTION A.8. EXTINGUISHMENT B. MUTUUM B.1. OBLIGATIONS OF THE BORROWER B.2. INTEREST AND SUSPENSION OF USURY LAW B.3. REQUISITES FOR INTEREST TO BE CHARGEABLE B.4. ELEMENTS OF USURY

420 420 420 421 421

II. DEPOSIT

424

A. VOLUNTARY DEPOSIT A.1. EXTINGUISHMENT A.2. OBLIGATIONS OF A DEPOSITARY A.3. AUTHORITY OF DEPOSITARY A.4. OBLIGATIONS OF A DEPOSITOR A.5. AUTHORITY OF DEPOSITOR B. NECESSARY DEPOSIT B.1. KINDS OF NECESSARY

424 425

CIVIL LAW

DEPOSIT B.2. DEPOSIT BY TRAVELERS IN HOTELS AND INNS B.3. EXTENT OF LIABILITY UNDER ART.1998 B.4. WHEN HOTEL-KEEPER LIABLE B.5. WHEN HOTEL-KEEPER NOT LIABLE B.6. HOTEL-KEEPER’S RIGHT TO RETENTION C. JUDICIAL DEPOSIT C.1. NATURE AND PURPOSE C.2. DEPOSITARY OF SEQUESTERED PROPERTY C.3. APPLICABLE LAW

426

III. GUARANTY AND SURETYSHIP

427

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

422 422 422 422 422 422 422 423 423

425 425 425 425 426 xvi

426 426 426 426 426 427 427 427 427

428 430 431 431 432 434 434 434

IV. PLEDGE

435

A. CHARACTERISTICS B. KINDS C. ESSENTIAL REQUISITES D. REQUISITES FOR PERFECTION E. OBLIGATIONS OF PLEDGEE F. RIGHTS OF PLEDGOR G. FORECLOSURE G.1. REQUIREMENTS IN SALE OF THE THING PLEDGED BY A CREDITOR, IF CREDIT IS NOT PAID ON TIME G.2. EFFECTS OF THE SALE OF THE THING PLEDGED

435 435 436 436 437 437 437

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H. PLEDGE AS DISTINGUISHED FROM CHATTEL MORTGAGE [ARTS. 2140, 1484] I. PACTUM COMMISSORIUM J. EQUITABLE MORTGAGE

438 438 438

V. REAL MORTGAGE

439

A. OBJECTS OF REAL MORTGAGE B. OBLIGATIONS SECURED C. CHARACTERISTICS C.1. CHARACTERISTICS OF THE COLLATERAL C.2. CHARACTERISTICS OF THE MORTGAGE D. KINDS E. PRINCIPLE OF INDIVISIBILITY OF PLEDGE/MORTGAGE F. ESSENTIAL REQUISITES COMMON TO PLEDGE AND MORTGAGE G. FORECLOSURE OF MORTGAGE G.1. JUDICIAL FORECLOSURE G.2. EXTRAJUDICIAL FORECLOSURE G.3. NATURE OF POWER OF FORECLOSURE BY EXTRAJUDICIAL SALE G.4. RIGHT TO SURPLUS OR DEFICIENCY G.5. EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE SALE H. WAIVER OF SECURITY BY CREDITOR I. REDEMPTION

439 439 439

VI. ANTICHRESIS

445

A. CHARACTERISTICS B. FORMAL REQUISITES C. OBJECT OF THE CONTRACT D. AS DISTINGUISHED FROM OTHER CONTRACTS D. OBLIGATIONS OF ANTICHRETIC CREDITOR E. REMEDIES OF CREDITOR IN CASE OF NON-PAYMENT OF DEBT

445 445 445

CIVIL LAW

VIII. QUASI-CONTRACTS

446

439

A. NEGOTIORUM GESTIO (UNAUTHORIZED MANAGEMENT) A.1. OBLIGATIONS OF A GESTOR A.2. OBLIGATIONS OF THE OWNER OF THE PROPERTY OR BUSINESS A.3. EFFECT OF RATIFICATION A.4. EXTINGUISHMENT OF MANAGEMENT B. SOLUTIO INDEBITI (UNDUE PAYMENT) C. OTHER QUASI-CONTRACTS

439 440

IX. CONCURRENCE AND PREFERENCE OF CREDITS

440

443

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

443

LAND TITLES AND DEEDS

443 444

I. TORRENS SYSTEM

455 456 457

445

CLASSIFICATION OF LANDS: ADVANTAGES ADMINISTRATION OF THE TORRENS SYSTEM CERTIFICATE OF TITLE EFFECT OF REGISTRATION UNDER THE TORRENS SYSTEM EFFECT OF NON-REGISTRATION

445

II. THE REGALIAN DOCTRINE

460

446

A. EFFECTS B. CONCEPT OF NATIVE TITLE, TIME IMMEMORIAL POSSESSION

461

441 441 441 442 443

xvii

446 446 447 447 447 447 448 450 450 450 451 452 452 453 453 453 454

457 458 458 459

461

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III. CITIZENSHIP REQUIREMENT

462

A. INDIVIDUALS B. CORPORATIONS

462 463

IV. ORIGINAL REGISTRATION

464

A. KINDS OF ORIGINAL REGISTRATION B. WHO MAY APPLY C. PROCEDURE IN ORDINARY LAND REGISTRATION D. EVIDENCE NECESSARY

465 470 471

VI. CADASTRAL REGISTRATION

478

VII. JUDICIAL CONFIRMATION OF IMPERFECT TITLE

480

A. FILING OF THE APPLICATION: B. PROCEDURE IN JUDICIAL CONFIRMATION:

481

VIII. REMEDIES

482

IX. PETITIONS AND MOTIONS AFTER ORIGINAL REGISTRATION

484

X. DEALINGS WITH UNREGISTERED LANDS

486

XI. NON-REGISTERABLE PROPERTIES

487

TORTS I. PRELIMINARY CONSIDERATIONS A. DEFINITION OF TORT A.1. ACCORDING TO MANNER OF COMMISSION A.2. ACCORDING TO SCOPE B. DEFINITION OF QUASI-DELICT C. CULPA AQUILIANA DISTINGUISHED FROM CRIME D. CULPA AQUILIANA DISTINGUISHED FROM CULPA

CONTRACTUAL; PRESENCE OF CONTRACTUAL RELATIONS D.1. AS TO SOURCE D.2. AS TO BURDEN OF PROOF D.3. AS TO APPLICABILITY OF THE DOCTRINE OF PROXIMATE CAUSE D.4. AS TO THE DEFENSE OF AN EMPLOYER FOR THE NEGLIGENCE OF AN EMPLOYEE

464 464

V. SUBSEQUENT REGISTRATION

CIVIL LAW

481

489 490 490 490 490 490 491

xviii

491 491 491 491 491

II. QUASI-DELICT

492

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

492

III. INTENTIONAL TORTS

508

A. HUMAN RELATIONS TORTS A.1. ABUSE OF RIGHT

508 508

493 493 494 494 496 496 496 496 502 504 504 505 505 505 505 505 506 506 507 507 507

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A.2. ACTS CONTRARY TO LAW A.3. ACTS CONTRARY TO MORALS A.4. UNJUST ENRICHMENT A.5. VIOLATION OF HUMAN DIGNITY FAMILY RELATIONS SOCIAL RELATIONS ECONOMIC RELATIONS A.6 DERELICTION OF DUTY A.7. UNFAIR COMPETITION B. INDEPENDENT CIVIL ACTIONS B.1. VIOLATION OF CIVIL AND POLITICAL RIGHTS B.2. DEFAMATION, FRAUD, PHYSICAL INJURIES B.3. NEGLECT OF DUTY B.4. CATCH-ALL INDEPENDENT CIVIL ACTION IV. LIABILITY ATTACHED TO SPECIFIC PERSONS A. STRICT LIABILITY A.1. POSSESSOR OR USER OF ANIMALS A.2. PROVINCES, CITIES, AND MUNICIPALITIES A.3. PROPRIETOR OF BUILDING OR STRUCTURE A.4. ENGINEER OR ARCHITECT OF COLLAPSED BUILDING A.5. OWNERS OF ENTERPRISES OR OTHER EMPLOYERS A.6. HEAD OF A FAMILY FOR THINGS THROWN OR FALLING A.7. PRODUCTS LIABILITY I. MANUFACTURERS / PROCESSORS OF FOODSTUFFS II. CONSUMER ACT – RA 7394, SECS. 92-107 (CH. 1) A.8. NUISANCE EASEMENT AGAINST NUISANCE DAMAGES

509 509 511 511 513 514 514 515 515 515 515

CIVIL LAW

C. TYPES OF DAMAGES

531

II. ACTUAL & COMPENSATORY DAMAGES

532

III. MORAL DAMAGES

539

IV. NOMINAL DAMAGES

546

V. TEMPERATE DAMAGES

547

VI.LIQUIDATED DAMAGES

548

VII. EXEMPLARY OR CORRECTIVE DAMAGES 549

516 518

VIII. GRADUATION OF DAMAGES

552

519

IX. MISCELLANEOUS RULES DAMAGES THAT CANNOT CO-EXIST DAMAGES THAT MUST CO-EXIST

554 554 554

519

PRIVATE INTERNATIONAL LAW

519

I. INTRODUCTION

556

519

II. JURISDICTION AND CHOICE OF LAW

557

518

519 520 521 521 522 522 522 525 525 530

I. DAMAGES

531

A. DEFINITION B. WHEN ALLOWED

531 531 xix

A. JURISDICTION A.1. BASIS OF EXERCISE OF JUDICIAL JURISDICTION A.2. WAYS OF DEALING WITH A CONFLICTS PROBLEM B. CHOICE OF LAW C. THE PROBLEM OF CHARACTERIZATION C.1 CHARACTERIZATION AND THE SINGLE-ASPECT METHOD C.2 DEPECAGE D. THE PROBLEM OF RENVOI D.1. DEFINITION D.2. VARIOUS WAYS OF DEALING WITH THE PROBLEM OF RENVOI E. NOTICE AND PROOF OF FOREIGN LAW E.1. EXTENT OF JUDICIAL NOTICE E.2. PROOF OF FOREIGN LAW E.3. EXCEPTIONS TO THE APPLICATION OF FOREIGN LAW

555

557 557 557 558 559 559 560 560 560 560 560 560 561 561

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III. PERSONAL LAW

561

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

561

IV. CHOICE OF LAW PROBLEMS

564

A. CHOICE-OF-LAW IN FAMILY RELATIONS A.1. MARRIAGE A.2. DIVORCE AND SEPARATION A.3. ANNULMENT AND DECLARATION OF NULLITY A.4. PARENTAL RELATIONS A.5. ADOPTION B. CHOICE OF LAW IN PROPERTY B.1. THE CONTROLLING LAW B.2. CAPACITY TO TRANSFER OR ACQUIRE PROPERTY B.3. EXTRINSIC AND INTRINSIC VALIDITY OF CONVEYANCES B.4. EXCEPTION TO LEX SITUS RULE B.5. SITUS OF CERTAIN PROPERTIES C. CHOICE OF LAW IN CONTRACTS C.1. EXTRINSIC VALIDITY OF CONTRACTS C.2. INTRINSIC VALIDITY OF

561 561 562 562 562 562 562 562 563 563 563 563 563 563

564 564 565 565 565 566 566 566 566 566 566 566 566 566 xx

CIVIL LAW

CONTRACTS C.3. CAPACITY TO ENTER INTO CONTRACTS C.4. CHOICE OF LAW ISSUES IN CONFLICTS CONTRACTS CASES C.5. ADHESION CONTRACTS D. CHOICE OF LAW IN WILLS, SUCCESSION AND ADMINISTRATION OF ESTATES D.1. EXTRINSIC VALIDITY OF WILLS D.2. INTRINSIC VALIDITY OF WILLS D.3. INTERPRETATION OF WILLS D.4. REVOCATION D.5. PROBATE D.6. ADMINISTRATION OF ESTATES E. CHOICE OF LAW IN TORTS AND CRIMES E.1. LEX LOCI DELICTI COMMISSI E.2. MODERN THEORIES ON FOREIGN TORT LIABILITY E.3. FOREIGN TORT CLAIMS E.4. DISTINGUISHING BETWEEN TORTS AND CRIMES E.5. LEX LOCI DELICTI F. CHOICE OF LAW AFFECTING CORPORATIONS AND OTHER JURIDICAL ENTITIES F.1. CORPORATIONS F.2. PARTNERSHIPS

566

V. FOREIGN JUDGMENTS

571

A. RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS

571

SUMMARY OF CONFLICTS OF LAW RULES

573

567 567 567 567 567 567 567 567 567 567 568 568 568 568 568 568 569 569 570

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I. Effect and Application of Laws

CIVIL LAW

Conclusive Presumption: That everyone knows the law, even if they have no actual knowledge of the law. Mistake of Fact & Difficult Questions of Law:

A. WHEN LAWS TAKE EFFECT

These may excuse a party from the legal consequences of his conduct; but not ignorance of law:

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

•

In specific instances provided by law, mistake as to difficult legal questions has been given the same effect as a mistake of fact. (Tolentino)

•

The laws referred to by this article are those of the Philippines. There is no conclusive presumption of knowledge of foreign laws. (Tolentino)

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

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

General Rule: All statutes are to be construed as having only prospective operation.

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

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

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

D. MANDATORY OR PROHIBITORY LAWS Art. 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity.

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

Art. 17, par. 3 Prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be PAGE 2 OF 574

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rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.

CIVIL LAW

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

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

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

W aiver – voluntary and intentional relinquishment or abandonment of a known legal right or privilege. It has been ruled that a waiver to be valid and effective must be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him [RB Michael Press v Galit (2008)]

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

Exceptions: (1) If the waiver is contrary to law, public order, public policy, morals or good customs (2) If the waiver prejudices a third person (3) If the alleged rights do not yet exist (4) If the right is a natural right

F. REPEAL OF LAWS Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse, or custom or practice to the contrary.

H. DUTY TO RENDER JUDGMENT Art. 9. No judge or court shall decline to render judgment by reason of the silence, obscurity or insufficiency of the laws.

When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.

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

Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution. Two Kinds of Repeal (Tolentino) (1) Express or Declared – contained in a special provision of a subsequent law (2) Implied or Tacit – takes place when the provisions of the subsequent law are incompatible or inconsistent with those of an earlier law.

I. PRESUMPTION AND APPLICABILITY OF CUSTOM Art. 10. In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. PAGE 3 OF 574

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

J. LEGAL PERIODS Art. 13. When the laws speak of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twentyfour hours; and nights from sunset to sunrise. If months are designated by their name, they shall be computed by the number of days which they respectively have. In computing a period, the first day shall be excluded, and the last day included. Revised Adm inistrative Code Section 31. Legal Periods. - "Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; "day," to a day of twenty-four hours; and "night," from sunset to sunrise. Policy on Last Day being a Legal Holiday/Sunday If the period arises by statute or orders by the government, the last day will automatically be considered the next working day If the period arises from a contractual relationship, the act will still be due on that Legal Holiday/Sunday There obviously exists a manifest incompatibility in the manner of computing legal periods between the Civil Code and the Revised Administrative Code of 1987. Since the Administrative Code is the more recent law, it governs the computation of legal period [CIR vs Primetown (2007)]

CIVIL LAW

K. APPLICABILITY OF PENAL LAWS Art. 14. Penal laws and those of public security and safety shall be obligatory upon all who live or sojourn in the Philippine territory, subject to the principles of public international law and to treaty stipulations. Exemptions under International Law (Theory of Extraterritoriality): (1) When the offense is committed by a foreign sovereign while in Philippine territory (2) When the offense is committed by diplomatic representatives (3) When the offense is committed in a public or armed vessel of a foreign country.

L. BINDING EFFECT Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. Art. 16. Real property as well as personal property is subject to the law of the country where it is stipulated. However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found. Art. 17.The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed. When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by PAGE 4 OF 574

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

CIVIL LAW

II. Persons Personality A. CONCEPT PERSONALITY

OF

Juridical Capacity

PERSON

and AND

Capacity to Act

Fitness of man to be the Power to do acts subject of legal with legal effect relations Passive

Active

Aptitude for the Holding Aptitude for the and Enjoyment of rights Exercise of rights Inherent persons

in

Lost upon death

natural Must be acquired Lost through death and other causes

Can exist without Must exist with capacity to act juridical capacity Cannot be limited or May be restricted restricted or limited Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every natural person and is lost only through death. Capacity to act, which is the power to do acts with legal effect, is acquired and may be lost. N.B.: Juridical capacity can exist even without capacity to act; the existence of the latter implies that of the former. Full civil capacity is the existence of both capacity to act and juridical capacity. Capacity and incapacity depends on the law, therefore it cannot be modified by agreements. It is a matter of public interest. (Tolentino)

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

Birth – complete removal of the fetus from the mother’s womb; before birth, a fetus is merely part of the mother’s internal organs. It is enough that the child lives even for an instant. Proof that the fetus was alive upon separation is complete respiration as atest or sign of independent life It is presumed that the child was alive and it is the contradicting party who has the burden of proof. Intra-Uterine Life When Considered Born 7 m onths or more

Alive upon delivery

Less than 7 months

Alive only after completion of 24 hours from delivery

CIVIL LAW

An aborted fetus had conditional personality but never acquired legal rights/civil personality because it was not alive at the time of delivery from the mother’s womb. No damages can be claimed in behalfof the unborn child. [Geluz vs CA (1961)]

C. DEATH Art. 42. Civil personality is extinguished by death. The effect of death upon the rights and obligations of the deceased is determined by law, by contract and by will. Art. 43. If there is a doubt, as between two or more persons who are called to succeed each other, as to which of them died first, whoever alleges the death of one prior to the other, shall prove the same; in the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other. Criminal liability ends with death BUT civil liability may be charged against the estate [People v. Tirol, (1981)]. Note: Article 43 provides a statutory presumption when there is doubt on the order of death between persons who are called to succeed each other (only). The statutory presumption of Article 43 was not applied due to the presence of a credible eyewitness as to who died first [Joaquin v. Navarro, (1948)]. Compare Art. 43 with Rule 131, Sec. 3 (jj), presum ption of Survivorship. Art. 43

Rule 131, Sec. 3 (jj)

Only use the presumptions when there are no facts to get inferences from

Personality of Conceived Child (1) Limited - only for purposes favorable to it. (2) Conditional - it depends upon the child being born alive later A conceived child can acquire rights while still in the mother’s womb. It can inherit by will or by intestacy. Period of Conception -the first 120 days of the 300 days preceding the birth of the child. PAGE 6 OF 574

Only use for succession purposes

Cannot be used for succession purposes

In any circumstance

Only during death in calamities, wreck, battle or conflagration

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

actions, in conformity with the laws and regulations of their organization. Article 47. Upon the dissolution of corporations, institutions and other entities for public interest or purpose mentioned in No. 2 of article 44, their property and other assets shall be disposed of in pursuance of law or the charter creating them. If nothing has been specified on this point, the property and other assets shall be applied to similar purposes for the benefit of the region, province, city or municipality which during the existence of the institution derived the principal benefits from the same.

Presumed Survivor

Both under 15

Older

Both above 60

Younger

One under 15, the other above 60

One under 15

Both over 15 and under 60; different sexes

Male

Both over 15 and under 60; same sex

Older

One under 15 or over 60, the other between those ages

One between 15 and 60

CIVIL LAW

Concept of Juridical Persons is that an abstract being is formed for the realization of a collective purpose that the law granted with capacity for rights and obligations. It requires recognition of the State and is independent of the members (Tolentino).

D. JURIDICAL PERSONS E. RESTRICTIONS ON CIVIL CAPACITY

Article 44. The following are juridical persons:

E. 1. PRESUMPTION OF CAPACITY

(1) The State and its political subdivisions;

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

(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law; (3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.

E. 2. RESTRICTIONS ON CAPACITY TO ACT Art. 38.Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person from certain obligations, as when the latter arise from his acts or from property relations, such as easements.

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

Art. 39. The following circumstances, among others, modify or limit capacity to act: age, insanity, imbecility, the state of being a deaf-mute, penalty, prodigality, family relations, alienage, absence, insolvency and trusteeship. The consequences of these circumstances are governed in this Code,

Article 46. Juridical persons may acquire and possess property of all kinds, as well as incur obligations and bring civil or criminal PAGE 7 OF 574

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other codes, the Rules of Court, and in special laws. Capacity to act is not limited on account of religious belief or political opinion. A married woman, twenty-one years of age or over, is qualified for all acts of civil life, except in cases specified by law. General rule: Incapacitated persons are not exempt from certain obligations arising from his acts or property relations. I. Minority RA 6809 (1989): An act lowering the age of majority from twenty-one to eighteen years.

CIVIL LAW

Minors are obliged to make restitution insofar as they have been benefited (Art. 1399). [Braganza vs Villa Abrille (1959] Effects on Marriage (1) May not yet contract marriage (Art. 5, FC). (2) Marriages, where one of the parties is below 18, even with the consent of parents/guardians, are void (Art. 35, FC). Effect on Crimes (1) General rule: EXEMPTED from criminal liability (2) Exception: Acted with discernment, and the minor is between 15 and 18 years of age.

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

II. Insanity Insanity includes many forms of mental disease, either inherited or acquired. A person may not be insane but only mentally deficient (idiocy, imbecility, feeblemindedness). Effect on Contracts (1) Incapacity to give consent to a contract (Art. 1327(2)) (2) Contracts entered into during lucid intervals are valid (Art. 1328) (3) Restitution of benefits (Art. 1399) (4) Voidable if one of the parties is insane (Art. 1390) (5) Unenforceable if both of the parties are insane (Art. 1403 (3)) Effect on Crimes (1) General rule: EXEMPTED from criminal liability (2) Exception: Acted during lucid interval Effect on Marriage

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

May be annulled if either party was of unsound mind unless the such party after coming to reason, freely cohabited with the other (Art. 45(2), FC)

When a minor made no active misrepresentation as to his minority and such minority is known to the other party, the contract is voidable as to the minor. [Bambalan vs Miranda (1928)]

Action for annulment of marriage must be filed by the sane spouse who had no knowledge of the other’s insanity, or by any relative/guardian of the insane before the

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death of either party; or by the insane spouse during a lucid interval or after regaining sanity (Art. 47(2), FC) In the absence of proof that the defendant had lost his reason or became demented a few moments prior to or during the perpetration of the crime, it is presumed that he was in a normal condition of mind. It is improper to conclude that he acted unconsciously, in order to relieve him from responsibility on the ground of exceptional mental condition, unless his insanity and absence of will are proven. [USA vs Vaguilar (1914)] Capacity to act must be supposed to attach to a person who has not previously been declared incapable, and such capacity is presumed to continue so long as the contrary be not proved, that is, that at the moment of his acting he was incapable, crazy, insane, or out his mind [Standard Oil vs Arenas (1911)] III. Deaf-Mutism (1) Cannot give consent to a contract if he/she also does not know how to write (Art. 1327(2), CC)

(1) It is an accessory penalty imposed upon persons who are sentenced to a principal penalty not lower than reclusion temporal (Art. 41, RPC). (2) Offender is deprived of rights of parental authority, or guardianship, of marital authority, of the right to manage his property and of the right to dispose of such by any act inter vivos (Art. 34, RPC) (3) For the validity of marriage settlements, the participation of the guardian shall be indispensable(Art. 123) VI. Fam ily relations (1) Justifying circumstance if acted in defense of person/rights of spouse, ascendants, descendants, brothers/sisters, and other relatives up to the 4th civil degree (Art. 11(2), RPC) (2) Mitigating circumstance if acted in the immediate vindication of a grave offense/felony committed against his spouse, ascendants or relatives of the same civil degree (Art. 13(5), RPC) (3) Incestuous and void marriages:

(2) Can make a valid WILL, provided: he must personally read the will. The contents of the same have either been read personally by him or otherwise communicated to him by 2 persons (Art. 807, CC) (3) Cannot be a witness to the execution of a will (Art. 820, CC) (4) Voidable if one of the parties is deaf-mute and does not know how to write (5) Unenforceable if both of the parties are deaf-mutes and does not know how to write IV. Prodigality

•

Between ascendants descendants of any degree;

and

•

Between brothers and sisters, whether full or half-blood. (Art. 37, FC)

(4) Donations/grants of gratuitous advantage between spouses during the marriage shall be VOID, except moderate gifts during family occasions (Art. 87, FC) (5) Prescription does not run between spouses, parent and child, guardian and ward (Art. 1109) (6) Descendants cannot be compelled to testifyin a criminal case, against his parents and grandparents •

Incompetent includes prodigals (Rules of Court Rule 92, Sec 2) Note: It is not the circumstance of prodigality, but the fact of being under guardianship that restricts capacity to act.

CIVIL LAW

UNLESS: crime was against the descendant OR by one parent against the other (Art. 215, FC)

(7) Spouses cannot sell property to each other, EXCEPT: •

V. Civil interdiction PAGE 9 OF 574

Absolute separation is agreed upon in the marriage settlements

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Judicial separation of property (Art. 1490)

(8) A suit between family members cannot prosper without any showing that earnest effort towards a compromise have been made but have failed (Art. 151, FC) •

EXCEPT: questions on civil status of persons, validity of a marriage or a legal separation, any ground for legal separation, future support, jurisdiction of courts, future legitime (Art. 2035).

CIVIL LAW

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

VII. Alienage Dual citizenship is different from dual allegiance. The former arises when, as a result of the concurrent application of the different laws of two or more states, a person is simultaneously considered a national by the said states. Dual allegiance, on the other hand, refers to the situation in which a person simultaneously owes, by some positive act, loyalty to two or more states. While dual citizenship is involuntary, dual allegiance is the result of an individual’s volition. For candidates with dual citizenship, it should suffice if, upon the filing of their certificates of candidacy, they elect Philippine citizenship to terminate their status as persons with dual citizenship considering that their condition is the unavoidable consequence of conflicting laws of different states. [Cordora vs COMELEC (2009)]

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

VIII. Absence

Art. 42.The subsequent marriage referred to in the preceding Article shall beautomatically terminated by the recording of the affidavit of reappearance of the absent spouse, unless there is a judgment annulling the previous marriage or declaring it void ab initio.

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

For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse.

A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil registry of the residence of the parties to the subsequent marriage at the instance of any interested person, with due notice to the spouses of the subsequent marriage and without prejudice to the fact of reappearance being judicially determined in case such fact is disputed.

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CIVIL LAW

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

F. DOMICILE AND RESIDENCE OF PERSON For Natural Persons: The place of their habitual residence (Art. 50)

The Family Code took effect on August 3, 1988.

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

B. REPEAL AND AMENDMENT

Dom icile vs. Residence While domicile is permanent (there is intent to remain), residence is temporary and may be changed anytime (there is no necessary intent to remain). Requisites of Dom icile [Gallego v. Vera (1941)] 1. Physical Presence in a fixed place 2. Intent to remain permanently (animus manendi) Kinds of Dom icile (1) Domicile of Origin •

Domicile of parents of a person at the time he was born.

(2) Domicile of Choice •

Domicile chosen by a person, changing his domicile of origin.

•

A 3rd requisite is necessary – intention not to return to one’s domicile as his permanent place.

(3) Domicile by Operation of Law (i.e., Article 69, domicile of minor) •

A married woman does not lose her domicile to her husband. [Romualdez-Marcos vs. Comelec (1995)]

III. Family Code A. EFFECT AND RETROACTIVITY PAGE 11 OF 574

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

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IV. Marriage And Personal Relationship Between Spouses

CIVIL LAW

answerable in damages in accordance with Article 21 aforesaid. [Wassmer vs Velez (1964)] Article 21 may be applied in a breach of promise to marry where the woman is a victim of moral seduction. [Baksh vs CA (1993)]

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

C. REQUISITES C.1. KINDS OF REQUISITES AND EFFECTS OF NON-COMPLIANCE Essential Requisites Formal Requisites (Art. (Art. 2) 3)

1987 Constitution Article XV, Section 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State.

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

Legal Capacity of the contracting parties, who must be a male and a female

Authority of solemnizing officer

Consent (of the parties) freely given in the presence of a solemnizing officer.

A valid marriage license (subject to exceptions) Marriage Ceremony

Exceptions license:

for

a

valid

marriage

(1) Marriages in articulo mortis or when one or both parties are at the point of death, (2) Marriage in isolated places with no available means of transportation,

B. AGREEMENTS PRIOR TO MARRIAGE

(3) Marriage among Muslims or other ethnic cultural communities,

Extrajudicial dissolution of the conjugal partnership without judicial approval is void. [Espinosa vs Omana (2011)]

Marriages of those who have lived together as husband and wife without any legal impediment for at least 5 years

Mere breach of promise to marry is not an actionable wrong. But to formally set a wedding and go through all the abovedescribed preparation and publicity, only to walk out of it when the matrimony is about to be solemnized, is quite different. This is palpably and unjustifiably contrary to good customs for which defendant must be held

Effect of absence of requisites

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Absence Effect VOID

Defect or Irregularity VOIDABLE

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CIVIL LAW

Essential Requisites

Fraud here refers to matters which relate to the marital relation:

1. Gender

•

N.B.: The best source for citing the requirement of male/female is still statutory, as provided explicitly in the Family Code.

Non-disclosure of previous conviction by final judgment of a crime involving moral turpitude;

•

Concealment of pregnancy by another man;

•

Concealment of a sexually transmitted disease;

•

Concealment of drug addiction, alcoholism, lesbianism, or homosexuality

Changing of sex in one’s birth certificate on the basis of sex reassignment shall be denied; otherwise, it would result in confusion and would allow marriage between persons of the same sex which is in defiance of the law, as marriage is a union between a man and a woman.[Silverio v. Republic (2007)] 2. Age

Formal Requisites 1. Cerem ony

Legal Capacity (Art. 5) Male or female 18 years old and above, not under any of the impediments mentioned in Art. 37 (incestuous marriages) & Art. 38 (marriages against public policy) may contract marriage. 3. Consent freely given Consent here refers to the consent of the contracting parties; not of the parent/guardian in those cases where such consent is required (when either party is between 18 to 21 years of age).

Marriage Ceremony No prescribed form or religious rite for the solemnization of marriage is required. (Art. 6) The couple's written agreement where they declare themselves as husband and wife, signed by them before a judge and two capable witnesses, even though it was independently made by them, still counts as a valid ceremony. [Martinez v. Tan, (1909)] Minimum requirements prescribed by law: 1.

Absence: A marriage entered into by a person whose real intent is to avoid prosecution for rape is void for total lack of consent. The accused did not intend to be married. He merely used such marriage to escape criminal liability. [People v. Santiago, (1927)] Defect: Art. 45, FC. A marriage may be annulled for any of the following causes existing at the time of the marriage: xxx (3) that the consent of either party was obtained by fraud, unless such party afterwards, with full knowledge of the facts constituting the fraud, freely cohabited with the other as husband and wife.

Appearance of contracting parties personally before the solemnizing officer (Art. 3)

2. Personal declaration that they take each other as husband and wife. (Art. 3) 3. Presence of at least two witnesses of legal age. (Art. 3) 4. The declaration shall be contained in the Marriage Certificate. (Art. 6) 5. Marriage certificate shall be signed by the contracting parties and their witnesses and attested by the solemnizing officer. (Art. 6) N.B.: In a marriage in articulo mortis, when one or both parties are unable to sign the marriage certificate, it shall be sufficient for one of the witnesses to write the name of said party, which shall be attested by the solemnizing officer. (Art. 6, par. 2)

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Places where marriage shall be publicly solemnized: 1.

Articulo Mortis

Chambers of the judge or in open court

(1) Ship Captain or Airplane Chief may solemnize a marriage in articulo mortis between passengers or crew members (Art. 7, 31)

2. Church, chapel, or temple 3. Office of the consul-general, consul, or vice-consul (Art. 8)

(2) A Military commander of a unit may solemnize marriages in articulo mortis between persons w/in the zone of military operation. (Art. 7, 32)

Exceptions: •

Marriages performed in articulo mortis or in remote places. (Art. 29)

•

Where both parties request in writing that marriage be solemnized at a place designated by them.

Marriages Abroad (1) Consul-general, consul or vice-consul may solemnize marriages between Filipino citizens abroad. (Art. 7, 10)

N.B.: Non-compliance with this requirement does not invalidate the marriage (premise: more witnesses = more people can notify officer of impediments to marriage). 2. Authority Officer

of

the

Solemnizing

W ho may solemnize marriage: Normal Circumstances (1) Incumbent member of the Judiciary within his jurisdiction. (Art. 7) (2) Priest, Rabbi, Imam or Minister of any Church or Religious Sect. Must be: (a) Duly authorized by his church or religious sect (b) Registered with the civil registrar general (c) Acting within the limits of the written authority granted to him by his church or religious sect. (d) At least one of the contracting parties belongs to the solemnizing officer’s church or religious sect. (Art. 7) (3) Municipal and City Mayors (LGC sec. 444455) (4)

CIVIL LAW

Where a judge solemnizes a marriage outside his jurisdiction, there is a resultant irregularity in the formal requisite laid down in Article 3, which while it may not affect the validity of the marriage, may subject the officiating official to administrative liability. [Navarro v. Domagtoy (1996); Aranes v. Occiano (2002)] A marriage which preceded the issuance of the marriage license is void and the subsequent issuance of such license cannot render valid the marriage. Except in cases provided by law, it is the marriage license that gives the solemnizing officer the authority to solemnize a marriage. [Aranes v Occiano (2002)]. 3. License required GENERAL RULE: License required, which is issued by local registrar of city or municipality where either contracting party habitually resides (Art. 9).Each contracting party should file separately. (Art. 11) RA 10354, Sec 15 – Certificate of Compliance – No marriage license shall be issued by the Local Civil Registrar unless the applicants present a Certificate of Compliance issued for free by the local Family Planning Office certifying that they had duly received adequate instructions and information on responsible parenthood,

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family planning, breastfeeding, and infant nutrition. W here Valid: License valid in any part of the Philippines Period of Validity: It will be valid for 120 days from date of issue, automatically cancelled at the expiration of such period.

CIVIL LAW

(4) Marriages by Muslims and Ethnic cultural minorities provided they are solemnized in accordance with their customs, rites or practices. (Art. 33) (5) Marriage by parties who have cohabited for at least 5 years without any legal impediment to marry each other. (Art. 34, Ninal vs. Badayog (2000))

I. Special Situations a. Anyone between 18-21 years old who has not yet been emancipated must present the written consent that was given by his or her parent or guardian. (Art. 14) b. Anyone between 21-25 must ask for advice from his or her parents or guardians. If the advice wasn’t obtained, the marriage license will only be released 3 months after the publication of the application. (Art. 15) II. Foreign National When either or both parties are foreign nationals: Certificate of legal capacity to contract marriage, issued by a diplomatic or consular official, shall be submitted before a marriage license can be obtained (Art. 21) Stateless persons or refugees from other countries: Affidavit stating circum stances showing capacity to contract marriage, instead of certificate of legal capacity (Art. 21)

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

legal

(3) The fact of absence of legal impediment between the parties must be present at the time of marriage; (1) 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 (2) The solemnizing officer must execute a sworn statement that he had ascertained the qualifications of the parties and that he had found no legal impediment to their marriage. [Borja-Manzano vs. Judge Sanchez (2001)] 4. M arriage certificate Absence and irregularity of marriage license and contract

III. Exceptions (1) Marriage in articulo mortis (Art. 27) ▪ The marriage may be solemnized without the necessity of a marriage license. ▪ It remains valid even if ailing party survives. (1) Between passengers or crew members in a ship or airplane (Art. 31) (2) Persons within a military zone (Art. 32) (3) Marriage in remote and inaccessible places (Art. 28)

There is a presumption of regularity of official acts, and the issuance of the Civil Registrar of a Certificate of Due Search and Inability to Findthe application for a marriage license certifies its inexistence, rendering the marriage void. [Republic v. CA and Castro (1994)] Before a marriage can be solemnized, a valid marriage license must be presented first, otherwise, it is void. [Moreno v. Bernabe (1995)]

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Marriage Certificate

Exceptions:

Where parties declare that they take each other as husband and wife; contains the ff:

(1) Marriage between persons below 18 years old (Art. 35(1))

(1) Full name, sex, age of party

(2) Bigamous or polygamous marriage (Art. 35(4))

(2) Citizenship, religion, habitual residence (3) Date and precise time of celebration of marriage (4) That marriage license was properly issued (except in marriages of exceptional character) (5) That parental consent was secured, when required (6) That requirement as to parental advice was complied with, when required

(3) Mistake in identity (Art. 35 (5)) (4) Marriages void under Article 53 (Art. 35 (6)) (5) Psychological incapacity (Art. 36) (6) Incestuous marriages (Art. 37) (7) Marriage void for reasons of public policy (Art. 38)

(7) That parties have entered into marriage settlements, if any (Art. 22)

Essential requisites

N.B.: Not an essential or formal requisite without which the marriage will be void[Madridejo v. de Leon (1930)]

Inherent in the parties, carried everywhere

Requirements independent of the parties

Best evidence that a marriage does exist. [Tenebro v. CA (2004)]

Lex Nationalii – Laws relating to family rights and duties, or to the status, condition, and legal capacity of persons are binding upon Phil citizens even though living abroad (Art. 15)

Lex loci celebrationisif valid where celebrated, then valid everywhere; forms of contracting marriage are to be regulated by the law where it is celebrated. (Art. 26)

Foreign marriages void under Phil law due to lack of an essential requisite, even if valid under foreign laws, will not be recognized.

Foreign marriages may be void under Phil law due to absence of a formal requisite under foreign laws.

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

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

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

Formal requisites

in

Foreign Divorces

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•

Those obtained by Filipino citizens are void under Philippine law.

•

If the foreign spouse obtains a valid divorce decree abroad capacitating him/her to remarry, the Filipino spouse

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shall have capacity to remarry under Philippine law. (Art. 26, par.2) Marriages judgm ent

dissolved

by

foreign

Aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law. The marriage tie when thus severed as to one party, ceases to bind either. [Van Dorn vs Romillo (1985)] A marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad, because of Articles 15 and 17 of the Civil Code. In mixed marriages involving a Filipino and a foreigner, Article 26 of the Family Code allows the former to contract a subsequent marriage in case the divorce is “validly obtained abroad by the alien spouse capacitating him or her to remarry.” A divorce obtained abroad by a couple, who are both aliens, may be recognized in the Philippines, provided it is consistent with their respective national laws. [Garcia vs Recio (2001)] The citizenship of the spouses at the time of the divorce determines their capacity to obtain a valid divorce. [Quita v. Dandan (1998)] Courts will only determine (1) whether the foreign judgment is inconsistent with an overriding public policy in the Philippines; and (2) whether any alleging party is able to prove an extrinsic ground to repel the foreign judgment, i.e. want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. If there is neither inconsistency with public policy nor adequate proof to repel the judgment, Philippine courts should, by default, recognize the foreign judgment as part of the comity of nations. [Fujiki vs Marinay (2013)]

E. COMMON-LAW MARRIAGES Art. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them

CIVIL LAW

through their work or industry shall be governed by the rules on co-ownership. In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the former's efforts consisted in the care and maintenance of the family and of the household. Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation. When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation. Art. 148. In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. In the absence of proof to the contrary, their contributions and corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of money and evidences of credit. If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly married to another, his or her shall be forfeited in the manner provided in

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the last paragraph of the preceding Article.

F. 1. VOID MARRIAGES

The foregoing rules on forfeiture shall likewise apply even if both parties are in both faith.

Type of Void Marriages (1) Absence requisites

of

any

formal/essential

(2) Bigamous and polygamous marriages Though there is no technical marital partnership between person living maritally without being lawfully married, nevertheless there is between them an informal civil partnership which would entitle the parties to an equal interest in property acquired by their joint efforts [Lesaca vs Lesaca (1952)]

(3) Subsequent marriage, reappearance of spouse

upon

(4) Bad faith of both spouses (5) Psychologically Incapacitated spouse (6) Void subsequent marriages (7) Incestuous Marriages

F. VOID AND VOIDABLE MARRIAGES

(8) Non-compliance with recording requirement after declaration of nullity

Presumption of Marriage

Art. 39. The action or defense for the declaration of absolute nullity shall not prescribe. However, in case of marriage celebrated before the effectivity of this Code and falling under Article 36, such action or defense shall prescribe in ten years after this Code shall taken effect. (As amended by Executive Order 227)

(1) Presumption in favor of a valid marriage (Art 220, CC) (2) The presumption that a man and a woman deporting themselves as husband and wife have entered into a lawful contract of marriage is satisfactory if uncontradicted. (Sec. 3 (aa), Rule 131, ROC) (3) In marriages of exceptional character, the existence of the marriage is presumed, even in the total absence of a marriage license. (Vda. De Jacob v CA (1999)) (4) If a marriage certificate is missing, and all means have not yet been exhausted to find it, then the marriage is presumed to exist (Sevilla v. Cardenas (2006)) Absence of a marriage certificate is not proof of absence of marriage. To prove the fact of marriage, the following would constitute competent evidence: (1) the testimony of witnesses to matrimony; (2) documentary photos or videos of the wedding; (3) the couple’s public cohabitation; and (4) birth and baptismal certificates of children born during the union. [Trinidad v CA (1998)]

a. Absence of Requisites Art. 4(1):The absence of any essential or formal requisites shall render the marriage void ab initio, except as stated in Article 35 (a). Art. 5: Any male or female of the age of eighteen years or upwards not under any of the impediments mentioned in Articles 37 and 38, may contract marriage. Void from the Beginning (Art. 35) (1) Marriage where any party is below eighteen years of age even with the consent of parents or guardians (2) Marriage solemnized by any person not legally authorized to perform marriages unless such marriages were contracted with either or both parties believing in good faith that the solemnizing officer had legal authority to do so. Note: One’s belief in good faith that the solemnizing officer has the required authority is a mistake of fact, and not of law.

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(3) Marriage solemnized without a valid marriage license, except in marriages under exceptional circumstances (4) Bigamous or polygamous marriages not falling under Article 41 (Art. 41: subsequent marriage by present spouse who obtained a declaration of presumptive death for absent spouse prior to the subsequent marriage) (5) There is a mistake as to the identity of the other contracting party (6) Subsequent marriages that are void under Article 53 (Non-compliance with Art. 52) To be considered void on the ground of absence of a marriage license, the law requires that the absence of such marriage license must be apparent on the marriage contract, or at the very least, supported by a certification from the local civil registrar that no such marriage license was issued to the parties. [Alcantara v. Alcantara (2007)]

The accused may still be charged with the crime of bigamy, even if there is a subsequent declaration of the nullity of the second marriage, so long as the first marriage was still subsisting when the second marriage was celebrated. [Capili vs People (2013)] c. Subsequent Marriage Spouse Is Absent

and

Polygam ous

W hen

One

Requirements for Subsequent Marriage to be Valid W hen Prior Spouse is Absent (Art. 41): (1) Subsequent marriage due to ordinary absence where: (a) Absent spouse had been absent for 4 consecutive years; (b) The spouse present had a wellfounded belief that absent spouse is dead; and (c) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse).

An action for nullity of marriage is imprescriptible. [Republic v. Dayot (2008)] b. Bigam ous Marriages

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(2) Subsequent marriage due extraordinary absence where:

to

Article 40 (No Judicial Declaration Of Nullity)

(a) Absent spouse had been missing for 2 consecutive years;

A person entered into a subsequent marriage without first getting a judicial declaration of nullity of the first void marriage

(b) There is danger of death under the circumstances set forth in Art. 391 CC attendant to the disappearance; a. Onboard vessel lost at sea voyage, airplane,

Article 41 (Presumptive Death) Failure of the spouse present to obtain a judicial declaration of presumptive death before entering a subsequent marriage

b. Armed forces in war, or c. Danger of death under other circumstances, existence not known

Article 44 (Bad Faith of both spouses) Both spouses entering a subsequent marriage after presumptive death, who acted in bad faith It is now settled that the fact that the first marriage is void from the beginning is not a defense in a bigamy charge. As with a voidable marriage, there must be a judicial declaration of the nullity of a marriage before contracting the second marriage. [Mercado vs Tan (2000)]

(c) The spouse present had a wellfounded belief that the missing person is dead; and (d) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse). Institution of a summary proceeding is not sufficient. There must also be a summary judgment. (Balane)

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Only the spouse present can file or institute a summary proceeding for the declaration of presumptive death of the absentee. [Bienvenido v. CA (1994)] While an action for declaration of death or absence under Rule 72, Section 1(m), expressly falls under the category of special proceedings, a petition for declaration of presumptive death under Article 41 of the Family Code is a summary proceeding, as provided for by Article 238 of the same Code. [Republic vs Granada (2012)] The belief of the present spouse must be the result of proper and honest to goodness inquiries and efforts to ascertain the whereabouts of the absent spouse and whether the absent spouse is still alive or is already dead. This is drawn from circumstances before and after the disappearance and the nature and extent of inquiries made. [Republic vs Granada (2012)] Effect of Spouse

Reappearance

of

Difference between Absence in the Civil Code and Family Code Family Code As to period

Exception: It is automatically terminated by the recording of the affidavit of reappearance of the absent spouse at the instance of any interested person, with due notice to the spouses of the subsequent marriage. (Art. 42) Note: It is the recording of the affidavit of reappearance that automatically terminates the subsequent marriage. Hence, if absentee spouse reappears without recording affidavit of reappearance, then there is no legal effect. Meanwhile, absentee spouse cannot remarry. (Tolentino) Exception to Exception: If there is a judgment annulling the previous marriage or declaring it void ab initio. (Art. 42) Good Faith: period of absence for presumptive death is MANDATORY thus cannot be shortened by good faith and if be done so will be void.

Civil Code

4 years under normal circumstances; 2 years under extraordinary circumstances

Absent for at least 7 years;

As to remarriage

In order to remarry, summary proceeding is necessary

Declaration of presumptive death is not necessary

As to who can institute the action

Can be instituted by the spouse present, any interested party, and the subsequent spouse

The spouses themselves

As to effect on subsequent marriage

Subsequent marriage is automatically terminated by the recording of an affidavit of reappearance of the absent spouse

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

As to ground

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

Absent

General Rule: The subsequent marriage remains valid.

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4 years under extraordinary circumstances

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

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Art. 391, Civil Code. The following shall be presumed dead for all purposes, including the division of the estate among the heirs: 1.

A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane;

2. A person in the armed forces who has taken part in war, and has been missing for four years; 3. A person who has been in danger of death under other circumstances and his existence has not been known for four years. N.B.: Although 7 years presumption of death of CC, the FC makes an purpose of remarriage requirement to 4 years.

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

d. Bad Faith of Both Spouses Art. 44. If both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio and all donations by reason of marriage and testamentary dispositions made by one in favor of the other are revoked by operation of law. E. Psychological Incapacity Contracted by any party who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital obligations of marriage, even if such incapacity becomes manifest only after its solemnization(Art. 36) There are 3 characteristics for determining psychological incapacity: gravity, antecedent, and incurability. [Santos v. Bedia-Santos (1995)] Molina Doctrine in Psychological Incapacity (1) The burden of proof to show the nullity of the marriage belongs to the plaintiff. This is to be investigated by the OSG for collusion.

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(2) The root cause of the psychological incapacity must be: (a) medically or clinically identified, (b) alleged in the complaint, (c) sufficiently proven by the experts, (d) clearly explained in the decision. (3) The incapacity must be proven to be existing at “the time of the celebration” of the marriage. (4) Such incapacity must also be shown to be medically or clinically permanent or incurable. (5) Such illness must be grave enough to bring about the disability of the party to assume the essential obligations of marriage. (6) The essential marital obligations must be those embraced by Articles 68 up to 71 of the Family Code as regards the husband and wife as well as Articles 220, 221, and 225 of the same Code in regard to parents and their children. (7) Interpretations given by the National Appellate Matrimonial Tribunal of the Catholic Church in the Philippines, while not controlling/decisive, should be given great respect by our courts. (8) The trial court must order the prosecuting attorney or fiscal and the Solicitor General to appear as counsel for the state. No decision shall be handed down unless the Solicitor General issues a certification. [Republic v Molina (1997)] Refusal of husband to have sex was interpreted as psychological incapacity. “A man who can but won’t is psychologically incapacitated” [Tsoi v. CA (1997)] Psychological incapacity maybe established by the totality of the evidence presented. Personal medical examination could be dispensed with. [Marcos v. Marcos (2000)] There is no requirement that the respondent be medically examined first. [Republic v. San Jose (2007)] “Pathological liar” considered as psychological incapacity, Molina guidelines met. [Antonio v. Reyes (2006)] In the task of ascertaining the presence of psychological incapacity as a ground for the

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nullity of marriage, the courts, which are concededly not endowed with expertise in the field of psychology, must of necessity rely on the opinions of experts in order to inform themselves on the matter, and thus enable themselves to arrive at an intelligent and judicious judgment. [Kalaw v. Fernandez (2015)]

Relationships outside of Art. 37 and 38 which are not impediments to marriage: brother-inlaw with sister-in-law, stepbrother with stepsister, guardian with ward, adopted with illegitimate child of the adopter, adopted son of the husband with adopted daughter of the wife, parties who have been convicted of adultery

f. Incestuous Marriages

h. Non-compliance Requirem ent after Nullity

Article 37 (Incestuous): (1) Between ascendants and descendants of any degree, legitimate or illegitimate (2) Between brothers and sisters, whether full or half blood, legitimate or illegitimate g. Against Public Policy Article 38 (Against Public Policy): (1) Between collateral blood relatives, legitimate or illegitimate, up to the fourth civil degree. (2) Between step-parents and step-children. ▪

N.B.: Stepbrothers and stepsisters can marry because marriages between them are not among those enumerated in Article 38.

(3) Between parents-in-law and children-inlaw. (4) Between adopting parent and adopted child. (5) Between the surviving spouse of the adopting parent and the adopted child. (6) Between the surviving spouse of the adopted child and the adopter. (7) Between an adopted child legitimate child of the adopter.

and

a

(8) Between adopted children of the same adopter. (9) Between parties where one, with the intention to marry the other, killed that other person's spouse, or his or her own spouse.

with Recording Declaration of

Article 53 (Non-Recording): Subsequent marriage of spouses, where the requirements of recording under Art. 52 have not have been complied with, shall be null and void. Art. 52.The judgment of annulment or of absolute nullity of the marriage, the partition and distribution of the properties of the spouses and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise, the same shall not affect third persons. Previous marriage declared void ab initio or annulled The word “solely” in Art. 40 referred to validating subsequent marriages but NOT to limiting the purposes for which a judicial declaration of nullity can be invoked. [Domingo v. CA (1993)]N.B.: Separation of property is also a valid purpose for filing for a judicial declaration of nullity. Even if the judge’s first marriage contracted in 1965 was void for not having a marriage license, the requirement for a judicial declaration of nullity in Art. 40 still applies for his subsequent marriage contracted in 1991. [Atienza v. Brillantes, (1995)] Where both marriages were contracted prior to the effectivity of the FC, the requirement of Art. 40 does not apply to the second marriage where a right is already vested and on which the FC cannot have retroactive effect. [Apiag v. Cantero, (1997)]

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Article 43 and 44 (Effects of Termination of Bigam ous Marriage under Art. 42)

Exceptions: (1) Nullity of marriage cases commenced before effectivity of A.M. No. 02-11-10-SC

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

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

Procedure marriage

Specifically, A.M. No. 02-11-10-SC extends only to marriages covered by the Family Code, which took effect on August 3, 1988, but, being a procedural rule that is prospective in application, is confined only to proceedings commenced after March 15, 2003. [Ablaza v. Republic (2010)]

attacking

a

void

Exception: A person in a void marriage must first file for a declaration of nullity in order to subsequently marry Requisites for valid rem arriage: Art. 52. The judgment of annulment or of absolute nullity of the marriage the partition and distribution of the properties of the spouses and the delivery of the children's presumptive legitimes shall be recorded in the appropriate civil registry and registries of property; otherwise the same shall not affect third persons.

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

General Rule: Only the husband or wife may file the petition. (AM No. 02-11-10 SC, Sec. 2a)

in

General Rule: Void Marriages may be attacked collaterally or directly.

Article44 (Donations):

W ho may file the petition for nullity of void marriages?

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(1) The previous marriage should be judicially declared void or annulled (final judgment) [Terre v. Terre (1992), Atienza v. Brillantes (1995)]; (2) Must comply with the requirements of Art. 52.

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Safeguard against collusion and No confession of judgm ent Art. 48 (2):In the cases referred to in the preceding paragraph, no judgment shall be based upon a stipulation of facts or confession of judgment. Stipulation of Facts: An admission by both parties after agreeing to the existence of any of the grounds or facts that would constitute a void/voidable marriage Confession of judgment: The admission by one party admitting his/her fault to cause the invalidity of the marriage. Although the admission of guilt of the wife constitutes a confession of judgment, the husband was also able to present other evidence to support the allegation. Hence, there was no collusion. [Ocampo v. Florenciano (1960)] Participation of the OSG The obvious intent of the AM 02-11-10-SC was to require the OSG to appear as counsel for the State in the capacity of a defensor vinculi (i.e., defender of the marital bond) to oppose petitions for, and to appeal judgments in favor of declarations of nullity of marriage under Article 36 of the Family Code, thereby ensuring that only the meritorious cases for the declaration of nullity of marriages based on psychological incapacity-those sufficiently evidenced by gravity, incurability and juridical antecedence-would succeed. [Mendoza vs Republic (2012)] No Motion to Dismiss AM 02-11-10-SC Sec.7 prohibits the filing of a motion to dismiss in actions for annulment of marriage. [Aurelio vs Aurelio (2011)] Effect of pendency of declaration of nullity:

action

for

(1) The court shall provide for the support of the spouses, (2) The custody and support of the common children, giving paramount consideration to their moral and material welfare, their choice of parent with whom they wish to remain. (3) The court shall also provide for visitation rights of other parent. (Art. 49)

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Effect of res judicata Suffice it to state that parties are bound not only as regards every matter offered and received to sustain or defeat their claims or demand but as to any other admissible matter which might have been offered for that purpose and of all other matters that could have been adjudged in that case. [Mallion vs Alcantara (2006)] Effect of final judgment declaring nullity The effects provided for by paragraphs (2), (3), (4) and (5) of Article 43 and by Article 44 shall also apply in the proper cases to marriages which are declared void ab initio or annulled by final judgment under Articles 40 and 45 (Art. 50(1)). Final judgment in such cases shall provide for: (1) Liquidation, partition, and distribution of the properties of the spouses (2) Custody and support of the common children (3) Delivery of their presumptive legitimes UNLESS: such matters had been adjudicated in previous judicial proceedings (Art. 50(2)) All creditors of the spouses/property regime shall be notified of the proceedings for liquidation (Art. 50(2 and 3)) In the partition, the conjugal dwelling and lot shall be adjudicated to the spouse with whom majority of the common children remain (Art. 102 and 129, Art. 50(4)) Tender years presumption: Children below 7 years age will be in the custody of the mother. Presumptive legitimes, computed as of the date of the final judgment, shall be delivered in cash, property or sound securities: (1) Unless the parties, by mutual agreement judicially approved, had already provided for such (Art. 51(1)) (2) The children/guardian/trustee of property may ask for the enforcement of the judgment (Art. 51(2))

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(3) The delivery of the presumptive legitimes shall not prejudice the ultimate successional rights, but the value of the properties already received shall be considered as advances on their legitime (Art. 51(3))

Article 45. A marriage may be annulled for any of the following causes, existing at the time of the marriage: (1) That the party in whose behalf it is sought to have the marriage annulled was eighteen years of age or over but below twenty-one, and the marriage was solemnized without the consent of the parents, guardian or person having substitute parental authority over the party, in that order, unless after attaining the age of twenty-one, such party freely cohabited with the other and both lived together as husband and wife;

Generally, children born or conceived within void marriages are illegitimate. Exceptions: •

Children conceived or born before the judgment under Article 36 has become final and executory (Art. 54)

•

Children conceived or born of subsequent marriages under Article 53 (Art. 54)

(2) That either party was of unsound mind, unless such party after coming to reason, freely cohabited with the other as husband and wife; (3) That the consent of either party was obtained by fraud, unless such party afterwards, with full knowledge of the facts constituting the fraud, freely cohabited with the other as husband and wife;

F.2. VOIDABLE OR ANNULLABLE MARRIAGE Article 14: In case either or both of the contracting parties, not having been emancipated by a previous marriage, are between the ages of eighteen and twentyone, Inaddition to the requirements of the preceding articles:

(4) That the consent of either party was obtained by force, intimidation or undue influence, unless the same having disappeared or ceased, such party thereafter freely cohabited with the other as husband and wife;

▪ Exhibit to the local civil registrar the consent to their marriage of their father, mother, surviving parent or guardian, or persons having legal charge of them, in the order mentioned

(5) That either party was physically incapable of consummating the marriage with the other, and such incapacity continues and appears to be incurable; or

▪ Manifested in writing by the interested party, who personally appears before the proper local civil registrar, or ▪ In the form of an affidavit made in the presence of two witnesses and attested before any official authorized by law to administer oaths ▪ The personal manifestation shall be recorded in both applications for marriage license, and the affidavit, if one is executed instead, shall be attached to said applications.

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(6) That either party was afflicted with a sexually-transmissible disease found to be serious and appears to be incurable.

Action to Annul: Action in rem, concerns status of parties; res is relation between parties or marriage tie; jurisdiction depends on nationality or domicile not the place of celebration.

Grounds for Annulment

Grounds for Annulment explained:

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

a. Lack of parental consent

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•

18 ≤ x < 21 without parental consent

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▪ Concealment of STD regardless of nature existing at time of marriage

Ratified by party 18 or above but below 21 upon free cohabitation upon reaching 21.

▪ Concealment of drug addiction, habitual alcoholism, homosexuality, lesbianism existing at time of marriage

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

(a) No other misrepresentation or deceit of character, health, rank, fortune or chastity shall constitute fraud. (b) Conviction of Crime: requisites are ▪ Moral turpitude ▪ Conviction (a) Concealment of Pregnancy ▪ Fraud against very essence of marriage; importance of procreation of children; an assault to the integrity of the union by introducing ALIEN BLOOD

b. Insanity •

Mental incapacity or insanity is a vice of consent;

•

Can be ratified by cohabitation after insanity is cured or during a lucid interval

•

Mere mental weakness is not a ground for annulment, but if found grave enough, it may amount to psychological incapacity.

(e) May be ratified upon free cohabitation after knowledge of fraud.

•

Intoxication, somnambulism where one had no mental capacity to give consent is equivalent to insanity

Art. 45 STD

•

•

▪ If husband knew of pregnancy, the marriage cannot be annulled on the ground of concealment

Art. 46 STD

Must exist at the time of the celebration of the marriage. Insanity that occurs after the celebration of marriage does not constitute a cause for nullity [Katipunan v. Tenorio (1937)]

Ground for annulment

The STD is a type of fraud which is a ground for annulment

Does not have to be concealed

Must be concealed

Law presumes SANITY, burden of proof on party alleging insanity

Must be serious and incurable

Need not be serious nor incurable

The STD itself is the ground for annulment

It is the concealment that gives rise to the annulment

c. Fraud (a) Only those enumerated in Art. 46: ▪ Non-disclosure of previous conviction by final judgment of a crime involving moral turpitude ▪ Concealment by wife at the time of marriage, that she was pregnant by another man

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Effect of Cure to Fraud in Art. 46:

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e. Impotency

Recovery or rehabilitation from STD, drug addiction, and habitual alcoholism will NOT bar action for annulment; the defect is not the disease, but the fraud which vitiated consent.

(a) Must exist at time of marriage, and be continuous and incurable. If incapacity can be remedied or is removable by operation, not annullable [Sarao v Guevarra(1940)]

Wife gave birth 3 months after marriage, and husband then filed for annulment on the ground of concealment of non-virginity. Denied. Court held that it was unbelievable that husband could not have noticed when wife had been at least 6 months pregnant prior to marriage. [Buccat v. Mangonon de Buccat, (1941)]

(b) Physical condition sexual intercourse with a person of the opposite sex is impossible, not mere sterility (c) Only the potent spouse can file the action for annulment and he/she must not have been aware of the other’s impotency at the time of marriage (Sempio-Diy)

The Supreme Court granted annulment because the wife concealed the fact that she was 4 months pregnant during the time of the marriage. Since Delizo was “naturally plump,” Aquino could hardly be expected to know, by mere looking, whether or not she was pregnant at the time of the marriage. [Aquino v. Delizo, (1960)]

▪

(d) When both spouses are impotent, marriage cannot be annulled because neither spouse is aggrieved. (SempioDiy)

It is the concealment of homosexuality, and not homosexuality per se, that vitiates the consent of the innocent party. Such concealment presupposes bad faith and intent to defraud the other party in giving consent to the marriage. [Almelor v. RTC, (2008)] d. Force, influence

intim idation,

▪

An impotent plaintiff could not have expected copulation with the other spouse. (Tolentino)

(e) Potency is presumed; party who alleges impotency has burden of proof [Jimenez v Canizares (1960)]

undue

(f) REFUSAL of wife to be examined DOES NOT PRESUME impotency[Jimenez v Canizares (1960)] N.B.: If she continues to refuse the physical exam, she can be held in contempt & ordered confined in jail until she does so

(a) Force must be one as to prevent party from acting as a free agent; will destroyed by fear/compulsion (b) Intimidation must be one as to compel the party by a reasonable/well-grounded fear of an imminent and grave evil upon his person/properties

If he/she was aware, it is implied that he/she renounced copulation by consenting to the marriage. (Tolentino)

f.

Sexually-transm issible serious and incurable

disease

(c) Degree of intimidation: age, sex, condition of person borne in mind

(a) Should exist at the time of the marriage

(d) Threat or intimidation as not to act as free agent;

(b) Should be found serious

(e) May be ratified upon cohabitation after force, intimidation, or undue influence has ceased or disappeared.

(d) Reason: danger to the health of spouse & offspring/s

(c) Should appear to be incurable

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(f) Not subject to ratification: cannot be ratified or convalidated by cohabitation: ▪ Affliction of STD is unknown to the other spouse (Balane) ▪ The other spouse must also be free from a similar STD. (Balane) W ho may file, Prescription, Ratification Ground (Art. 45)

Who can file (Art. 47)

Prescription (Art. 47)

Lack of parental consent

Party 18 or above but below 21

Within 5 years after attaining 21.

Parent or guardian who did not give consent

Before party below 21 reaches 21.

Insanity

Sane spouse with no knowledge of the other’s insanity

Any time before the death of either party

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

Free cohabitation of insane party after insane party comes to reason

Legal guardian of insane party Insane party

During lucid interval or after regaining sanity, and before death

Fraud

Injured party (defrauded party)

Within 5 years after discovery of fraud

Free cohabitation after having full knowledge of fraud

Force, intimidation, undue influence

Injured party

Within 5 years after disappearance of force, undue influence, or intimidation

Free cohabitation after the force or intimidation or undue influence has ceased or disappeared

Impotence

Potent spouse

Within 5 years after marriage

Cannot be ratified but action prescribes

STD

Healthy party

Within 5 years after marriage

Cannot be ratified but action prescribes

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Marriages Not Subject to Ratification: (1) One spouse is incurably impotent

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suffice to comply with the mandatory requirement. [Corpuz v. Ochoterena, (2004)]

(2) One spouse has an incurable STD Reason: Public policy and health. Although the action of to annul these marriages can prescribe (5 years). Presence of Prosecutor Art. 48:To prevent collusion between the parties, fabrication or suppression of evidence, the prosecuting attorney or fiscal shall appear on behalf of the State. In a legal separation or annulment case, the prosecuting attorney must first rule out collusion as a condition sine qua non for further proceedings. A certification by the prosecutor that he was present during the hearing and even cross-examined the plaintiff does not

Effects of Pending Decree of Annulm ent The Court shall provide for the support of spouses and support and custody of children. In determining which parent should have custody of them, their moral and material welfare shall be given paramount consideration. Effects of Decree of Annulment (Same as Decree of Nullity) The effects provided for by paragraphs (2), (3), (4) and (5) of Article 43 and by Article 44 shall also apply in the proper cases to marriages which are declared void ab initio or annulled by final judgment under Articles 40 and 45 (Art. 50(1)).

Comparative Table on Void and Voidable Marriages Void

Voidable

Nature

No validity from the time of performance

Valid until annulled

Susceptibility of Ratification

Cannot be ratified

Can be ratified

Property Relation

Only co-ownership; No ACP or CPG despite having entered into a marriage settlement

ACP or any other propery regime in accordance with the marriage settlement`

Status of Children

Illegitimate under Art. 165 (with Art 36 and Art 53 as exceptions)

Children are legitimate if conceived or born prior to the decree

How Impugned

(a) May be attached directly or collaterally, but for the purpose of remarriage, a judicial declaration of nullity is required (b) Can be impugned even after death of the parties

(a) Cannot be attacked collaterally

W ho may challenge validity

A proper interested person (depending on the dates of marriage and of filing of proceeding)

A party to the marriage

Susceptible to Prescription

Does not prescribe

Prescribes

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(b) Cannot be impugned after the death of one of the parties

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G. THE LAW ON SEPARATION OF THE SPOUSES

Muslims, this Muslim Code will apply. [Zamoranos vs People (2011)]

SEPARATION IN FACT

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

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

H. LEGAL SEPARATION Note: The grounds for legal separation are exclusive. (Article 55)

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

These must be filed within 5 years after occurrence of cause (Article 57) (1) Repeated physical violence or grossly abusive conduct directed against the petitioner, a common child, or a child of the petitioner; (2) Physical violence or moral pressure to compel the petitioner to change religious or political affiliation;

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

(3) Attempt of respondent to corrupt or induce the petitioner, a common child, or a child of the petitioner, to engage in prostitution, or connivance in such corruption or inducement; (4) Final judgment sentencing the respondent to imprisonment of more than six years, even if pardoned;

ABSOLUTE DIVORCE Article 26, par. 2 Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law. (As amended by Executive Order 227)

(5) Drug addiction or habitual alcoholism of the respondent; (6) Lesbianism or homosexuality of the respondent; •

If both parties are Muslims, there is a presumption that the Muslim Code or Muslim law is complied with. If together with it or in addition to it, the marriage is likewise solemnized in accordance with the Civil Code of the Philippines, whichever comes first is the validating rite and the second rite is the merely ceremonial one. But, in this case, as long as both parties are

It is the concealment of homosexuality, and not homosexuality per se, that vitiates the consent of the innocent party. Such concealment presupposes bad faith and intent to defraud the other party in giving consent to the marriage. (Almelor vs RTC (2008))

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

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(8) Sexual infidelity or perversion; •

of force, physical or other harm or threat of physical or other harm, or intimidation directed against the woman or child. This shall include, but not limited to, the following acts committed with the purpose or effect of controlling or restricting the woman's or her child's movement or conduct:

Adultery is not a continuing crime; it is consummated at every moment of carnal knowledge. Thus, every sexual act is a ground for legal separation. [People v. Zapata and Bondoc (1951)]

(9) Attempt by the respondent against the life of the petitioner; or

(a) Threatening to deprive or actually depriving the woman or her child of custody to her/his family;

(10) Abandonment of petitioner by respondent without justifiable cause for more than one year. •

CIVIL LAW

(b) Depriving or threatening to deprive the woman or her children of financialsupport legally due her or her family, or deliberately providing the woman's children insufficient financial support;

Abandonment is not mere physical estrangement but also financial and moral desertion. There must be an absolute cessation of marital relations, duties, and rights with the intention of perpetual separation. [Dela Cruz. v. Dela Cruz (1968)]

(c) Depriving or threatening to deprive the woman or her child of a legalright;

The death of one party in a legal separation case abates the action. This is because the death of either spouse automatically dissolves the marriage. An action for legal separation is also purely personal between the spouses. [Lapuz Sy v. Eufemio (1972)]

(d) Preventing the woman in engaging in any legitimate profession, occupation, business or activity or controlling the victim's own money or properties, or solely controlling the conjugal or common money, or properties;

Acts of Violence according to RA 9262(as grounds for legal separation under Art 55(1))

(6) Inflicting or threatening to inflict physical harm on oneself for the purpose of controlling her actions or decisions;

(1) Causing physical harm to the woman or her child; (2) Threatening to cause the woman or her child physical harm;

(7) Causing or attempting to cause the woman or her child to engage in any sexual activity which does not constitute rape, by force or threat of force, physical harm, or through intimidation directed against the woman or her child or her/his immediate family;

(3) Attempting to cause the woman or her child physical harm; (4) Placing the woman or her child in fear of imminent physical harm; (5) Attempting to compel or compelling the woman or her child to engage in conduct which the woman or her child has the right to desist from or desist from conduct which the woman or her child has the right to engage in, or attempting to restrict or restricting the woman's or her child's freedom of movement or conduct by force or threat

(8) Engaging in purposeful, knowing, or reckless conduct, personally or through another, that alarms or causes substantial emotional or psychological distress to the woman or her child. This shall include, but not be limited to, the following acts:

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(a) Stalking or following the woman or her child in public or private places;

W hen to file/try actions An action for legal separation shall be filed within five years from the time of the occurrence of the cause. (Art. 57)

(b) Peering in the window or lingering outside the residence of the woman or her child;

Cooling-off Effects

(c) Entering or remaining in the dwelling or on the property of the woman or her child against her/his will;

Reconcilation

Actions cannot be tried unless the court has attempted to reconcile the spouses, and determined that despite such efforts, reconciliation is highly improbable (Art. 59)

of

N.B.: This is without prejudice to judicial determination of custody of children, alimony, and support pendente lite.

(9) Causing mental or emotional anguish, public ridicule or humiliation to the woman or her child, including, but not limited to, repeated verbal and emotional abuse, and denial of financial support or custody of minor children of access to the woman's child/children.

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

Defenses Grounds for denying separation (Article 56):

and

Action cannot be tried before six monthshave elapsed from the filing of the petition (Art. 58).

(d) Destroying the property and personal belongings or inflicting harm to animals or pets of the woman or her child; and (e) Engaging in any form harassment or violence;

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legal

N.B.: This provision of the Family Code dictating a mandatory 6-month cooling-off period does not apply in cases where violence, as used in RA 9262 (Anti-Violence Against Women and their Children), is alleged. The case should be heard as soon as possible by the court.

(1) Condonation by aggrieved party (2) Consent by aggrieved party to the commission of the offense (3) Connivance between parties in the commission of the offense (4) Mutual guilt or Recrimination between spouses in the commission of any ground for legal separation

Confession of Judgment No decree of legal separation shall be based upon a stipulation of facts or a confession of judgment (Art. 60, par. 1. FC).

(5) Collusion between parties to obtain decree of legal separation

N.B.: Art. 60 par. 1 applies only if the judgment was based solely on the stipulation of facts or solely on the confession of judgment. Thus, if other grounds were used, Art. 60 par. 1 is not applicable. (Balane)

(6) Prescription of action for legal separation (Art. 57: 5 years from occurrence of the cause of action) (7) Reconciliation of parties during pendency of action (Art. 66 par.1) (8) Death of either party during pendency of action (Lapuz-Sy vs. Eufemio)

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

(4) Guilty spouse shall be disqualified from Inheriting from innocent spouse by intestate succession. The provisions in favor of the guilty party in the will of the innocent spouse shall also be revoked by operation of law. (Art. 63)

Effects of Filing Petition

(6) Innocent spouse may also revoke designation of guilty spouse as beneficiary in an Insurance policy, even if such stipulations are irrevocable. (Art. 64. FC, cf. PD 612, sec. 11)

(5) Donationsin favor of the guilty spouse may be revoked (Art. 64) but this action prescribes after 5 years from the decree of legal separation.

(1) The spouses are entitled to live separately, but the marital bond is not severed. (Art. 61 (1)) (2) Administration of community or conjugal property – If there is no written agreement between the parties, the court shall designate one of them or a third person to administer the ACP or CPG. (Art. 61, par. 2)

(7) Obligation for mutual support ceases, but the court may order the guilty spouse to support the innocent spouse. (Art. 198) (8) The wife shall continue to use the surnameof the husband even after the decree for legal separation. [Laperal v. Republic (1992)]

Effects of Pendency The Court shall provide for: (Art. 62, cf. Art. 49. FC)

Reconciliation

▪ Support of spouses

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

▪ Custody of children: The court shall give custody of children to one of them, if there is no written agreement between the spouses. ▪ Visitation rights of the other spouse Effects of Separation

Decree

of

Effects of Reconciliation (1) Proceedings for legal separation shall be terminated at whatever stage. (Art. 66)

Legal

(1) The spouses can live separately (Art. 63) but the marriage bonds are not severed.

(2) If there is a final decree of legal separation, it shall be set aside. (Art. 66)

(2) The ACP or CPG shall be dissolved and liquidated, and the share of the guilty spouse shall be forfeited in favor the common children, previous children, or innocent spouse, in that order (Art. 63. cf. Art. 43, par. 2).

(3) The separation of property and forfeiture of share of guilty spouse shall subsist, unless the spouses agree to revive their former property regime or to institute another property regime.(Art. 66 cf. Art. 67)

(3) Custody of the minor children shall be awarded to the innocent spouse (Art. 63, cf. Art 213)

(4) Joint custody of children is restored.

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(5) The right to intestate succession by guilty spouse from innocent spouse is restored.

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(6) The right to testamentary succession depends on the will of the innocent spouse

Annex to Void and Voidable Marriages and Legal Separation Void Marriages Grounds

(1)

Voidable Marriages

One is a minor

(2) No authority to marry (3) No valid marriage license (4) Bigamous and polygamous marriages

Legal Separation

(1) Lack of parental consent

(1) Repeated Physical Violence

(2) Insanity

(2) Pressure to compel to change religious/political affiliations

(3) Fraud (4) Force, Intimidation (5) Undue Influence (6) Impotence

(5) Mistake of identity (7) Serious and Incurable STD (6) Void subsequent marriage (7) Psychological incapacity

(3) Corruption / Inducement to engage in prostitution (4) Final judgment with sentence of more than 6 yrs. (5) Drug Addiction / Habitual Alcoholism

(8) Incestuous Marriages

(6) Homosexuality / Lesbianism

(9) Marriages against public policy

(7) Bigamous marriage (8) Sexual Infidelity (9) Attempts against the life of petitioner (10) Abandonment without just cause for more than 1 year

Defenses

(1) Condonation (2) Consent NONE

(3) Connivance (4) Collusion (5) Mutual Guilty (6) Prescription

Prescription

No prescription

(1) Lack Consent:

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of

Parental Within 5 years from the occurrence of the cause

Void Marriages Who can file

Voidable Marriages

Legal Separation

According to A.M. No. Spouses – 5 years after Only the spouses (cannot 02-11-10-SC): turning 21 survive the death of the plaintiff) (a) Before March 18, Parents – before the 2003 (petition for spouse turns 21 nullity or celebration of (2) Insanity marriage) – any party Insane spouse – during (b) On and after March lucid intervals 18, 2003 (petition for nullity or celebration of Sane spouse/guardian – marriage) – only the lifetime spouses (3) Fraud – 5 years after the discovery of the fraud (4) Force, Intimidation, Undue Influence – 5 years after cessation (5) Impotence or STD – 5 years from marriage

Effects of Pendency

In the absence of adequate provisions in a written (1) Live separately agreement: (2) Designate either of (1) Support of spouses them or a third person as administrator of property (2) Support and custody of children (3) Support of spouses (3) Visitation Rights (4) Support and custody of Children (5) Visitation rights

Effects of Decree

Void Marriages

Voidable Marriages

Legal Separation

(1) Children – considered illegitimate except for those annulled under Art 36 and Art 53

(1) Children – considered legitimate conceived and/or born prior to the termination of the marriage

(1) May live separately but marriage bonds not severed

(2) No ACP/CPG, or marriage settlement void because there was no marriage – property relations governed by co-ownership (same as common-law spouses) (3) Donations valid unless in bad faith, revoked by law (4) Revocation designation beneficiary

of as

(5) Disqualified inherit testate/intestate

to by

(2) ACP/CPG will be dissolved and liquidated (2) ACP/CPG will be – offending spouse will dissolved and liquidated have no right to the net – the spouse in bad faith profits will forfeit his share to (3) Custody of minor his children or spouse children – Innocent (as the case may be) by Spouse operation of law (4) Disqualified to inherit (3) Donations valid from each other – will unless in bad faith, revoked by operation of revoked by law law (4) Revocation of (5) Revocation of designation as designation as beneficiary beneficiary (5) Disqualified to (6) Donations inter vivos inherit by are revoked testate/intestate

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V. Rights and Obligations of Spouses

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

N.B.:These rights and duties are not subject to stipulation between the spouses and though they may voluntarily agree to any change in their personal relations, this agreement will be void and have no legal effect.

A. LIVE TOGETHER

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

C. SUPPORT The spouses are jointly responsible for the support of the family. The expenses for such support and other conjugal properties shall be paid:

The right to live together refers to the right of consortium which is “not susceptible of precise or complete definition but, broadly speaking, companionship, love, affection, comfort, mutual services, sexual intercourse—all belonging to the marriage state—taken together make up what we refer to as consortium. GENERAL RULE: It is their obligation to do so (cohabitation). It is also their obligation to observe mutual love, respect and fidelity and render mutual help and support. (Art. 68) EXEMPTION: One spouse living abroad or there are valid and compelling reasons (Art. 69 (2)) – at the discretion of the court. EXEMPTION TO EXEMPTION: Incompatibility with the solidarity of the family (Art. 69 (2)) Goitia v. Cam pos Rueda (1916): If the wife abandons the family domicile (vs obligation of cohabitation) with justifiable causei.e. being forced to perform lewd sexual acts, the husband’s obligation to support her is not terminated. The law will not permit the husband to terminate the obligation to support his wife by his own wrongful acts in driving the wife to seek protection in her parents’ home.

•

From the conjugal property;

•

If none, income or the fruits of their separate properties;

•

If none, from their separate properties, wherein they shall be liable in proportion to their properties (Art. 70)

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

D. MANAGEMENT OF FAMILY LIFE This is the right and duty of both spouses. The expenses for such management shall be paid in accordance with the provisions of Article 70 (Art. 71).

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

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

F. EXERCISE OF PROFESSION B. FAMILY DOMICILE PAGE 37 of 574

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Either spouse may exercise any legitimate profession, without need for consent of the other. o

The other spouse may only object on valid, serious, and moral grounds.

o

In case of disagreement, the Court shall decide whether: ▪

The objection is proper, and

▪

Benefit has accrued to the family before OR after the objection.If BEFORE, enforce resulting obligation against the separate property of the spouse who has not obtained consent. (Art. 73)

Although marriage is one of the events required to be recorded in the civil register, a woman does not register her married name. Neither does a married woman file a petition for change of name in order to use her husband’s surname.

G. USE OF SURNAME Art 370, CC. A married woman may use: 1)

CIVIL LAW

Her maiden first name and surname and add her husband’s surname, or

2) Her maiden first name and her husband’s surname or 3) Her husband’s full name, but prefixing a word indicating that she is his wife, such as Mrs. Art 373, CC. A widow may use the deceased husband’s surname as though he were still living, in accordance with Article 370. Art 376, CC. No person can change his name or surname without judicial authority Art 377, CC. Usurpation of a name and surname may be the subject of an action for damages and other relief. Art 378, CC. The unauthorized or unlawful use of another person’s surname gives a right of action to the latter.

N.B.: From the foregoing provisions, it can be gleaned that a woman is not mandated by law to adopt her husband’s name after marriage. Article 370 is merely directory, since it provides that a woman may choose any of the options provided. PAGE 38 of 574

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VI. Property Relations of Spouses

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Marriage Settlem ent Rules When modifications can be made General rule: Before celebrated [Art. 76]

A. MARRIAGE SETTLEMENTS According to Art. 74, Property relations between husband and wife are governed: (1) By marriage settlements executed before the marriage (2) By the provisions of this Code (3) By the local custom

marriage

is

Art. 63(2): Property regime is dissolved and liquidated Arts. 66 and 67: Reconciliation in case of legal separation Art. 128: When abandoned spouse petitions the court for judicial separation of property Art. 135: Sufficient cause for judicial separation of property

Requisites for Validity Art. 75. The future spouses may, in the marriage settlements, agree upon the regime of absolute community, conjugal partnership of gains, complete separation of property, or any other regime. In the absence of marriage settlement, or when the regime agreed upon is void, the system of absolute community of property as established in this Code shall govern. N.B.: Marriage settlements are considered accessory to the marriage, therefore as per Art. 81, stipulations in consideration of future marriage and donations will be void if the marriage does not take place. Art. 103(3) & 130(3). Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage.

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Art. 136: Voluntary dissolution of ACP or CPG by the spouses

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

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B. DONATIONS MARRIAGE

BY

REASON

OF

Solis v. Barroso (1928): In donations propter nuptias, the marriage is really a consideration, but not in the sense of giving birth to the obligation. There can be a valid donation even if the marriage never took place, but the absence of marriage is a ground for the revocation of the donation. Mateo v. Lagua (1969): Donations propter nuptias are without onerous consideration, marriage being merely the occasion or motive for the donation, not its cause. Being liberalities, they remain subject to reduction for inofficiousness upon the donor’s death, if they should infringe the legitime of a forced heir. Requisites nuptias

of

donations

RULES FOR MARRIAGE

CIVIL LAW

DONATIONS

BEFORE

General rule: Future spouses who agree upon a regime other than ACP cannot donate to each other more than 1/5 of their present property (excess shall be considered void). [Art. 84] Donations of encumbrances 1.

property

subject

to

Are considered valid.

2. In case of foreclosure: a. if property value < obligation, donee shall not be liable for the deficiency b. if property value > obligation, donee shall be entitled to the excess (Art. 85)

propter GROUNDS FOR REVOCATION OF DONATION PROPTER NUPTIAS [Art. 86]

1. Made before the celebration of marriage 2. Made in consideration of marriage 3. In favor of one or both of the future spouses

1. If the marriage is not celebrated or judicially declared void ab initio, EXCEPT donations made in marriage settlements.

4. Donor must be one of the betrothed or any third person

2. When the marriage takes place without the consent of the parents or guardians, as required by law.

Donations excluded

3. When the marriage is annulled, and the donee acted in bad faith.

• Ordinary wedding gifts given after the celebration of the marriage • Donations in favor of future spouses made before marriage but not in consideration thereof • Donations made in favor of persons other than the spouses even if founded on the intended marriage

4. Upon legal separation, if the donee is the guilty spouse. 5. If there is a resolutory condition, and it is not complied with. 6. When donee has committed an act of ingratitude: [Art. 765, CC]

W ho may donate

a. An offense against person or property of donor, or his wife or children under parental authority. b. An imputation to the donor of any criminal offense, or any act involving moral turpitude, even if proven, unless the crime is committed against the donee, his wife or children under his authority.

• Spouses to each other • Parents of one or both spouses • Third persons to either or both spouses

c. Refusing to support the donor, if he/she is legally required to do so. PAGE 40 of 574

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Effects nullity

of

PERSONS AND FAMILY RELATIONS

judicial

declaration

the provision prohibiting donations between spouses during marriage.

of

Distinguished Donations

Donations by reason of marriage shall remain valid EXCEPT that if the donee contracted marriage in bad faith, such donations made to said donee are revoked by operation of law. [Art. 43 (3)]Thus, even if spouse in good faith condones the donee, the donation propter nuptias is still forfeited.

Donations nuptias

Effects provided for by Art. 43(2), (3), (4), and (5) and by Art. 44 shall also apply to marriages that are declared void ab initio or annulled by final judgment under Article 40 (Judicial declaration of nullity) and 45 (Voidable marriages). [Art. 50] RULES FOR MARRIAGE

DONATIONS

CIVIL LAW

DURING

General rule: Spouses cannot donate to each other, directly or indirectly; donations made by spouses to each other during the marriage are void. [Art. 87]

from

Ordinary

propter Ordinary donations

Does not require express acceptance

Express acceptance necessary

May be made by minors (Art. 78)

Cannot be made by minors

May include future property

Cannot include future property

If present property is donated and property is not absolute community, limited to 1/5 (Art. 84)

No limit to donation of present property provided legitimes are not impaired

Grounds for Grounds for revocation revocation - in Art. 86 - in donation laws

These donations refer to donations inter vivos (Tolentino) Exception: Moderate gifts on the occasion of any family rejoicing.

ABSOLUTE COMMUNITY OF PROPERTY AND CONJUGAL PARTNERSHIP OF GAINS

Harding v. Commercial Union (1918): The prohibition on donations can only be assailed by persons who bear such relation to the parties or the property itself, that their rights are being interfered with. Here, the insurance company of the donated car cannot assail the validity of the donation. In addition, the codal exception of “moderate gifts” depends on the income class of the spouses and a car could be considered a “moderate gift” that does not infringe the prohibition of donation between spouses.

Art. 80. In absence of a contrary stipulation in a marriage settlement, the property relations of the spouses shall be governed by Philippine laws, regardless of the place of the celebration of the marriage and their residence. N.B.:By the Nationality Rule [Art. 15], the rule that Absolute Community Property (ACP) is the default mode of property relations absent any marriage settlement applies to all Filipinos, regardless of the place of the marriage and their residence.

Nazareno v. Birog (1947): A spouse cannot donate to persons which the other spouse may inherit from as it constitutes an indirect donation.

EXCEPTIONS (Art. 80) • Where both spouses are aliens • 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

RULES FOR DONATIONS BETW EEN COMMON-LAW SPOUSES Matabuena v Cervantes (1971): The donation between common-law spouses falls within PAGE 41 of 574

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• With respect to the extrinsic validity of contracts entered into in the Philippines but affecting property situated in a foreign country whose laws require different formalities for its extrinsic validity Art. 81. Everything stipulated in the settlements or contracts referred to in the preceding articles in consideration of a future marriage, including donations between the prospective spouses maded therein, shall be rendered void if the marriage does not take place. However, stipulations that do not depend upon the celebration of marriage shall be valid. e.g. recognition of paternity of illegitimate child Art. 89. No waiver of rights, shares and effects of the absolute community of property during the marriage can be made except in case of judicial separation of property. When the waiver takes place upon a judicial separation of property, or after the marriage has been dissolved or annulled, the same shall appear in a public instrument and shall be recorded as provided in Article 77. The creditors of the spouse who made such waiver may petition the court to rescind the waiver to the extent of the amount sufficient to cover the amount of their credits. Art. 90. The provisions on co-ownership shall apply to the absolute community of property between the spouses in all matters not provided for in this Chapter. N.B.: The creditors of the spouse who made such waiver may petition the court to rescind the waiver to the extent of the amount sufficient to cover the amount of their credits.

ABSOLUTE PROPERTY

CIVIL LAW

COMMUNITY

OF

The community property consists of all the property owned by the spouses at the time of the celebration of the marriage and those either one or both of them acquired during the marriage. There is a presumption in law that properties acquired during the marriage belong to the community, unless it is proved that it is one of those excluded therefrom. CONJUGAL PARTNERSHIP OF GAINS This property regime was formerly the default regime under the Civil Code. In this regime, the spouses retain ownership of their separate property. However, the spouses also place in common fund the proceeds, products, fruits and income of their separate property and those acquired by either or both spouses through their efforts or by chance. The presumption applies that all properties acquired during the marriage belong to the CPG. There are 3 distinct patrimonies in this system, the husband’s capital property, the wife’s paraphernal property and the conjugal property. SEPARATION OF PROPERTY Each spouse has complete control and ownership of his or her own properties which will include “all earnings from his or her profession, business or industry and all fruits, natural, industrial or civil, due or received during the marriage form his or her separate property.” Expenses of the family shall be shouldered by the spouses in proportion to their income, or, in case of insufficiency or default thereof, to the current market value of their separate properties.

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COMPARISON OF ACP and CPG ABSOLUTE COMMUNITY OF PROPERTY When it commences

At the precise moment of the celebration of the marriage [Art. 88]

CONJUGAL PARTNERSHIP OF GAINS Default property regime for marriages celebrated before the Family Code took effect (August 3, 1988) For marriages after the Family Code, if agreed to by the parties through a marriage settlement.

What it consists of

All the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter [Art. 91]

Proceeds, products, fruits, and income of their separate properties

Under the ACP, spouses cannot exclude specific properties from the regime.

Everything acquired by them by chance.

Winnings from gambling shall accrue to the community property [Art. 95]

Specific properties (Art. 117) 1. Acquired by onerous title during the marriage at the expense of the common fund; 2. Acquired through the labor, industry, work, or profession of either or both spouses 3. Fruits from common property and net fruits of the exclusive property of each spouse 4. Share of either spouse in hidden treasure, whether as finder or owner of property where treasure was found 5. Acquired through occupation such as fishing or hunting 6. Livestock existing at dissolution of partnership in excess of what is brought by either spouse to the marriage 7. Acquired by chance, such as winnings from gambling or betting

Everything acquired by them during marriage through their own efforts

Moral damages arising from a contract paid from the CPG [Zulueta v. Pan Am (1973)] Loans contracted during the marriage are conjugal, and so is any property acquired therefrom [Mendoza v. Reyes (1983)] Property purchased by installment, paid partly with conjugal funds and partly with exclusive funds, if full ownership was vested during the marriage; the CPG shall reimburse the owner-spouse [Art. 118] If a winning ticket is bought by conjugal funds, the prize is conjugal (otherwise, the prize is exclusive property of the spouse who PAGE 43 of 574

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ABSOLUTE COMMUNITY OF PROPERTY

CIVIL LAW

CONJUGAL PARTNERSHIP OF GAINS owns the ticket) Improvement on exclusive property: if original value < new value (where new value = value of land + value of improvements + net change in value), then land becomes conjugal property, subject to the reimbursement of the value of the property of the owner-spouse at the dissolution of the CPG Property belonging to one spouse converted into another kind totally different in nature from its original form during marriage becomes conjugal in the absence of proof that the expenses of the conversion were exclusively for the account of the original owner-spouse, subject to reimbursement of the value of the original property from the conjugal partnership

What remains exclusive property

Properties acquired before the marriage, for those with legitimate descendants with a former marriage (to protect rights of children by a former marriage)

Property brought into the marriage by each spouse as his/her own

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

Property acquired by either spouse during the marriage by gratuitous title

Properties for personal use Except: Jewelry (partakes of the nature of an investment)

Property acquired by right of redemption, by barter, or by exchange with property belonging to either spouse Plata v. Yatco: Plata purchased property when she was single. When married, she and her husband Bergosa co-signed a mortgage on the property. Upon foreclosure, Bergosa was sued for illegal detainer. A writ of execution on the property was carried out but Plata refused to leave the premises. SC ruled that Plata cannot be held in contempt. Property is not conjugal. Her husband signing as co-mortgagor does not convert it to CPG. She could ignore execution because the

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ABSOLUTE COMMUNITY OF PROPERTY

CIVIL LAW

CONJUGAL PARTNERSHIP OF GAINS decision was for her husband alone. Property purchased with exclusive money of either spouse Property purchased by installment, paid partly with conjugal funds and partly with exclusive funds, if full ownership was vested before the marriage [Art. 118] Even if the installment is completed after the marriage, the property is exclusive if ownership was vested in one spouse before the marriage [Lorenzo v. Nicolas (1952)]

Presumption

All properties acquired during the marriage form part of the ACP, unless it be proven that they are excluded. [Art. 93]

All property acquired during the marriage, whether made, contracted, or registered in the name of one spouse, are presumed conjugal unless the contrary is prove. [Art 116]

Charges and Obligations

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

Arts. 121-123 1. Support of the following: a. Spouses; b. Common children; c. Legitimate children of previous marriage; d. Illegitimate children – follow the provisions on Support; Partnership assets liable in case responsibilities under Art. 121 have been covered and there is absence or insufficiency of the exclusive property of the debtor-spouse but the payment shall be considered as advance to the share of the debtor-spouse.

If community property is insufficient, the spouses are solidarily liable for the unpaid

If conjugal partnership property is insufficient, the spouses are solidarily liable for the unpaid balance from their separate properties except

2. Expenses to enable either spouse to commence/complete a 2. Expenses to enable either professional/vocational course or activity for spouse to commence/ complete a self-improvement; professional/vocational course or activity for self-improvement; 3. Value donated or promised by both spouses in favor of common legitimate children for the 3. Value donated or promised by exclusive purpose of commencing/ both spouses in favor of common completing a professional/ vocational course legitimate children for the or activity for self-improvement exclusive purpose of commencing/ completing a professional/ vocational course or activity for self-improvement

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ABSOLUTE COMMUNITY OF PROPERTY

CONJUGAL PARTNERSHIP OF GAINS

balance from their separate properties except for: 1. Debts contracted by either spouse before marriage which have not redounded to the benefit of the family; 2. Support of illegitimate children; and 3. Liabilities incurred by either spouse arising from crime or quasi-delict. Gambling losses of any kind (i.e. legal or illegal) shall be borne by the losing spouse’s separate property [Art. 95]

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

Ownership, administration, enjoyment, and disposition

The administration and enjoyment of the community property shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for a proper remedy, within 5 years from the date of contract (Art. 96)

The administration and enjoyment of the CPG shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy, within 5 years from the date of contract (Art. 124) De Ansaldo v. Sheriff of Manila (1937): Spouses are not co-owners of CPG during the marriage and cannot alienate the supposed ½ interest of each in the said properties. The interest of the spouses in the CPG is only inchoate or a mere expectancy and does not ripen into title until it appears after the dissolution and liquidation of the partnership that there are net assets.

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ABSOLUTE COMMUNITY OF PROPERTY

CONJUGAL PARTNERSHIP OF GAINS

Either spouse may, through a will, dispose of his or her interest in the community property. [Art. 97] However, the will should refer only to his or her share in the community property.

Art. 124, par. 2: Disposition or encumbrance of conjugal property requires the following: Authority of the court or written consent of the other spouse. The absence of such will render such encumbrance void.

Donation of one spouse without the consent of the other is not allowed. [Art. 98] Exceptions: Moderate donations to charity due to family rejoicing or distress

Consent or approval by both spouses, or authority given by the court in lieu of the consent of the other spouse.

Moderate gifts by each spouse to the other due to family rejoicing Moderation depends on the family’s socio-economic status. ACP allows donations in excess of one-fifth of present property of future spouses because the donation would form part of the community property once the marriage is celebrated. [Art. 84] Jader-Manalo v. Camaisa (2002): Mere awareness of a transaction is NOT consent. Hom eowner’s Savings & Loan Bank v. Dallo (2005): In the absence of (court) authority or written consent of the other spouse, any disposition or encumbrance of the conjugal property shall be void. Cheeseman v. IAC (1991): If however, one of the spouses is an alien, the Filipino spouse may encumber or dispose of the property w/o the consent of the former. The property is presumed to be owned exclusively by the Filipino spouse. Dissolution of the regime

Terminates upon [Art. 99]: 1. Death of either spouse – follow rules in Art. 103 2. Legal separation – follow rules in Arts. 63 and 64 3. Annulment or judicial declaration of nullity – follow rules in Arts. 50 and 52 Judicial separation of property during marriage – follow rules in Arts. 134 to 138

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

Rules on de facto separation

Rules on de facto separation [Art. 100] De facto separation does not

Rules on de facto separation [Art. 127] De facto separation does not affect the CPG, except that:

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CONJUGAL PARTNERSHIP OF GAINS

affect the ACP, except that: Spouse who leaves the conjugal home without just cause shall not be entitled to support; however, he/she is still required to support the other spouse and the family If consent is necessary for transaction but is withheld or otherwise unobtainable, authorization may be obtained from the court Support for family will be taken from the ACP If ACP is insufficient, spouses shall be solidarily liable

Spouse who leaves the conjugal home without just cause shall not be entitled to support; however, he/she is still required to support the other spouse and the family 2. If consent is necessary for transaction but is withheld or otherwise unobtainable, authorization may be obtained from the court 3. Support for family will be taken from the partnership property. 4. If partnership property is insufficient, spouses shall be solidarily liable

Effect of de facto separation

If it is necessary to administer or encumber separate property of spouse who left, spouse present may ask for judicial authority to do this If ACP is not enough and one spouse has no separate property, spouse who has property is liable for support, according to provisions on support.

5. If it is necessary to administer or encumber separate property of spouse who left, spouse present may ask for judicial authority to do this 6. If partnership property is not enough and one spouse has no separate property, spouse who has property is liable for support, according to provisions on support.

Charges and Obligations

Abandonment [Art. 101] Present/aggrieved spouse may petition the court for: 1. Receivership 2. Judicial separation of property 3. Authority to be the sole administrator of the absolute community, subject to precautionary conditions that the court may impose

Abandonment [Art. 128] Present/aggrieved spouse may petition the court for: 1. Receivership 2. Judicial separation of property 3. Authority to be the sole administrator of the partnership property, subject to precautionary conditions that the court may impose

A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without any intention of returning.

Rules on Abandonment

Spouse is prima facie considered to have abandoned the other spouse and the family if he or she has: 1. Left for a period of 3 months 2. Failed to inform the other spouse of his or her

A spouse is deemed to have abandoned the other when he or she has left the conjugal dwelling without any intention of returning. Spouse is prima facie considered to have abandoned the other spouse and the family if he or she has: 1. Left for a period of 3 months 2. Failed to inform the other spouse of his or her whereabouts for a period of 3 months Partosa-Jo v. CA (1992): Physical separation of the spouses, coupled with the husband’s refusal to give support to the wife, sufficed to constitute abandonment as a ground for an action for the judicial

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ABSOLUTE COMMUNITY OF PROPERTY whereabouts for a period of 3 months Liquidation of assets and liabilities

Procedure [Art. 102] • Inventory of assets of ACP and of spouses, with market values • Obligations are paid with community property, and separate obligations not charged to ACP paid by respective assets of spouses If obligations exceed the assets of the ACP, nothing is divided. Creditors can go after the separate properties of the spouses, which are solidarily liable for the deficiency • Delivery of whatever remains in their exclusive property • Balance, or net remainder is divided equally between the spouses, irrespective of how much each brought into the community • If personal obligations of a spouse exceed his/her separate property, creditor can go after the share of the spouse on the net remainder of the ACP, without prejudice to the provisions of law on forfeitures and delivery of presumptive legitimes • After covering all community obligations and obligations of spouses, balance of separate properties shall be delivered to respective spouses or their heirs, and they will also divide into two equal shares whatever is left of the community assets, without prejudice to the provisions of law on forfeitures and delivery of presumptive legitimes

CIVIL LAW

CONJUGAL PARTNERSHIP OF GAINS separation of their conjugal property. Procedure [Art. 129] 1. Prepare an inventory of all properties 2. Amounts advanced by CPG in payment of personal debts and obligations shall be credited to the CPG 3. Reimburse each spouse for the use of his/her exclusive funds in the acquisition of property or for the value of his or her exclusive property, the ownership of which has been vested by law in the conjugal partnership 4. Debts and obligations of CPG shall be paid out of the conjugal assets, otherwise both spouses are solidarily liable with their exclusive property 5. Remains of the exclusive properties shall be delivered to respective owner-spouses. 6. Indemnify loss/deterioration of movables belonging to either spouse, even due to fortuitous event, used for the benefit of the family 7. Net remainder of CPG shall constitute the profits which shall be divided equally between husband and wife except when: • A different proportion or division was agreed upon in the marriage settlements • There has been a voluntary waiver or forfeiture of such share as provided in the FC 8. Presumptive legitimes are delivered to common children 9. Conjugal dwelling goes to: • Spouse with whom majority of common children choose to remain (below 7 y.o. = deemed to have chosen the mother based on the tender years presumption) • Whoever the court chooses in case of lack of majority

Rules in case of termination of marriage by death of one of the spouses [Art. 104]: 1. The community property shall be liquidated in the same proceeding for the settlement of the estate of the deceased spouse. PAGE 49 of 574

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2. If no such judicial settlement proceeding is instituted, surviving spouse shall liquidate the community property either judicially or extra-judicially within one year from the death of the deceased spouse. a. If no liquidation is made within the period, any disposition or encumbrance involving community property of the terminated marriage shall be void. b. Non-compliance with liquidation procedures would mean that a subsequently contracted marriage will follow a regime of complete separation of property. Procedure for liquidation of properties of two marriages [Art. 104]: Determine the capital, fruits, and income of each community upon such proof as may be considered according to the rules of evidence. In case of doubt as to which community the existing properties belong, they shall be divided between two communities in proportion to the capital and duration of each. Separation of Property of the Spouses and Administration of Common Property by One Spouse During the Marriage Art. 134. In the absence of an express declaration in the marriage settlements. The separation of property between spouses during the marriage shall not take place except by judicial order. Such judicial separation of property may either be voluntary or for sufficient cause.

Sufficient Causes and Grounds for Return to Previous Regime Sufficient Causes for Judicial Separation of Grounds for Return to Previous Regime Property (Art. 135) (Art. 141) (1) Spouse of petitioner has been sentenced to a (1) Termination of the civil interdiction penalty which carries with it the penalty of civil interdiction (2) Spouse of petitioner is judicially declared an (2) Reappearance of absentee spouse absentee (3) Loss of parental authority of the spouse of (3) Restoration of parental authority to the spouse petitioner has been decreed by the court previously deprived of it (4) Spouse of petitioner has abandoned the latter (4) When the spouse who left the conjugal home or failed to comply with his or her obligations to without legal separation resumes common life with the family the other (5) The spouse granted the power of (5) When the court, being satisfied that the spouse administration in the marriage settlements has granted the power of administration in will not again abused that power abuse that power, authorizes the resumption of said administration (6) At the time of the petition, the spouses have (6) Reconciliation and resumption of common life of been separated in fact for at least 1 year and the spouses who had been separated in fact for at reconciliation is highly improbable. least 1 year PAGE 50 of 574

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(7) When after voluntary dissolution of the ACP or CPG has been judicially decreed upon the joint petition of the spouses, they agree to the revival of the former property regime. No voluntary separation of property may thereafter be granted.

SEPARATION OF PROPERTY Agreed upon in the marriage settlements by the spouses

When it applies

Mandatory under Arts. 103 & 130 (subsequent marriages contracted by a surviving spouse without judicial settlement of previous property regime) Judicial separation of property (Voluntary or just cause) Default property regime when there is reconciliation between spouses after judicial separation of property Present or future property or both Each spouse’s earnings from his or her own profession, business, or industry

What it consists of

Natural, industrial or civil fruits of spouse’s separate properties May be total or partial If partial, property not considered separate is presumed to pertain to the ACP

Liabilities

Family expenses: Both spouses are liable in proportion to their income; if insufficient, based on the current value of their separate properties Creditors for family expenses: Spouses solidarily liable Spouses may own, dispose, possess, and administer separate estates without the consent of the other

Ownership, administration, enjoyment, and disposition

Administration of exclusive properties may be transferred between spouses when: One spouse becomes the other spouse’s guardian 1. One spouse is judicially declared an absentee 2. One spouse is given the penalty of civil interdiction 3. One spouse becomes a fugitive Conveyance between the spouses is allowed under Art. 1490, NCC.

In Re: voluntary dissolution of CPG of Sps. Bernas (1965):

and 2nd marriages were not informed; the separation of property may prejudice the rights and shares of the children.

A voluntary separation of properties is not perfected by mere consent but upon the decree of the court approving the same. The petition for voluntary separation of property was denied because the children of the 1st

Maquilan v. Maquilan (2007): A compromise agreement with judicial recognition is valid, pending petition for declaration of nullity of marriage.

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CIVIL LAW

PROPERTY REGIME OF UNIONS W ITHOUT MARRIAGE, Arts. 147-148

Applicability

Art. 147

Art. 148

Man and woman living together as husband and wife, with capacity to marry (Art.5, without any legal impediment) -at least 18 years old -not violative of Art. 37 (incestuous void marriage) -not violative of Art. 38 (void marriage by reason of public policy) -not bigamous

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

Other void marriages due to absence of formal requisite Salaries and wages

Owned in equal shares

Separately owned by parties

Remains exclusive, provided there is Properties acquired through proof exclusive funds Properties acquired by both through work and industry

Governed by rules on co-ownership

Remains exclusive

Owned in common in proportion to respective contribution

Owned in equal shares since it is presumed to have been acquired through joint efforts

Properties acquired while living together

If one party did not participate in acquisition, presumed to have contributed jointly, if the former’s effort consisted in the care and maintenance of family and household N.B. Neither party can encumber or dispose by acts inter vivos his share in co-owned property without the consent of the other party until cohabitation is terminated.

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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.

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Art. 147

Forfeiture

CIVIL LAW

Art. 148

Where only one party to a void marriage is in good faith, share of party in bad faith is forfeited: -In favor of their common children -In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants -In the absence of such descendants, such share belongs to the innocent party

Difference between Articles 147 and 148 Art. 147 applies “to unions of parties who are legally capacitated and not barred by any impediment to contract marriage, but whose marriage is nonetheless void for other reasons, like the absence of a marriage license.” Article 148 refers to “the property regime of bigamous marriages, adulterous relationships, relationships in a state of concubinage, relationships where both man and woman are married to other persons, multiple alliances of the same married man.” [Nicdao Cariño v. Yee Cariño (2001)]. Yaptinchay v. Torres (1969): Application of Article 148; there was no proof of actual contribution, while there was a subsisting marriage apart from the union without marriage, therefore, the N. Forbes house goes to the CPG of subsisting marriage Villanueva v. CA (2004): Transfer of certificate and tax declarations are not sufficient proof of joint contribution.

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If one party is validly married to another his/her share in the co-owned properties will accrue to the ACP/CPG of his/her existing valid marriage. If the party who acted in bad faith is not validly married to another, his/her share shall be forfeited in the same manner as that provided in Art 147. The same rules on forfeiture shall apply if both parties are in bad faith.

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VII. Family Relations

CIVIL LAW

o

Such efforts have failed; and

o

Such earnest efforts and the fact of failure must be alleged.

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

•

Exceptions

Art. 150. Family relations include those:

o

The general rule shall not apply to cases which may not be the subject of compromise.

o

The following cannot be subject of compromise: (Art 2035)

(1) Between husband and wife

1. Civil status of persons,

(2) Between parents and children (3) Among other descendants

ascendants

2. Validity of marriage or a legal separation,

and

3. Any ground for legal separation,

(4) Among brothers and sisters, full or half blood.

4. Future support (as it is presumed to be needed for the survival of the one receiving support),

General Rules

5. Jurisdiction of courts,

•

The family is an institution that is governed by law

•

The internal aspect of the family is sacred and inaccessible to law because law must respect the freedom of action of man.

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

6. Future legitime

THE FAMILY HOME A. WHAT CONSTITUTES THE FAMILY HOME? General Rules o

The family home is the dwelling house where family resides and the land on which it is sustained (Art. 152)

o

The family home must be part of the properties of the absolute community or the conjugal partnership, or of the exclusive properties of either spouse with the other’s consent. It may also be constituted by an unmarried head of a family in his or her own property. (Art. 156)

o

The actual value of the family home shall not exceed, at the time of its constitution, the amount of

General Rules •

Suit between members of the same family shall prosper only if it shall appear in a verified complaint or petition that: o

The case will be dismissed if it is shown that no such efforts were made.

Earnest efforts towards a compromise have been made; PAGE 54 of 574

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P300,000 in urban areas, and P200,000 in rural areas, or such amounts as may hereafter be fixed by law (Art. 157) o

For the purposes of availing of the benefits of a family home as provided for in this Chapter, a person may constitute, or be the beneficiary of, only one home. (Art. 161)

(3) Debts secured by mortgages on the premises before or after such constitution. (4) Debts due to laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished material for the construction of the building.

D. BENEFICIARIES

B. WHO MAY CONSTITUTE THE FAMILY HOME?

Art. 154. The beneficiaries of a family home are: 1. The husband and wife, or an unmarried person who is the head of a family; and

General Rules o

The family home may be constituted jointly by the husband and wife or an unmarried head of the family (Art. 152)

o

A person may constitute and be the beneficiary of only one family home (Art. 161)

2. Their parents, ascendants, descendants brothers, and sisters (legitimate/illegitimate), who are living in the family home and who depend on the head of the family for support General Rule o

C. WHEN IS IT DEEMED CONSTITUTED? General Rules o

o

CIVIL LAW

The family home is deemed constituted on a house and lot form the time it is occupied as a family residence.

o

The family home is exempt from the following from the time of its constitution and so long as any of its beneficiaries actually resides therein (Art. 153):

Requisites to be a beneficiary: o

The relationship is within those enumerated in Art. 150

o

They live in the family home

o

They are dependent for legal support on the head of the family

Requirements for the sale, alienation, donation, assignment, or encumbrance of the family home (Art. 158) o

The written consent of the person constituting it,

o

That of the spouse of the person constituting it, and

o

That of majority of the beneficiaries of legal age

(1) Execution (2) Forced sale (3) Attachment Exceptions in the exemption of the fam ily hom e from execution (Art. 155) (1) Nonpayment of taxes. (2) Debts incurred prior to the constitution of the family home.

Patricio vs. Dario (2006): The law explicitly provides that occupancy of the family home either by the owner thereof or by “any of its beneficiaries” must be actual. That which is “actual” is something real, or actually existing, as opposed to something merely possible, or to something which is presumptive or constructive. Actual

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occupancy, however, need not be by the owner of the house specifically. Rather, the property may be occupied by the “beneficiaries” enumerated in Article 154 of the Family Code, which may include the inlaws where the family home is constituted jointly by the husband and wife. But the law definitely excludes maids and overseers. They are not the beneficiaries contemplated by the Code.

written consent of the person constituting the same the latter’s spouse and a majority of the beneficiaries of legal age. In case of conflict the court shall decide. Art. 159. The family home shall continue despite the death of one or both spouses or of the unmarried head of the family for a period of 10 years or as long as there is a minor beneficiary, and the heirs cannot partition the same unless the court finds compelling reasons therefor. This rule shall apply regardless of whoever owns the property or constituted the family home.

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

General Rule: As a rule, the family home is exempt from execution, forced sale or attachment.

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

General Rule o

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

F. WHEN IT MAY BE SOLD Art. 158. The family home may be sold alienated donated assigned or encumbered by the owner or owners thereof with the

CIVIL LAW

General Rules o

In any event, if the value of the currency changes after the adoption of this Code, the value most favorable for the constitution of a family home shall be the basis of evaluation.

o

Urban areas include chartered cities and municipalities

o

All others are deemed to be rural areas

Procedure to avail of right under Art. 160 1.

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The creditor must file a motion in the court proceeding where he obtained a favorable decision for a writ of execution against the family home.

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2. There will be a hearing on the motion where the creditor must prove that the actual value of the family home exceeds the maximum amount fixed by the FC either at the time of its constitution or as a result of improvements introduced thereafter. 3. If the creditor proves that the actual value exceeds the maximum amount the court will order its sale in execution. 4. If the family home is sold for more than the value allowed, the proceeds shall be applied as follows:

CIVIL LAW

VIII. Paternity Filiation

Art. 163. The filiation of children may be by nature or by adoption. Natural filiation may be legitimate or illegitimate. Kinds of Filiation [Arts. 163, 164, 165]: (1) Natural • Legitimate • Illegitimate

a. First, the obligation enumerated in Article 157 must be paid

(2) Legal Fiction (Adoption)

b. Then the judgment in favor of the creditor will be paid, plus all the costs of execution

A. LEGITIMATE CHILDREN

c. The excess, if any, shall be delivered to the judgment debtor General Rules o

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

and

Art. 164. Children conceived or born during the marriage of the parents are legitimate. Children conceived as a result of artificial insemination of the wife with the sperm of the husband or that of a donor or both are likewise legitimate children of the husband and his wife, provided, that both of them authorized or ratified such insemination in a written instrument executed and signed by them before the birth of the child. The instrument shall be recorded in the civil registry together with the birth certificate of the child. 1. Natural/Biological Liyao v. Liyao (2002): A child conceived or born during a valid marriage is presumed to belong to that marriage, regardless of the existence of extramarital relationships. 2. Artificial Insemination Requisites legitim ate:

to

be

considered

(a) Artificial insemination made on wife (b) Sperm comes from any of the following:

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•

Husband

•

Third Person Donor

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Husband and third person donor

(c) In case of donor sperm, husband and wife must authorize/ratify insemination in a written instrument •

Executed & signed by husband and wife before the birth of the child.

•

Recorded in the civil registry together with the birth certificate of the child.

Dual consent is required whether the semen used comes from the husband or a third person donor (Tolentino) De Castro v. Assidao-De Castro, (2008): Common children born before the annulment are legitimate, and therefore entitled to support from each of the spouses. Impugning Legitim acy

Andal v. Macaraig (1951): Serious illness of the husband which absolutely prevented him from having sexual intercourse with his wife, like if the husband was already in comatose or in a vegetative state, or sick with syphilis in the tertiary stage so that copulation was not possible. But tuberculosis, even in its most crucial stage, does not preclude copulation between the sick husband and his wife. Jao v. CA (1987): Blood-type matching is an acceptable means of impugning legitimacy, covered by Art. 166(2), under "biological or other scientific reasons." But this is only conclusive of the fact of nonpaternity. Benitez-Badua v. CA (1994): Only the man (and his heirs in certain situations) can impugn the legitimacy of the child Legitim acy with regard to the mother:

Grounds for im pugning legitim acy of a child are [Art. 166]: (1) Physical impossibility for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days which immediately preceded the child's birth due to: a. Physical incapacity of the husband to have sexual intercourse with his wife b. Husband and wife were living separately as to make sexual intercourse impossible c. Serious illness of the absolutely preventing intercourse

CIVIL LAW

husband sexual

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

(2) Other biological or scientific reasons, except Artificial Insemination (3) And in case of Artificial Insemination, the written consent of either parent was vitiated through fraud, violence, mistake, intimidation, or undue influence Macadangdang v. CA (1980): Mere proximate separation between the spouses is not sufficient physical separation to constitute as ground for impugning legitimacy. PAGE 58 of 574

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

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Note: The legitimacy or illegitimacy of a child born after 300 days following the termination of the marriage – burden of proof upon whoever alleges the status. [Art. 169] If nobody asserts the legitimacy or illegitimacy of the child described in Art. 169, the child should be considered illegitimate unless legitimacy is proved. Legitimacy cannot be presumed here since the birth was beyond the 300-day period of gestation. While it goes against the policy of law to lean in favor of legitimacy, this interpretation is better than the anomalous situation created by Art. 169, which is a child without a status. (Tolentino) Action for Impugning [Arts. 170 and 171]

Legitim acy

May be brought within 1, 2, or 3 years from the knowledge of the birth, or the knowledge of registration of birth. (1) Within 1 year - if husband or any heirs reside in the same city or municipality where the child was born or his birth was recorded. (2) Within 2 years - if the husband or all heirs live in the Philippines but do not reside in the same city or municipality where the child's birth took place or was recorded (3) Within 3 years - if the husband or all heirs live outside the Philippines when the child's birth took place or was recorded in the Philippines If the birth of the child has been concealed or was unknown to the husband, the above periods shall be counted:

CIVIL LAW

within the periods prescribed in Art. 170 [Art. 171]: (a) If the husband died before the expiration of the period fixed for bringing his action (b) If he should die after the filing of the complaint without having desisted therefrom (c) If the child was born after the death of the husband. Sayson v. CA (1992): Legitimacy can only be attacked directly.

B. PROOF OF FILIATION Art. 172. The filiation of legitimate children is established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or (2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned. In the absence of the foregoing evidence, the legitimate filiation shall be proved by: (1) The open and continuous possession of the status of a legitimate child; or (2) Any other means allowed by the Rules of Court and special laws. Legitim ate children may establish their filiation by any of the following [Art. 172]: (1) Primary Evidence

(1) From the discovery or knowledge of the birth of the child, or

•

Their record of birth appearing in the civil registry.

•

An admission of his filiation by his parent in a public document or a private handwritten instrument and signed by said parent

(2) From the discovery or knowledge of its registration, whichever is earlier.

(2) Secondary Evidence GENERAL RULE: Only the husband can impugn the legitimacy of a child. If he does not bring an action within the prescribed periods, he cannot file such action anymore thereafter, and this is also true with his heirs. EXCEPTION: That the heirs of the husband may file the action or continue the same

•

Proof of open and continuous possession of status as legitimate child

•

Any other means stated by the rules of court or special laws

Note: Only in the absence of primary evidence

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

CIVIL LAW

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

for

Claiming

Filiation

[Art.

Rights of Legitim ate Children [Art. 174]:

(a) For actions based on primary evidence, the same periods stated in Art. 173 apply.

(a) To bear the Surnames of the father and the mother, in conformity with the provisions of the Civil Code on surnames

(b) For actions based on secondary evidence, the action may only be brought during the lifetime of the alleged parent.

(b) To receive support from their parents, their ascendants, and in proper cases, their brothers and sisters, in conformity with the provisions of the Code on Support

PRIMARY EVIDENCE

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

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

Mendoza v. Melia (1966): Baptismal certificates are given probative value only for births before 1930. Birth certificates must be signed by the parents and sworn for it to be admitted as evidence. Eceta v. Eceta (2004): Signature of the father on the birth certificate is considered as an acknowledgement of paternity and mere presentation of a duly authenticated copy of such certificate will successfully establish filiation. Baluyut v. Baluyut (1990): Unsigned birth certificates are not evidence of recognized filiation. De Jesus v. Estate of Decedent Juan Gam boa Dizon (2001): The due recognition of an illegitimate child in a record of birth, a will, a statement before a court of record, or in any authentic writing, is in itself a consummated act of acknowledgement of the child, and no further court action is required. SECONDARY EVIDENCE

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

CIVIL LAW

Estate of Rogelio Ong v. Diaz (2007): DNA evidence can still be used even after the death of the parent. Lim v. CA (1975): Marriage certificates cannot be used as proof of filiation.

Heirs of Rodolfo Bañas v. Heirs of Bibiano Bañas (1985): "Su padre [Your father]" ending in a letter is only proof of paternal solicitude and not of actual paternity. Signature on a report card under the entry of "Parent/Guardian" is likewise inconclusive of open admission.

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

Gono-Javier vs. Court of Appeals (1994): Mere possession of status as an illegitimate child does not make an illegitimate child recognized but is only a ground for bringing an action to compel judicial recognition by the assumed parent. Perla v. Baring and Perla (2012): To prove open and continuous possession of the status of an illegitimate child, there must be evidence of the manifestation of the permanent intention of the supposed father to consider the child as his, by continuous and clear manifestations of parental affection and care, which cannot be attributed to pure charity.

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

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

Rights of Illegitimate Children:

De Jesus v. Syquia (1933): By "open and continuous possession of the status of a legitimate child" is meant the enjoyment by the child of the position and privileges usually attached to the status of a legitimate child, like bearing the paternal surname, treatment by the parents and family of the child as legitimate, constant attendance to the child's support and education, and giving the child the reputation of being a child of his parents.

(a) Use the Surname and be under the parental authority of the mother (b) However, may use the surname of father if •

Their filiation has been expressly recognized by the father through the record of birth appearing in the civil register; or

•

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

•

Provided, the father has the right to institute an action before the regular

OTHER EVIDENCE Agustin v. CA (2005): DNA evidence can be used as proof of paternity. PAGE 61 of 574

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courts to prove non-filiation during his lifetime [RA 9255] Grande v. Antonio (2014): The use of the word “may” in Art. 176 readily shows that an acknowledged illegitimate child is under no compulsion to use the surname of his illegitimate father. The word “may” is permissive and operates to confer discretion upon the illegitimate children. (c) Shall be entitled to Support in conformity with the Family Code (d) Legitime shall consist of one-half of the legitime of a legitimate child.

CIVIL LAW

marriage shall benefit descendants [Art. 181]

their

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

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

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

GENERAL RULE: "Legitimated" children are illegitimate children who because of the subsequent marriage of their parents are, by legal fiction, considered legitimate. To be capable of legitim ation: (1) The child must have been conceived and born outside of wedlock; and (2) The parents, at the time of the child's conception, were not disqualified by any impediment to marry each other, or disqualified only because either or both of them were below 18 years old. (Art. 177 as amended by RA 9858) Procedure and Effects: (a) Legitimation shall take place by a subsequent valid marriage between the parents. The annulment of a voidable marriage shall not affect the legitimation. [Art. 178] (b) Effects of legitimation shall retroact to the time of the child’s birth [Art. 180] (c) Legitimation of children who died before the celebration of the PAGE 62 of 574

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

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

LEGITIMATION

ADOPTION

Legal effect

The law merely makes legal what exists by nature

The law creates by fiction a relation which did not in fact exist

Persons affected

Natural children

Strangers (generally)

Procedure

Extrajudicial acts of parents

Always by judicial decree

Both parents

Both parents Except when: • One spouse seeks to adopt the legitimate child of the other • One spouse seeks to adopt his own illegitimate child, provided that the other spouse has signified their consent thereto • Spouses are legally separated from each other

W ho should apply

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

Creates a relationship only between the child and the adopting parents

RA 8552 – Dom estic Adoption Law (February 25, 1998)

(f) In a position to support and care for his/her children in keeping with the means of the family

A. WHO CAN ADOPT

(g) Has undergone pre-adoption services B. Aliens (Sec. 7b)

A. Filipino Citizens (Sec. 7a)

- Same for Filipinos provided further that:

(a) Of legal age (b) With full civil capacity and legal rights (c) Of good moral character and has not been convicted of any crime involving moral turpitude (d) Emotionally and psychologically capable of caring for children (e) At least sixteen (16) years older than adoptee, except when adopter is biological parent of the adoptee or is the spouse of the adoptee’s parent PAGE 63 of 574

(1) His/her country has diplomatic relations with the Philippines (2) Has been living in the Philippines for 3 continuous years prior to the filing of application and maintains such residence until the decree is entered (provided that absences not exceeding 60 days per 1 year for professional, business, or emergency reasons are allowed) (3) Has been certified by his/her diplomatic or consular office or any

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appropriate government agency that he/she has the legal capacity to adopt in his/her country (4) His/her government allows the adoptee to enter his/her country as his/her adoptee and reside there permanently as an adopted child (5) Has submitted all the necessary clearances and such certifications as may be required

(f) A child whose biological or adoptive parent(s) has died, provided that no proceedings shall be initiated within 6 months from the time of death of said parent(s) Exceptions to the Requirement of a Certification that the Child is Available for Adoption (Sec. 4):

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

•

Adoption of a child by his/her stepparent;

•

Adoption by a relative within the 4th civil degree by consanguinity or affinity is

The prospective adoptee if 10 years or older

(2) The prospective adoptee’s biological parents, legal guardian or the government instrumentality or institution that has custody of the child

With respect to their wards, after the termination of the guardianship and clearance of his/her accountabilities.

(3) The prospective adopters’ legitimate and adopted children who are 10 years or older (4) The prospective adopters’ illegitimate children, if any, who are 10 years or older and living with them

B. WHO CAN BE ADOPTED (SEC. 8) (a) Minor who has been administratively or judicially declared available for adoption

(d) A person of legal age if, prior to the adoption, said person has been consistently considered and treated by the adopter(s) as his/her child since minority

Adoption of an illegitimate child by his/her biological parent;

(1)

C. Guardians

(c) Illegitimate child by a qualified adopter to improve the child’s status to that of legitimacy

•

Persons whose written consent necessary for adoption (Sec. 9)

(c) Adopter 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

(b) Legitimate child of one spouse by another

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(5) The spouse, if any, of the person adopting or to be adopted. Note: A decree of adoption shall be effective as of the date the original petition was filed. It also applies in case the petitioner dies before the issuance of the decree of adoption to protect the interest of the adoptee.

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C. PRE-ADOPTION PROCEDURES

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3. Required supporting documents for a petition for the declaration of involuntary com m itm ent:

1. Voluntary Commitment of biological parent(s) wanting to put their child up for adoption

(a) Social Case Study Report by DSWD / LGU / institution charged with child’s custody

Counseling on their options other than adoption

(b) Proof of efforts to locate the child’s parents/known relatives Explaining to them the implications of losing their parental authority over the child

Continuing services shall be provided after relinquishment to cope with feelings of loss, etc. and other services for the reintegration to the community of the biological parent(s)

Written certification that a local/national radio/TV case was aired on 3 different occasions

-

Publication in 1 newspaper of general circulation

-

Police report / barangay certification of due diligence

-

Returned registered mail to last known address of parents

(c) Birth certificate, if available

Biological parent(s) who decide to keep the child shall be provided with adequate services and assistance to fulfill their parental responsibilities

(d) Recent photo and photo abandonment of child

Biological parent(s) who decide to put the child for adoption shall sign the Deed of Voluntary Commitment (DVC), which shall be rescissible within 3 months from signing of the same

2. Involuntary Commitment abandoned or neglected child

-

of

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

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

Issuance of certification by DSWD Secretary declaring the child legally available for adoption within 3 months following involuntary commitment

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D. ADOPTION PROCEDURES

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Note: •

•

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distinction from legitimate filiation. However, if the adoptee and his/her biological parents had left a will, the law on testamentary succession shall govern.

DSWD must certify the child as legally available for adoption as a prerequisite for adoption proceedings.

Art. 190 (as amended). Legal or intestate succession to the estate of the adopted shall be governed by the following rules:

After the decree of adoption, the court may also issue a travel authority, if needed.

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

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

E. WHO MAY ADOPTED

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

NOT

ADOPT/

BE

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

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

(4) When only adopters survive, they shall inherit 100% of the estate (5) When only collateral blood relatives survive, ordinary rules of legal or intestate succession shall apply

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

(d) Nam e [CC, Art. 365.]

F. RIGHTS OF AN ADOPTED CHILD

An adopted child shall bear the surname of the adopter

(a) Parental Authority [Sec. 16]

RA 8552 allows the change of first name to be instituted in the same proceeding as the adoption: “the decree of adoption shall state the name by which the child is to be known.”

Except in cases where the biological parent is the adopter’s spouse, all legal ties between biological parent and adoptee shall be severed, and the same shall then be vested on the adopters.

The law is silent as to what middle name the adoptee may use but the SC has held that an adoptee is entitled to all the rights provided by law to a legitimate child, including the right to bear the surname of her father and mother. [In re: Adoption of Stephanie Nathy Astorga Garcia (2005)]

(b) Legitim acy [Sec. 17] The adoptee shall be considered the legitimate son/daughter of the adopters for all intents and purposes, and as such is entitled to all rights and obligations provided by law to legitimate children born to them without discrimination of any kind.

(e) Nationality

(c) Succession [Sec. 18] In legal and intestate succession, the adopter and the adoptee shall have reciprocal rights of succession without PAGE 67 of 574

Adoption does not confer citizenship: Sec. 3, Art. 4 of the Constitution: Philippine citizenship may be lost/acquired [only] in the manner provided by law.

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The right to confer citizenship belongs to the State (political) and cannot be granted by a citizen through adoption. Adoption creates a relationship between the adopter and adoptee, not between the State and the adoptee.

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Effects of Rescission [Sec. 20]: (1) Parental authority of the adoptee's biological parents, if known, OR the legal custody of the DSWD shall be restored IF the adoptee is still a minor or incapacitated

G. RESCISSION OF ADOPTION

(2) Reciprocal rights and obligations of the adopters and the adoptee shall be extinguished

Adoptee may file action for rescission, with the assistance of DSWD if he/she is a minor or over 18 but incapacitated, based on the ff grounds (Sec. 19):

(3) Court shall order the Civil Registrar to cancel the amended certificate of birth of the adoptee and restore his/her original birth certificate

(1) Repeated physical and verbal maltreatment by adopters despite having undergone counseling

(4) Succession rights shall revert to its status prior to adoption, but only as of the date of judgment of judicial rescission

(2) Attempt on life of adoptee

(5) Vested rights prior to judicial rescission shall be respected

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

of

the

adopter

by

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

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

(7) Living a dishonorable/disgraceful life (8) Conviction of a crime which carries with it the penalty of civil interdiction

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-

The simulation was for the child’s best interest

-

Child has been treated consistently as his own

-

Petition filed within 5 years of RA 8552’s effectivity (2003)

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Three-in-one Procedure -

Correction of entries in birth certificate

-

Deed of Voluntary Commitment or Declaration of abandonment

-

Adoption decree

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

CIVIL LAW

(g) Agrees to uphold the basic rights of the child as embodied under Philippine laws, the U.N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement the provisions of this Act (h) Comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption is allowed under his/her national laws (i) Possesses all the qualifications and none of the disqualifications provided in applicable Philippine laws. I. 2. WHO CAN BE ADOPTED (a) Only a legally-free child may be the subject of inter-country adoption.

I. 1. WHO CAN ADOPT Any foreign national or a Filipino citizen permanently residing abroad who has the qualifications and none of the disqualifications under the Act may file an application if he/she: (a) Is at least 27 years of age and at least 16 years older than the child to be adopted, at the time of application unless the adopter is the parent by nature of the child to be adopted or the spouse of such parent (b) If married, his/her spouse must jointly file for the adoption

(b) A legally-free child is one who has been voluntarily or involuntarily committed to the DSWD of the Philippines, in accordance with the Child and Youth Welfare Code. (c) No child shall be matched to a foreign adoptive family unless it is satisfactorily shown that the child cannot be adopted locally (last resort). (d) In order that such child may be considered for placement, the following documents must be submitted to the Board: •

Child study

•

Birth Certificate Certificate

•

Deed of Voluntary Commitment/ Decree of Abandonment/ Death Certificate of parents

•

Medical Evaluation / History

(e) Is eligible to adopt under his/her national law

•

Psychological necessary

(f) Is in a position to provide the proper care and support and to give the necessary moral values and example to all his children, including the child to be adopted

•

Recent photo of the child

(c) Has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and has undergone the appropriate counseling from an accredited counselor in his/her country (d) Has not been convicted of a crime involving moral turpitude

/

Foundling

Evaluation,

as

Where the petition for adoption was granted after the child had shot and killed a girl, the Supreme Court did not consider the retroactive effect given to the decree of adoption so as to impose a liability upon

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adopting parents at a time when adopting parents had no actual or physically custody over the child. Retroactive effect may perhaps be given to the granting of the petition for adoption where such is essential to permit the accrual of some benefit or advantage in favor of the adopted child. In the instant case, however, to hold that parental authority had been retroactively lodged in the adopting parents so as to burden them with liability for a tortuous act that they could not have foreseen and which they could not have prevented would be unfair and unconscionable. [Tamargo v. CA (1992)] Adoption is a juridical act, proceeding in rem. Because it is artificial, the statutory requirements in order to prove it must be strictly carried out. Petition must be announced in publications and only those proclaimed by the court are valid. Adoption is never presumed. [Lazatin v. Campos (1979)] Validity of facts behind a final adoption decree cannot be collaterally attacked without impinging on that court’s jurisdiction. [Santos v. Aranzanso (1966)]

X. Support A. WHAT IT COMPRISES Consists of everything indispensable for sustenance, dwelling, clothing, medical attendance, education and transportation, in keeping with the financial capacity of the family. [Art. 194] •

Education includes a person’s schooling or training for some profession, trade or vocation, the right to which shall subsist beyond the age of majority.

•

Transportation includes expenses in going to and from school, or to and from place of work.

B. WHO ARE OBLIGED •

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

CIVIL LAW

To support each other: o

Spouses;

o

Legitimate descendants;

o

Parents and their children (legitimate and illegitimate) and the children of the latter (legitimate and illegitimate);

o

Legitimate brothers and sisters, whether of full or half-blood; [Art. 195]

o

Illegitimate brothers and sisters, whether of full or half-blood, except when the need for support of one (of age) is due to a cause imputable to his/her fault or negligence. [Art. 196]

ascendants

and

Note: Both legitimate and illegitimate children are entitled to support. •

Order of support: o

If there are multiple obligors ▪ Spouse ▪ Descendants, nearest in degree ▪ Ascendants, nearest in degree ▪ Brothers and Sisters [Art. 199]

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

giver and the necessities of the recipient. (Gotardo v. Buling (2012)) •

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

•

Observe order in Article 199 as to whose claim shall be satisfied first;

o

But if the concurrent obligees are the spouse and a child subject to parental authority, the child shall be preferred.

Person obliged refuses or fails to give support

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

If there are multiple recipients and only one obligor, and the latter has no sufficient means to satisfy all claims: o

Stranger gives support

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

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

•

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•

The above preference given to a child under parental authority over the spouse should prevail only if the person obliged to support pays it out of his separate property. So if the support comes from ACP or CPG, the above rule of preference for the child does not apply. (Tolentino)

Contractual support or that given by will The excess in amount beyond that required for legal support shall be subject to levy on attachment or execution. [Art. 208] Reason: The amount of support agreed upon in the contract or given in the will can be more than what the recipient needs (Sempio-Diy).

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

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

Even if the parents-in-law were the ones who called for the physician’s services for the childbirth of their daughter-in-law, it is the woman’s husband who is bound to pay the fees due to the physician. (Pelayo v. Lauron (1909))

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

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

XI. Parental Authority and Custody of Children

D. AMOUNT

Parental authority is the mass of rights and obligations which parents have in relation to the person and property of their children until their emancipation, and even after this under certain circumstances (Manresa).

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

PARENTAL AUTHORITY INCLUDES [ART. 209]:

E. WHEN DEMANDABLE [ART. 203] •

The obligation to give support shall be dem andable from the time the person who has a right to receive the same needs it for maintenance, but it shall not be paid except from the date of judicial or extra-judicial demand.

•

Support pendente lite may be claimed in accordance with the Rules of Court.

•

Payment shall be made within the first 5 days of each corresponding month. When the recipient dies, his heirs shall not be obliged to return what he has received in advance.

(1) The caring for and rearing of children for civic consciousness and efficiency; (2) The development of the moral, mental and physical character and well-being of said children Parental authority and responsibility may not be renounced or transferred except in the cases authorized by law. [Art. 210] CASES WHEN PARENTAL AUTHORITY AND RESPONSIBILITY MAY BE TRANSFERRED OR RENOUNCED: • Adoption; • Guardianship; or

F. OPTIONS •

Payment of the amount; or

•

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

G. ATTACHMENT The right to receive support as well as any money or property obtained as such support shall not be levied upon on attachment or execution. [Art. 205] This is to protect that which the law gives to the recipient against want and misery. (Tolentino)

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

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(a) In case of death, absence or unsuitability of the parents, substitute parental authority shall be exercised by the surviving grandparent

(1) Natural right and duty of parents [Art. 209, FC] (2) Cannot be renounced, transferred or waived, except in cases authorized by law [Art 210, FC]

(b) When several grandparents survive, the one designated by the court shall exercise parental authority, taking into account all relevant considerations, especially the choice of the child over seven years of age, unless the grandparent chosen is unfit

(3) Jointly exercised by the father and the mother [Art. 211, FC] (4) Purely personal and cannot be exercised through agents (5) Temporary PARENTAL PREFERENCE RULE: The natural parents, who are of good character and who can reasonably provide for the child, are ordinarily entitled to custody as against all persons. [Santos v CA (1995)] WHO EXERCISES AUTHORITY IN CASES OF DEATH, ABSENCE, UNSUITABILITY, REMARRIAGE, OR SEPARATION OF PARENTS: (1) In case one parent is absent or already dead, the present or surviving parent [Art. 212] Remarriage of the surviving parent shall not affect his/her parental authority over the children, unless the court appoints another person to be the guardian of the children or their property [Art. 212] (2) In case of a void/annulled marriage, and there is no agreement between spouses, the parent designated by the court [Art. 43 par. 1; Art. 49] (3) Innocent spouse gets custody of minor children in legal separation [Art. 63 par. 3] (4) The court shall take into account all relevant considerations, especially the choice of the child over seven years of age, unless the parent chosen is unfit [Art. 213 par. 1] (5) Substitute parental authority [Art. 214]

Descendant’s Privilege of Refusal to Testify [Art. 215]: No descendant shall be compelled, in a criminal case, to testify against his parents and grandparents. Exception: When such testimony is indispensable in (1) a crime against the descendant, or (2) a crime by one parent against the other. TENDER YEARS PRESUMPTION: NO child under 7 years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise. [Art. 213 par 2; Art. 363, NCC; Gamboa v. CA (2007)] Examples of com pelling reasons for custody to be granted to the father: (1) When the mother is insane; (2) With a communicable disease that might endanger the life or health of the child; (3) Is maltreating the child; or (4) Has another child by another man who lives with her. [Cervantes v. Fajardo (1989)] Note: Alleged lesbianism [Gualberto v. Gualberto (2005)], prostitution or infidelity to husband does not necessarily make a mother unfit as parent. It must be shown that such lesbianism, prostitution or infidelity adversely affect the child.

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

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PERSONS EXERCISING SPECIAL PARENTAL AUTHORITY [Art. 218] (1) School, its administrators and teachers; or (2) The individual, entity engaged in child care

or

institution

Note: Exercised over minor child while under their supervision, instruction or custody.

Note: The same order applies to the appointment of judicial guardian over the property of the child SUBSTITUTE PARENTAL AUTHORITY OVER DISADVANTAGED CHILDREN [Art. 217] Entrusted in summary judicial proceedings to: (1) Heads of children’s homes (2) Orphanages (3) Similar institutions duly accredited by the proper government agency (such as the DSWD) WHO ARE DISADVANTAGED CHILDREN: (1) Foundlings – one who is deserted or abandoned as an infant or a child, with parents, guardian, or relatives being unknown or one who is committed in an orphanage or charitable or similar institution with unknown facts of birth and parentage (2) Abandoned – one who has no proper parental care or guardianship, or whose parents or guardians have deserted him for a period of at least six continuous months (3) Neglected – one whose basic needs have been deliberately unattended or inadequately attended (4) Abused – one who is taken advantage of, exploited and maltreated (5) Others similarly situated

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XII. Emancipation Art. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of eighteen years. Art. 236. Emancipation shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life, save the exceptions established by existing laws in special cases. Contracting marriage shall require parental consent until the age of twenty-one. Nothing in this Code shall be construed to derogate from the duty or responsibility of parents and guardians for children and wards below twenty-one years of age mentioned in the second and third paragraphs of Article 2180 of the Civil Code.

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XII. Summary Judicial Proceedings Under FC A. PROCEDURAL RULES PROVIDED FOR IN THIS TITLE SHALL APPLY TO [ART. 238]: (1) Separation in fact between husband and wife (2) Abandonment by one of the other (3) Incidents involving parental authority

B. SEPARATION IN FACT A verified petition alleging the following facts is required when [Art. 239]: • A husband and wife are separated in fact; or, • One has abandoned the other

Persons between ages twenty-one and twenty-four, shall be obliged to ask their parents or guardian for advice upon the intended marriage. • No advice or unfavorable advice: marriage license shall not be issued till after three months following the completion of the publication of the application therefor • Sworn statement by the contracting parties that advice has been sought, together with written advice if any or refusal to give advice: attached to the application for the marriage license [Art. 15, FC] RA 6809: By virtue of this law, emancipation can no longer take place by virtue of the minor’s marriage or by the concession of the parents to a minor in a recorded public instrument.

Situation: Where one of them seeks judicial authorization for a transaction where the consent of the other spouse is required by law but such consent is withheld or cannot be obtained The petition shall: (1) Attach the proposed deed, if any, embodying the transaction, if none, shall describe in detail the said transaction and state the reason why the required consent thereto cannot be secured. (2) The final deed duly executed by the parties shall be submitted to and approved by the court. Separate Claim for Dam ages: Claims for damages by either spouse, except costs of the proceedings, may be litigated only in a separate action. [Art. 240] Jurisdiction: Jurisdiction over the petition shall, upon proof of notice to the other spouse, be exercised by the proper court authorized to hear family cases, if one exists, or in the regional trial court or its equivalent sitting in the place where either of the spouses resides. [Art. 241]

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Notification to other spouse: (1) Upon the filing of the petition, the court shall notify the other spouse, whose consent to the transaction is required, of said petition, ordering said spouse to show cause why the petition should not be granted, on or before the date set in said notice for the initial conference. (2) The notice shall be accompanied by a copy of the petition and shall be served at the last known address of the spouse concerned. [Art. 242] Procedure: (1) A preliminary conference shall be conducted by the judge personally without the parties being assisted by counsel. (2) After the initial conference, if the court deems it useful, the parties may be assisted by counsel at the succeeding conferences and hearings. [Art. 243]

endeavor to protect the interests of the non-appearing spouse. [Art. 245] Nature of judgm ent: The judgment of the court shall be immediately final and executory. [Art 247] Rules applicable for adm inistering or encumbering separate property of spouse: The petition for judicial authority to administer or encumber specific separate property of the abandoning spouse and to use the fruits or proceeds thereof for the support of the family shall also be governed by these rules. [Art. 248]

C. INCIDENTS INVOLVING PARENTAL AUTHORITY Procedure

(3) If the petition is not resolved at the initial conference, said petition shall be decided in a summary hearing. Basis of summary hearing (at the sound discretion of the court):

(1) Such petitions shall be verified and filed in the proper court of the place where the child resides. [Art. 250] (2) Upon the filing of the petition, the court shall notify the parents or, in their absence or incapacity, the individuals, entities or institutions exercising parental authority over the child. [Art. 251]

• Affidavits • Documentary evidence • Oral testimonies at the court’s sound discretion. If testimony is needed, the court shall specify the witnesses to be heard and the subject-matter of their testimonies, directing the parties to present said witnesses. [Art. 246(a)] W hen appearance required:

of

spouses

1. In case of non-appearance of the spouse whose consent is sought, the court shall inquire into the reasons for his failure to appear, and shall require such appearance, if possible. [Art. 244] 2. If, despite all efforts, the attendance of the non-consenting spouse is not secured, the court may proceed ex parte and render judgment as the facts and circumstances may warrant. In any case, the judge shall

CIVIL LAW

Note: • Petitions filed under Articles 223, 225 and 235 of this Code involving parental authority shall be verified. [Art. 249] • The rules in Chapter 2 hereof shall also govern summary proceedings under this Chapter insofar as they are applicable [Art. 253] • The foregoing rules in Chapter 2 (Separation in Fact) and (Incidents Involving Parental Authority) hereof shall likewise govern summary proceedings filed

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• Declaration of presumptive death [Art. 41] • Delivery of presumptive legitime [Art. 51]

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XIII. Care and Education of Children

• Fixing of family domicile [Art. 69] • Disagreements regarding one spouse’s profession, occupation, business, or activity [Art. 73] • Disposition or encumbrance of common property in ACP where one spouse is incapacitated or unable to participate in the administration; administration of absolute community in a disagreement and the wife takes recourse within five years [Art. 96]

Every child:

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

(4) Has a right to live in an atmosphere conducive to his physical, moral and intellectual development. [Art. 356, NCC]

(1) Is entitled to parental care; (2) Shall receive education;

at

least

elementary

(3) Shall be given moral and civic training by the parents or guardian;

Duties of the child: (1) Obey and honor his parents or guardian; (2) Respect his grandparents, old relatives, and persons holding substitute parental authority;

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

(3) Exert his utmost for his education and training; (4) Cooperate with the family in all matters that make for the good of the same. [Art. 357, NCC] Every parent and every person holding substitute parental authority shall see to it that the rights of the child are respected and his duties complied with, and shall particularly, by precept and example, imbue the child with highmindedness, love of country, veneration for the national heroes, fidelity to democracy as a way of life, and attachment to the ideal of permanent world peace. [Art. 358, NCC] The government promotes the full growth of the faculties of every child. The government will establish, whenever possible: (1) Schools in every barrio, municipality and city where optional religious instruction shall be taught as part of the curriculum at the option of the parent or guardian; (2) Puericulture and similar centers; PAGE 77 of 574

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XIV. Surnames

(3) Councils for the Protection of Children; (4) Juvenile courts. [Art. 359, NCC]

A. SURNAMES OF CHILDREN The Council for the Protection of Children shall look after the welfare of children in the m unicipality.

(1) Legitimate and legitimated children shall principally use the surname of the father. [Art. 364]

Functions:

(2) An adopted child shall bear the surname of the adopter. [Art. 365]

(1) Foster the education of every child in the municipality (2) Encourage the cultivation of the duties of parents (3) Protect and assist abandoned mistreated children, and orphans (4) Take steps delinquency

to

prevent

or

juvenile

(5) Adopt measures for the health of children (6) Promote the opening and maintenance of playgrounds (7) Coordinate the activities of organizations devoted to the welfare of children, and secure their cooperation. [Art. 360, NCC] (8) Juvenile courts will be established, as far as practicable, in every chartered city or large municipality.[Art. 361, NCC] Whenever a child is found delinquent by any court, the father, mother, or guardian may in a proper case be judicially admonished. [Art. 362, NCC]

(3) A natural child acknowledged by both parents shall principally use the surname of the father. If recognized by only one of the parents, a natural child shall employ the surname of the recognizing parent. [Art 366] (4) Natural children by legal fiction shall principally employ the surname of the father [Art. 367] (5) Illegitimate children referred to in Article 287 shall bear the surname of the mother. [Art 368] (6) Children conceived before the decree annulling a voidable marriage shall principally use the surname of the father. [Art. 369]

B. WIFE AFTER MARRIAGE

AND

DURING

(1) A married woman may use [Art. 370]: (a) Her maiden first name and surname and add her husband's surname, or (b) Her maiden first name and her husband's surname or (c) Her husband's full name, but prefixing a word indicating that she is his wife, such as "Mrs." (2) In case of annulment of marriage, and the wife is the guilty party, she shall resume her maiden name and surname. If she is the innocent spouse, she may resume her maiden name and surname. However, she may choose to continue employing her former husband's surname, unless [Art. 371]: (a) The court decrees otherwise, or (b) She or the former husband is married again to another person.

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(3) When legal separation has been granted, the wife shall continue using her name and surname employed before the legal separation. [Art. 372] (4) A widow may use the deceased husband's surname as though he were still living, in accordance with Article 370. [Art 373]

XV. Rules Governing Persons who are Absent A. PROVISIONAL MEASURES IN CASE OF ABSENCE [ARTS. 381-383]

C. CONFUSION AND CHANGE OF NAMES

Art. 43. If there is a doubt as between two or more persons who are called to succeed each other as to which of them died first whoever alleges the death of one prior to the other shall prove the same; in the absence of proof it is presumed that they died at the same time and there shall be no transmission of rights from one to the other.

In case of identity of names and surnames, the younger person shall be obliged to use such additional name or surname as will avoid confusion. [Art. 374] In case of identity of names and surnames between ascendants and descendants, the word "Junior" can be used only by a son. Grandsons and other direct male descendants shall either [Art. 375]: (1) Add a middle name or the mother's surname, or (2) Add the Roman Numerals II, III, and so on. Usurpation of a name and surname may be the subject of an action for damages and other relief. [Art. 377]

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Note: Article 43 provides a statutory presumption when there is doubt on the order of death between persons who are called to succeed each other (only). Presumption in the Rules of Court (Rule 131, sec. 3, (jj.) (Presumption of survivorship)

The unauthorized or unlawful use of another person's surname gives a right of action to the latter [Art. 378]

Age

Presumed Survivor

Both under 15

Older

Both above 60

Younger

One under 15, the other above 60

One under 15

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

Both over 15 and under 60; different sexes

Male

Illegitmate Children shall use the surname and shall be under the parental authority of their mother. However, they may use the surname of their father if their filiation has been expressly recognized by their father through:

Both over 15 and under 60; same sex

Older

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

(a) record of birth in civil register (b) admission in public document (c) admission in private handwritten document

One under 15 or over One between 15 and 60, the other 60 between those ages Note: Applicable only to two or more persons who perish in the same calamity, and it is not shown who died first, and there are no particular circumstances from which it can be inferred.

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Exception to the Exception:

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

Art. 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary. This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired. Art. 382. The appointment referred to in the preceding article having been made, the judge shall take the necessary measures to safeguard the rights and interests of the absentee and shall specify the powers, obligations and remuneration of his representative, regulating them, according to the circumstances, by the rules concerning guardians.

General rule: Marriage contracted by any person during the subsistence of a previous marriage is void. Exceptions: The following subsequent marriage of the present spouse is valid: (1) Subsequent marriage due to ordinary absence where: (a) The prior spouse had been absent for 4 consecutive years;

Art. 383. In the appointment of a representative, the spouse present shall be preferred when there is no legal separation.

(b) The spouse present had a wellfounded belief that absent spouse is dead; and (c) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse). (2)

Subsequent marriage due extraordinary absence where:

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to

If the absentee left no spouse, or if the spouse present is a minor, any competent person may be appointed by the court.

Requisites: The judge may appoint a person to represent absentee when: (1) Person disappears from his domicile

(a) The prior spouse had been missing for 2 consecutive years;

(2) His whereabouts are unknown (3) No agent to administer his property

(b) There is danger of death attendant to the disappearance [Art. 391, Civil Code]; (c) The spouse present had a wellfounded belief that the missing person is dead; and

(4) An interested party, a relative, or a friend files the action W ho may be representative?

(d) Judicial declaration of presumptive death was secured (no prejudice to the effect of the reappearance of the absent spouse).

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appointed

as

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

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B. DECLARATION OF ABSENCE [ARTS.

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subordinated to the condition of his death.

384-389]

C. ADMINISTRATION OF THE PROPERTY OF THE ABSENTEE [ARTS.

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

387-389]

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

Art. 385. The following may ask for the declaration of absence:

Art. 388. The wife who is appointed as an administratrix of the husband's property cannot alienate or encumber the husband's property, or that of the conjugal partnership, without judicial authority.

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

Art. 389. The administration shall cease in any of the following cases:

Art. 386. The judicial declaration of absence shall not take effect until six months after its publication in a newspaper of general circulation.

2. When the death of the absentee is proved and his testate or intestate heirs appear;

1. When the absentee appears personally or by means of an agent;

3. When a third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title.

W hen may absence be declared? • Two years without any news about the absentee

In these cases the administrator shall cease in the performance of his office, and the property shall be at the disposal of those who may have a right thereto.

• Five years if the absentee left a person in charge of administration of his property • Declaration takes effect only after six months after publication in a newspaper of general circulation

W ho may adm inister the property?

W ho may ask for a declaration of absence?

• Spouse present shall be preferred when there is no legal separation • If no spouse or spouse is incapacitated, any competent person

(1) Spouse present (2) Heirs instituted in a will, who may present an authentic copy of the same;

W hen will the property cease?

adm inistration

of

Administrator shall cease in performance of his office, and property shall be disposed in favor of those who have a right thereto when

(3) Relatives who may succeed by the law of intestacy; (4) Those who may have some right over the property of the absentee, PAGE 81 of 574

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(1) Absentee appears personally or by means of an agent

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• If absentee disappeared after age of 75, 5 years shall be sufficient.

(2) Testate or intestate heirs appear, upon proof of death of absentee

Extraordinary Absence

(3) Third person appears, with a proper document showing he has acquired absentee’s property by purchase or other title

Only 4 years is required for presumption to arise if: (1) A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane;

D. PRESUMPTION OF DEATH [ARTS. 390-392]

(2) A person in the armed forces who has taken part in war, and has been missing for four years;

Art. 390. After an absence of 7 years, it being unknown whether or not the absentee still lives, he shall be presumed dead for all purposes, except for those of succession.

(3) A person who has been in danger of death under other circumstances and his existence has not been known for four years.

The absentee shall not be presumed dead for the purpose of opening his succession till after an absence of 10 years. If he disappeared after the age of 75 years, an absence of 5 years shall be sufficient in order that his succession may be opened.

Note: • Although 7 years is required for the presumption of death of an absentee in the Civil Code, Art. 41 of the Family Code makes an exception for the purpose of remarriage by limiting such requirement to 4 years.

Art. 391. The following shall be presumed dead for all purposes, including the division of the estate among the heirs:

• Art. 41 also limits the required 4 years in Art. 391 for absence under exceptional circumstances to only 2 years.

1. A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane;

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

2. A person in the armed forces who has taken part in war, and has been missing for four years; 3. A person who has been in danger of death under other circumstances and his existence has not been known for four years.

General rule: A person shall be presumed dead for all purposes after absence for a period of 7 years. Exception: Succession • In succession, 10 years is required for presumption of death.

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XVI. Funerals The duty and the right to make arrangements for the funeral of a relative shall be in accordance with the order established for support, under Article 294 [Art. 305]: (1) Spouse (2) Descendants in the nearest degree. In case of descendants of the same degree, the oldest shall be preferred.

CIVIL LAW

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

(3) The ascendants in the nearest degree. In case of ascendants, the paternal shall have a better right (4) The brothers and sisters, the oldest shall be preferred. (5) Municipal authorities – if there are no persons who are bound to support or if such persons are without means Nature of funeral: Every funeral shall be in keeping with the social position of the deceased. [Art. 306] The funeral shall be: (1) In accordance with the expressed wishes of the deceased. (2) In the absence of such expression, his religious beliefs or affiliation shall determine the funeral rites. (3) In case of doubt, the form of the funeral shall be decided upon by the person obliged to make arrangements for the same, after consulting the other members of the family [Art. 307] Note: No human remains shall be retained, interred, disposed of or exhumed without the consent of the persons mentioned in articles 294 and 305. Dam ages: Any person who shows disrespect to the dead, or wrongfully interferes with a funeral shall be liable to the family of the deceased for damages, material and moral [Art. 309]

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

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XVII. Entries in the Civil Register

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

A. CIVIL CODE

B. RA 9048 AS AMENDED BY RA 10172

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

- An act authorizing the city or municipal civil registrar or the consul general to correct a clerical or typographical error in an entry and/or change of first name or nickname in the civil register without need of a judicial order, amending for this purpose articles 376 and 412 of the civil code of the philippines

Art. 408. The following shall be entered in the civil register: 1. Births; 2. marriages; 3. deaths; 4. legal separations; 5. annulments of marriage; 6. judgments declaring marriages void from the beginning; 7. legitimations; 8. adoptions; 9. acknowledgments of natural children; 10. naturalization; 11. loss, or 12. recovery of citizenship; 13. civil interdiction; 14. judicial determination of filiation; 15. voluntary emancipation of a minor; and 16. changes of name. Art. 409. In cases of legal separation, adoption, naturalization and other judicial orders mentioned in the preceding article, it shall be the duty of the clerk of the court which issued the decree to ascertain whether the same has been registered, and if this has not been done, to send a copy of said decree to the civil registry of the city or municipality where the court is functioning.

General rule: No entry in a civil register shall be changed or corrected without a judicial order Exceptions: (1) Clerical or typographical errors or (2) Intersex persons Clerical or typographical errors •

Change of: first name or nickname, day and month in the date of birth, or sex of a person

•

This exception applies where it is patently clear that there was a clerical or typographical error or mistake in the entry, which can be corrected or changed by the concerned city or municipal civil registrar or consul general in accordance with the provisions of this Act and its implementing rules and regulations

Intersex persons •

Sexual development of intersex persons—those whose sex chromosomes, genitalia, and/or secondary sex characteristics are determined to be neither exclusively male nor female, makes gender classification at birth inconclusive. It is only at maturity that the gender of such persons become fixed.

•

In the case of Jennifer Cagandahan, who suffered from Congenital Adrenal Hyperplasia and had two sex organs and whose female sex organs did not develop normally, the Court granted her

Art. 410. The books making up the civil register and all documents relating thereto shall be considered public documents and shall be prima facie evidence of the facts therein contained. Art. 411. Every civil registrar shall be civilly responsible for any unauthorized alteration made in any civil register, to any person suffering damage thereby. However, the civil registrar may exempt himself from such liability if he proves that he has taken every reasonable precaution to prevent the unlawful alteration. PAGE 84 of 574

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petition to change her registered sex from female. [Republic v Cagandahan (2008)]. Note: • Clerical or typographical error refers to a mistake committed in the performance of clerical work in writing, copying, transcribing or typing an entry in the civil register that is harmless and innocuous (i.e. misspelled name, misspelled place of birth, mistake in the entry of day and month in the date of birth or the sex of the person or the like, which is visible to the eyes or obvious to the understanding, and can be corrected or changed only by reference to other existing record or records) • Before the amendment by RA 10172, no correction must involve the change of sex, nationality, age or status of the petitioner. After the amendment, change of sex can now be subjected to correction without judicial order under the rules of this Act. • Civil Register refers to the various registry books and related certificates and documents kept in the archives of the local civil registry offices, Philippine Consulates and of the Office of the Civil Registrar General. Sec. 3. W ho May File the Petition and W here. – Any person having direct and personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register may file, in person, a verified petition with the local civil registry office of the city or municipality where the record being sought to be corrected or changed is kept. In case the petitioner has already migrated to another place in the country and it would not be practical for such party, in terms of transportation expenses, time and effort to appear in person before the local civil registrar keeping the documents to be corrected or changed, the petition may be filed, in person, with the local civil registrar of the place where the interested party is presently residing or domiciled. The two (2) local civil registrars concerned will then

CIVIL LAW

communicate to facilitate the processing of the petition. Citizens of the Philippines who are presently residing or domiciled in foreign countries may file their petition, in person, with the nearest Philippine Consulates. The petitions filed with the city or municipal civil registrar or the consul general shall be processed in accordance with this Act and its implementing rules and regulations. All petitions for the clerical or typographical errors and/or change of first names or nicknames may be availed of only once. Grounds W ho may file the petition and where? (1) Any person having direct personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register (2) Verified petition with the local civil registry office of the city or municipality (a) where the record being sought to be corrected or changed is kept (b) where the interested party is presently residing or domiciled, if it will be impractical to submit in the place where record is kept (i.e. when party has migrated to another place in the country) (c) nearest Philippine Consulates, if the petitioner is presently residing or domiciled in foreign countries Note: All petitions for the clerical or typographical errors and/or change of first names or nicknames may be availed of only once. Sec. 4. Grounds for Change of First Name or Nickname. – The petition for change of first name or nickname may be allowed in any of the following cases: (1) The petitioner finds the first name or nickname to be ridiculous, tainted with dishonor or extremely difficult to write or pronounce.

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(2) The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that first name or nickname in the community: or (3) The change will avoid confusion. Sec. 5. Form and Contents of the Petition. – The petition for correction of a clerical or typographical error, or for change of first name or nickname, as the case may be, shall be in the form of an affidavit, subscribed and sworn to before any person authorized by the law to administer oaths. The affidavit shall set forth facts necessary to establish the merits of the petition and shall show affirmatively that the petitioner is competent to testify to the matters stated. The petitioner shall state the particular erroneous entry or entries, which are sought to be corrected and/or the change sought to be made.

CIVIL LAW

change or sex transplant. The petition for change of first name or nickname, or for correction of erroneous entry concerning the day and month in the date of birth or the sex of a person, as the case may be, shall be published at least once a week for two (2) consecutive weeks in a newspaper of general circulation. Furthermore, the petitioner shall submit a certification from the appropriate law enforcement agencies that he has no pending case or no criminal record. The petition and its supporting papers shall be filed in three (3) copies to be distributed as follows: first copy to the concerned city or municipal civil registrar, or the consul general; second copy to the Office of the Civil Registrar General; and third copy to the petitioner

C. RULE 108, RULES OF COURT - Cancellation or correction of entries in the civil registry

The petition shall be supported with the following docum ents: (1) A certified true machine copy of the certificate or of the page of the registry book containing the entry or entries sought to be corrected or changed. (2) At least two (2) public or private documents showing the correct entry or entries upon which the correction or change shall be based; and (3) Other documents which the petitioner or the city or municipal civil registrar or the consul general may consider relevant and necessary for the approval of the petition. No petition for correction of erroneous entry concerning the date of birth or the sex of a person shall be entertained except if the petition is accompanied by earliest school record or earliest school documents such as, but not limited to, medical records, baptismal certificate and other documents issued by religious authorities; nor shall any entry involving change of gender corrected except if the petition is accompanied by a certification issued by an accredited government physician attesting to the fact that the petitioner has not undergone sex

Sec. 1. W ho may file petition. - Any person interested in any act, event, order or decree concerning the civil status of persons which has been recorded in the civil register, may file a verified petition for the cancellation or correction of any entry relating thereto, with the Court of First Instance of the province where the corresponding civil registry is located. Sec. 2. Entries subject to cancellation or correction. - Upon good and valid grounds, the following entries in the civil register may be cancelled or corrected: (a) births; (b) marriages; (c) deaths; (d) legal separations; (e) judgments of annulments of marriage; (f) judgments declaring marriages void from the beginning; (g) legitimations; (h) adoptions; (i) acknowledgments of natural children; (j) naturalization (k) election, loss or recovery of citizenship (l) civil interdiction; (m) judicial determination of filiation; (n) voluntary emancipation of a minor; and (o) changes of name.

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Sec. 3. Parties. - When cancellation or correction of an entry in the civil register is sought, the civil registrar and all persons who have or claim any interest which would be affected thereby shall be made parties to the proceeding. Sec. 4. Notice and publication. - Upon the filing of the petition, the court shall, by an order, fix the time and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The court shall also cause the order to be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province. Sec. 5. Opposition. - The civil registrar and any person having or claiming any interest under the entry whose cancellation or correction is sought may, within fifteen (15) days from notice of the petition, or from the last date of publication of such notice, file his opposition thereto.

CIVIL LAW

W ho may file petition? - Any person interested in any act, event, order or decree concerning the civil status of persons which has been recorded in the civil register W here filed? - Verified petition for cancellation or correction of entry in the civil registry may be filed with the Regional Trial Court of the province where the corresponding civil registry is located Entries subject Correction

to

Cancellation/

• Births • Marriages • Deaths • Legal separations • Judgments of annulments of marriage • Judgments declaring marriages void from the beginning • Legitimations • Adoptions

Sec. 6. Expediting proceedings. - The court in which the proceeding is brought may make orders expediting the proceedings, and may also grant preliminary injunction for the preservation of the rights of the parties pending such proceedings.

• Acknowledgments of natural children • Naturalization • Election, loss or recovery of citizenship • Civil interdiction • Judicial determination of filiation

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

• Voluntary emancipation of a minor • Changes of names

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PROPERTY

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

II. Classification

I. Characteristics

A. HIDDEN TREASURE

(1) Utility – capacity to satisfy human wants (2) Substantivity and Individuality – the thing must have a separate and autonomous existence (3) Susceptibility of being appropriated – capable of being obtained even if not yet actually appropriated; what cannot be appropriated (subject to human control) because of physical impossibility (distance, depth, or immensity) cannot be considered ‘things’ (e.g. stars, moon, ocean)

Any hidden and unknown deposit of money, jewelry or other precious objects, the lawful ownership of which does not appear. [NCC 439] General Rule: Hidden treasure belongs to the owner of the land, building, or other property on which it is found [NCC 438] Exception: if discovery is made on the property of another, or of the State or any of its subdivisions, AND by chance (a) Right of a finder by chance who is NOT a trespasser/ intruder: ½ of treasure (b) Right of a usufructuary who finds treasure: ½ of treasure (c) Right of State to acquire things of interest to science or the arts –State may acquire at just price which shall be divided in conformity with the rule stated Note: For purposes of hidden treasure, a usufructuary is considered a stranger to property; naked owner gets owner’s share (NCC 566).

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

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(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included; (7) Fertilizer actually used on a piece of land; (8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant;

CIVIL LAW (ii) Separate Ownership i.e. a building on rented land is still considered an immovable. [Tolentino] (iii) No matter who built it Where Building Is Treated As Personal Property: Doctrine of Estoppel “although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise.” [Tumalad v. Vicencio, (1971)] (2) Par. 8 (c) Mineral Deposits

(9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast; (10) Contracts for public works, servitudes and other real rights immovable property.

(i) Minerals still deposited in the soil; (ii) When minerals have been extracted, they become chattel.

and over

(d) Slag Dump: dirt and soil taken from a mine and piled upon the surface of the ground. Minerals can be found inside the dump.

CATEGORIES OF IMMOVABLES

(e) Waters: those still attached to or running thru the soil or the ground.

(a) By nature (nos. 1 & 8) (b) By incorporation (nos. 2, 3 & 7) (c) By destination (nos. 4, 5, 6 & 9) (d) By analogy (no. 10) Immovables by Nature: cannot be moved from place to place; their intrinsic qualities have no utility except in a fixed place. (pars. 1 & 8)

Immovables by Incorporation: essentially movables but are attached to an immovable in such a way as to be an integral part [Par. 2, 3, & 7] (3) Par. 2

(1) Par. 5 (a) Building - their adherence to the land must be permanent and substantial, not merely superimposed (b) Buildings have been considered as immovables by nature, despite: (i) Agreement by the parties e.g. they constitute a separate mortgage on the building and the land [Punzalan v. Lacsamana (1983)]

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(f) Trees and plants: only immovables when they are attached to the land or form an integral part of an immovable (i) When they have been cut or uprooted, they become movables. (g) By special treatment of Act 1508 (Chattel Mortgage Law), growing crops may be subject of a Chattel Mortgage. (h) For the purpose of attachment: growing crops are to be attached in the same manner as realty. (Rule 59, Sec. 7)

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GENERAL RULE: Growing crops are considered real property

(a) Must be machinery, receptacles, instruments, or implements

EXCEPTION: the moment they are detached or uprooted from the land, they become personal property

(b) Placed by the owner or the tenant (as agent);

(4) Par. 3 (i) Res vinta in Roman Law (j) “Attachment in a fixed manner”: breakage or injury in case of separation will be substantial e.g. wells, sewers, aqueducts and railways (i) Whether attached by the owner himself or some other person (5) Par. 7 Actually used (it has been spread over the land)

Machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. [Davao Sawmill v. Castillo, (1935)] (c) The machine, receptacle, instrument, implement must also be essential to the business (tend directly to meet the needs of industry or work) in order to be considered realty. [Mindanao Bus Co. v City Assessor (1962)] Except: Estoppel Parties may, by agreement, treat as personal property that which by nature would be real, as long as no third parties would be prejudiced. That characterization is effective between the parties. [Makati Leasing v. Wearever (1983)]

Immovables by Destination: essentially movables but by the purpose for which they have been placed in an immovable, partake of the nature of an immovable [Par. 4, 5, 6 & 9] (6) Par. 4 (k) Placed by the owner or by the tenant (as agent);

(2) Par. 6

(i) With intention of attaching them permanently even if adherence will not involve breakage or injury. (l) Where the improvement or ornaments placed by the lessee are not to pass to the owner at the expiration of the lease, they remain movables for chattel mortgage purposes. [Davao Sawmill v. Castillo (1935)] (7) Par. 5 Immovability depends upon ownership of both movable and tenement, being destined for use in the industry or works which can be carried on in the tenement, e.g. sewing machines owned by the owner of a garment factory; The moment they are separated, (from the immovable or from the industry or work in which they are utilized) they recover their condition as movables.

Requisites: (i) Placed by the owner or the tenant (as agent); (ii) With the intention of permanent attachment; (iii) Forming a permanent part of the immovable. (3) Par. 9 Need not be placed by owner of land A floating house tied to a shore and used as a residence is considered real property, considering that the waters on which it floats are considered immovables. But if the floating house makes it a point to journey from place to place, it assumes the category of a vessel, and is considered a movable.

Requisites for Immovability in Par. 5:

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Immovables by Analogy: Contracts for public works, servitudes, other real rights over immovable property e.g. usufruct and lease of real property for a period of 1 year and registered [Par. 10] Note: Parties may by agreement treat buildings as movables, effective only as to them, but void if rights of third persons are involved. It is based, partly, upon the principle of estoppel. [Evangelista vs. Alto Surety(1958)]

(a) Ability to change location – whether it can be carried from place to place; (b) Without substantial injury to immovable to which it is attached.

the

(c) Unless expressly included in Art. 415 (Test by Exclusion is Superior) (6) By special provision of law (a) Growing crops Mortgage Law

For purposes of taxation, improvements on land are commonly taxed as realty, even though for some purposes, they might be considered as personalty. [Manila Electric v. Central Bank (1962)]

under

the

Chattel

(b) Intellectual property – considered personal property; it consists in the pecuniary benefit which the owner can get by the reproduction or manufacture of his work. (7) By forces of nature

B.2. PERSONAL OR MOVABLE

e.g. electricity, gas, heat, oxygen

NCC 416 Corporeal or tangible movables

•

(1) Those movables susceptible of appropriation which are not included in the preceding article (Art. 415); (2) Real property which by any special provision of law is considered as personalty; (3) Forces of nature which are brought under control by science; and (4) In general, all things which can be transported from place to place without impairment of the real property to which they are fixed.

B. 3. IMPORTANCE AND SIGNIFICANCE OF CLASSIFICATION UNDER THE NCC (1) In criminal law (a) Usurpation of property can take place only with respect to real property. [RPC 312]

(5) NCC 417 Incorporeal or intangible movables (6) Obligations and actions which have for their object movables or demandable sums; and (7) Shares of stock of agricultural, commercial and industrial entities, although they may have real estate.

Gas is a valuable article of merchandise, bought and sold like other personal property, susceptible of being severed from a mass of larger quantity and of being transported from place to place [US v Tambunting (1921)]

(b) Robbery and theft can be committed only against personal property. [RPC 293, 308] (2) In the forms of contracts (a) Subject matter of specific contracts:

TESTS TO CHARACTER

DETERMINE

MOVABLE

(4) By exclusion Everything NOT included in Article 415 Parties cannot by agreementtreat as immovable that which is legally movable (5) By description

(i) Only real property can be the subject of real estate mortgage [NCC 2124] and antichresis. [NCC 2132] (ii) Only personal property can be the subject of voluntary deposit [NCC 1966], pledge [NCC 2094] and chattel mortgage. [Act 1508] (b) Donations of real property to be valid are required to be in a public instrument

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[NCC 749] but a donation of a movable may be made orally or in writing. [NCC 748]

CIVIL LAW except for chattel mortgages. [Chattel Mortgage Register, NCC 2140] (8) Preference of credits

(3) For acquisitive prescription

(a) Movables governed by NCC 2241

(a) Real property can be acquired by prescription in 30 years (bad faith) and 10 years (good faith). (NCC 1137, 1134)

(b) Immovables governed by NCC 2242 (9) Double sales (NCC 1544) (a) For movables – ownership shall be transferred to the person who first took possession thereof in good faith

(b) Movables can be acquired by prescription in 8 years (bad faith) and 4 years (good faith). (NCC 1132)

(b) For immovables – ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property; or if there be no inscription, to the person who in good faith first took possession, or in the absence of possession, to the person who presents the oldest title, provided there is good faith.

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

-

(5) Venue of actions (a) Real actions - Actions concerning real property are commenced in the court that has jurisdiction over the area where the real property is situated. [Rules of Court Rule 4 Sec. 1]

C. BASED ON OWNERSHIP/ RIGHTSHOLDER

(b) Personal actions - Commenced where the plaintiff or any of the principal plaintiffs, or where the defendant or any of the principal defendants resides, or if a non-resident defendant, where he may be found, at the election of the plaintiff. [Rule 4 Sec. 2]

Churches and other consecrated objects are considered outside the commerce of man; they are considered neither public nor private property.

(6) The governing law (Private International Law): (a) Immovables - governed by the law of the country where they are located (rei situs). (b) Movables - governed by the personal laws of the owner. (which in some cases is the law of his nationality and in other cases, the law of his domicile) (7) Affecting third persons (a) In transactions involving real property – must be recorded in the Registry of Property to affect third persons.

NCC 419. Property is either of public dominion or of private ownership.

C.1. PUBLIC DOMINION Property of public dominion is outside the commerce of man. They cannot be the subject matter of private contracts, cannot be acquired by prescription and they are not subject to attachment and execution nor burdened with a voluntary easement. Public Dominion Public Domain Public Lands

(b) In transactions involving personal property – registration is not required,

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

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CHARACTERISTICS

for public service, shall form part of the patrimonial property of the State [NCC 422]

Not owned by the State but pertains to it as territorial sovereign; to hold in trust for the interest of the community.

(ii) An express declaration by the State (either by the Congress or by the President, if the power was provided by law) that the property of public dominion has been converted into patrimonial property, even though it was classified as alienable or disposable. [Heirs of Malabanan v. Republic (2009)]

Purpose: For public use, and not for use by the State as a juridical person. Cannot be the subject of appropriation either by the State or by private persons. CLASSIFICATIONS Administered by the State [NCC 420] (1) Those intended for public use. (roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character) (2) Those (w/o being for public use) and are intended for some public service: may be used only by authorized persons but exists for the benefit of all, e.g. fortresses, unleased mines and civil buildings. (3) Those for the development of the national wealth. Includes natural resources such as minerals, coal, oil and forest. (4) Patrimonial property: (a) Owned by the State over which it has the same rights as private individuals in relation to their own property. (b) Subject to the administrative laws and regulations on the procedure of exercising such rights, e.g. friar lands, escheated properties and commercial buildings. (c) Purpose: (i) Enables the State to attain its economic ends (ii) Serves as a means for the State’s subsistence and preservation (iii) Enables the State to fulfill its primary mission (d) Conversion of property of public dominion for public use to patrimonial property: (i) Property of public dominion, when no longer intended for public use or

Administered by Municipal Corporations [NCC 424 (1)] (1) Property for public use, in the provinces, cities, and municipalities, consist of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. (2) Patrimonial Corporations:

property

of

Municipal

All other property possessed by any of them (provinces, cities, and municipalities) [NCC 424 (2) The province or municipality, as a juridical entity, also possesses private property to answer for its economic necessities. Presumption: that land comes from the State upon the creation of the municipality. All lands in the possession of the municipality are roperties of public dominion held in trust for the State’s inhabitants are subject to the control and supervision of the State. Exception: Properties acquired with their own funds in their private or corporate capacity over which the political subdivision has ownership and control. A municipal corporation must prove that they acquired the land with their own corporate funds. [Salas v. Jarencio, (1972)] Note: The Local Government Code classifies property pf LGUs into: (1) property of LGU in its governmental character, which is broader than NCC 424, (2) property of LGU in its proprietary character.

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C.2. PRIVATE OWNERSHIP

D. BASED ON CONSUMABILITY

Can be exercised by the state in its private capacity or by private persons.

[NCC 418]

KINDS

Only applies to movable property, determined by nature.

(1) Patrimonial property - Property owned by the State and its political subdivisions in their private capacity; all property of the State not included in NCC 420 (on public dominion) [NCC 421-424]

D.1. CONSUMABLE

(2) Property belonging to private persons, either individually or collectively [NCC 425] Property of private ownership, besides the patrimonial property of the State, provinces, cities, and municipalities, consists of all property belonging to private persons, either individually or collectively. Refers to all property belonging to private persons, natural or juridical, either individually or collectively CONVERSION Alienable Public Land converted to Private Property through Prescription Alienable public land held by a possessor – personally/through predecessors-in-interest, openly, continuously and exclusively – for 30 years is converted to private property by the mere lapse or completion of the period. The application for confirmation is a mere formality, because land had already been converted, giving rise to a registrable title. [Director of Lands v. IAC (1986)] Private Land converted to Property of Public Dominion through abandonment and reclamation Through the gradual encroachment or erosion by the ebb and flow of the tide, private property may become public if the owner appears to have abandoned the land, and permitted it to be totally easten up by the sea so as to become part of the shore. The land having disappeared on account of the gradual erosion in case of natural expropriation, and having remained submerged until they were reclaimed by the government, they are public land. [Government v. Cabangis (1929)]

(1) Movables which cannot be used in a manner appropriate to their nature without their being consumed. (e.g. food) (2) Consumable goods cannot be the subject matter of a commodatum unless the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. D.2. NON-CONSUMABLE All others not falling under ‘consumable’ e.g. money in coin.

E. BASED ON SUSCEPTIBILITY TO SUBSTITUTION Only applies to movables, determined by the intention of the parties. E.1. FUNGIBLES Things that, because of their nature or the will of the parties, are capable of being substituted by others of the same kind, not having a distinct individuality. E.2. NON-FUNGIBLES (1) Things that cannot be substituted for another; (2) If the parties agreed that the same thing be returned, it is not fungible.

F. BASED ON THE CONSTITUTION [ARTICLE XII, SEC 3] (1) Public Agricultural Land; (2) Mineral Land; (3) Timber Land; (4) National Parks.

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III. Ownership

(6) Jus Possidendi: right to possess the property (Implied from all the other rights)

A. DEFINITION AND CONCEPT

(7) Jus Accessionis: right to whatever is attached to the thing in such a way that they cannot be separated without injury

Independent right of exclusive enjoyment and control of a thing. Has the purpose of deriving all advantages required by the reasonable needs of the owner/holder of right and promotion of general welfare.

(8) Jus Tresauris: right to hidden treasure Other Specific Rights found in the NCC: (1) Right to Exclude; Doctrine of Self-Help (Art. 429, NCC)

A complete subjection to an owner’s will.

(2) Right to enclose or fence (Art. 430)

May be exercised in everything not prohibited by public law or the rights of another. (Art. 427)

(3) Right to receive just compensation in case of expropriation (Art. 435) (4) Right to hidden treasure (Art. 438- 439)

B. TYPES OF OWNERSHIP Full Ownership - With complete rights over the property. Naked Ownership - Absence of jus fruendi and jus utendi. Sole Ownership - Ownership vested only in one person. Co-Ownership - Ownership vested in 2 or more persons in ideal shares or undivided interest.

C. RIGHT IN GENERAL C.1. RIGHTS INCLUDED IN OWNERSHIP [NCC 428] (1) Right to enjoy and dispose of a thing, without other limitations than those established by law. (2) Right of action against the holder and possessor of the thing in order to recover it. C.2. BUNDLE OF RIGHTS (1) Jus Utendi: right to use and enjoy

C.3. PROTECTING PROPERTY C.3.1 BASIC DISTINCTIONS REAL RIGHTS V. PERSONAL RIGHTS Real Rights Rights that confer upon its holder an autonomous power to derive directly from a thing certain economic advantages independently of whoever the possessor of the thing. The number of real rights is an open classification: 1. Ownership 2. Real right of possession 3. Usufruct 4. Real right of praedial servitudes (easement) 5. Recorded lease 6. Real estate mortgage 7. Chattel mortgage

(2) Jus Fruendi: right to receive the fruits (3) Jus Abutendi: right to consume a thing by use (4) Jus Disponendi: right to alienate, encumber, transform or even destroy the thing owned (5) Jus Vindicandi: right to recover possession of property based on a claim of ownership

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8. Pledge 9. Antichresis 10. Retention 11. Preemption 12. Redemption 13. Stewardship 14. Certificate of Ancestral Domain Title; Certificate of Ancestral Domain Claims in the IPRA Law

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Personal Rights Rights of a person to demand from another as a definite passive subject, the fulfillment of a prestation to give, to do or not to do. Real Rights Definite active subject who has a right against ALL persons generally as an indefinite passive subject. Object is generally a corporeal thing. Generally extinguished by the loss or destruction of the thing over which it is exercised. It is directed against the whole world, giving rise to real actions against 3rd persons.

Personal Rights Definite active subject (creditor) and a definite passive subject (debtor). Subject matter is always an incorporeal thing. Personal right survives the subject matter. It is binding or enforceable only against a particular person giving rise to personal actions against such debtor and his privies.

CIVIL LAW An action to redeem, or to recover title to or possession of, real property is not an action in rem or an action against the whole world, like a land registration proceeding or the probate of a will; it is an action in personam, so much so that a judgment therein is binding only upon the parties properly impleaded and duly heard or given an opportunity to be heard. [Ching v. CA (1990)] C.3.2. REMEDIES DOCTRINE OF SELF-HELP [NCC 429-430] The owner may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property. Every owner may enclose or fence his land or tenements by any other means without detriment to servitudes constituted thereon. ACTIONS TO RECOVER OWNERSHIP AND POSSESSION OF PROPERTY IMMOVABLE PROPERTY Accion Reivindicatoria Recovery of ownership of real property. Including but not limited to possession.

REAL ACTION V. PERSONAL ACTION (ROC, RULE 4 SEC 1-2)

Prescription of Action: 30 years.

Real action - Actions affecting title to or possession of real property or any interest therein.

Accion Publiciana

Personal action - All other actions.

Recovery of real right of possession (posession de jure). Judgment as to who has the better right of possession.

ACTION IN REM V. ACTION IN PERSONAM V. ACTION QUASI IN REM

Also, actions for ejectment not filed within 1 year must be filed as accion publiciana.

Action in rem - Action against a property, judgment binding against the whole world.

Prescription: 10 years.

Action in personam - Action against a specific person, judgment binding against that particular person.

Accion Interdictal - Action for Ejectment

Action quasi in rem - Action against a specific property with respect to a person.

A summary action for recovery of actual, material or de facto physical possession through either an action for Forcible Entry or Unlawful Detainer.

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Distinction between forcible entry and unlawful detainer (1) Forcible Entry: Lawful possessor deprived through FISTS: FISTS (Force, Intimidation, Strategy, Threats, Stealth) Prior physical possession must be alleged. Prescription: 1 year from dispossession (force, intimidation, threats) or from knowledge of dispossession (strategy, stealth). (2) Unlawful Detainer: Possessor refused to vacate upon demand by owner.

CIVIL LAW

D. LIMITATIONS ON OWNERSHIP D.1. GENERAL LIMITATIONS: Taxation, eminent domain, police power POLICE POWER PROPERTY TAKEN WITH NO COMPENSATION FOR GENERAL WELFARE When any property is condemned or seized by competent authority in the interest of health, safety or security, the owner thereof shall not be entitled to compensation, unless he can show that such condemnation or seizure is unjustified. [Art. 436, Civil Code] Requisites

Legal possession (by permission/ tolerance) becomes unlawful upon failure to vacate.

To justify the exercise of police power, the following must appear [US v Toribio (1910)]:

Prior physical possession must be alleged. Prescription of action: 1 year from last notice to vacate.

(1) The interests of the public generally, require such interference (as distinguished from those of a particular class); and

MOVABLE PROPERTY

(2) The means are reasonably necessary for the accomplishment of a purpose, and not unduly oppressive.

Replevin For manual delivery of movable property, for either ownership or possession Acquisitive Prescription of Right: 4 years (good faith) or 8 years (bad faith)

TAXATION Forced contribution government.

to

the

operation

of

EMINENT DOMAIN

Requisites for recovery of property [NCC 434] (1) Property must be identified; If titled land, through a relocation survey and a title properly identifying boundaries and location and technical description. (2) Plaintiff must rely on the strength of his title and not on weakness of defendant’s claim. Right must be founded on positive title and not on lack or insufficiency of defendant’s. Ei incumbit probatio qui dicit, non qui negat: He who asserts, not he who denied must prove.

Property taken for public use/purpose, but subject to due process and payment of just compensation. Requisites To justify the exercise of the right of eminent domain, the following requisites must all be present: (1) Private property or its use as the object of the expropriation; (2) The property or its use is taken by the State or by competent authority; (3) The purpose of the taking is for public use; (4) The taking must be attended with due process of law; and (5) There is payment of just compensation.

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Note:

Nuisance

Expropriation may be exercised on both real and personal property. [Rule 67, Rules of Court]

A nuisance is any act, omission, establishment, business, condition of property, or anything else which:

Expropriation may be exercised not only on property but also its use such as the use of telephone lines [Republic v PLDT (1969)] Eminent domain may be availed of to impose only a burden upon the owner of the condemned property, without loss of title and possession. D.2. SPECIFIC LIMITATIONS:

(1) Injures or endangers the health or safety of others; (2) Annoys or offends the senses; (3) Shocks, defies or disregards decency or morality; (4) Obstructs or interferes with the free passage of any public highway or street, or any body of water; or (5) Hinders or impairs the use of property. [NCC 694]

Legal Servitudes Once requisites are satisfied, the servient owner may ask the Court to declare the existence of an easement. (1) Art. 644 & 678: Aqueduct

CLASSES OF NUISANCE [Iloilo Cold Storage v. Municipal Council (1913) ] Nuisances per se

(2) Art. 679: Planting of trees (3) Art. 670: Light and View (4) Art. 649 & 652: Right of Way (5) Art. 637: Passage of water from upper to lower tenements (6) Art. 676: Drainage of buildings

Those which are unquestionably and under all circumstances nuisances (i.e. gambling houses, houses of ill fame, etc.) May be summarily abated. Nuisance per accidens Nuisances because of particular facts and circumstances surrounding the otherwise harmless cause of nuisance

(7) Art. 684-687: Lateral and subjacent support

Requires a hearing before a tribunal to be abated

Must not injure the rights of a third person Sic Utere Tuo Ut Alienum Non Laedas The owner of a thing cannot make use thereof in such manner as to injure the rights of a third person. [NCC 431] Actions in a State of Necessity The owner of a thing has no right to prohibit the interference of another with the same, if the interference is necessary to avert an imminent danger and the threatened damage, compared to the damage arising to the owner from the interference, is much greater. The owner may demand from the person benefited, indemnity for the damage to him. [NCC 432]

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SUMMARY OF ACTIONS Action

Venue

Summon

Prayer

Forcible Entry / Unlawful Detainer

Real Action

In personam

Possession

Accion Publiciana

Real Action

In personam

Possession

Accion Reividicatoria

Real Action

In personam

Possession

Ownership

Real Action Real Action Personal Action

In personam Quasi-in rem In personam

Title

Constructive trust

Exception (i.e. no acquisitive prescription): Torrens Title and property of public dominion; Exception to exception: laches 10 years (NCC 1456)

Quieting of Title

Ownership

Imprescriptible

Possession

Possession or Ownership

GF: 4 years BF: 8 years

Reconveyance Quieting of Title Replevin

Basis Prior physical possession for forcible entry; Notice to vacate for unlawful detainer Real right of Possession

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Prescription

1 year

10 years [NCC 555(4)] GF: 10 years BF: 30 years [NCC 1137]

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IV. Accession

CIVIL LAW

General Rule: To the owner of the principal belongs the natural, industrial and civil fruits. Exceptions:

Accession – the right by virtue of which the owner of a thing becomes the owner of everything that is produced thereby, or which is incorporated or attached thereto, either naturally or artificially. [NCC 440] Accession is one of the bundle of rights of ownership and is not a mode of acquiring property; it does not depend upon a new title. Accessories – things joined to or included with the principal thing for the latter’s embellishment, better use, or completion, but which cannot be separated without damage or injury.

A. CLASSIFICATION OF ACCESSION (1) Accession Discreta – the right pertaining to the owner of a thing over everything produced thereby (by internal forces). (2) Accession Continua – the right pertaining to the owner of a thing over everything that is incorporated or attached thereto either naturally or artificially (by external forces). (a) Over Immovables (i) Industrial or artificial (building, planting, sowing) (ii) Natural (1) Alluvion (2) Avulsion (3) Change of Course of River (4) Formation of Islands (b) Over Movables (i) Conjunction and Adjunction (ii) Commixtion and Confusion (iii) Specification

(1) Possession in good faith (fruits belong to possessor by good faith for as long as he remains in good faith) (2) Usufruct (to usufructuary) (3) Lease (to lessee in civil law lease of agricultural land; lessor gets rentals as civil fruits) (4) Antichresis KINDS OF FRUITS (1) Natural – spontaneous products of soil and the young and other products of animals [NCC 442 (1)] Under the rule partus sequitur ventrem, to the owner of female animals would also belong the young of such animals although this cannot apply when the owner mixes his cattle with those of another and they interbreed, thus co-ownership is applied [Siari Valley Estates v. Lucasan (1960)]. (2) Industrial – produced by lands of any kind through cultivation or labor [NCC 442 (2)]. Standing trees are not fruits since they are considered immovables although they produce fruits themselves. However, they may be considered as industrial fruits when they are cultivated or exploited to carry on an industry, as in tree plantation. (3) Civil – easily prorated for under NCC 544 they are deemed to accrue daily and belong to the possessor in good faith in that proportion (e.g. rents of buildings, price of leases or lands and the amount of perpetual or life annuities or other similar income). Notes:

A.1. WITH RESPECT TO IMMOVABLES ACCESSION DISCRETA Right of ownership to the fruits. [NCC 441]

Natural and industrial fruits are real property while still ungathered. Only those that are manifest or born are considered as natural or industrial fruits.

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PRINCIPLES APPLICABLE TO ACCESSION DISCRETA

(i) Possessor in Good Faith (ii) Usufructuary

(1) Time of Accrual depending on kind:

(iii) Lessee

Annuals: from the time seedlings appear on the ground. Perennials: from the time fruits actually appear on the plants. Young of animals: from the time they are in the womb, although unborn – beginning of maximum ordinary period of gestation. Fowls: from the time of incubation.

(iv) Antichretic creditor MEANING OF BAD FAITH On the part of the landowner Whenever the building, planting or sowing was done with his knowledge and without opposition on his part (NCC 453, par. 2). On the part of the owner of materials

(2) He who receives the fruits has the obligation to pay the expenses incurred by a third person in the production, gathering and preservation of the fruits. [NCC 443] Exception: Owner does not have to pay if land is recovered before gathering from a possessor in bad faith. But if owner recovers land from possessor in bad faith, he may choose to acquire the land and he can make the possessor, builder, planter, sower account for the fruits that have been gathered, with the obligation to deduct the expenses for producing, harvesting and preservation of the fruits. PRINCIPLES APPLICABLE TO ACCESSION CONTINUA (1) Accession Continua Artificial or Industrial Building, planting or sowing on land owned by another (over immovables).

Allows the use of his materials without protest. On the part of the builder, planter and sower, he is a possessor in bad faith at the time of BPS if he: Knows that he does own the land, nor the right to build thereon or no permission of the owner of the materials to pay their value. Note: Bad faith leads to liability for damages and the loss of the works or the improvement without reimbursement. Bad faith of one party neutralizes the bad faith of the other. (2) Accession Continua Natural Land deposits, etc. ALLUVIUM

General Rule: Whatever is built, planted or sown on the land of another + improvements or repairs made thereon, belong to the owner of the land subject to the rules on BPS (NCC 445).

Soil is gradually deposited on banks adjoining the river. There can be no acquisition of soil deposited on the shores of the sea [De Buyser v. Director of Lands (1983)]

Presumptions

(1) Deposit of soil or sediment is gradual and imperceptible;

(a) All works, sowing and planting are presumed made by the owner and at his expense, unless the contrary is proved. (b) The owner of the principal thing owns the natural, industrial and civil fruits, except when the following persons exist:

Requisites

(2) As a result of the action of the currents of the waters of the river and should have no human intervention; (3) Land where the accretion takes place is adjacent to the banks of the rivers; and

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(4) Deemed to Exist: When the deposit of the sediment has reached a level higher than the highest level of the water during the year, i.e. higher than the river bank. Effect: The riparian owner automatically owns the Alluvion but it does not automatically become registered property in his name. [Grande v CA (1962)]

CIVIL LAW

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 v. Tuazon (1929)] CHANGE OF COURSE OF RIVER Requisites: (1) Change in the natural course of the waters of the river; and

Rationale To offset the owner’s loss from possible erosion due to the current of the river; To compensate for the subjection of the land to encumbrances and legal easements. When is Alluvion formed? When the deposit of sediment has reached a level higher than the highest level of water during the year Where the deposit is by sea water, it belongs to the state. A gradual change of bed is also governed by the rules of alluvium [Canas vs. Tuason (1906)]

(2) Such change causes the abandonment of the river beds. “Natural Bed”: ground covered by its waters during the highest floods. [Binalay v. Manalo (1991)] (3) Such change is sudden or abrupt Results Owners whose lands are occupied by the new course automatically become owners of the old bed, in proportion to the area they lost

AVULSION

Owners of the lands adjoining the old bed are given the right to acquire the same by paying the value of the land.

A known portion of land is segregated from one estate by the forceful current of a river, creek or torrent and transferred to another.

*Not exceeding the value of the land invaded by the new bed (the old property of the owner)

Requisites

The new bed opened by the river on a private estate shall become of public dominion.

(1) Segregation and transfer of land is sudden and abrupt; (2) Caused by the current of the water; and (3) The portion of land transported must be known and identifiable; or (4) Can also apply to sudden transfer by other forces of nature such as land transferred from a mountain slope because of an earthquake. Effect: The ownership of the detached property is retained by the owner subject to removal within 2 years from the detachment.

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. FORMATION OF ISLANDS They belong to the State if [NCC 464]: (1) Formed on the seas within the jurisdiction of the Philippines. (2) Formed on lakes, or (3) Formed on navigable or floatable rivers:

In case of uprooted trees, the owner retains ownership if he makes a claim within 6 months. This refers only to uprooted trees PAGE 103 OF 102

(a) Capable of affording a channel or passage for ships and vessels;

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(b) Must be sufficient not only to float bancas and light boats, but also bigger watercraft;

(1) Formed through successive accumulation of alluvial deposits

(c) Deep enough to allow unobstructed movements of ships and vessels.

(3) If island is in the middle: divided longitudinally in half.

TEST: can be used as a highway of commerce, trade and travel.

(4) if nearer to one margin or bank, to the nearer reparian owner

Note: There is no accession when islands are formed bythe branching of a river; the owner retains ownership of the isolated piece of land.

Note: If a landowner allows the sea or a lake to eat up his land completely, it is a case of natural

They belong to the owners of the nearest margins or banks if [NCC 465]:

(2) On non-navigable and non-floatable rivers

expropriation and if the land later reappears, he does not regail ownership thereof. [Republic v. Cabangis (1929)]

Landowner [LO] in Good Faith Rights of Landowner [NCC 448] Options: Buy from BPS but only after payment of indemnity for necessary, useful and ornamental expenses [NCC 546 and Builder, 548]; BPS in good faith has right of retention; Planter, Sell to BP (unless the value of the land is considerably more Sower [BPS] than that of the building or trees); or in Good Faith Remedy: Rent to BP if LO does not want to buy Note: If BP refuses or cannot purchase the land, he loses his right of retention and must turnover possession to landowner. Rent to S.

Builder, Planter, Sower [BPS] in Bad Faith

Rights of Landowner [NCC 449-452] Options: Appropriate the improvements without paying indemnity; Demolish/Remove the work of BPS at the expense of BPS; Sell to BP without any right to refuse even if value of land is considerably whole; or Rent to the S

Landowner [LO]in Bad Faith Absolute Duties of Landowner [NCC 447]: Pay damages; and Allow removal even if it causes damage or destruction; or Buy or pay for value of improvement.

Same as though both landowner and BPS are in good faith

Absolute right to Damages from BPS. Note: Good faith does not necessarily exclude negligence, which gives rise to damages under Article 2176 (NCC 456).

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Owner of Material [OM] in Good Faith Owner of Material [OM] in Bad Faith

PROPERTY

CIVIL LAW

Landowner [LO] in Good Faith

Landowner [LO]in Bad Faith

Right of Landowner [NCC 447] To buy the improvements unless OM can remove without damage.

Absolute Duties of Landowner [NCC 447]: Pay damages; and Allow removal in any event; or Pay for value of material.

Absolute Rights of Landowner [NCC 447] To appropriate the materials without payment. Right to damages from OM.

Same as though both landowner and material manare in good faith

Landowner

BPS

Owner of Material [OM]

Good faith Options: (1) Right to acquire improvements and pay indemnity to BPS; subsidiarily liable to OM; (2) Sell the land to BP except if the value of the land is considerably more; or (3) Rent to S. Good faith Options: (1) Right to acquire improvements and pay indemnity to BPS; (2) Sell land to BP except if the value of the land is considerably more; or (3) Rent to S.

Good faith (1) Right of retention until necessary and useful expenses are paid; (2) To pay value of materials to OM.

Good faith (1) Collect value of material primarily from BPS and subsidiarily to landowner if BPS is insolvent; and (2) Limited right of removal (if the removal will not cause any injury)

Good faith (1) Right of retention until necessary and useful expenses are paid. (2) Keep BPS without indemnity to OM and collect damages from him. Good faith Bad faith (1) Landowner has right to collect Recover necessary expenses damages from BPS in any case and for preservation of land from the option to either landowner unless landowner (a) Acquire improvements w/o sells land. paying for indemnity; (b) Demolition or restoration; or (c) Sell to BP, or to rent to sower (2) Pay necessary expenses to BPS.

Bad faith (1) Lose the material without right to indemnity. (2) Must pay for damages to BPS.

Bad faith Same as when all acted in good faith under Article 453

Bad faith Same as when all acted in good faith under Article 453

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Bad faith (1) Recover value from BPS (as if both are in good faith) (2) If BPS acquires improvement, remove materials if feasible w/o injury (3) No action against landowner but may be liable to landowner for consequential damages Bad faith Same as when all acted in good faith under Article 453

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Bad faith (1) Acquire improvement after paying indemnity and damages to BPS unless the latter decides to remove. (2) Subsidiarily liable to OM for value of materials if he acquires BPS and damages; no subsidiary liability if BPS chooses removal in any event. Good faith Options: (1) Right to acquire improvements and pay indemnity to BPS; subsidiarily liable to OM; (2) Sell the land to BP except if the value of the land is considerably more; or (3) Rent to S. Good faith (1) Landowner has right to collect damages from BPS in any case and the option to either (a) Acquire improvements w/o paying for indemnity; (b) Demolition or restoration; or (c) Sell to BP, or to rent to sower (2) Pay necessary expenses to BPS. Bad faith Acquire improvements and pay indemnity and damages to BPS unless the latter decides to remove materials.

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CIVIL LAW

Good faith (1) May remove improvements. (2) Be indemnified for damages in any event (3) Pay OM the value of the materials

Good faith (1) Remove materials at any event (2) Collect value of materials from BPS; subsidiarily from landowner, if landowner is made to pay for BPS and damages

Bad faith (1) No right of retention. (2) Pay value of materials to OM and pay him damages.

Good faith (1) Collect value of materials primarily from BPS and subsidiarily from landowner, if landowner acquires the BPS. (2) Collect damages from BPS. (3) Absolute right to remove materials in any event. Good faith (1) Collect value of materials primarily from BPS and subsidiarily from landowner (2) Collect damages from BPS (3) If BPS acquires improvements, absolute right of removal in any event. Bad faith (1) No right to indemnity. (2) Loses right to the materials.

Bad faith (1) Right to necessary expenses. (2) Pay value of materials to OM. (3) Pay damages to OM/LO.

Good faith (1) Receive indemnity for damages. (2) Absolute right of removal of improvements in any event.

Note: If there are 3 parties in BPS, solve the problem by considering the options open to the landowner vis-à-vis BPS depending on their good faith or bad faith; apply NCC 455 re: one who acted in good faith.

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A.2. WITH PROPERTY

RESPECT

TO

MOVABLE

CIVIL LAW If owner of principal is in bad faith, owner of the accessory has a right to choose between the owner of the principal paying him its value or that the thing belonging to him be separated, even though for this purpose it be necessary to destroy the principal thing; and in both cases, there shall be indemnity for damages.

TYPES Conjunction or Adjunction Process where 2 movables belonging to different owners are attached to each other to form a single object. Mixture

Test to determine the principal thing

The union of materials belonging to different owners where the components lose their identity.

In the order of application, the principal is that:

Specification

(1) To which the other has been united as an ornament or for its use or perfection (“Rule of importance and purpose”).

Transforming or giving of a new form to another’s material through labor.

(2) Of greater value. (3) Of greater volume.

CONJUNCTION / ADJUNCTION

(4) That of greater merits, taking into consideration all the pertinent legal provisions, as well as the comparative merits, utility and volume of their respective things. [Manresa]

Requisites (1) There are 2 movables belonging to 2 different owners; (2) They are united in such a way that they form a single object; and

When separation allowed

(3) They are so inseparable that their separation would impair their nature or result in substantial injury to either component. Ownership adjunction

of

new

object

formed

(1) When separation will not cause any injury; or (2) When the accessory is much more precious:

by

(a) Owner of accessory may demand separation even though the principal thing may suffer (NCC 469).

GENERAL RULE: The owner of the principal thing acquires the accessory, with the obligation to indemnify the owner of the accessory for its value in its original state.

(b) Owner who caused the union shall bear the expenses for separation even if he acted in good faith.

(1) If union was made in good faith

(3) When the owner of the principal is in bad faith.

EXCEPTION: if the accessory is much more precious than the principal, the owner of the accessory may demand separation even if the principal suffers some injury

Note: In painting and sculptures, writings, printed matter, engravings and lithography, the board, metal, stone, canvas, paper or parchment are deemed as the accessory things (NCC 468, par. 2).

(2) If union was in bad faith, NCC 470 applies: Owner of accessory in bad faith loses the thing incorporated and has the obligation to indemnify the owner of the principal thing for damages. PAGE 107 OF X

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MIXTURE

CIVIL LAW material, in consequence of the work itself, undergoes a transformation.

Kinds

It is the transformation of another’s material by the application of labor.

(1) Commixtion: mixture of solid things (2) Confusion: mixture of liquid things, and includes mixture of gases

Examples: Turning grapes into wine, flour into bread, marbles into a piece of sculpture Rules

Rules

(1) Person in good faith

(1) Mixture by will of the owners:

General rule: Worker becomes the owner but must indemnify the owner (who was also in good faith) for the value of the material.

Primarily governed by their stipulations. In the absence of stipulation, each owner acquires a right or interest in the mixture in proportion to the value of his material, i.e. coownership is created.

Exception If the material is more valuable than the new thing, the owner of the material may choose:

(2) Mixture caused by an owner in good faith or by chance

•

To take the new thing but must pay for the value of the work or labor; or

Share of each owner shall be proportional to the value of the part that belonged to him. If things mixed are exactly the same kind, quality and quantity, divide the mixture equally. If things mixed are of different kind or quality, a co-ownership arises. If they can be separated without injury, the owners may demand separation. Expenses are borne by the owners pro rata.

•

To demand indemnity for the value of the material.

NOTE: Good faith in accession does not necessarily exclude negligence, which gives rise to damages.

(2) Person in bad faith

If the owner was in bad faith, maker may appropriate the new thing without paying the owner, or require the owner to pay him the value of the thing or his work, with right to indemnity.

General rule: Owner may either appropriate the new thing to himself without paying the maker, or owner may demand value of material plus damages

(3) Mixture caused by an owner in bad faith

Exception: The first option is not available in case the value of the work, for artistic or scientific reasons, is considerably more than that of the material, in which case the owner of the material can ask for payment of material and damages.

Actor forfeits the thing belonging to him. Actor also becomes liable for damages. (4) Mixture made with knowledge without objection of the other owner

and

Rights to be determined as though both acted in good faith.

(3) Person made use of material with consent and without objection of owner Rights shall be determined as though both acted in good faith

SPECIFICATION Takes place when the work of a person is done on the material of another, such

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CIVIL LAW

V. Quieting of Title

E. THE ACTION TO QUIET TITLE DOES NOT APPLY:

A. IN GENERAL

(1) To questions involving interpretation of documents;

A remedy or form of proceeding originating in equity jurisprudence. Equity comes to the aid of the plaintiff who would suffer if the instrument (which appear to be valid but is in reality void, ineffective, voidable or unenforceable) was to be enforced.

(2) To mere written or oral assertions of claim, EXCEPT (a) made in a legal proceeding or (b) asserting that an instrument or entry in plaintiff’s favor is not what it purports to be; (3) To boundary disputes; (4) To deeds by strangers to the title UNLESS purporting to convey the property of the plaintiff;

B. PURPOSE To declare: (a) The invalidity of a claim on a title; or

(5) To instruments invalid on their face; or

(b) The invalidity of an interest in property.

(6) Where the validity of the instrument involves a pure question of law.

To free the plaintiff and all those claiming under him from any hostile claim on the property.

F. REQUIREMENTS F.1. REQUISITES OF AN ACTION TO QUIET TITLE

C. NATURE: QUASI IN REM A suit against a particular person or persons in respect to the res and the judgment will apply only to the property in dispute. The action to quiet title is characterized as a proceeding quasi in rem. Technically, it is neither in rem nor in personam. In an action quasi in rem, an individual is named as a defendant. However, unlike suits in rem, a quasi in rem judgment is conclusive only between the parties. [Spouses Portic v. Cristobal]

D. JUSTIFICATIONS TO BRING AN ACTION TO QUIET TITLE (1) To prevent future or further litigation on the ownership of the property.

(1) There is a cloud on title to real property or any interest to real property; (2) The plaintiff must have legal or equitable title to, or interest in the real property; and (3) Plaintiff must return the received from the defendant.

benefits

“Cloud on title” means a semblance of title, either legal or equitable, or a claim or a right in real property, appearing in some legal form but which is, in fact, invalid or which would be inequitable to enforce. A cloud exists if: (1) There is a claim emerging by reason of:

(2) To protect the true title and possession. (3) To protect the real interest of both parties. (4) To determine and make known the precise state of the title for the guidance of all.

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(a) Any instrument e.g. a contract, or any deed of conveyance, mortgage, assignment, waiver, etc. covering the property concerned; (b) Any record, claim, encumbrance e.g. an attachment, lien, inscription,

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adverse claim, lis pendens, on a title; or (c) Any proceeding e.g. an extrajudicial partition of property. (2) The claim should appear valid or effective and extraneous evidence is needed to prove their validity or invalidity; Test: Would the owner of the property in an action for ejectment brought by the adverse party be required to offer evidence to defeat a recovery? As a general rule, a cloud is not created by mere verbal or parole assertion of ownership or an interest in property. (3) Such instrument, etc. is, in truth and in fact, invalid, ineffective, voidable, or unenforceable, or has been extinguished or terminated, or has been barred by extinctive prescription; and

CIVIL LAW

Equitable title: the person has beneficial ownership of the property.

the

The plaintiff must return the benefits received from the defendant [NCC 479]

G. QUIETING OF TITLE V. REMOVAL OF CLOUD Quieting of Title There isn’t always an adverse claim (e.g. land registration cases) Remedial action involving a present adverse claim

Removal of Cloud There is always an adverse claim by virtue of an instrument, record, claim, encumbrance or proceeding. Preventive action to prevent a future cloud on the title

H. PRESCRIPTION PRESCRIPTION OF ACTION

(4) Such instrument, etc. may be prejudicial to the true owner or possessor.

When the plaintiff is in possession of the property, the action to quiet title does not prescribe.

F.2. REQUISITES OF AN ACTION TO PREVENT A CLOUD:

When the plaintiff is not in possession of the real property, the action to quiet title may prescribe depending upon the right of action filed by the plaintiff:

(1) Plaintiff has a title to a real property or interest therein;

(a) 10 yrs. – if plaintiff is a possessor with a real right, i.e. accion publiciana, or if action is for reconveyance on the basis of a constructive trust under NCC 1456

(2) Defendant is bent on creating a cloud on the title or interest therein. The danger must not be merely speculative or imaginary but imminent; and (3) Unless the defendant is restrained or stopped, the title or interest of the plaintiff will be prejudiced or adversely affected. The plaintiff must have legal or equitable title to, or interest in the real property [NCC 477]

(b) 30 yrs. – if plaintiff is the owner of real property Note: An action to quiet title may be defeated by a claim of ordinary or extraordinary acquisitive prescription by the defendant.

Legal title: the party is the registered owner of the property.

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VI. Co-ownership

Any stipulation in a contract to the contrary shall be void.

The form of ownership when the ownership of an undivided thing or right belongs to different persons. [NCC 484]

The portions belonging to the co-owners in the co-ownership shall be presumed equal, unless the contrary is proved.

A. REQUISITES

Each co-owner has absolute control over his ideal share

(1) Plurality of owners; (2) Object must be an undivided thing or right; and (3) Each co-owner’s right must be limited only to his ideal or abstract share of the physical whole.

B. WHAT GOVERNS CO-OWNERSHIP (1) Contracts;

Every co-owner has absolute ownership of his undivided interest in the co-owned property and is free to alienate, assign or mortgage his interest, except as to purely personal rights. While a co-owner has the right to freely sell and dispose of his undivided interest, nevertheless, as a coowner, he cannot alienate the shares of his other co-owners – nemo dat quod non habet. [Acabal v. Acabal (2005)]

(2) Special laws; and (3) The Civil Code

Mutual respect among co-owners with regard to use, enjoyment, and preservation of the things as a whole

C. CHARACTERISTICS OF COOWNERSHIP (1) There are 2 or more co-owners. (2) There is a single object which is not materially or physically divided and his ideal share of the whole. (3) There is no mutual representation by the co-owners. (4) It exists for the common enjoyment of the co-owners.

(1) The property or thing held pro indiviso is impressed with a fiduciary character: each co-owner becomes a trustee for the benefit of his co-owners and he may not do any act prejudicial to the interest of his co-owners. (2) Until a judicial division is made, the respective part of each holder cannot be determined. The effects of this would be: (a) Each co-owner exercises, together with the others, joint ownership over the pro indiviso property, in addition to his use and enjoyment of the same

(5) It has no distinct legal personality. (6) It is governed first of all by the contract of the parties; otherwise, by special legal provisions, and in default of such provisions, by the provisions of Title III on Co-Ownership. There are ideal shares defined but not physically identified [NCC 485] The share of the co-owners, in the benefits as well as in the charges, shall be proportional to their respective interests.

(b) Each co-owner may enjoy the whole property and use it. (3) Redemption exercised by a co-owner inures to the benefit of his other coowners [Mariano v. CA (1993)] Only limitation Each co-owner of realty held pro indiviso exercises his rights over the whole property and may use and enjoy the same with no other limitation than that he shall not injure

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the interests of his co-owners. [Pardell v. Bartolome (1912)]

D. SOURCES OF CO-OWNERSHIP D.1. LAW Cohabitation: co-ownership common law spouses

between

The Family Code, in the following provisions, apply rules on co-ownership: Art. 147: between a man and a woman living together as husband and wife without the benefit of marriage but are capacitated to marry each other, or under a void marriage Art. 148: between a man and a woman not capacitated to marry each other Art. 90: if matter is not provided in the FC Chapter on ACP, then rules on coownership will apply Purchase creating implied trust If two or more persons agree to purchase property and by common consent, the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. [NCC 1452] Easement of party wall: co-ownership of part-owners of a party wall [NCC 658] Condominium Law: co-ownership of the common areas by holders of units Sec. 6, RA 4726. The Condominium Act. Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions, the incidents of a condominium grant are as follows: (c) Unless otherwise, provided, the common areas are held in common by the holders of units, in equal shares, one for each unit.

CIVIL LAW

Article 494, Civil Code. No co-owner shall be obliged to remain in the co-ownership. Each coowner may demand at any time the partition of the thing owned in common, insofar as his share is concerned. Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement. A donor or testator may prohibit partition for a period which shall not exceed twenty years. Neither shall there be any partition when it is prohibited by law. No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership. By the creation of a Universal Partnership of all present property NCC 1778. A partnership of all present property is that in which the partners contribute all the property which actually belongs to them to a common fund, with the intention of dividing the same among themselves, as well as all the profits which they may acquire therewith. NCC 1779. In a universal partnership of all present property, the property which belonged to each of the partners at the time of the constitution of the partnership, becomes the common property of all the partners, as well as all the profits which they may acquire therewith. A stipulation for the common enjoyment of any other profits may also be made; but the property which the partners may acquire subsequently by inheritance, legacy, or donation cannot be included in such stipulation, except the fruits thereof By Association and Societies with Secret Articles

D.2. CONTRACT By Agreement of Two or More Persons

NCC 1775. Associations and societies, whose articles are kept secret among the members, and wherein any one of the PAGE 112 OF 574

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members may contract in his own name with third persons, shall have no juridical personality, and shall be governed by the provisions relating to co-ownership.

CIVIL LAW

Hidden Treasure [NCC 438] When the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, one-half shall be allowed to the finder.

D.3. INTESTATE SUCCESSION Co-ownership between the heirs before partition of the estate NCC 1078. Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased.

D.6. BY OCCUPANCY Harvesting and Fishing: Co-ownership by two or more persons who have seized a res nullius thing

E. RIGHTS OF CO-OWNERS

For as long as the estate is left undivided the heirs will be considered co-owners of the inheritance.

E.1. RIGHT TO SHARE IN THE BENEFITS AS WELL AS THE CHARGES [NCC 485]

If one of the heirs dies, his heirs will in turn be co-owners of the surviving original heirs.

Stipulation to the contrary is void;

D.4. TESTAMENTARY DISPOSITION OR DONATION INTER VIVOS When a donation is made to several persons jointly, it is understood to be in equal shares, and there shall be no right of accretion among them, unless the donor has otherwise provided. [NCC 753]

Proportional to their interests; Portion belonging to the co-owners is presumed equal. E.2. RIGHT TO USE THE THING OWNED IN COMMON [NCC 486] Limitations: That he use the thing in accordance with the purpose for which it is intended.

Exception: Donations to spouses jointly, right of accretion is presumed unless donor provides otherwise

That he uses it in such a way as to not injure the interest of the co-ownership or prevent the other co-owners from using it.

A donor or testator may prohibit partition for a period which shall not exceed 20 years.

If co-owner exclusively uses property owned in common, he is liable to pay rentals for other co-owners’ share [Pardell v. Bartolome (1912)].

D.5. BY FORTUITOUS EVENT OR BY CHANCE Co-ownership between owners of 2 things that are mixed by chance or by will of the owners: [NCC 472] Each owner shall acquire a right proportional to the part belonging to him, bearing in mind the value of the things mixed or confused.

E.3. RIGHT TO BRING AN ORDER IN EJECTMENT [NCC 487] E.4. RIGHT TO COMPEL OTHER COOWNERS TO CONTRIBUTE TO THE EXPENSES OF PRESERVATION AND TO THE TAXES [NCC 488] Any one of the other co-owners may exempt himself by renouncing so much of his

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undivided interest as may be equivalent to his share of the expenses and taxes. No waiver if it is prejudicial to the coownership Note: Renunciation needs the consent of other co-owners as this is akin to a dacion en pago [J.B.L. Reyes]

CIVIL LAW

An agreement to keep the thing undivided for a certain period not exceeding 10 years is valid. Term may agreement.

be

extended

by

a

new

Donor or testator may prohibit partition, period not to exceed 20 years. No partition may be made if prohibited by law.

E.5. RIGHT TO REPAIR [NCC 489] Repairs for preservation may be made at the will of one of the co-owners but he must first notify his co-owners if practicable.

Right does not prescribe for as long as coownership lasts or is recognized.

Expenses to improve or embellish, decided upon by a majority.

E.9. RIGHT TO REDEMPTION [NCC 1619]

E.6. RIGHT TO OPPOSE ALTERATIONS

If 2 or more co-owners wish to exercise this right, redemption will be made in proportion to their share in the thing

[NCC 491] Consent of all the others is needed to make alterations, even if the alteration benefits all.

May exercise this in case the shares of other co-owners are sold to a third person

If the withholding of the consent is clearly prejudicial to the common interest, the courts may afford relief

E. 10. RIGHT TO PROTEST AGAINST ACTS OF MAJORITY WHICH ARE PREJUDICIAL TO MINORITY [NCC 492(3)]

Reason for the rule: alteration is an act of ownership, not of mere administration.

Should the resolution of the majority be seriously prejudicial to those interested in the property owned in common:

E.7. RIGHT TO FULL OWNERSHIP OF HIS PART AND OF THE FRUITS AND BENEFITS PERTAINING THERETO

The court, at the instance of an interested party, shall order such measures as it may deem proper, including the appointment of an administrator.

[NCC 493] Therefore he may alienate, assign or mortgage it, and even substitute another person in its enjoyment except when personal rights are involved. The effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership.

Note: Rules on Co-Ownership do not apply to CPG or ACP. These are governed by the Family Code. Even void marriages and cohabitation of incapacitated persons are governed by FC 50, 147, and 148.

F. IMPLICATIONS OF CO-OWNER’S RIGHT OVER HIS IDEAL SHARE

E.8. RIGHT TO PARTITION [NCC 494]

Co-Owner has the right:

Each may demand at any time the partition of the thing, insofar as his share is concerned.

(1) To share in fruits and benefits

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(2) To alienate, mortgage or encumber and dispose of his ideal share—but other owners can exercise right of redemption (3) To substitute another person in the enjoyment of the thing (4) To renounce part of his interest to reimburse necessary expenses incurred by another co-owner (NCC 488) EFFECT OF TRANSACTION BY EACH COOWNER (1) Limited to his share in the partition (2) Transferee does not acquire any specific portion of whole property until partition (3) Creditors of co-owners may intervene in partition or attack the same if prejudicial [NCC 499], except that creditors cannot ask for rescission even if not notified in the absence of fraud. [NCC 497]

CIVIL LAW

G.3. EMBELLISHMENTS IMPROVEMENTS

OR

(1) Notify co-owners of improvements and embellishments to be made. If no notification is made, the co-owner who advanced the expenses will only have the right to be reimbursed if he proves the necessity of such repairs and the reasonableness of the expenses. Exception: If proven that had there been a notification, they could have hired another who would charge lessor that they know of a store that sells the needed material at a cheaper price. The reimbursement will be limited to the amount that should have been spent had he notified the others, and the difference shall be borne by him alone. (2) Decisions by the majority must be followed.

G. RULES

Act of Co-Owner Preservation

G.1. ON RENUNCIATION OF SHARE (DIFFERENT FROM RENUNCIATION OF CO-OWNERSHIP) Other co-owners may choose not to contribute to the expenses by renouncing so much of his undivided interest as may be equivalent to his share of the necessary expenses and taxes.

Alterations Lease for more than 1 year Acts of administration Improvement/ Embellishing the Thing/ Useful expenses

Renunciation must be express; thus, failure to pay is nota renunciation of the right. Requires the consent of other co-owners because it is a case of dacion en pago (cessation of rights) involving expenses and taxes already paid. [J.B.L. Reyes] Cannot renounce his share if it will be prejudicial to another co-owner.

Consent Needed May be made at will by any coowner but must first notify other co-owners if practicable Consensus of Majority Consensus of Majority Majority of coowners Majority of coowners

H. TERMINATION OR

G.2. REPAIRS FOR PRESERVATION

EXTINGUISHMENT

First, notify other co-owners, as far as practicable.

H.1. TOTAL DESTRUCTION OF THING OR LOSS OF THE PROPERTY CO-OWNED

Co-owner may advance expenses for preservation even without prior consent; he is entitled to reimbursement.

Is there still co-ownership if a building is destroyed? Yes, over the land and the debris.

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H.2. MERGER OF ALL INTERESTS IN ONE PERSON

Action for partition will determine:

H.3. ACQUISITIVE PRESCRIPTION

(2) How the property will be divided between the plaintiff and defendant.

By whom (1) A third person. [NCC 1106] (2) A co-owner against the other co-owners. Requisites for acquisitive prescription against co-owners [Adille v CA (1988)]: (1) A co-owner repudiates the co-ownership by executing unequivocal acts of repudiation leading to ouster of other coowners; (2) The act of repudiation is clearly made known to other co-owners; (3) The evidence thereon is clear and conclusive; and (4) The co-owner has been in possession thru open, continuous, exclusive and notorious possession of the property for the period required by law. N.B.: there is a presumption that possession of a co-owner is not adverse Registration under the Torrens system is constructive notice of title but is not sufficient notice of the act of repudiation. [Adille v CA (1988)] H.4. PARTITION OR DIVISION Procedure for Partition Governing rule: Rule 69 of the Rules of Court. How: By agreement of parties or by judicial decree. Form: Oral or Written (Statute of Frauds does not operate here because it is not a conveyance of property but a mere segregation or designation of which parts belong to whom) The Rules of Court do not preclude agreements or settlements.

(1) Whether or not the plaintiff is indeed a co-owner of the property

Effects of Partition (1) Confers exclusive ownership of the property adjudicated to a co-heir. (2) Co-heirs shall be reciprocally bound to warrant the title to and the quality of each property adjudicated. (3) Reciprocal obligation of warranty shall be proportionate to the respective hereditary shares of co-heirs. (4) An action to enforce warranty must be brought within 10 years from the date the right accrues. (5) The co-heirs shall not be liable for the subsequent insolvency of the debtor of the estate. Rights against individual co-owners in case of partition [NCC 497] The creditors are allowed to take part in the partition. Reason for the rule: They own part of the interest of the co-owners who made the assignment or alienation. Intervention of creditors and assignees General Rule: Creditors may take part in the division. They need to establish the existence of the credit during co-ownership. Exception: If the partition was already executed, they cannot impugn partitiion Exception to the exception: If there was fraud, or a previous formal opposition to prevent the partition, without prejudice to right of debtor/assignor to maintain its validity.

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Rules on assignees:

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notice

to

creditors

and

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VII. Possession

(1) The law does not expressly require previous notice to the creditors and assignees before a partition, but the latter have the right of creditors and assignees to take part in the division.

The holding of a thing or the enjoyment of a right. [NCC 523]

(2) If notice is not given, the partition may be impugned by creditor/assignee if made in fraud of creditors.

To possess, in a grammatical sense, means to have, to physically and actually occupy a thing, with or without right. [Sanchez Roman]

(3) Once notice has been given, it is the duty of creditors and assignees to intervene and make known their stand. (a) If they fail, they cannot question the division made, except in cases of fraud. (b) If they formulate a formal question, they can contest such partition

A. CONCEPT OF POSSESSION

It is the holding of a thing or a right, whether by material occupation or by the fact that the thing or the right is subjected to the action of our will. [Manresa] Possession includes the idea of occupation. It cannot exist without it. (Exceptions: NCC 537) Right of possession (jus possessionis) Independent right

Partition of an indivisible thing (NCC 498) 1st option: The co-owners can agree that one of them shall be the sole owner by paying the value of other co-owners’ shares 2nd option: If they cannot agree who among them shall be sole owner, the property will be sold to a 3rd person and the proceeds distributed among them.

Right to possess (jus possidendi) Incident to ownership

B. ESSENTIAL REQUISITES OF POSSESSION Corpus possessionis: Holding (actual or constructive) of a thing or exercise of a right, if right is involved. Possession and cultivation of a portion of a tract under claim of ownership of all is a constructive possession of all, if the remainder is not in adverse possession of another [Ramos v. Director of Lands (1918)]; or the land area is so big that it is impossible that there are no adverse possessors. Doctrine of constructive possession applies when the possession is under title calling for the whole. It does not apply where possession is without title. N.B. To apply the doctrine, intention to possess must be proved. Animus possidendi: Intention to possess

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There is no possession if the holder does not want to exercise the rights of a possessor.

This is possession that springs from ownership.

Implied from the acts of the possessor.

Actually, jus possessionis.

May be contradicted and rebutted by evidence – to prove that the person who is in possession does not in fact exercise power or control and does not intend to do so.

C. DEGREES OF POSSESSION Mere holding or possession without title and in violation of the right of the owner Possession of a thief or usurper of land Here, both the possessor and the public know that the possession is wrongful. Possession with juridical title but not that of ownership e.g. possession of a tenant, depository agent, bailee trustee, lessee, antichretic creditor. This possession is peaceably acquired. This degree of possession will never ripen into full ownership as long as there is no repudiation of concept under which property is held. Possession with just title or title sufficient to transfer ownership, but not from the true owner e.g. possession of a vendee from a vendor who pretends to be the owner.

possidendi

not

just

jus

D. CASES OF POSSESSION D.1. POSSESSION FOR ONESELF, OR POSSESSION EXERCISED IN ONE’S OWN NAME AND POSSESSION IN THE NAME OF ANOTHER [NCC 524] In one’s own name – the fact of possession and the right to such possession is found in the same person. In the name of another – the one in actual possession is without any right of his own, but is merely an instrument of another in the exercise of the latter’s possession. D.2. POSSESSION IN THE CONCEPT OF AN OWNER, AND POSSESSION IN THE CONCEPT OF A HOLDER WITH THE OWNERSHIP BELONGING TO ANOTHER [NCC 525] Possession in Concept of Holder One who possesses as a mere holder, not in the concept of owner, acknowledges in another a superior right which he believes to be ownership, whether his belief be right or wrong. He is also a possessor under the second degree of possession. e.g. tenant, usufructuary, borrower in commodatum.

This degree of possession ripens into full ownership by lapse of time.

Possession in Concept of Owner

Period of acquisitive prescription will depend upon good/bad faith of possessor.

May be exercised by the owner himself or one who claims to be so.

Possessor is a possession in the concept of owner.

When a person claims to be the owner of a thing, whether he believes so or not, acting as an owner, and performing acts of ownership, and he is or may be considered as the owner by those who witness his exercise of proprietary rights, then he is a possessor in the concept of owner. This is

Possession with a just title from the true owner

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the kind of possession that ripens into ownership under Article 540, when such possession is public, peaceful and uninterrupted. [see Art. 1118]. Effects of Possession in Concept of an Owner (1) Converted into ownership by the lapse of time necessary for prescription. (2) Possessor can bring all actions necessary to protect his possession, availing himself of any action which an owner can bring, except accion reivindicatoria which is substituted by accion publiciana. (3) He can ask for the inscription of possession in the registry of property. (4) Upon recovering possession from one who has unlawfully deprived him of it, he can demand fruits and damages. (5) He can do on the thing possessed everything that the law authorizes an owner to do; he can exercise the right of pre-emption and is entitled to the indemnity in case of expropriation. D.3. POSSESSION IN GOOD FAITH AND POSSESSION IN BAD FAITH [NCC 526] POSSESSOR IN GOOD FAITH one who is not aware that there exists in his title or mode of acquisition any flaw or defectwhich invalidates his title or mode of acquisition. Good faith – consists in the possessor’s belief that the person from whom he received a thing was the owner of the same and could convey his title. It implies freedom from knowledge and circumstances which ought to put a person on inquiry. The belief of a possessor that he is the owner of the thing must be based upon the title or mode of acquisition, such as a sale, a donation, inheritance or other means of transmitting ownership; for without this, there can be no real, well-grounded belief of one’s ownership.

CIVIL LAW

Error in the application of the law, in the legal solutions that arise from such application, in the appreciation of legal consequence of certain acts, and in the interpretation of doubtful or difficult provisions or doctrines, may properly serve as basis for good faith. Possessor in bad faith – one who knows his title is defective. Only personal knowledge of the flaw in the title or mode of acquisition can make him a possessor in bad faith for bad faith is not transmissible from one person to another. Mistake or ignorance of the law, by itself, cannot become the basis of good faith. What makes the error or ignorance a basis of good faith is the presence of an apparent “doubt” or “difficulty” in the law. In other words, the law is complex, ambiguous, or vague such that it is open to two or more interpretations. When the ignorance of the law is gross and inexcusable, as when a person of average intelligence would know the law, such ignorance cannot be the basis of good faith. Otherwise, the intendment of Article 3 which states that, “Ignorance of the law excuses no one from compliance therewith,” will be defeated. What Things May be Possessed [NCC 530] Only things and rights which are susceptible of being appropriated may be the object of possession. What May Not Be Possessed by Private Persons (1) Res Communes (2) Property of Public Dominion (3) Right under discontinuous and/or non-apparent easement

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E. ACQUISITION OF POSSESSION E.1. WAYS OF ACQUIRING POSSESSION [NCC 531] By material occupation “Material occupation” – used in its ordinary meaning and not in its technical meaning under NCC 712, which defines occupation as a mode of acquiring ownership. Possession acquired by material occupation is only possession as a fact, not the legal right of possession. Constructive delivery is considered as an equivalent of material occupation in two situations where such occupation is essential to the acquisition of possession: (1) Tradicion brevi manu – takes place when one who possesses a thing by title other than ownership, continues to possess the same under a new title, that of ownership.

CIVIL LAW

Examples: Donations; Succession; Contracts (like a sale with right to repurchase); Judicial possession; Execution of judgments; Execution and registration of public instruments; Inscription of possessory information titles. The execution of the required formalities is equivalent to delivery of the property. E.2. BY WHOM MAY POSSESSION BE ACQUIRED [NCC 532] (1) By the same person (2) By his legal representative (3) By his agent (4) By any person without any power whatsoever but subject to ratification, without prejudice to proper case of negotiorum gestio [Arts. 2144, 2149, 2150] (5) By his legal representative (6) Qualifiedly, minors and incapacitated persons [NCC 535]

(2) Tradicion constitutum possessorium – takes place when the owner alienates the thing, but continues to possess the same under a different title.

(a) Incapacitated – all those who do not have the capacity to act (insane, lunatic, deaf-mutes who cannot read and write, spendthrifts and those under civil interdiction).

By subjection to the action of one’s will

(b) Object of possession– things only, not rights.

This mode refers more to the right of possession than to possession as a fact. The “action of our will” must be juridical, in the sense that it must be according to law.

(c) Method of acquisition – material occupation; acquisition by means for which the incapacitated person has the capacity, such as acquisition by succession, testate or intestate, or by donations propter nuptias, pure and simple donations.

It includes: (1) Tradicion symbolica – by delivering some object or symbol placing the thing under the control of the transferee, e.g. keys to a warehouse includes contents thereof. (2) Tradicion longa manu – by the transferor pointing out to the transferee the things that are being transferred.

F. WHAT DO NOT AFFECT POSSESSION [NCC 537] F.1. ACTS MERELY TOLERATED

By execution of proper acts under legal formalities This mode refers to juridical acts or the acquisition of possession by sufficient title evidenced by the performance of required formalities.

Those which because of neighborliness or familiarity, the owner of property allows another person to do on the property; Those services or benefits which one’s property can give to another without material injury or prejudice to the owner,

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who permits them out of friendship or courtesy; Permissive use merely tolerated by the possessor cannot affect possession and cannot be the basis of acquisitive prescription. Possession to constitute the foundation of prescriptive right must be possession under claim of title; it must be adverse. [Cuaycong v. Benedicto (1918)]

F.2. ACTS EXECUTED CLANDESTINELY AND WITHOUT THE KNOWLEDGE OF THE POSSESSOR [NCC 1108]

CIVIL LAW

intimidation for more than one year, he becomes a de jure possession.

RULES TO SOLVE CONFLICTS OF POSSESSION [NCC 538] General Rule: Possession cannot be recognized in two different personalities, except in cases of co-possession by copossessors without conflict of claims or interest. In case of conflicting preference is given to:

Possession nby oissessor is not affected as long as it remains clandestine and unknown. Possession has to be in the concept of an owner, public, peaceful and uninterrupted.

possession

–

(1) Present possessor or actual possessor; (2) If there are two or more possessors, the one longer in possession; (3) If the dates of possession are the same, the one who presents a title; or (4) If all conditions are equal, the thing shall be placed in judicial deposit pending determination of possession or ownership through proper proceedings.

F.3. ACTS OF VIOLENCE AS LONG AS THE POSSESSOR OBJECTS THERETO [NCC 536] Possession cannot be acquired through force or intimidation as long as there is a possessor who objects thereto. This includes forcibly taking away the property from another, and also when one occupied the property in the absence of another, and repels the latter upon his return. Possessor must file a case of forcible entry if property is an immovable, and replevin if property is a movable. He who believes that he has an action or a right to deprive another of the holding of a thing must invoke the aid of a competent court, if holder refuses to deliver the thing (NCC 536). Effect on Possession Acts mentioned do not constitute true possession. They do not interrupt the period of prescription nor affect the rights to the fruits. N.B.: If a deforciant succeeds in remaining in possession through force and

G. EFFECTS OF POSSESSION G.1. RIGHTS OF A POSSESSOR IN GOOD FAITH (1) Right to be protected and respected in possession; (NCC 539) (2) Right to bring possession;

action

to

restore

(3) Right to the fruits already received; (4) (NCC. 544) (5) At the time good faith possession ceases, he has the right to a part of cultivation expenses and to a part of net fruits in proportion to time of possession (NCC. 545) (6) Right to necessary expenses; (NCC. 546) (7) Right to retain the reimbursed; (NCC. 546)

thing

until

(8) Right to remove useful improvements removable without damage to the principal thing or to refund its value; (upon election by the owner) (NCC. 547)

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(9) Right to recover removable ornaments unless owner opts to buy them (NCC. 548)

Reimburse the value of fruits received and which the legitimate possessor could receive; (NCC 549)

G.2. OBLIGATIONS OF A POSSESSOR IN GOOD FAITH

Pay in proportion to the charges, expenses of cultivation and the net proceeds upon cessation of good faith; (NCC 545)

(1) Pay in proportion to the charges, expenses of cultivation and the net proceeds upon cessation of good faith; (NCC 545) The owner of the thing may give the possessor in good faith the right to finish the cultivation and gathering of the growing fruits, as an indemnity for his part of the expenses of cultivation and the net proceeds. The possessor in good faith who refuses to accept this concession shall lose the right to be indemnified in any other manner. (2) Costs of litigation; (NCC 550) (3) Liability to the deterioration/loss of a thing possessed if acted through fraudulent intent/negligence after the judicial summons. (NCC 552) G.3. RIGHTS OF A POSSESSOR IN BAD FAITH (1) Right to be respected in possession; (NCC 539) (2) Right to necessary expenses and the expenses for production, gathering, and preservation of fruits; (NCC. 545 and 546) Does not have right to reimbursement of expenses for luxury but may remove them as long as the principal thing suffers no injury, or may sell them to the owner who opts to buy the removable ornaments. No right to reimbursement for useful improvements and no limited right of removal.

Costs of litigation; (NCC 550) Liability to the deterioration/loss of a thing possessed in every case, including fortuitous events. (NCC 552) G.5. RIGHT TO BE PROTECTED IN HIS POSSESSION [NCC 539] Every possessor has a right to be respected in his possession; if disturbed, possessor has a right to be protected in or restored to said possession. “Every possessor” includes all kinds of possession, from that of an owner to that of a mere holder, except that which constitutes a crime Reason for the rule: To prevent anyone from taking the administration of justice into his own hands. Even the owner cannot forcibly eject the possessor, but must resort to the courts. RULES (1) Lawful possessor can employ self-help (NCC 429) (2) To consolidate title by prescription, the possession must be under claim of ownership, and it must be peaceful, public and uninterrupted. (3) Acts of possessory character done by virtue of a license or mere tolerance by the real owner are not sufficient and will not confer title by prescription or adverse possession.

G.4. OBLIGATIONS OF A POSSESSOR IN BAD FAITH

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(a) Possession of real property presumes possession of the movables therein (NCC 542); (b) Each co-owner is deemed to have exclusive possession of the part which may be allotted to him upon the

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division, for the entire period during which the co-possession lasted.

increase in value which the thing may have acquired by reason thereof.

(4) Interruption in the possession of the whole or a part of a thing possessed in common shall be to the prejudice of all the possessors. (NCC 543)

Bad faith possessor has no limited right of removal. H.3. EXPENSES FOR LUXURY They do not affect the existence or the substance of the thing itself, but only the comfort, convenience or enjoyment of the possessor.

H. REIMBURSEMENT FOR EXPENSES – POSSESSOR IN GOOD/BAD FAITH [NCC 546-552] H.1. NECESSARY EXPENSES (1) Imposed by the thing itself for its preservation and has no relation to the desire or purpose of the possessor. (2) They are the “cost of living” for the thing and must be reimbursed to the one who paid them, irrespective of GF or BF. Only the possessor in GF may retain the thing until he has been reimbursed therefor. (3) The expenses are not considered improvements; they do not increase the value of the thing, but merely prevent them from becoming useless. (4) A possessor in bad faith is entitled to reimbursement for necessary expenses but without right of retention. H.2. USEFUL EXPENSES Incurred to give greater utility or productivity to the thing, e.g. Wall surrounding an estate, an irrigation system, planting in an uncultivated land, a fishpond, an elevator in the building, electric lighting system They are reimbursed only to the possessor in GF as a compensation or reward for him. A possessor in BF cannot recover such expenses. If the useful improvements can be removed without damage to the principal thing, the possessor in good faith may remove them, unless the person who recovers the possession refunds the expenses or pays the

They are not the subject of reimbursement, because the law does not compensate personal whims or caprices, e.g. Opening of a garden, placing fountains and statues in it, adorning the ceilings with paintings, and the walls with reliefs. Bad faith possessor has no right of reimbursement but has limited right of removal, where owner has the option to buy removable ornament. Notes (1) Costs of litigation over the property shall be borne by every possessor. [NCC 550] (2) Improvements caused by nature or time shall always inure to the benefit of the person who has succeeded in recovering possession [NCC 551] Includes all the natural accessions referred to by articles 457-465, and all those that do not depend upon the will of the possessor. (e.g. widening of the streets, rising of fountains of fresh or mineral water, increase of foliage of trees)

Possessor in GF

Possessor in BF

Fruits Received Must reimburse the legitimate possessor Entitled to the fruits for fruits received or while possession is in could have been GF and before legal received, less interruption (544) expenses under Art. 443 (549)

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Possessor in GF

Possessor in BF

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Possessor in GF

Ornamental Expenses

Pending Fruits Entitled to part of the expenses of cultivation, and to a part of the net harvest, in proportion to the time of the Goes to the possession. legitimate possessor who recovers Indemnity may be, at possession (549) the owner’s option, 1. In money, OR 2. By allowing full cultivation and gathering of the fruits (545) Charges Must share with the legitimate possessor, Same as with GF in proportion to the (545) time of the possession (545)

Reimbursement only (546)

Useful Expenses Right of retention until reimbursed; Owner’s option to reimburse him either for expenses or for increase in value which the thing may No right to have acquired (546) reimbursement and no right of removal Limited right of (547) removal – should not damage principal and owner does not exercise option of paying the expenses or increase in value (547)

Limited right of removal (548)

Limited right of removal (549)

Deterioration or Loss No liability unless due to fraud or negligence after Liable in every case becoming in BF after (552) service of summons (552) Costs of Litigation Bears cost (550)

Bears cost (550)

I. LOSS OR UNLAWFUL DEPRIVATION OF A MOVABLE PROPERTY I.1. POSSESSION OF MOVABLE ACQUIRED IN GOOD FAITH (IN CONCEPT OF OWNER) IS EQUIVALENT TO TITLE [NCC 559]

Necessary Expenses Right to reimbursement and retention in the meantime (546)

Possessor in BF

Possessor has actual title defeasible only by true owner.

which

is

REQUISITES OF TITLE (1) Possession in GF; (2) The owner has voluntarily parted with the possession of the thing; and (3) The possession is in the concept of an owner. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession. When the owner can recover (1) Has lost the thing; or (2) Has been unlawfully deprived thereof. (3) Includes swindling, not only theft or robbery If the current possessor has acquired it in good faith at a public sale, owner must reimburse the price paid in order to recover the property.

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I.2. PERIOD TO RECOVER [NCC 1140, 1132, 1133]

J. EFFECTS OF POSSESSION IN THE CONCEPT OF AN OWNER

Actions to recover movable properties prescribe after 8 years from the time the possession thereof is lost, unless the possessor has acquired the ownership by prescription for a lesser period.

General Rule: Possession may lapse and ripen into full ownership. Possession in the concept of owner has in his favor the presumption that he has just title and he cannot be obliged to show or prove it; but not for purposes of acquisitive prescription. [NCC 541] For purposes of prescription, just title must be proved; it cannot be presumed. (NCC 1131)

Ownership of movable properties prescribes through uninterrupted possession for 4 years in good faith. Ownership of personal property also prescribes through uninterrupted possession for 8 years, without need of any other condition. Movable properties possessed through a crime can never be acquired through prescription by offender (NCC 1133). I.3. FINDER OF LOST MOVABLE [NCC 719720] (1) Whoever finds a movable, which is not a treasure, must return it to its previous possessor. (2) If the previous possessor is unknown, the finder shall immediately deposit it with the mayor of the city or municipality where the finding has taken place. (3) The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems best. (4) If the movable cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at public auction 8 days after the publication. (5) 6 months from the publication having elapsed without the owner having appeared, the thing found, or its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may be, to reimburse the expenses. (6) If the owner should appear in time, he shall be obliged to pay, as a reward to the finder, 1/10 of the sum or of the price of the thing found.

Basis: Possession presumes ownership, unless the contrary is proved. Just title: that which is legally sufficient to transfer the ownership or the real right to which it relates. For the purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. [NCC 1129] Exception: For the purposes of prescription, just title must be proved; it is never presumed. [NCC 1131] (1) Possessor may bring all actions necessary to protect his possession except accion reivindicatoria. (2) May employ self-help under Art. 429. (3) Possessor may ask for inscription of such real right of possession in the registry of property. (4) Has right to the fruits and reimbursement of expenses (assuming he is possessor in good faith) (5) Upon recovery of possession which he was unlawfully deprived of, may demand fruits and damages. (6) Generally, he can do on the things possessed everything that the law authorizes the owner to do until he is ousted by one who has a better right. (7) This is whether possession is in good faith or in bad faith [NCC. 528]

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PRESUMPTION IN FAVOR OF THE POSSESSOR—FOR ACQUISITIVE PRESCRIPTION

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If the natural interruption is for only one year or less, the time elapsed shall be counted in favor of the prescription [NCC 1122]

Of good faith until contrary is proved Presumption is only juris tantum because possession is the outward sign of ownership. Unless such proof of bad faith is presented, the possessor will be held to be in good faith. [NCC 527] So long as the possessor is not actually aware of any defect invalidating his title, he is deemed a possessor in good faith. Of continuity of initial good faith in which possession was commenced; possession in good faith does not lose this character except in case and from the moment possessor became aware or is not unaware of improper or wrongful possession [NCC 528] Good faith ceases from the date of the summons to appear at the trial if defendant/possessor loses the case. [Cordero v Cabral (1983)] Good faith ceases when there is: (1) Extraneous evidence; or (2) A suit for recovery of the property by the true owner. Of enjoyment of possession in the same character in which possession was acquired until the contrary is proved [NCC 529] Of non-interruption of possession in favor of present possessor who proves possession at a previous time until the contrary is proved [NCC 554] Possession is interrupted for the purposes of prescription, naturally or civilly. [NCC 1120] Possession is naturally interrupted when through any cause it should cease for more than one year [NCC 1121]

Civil interruption is produced by judicial summons to the possessor. [NCC 1123] Judicial summons shall be deemed not to have been issued and shall not give rise to interruption [NCC 1124]: (1) If it should be void for lack of legal solemnities; (2) If the plaintiff should desist from the complaint or should allow the proceedings to lapse; (3) If the possessor should be absolved from the complaint In all these cases, the period of the interruption shall be counted for the prescription Non-interruption of possession of property unjustly lost but legally recovered [NCC. 561] Other presumptions with respect to specific properties of property rights (1) Of extension of possession of real property to all movables contained therein so long as in is not shown that they should be excluded (NCC 542) (2) Non-interruption of possession hereditary property (NCC 553)

of

(a) Possession of hereditary property is deemed transmitted to the heir without interruption and from the moment of the death of the decedent (3) Of just title in favor of possessor in concept of owner (NCC 541) (4) Exclusive Possession Property (NCC. 543)

of

Common

(5) Present possessor may tack his possession to that of his grantor or predecessor in interest (NCC 1138 (1))

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K. LOSS/TERMINATION OF POSSESSION [NCC 555]

CIVIL LAW

After 1 year, the actions for forcible entry and unlawful detainer can no longer be brought. But accion publiciana may still be instituted to recover possession de jure.

(1) By the abandonment of the thing; (2) By an assignment made to another either by onerous or gratuitous title; (3) By the destruction or total loss of the thing, or because it goes out of commerce; (4) By the possession of another, subject to the provisions of Art. 537, if the new possession has lasted longer than 1 year. But the real right of possession is not lost till after the lapse of 10 years.

L. RULES FOR LOSS OF MOVABLES The possession of movables is not deemed lost so long as they remain under the control of the possessor, even though for the time being he may not know their whereabouts. (NCC 556) Control – judicial control or right, or that the thing remains in one’s patrimony.

K.1. ABANDONMENT

Wild animals are possessed only while they are under one's control. (NCC 560)

Includes the giving up of possession, and not necessarily of ownership by every possessor.

Domesticated or tamed animals – if they retain the habit of returning to the premises of the possessor.

It is the opposite of occupation. It consists of the voluntary renunciation of all the rights which the person may have in a thing, with intent to lose such a thing. To be effective, it is necessary that it be made by a possessor in the concept of an owner. It must clearly appear that the spes recuperandi is gone and the animus revertendi is finally given up. K.2. ASSIGNMENT, EITHER GRATUITOUS OR ONEROUS Complete transmission of ownership rights to another person, gratuitously or onerously.

M. KINDS OF ANIMALS WILD OR FERAL those which live naturally independent of man. TAMED those which, being wild by nature, have become accustomed to recognize the authority of man. When they observe this habit of returning to the place which the possessor keeps them, they are placed in the same category as domestic and when they lose it, they are considered as wild. DOMESTIC

K.3. POSSESSION BY ANOTHER Acts merely tolerated, and those executed clandestinely and without the knowledge of the possessor of a thing, or by violence, do not affect possession.

those which are born and reared ordinarily under the control and care of man; they are under the ownership of man, and do not become res nullius unless they are abandoned.

Possession that is lost here refers only to possession as a fact (de facto), not the legal right of possession (de jure). It is the possession that the new possessor acquires.

Note: Some abandoned domestic animals like cats, horses, goats may become wild or feral.

Real right of possession is lost only after 10 years.

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VIII. Usufruct Usufruct is a temporary real right which gives a right to enjoy the property as well as its fruits of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides. [NCC 562]

CIVIL LAW

(3) Preservation is a natural requisite, not essential because the title constituting it or the law may provide otherwise. (4) Reasons for substance

preserving

(a) To prevent exploitation;

form

and

extraordinary

(b) To prevent abuse, which is frequent;

A. OBJECTS OF USUFRUCT

(c) To prevent impairment.

INDEPENDENT RIGHTS A servitude which is dependent on the tenement to which it attaches cannot be the object of usufruct.

Exception: In an abnormal usufruct, alteration is allowed. (5) Usufruct is extinguished by the death of the usufructuary. (6) Natural because a contrary intention may prevail.

THINGS Non-consum able things. Consumable things, but only as to their value if appraised, or on an equal quantity and quality if they were not appraised.

C. CLASSIFICATION C.1. BY ORIGIN i. Voluntary: created by the will of private persons

Unproductive things e.g. sterile or absolutely unproductive land, or things for mere pleasure, such as promenades, statues or paintings, even if they do not produce any utility.

(1) By act inter vivos– such as contracts and donations: (2) By donation of the usufruct; (3) By retention of the usufruct by donor; (4) Where a usufruct is constituted inter vivos and for valuable consideration, the contract is unenforceable unless in writing;

B. CHARACTERISTICS (1) It is a real right; (2) Of temporary duration; (3) The purpose is to derive all advantages from the thing due to normal exploitation.

(5) By act mortis testament.

causa

–

such

as

ii. Legal: as provided by law. B.1. NATURAL CHARACTERISTICS (1) Includes only the right to use them (jus utendi), the right to own the fruits (jus fruendi) and the right to possess (jus possidendi). (2) Usufructuary must preserve the form or substance of the thing.

Usufruct of parents over the property of unemancipated children. (now limited to the collective daily needs of the family) [FC 26] iii. Mixed: created both by law and the acts of persons, i.e. by acquisitive prescription.

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The rights and duties of the usufructuary provided by law may be modified or eliminated by the parties. The title constituting the usufruct may validly authorize the usufructuary to alienate the thing itself held in usufruct. If the usufructuary is authorized to alienate the thing in case of necessity, it is the usufructuary who determines the question of necessity. C.2. BY PERSON ENJOYING THE RIGHT OF USUFRUCT i. Simple: only one usufructuary enjoys the property. ii. Multiple: several usufructuaries enjoy the property as co-usufructuaries. iii. Sim ultaneous: at the same time.

CIVIL LAW

Usufruct over a real right is by itself a real right. Right to receive present or future support cannot be the object of the usufruct. ii. Things Normal: involves non-consummable things where the form and substance are preserved. Abnormal or irregular: when the usufruct includes things which cannot be used in a manner appropriate to its nature without being consumed. The usufructuary has right to make use of them under the obligation of paying their appraised value at the termination of the usufruct, if they were appraised when delivered. If they were not appraised, he has the right to return the same quantity and quality, or pay their current price at the time the usufruct ceases. [NCC 574]

iv. Successive: one after the other. Lim itations On Successive Usufruct (1) If usufruct is by donation, ALL donees must be alive. [NCC 756] (2) Fiduciary or first heir and the second heir must be alive at the time of the death of the testator. [NCC 863] (3) If by testamentary succession, there must be only 2 successive usufructuaries, and both must be alive or at least already conceived at the time of the testator’s death and later born alive. [NCC 869]

In reality, the usufruct is not consumable things themselves, the sum representing their value quantity of things of the same quality.

upon the but upon or upon a kind and

The usufructuary, in effect, becomes the owner of the things in usufruct, while the grantor becomes a mere creditor entitled to the return of the value or of the things of the same quantity and quality (as if converted into a simple loan). Example: Usufruct over sterile animals (NCC 591, par. 4).

C.3. BY OBJECT OF USUFRUCT Usufruct may be constituted on the whole or a part of the fruits of the thing or on a right, provided it is not strictly personal or intransmissible. [NCC 564]

[NCC

574;

Bar

Includes things which cannot be used without being consumed. Money may be the object of usufruct [Alunan v. Veloso, 52 Phil 545]

i. Rights Must not be intransmissible.

iv. Quasi-usufruct 1998]

strictly

personal

or

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D. RIGHTS AND OBLIGATIONS OF USUFRUCTUARY

C.4. BY THE EXTENT OF THE USUFRUCT i. At to the Fruits Total: all consumed by the usufruct. Partial: only on certain aspects of the usufruct’s fruits.

D.1. RIGHTS AS TO THE THING AND ITS FRUITS (1) Right to enjoy the property

Singular: only on particular property of the owner.

(2) Right to enjoy the property to the same extent as the owner, but only with respect to its use and the receipt of its fruits.

Universal: pertains to the usufruct over universal property, i.e. over an entire patrimony, a while inheritance of a compulsory heir, a dowry;

(3) Usufructuary cannot extract products which do not constitute fruits because he is bound to preserve the form and substance of the thing.

A universal usufructuary must pay the debts of the naked owner, if stipulated. Article 758 and 759 on donations apply.

(4) Usufructuary rights may be transferred, assigned or otherwise disposed of by the usufructuary.

ii. As to the Object

NCC 758: When the donation imposes upon the donee the obligation to pay the debts of the donor, if the clause does not contain any declaration to the contrary, the former is understood to be liable to pay only the debts which appear to have been previously contracted. In no case shall the donee be responsible for the debts exceeding the value of the property donated, unless a contrary intention clearly appears.

NCC 759: There being no stipulation regarding the payment of debts, the donee shall be responsible therefor only when the donation has been made in fraud of creditors.

(5) Not exempt from execution and can be sold at public auction. HIDDEN TREASURE As to hidden treasure, usufructuary is considered a stranger without a right to a share, unless he is also the finder of the treasure With respect to hidden treasure which may be found on the land or tenement, he shall be considered a stranger. Hidden treasure belongs to the owner of the land, building, or other property on which it is found. Nevertheless, when the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, onehalf thereof shall be allowed to the finder.

The donation is always presumed to be in fraud of creditors, when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation.

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i. Right to fruits pending at the beginning of usufruct Fruits pending at Fruits pending at the beginning of the termination of the usufruct the usufruct Belong to the usufructuary

Belong to the naked owner

Without need to reimburse the expenses to the owners

The owner shall reimburse to the usufructuary ordinary cultivation expenses from the proceeds of the fruits (not to exceed the value of the fruits)

Without prejudice to Rights of innocent 3rd the right of 3rd parties should not be persons e.g. if the prejudiced. fruits arose by building, planting, sowing by a possessor in good faith, the pending crop expenses of cultivation and of the net harvest and charges shall be prorated between said possessor and the usufructuary in proportion to the time of possession (NCC 545) N.B. In the case of civil fruits, no need to prorate, as civil fruits accrue daily [NCC 544]

CIVIL LAW

interest on bonds or securities payable to bearer, each payment due shall be considered as the proceeds or fruits of such right. Whenever it consists in the enjoyment of benefits accruing from a participation in any industrial or commercial enterprise, the date of the distribution of which is not fixed, such benefits shall have the same character. If the usufruct is constituted only on the land and not the building built thereon then the right to the fruits by the usufructuary would not extend to the building. The building is considered as a separate and distinct prinicipal which produces its own fruits. [Gabuya v Cui (1971)] Right to enjoy any increase through accessions and servitudes, including products of hunting and fishing. iii. Right to lease the thing General rule: The usufructuary may lease the thing to another but this shall terminate upon the expiration of the usufruct, saving leases of rural lands, which shall be considered as subsisting during the agricultural year, i.e. the period from planting to harvesting of one crop. Exceptions (1) Legal usufructs cannot be leased. (2) Caucion juratoria (lease would show that the usufructuary does not need the property badly). (3) Usufruct is purely personal, e.g. title creating usufruct provides that usufructuary shall personally use and enjoy the property given in usufruct.

ii. Right to civil fruits Civil fruits – deemed to accrue daily, and belong to the usufructuary in proportion to the time the usufruct may last. Whenever a usufruct is constituted on the right to receive a rent or periodical pension, whether in money or in fruits, or in the

Effect of the transfer of right: The transfer or lease of the usufruct does not terminate the relation of the usufructuary with the owner. Death of the transferee does not terminate the usufruct but it terminates upon the

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death of the usufructuary who made the transfer.

(b) Cannot renounce a servitude; (c) Cannot mortgage or pledge a thing. (2) Except:

Rules as to Lease: (1) The property in usufruct may be leased even without the consent of the owner.

(a) When the right of usufruct is converted into the right of ownership;

(2) The lease should be for the same period as the usufruct.

(b) When the things are consumable (NCC 574);

EXCEPT: leases of rural lands continues for the remainder of the agricultural year.

(c) When the things by their nature are intended for sale, such as the merchandise in a commercial establishment; and

(3) A lease executed by the usufructuary before the termination of the usufruct and subsisting after the termination of the usufruct must be respected, but the rents for the remaining period will belong to the owner. (4) If the usufructuary has leased the lands or tenements given in usufruct, and the usufruct should expire before the termination of the lease, he or his heirs and successors shall receive only the proportionate share of the rent that must be paid by the lessee. [NCC, 568] (5) It is the usufructuary and not the naked owner who has the right to choose the tenant. (6) As corollary to the right of the usufructuary to all the rent, to choose the tenant, and to fix the amount of the rent, she necessarily has the right to choose herself as the tenant thereof; and, as long as the obligations she had assumed towards the owner are fulfilled. [Fabie v. Gutierrez David (1945)] (7) A lease executed by the owner before the creation of the usufruct is not extinguished by such usufruct. Lim itations on the Right to Lease the Property

(d) When the things, whatever their nature, are delivered under appraisal as equivalent to their sale. (3) Future crops may be sold but such sale would be void if usufruct terminates prior to harvest of future fruits. The buyer’s remedy is to recover from the usufructuary. (4) The usufructuary-lessor is liable for the act of the substitute. (5) A usufructuary who alienates or leases his right of usufruct shall answer for any damage which the things in usufruct may suffer through the fault or negligence of the person who substitutes him. [NCC, 590] (6) A usufructuary can sell or alienate his right of usufruct, apart from the thing held in usufruct, but the right of usufruct remains a temporary real right. iv. Improvements by the Usufructuary of the Land [NCC 579] He may improve the thing without altering its form and substance; He may remove improvements made by him if it is possible to do so without damage to property

(1) Usufructuary cannot do the following: (a) Cannot alienate or dispose of the objects included in the usufruct;

v. Usufructuary M ay Improvements [NCC 580]

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(1) The usufructuary may set off the improvements he may have made on the property against any damage to the same. Right to improve the thing, but improvement inures to the benefit of the naked owner [NCC 579] Usufructuary is reimbursement.

not

entitled

to

(2) Whenever the usufructuary can remove the improvements without injury to the property in usufruct, he has the right to do so, and the owner cannot prevent him from doing so even upon payment of their value. This right does not involve an obligation – if the usufructuary does not wish to exercise it, he cannot be compelled by the owner to remove the improvements. This right to remove improvements can be enforced only against the owner, not against a purchaser in good faith to whom a clean title has been issued. (3) Usufructuary may set off the improvements against any damage to the property. The improvements should have increased the value of the property, and that the damages are imputable to the usufructuary. Increase in value and the amount of damages are set off against each other. If the damages exceed the increase in value, the difference should be paid by the usufructuary as indemnity. If the increase in value exceeds the damages, and the improvements are of such nature that they can be removed without injury to the thing in usufruct, the settlement of the difference must be agreed upon by the parties.

CIVIL LAW

(4) If the improvements cannot be removed without injury, the excess in value accrues to the owner. (5) Registration of improvements – to protect usufructuary against 3rd persons D.2. RIGHTS AS TO THE LEGAL RIGHT OF USUFRUCT ITSELF i. Right usufruct

to

m ortgage

right

of

The usufructuary may alienate his right of usufruct, even by a gratuitous title; but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct. [NCC. 572] ii. Does not include parental usufruct because of personal and fam ily considerations. Is there still a personal usufruct? Answer: No. NCC 321 was amended by FC 226, where there is no more mention of a parental usufruct. [Prof. Labitag] Right to alienate the usufruct except in purely personal usufructs or when title constituting it prohibits the same. Parental usufruct is inalienable. D.3. OBLIGATIONS AT THE BEGINNING OF THE USUFRUCT OR BEFORE EXERCISING THE USUFRUCT (1) To make, after notice to the owner or his legitimate representative, an inventory of all the property, which shall contain an appraisal of the movables and a description of the condition of the immovables; and (2) To give security, binding himself to fulfill the obligations imposed upon him in accordance with this Chapter. Note: These requirements are not conditions precedent to the commencement of the right of the usufruct but merely to the

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entry upon the possession and enjoyment of the property.

CIVIL LAW

(3) Gratitude on the donee’s part demands that the donor be excused from filing the bond. (4) Title constituting usufructuary.

i. To Make An Inventory Requisites (1) Immovables must be described; and (2) Movables must be appraised because they are easily lost or deteriorated.

It is only by way of exception that a caucion juratoria is allowed, and only under the special circumstances: (a) Proper court petition;

Expenses for the making of the inventory are borne by the usufructuary.

(b) Usufruct is over a house, furniture or tools of a trade and the necessity for delivery of furniture, implements or house included in the usufruct;

The inventory may be in a private document, except when immovables are involved. (a public instrument is prescribed to affect 3rd persons).

(c) Approval of the court; and (d) Sworn promise.

Failure to make an inventory does not affect the rights of the usufructuary to enjoy the property and its fruits.

A usufructuary under this can neither alienate his right nor lease the property, for that would mean that he does not need the dwelling or the implements and furniture.

A prima facie presumption arises that the property was received by the usufructuary in good condition.

Exception inventory

to

the

requirem ent

of

When no one will be injured, the usufructuary may be excused from this obligation. ii. To give a bond for the faithful perform ance of duties as usufructuary Any kind of sufficient security is allowed, e.g. cash, personal bond, mortgage. No bond is required in the following: (1) No prejudice would result; [Art. 585] (2) Usufruct is reserved by a donor; [Art. 584]

excused

(5) A usufructuary may take possession under a caucion juratoria (bond by oath) [Art. 587]

Concurrence of the owner in the making of the inventory.

Even if he is already in possession, he may still be required to make an inventory.

usufruct

Effect of filing a bond Retroactivity: upon giving the security, the usufructuary will be entitled to all the benefits accruing since the time when he should have begun to receive them. Effect of failure to give bond: [NCC 586] (1) The owner may demand that the immovable properties be placed under administration; (2) That the movable properties be sold and the proceeds of the sale be the property held in usufruct – legal interest of 6% shall be the fruits; (3) That the public bonds, instruments of credit payable to order or to bearer be converted into registered certificates or deposited in a bank or public institution; and

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(4) That the capital or sums in cash and the proceeds of the sale of the movable property be invested in safe securities. The owner may, until the usufructuary gives security, retain in his possession the property in usufruct as administrator, subject to the obligation to deliver to the usufructuary the net proceeds, after deducting the sums, which may be agreed upon or judicially allowed him for such administration. D.4. DURING THE USUFRUCT (1) To take care of the thing like a good father of a family; (2) To undertake ordinary repairs; (3) To notify owner of need to undertake extraordinary repairs; (4) To pay for annual charges and taxes on the fruits; (5) To notify owner of any act detrimental to ownership; (6) To shoulder the costs of litigation regarding the usufruct; and (7) To answer for fault or negligence of alienee, lessee or agent of usufructuary. i. To take care of the thing like a good father of a fam ily When damages are caused to the property by the fault or negligence of the usufructuary, the naked owner need not wait for the termination of the usufruct before bringing the action to recover proper indemnity. The bad use of a thing, which causes considerable injury, entitles the naked owner to demand the delivery and administration of the thing. The exercise of this remedy does not extinguish the usufruct. He may set off the value of useful improvements against his liability for damages (NCC 580).

CIVIL LAW

ii. To undertake ordinary repairs The usufructuary is obliged to make the ordinary repairs needed by the thing given in usufruct. [NCC 592] Ordinary repairs: (8) Such as are required by the wear and tear due to the natural use of the thing and are indispensable for its preservation; (9) Deteriorations or defects arise from the natural use of the thing; (10) Repairs are necessary preservation of the thing.

for

the

The usufructuary is bound to pay only for the repairs made during the existence of the usufruct. If the defects existed already at the time the usufruct began, the obligation to defray the ordinary repairs falls upon the owner. If the defects are caused by the ordinary use of the thing, the usufructuary may exempt himself from making the repairs by returning to the owner the fruits received during the time that the defects took place. Except: When the ordinary repairs are due to defects caused by the fault of the usufructuary If the usufructuary fails to make the repairs even after demand, the owner may make them at the expense of the usufructuary iii. To notify owner of need undertake extraordinary repairs

to

Extraordinary repairs (1) Those caused by exceptional circumstances, whether or not they are necessary for the preservation of the thing; or (2) Those caused by the natural use of the thing, but are not necessary for its preservation. General Rule: Naked owner must make the extraordinary repairs.

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The usufructuary is obliged to pay legal interest on the amount while usufruct lasts. If the extraordinary repairs are indispensable, and the naked owner fails to undertake them, the usufructuary may make such repairs. Requisites: (1) There must be due notification to the naked owner of the urgency – if it is not urgent, there is no obligation to give notice;

CIVIL LAW

vii. To answer for fault or negligence of the alienee, lessee or agent of the usufructuary [NCC 590] The usufructuary is made liable for the acts of the substitute. While the substitute answers to the usufructuary, the usufructuary answers to the naked owner. D.5. AT THE TIME OF THE TERMINATION OF THE USUFRUCT

(2) The naked owner failed to make them; and

To deliver the thing in usufruct to the owner in the condition in which he has received it, after undertaking ordinary repairs.

(3) The repair is needed for preservation.

Except:

The usufructuary who has made the extraordinary repairs necessary for preservation is entitled to recover from the owner the increase in value, which the tenement acquired by reason of such works.

Abnormal usufruct – A thing of the same kind, quantity and quality is returned; if with appraised value, must return value appraised.

Usufructuary may retain, i.e. has a right of retention, until he is paid.

E. SPECIAL CASES OF USUFRUCT

iv. To pay for annual charges and taxes on the fruits

E.1. USUFRUCT OVER A PENSION OR A PERIODICAL INCOME [NCC 570]

It is well settled that a real tax, being a burden upon the capital, should be paid by the owner of the land and not by a usufructuary. There is no merit in the contention of distinguishing public lands into alienable and indisposable. All properties owned by the government, without any distinction, are exempt from taxation. [Board of Assessment Appeals of Zamboanga del Sur v. Samar Mining Company, Inc.(1971)]

Each payment due shall be considered as the proceeds or fruits of such right. The usufruct shall be distributed as civil fruits. E.2. USUFRUCT OF PROPERTY OWNED IN COMMON [NCC 582] The usufructuary takes the place of the coowner as to: (1) Management;

v. To notify owner of any act detrimental to ownership [NCC 601]

(2) Fruits; and

vi. To shoulder the costs of litigation regarding the usufruct [NCC 602]

Effect of partition:

(3) Interest.

(1) The right of the usufructuary is not affected by the division of the property in usufruct among the co-owners.

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(2) After partition, the usufruct is transferred to the part allotted to the co-owner. E.3. USUFRUCT CONSTITUTED ON A FLOCK OR HERD OF LIVESTOCK [NCC 591] On sterile stock: same rules on fungible property govern. (i.e. it is an abnormal usufruct – may dispose of or consume the animal [NCC 574] On fruitful stock: (3) Must replace ordinary losses of the stock with the young if: (a) Some animals die from natural causes; or (b) Some animals are lost due to rapacity of beasts of prey. (4) No obligation to replace if: (a) There is a total loss of animals because of some unexpected or unnatural loss (like contagious disease or any other uncommon event, provided the usufructuary has no fault); or (b) If all perish, the usufructuary should deliver the remains to the owner. There is a partial loss if a part of the stock perishes, the usufruct subsists on the remainder. E.4. USUFRUCT OVER FRUIT BEARING TREES AND SHRUBS AND WOODLANDS [NCC 575-577] The usufructuary can: (5) Use dead trunks and those cut off or uprooted by accident with obligation to replace them with new plamts; (6) Make usual cuttings that owner used to do, and in default thereof, according to the custom of the place with regard to the manner, amount and season; and

CIVIL LAW

(7) Cut the trees that are not useful. (8) If a result of a calamity, most trees have disappeared, usufructuary may leave dead or uprooted trunks to owner and demand removal thereof and clear the land. (9) In tree nurseries, to make necessary thinnings, so the rest may grow properly. E.5. USUFRUCT ON A RIGHT OF ACTION TO RECOVER PROPERTY [NCC 578] The action may be instituted in the usufructuary’s name. As the owner of the usufruct, he is properly deemed a proper party-in-interest. If the purpose is the recovery of the real or personal property or a real right, he is still required under Art. 578 to obtain the naked owner’s authority. If action brought by usufructuary succeeds and he recovers property, usufruct is limited to the fruits, ownership to the naked owner. If the purpose is to object to or prevent disturbances over the property, no special authority from the naked owner is needed. If it relates to ownership of property, he must notify the naked owner. E.6. USUFRUCT ON PROPERTY [NCC 600]

MORTGAGED

Usufructuary not obligated to pay the principal obligation foreclosed, owner is liable for value of right of usufruct. When the usufruct is universal and some objects are mortgaged, apply Art. 598. If the usufructuary mortgaged the usufructuary right, he is liable to pay his own debt. He cannot mortgage property held in usufruct. E.7. USUFRUCT OVER PATRIMONY [NCC 598] Applies when:

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(10) The usufruct is a universal usufruct; and (11) If at its constitution the owner had debts or is obliged to make periodical payments (whether or not there be known capital) General rule: The usufructuary is not liable for the owner’s debts. NCC 758 and 759 applies. Exceptions: (1) When it is so stipulated; usufructuary shall be liable for debts previously contracted if contrary declaration, but only up to value of the usufruct, unless contrary is indicated in the title;

the the no the the

(2) If there is no specification, he is liable only for debts incurred by the owner before the usufruct was constituted; or (3) When the usufruct is constituted in fraud of creditors. In no case shall the usufructuary be responsible for debts exceeding the benefits under the usufruct. (except when the contrary intention appears) E.8. USUFRUCT OVER DETERIORABLE PROPERTY The usufructuary shall have the right to make use thereof in accordance with the purpose for which they are intended. It is sufficient if the usufructuary returns the things in the condition in which they may have been found at the time of the expiration of the usufruct after having made ordinary repairs. Except: when such defects were caused through the usufructuary’s fraud and negligence. If the usufructuary does not return the things upon the expiration of the usufruct, he should pay an indemnity equivalent to the value of the things at the time of such expiration.

CIVIL LAW

E.9. USUFRUCT OVER CONSUMABLE PROPERTY [NCC 574] The usufructuary shall have the right to make use of them under the obligation of paying their appraised value at the termination of the usufruct, if they were appraised when delivered. If not appraised, he shall have the right to return at the same quantity and quality, or pay their current price at the time the usufruct ceases. An abnormal usufruct, but the usufruct shall be a normal usufruct if consumable is merely for exhibition.

F. RIGHTS OF THE OWNER F.1. AT THE USUFRUCT

BEGINNING

OF

THE

See obligations of usufructuary at the beginning of the usufruct) F.2. DURING THE USUFRUCT (1) Retains title to the thing or property. (2) He may alienate the property: he may not alter the form or substance of the thing; nor do anything prejudicial to the usufructuary. (3) He may construct buildings, make improvements and plantings, provided: (4) The value of the usufruct is not impaired; and (5) The rights of the usufructuary are not prejudiced. (6) He can constitute a voluntary easement over land/building held in usufruct, but if it affects the usufructuary right, the usufruct mas give his consent. If easement is perpetual, consent of both must be obtained (NCC 689-690)

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G. EXTINGUISHMENT/ TERMINATION [NCC 603] (1) By the death of the usufructuary, unless a contrary intention clearly appears; (2) By the expiration of the period for which it was constituted, or by the fulfillment of any resolutory condition provided in the title creating the usufruct; (3) By merger of the usufruct ownership in the same person;

and

(4) By renunciation of the usufructuary;

CIVIL LAW

When a contrary intention clearly appears: If the usufructuary dies before the happening of a resolutory condition, the usufruct is extinguished. Usufruct is personal and it cannot be extended beyond the lifetime of the usufructuary. [Sanchez Roman and SC] If period is fixed with reference to the age of a third person usufruct continues until such person attains that age, even if he dies before reaching such age, unless expressly granted in consideration of his existence in life [NCC 606]

(5) By the total loss of the thing in usufruct; (6) By the termination of the right of the person constituting the usufruct; or (7) By prescription.

G.2. EXPIRATION OF PERIOD OR FULFILLMENT OF RESOLUTORY CONDITION IMPOSED ON USUFRUCT BY PERSON CONSTITUTING USUFRUCT In favor of juridical persons [NCC. 605]

G.1. DEATH OF USUFRUCTUARY Exceptions: (1) In multiple usufructs: it ends at the death of the last survivor [NCC 611] (2) If a simultaneous usufruct: all the usufructuaries must be alive (or at least conceived and born alive later) at the time of constitution. (3) If successive usufruct: (a) If by virtue of donation – all the donees-usufructuaries must be living at the time of the donation; (b) If by will – there should only be 2 successive usufructuaries and both must have been alive at the time of testator’s death. Note: Same rule as in fideicommissary substitution [NCC 863-867, par. 1] If the period is fixed by reference to the life of another or there is a resolutory condition, death does not affect the usufruct and the right is transmitted to the heirs of the usufructuary until the expiration of the term or the fulfillment of the condition.

Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. If before the expiration of such period the town is abandoned, or the corporation or association is dissolved, the usufruct shall be extinguished. Usufruct granted for the tim e that may elapse before a third person attains a certain age [NCC 606] It shall subsist for the number of years specified even if the third person should die before the period expires unless such usufruct has been expressly granted only in consideration of the existence of such person. G.3. MERGER OF RIGHTS OF USUFRUCT AND NAKED OWNERSHIP IN ONE PERSON Illustration: H was the usufructuary of land owned by X. X dies, leaving in his will, the naked ownership of the land to H. the usufruct is extinguished because now H is both the naked owner and the usufructuary.

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G.4. RENUNCIATION OF USUFRUCT

Situation

W aiver: A voluntary surrender of the rights of the usufructuary, made by him with the intent to surrender them. Lim itations: (1) Must be express: tacit renunciation is not sufficient; (2) Does not need the consent of naked owner; and (3) If made in fraud of creditors, they may rescind the waiver through an action under Article 1381 (accion pauliana). G.5. EXTINCTION OR LOSS OF PROPERTY [NCC 608] Situation

premium paid by usufruct subsists on owner and new building. usufructuary (par. 1) If owner does not rebuild, interest upon insurance proceeds paid to usufructuary. When the insurance taken by the naked owner only because usufructuary refuses to contribute to the premium (par. 2)

Effect Art. 607

If destroyed property is not insured If the building forms Usufruct continues part of an immovable over the land and under usufruct materials (plus interests), if owner does not rebuild. If usufruct is on the building only

Usufruct continues over the land and materials (plus interests), if owner does not rebuild.

When insurance taken by usufructuary only depends on value of usufructuary’s insurable interest

If he does not rebuild, usufruct continues over remaining land and/or owner may pay interest on value of both materials and land [Art. 607].

Insurance proceeds go to the usufructuary. No obligation to rebuild. Usufruct continues on the land. Owner has no share in insurance proceeds.

Art. 608 If destroyed property is insured before termination of the usufruct If owner rebuilds,

Owner entitled to insurance money (no interest paid to usufructuary).

If owner rebuilds, usufruct does not continue on new building, but owner must pay interest on value of land and old materials.

If owner rebuilds, usufructuary must allow owner to occupy the land and to make use of materials; but the owner must pay interest on the value of both the land and the materials.

When insurance

Effect

G.6. TERMINATION OF THE RIGHT OF PERSON CONSTITUTING THE USUFRUCT Example: usufructs constituted by a vendee a retro terminate upon redemption.

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G.7. PRESCRIPTION Adverse possession against the owner or the usufructuary. It is not the non-use which extinguishes the usufruct by prescription, but the use by a 3rd person.

CIVIL LAW

The bad use must cause considerable injury not to the thing, but to the owner. Usufructuary is liable for damages caused to property.

There can be no prescription as long as the usufructuary receives the rents from the lease of the property, or he enjoys the price of the sale of his right.

H. CONDITIONS NOT AFFECTING USUFRUCT H.1. EXPRORPIATION USUFRUCT [NCC 609]

OF

THING

IN

If naked owner alone was given the indemnity, he has the option: (1) To replace with equivalent thing; or (2) To pay to the usufructuary legal interest on the indemnity. This requires a security to be given by the naked owner for the payment of the interest. If both the naked owner and the usufructuary were separately given indemnity, each owns the indemnity given to him, the usufruct being totally extinguished. If usufructuary alone was given the indemnity, he must give it to the naked owner and compel the latter to return either the interest or to replace the property. He may even deduct the interest himself, if the naked owner fails to object. H.2. BAD USE OF THING IN USUFRUCT [NCC 610] Bad use does not extinguish the usufruct but entitles the owner to demand delivery and administration of the thing with the obligation to pay the net proceeds of fruits.

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IX. Easement

even immovable by incorporation, destination or by analogy. [NCC 613]

An encumbrance imposed upon an immovable by nature for the benefit of another immovable belonging to a different owner. [NCC. 613]

Immovable: used in its common and not in the legal sense, meaning only property immovable by nature can have easements.

A real right which burdens a thing with a prestation of determinate servitudes for the exclusive enjoyment of one who is not an owner of a tenement.

iv. It lim its the servient owner’s right of ownership for the benefit of the dominant estate.

A real right by virtue of which the owner has to abstain from doing or allow somebody else to do something to his property for the benefit of another. Dom inant Estate – the immovable in favor of which the easement is established. Servient Estate – the immovable which is subject to the easement .

by

Right of limited use but no right to possess the servient estate. There exists a limitation on ownership: the dominant owner is allowed to enjoy or use part of the servient estate, or imposes on the owner a restriction as to his enjoyment of his own property. Being an abnormal limitation of ownership, it cannot be presumed.

A. CHARACTERISTICS

v. It creates tenem ents:

A.1. ESSENTIAL FEATURES:

There is no transfer of ownership, but a relationship is created, depending on the type of easement.

i. It is a real right – it gives an action in rem or real action against any possessor of the servient estate Owner of the dominant estate can file a real action for enforcement of right to an easement Action in rem: an action against the thing itself, instead of against the person. ii. It is a right enjoyed over another’s property (jus in re aliena). When the dominant and the servient estates have the same owner, the easement is extinguished. Separate ownership is a prerequisite to an easement.

a

relation

between

General Rule: It may consist in the owner of the dominant estate demanding that the owner of the servient estate refrain from doing something (servitus in non faciendo) or that the latter permit that something be done over the servient property (servitus in patendo), but not in the right to demand that the owner of the servient do something (servitus in faciendo) except if such act is an accessory obligation to a praedial servitude (obligation propter rem) Servient owner merely allows something to be done to his estate. Exception: Praedial servitudes

iii. It is a right constituted over an im m ovable by nature (land and buildings), not over movable properties or

Right to place beams in an adjoining wall to support a structure. Right to use another’s wall to support a building.

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vi. It is inherent or inseparable from estate to which they actively or passively belong [NCC 617]

CIVIL LAW

Easement Usufruct

Distinguished

Easem ent

from

Usufruct

Easements are merely accessory to the tenements, and a “quality thereof.” They cannot exist without tenements.

May be constituted May be constituted only on an on either movable or immovable property immovable property

Easements exist even if they are not expressly stated or annotated as an encumbrance on the titles.

Not extinguished by Extinguished by the the death of death of usufructuary dominant owner

vii. It is intransm issible – it cannot be alienated separately from the tenement affected or benefited Any alienation of the property covered carries with it the servitudes affecting said property. But this affects only the portion of the tenement with the easement, meaning that the portions unaffected can be alienated without the servitude.

Non-possessory right over an immovable

Involves a right of possession in an immovable

Limited to particular Includes all the uses or specific use of the and the fruits of the servient estate property

B. CLASSIFICATION B.1. AS TO RECIPIENT OF BENEFITS

viii. It is indivisible [NCC 618] If the servient estate is divided between two or more persons, the easement is not modified, and each of them must bear it on the part that corresponds to him. If the dominant estate is divided between two or more persons, each of them may use the easement in its entirety, without changing the place of its use, or making it more burdensome in any other way.

i. Real or Praedial: exists for the benefit of a particular tenement. ii. Personal: exists for the benefit of persons without a dominant tenement e.g. usus habitatio (right to reside in a house) and operae servorum (right to the labor of slaves) in Roman law. B.2. AS TO CAUSE OR ORIGIN

ix. It has perm anence – once it attaches, whether used or not, it continues and may be used anytime Perpetual: exists as long as property exists, unless it is extinguished.

i. Legal: created by law, whether for public use or for the interest of private persons. Once requisites are satisfied, the owner of the dominant estate may ask the Court to declare that an easement is created. Example: Natural drainage of waters, Abutment of land, Aqueduct, etc. ii. Voluntary: Created by the will of the owners of the estate through contract, last will or donation.

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Note: There is no such thing as a JUDICIAL EASEMENT. The Courts cannot create easements, they can only declare the existence of one, if it exists by virtue of the law or will of the parties. [Castro v. Monsod, February 2, 2011]

CIVIL LAW

Note: Prescription starts to run from service of notarial prohibition.

C. GENERAL RULES i. Nulli res sua servi: No one can have a servitude over one’s own property. ii. Servitus in faciendo consistere nequit: A servitude cannot consist in doing.

B.3. AS TO ITS EXERCISE [NCC 615] i. Continuous: Use is or may be incessant, without the intervention of any act of man ii. Discontinuous: Used at intervals, and dependent upon the acts of man. Note: This classification is important in determining prescription: only continuous and apparent easements can be created by prescription. B.4. AS INDICATION OF ITS EXISTENCE [NCC 615] i. Apparent: Made known and continually kept in view by external signs that reveal the use and enjoyment of the same. ii. Non-apparent: No external indication of their existence. Note: Also important for purposes of prescription.

Although some easements seem to impose a positive prestation upon the owner of the servient estate, in reality, the primary obligation is still negative. Illustration: Under Article 680: the owner of a tree whose branches extend over to a neighboring property is required to cut off the extended branches, but the real essence of the easement is the obligation NOT TO ALLOW the branches of the tree to extend beyond the land. iii. Servitus servitutes esse non potest: There can be no servitude over another servitude. iv. A servitude must be exercised civiliter – in a way least burdensome to the owner of the servient estate. v. A servitude must have a perpetual cause

D. RELEVANCE OF CLASSIFICATIONS B.5. BY THE OBJECT OR OBLIGATION IMPOSED [NCC 616]

D.1. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY PRESCRIPTION

i. Positive: Imposes upon the owner of the servient estate the obligation of allowing something to be done, or extraordinarily or doing it himself.

Continuous and apparent easements may be acquired by prescription of 10 years [NCC. 620]

ii. Negative: Prohibits the owner of the servient estate from doing something that he could lawfully do if the easement did not exist. e.g. Negative Easement of Light and View: An opening is made on the wall of the dominant estate, and the easement consists of imposing upon the servient estate the obligation to not build anything that would obstruct the light.

N.B.: No need for good faith and just title. D.2. DETERMINES WHAT EASEMENTS CAN BE ACQUIRED BY TITLE Continuous nonapparent easements, and discontinuous ones, whether apparent or not, may be acquired only by virtue of a title. [NCC. 622]

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The existence of an apparent sign of easement between two estates, established or maintained by the owner of both, shall be considered, as a title in order that the easement may continue actively and passively. Unless: At the time the ownership of the two estates is divided, the contrary should be provided in the title of conveyance of either of them, or the apparent sign should be removed before the execution of the deed. This provision shall also apply in case of the division of a thing owned in common by two or more persons. [NCC. 624] D.3. DETERMINES HOW TO COMPUTE THE PRESCRIPTIVE PERIOD [NCC 621]

CIVIL LAW

(2) Continuous non-apparent easements, and discontinuous ones, whether apparent or not, are acquired only by virtue of a title. [NCC 622] (3) The absence of a document or proof showing the origin of an easement which cannot be acquired by prescription may be cured by a deed of recognition by the owner of the servient estate or by a final judgment. [NCC 623] (4) The existence of an apparent sign of easement between two estates, established or maintained by the owner of both, shall be considered as a title in order that the easement may continue actively and passively. Unless: at the time the ownership of either of the two estates is transferred, the contrary should be provided in the title of conveyance of either of them, or the sign aforesaid should be removed before the execution of the deed. This provision shall also apply in case of the division of a thing owned in common by two or more persons. [NCC 624]

In positive easements, from the day on which the owner of the dominant estate, or the person who may have made use of the easement, commenced to exercise it upon the servient estate. In negative easements, from the day on which the owner of the dominant estate forbade, by an instrument acknowledged before a notary public, the owner of the servient estate from executing an act which would be lawful without the easement. D.4. DETERMINES HOW EASEMENT IS LOST BY PRESCRIPTION [NCC 631 (2)]

(5) If the easement has been acquired but no proof of existence of easement available, and the easement is one that cannot be acquired by prescription, the defect may be cured by: (a) Deed of recognition by owner of servient estate: By an affidavit or a formal deed acknowledging the servitude; or

By nonuser for 10 years: With respect to discontinuous easements, this period shall be computed from the day on which they ceased to be used.

(b) By final judgm ent: Owner of the dominant estate must file a case in Court to have the easement declared by proving its existence through other evidence.

With respect to continuous easements, from the day on which an act contrary to the same took place.

(6) The existence of an apparent sign is considered as title.

E. CREATION E.1. BY TITLE OR BY EQUIVALENT TO A TITLE

SOMETHING

(1) Continuous and apparent easements may be acquired by virtue of a title. [NCC 620] PAGE 145 OF 574

Illustration: The presence of 4 windows was considered an apparent sign that created a negative easement of light and view (altius non tollendi) i.e. not to build a structure that will cover the windows. [Amor v. Florentino (1943)].

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E.2. BY LAW (LEGAL EASEMENTS) Easements imposed by law have for their object either public use or the interest of private persons. [NCC 634] These easements may be modified by agreement of the interested parties, whenever the law does not prohibit it or no injury is suffered by a third person. [NCC 636] E.3. BY WILL OF THE (VOLUNTARY EASEMENTS)

OWNERS

Every owner of a tenement or a piece of land may establish the easements that he may deem suitable and best provided he does not contravene the laws, public policy, or public order. [NCC 688] Note: If an owner constitutes an easement over his own property and makes such easement available to the general public, said owner may not arbitrarily discriminate against certain persons by not letting them use the easement. [Negros Sugar Company v Hidalgo (1936)] E.4. BY PRESCRIPTION Continuous and apparent easements may be acquired by prescription of 10 years. [NCC 620] Requisites: (1) The easement must be continuous and apparent; (2) The easement must have been used for 10 years; and (3) There is no need for good faith or just title. N.B. Example of a continuous and apparent easement is of light and view, as opposed to a right of way which is discontinuous but apparent, and thus cannot be acquired by prescription.

CIVIL LAW

Note: Mere passage which was permitted and is under an implied license cannot be the basis of prescription. [Archbishop of Manila v Roxas (1912)]

F. LEGAL EASEMENTS F.1. LAW EASEMENTS

GOVERNING

LEGAL

i. For public easem ents Special laws and regulations relating thereto. (ex: PD 1067 and PD 705) By the provisions of Chapter 2, Title VII, Book II, NCC. ii. For private legal easem ents By agreement of the interested parties whenever the law does not prohibit it and no injury is suffered by a 3rd person. By the provisions of Chapter 2, title VII, Book II.

G. VOLUNTARY EASEMENTS Every owner of a tenement or piece of land may establish thereon the easements which he may deem suitable, and in the manner and form which he may deem best. [NCC 688] The owner of a thing, the usufruct of which belongs to another, may impose, without the consent of the usufructuary, any servitudes which will not injure the right of usufruct. [NCC 689] Whenever the naked ownership belongs to one person and the beneficial ownership to another, no perpetual voluntary easement may be established thereon without the consent of both owners. [NCC 690] Consent of all co-owners is required to impose an easement on an undivided tenement. [NCC 691]

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H. RIGHTS AND OBLIGATIONS OF OWNERS OF DOMINANT AND SERVIENT ESTATES

CIVIL LAW

the easement can be used for all the needs of the dominant estate.

H.1. RIGHTS OF DOMINANT ESTATE OWNER (1) To use the easement and exercise all rights necessary for it [NCC 625, 626] (2) The owner of the dominant estate is granted the right to use the principal easement, and all accessory servitudes.

(2) To notify the owner of the servient estate before making repairs and to make repairs in a manner least inconvenient to the servient estate [NCC 627(2)] (3) Not to alter the easement or render it more burdensome The owner of the dominant estate may make repairs at his expense, but he cannot alter the easement or make it more burdensome.[NCC 627]

Example: Easement of drawing water carries with it the easement of right of way to the place where water is drawn.

Making the easement more burdensome means widening the easement. [Valderrama v. North Negros Sugar Co. (1925)]

Lim itation: Only for the original immovable and the original purpose. (3) To make, at his own expense, on the servient estate any works necessary for the use and preservation of the servitude, but without altering it or rendering it more burdensome.

(4) To contribute to expenses of works necessary for use and preservation of servitude, if there are several dominant estates, unless he renounces his interest [NCC 628]

(4) In a right of way, to ask for change in width of easement sufficient for needs [NCC 651]

The contribution is in proportion to the benefits which each may derive from the work.

(5) To renounce totally the easement, if he desires to be exempt from contributing to the expenses.

Anyone who does not wish to contribute may exempt himself by renouncing the easement for the benefit of the others.

The needs of the dominant property ultimately determine the width of the passage. And these needs may vary from time to time. [Encarnacion v. Court of Appeals] H.2. OBLIGATIONS ESTATE OWNER

OF

If the owner of the servient estate should make use of the easement in any manner whatsoever, he shall also be obliged to contribute to the expenses in the proportion stated, saving an agreement to the contrary.

DOMINANT

(1) To use the easement for the benefit of immovable and in the manner originally established [NCC 626]

(5) To do at his expense all necessary works for the use and preservation of the easement [NCC 627]

If established for a particular purpose, the easement cannot be used for a different one. However, if established in a general way, without specific purpose,

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The necessity of the works determines extent of such works.

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H.3. RIGHTS OF THE SERVIENT ESTATE OWNER

H.4. OBLIGATIONS OF SERVIENT ESTATE OWNER

(1) To retain ownership and use of his property

(1) Not to impair the use of the easement [NCC 629(1)]

The owner of the servient estate retains the ownership of the portion on which the easement is established, and may use the same in such a manner as not to affect the exercise of the easement. [NCC 630]

(2) To contribute proportionately to expenses if he uses the easement [NCC 628(2)]

The servient owner must respect the use of the servitude, but retains ownership and use of the same, in a manner not affecting the easement. (2) To change the place and manner of the use of the easement [NCC 629] General rule: The owner of the servient estate cannot impair the use of the servitude. Exceptions: By reason of either: (a) The place/manner originally assigned, the use of such easement has become VERY INCONVENIENT to the owner; (b) The easement should prevent him from making any important works, repairs or improvements thereon;

Unless there is an agreement to the contrary (3) To pay for the expenses incurred for the change of location or form of the easement

I. EXTINGUISHMENT OF EASEMENTS (1) By merger in the same person of the ownership of the dominant and servient estates; (2) By non-user for ten years; (3) When either or both of the estates fall into such condition that the easement cannot be used; (4) By the expiration of the term or the fulfillment of the condition, if the easement is temporary or conditional; (5) By the renunciation of the owner of the dominant estate; or

The change must be done at his expense;

(6) By the redemption agreed upon between the owners of the dominant and servient estates.

He offers another place or manner equally convenient; and

I.1. MERGER

The change is done in such a way that no injury is caused to the dominant owner or to those who may have a right to use the easement. (3) To use the easement May use the easement but must also contribute proportionately to the expenses.

Must be absolute, perfect and definite, and not merely temporary. Absolute: Ownership of the property must be absolute, thus not applicable to lease, usufruct, etc. Perfect: Merger must not be subject to a condition. If the merger is temporary, there is at most a suspension of the easement, but no extinguishment.

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I.2. BY A NON-USER FOR 10 YEARS Owner of dominant estate does not exercise right over easement. This is inaction, renunciation.

and

not

outright

CIVIL LAW

I.5. RENUNCIATION OF THE OWNER OF THE DOMINANT ESTATE Must be specific, clear, (distinguished from non-user).

express

This is due to the voluntary abstention by the dominant owner, and not due to a fortuitous event.

I.6. OTHER CAUSES NOT MENTION IN NCC 631

Computation of the period:

(2) Termination of the right of grantor of the voluntary easement;

Discontinuous easem ents: counted from the day they ceased to be used. Continuous easements: counted from the day an act adverse to the exercise of the easement took place. E.g. in an easement of light and view, the erection of works obstructing the servitude would commence the period of prescription.

(1) Annulment and rescission of the title constituting the voluntary easement;

(3) Abandonment of the servient estate; (4) Owner of the servient estate gives up ownership of the easement (e.g. the strip of land where the right of way is constituted) in favor of the dominant estate. The easement is extinguished because ownership is transferred to the dominant owner, who now owns both properties.

The use by a co-owner of the dominant estate bars prescription with respect to the others. Note: Non-user cannot extinguish servitudes not yet exercised. Extinguishment by non-use only applies to easements which being in use are later abandoned. [Francisco v Paez (1930)]

(5) Eminent domain; or (6) The government’s power to expropriate property for public use, subject to the payment of just compensation. (7) Special cause for extinction of legal rights of way: if right of way no longer necessary. [NCC 655]

I.3. BY IMPOSSIBILITY OF USE Impossibility referred to must render the entire easement unusable for all time. Impossibility of using the easement due to the condition of the tenements (e.g. flooding) only suspends the servitude until it can be used again. Except: If the suspension exceeds 10 years, the easement is deemed extinguished by non-user. I.4. EXPIRATION OF THE TERM OR FULFILLMENT OF RESOLUTORY CONDITION Applicable only to voluntary easements.

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If the right of way granted to a surrounded estate ceases to be necessary because its owner has joined it to another abutting on a public road, the owner of the servient estate may demand that the easement be extinguished, returning what he may have received by way of indemnity. The interest on the indemnity shall be deemed to be in payment of rent for the use of the easement. The same rule shall be applied in case a new road is opened giving access to the isolated estate.

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In both cases, the public highway must substantially meet the needs of the dominant estate in order that the easement may be extinguished. Right of way necessary:

ceases

to

be

(a) Owner of the dominant estate has joined to another abutting on a public road. (b) A new road is opened giving access to the isolated estate. Requisite: the public highway must substantially meet the needs of the dominant estate in order that the easement may be extinguished Owner of the servient estate may demand that the easement be extinguished. Owner of the servient estate must return indemnity he received (value of the land)

J. KINDS OF PRIVATE LEGAL EASEMENTS

(2) Riparian banks [NCC 638] (3) Dam [NCC 639] (4) Drawing water and watering animals [NCC 640-641] (6) Stop lock or sluice gate [NCC 647] (7) Right of way [NCC 649-657] (8) Party wall [NCC 658-666] (9) Light and view [NCC 667-681] (10) Drainage of buildings [NCC 674] (11) Intermediate distances [NCC 677-681] (12) Nuisance [NCC 682-683]

(13) Lateral and subjacent support [NCC 684-687] J.1. THOSE ESTABLISHED FOR THE USE OF WATERS OR RELATING TO WATERS i. Natural Drainage Lower estates are obliged to receive the waters which naturally and without the intervention of man descend from the higher estates (as well as the stones or earth which they carry with them). The owner of the lower estate cannot do any works that will impede this easement. The owner of the higher estate cannot do any works that will increase the burden. ii. Riparian Banks The banks of rivers and streams are subject throughout their entire length and within a zone of 3 meters for urban areas, 20 meters for agricultural areas and 40 meters for forest areas (PD 1067, Water Code as amended by PD 1067) along their margins, to the easement of public use in the general interest of navigation, floatage, fishing, recreation and salvage. Estates adjoining the banks of navigable or floatable rivers are subject to the easement of towpath for the exclusiveservice of river navigation and floatage.

(1) Natural drainage of water [NCC 637]

(5) Aqueduct [NCC 642-646]

CIVIL LAW

If it be necessary to occupy lands of private ownership, the proper indemnity shall first be paid. iii. Dam Whenever for the diversion of water it should be necessary to build a dam, and the person who is to construct it is not the owner of the banks, or lands which must support it, he may establish the easement of abutment of a dam, after payment of the proper indemnity.

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iv. Drawing Animals

PROPERTY

W ater

and

W atering

Compulsory easements for drawing water or for watering animals can be imposed only for reasons of public use in favor of a town or village, after payment of the proper indemnity. Easements for drawing water and for watering animals carry with them the obligation of the owners of the servient estates to allow passage to persons and animals to the place where such easements are to be used, and the indemnity shall include this service. The width of the easement must not exceed 10 meters. v. Aqueduct Any person who may wish to use upon his own estate any water of which he can dispose shall have the right to make it flow through the intervening estates, with the obligation to indemnify their owners, as well as the owners of the lower estates upon which the waters may filter or descend. Person desiring to make use of this right is obliged to: (1) To prove that he can dispose of the water and that it is sufficient for the use for which it is intended; (2) To show that the proposed right of way is the most convenient and the least onerous to third persons; and

CIVIL LAW

This easement is considered as continuous and apparent, even though the flow of the water may not be continuous, or its use depends upon the needs of the dominant estate, or upon a schedule of alternate days or hours. Therefore, it can be created by prescription. N.B.: In the appropriation of water, there is a need to apply for water rights. vi. Stop Lock or Sluice Gate The construction of a stop lock or sluice gate in the bed of the stream from which the water is to be taken, for the purpose of improving an estate. Such person may demand that the owners of the banks permit its construction, after payment of damages, including those caused by the new easement to such owners and to the other irrigators. J.2. RIGHT OF WAY W ho may demand (1) The owner of the dominant estate; or (2) Any person with the real right to cultivate or use the dominant estate e.g. a usufructuary, a de jure possessor. Note: a lessee cannot demand such easement, because the lessor is the one bound to maintain him in the enjoyment of the property. Requisites:

(3) To indemnify the owner of the servient estate in the manner determined by the laws and regulations

(1) The dominant estate is surrounded by other immovables owned by other persons;

Easement of aqueduct for private interest cannot be imposed on buildings, courtyards, annexes, or outhouses, or on orchards or gardens already existing.

(2) There must absolutely be no access i.e. means of entrance or exit/egress to a public highway;

This easement does not prevent the owner of the servient estate from closing or fencing it, or from building over the aqueduct in such manner as not to cause the latter any damage, or render necessary repairs and cleanings impossible.

(3) Even if there is access, it is difficult or dangerous to use, or grossly insufficient; (4) Mere inconvenience in the use of an outlet does not render the easement a necessity;

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(5) An adequate outlet is one that is sufficient for the purpose and needs of the dominant owner, and can be established at a reasonable expense; (6) Does not necessarily have to be by land – an outlet through a navigable river or a lake or the sea if suitable to the needs of the tenement is sufficient; (7) The isolation of the immovable is NOT due to the dominant owner’s own acts e.g. if he constructs building to others obstructing the old way; and (8) There is payment of indemnity; If right of way is permanent and continuous for the needs of the dominant estate = value of the land + amount of damage caused to the servient estate; If right of way is limited to necessary passage for cultivation of the estate and for gathering crops, without permanent way = damage caused by encumbrance.

CIVIL LAW

extinguish the said easement, being voluntary and not compulsory. The free ingress and egress along Mangyan Road created by the voluntary agreement between the parties is thus legally demandable with the corresponding duty on the servient estate not to obstruct the same. [La Vista Association v. CA] The width of the easement of right of way shall be that which is sufficient for the needs of the dominant estate, and may accordingly be changed from time to time. [NCC651] Obligations In Permanent And Temporary Easements Of Right Of W ay Perm anent right of way

Tem porary right of way

Indemnity Consists of the damages and the value of the land.

Rules for establishing Right of W ay:

Consists of the damages only.

Necessary repairs

(1) Must be established at the point least prejudicial to the servient estate. [NCC 650] (2) Insofar as consistent with the first rule, where the distance from the dominant estate to a public highway is shortest. The criterion of least prejudice to the servient estate must prevail over the criterion of shortest distance although this is a matter of judicial appreciation. While shortest distance may ordinarily imply least prejudice, it is not always so as when there are permanent structures obstructing the shortest distance; while on the other hand, the longest distance may be free of obstructions and the easiest or most convenient to pass through. [Quimen v. CA (1996)]

Dominant owner to spend on such.

Servient owner to spend on such.

Share in taxes The dominant owner Servient owner to shall reimburse a spend on such. proportionate share of taxes to the proprietor of the servient estate.

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Rules on Indemnity for Estates Enclosed Through a Sale, Exchange, Partition or D onation. Sale, exchange or partition

CIVIL LAW

(2) Right of way to raise on another’s land scaffolding or other objects necessary for the work. If it be indispensable for the construction, repair, improvement, alteration or beautification of a building, to carry materials through the estate of another, or to raise therein scaffolding or other objects necessary for the work, the owner of such estate shall be obliged to permit the act, after receiving payment of the proper indemnity for the damage caused him. [NCC656]

Donation

Buyer, grantee or donee as dom inant owners The buyer or grantee The donee shall pay shall grant the right the donor indemnity. of way without indemnity. Seller, grantor or donor as dom inant owners The seller or grantor The donee shall shall pay indemnity. grant the right of way without indemnity.

(3) Right of way for the passage of livestock known as animal path, animal trail, watering places, resting places, animal folds. [NCC 657] Easements of the right of way for the passage of livestock known as animal path, animal trail or any other, and those for watering places, resting places and animal folds, shall be governed by the ordinances and regulations relating thereto, and, in the absence thereof, by the usages and customs of the place.

Extinguishment as Legal Easem ent of Right of W ay [NCC 655] (1) The owner has joined the dominant estate to another abutting the public road. (2) A new road is opened giving access to the isolated estate.

Without prejudice to rights legally acquired, the animal path shall not exceed in any case the width of 75 meters, and the animal trail that of 37 meters and 50 centimeters.

Notes on extinguishment (1) Extinguishment is not automatic. The owner of the servient estate must ask for such extinguishment.

Whenever it is necessary to establish a compulsory easement of the right of way or for a watering place for animals, the provisions of this Section and those of Articles 640 and 641 shall be observed. In this case the width shall not exceed 10 meters

(2) Indemnity paid to the servient owner must be returned without interest. Interest on account of indemnity is deemed to be rent for use of easement. Special Rights of W ay (1) Right of way to carry materials for the construction, repair, improvement, alteration or beautification of a building through the estate of another.

J.3. PARTY WALL Refers to all those mass of rights and obligations emanating from the existence and common enjoyment of wall, fence,

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enclosures or hedges, by the owners of adjacent buildings and estates separated by such objects.

W hen Existence Of Easement Party W all Is Presumed

Nature

(2) In dividing walls of gardens or yards situated in cities, or towns, or in rural communities.

A common wall which separates two estates, built by common agreement at the dividing line such that it occupies a portion of both estates on equal parts. A party wall is a special form of coownership (a kind of compulsory coownership). Each owner owns part of the wall but it cannot be separated from the other portions belonging to the others. A party wall has a special characteristic that makes it more of an easement as it is called by law. An owner may use a party wall to the extent of the ½ portion on his property. Co-Ownership

Party W all

Before division of shares, a co-owner cannot point to any definite portion of the property as belonging to him.

Shares of the coowners cannot be physically segregated but they can be physically identified.

None of the coowners may use the community property for his exclusive benefit because he would be invading the rights of the others.

There is no such limitation

In a co-ownership, partial renunciation is allowed.

Any owner may free himself from contributing to the cost of repairs and construction of a party wall by renouncing all his rights thereto.

Of

(1) In dividing walls of adjoining buildings up to the point of common elevation.

(3) In fences, walls and live hedges dividing rural lands. Note: A title or an exterior sign, or any other proof showing that the entire wall in controversy belongs exclusively to one of the adjoining property owners may rebut these presumptions. W hen Existence Of An Exterior Sign Is Presumed [NCC 660] (1) Whenever in the dividing wall of buildings there is a window or opening. (2) Whenever one side is straight and plumb on all its facement, and on the other, it has similar conditions on the upper part, but the lower part slants or projects outward. (3) Whenever the entire wall is built within the boundaries of one of the estates. (4) Whenever the dividing wall bears the burden of the binding beams, floors and roof frame of one of the buildings, but not those of the others. (5) Whenever the dividing wall between courtyards, gardens, and tenements is constructed in such a way that the coping sheds the water upon only one of the estates. (6) Whenever the dividing wall, being built of masonry, has stepping stones, which at certain intervals project from the surface on one side only, but not on the other. (7) Whenever lands enclosed by fences or live hedges adjoin others that are not enclosed.

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Note: The deposit of earth or debris on one side alone is an exterior sign that the owner of that side is the owner of the ditch or drain. The presumption is an addition to those enumerated in NCC 660.

CIVIL LAW

Obligations Of Owners Of A Party W all (1) To contribute proportionately to the repair and maintenance of the party wall unless he renounces his partownership.

Right Of Owners Of A Party W all

This includes the renunciation of the share in the wall and the land

i. Generally, part-owners m ay use the wall in proportion to their respective interests, provided that:

He cannot renounce his part if his building is being supported by the party wall

(1) The right to use by the other party is not interfered with;

(2) If he raises the height of the wall, he must:

(2) The consent by the other owner is needed if a party wants to open a window; and

(a) Bear the cost of maintenance of the additions;

(3) The condition of the determined by experts.

building

(b) Bear the cost of construction, if the wall cannot support the additional height;

is

ii. To increase the height of the wall.

(c) Give additional land, if necessary to thicken the wall;

(1) He does this at his expense, including the thickening of the wall on his land.

(d) Pay for damages, if necessary, even if temporary; and

(2) He shall indemnify the other party for any damages.

(e) Bear the increased expenses for preservation

iii. To acquire a half-interest in any increase in height or thickness of the wall, paying a proportionate share in the cost of the work and the value of the land covered. Note that the value of the land must be appraised at the time of acquisition. iv. To renounce his part ownership of a party wall if he desires to dem olish his building supported by the wall. He shall bear all the expenses of repairs and work necessary to prevent any damage which the demolition may cause to the party wall.

J.4. EASEMENT OF LIGHT AND VIEW Definition Easement of light (jus luminum ) is the right to admit light from the neighboring estate by virtue of the opening of a window or the making of certain openings. Easement of view (jus prospectus) is the right to make openings or windows, to enjoy the view through the estate of another and the power to prevent all constructions or works which would obstruct such view or make the same difficult. Necessarily includes the easement of light. It is possible to have light only without a view.

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Note: If an owner has an easement of view, he also has an easement of light, but not vice versa.

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Rules And Restrictions On Openings And Structures i. Openings for light When the opening is 2 meters or more away from another’s tenement, i.e. the boundary line:

Nature (1) Positive: Opening a window through a party wall

(a) An owner may build any kind of opening without restriction.

When the opening is made through the wall of another

When the wall is contiguous (less than 2 meters) to another’s tenement:

When a part owner of a party wall opens a window therein, such act implies the exercise of the right of ownership by the use of the entire thickness of the wall.

(b) Openings are made at the height of the ceiling joists (horizontal beams) or immediately under the ceiling;

The easement is created only after the lapse of the prescriptive period. (2) Negative: Formal prohibition upon the owner of the adjoining land or tenement. Formal means that the prohibition has been notarized [Cortes v Yu-Tibo (1903)]

(c) Size: 30 cm square; (d) With iron grating imbedded in the wall; (e) With a wire screen. ii. Openings for view

When a person opens a window on his own building, he is exercising his right of ownership on his property, which does not establish an easement. Coexistent is the right of the owner of the adjacent property to build or plant on his own land, even if such structures or planting cover the window. If the adjacent owner does not build structures to obstruct the window, such is considered mere tolerance and NOT a waiver of the right to build. An easement is created only when the owner opens up a window and subsequently prohibits or restrains the adjacent owner from doing anything that may tend to cut off or interrupt the light and the 10-year prescriptive period has lapsed by a notarial prohibition.

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(a) The following structures cannot be built without following the prescribed distances: Window, apertures, balconies and other projections with a direct view upon or towards an adjoining land must have a distance of 2 meters between the wall and the contiguous property. (b) For structures with a side or oblique view (at an angle from the boundary line), there should be a distance of 60 centimeters. Measured from: (i) The outer line of the wall if the openings do not project. (ii) The outer line of the openings if they project. (iii) The dividing line between the two properties in cases of oblique views.

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Effect If Distances Are Not Com plied W ith (1) Easement is prescription

not

acquired

by

(2) Windows are considered unlawful openings and may be ordered by the Court to be closed. (3) Even if the adjoining owner does not object to the construction of such structures at first, he cannot be held to be in estoppel, unless the 10-year period of acquisitive prescription has passed. Note: In buildings separated by a public way or alley, not less than 3 meters wide, the distances required (2 m, 60 cm) do not apply.

CIVIL LAW

J.5. DRAINAGE OF BUILDINGS The owner of a building is obliged to construct its roof or covering in such manner that the rain water shall fall on his own land or on a street or public place, and NOT on the land of his neighbor, even though the adjacent land may belong to two or more persons, one of whom is the owner of the roof. Even if it should fall on his own land, the owner shall be obliged to collect the water in such a way as not to cause damage to the adjacent land or tenement. The true easement is Article 675 where the adjacent estate has the obligation of receiving the rain water falling from a neighboring roof and giving it an outlet on his own lot so as not to cause damage to the dominant estate.

If an easement is acquired to have direct views, balconies or belvederes, the owner of the servient estate must not build at less than 3 meters from the boundary line of the two tenements.

Easement of drainage if buildings [NCC 676] – to give outlet to rain water collected

The distances may be stipulated by the parties, but should not be less than what is prescribed by the law (2 meters and 60 cm).

Prohibiting the contraction and plantings near fortified places or fortresses without complying with special laws, ordinances and regulations relative hereto. NCC 677, in effect, establishes an easement in favor of the State. The general prohibition is dictated by the demands of national security.

Notes on Easem ent

the

Acquisition

of

the

Period of acquisitive prescription depends upon whether the easement of light and view is positive or negative, and only starts to run from the time the owner asserting the servitude has forbidden the owner of the adjoining tenement from doing something he could lawfully do. THUS, although the action to compel the closure might have prescribed because the easement has been created by prescription, the owner of the adjoining estate may still build on his own land a structure that might obstruct the view for 10 years, thus extinguishing it by non-user.

J.6. INTERMEDIATE DISTANCES

The following must comply with the regulations or customs of the place: (1) Construction of aqueduct, well, sewer, etc. (NCC 678) (2) Constructions, which by reason of their nature or products are dangerous or noxious. Planting of trees (NCC 679) No trees shall be planted near a tenement or piece of land belonging to another except at the distance authorized by the ordinances or customs of the place.

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In the absence of regulations: (1) At least 2 meters from the dividing line of the estates if tall trees are planted. (2) At least 50 centimeters if shrubs or small trees are planted. In case of violation, a landowner shall have the right to demand the uprooting of the plant even if it has grown spontaneously.

CIVIL LAW

X. Nuisance NCC 694. A nuisance is any act, omission, establishment, condition of property, or anything else which: Injures or endangers the health or safety of others; or Annoys or offends the senses; or Shocks, defies or disregards decency or morality; or

Branches, Roots and Fruits If the branches of any tree should extend over a neighboring estate, tenement, garden or yard, the owner of the latter shall have the right to demand that they be cut off.

Obstructs or interferes with free passage of any public highway or street, or any body of water; or Hinders or impairs the use of property.

If it be the roots of a neighboring tree, which should penetrate into the land of another, the latter may cut them off himself within his property.

Note: To constitute a nuisance there must be an arbitrary or abusive use of property or disregard of commonly accepted standards set by society.

Fruits naturally falling upon adjacent land belong to the owner of said land.

A municipal body has the power to declare and abate nuisances. BUT it has no power to find as fact that a particular thing is a nuisance. The determination of whether or not a nuisance exists is a judicial function, because to declare something a nuisance is to deprive its use. [Iloilo Cold Storage v Mun. Council of Iloilo (1913)]

J.7. LATERAL AND SUBJACENT SUPPORT The proprietor is prohibited from making dangerous excavations upon his land as to deprive any adjacent land or building of sufficient lateral or subjacent support. Easement of lateral and subjacent support is deemed essential to the stability of buildings.

A. NUISANCE V. TRESPASS

Support is lateral when a vertical plane divides the supported and supporting lands.

Use of one’s own Direct infringement property in such a of another’s right of manner as to cause property. injury to the property or right or interest of another, and generally results from the commission of an act beyond the limits of the property affected.

Support is subjacent when the supported land is above the supporting land.

Nuisance

Injury is consequential.

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Trespass

Injury is immediate.

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B. NUISANCE V. NEGLIGENCE Nuisance Whether it was unreasonable for the defendant to act as he did in view of the threatened danger or harm to one in plaintiff’s position.

Per se

Negligence

The wrong is Proof of the act and established by proof its consequences are of the mere act. It necessary. becomes a nuisance as a matter of law.

Whether the defendant’s use of his property was unreasonable as to plaintiff, without regard to foreseeability of injury.

Liability for the Liability is based on a resulting injury to want of proper care others regardless of the degree of care or skill exercised to avoid such injury. Principles ordinarily apply where the cause of action is for continuing harm caused by continuing or recurrent acts which cause discomfort or annoyance to plaintiff in the use of his property.

Per accidens

Principles ordinarily apply where the cause of action is for harm resulting from one act which created an unreasonable risk of injury.

Nuisance under any and all circumstances, because it constitutes a direct menace to public health or safety, and, for that reason, may be abated summarily under the undefined law of necessity

That which depends upon certain conditions and circumstances, and its existence being a question of fact, it cannot be abated without due hearing thereon in a tribunal authorized to decide whether such a thing does in law constitute a nuisance. [Iloilo Ice and Cold Storage v. Municipal Council of Iloilo, 24 Phil 471; Monteverde v. Generoso, 52 Phil, 123, 127]

C.2. ACCORDING TO INJURIOUS EFFECTS

C. CLASSES C.1. ACCORDING TO NATURE i. Nuisance per se or at law An act, occupation or structure which is a nuisance at all times and under any circumstances, regardless of location or surroundings.

SCOPE

OF

Test: not the number of persons annoyed but the possibility of annoyance to the public by the invasion of its rights – the fact that it is in a public place and annoying to all who come within its sphere. i. Public

ii. Nuisance per accidens or in fact One that becomes a nuisance by reason of circumstances and surroundings. It is not a nuisance by its nature but it may become so by reason of the locality, surrounding, or the manner in which it is conducted, managed, etc.

The doing of or the failure to do something that injuriously affects the safety, health or morals of the public. It causes hurt, inconvenience or injury to the public generally, or to such part of the public as necessarily comes in contact with it.

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ii. Private One which violates only private rights and produces damages to but one or a few specific persons.

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There must be a breach of some duty on the part of the person sought to be held liable for damages resulting from a nuisance before an action will lie against him. No one is to be held liable for a nuisance which he cannot himself physically abate without legal action against another for that purpose.

Mixed

D. 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. [Jarco Marketing Corp. v. CA (1999)] Basis of liability – The attractiveness is an invitation to children. Safeguards to prevent danger must therefore be set up. Note: A swimming pool or water tank is not an attractive nuisance, for while it is attractive, it cannot be a nuisance, being merely an imitation of the work of nature. [Hidalgo Enterprises v. Balandan (1952)]

Where several persons, acting independently, cause damage by acts which constitute a nuisance, each is liable for the damage which he has caused or for his proportionate share of the entire damage. E.3. LIABILITY OF TRANSFEREES The grantee of land upon which there exists a nuisance created by his predecessors in title is not responsible therefore merely because he becomes the owner of the premises, or merely because he permits it to remain. He shall be liable if he knowingly continues the nuisance. Generally, he is not liable for continuing it in its original form, unless he has been notified of its existence and requested to remove it, or has actual knowledge that it is a nuisance and injurious to the rights of others. If the transferee cannot physically abate the nuisance without legal action against another person, then he shall not be liable for such nuisance.

E. LIABILITY IN CASE OF NUISANCE E.1 WHO ARE LIABLE Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefor in the same manner as the one who created it. [NCC 696] E.2. LIABILITY NUISANCE

OF

CREATOR

OF

He who creates a nuisance is liable for the resulting damages and his liability continues as long as the nuisance continues.

E.4. NATURE OF LIABILITY All persons who participate in the creation or maintenance of a nuisance are jointly and severally liable for the injury done. If 2 or more persons who create or maintain the nuisance act entirely independent of one another, and without any community of interest, concert of action, or common design, each is liable only so far as his acts contribute to the injury. For solidary liability, there must be some joint or concurrent act or community of action or duty, or the several wrongful acts

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done at several times must have concurred in their effects as one single act to produce the injury complained of.

(2) It must be reasonably and efficiently exercised

E.5. RIGHT TO RECOVER DAMAGES

(4) No more injury must be done to the property or rights of individuals than is necessary to accomplish the abatement.

The abatement of a nuisance does not preclude the right of any person injured to recover damages for its past existence. [NCC 697] Abatement and damages are cumulative remedies.

(3) Means employed must not be unduly oppressive on individuals, and

(5) No right to compensation if property taken or destroyed is a nuisance. Action for Abatement

No Prescription The action to abate a public or private nuisance is NOT extinguished by prescription. [NCC 1143(2)]

F. REGULATION OF NUISANCES F.1. PUBLIC NUISANCE NCC 695. Nuisance is either public or private. A public nuisance affects a community or neighborhood or any considerable number of persons, although the extent of the annoyance, danger or damage upon individuals may be unequal. A private nuisance is one that is not included in the foregoing definition. Public Nuisance: That which affects a community or neighborhood or any considerable number of persons, although the extent of annoyance, danger or damage upon individuals may be unequal [NCC 695] Remedies (1) The remedies against a public nuisance are: (a) Prosecution under the Penal Code or any local ordinance;

The district health officer shall take care that one or all of the remedies against a public nuisance are availed of. If a civil action is brought by reason of the maintenance of a public nuisance, such action shall be commenced by the city or municipal mayor. The district health officer shall determine whether or not abatement, without judicial proceedings, is the best remedy against a public nuisance. A private person may file an action on account of a public nuisance if it is especially injurious to him. General rule: An individual has no right of action against a public nuisance. The abatement proceedings must be instituted in the name of the State or its representatives. Exception: An individual who has suffered some special damage different from that sustained by the general public may maintain a suit in equity for an injunction to abate it, or an action for damages which he has sustained. The action becomes a tort if an individual has suffered particular harm, in which case the nuisance is treated as a private nuisance with respect to such person.

(b) A civil action; or (c) Extrajudicial abatement.

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Requisites of the right of a private individual to abate a public nuisance (1) That demand be first made upon the owner or possessor of the property to abate the nuisance; (2) That such demand has been rejected; (3) That the abatement be approved by the district health officer and executed with the assistance of the local police; and (4) That the value of the destruction does not exceed P3000.

CIVIL LAW

Remedies (1) The remedies against a private nuisance are: (a) A civil action; or (b) Extrajudicial abatement. (2) The procedure for extrajudicial abatement of a public nuisance by a private person will also be followed. (3) The person extrajudicially abating a nuisance liable for damages if: (4) If he causes unnecessary injury; or

Rules

(5) If an alleged nuisance is later declared by the courts to be not a real nuisance.

(1) The right must be exercised only in cases of urgent or extreme necessity. The thing alleged to be a nuisance must be existing at the time that it was alleged to be a nuisance.

Remedies of the property owner

(2) A summary abatement must be resorted to within a reasonable time after knowledge of the nuisance is acquired or should have been acquired by the person entitled to abate. (3) The person who has the right to abate must give reasonable notice of his intention to do so, and allow thereafter a reasonable time to enable the other to abate the nuisance himself. (4) The means employed must be reasonable and for any unnecessary damage or force, the actor will be liable. The right to abate is not greater than the necessity of the case and is limited to the removal of only so much of the objectionable thing as actually causes the nuisance.

(1) A person whose property is seized or destroyed as a nuisance may resort to the courts to determine whether or not it was in fact a nuisance. (2) An action for replevin; (3) To enjoin the sale or destruction of the property; (4) An action for the proceeds of its sale and damages if it has been sold; or (5) To enjoin private parties from proceeding to abate a supposed nuisance.

(5) The property must not be destroyed unless it is absolutely necessary to do so. F.2. PRIVATE NUISANCE Private Nuisance: That which is not included in the definition of a public nuisance [NCC 695]

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XI. Modes of Acquiring Ownership and Other Real Rights

CIVIL LAW

Mode

Title

Directly and Serves merely to give immediately the occasion for its produces a real right. acquisition or existence.

(1) Occupation

Cause

Means

(2) By operation of Law, e.g. hidden treasure, accession discreta and continua, NCC 1434, 1456, FC 120, registration of land under PD 1529.

Proximate cause

Remote cause

(3) Donation

Essence of the right, Means whereby that which is to be “essence” is created or transmitted. transmitted.

(4) Tradition (5) Intellectual Property

A. OCCUPATION

(6) Prescription (7) Succession

Note: Ownership of land cannot be acquired by occupation.

Mode is a specific cause which produces dominion and other real rights as a result of the co-existence of special status of things, capacity and intention of persons and fulfillment of the requisites of law.

Possession

Occupation

Possession is the holding of a thing or the enjoyment of a right [NCC 523]

Things appropriable by nature which are without an owner, such as animals that are the object of hunting and fishing, hiddren treasure and abandoned movables, are acquired by occupation. [NCC 713]

Kinds of modes: (1) Original – occupation and intellectual creation (2) Derivative – based on a pre-existing right of another (the 5 other modes) Title is every juridical right which gives a means to the acquisition of real rights but in itself is insufficient to produce them. It is not by contract but by delivery that the ownership of property is transferred (Non nudis pactis, sed traditione, dominia rerum transferentur). Contracts only constitute titles or rights to transfer or acquisition of ownership, while delivery is the mode of accomplishing the same.

A.1. REQUISITES (1) The property must be a corporeal personal property susceptible of appropriation; (2) The property is either res nullius (no owner) or res derelict (abandoned property); (3) There is seizure or apprehension with the intent to appropriate; and (4) There is an observance of requisites or conditions prescribed by law.

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A.2. KINDS

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ii. Occupation Animals

i. Of Anim als (1) W ild or feral animals – seizure (hunting/fishing) in open season by means not prohibited. (2) Tamed/domesticated animals – General Rule: belong to the tamer for as long as tamed animal retains the habit of returning to the place where it is kept, but upon recovering freedom, are susceptible to occupation unless claimed within 20 days from seizure by another. (3) Tame/domestic animals – not acquired by occupation except when abandoned.

of

Dom esticated

Wild animals are possessed only while they are under one's control; domesticated or tamed animals are considered domestic or tame if they retain the habit of returning to the premises of the possessor. iii. Pigeons and Fish [NCC 717] Pigeons and fish which from their respective breeding places pass to another pertaining to a different owner shall belong to the latter, provided they have not been enticed by some artifice or fraud. iv. Hidden Treasure [NCC 718, 438] He who by chance discovers hidden treasure in another’s property: ½ shall be allowed to the finder.

ii. Of Other Personal Property (1) Abandoned – may be acquired (2) Lost (3) Hidden treasure – finder gets ½ by occupation; landowner gets ½ by accession; except in CPG system, share goes to the partnership.

If the finder is a trespasser, he shall not be entitled to any share of the treasure. If the things found be of interest to science or the arts, the State may acquire them at their just price, which shall be divided in conformity with the rule stated.

A.3. SPECIAL RULES [NCC 716] v. Lost Movables; Procedure After Finding Lost Movables [NCC 719]

i. Occupation of a Swarm of Bees The owner of a swarm of bees shall have a right to pursue them to another’s land, indemnifying the possessor of the latter for the damage. If the owner has not pursued the swarm, or ceases to do so within 2 consecutive days, the possessor of the land may occupy or retain the same, the owner having lost his ownership by leaving, abandoned them (no more intention to recover) The 20 days to be counted from their occupation by another person. This period having expired, they shall pertain to him who has caught and kept them.

Whoever finds a movable, which is not treasure, must return it to its previous possessor. If unknown, the finder shall immediately deposit it with the mayor of the city or municipality where the finding has taken place. The finding shall be publicly announced by the mayor for two consecutive weeks in the way he deems best. If the movable cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at a public auction eight days after the publication.

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Six months from the publication having elapsed without the owner having appeared, the thing found, or its value, shall be awarded to the finder. The finder and the owner shall be obliged, as the case may be, to reimburse the expenses. If the owner should appear in time, he shall be obliged to pay, as a reward to the finder, one-tenth of the sum or of the price of the thing found.

B. DONATION Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. (Simple donation) B.1. OTHER INSTANCES CONSIDERED AS DONATION

CIVIL LAW

(4) Form as prescribed by law; and (5) Impoverishment of donor’s patrimony and enrichment on part of donee. B.4. WHAT MAY BE DONATED (1) All present property or part thereof of the donor (2) Provided he reserves, in full ownership or usufruct, sufficient means for support of himself and all relatives entitled to be supported by donor at the time of acceptance. (3) Provided that no person may give or receive by way of donation, more than he may give or receive by will [NCC 752]; also, reserves property sufficient to pay donor’s debts contracted before donation, otherwise, donation is in fraud of creditors [NCC 759, 1387].

When a person gives to another a thing or right on account of the latter's merits or of the services rendered by him to the donor, provided they do not constitute a demandable debt. (Remuneratory donation)

(4) If donation exceeds the disposable or free portion of his estate, the donation is inofficious.

When the gift imposes upon the donee a burden that is less than the value of the thing given. (Onerous donation)

(1) Donations provided for in marriage settlements between future spouses – must be not more than 1/5 of present property.

B.2. NATURE Bilateral contract creating obligations on the donor’s part.

unilateral

Requires consent of both donor and donee (except for onerous donation) though it produces obligations only on the side of the donor, unless it is an onerous donation.

Exceptions:

(2) Donation propter nuptias by an ascendant consisting of jewelry, furniture or clothing not to exceed 1/10 of disposable portion. B.5. WHAT MAY NOT BE DONATED (1) Future property (2) Donations cannot comprehend future property.

B.3. REQUISITES (1) Consent and capacity of the parties; (2) Animus Donandi (intent to donate); (3) Delivery of thing donated in oral donation of movable valued at P5,000 or less, oncce proper form is complied with, donation is perfected;

(3) “Future property” is understood as anything which the donor does not currently own although the donor may or may not own it later. [Osorio v Osorio (1921)] (4) Inheritance is NOT considered as future property. [ibid]

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C. KINDS OF DONATIONS

Ordinary

Propter Nuptias as wills)

C.1. AS TO ITS TAKING EFFECT

Lim it as to donation of present property

i. Donation Inter Vivos [NCC 729] Donation which shall take effect during the lifetime of the donor, though the property shall not be delivered till after the donor's death. Irrevocable grounds: (1) Subsequent children;

EXCEPT birth

for of

the

the

No limit to donation of present property provided legitimes are not impaired.

Grounds for revocation

ff

donor’s

If present property is donated and property regime is ACP, limited to 1/5.

Law on donations

See below [FC 86]

(2) Donor’s failure to comply with imposed conditions;

Causes for revocation of donation propter nuptias:

(3) Donee’s ingratitude; or (4) Reduction of donation by reason of inofficiousness.

(1) If the marriage is not celebrated or judicially declared void ab initio, except donations made in the marriage settlements;

ii. Donation by Reason of Marriage/ Donation Propter Nuptias [FC 86]

(2) When the marriage takes place without the consent of the parents or guardian, as required by law;

Requisites: (1) Must be made before the celebration of marriage; (2) Made in consideration of the marriage; and (3) Made in favor of one or both of the future spouses. Ordinary Donations Propter Nuptias Ordinary

v.

Donations

Propter Nuptias

Express acceptance Necessary

Not required

As to future property Cannot include future property

May include future property (same rule

(3) When the marriage is annulled, and the donee acted in bad faith; (4) Upon legal separation, the one being the guilty spouse; (5) If it is with a resolutory condition and the condition is complied with; or (6) When the donee has committed an act of ingratitude as specified by the provisions of the Civil Code on donations in general. Donation between spouses General Rule: Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be VOID. The prohibition applies to persons living together as husband and wife without a valid marriage. Exception: Moderate gifts which the spouses may give each other on the occasion of any family rejoicing.

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Inter vivos Donation Mortis Causa [NCC 728] It only becomes effective upon the death of the donor. The donor’s death ahead of the donee is a suspensive condition for the existence of the donation.

As to transfer of ownership for right of disposition Ownership is immediately transferred. Delivery of possession is allowed after death.

Characteristics: (1) The transferor retains ownership and control of the property while alive; (2) The transfer is revocable at will before his death; and (3) The transfer will be VOID if the transferor should survive the transferee.

Inter vivos

Mortis causa

As to formalities Executed and accepted with formalities prescribed by CC.

Must be in the form of a will, with all the formalities for the validity of wills.

Upon acceptance by the donee, but the effect of such retroacts to the time of death of the donor.

As to revocation Irrevocable – may be Revocable upon the revoked only for the exclusive will of the reasons provided in donor. CC 760, 764, 765. As to reduction or suppression When it is excessive or inofficious, being preferred, it is reduced only after the donations mortis causa had been reduced or exhausted.

Inter Vivos v. Mortis Causa

Mortis causa

When it is excessive or inofficious, it is reduced first, or even suppressed.

Notes:

As to effectivity

The nature of the act, whether it’s one of disposition or of execution, is controlling to determine whether the donation is mortis causa or inter vivos.

Effective during the Effective after the lifetime of the donor. death of the donor. As to acceptance Acceptance must be made after the death of the donor, the donation being effective only after Acceptance must be the death of donor. made during the Acceptance during lifetime of the donor. the donor’s lifetime is premature and ineffective because there can be no contract regarding future inheritance.

What is important is the time of transfer of ownership even if transfer of property donated may be subject to a condition or a term. Whether the donation is inter vivos or mortis causa depends on whether the donor intended to transfer ownership over the properties upon the execution of the deed. [Gestopa v. CA (2002)] C.2. AS TO CAUSE OR CONSIDERATION Sim ple - made out of pure liberality or because of the merits of the donee.

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Remuneratory - made for services already rendered to the donor. Onerous - imposes a burden inferior in value to property donated. Improper - burden equal in value to property donated Sub-modo or modal - imposes a prestation upon donee as to how property donated will be applied.

CIVIL LAW

Onerous donations – form governed by the rules of contracts. D.2. PERFECTION i. Acceptance Donation is perfected upon the donor’s learning of the acceptance.

Mixed donations – e.g. sale for price lower than value of property.

Acceptance may be made during the lifetime of both donor and donee.

D. FORMALITIES REQUIRED

A document merely correcting the deed of donation does not constitute a new deed of donation so there is no need for a new acceptance [Osorio v Osorio (1921)]

D.1. HOW MADE AND ACCEPTED ii. W ho May Accept i. Movable properties [NCC 748] The donation of a movable may be made orally or in writing. Oral donation: requires the simultaneous delivery of the thing or of the document representing the right donated. If the value of the movable donated exceeds P5,000, the donation and the acceptance should be in writing, otherwise, the donation is void.

Donee: must accept personally or through an authorized person with special power for the purpose. [NCC 745] Note: A joint donation (donation to two or more persons) could not be accepted by a donee, independently of the other donee/s. [Genato v Lorenzo (1968)] iii. Tim e Of Acceptance

ii. Im m ovable properties [NCC 749]

Acceptance must be done during the lifetime of the donor and the donee.

Must be made in a public instrument specifying the donated property and the burdens assumed by the donee.

D.3. QUALIFICATIONS OF DONORS AND DONEES

The acceptance must be either: (1) In the same instrument; or

i. W ho May Give Donations

(2) In another public instrument notified to the donor in authentic form and noted in both deeds.

All persons who may contract and dispose of their property may make a donation. [NCC 735] Note:

Exceptions: Donations propter nuptias – need no express acceptance.

Donor’s capacity shall be determined as of the time of the making of the donation. [NCC 737]

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Capacity to donate is required for donations inter vivos and NOT in donations mortis causa.

(b) Any person who has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants;

Donor’s capacity is determined as of the time of the donation. Subsequent incapacity is immaterial.

(c) Any person who has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless;

ii. W ho May Receive Donations All who are not specially disqualified by law. [NCC 738]

(d) 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;

Minors and others who cannot enter into a contract: acceptance may be made through their parents or legal representatives. [NCC 741] Donations made to conceived and unborn children: those who would legally represent them if they were already born may accept the donations. [NCC 737]

(e) Any person convicted of adultery or concubinage with the spouse of the testator;

iii. W ho May Not Give or Receive Donations

(f) Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made;

By reason of public policy [NCC 739] (1) Those made between persons guilty of adultery or concubinage at the time of the donation;

(g) 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;

(2) Those made between persons guilty of the same criminal offense if the donation is made in consideration thereof; or (3) Those made to a public officer, his spouse, descendants, and/or ascendants by reason of the office.

(h) Any person who falsifies or forges a supposed will of the decedent. (2) NCC 1027:

By reason of the donee’s unworthiness or incapacity to succeed [NCC 740, 1032 except (6-8), and 1027 except (4)] (1) NCC 1032: (a) Parents who have abandoned their children or induced their daughters to lead a corrupt or immoral life, or attempted against their virtue;

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(a) The priest who heard the confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period; (b) The relatives of such priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong; (c) A guardian with respect to testamentary dispositions given by

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a ward in his favor before the final accounts of the guardianship have been approved, even if the testator should die after the approval thereof; nevertheless, any provision made by the ward in favor of the guardian when the latter is his ascendant, descendant, brother, sister, or spouse, shall be valid; (d) Any physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness; or (e) Individuals, associations and corporations not permitted by law to inherit. By reason of prejudice to creditors or heirs (1) If donation is made in fraud of creditos by debtor who is insolvent (rescissible for accion pauliana) (2) If legitimes of compulsory heirs infringed upon (donation is inofficious (revocation or reduction of donation)

CIVIL LAW

mortgages and other encumbrances unless the contrary has been stipulated; (6) Donations to several donees jointly: NO right of accretion EXCEPT: (7) When the donor provides otherwise; or (8) When the donation to husband and wife is joint with the right of accretion UNLESS the donor provides otherwise. (9) Donations by a person to his non-heirs are collationable. [Liguez v CA] (10) Donations made to one’s heirs must expressly prohibit collation to be exempted from collation. [De Roma v CA (1987)] E.2. SPECIAL PROVISIONS i. Reservation by donor of power to dispose (in whole or in part) or to encumber property donated [NCC 755] The donor may reserve the right to dispose of some things donated, or of some amount, which shall be a charge thereon.

E. EFFECTS OF DONATION / LIMITATIONS

But if he should die without having made use of this right, the property or amount reserved shall belong to the donee.

E.1. IN GENERAL

Donation of naked ownership to one donee and usufruct to another [NCC 756]

(1) The donee may demand actual delivery of thing donated; (2) The donee is subrogated to the rights of the donor in the property donated; (3) The donor is not obliged to warrant the things donated except in onerous donations where the donor is liable for eviction up to the extent of the burden; [NCC 754] (4) The donor is liable for eviction or hidden defects in case of bad faith on his part; [NCC 754]

The naked ownership and the usufruct may be donated separately, provided that all the donees are living at the time of the donation. ii. Conventional reversion in favor of donor or other person [NCC 757] (1) If made in favor of the donor: Reversion may be for any case and circumstance. (2) If made in favor of other persons: Such persons must be living at the time of the donation.

(5) In donation propter nuptias, the donor must release the property donated from

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If the rule is violated, the stipulation on reversion is void but the donation is still valid.

vi. Excessive/Inofficious Donations

iii. Paym ent of donor’s debt [NCC 758]

Donation inter vivos, made by a person having no children or descendants, legitimate or legitimated by subsequent marriage, or illegitimate, may be revoked or reduced by the happening of any of these events:

(1) If expressly stipulated: the donee must pay only the debts contracted before the donation unless specified otherwise. But in no case shall the donee be responsible for debts exceeding the value of the property donated unless clearly intended. (2) If there’s no stipulation – the donee will be answerable only for the donor’s debt only in case the donation is in fraud of creditors. iv. Illegal or im possible conditions [NCC 1183] Impossible conditions: those contrary to good customs or public policy and those prohibited by law shall annul the obligation, which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. The condition not to do an impossible thing shall be considered as not having been agreed upon. v. Double donations [NCC 744] Rule: Priority in time, priority in right. (1) If movable: one who possession in good faith.

first

took

(2) If immovable: one who recorded in registry of property in good faith (3) If there is no inscription, the one who first took possession in good faith. (4) If there is no possession, one who can present the oldest title.

A type of donation in which a person gives or receives more than what he may give or receive by will. [NCC 752]

(1) If the donor, after the donation, should have legitimate or legitimated or illegitimate children, even though they be posthumous; (2) If the child of the donor, whom the latter believed to be dead when he made the donation, should turn out to be living; or (3) If the donor subsequently adopt a minor child. The donation shall be revoked or reduced insofar as it exceeds the portion that may be freely disposed of by will, taking into account the whole estate of the donor at the time of the birth, appearance or adoption of a child [NCC 760]. Inofficious Donations The donation shall be reduced with regard to the excess. But this reduction shall not prevent the donations from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits. Only those who, at the time of the donor's death, have a right to the legitime and their heirs and successors-in-interest may ask for the reduction or inofficious donations. If, there being two or more donations, the disposable portion is not sufficient to cover all of them, those of the more recent date shall be suppressed or reduced with regard to the excess.

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Scope of am ount [NCC 750-752] The donations may comprehend all the present property of the donor, or part thereof. Provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor vii. Donations cannot com prehend future property.

F.3. THOSE MADE TO A PUBLIC OFFICER OR HIS WIFE, DESCENDANTS AND ASCENDANTS, BY REASON OF HIS OFFICE F.4. THOSE MADE TO PERSONS INCAPACITATED TO SUCCEED BY WILL. [NCC 1027]

G. REVOCATION V. REDUCTION

Future property is understood anything which the donor cannot dispose of at the time of the donation. viii. In fraud of creditors [NCC 759] Donation is always presumed to be in fraud of creditors, when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation. The donee shall be responsible for donot’s debts only when the donation has been made in fraud of creditors, otherwise creditors may rescind donation by way of accion pauliana.

Revocation

Reduction

Total withdrawal of Amount is only amount, whether the insofar as the legitime is impaired legitime is prejudiced or not

Benefits the donor

Benefits the donor’s heirs (except when made on the ground of the appearance of a child)

G.1. GROUNDS FOR REDUCTION (1) Inofficiousness

F. VOID DONATIONS [NCC 739-740, 1027]

A donation where a person gives or receives more than what he may give or receive by will is inofficious. [NCC 752]

F.1. THOSE MADE BETWEEN PERSONS WHO WERE GUILTY OF ADULTERY OR CONCUBINAGE AT THE TIME OF THE DONATION

(2) Subsequent birth, reappearance of child or adoption of minor by donor [NCC 760]

NOTE: The spouse of the donor or donee may bring the action for declaration of nullity and the guilt of the donor and donee may be proved by preponderance of evidence in the same action. F.2. THOSE MADE BETWEEN PERSONS FOUND GUILTY OF THE SAME CRIMINAL OFFENSE, IN CONSIDERATION THEREOF

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Effects of subsequent reappearance or adoption:

birth,

(a) A donation is valid if it does not exceed the free part computed as of the birth, adoption or reappearance of the child. (b) The donee must return the property or its value at the time of the donation.

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(c) The fruits must be returned from the filing of the action. (d) Mortgages by the donee are valid but may be discharged subject to reimbursement from the donee. (e) Extent of revocation: only to the extent of the presumptive legitime of the child.

(c) If he unduly refuses him support when the donee is legally or morally bound to give support to the donor. Applies to all donations EXCEPT: (1) Mortis causa (2) Propter nuptias

(3) Insufficient means of support

(3) Onerous donations

(4) In fraud of creditors

Notes:

(5) Prescription – 4 years from either:

Founded on moral duty: one who received a donation must be grateful to his benefactor.

(a) Birth of first legitimate child; (b) Legitimation, adoption, recognition of first child; (c) Judicial declaration of filiation; or (d) Knowledge of information on the existence of a child believed to be dead. G.2. REVOCATION (1) Failure to comply with any of the conditions imposed by the donor upon the donee (2) For additional legitime for subsequent birth, reappearance or adoption (3) Ingratitude The following cases are forms of ingratitude: (a) If the donee should commit some offense against the person, the honor or the property of the donor, or of his wife or children under his parental authority; (b) If the donee imputes to the donor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the donee himself, his wife or children under his authority; or

Conviction is not necessary. Time to file action for revocation – within 1 yr from knowledge of the offense by donor and it was possible for him to file the case [NCC 769]. W ho may file Action for revocation on the ground of donee’s ingratitude is personal to the donor; it cannot be filed by donor’s heirs, although they may substitute the donor in case he dies during the pendency of the case. Effect of revocation on alienations and encum brances [NCC 766] Alienations and mortgages effected before the notation of the complaint for revocation in the Registry of Property shall subsist. Later ones shall be void. Effect as to fruits [NCC 768] When the donation is revoked for any of the causes stated in NCC 760, or by reason of ingratitude, or when it is reduced because it is inofficious, donee shall not return the fruits except from the filing of the complaint. If the revocation is based upon noncompliance with any of the conditions imposed in the donation, the donee shall

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return not only the property but also the fruits thereof which he may have received after having failed to fulfill the condition. W hat m ay be donated All present property of the donor or part thereof

Limitation: (1) He reserves in full ownership or in usufruct, sufficient means for his support and for all relatives who are at the time of the acceptance of the donation are, by law, entitled to be supported Effect of non-reservation: donation is inofficious, reduction of the donation (2) He reserves sufficient property at the time of the donation for the full settlement of his debts Effect of non-reservation: considered to be a donation in fraud of creditors subject of accion pauliana, and donee may be liable for damages

W hat m ay not be donated (1) Future property; those which the donor cannot dispose of at the time of the donation [NCC 751] (2) More than what he may give or receive by will [NCC 752] If exceeds: inofficious Donations made to several persons jointly No accretion – one donee does not get the share Exception: those given to husband and wife, of the other donees who did not accept [NCC 753] except when the donor otherwise provides Donor Who are allowed: All persons who may contract (of Who are not allowed: legal age) and dispose of their property [NCC 735] (1) Guardians and trustees with respect to the property entrusted to them [NCC 736] Donor’s capacity is determined at the time of the making of donation [NCC 737]

(2) Made between person who are guilty of adultery or concubinage [NCC 739] Made between persons found guilty of the same criminal offense, in consideration thereof [NCC 739]

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Donee Who are allowed to accept donations: Those who are not specifically disqualified by law [NCC 738] Those who are allowed, with qualifications:

Who are not allowed: (1) Made between person who are guilty of adultery or concubinage [NCC 739]

Minors, insane/imbecile, deaf-mute and others (2) Made between persons found guilty of the who are incapacitated [see NCC 38], provided that same criminal offense, in consideration thereof their acceptance is done through their parents or [NCC 739] legal representatives [NCC 741] (3) Made to a public officer or his wife, descendant (2) Conceived and unborn children, provided that and ascendants, by reason of his office [NCC 739] the donation is accepted by those who would (4) Those who cannot succeed by will [NCC 740] legally represent them if they were already born Those made to incapacitated persons, although simulated under the guise of another contract [NCC 743] Acceptance of the donation Who may accept [NCC 745]

When to accept: during the lifetime of the donor or donee [NCC 746]

(1) Donee personally (2) Authorized person with a special power for the purpose or with a general sufficient power

W hat the donee acquires with the thing He shall be subrogated to all the rights and actions that would pertain to the donor in case of eviction [NCC 754] Obligation of the donor No obligation to warrant [NCC 754]

Exception: when the donation is onerous Obligation of the donee

If the donation so states, the donee may be obliged to pay the debts previously contracted by the donor and in no case shall he be responsible for the debts exceeding the value of the thing donated [NCC 758]

Exception: when contrary intention clearly appears

W hat m ay be reserved by the donor Right to dispose of some of the things donated, or If the donor dies without exercising this right of some amount which shall be a charge thereon

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Reversion The property donated may be restored or returned Limitation to (2): the third person would be living to at the time of the donation (1) Donor or his estate; or (2) Another person

Revocation/Reduction Tim e of Action

Transm issibility

Effect

Liability (Fruits)

Birth, appearance, adoption Within 4 years from birth, legitimation and adoption

Transmitted to children Property is returned Fruits returned from the and descendants upon filing of the complaint If the property has been the death of donor sold, its value at the time of donation shall be returned. If the property was mortgaged, the donor may redeem the mortgage, with right to recover the amount from the donee Non-com pliance with condition

Within 4 years from non- May be transmitted to compliance donor’s heirs and may be exercised against donee’s heirs

Property returned, Fruits received after alienations and having failed to fulfill mortgages void subject condition returned to rights of third persons in good faith

Ingratitude Within 1 year after knowledge by donor of the fact and it was possible for him to bring the action

Not transmitted to heirs of donor/ donee, but if donor dies during pendency of case, heirs may be substituted.

Property returned, but Fruits received from the alienations and filing of the complaint mortgages effected returned before the notation of the complaint for revocation in the registry of property subsist

Failure to reserve sufficient means for support At any time, by the donor or relatives entitled to support

Not transmissible

Reduced to the extent necessary to provide support

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Donee entitled

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Transm issibility

Effect

Liability (Fruits)

Inofficiousness for being in excess of what the donor can give by will Within 5 years from the Transmitted to donor’s death of the donor [NCC heirs 1149]

Donation takes effect on Donee entitled the lifetime of donor. Reduction only upon his death with regard to the excess

Fraud against creditors Rescission within 4 years from the perfection of donation/ knowledge of the donation

Transmitted to creditor’s Returned for the benefit Fruits returned/ if heirs or successors-in- of the creditor who impossible, indemnify interest brought the action creditor for damages

H. TRADITION

H.3. KINDS

It is a derivative mode of acquiring ownership and other real rights by virtue of which, there being intention and capacity on the part of the grantor and grantee and the preexistence of said rights in the estate of the grantor, they are transmitted to the grantee through a just title.

Real Tradition: physical delivery

H.1. REQUISITES Pre-existence in the estate of the grantor of the right to be transmitted; Just cause or title for the transmission; Intention on the part of the grantor to grant and on the part of the grantees to acquire; Capacity to transmit and to acquire; and An act that gives it outward form, physically, symbolically, or legally. H.2. PURPOSE Ownership and other real rights are transferred, among other means, by tradition. The delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract.

Constructive Tradition: when the delivery of the thing is not real or material but consists merely in certain facts indicative of the same Sym bolical Tradition: done through the delivery of signs or things which represent that which is being transmitted. (e.g. keys or title itself) Tradition by public instrument: consists in the substitution of real delivery of possession by a public writing with the delivery of a document which evidences the transaction. Traditio longa manu: made by the grantor pointing out to the grantee the thing to be delivered. Traditio brevi manu: takes place when the grantee is already in possession of the thing. (e.g. when the lessee buys the thing leased to him) Traditio constitutum possessorium: similar to brevi manu but in the opposite sense – when the owner alienates a thing but remains in possession in another concept as lesee or depositary.

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Quasi-tradition: delivery of incorporeal things or rights by the grantee exercising his rights with the grantor’s consent. Tradition by operation of law: delivery which is not included in the foregoing modes of delivery and where the delivery is effected solely by virtue of an express provision of law, e.g. NCC 1434.

CIVIL LAW

XII. Prescription By prescription, one acquires ownership and other real rights through the lapse of time in the manner and under the conditions laid down by law. In the same way, rights and conditions are lost by prescription. It is a means of acquiring ownership and other real rights or losing rights or actions to enforce such rights through the lapse of time.

A. RATIONALE It is purely statutory in origin. It is founded on grounds of public policy which requires for the peace of society, that juridical relations susceptible of doubt and which may give rise to disputes, be fixed and established after the lapse of a determinate time so that ownership and other rights may be certain for those who have claim in them.

B. KINDS OF PRESCRIPTION (1) Acquisitive prescription (2) Extinctive prescription B.1. ACQUISITIVE PRESCRIPTION The acquisition of ownership and other real rights through possession in the concept of owner of a thing in the manner and condition provided by law. May be ordinary or extraordinary: Ordinary: requires possession of things in good faith and with just title for the time fixed by law. Extraordinary: acquisition of ownership and other real rights without need of title or of good faith or any other condition. Prescription where possession in good faith converted into possession in bad faith: PAGE 178 OF 574

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(1) Ordinary

Acquisitive Prescription

Extinctive Prescription

Requires positive action of the possessor (a claimant) who is not the owner

Requires inaction of the owner out of possession or neglect of one with a right to bring his action

Movable properties - 4 years Immovable properties - 10 years (2) Extraordinary: Movable properties - 8 years Immovable properties - 30 years As a mode of acquisition, prescription requires existence of following: (1) Capacity of the claimant to acquire by prescription; (2) A thing capable prescription;

of

acquisition

by

(3) Adverse possession of the thing under certain conditions; and (4) Lapse of time provided by law. (5) Possession must be in the concept of owner, not holder. The following are only required in ordinary acquisitive prescription: (1) Good faith of the possessor; and (2) Proof of just title

Applicable to all Applicable to kinds of rights, ownership and other whether real or real rights personal Vests the property and raise a new title in the occupant

Vests the property and raise a new title in the occupant

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

Merely results in the loss of a real or personal right, or bars the cause of action to enforce said right

Can be proven under the general issue without its being affirmatively pleaded

Should be affirmatively pleaded and proved to bar the action or claim of the adverse party

Note:

C. NO PRESCRIPTION APPLICABLE

For extraordinary prescription, only possession in the concept of owner is required; no need of good faith and just title.

C.1. BY OFFENDER

Possession has to be in the concept of an owner, public, peaceful, and uninterrupted. B.2. EXTINCTIVE PRESCRIPTION The loss or extinguishment of property rights or actions through the possession by another of a thing for the period provided by law or through failure to bring the necessary action to enforce one’s right within the period fixed by law.

The offender can never acquire, through prescription, movable properties possessed through a crime. C.2. REGISTERED LANDS PD 1529 (Amending and codifying the laws relative to registration of property and for other purposes) No title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession.

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C.3. RIGHTS NOT EXTINGUISHED PRESCRIPTION [NCC 1143]

PROPERTY

BY

CIVIL LAW

C.8. PRESCRIPTION FROM LACHES

(1) To demand a right of way, regulated by NCC 649; (2) To bring an action to abate a public or private nuisance. C.4. ACTION TO QUIET TITLE IF PLAINTIFF IS IN POSSESSION

Prescription

C.5. VOID CONTRACTS The action or defense for the declaration of the inexistence of a contract does not prescribe. [NCC 1410] The title is susceptible to direct as well as to collateral attack. [Ferrer v. Bautista, 1994]

Laches

Concerned with the fact of delay

Concerned with the effect of delay

A question or a matter of time

Principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some subsequent change in the condition or the relation of the parties

Statutory

NOT statutory

Applies at law

Applies at equity

When plaintiff is in possession of the property: the action to quiet title does not prescribe. The reason is that the owner of the property or right may wait until his possession is disturbed or his title is assailed before taking steps to vindicate his right.

DISTINGUISHED

Cannot be availed of Being a defense of unless it is especially equity, need not be pleaded as an specifically pleaded affirmative allegation Based on a fixed time NOT based on a fixed time

C.6. ACTION TO DEMAND PARTITION No prescription shall run in favor of a coowner or co-heir against his co-owners or coheirs so long as he expressly or impliedly recognizes the co-ownership. [NCC 494]

D. PRESCRIPTION OR LIMITATION OF ACTIONS D.1. TO RECOVER MOVABLE PROPERTIES The action rescribes in 8 years from the time the possession thereof is lost. [NCC 1140]

C.7. PROPERTY OF PUBLIC DOMINION Prescription, both acquisitive and extinctive, does not run against the State in the exercise of its sovereign function to protect its interest EXCEPT with respect to its patrimonial property which may be the object of prescription. [NCC 1113]

However, the action shall not prosper if it is brought after 4 years when the possessor has already acquired title by ordinary acquisitive prescription. [NCC 1132] If the possessor acquired the movable in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid.

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D.2. TO RECOVER IMMOVABLES Real actions prescribe after 30 years [NCC 1141] UNLESS the possessor has acquired ownership of the immovable by ordinary acquisitive prescription through possession of 10 years. [NCC 1134] Action for reconveyance (1) Based on fraud: Prescribes 4 years from the discovery of fraud. (2) Based on trust: 10 fraudulent issuance of property.

im plied or years from registration certificate of

constructive the alleged or date of title over the

D.3. OTHER ACTIONS

CIVIL LAW

iv. Actions that Prescribe in 4 Years [NCC 1145] (1) Upon an injury to the rights of the plaintiff (2) Upon a quasi-delict But when the action arises from any act of any public officer involving the exercise of powers arising from Martial Law including the arrest, detention and/or trial of the plaintiff, the same must be brought within 1 year. v. Actions that Prescribe in One Year or Less [NCC 1147] (1) For forcible entry within one year from date of dispossession thru FISTS or unlawful detainer 1 year from date of last demand (2) For defamation

i. Action to foreclose m ortgage: Prescribes after 10 years from the time the obligation secured by the mortgage becomes due and demandable ii. Actions that Prescribe in 10 Years [NCC 1144] (1) Upon a written contract (2) Upon an obligation created by law (3) Upon a judgment The computation of the period of prescription of any cause or right of action, which is the same as saying prescription of the action, should start from the date the cause of action accrues or from the day the right of the plaintiff is violated. [Nabus v. CA, 1991] iii. Actions that Prescribe in 6 Years [NCC 1145]

vi. Other Actions that Prescribe in 1 Year under the Civil Code (1) To recover possession de facto [NCC 554 (4)] (2) To revoke a donation on the ground of ingratitude [NCC 769] (3) To rescind or recover damages if immovable is sold with non-apparent burden or servitude [NCC 1560 (3,4)] (4) To enforce warranty of solvency of debts in assignment of credits [NCC 1629] vii. W here Periods of Other Actions Not Fixed in the Civil Code and in Other Laws All other actions whose periods are not fixed in the Civil Code or in other laws must be brought within 5 years from the time the right of action accrues. [NCC 1149]

(1) Upon an oral contract (2) Upon a quasi-contract

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(2) When there is a written extrajudicial demand by the creditors (3) When there is any written acknowledgment of the debt by the debtor Civil actions are deemed commenced from the date of the filing and docketing of the complaint with the Clerk of Court. [Cabrera v. Riano (1963)] A written extrajudicial demand wipes out the period that has already elapsed and starts anew the prescriptive period [The Overseas Bank of Manila v. Geraldez, (1979)] Not all acts of acknowledgement of a debt interrupt prescription. To produce such effect, the acknowledgment must be “written”, so that the payment, if not coupled with the communication signed by the payor would interrupt the running of the period of prescription [PNB v. Osete (1968)]

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CIVIL LAW

CIVIL LAW

OBLIGATIONS

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I. Obligations

CIVIL LAW

B. CLASSIFICATION OF OBLIGATIONS 1. AS TO SANCTION

A. DEFINITION

(1) CIVIL OBLIGATION (or perfect obligation) – give a right of action to compel their performance; the sanction is judicial process

Art. 1156. An obligation is a juridical necessity to give, to do or not to do.

(2) NATURAL OBLIGATION – midway between civil and purely moral obligations; there is a juridical tie, but performance is left to the will of the debtor; after voluntary fulfillment by the obligor, the sanction is the law

A.1. ELEMENTS OF AN OBLIGATION (1) ACTIVE SUBJECT (Obligee/Creditor): The person who has the right or power to demand the prestation. (2) PASSIVE SUBJECT (Obligor/Debtor): The person bound to perform the prestation. (3) PRESTATION (Object): The conduct required to be observed by the debtor/obligor (to give, to do, or not to do). (4) VINCULUM JURIS (Juridical or Legal Tie; Efficient Cause): That which binds or connects the parties to the obligation. (De Leon) A.2. DIFFERENT KINDS OF PRESTATIONS (1) TO GIVE: real obligation; to deliver either (a) a specific or determinate thing, or (b) a generic or indeterminate thing. (2) TO DO: positive personal obligation; includes all kinds of work or service. (3) NOT TO DO: negative personal obligation; to abstain from doing an act; includes the obligation not to give. Requisites of a Prestation: (1) Possible - physically and juridically; (2) Assessable - Must have a possible equivalent in money. (3) Determinate, or at least, determinable; Art. 1156 provides the definition of civil obligations only (…juridical necessity); it does not cover natural obligations.

(3) MORAL OBLIGATION (or imperfect obligation) – the sanction is conscience or morality. These obligations are not judicially demandable. Moral duty is not a valid consideration. Natural Obligations Art. 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. Some natural obligations are set forth in the following articles. Natural obligations are midway between civil obligations and purely moral obligations. It is distinguished from moral in that it produces some juridical effects (ex. Right to retention), but is distinguished from moral in that it does not give rise to an action to compel its performance [Tolentino]. Payment is voluntary when the debtor knows that the obligation is a natural one. “Fulfillment” does not refer only to the delivery of things, but also to the performance of an act, the giving of security, and the execution of a document.

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Payment by mistake by a debtor believing the obligation to be a civil one, may be recovered on the principle of solutio indebiti [De leon].

the service he has rendered.

The contractor builds additional works, but is paid the additional cost of such works. Payor characterizes the payment as a "mistake," and not a "voluntary" fulfillment under Art. 1423 of the Civil Code. Hence, it urges the application of the principle of solution indebiti. However, it is not enough to prove that the payments made by payor to contractor were "not due" because there was no prior authorization or agreement with respect to additional works. There is a further requirement that the payment by the debtor was made either through mistake or under a cloud of doubt. In short, for the provisions on solutio indebiti to apply, there has to be evidence establishing the fram e of m ind of the payor at the time the payment was made [Uniwide v Titan-Ikeda, G.R. No. 126619, (2006)].

(1) There is a civil obligation

Rules on Natural Obligation:

Requisites under Art 1425 (Prescribed Civil Obligation – Payment to 3rd Person)

(1) The promise to perform a natural obligation is as effective as performance itself, and converts the natural obligation to a civil obligation. (2) Partial payment of a natural obligation does not make it civil; the part paid cannot be recovered, but payment of the balance cannot be enforced. The exception would be if the natural obligation is susceptible of ratification. (3) Guaranties for the performance of a natural obligation are valid. (4) Payment of a natural obligation is not subject to reduction by reason of inofficiousness, appearance of children or ingratitude. Examples of Natural Obligations Art. 1424. When a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of

Requisites under Art 1424 (Prescribed Civil Obligation – Obligor) (2) The right to sue upon it has already lapsed by extinctive prescription (3) Obligor performs contract voluntarily Consequence: Obligor cannot recover what he has delivered or value of the service he rendered. Art. 1425. When without the knowledge or against the will of the debtor, a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed, but the debtor later voluntarily reimburses the third person, the obligor cannot recover what he has paid.

(1) There is a debt (2) Action upon the debt has prescribed (3) A third person, without the knowledge or against the will of the debtor, pays the debt (4) Debtor voluntarily reimburses the third person Consequence: Obligor cannot recover what he has paid. Art. 1426. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian, after the annulment of the contract voluntarily returns the whole thing or price received, notwithstanding the fact that he has not been benefited thereby, there is no right to demand the thing or price thus returned.

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Art. 1427. When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the obligee who has spent or consumed it in good faith.

CIVIL LAW

the payer. Requisites under Art 1429 (Payment made by Heir) (1) Decedent incurred in debt during his lifetime (2) Heir voluntarily pays debt (3) Value of debt exceeds value of heir’s inheritance

Art 1426 and 1427 Distinguished 1426

1427

Presupposes a prior annulment

No prior annulment is involved

Refers to any object

Refers to money or fungible things

Consumption in good faith is not required

Requires consumption in good faith

Consequence: Payment is valid and heir cannot rescind it. Art. 1430. When a will is declared void because it has not been executed in accordance with the formalities required by 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.

Art. 1428. When, after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation, he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered.

Requisites under Art 1430 (Payment of legacy – Will declared Void) (1) There is a will providing for a legacy

Requisites under Art 1428 (Payment by Defendant notwithstanding failed action)

(2) The will is declared void because it was not executed in accordance with the formalities required by law

(1) There is a civil obligation

(3) Heir pays legacy

(2) An action to enforce such has failed (3) Defendant obligation

voluntarily

performs

the

Consequence: Defendant cannot demand return of what he has delivered or the payment of the value of the service Art. 1429. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased, the payment is valid and cannot be rescinded by

Consequence: Payment is effective and irrevocable. 2. As to Subject Matter (1) REAL – obligation to give (2) PERSONAL – obligation to do or not to do 3. As to the Affirm ativeness Negativeness of the Obligation

or

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(2) NEGATIVE: obligation not to give or not to do

CIVIL LAW

II. Nature and Effect of Obligations

4. As to Persons Obliged (1) UNILATERAL – only one of the parties is bound (2) BILATERAL – both parties are bound a. Reciprocal – performance by one is dependent on the performance by the other b. Non-reciprocal – performance by one is independent of the other [Paras] Sources of Obligations Art. 1157. Obligations arise from: (1) Law;

A. OBLIGATION “TO GIVE” A.1. TYPE OF THINGS: Specific Thing Particularly designated or physically segregated from all others of the same class (Art.1460); Identified by individuality. Cannot be substituted against the obligee’s will.

(2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. A single act or omission may give rise to different causes of action. A concurrence of scope in regard to negligent acts does not destroy the distinction between the civil liability arising from a crime and the responsibility for cuasi-delitos or culpa extracontractual. The same negligent act causing damages may produce civil liability arising from a crime... or create an action for cuasidelito or culpa extra-contractual. [Barredo vs. Garcia, G.R. No. L-48006, (1942)]

Generic Thing

Limited Generic Thing

Object is designated only by its class/ genus/ species.

When the generic objects are confined to a particular class.

Can be substituted by any of the same class and same kind.

A.2. RIGHTS AND DUTIES OF PARTIES: Duties of the Debtor

Rights of the Creditor

To Give a Specific Thing 1. To preserve or take care of the thing due (1163) 2. To deliver the thing itself (1165) 3. To deliver the fruits of the thing (1164) 4. To deliver its accessions and accessories (1166) (a) accessions – everything which is produced by a thing, or which is incorporated or

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1. To compel delivery (1165) 2. To recover damages in case of breach, exclusive or in addition to specific performance (1165; 1170) 3. To fruits from the time the obligation to deliver arises (1164) 4. Not to be compelled to receive a different one, although of the same value as, or more

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Duties of the Debtor

Rights of the Creditor

attached thereto, excluding fruits

valuable than that which is due (1244)

Duties Debtor

CIVIL LAW of

the

(1167)

(b) accessories – things destined for the embellishment, use or preservation of another thing of more importance

4. To pay damages in case of breach (1170)

5. To pay damages in case of breach (1170) To Give a Generic Thing 1. To take care of the thing (1163) 2. To deliver a thing of the quality intended by the parties taking into consideration the purpose of the obligation and other circumstances (1246) - Creditor cannot demand a thing of superior quality; neither can the debtor deliver a thing of inferior quality. 4. To pay damages in case of breach (1170)

Rights of the Creditor Note: The debtor cannot be compelled to perform his obligation. The ultimate sanction of civil obligations is indemnification of damages. This would be tantamount to involuntary servitude.

Not To Do

1. To ask that the obligation be complied with (1165)

1. Not to do what should not be done

2. To ask that the obligation be complied with by a third person at the expense of the debtor 3. To recover damages in case of breach (1165)

2. To shoulder cost of undoing what should not have been done (1168) 3. To pay damages in case of breach (1170)

1. To ask to undo what should not be done, at the debtor’s expense. (1168) 2. To recover damages, where it would be physically or legally impossible to undo what should not have been done, because of : a. the very nature of the act itself;

4. Not to be compelled to receive a different one, although of the same value as, or more valuable than that which is due (1244)

b. rights acquired by third persons who acted in good faith; c. when the effects of the acts prohibited are definite in character and will not cease even if the thing prohibited be undone.

B. OBLIGATION “TO DO” OR “NOT TO DO” B.1. RIGHTS AND DUTIES OF PARTIES: Duties Debtor

of

the

Rights of the Creditor

To Do 1. To do it (1167) 2. To shoulder the cost of execution should he fail to do it (1167) 3. To undo what has been poorly done

1. To have the obligation executed at the cost of the debtor (1167)

C. BREACH Art. 1170. Those who in the performance of their obligations are guilty of fraud (dolo), negligence (culpa), or delay (mora), and those who in any manner contravene the tenor thereof, are liable for damages.

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C.1. COMPLETE FAILURE TO PERFORM Substantial Breach

Slight Breach

or

1. Total breach

1. Partial breach

2. Amounts to nonperformance, basis for rescission (resolution) under Art. 1191 and payment of damages

2. There is partial/ substantial performance in good faith 3. Gives rise to liability for damages only (1234)

CIVIL LAW

C.2. DEFAULT, DELAY, OR MORA Failure to perform an obligation on time which constitutes breach of the obligation. [De Leon]

Casual

Rules on Default, Delay, or Mora Unilateral Obligations General Rule: “No demand, No delay.”

Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. In order that there may be substantial performance of an obligation, there must have been an attempt in good faith to perform, without any willful or intentional departure therefrom. The deviation from the obligation must be slight, and the omission or defect must be technical and unimportant, and must not pervade the whole or be so material that the object which the parties intended to accomplish in a particular manner is not attained. The non-performance of a material part of a contract will prevent the performance from amounting to a substantial compliance… The compulsion of payment is predicated on the substantial benefit derived by the obligee from the partial performance. Although compelled to pay, the obligee is nonetheless entitled to an allowance for the sum required to remedy omissions or defects and to complete the work agreed upon. [International Hotel Corp v Joaquin, G.R. 158361 (2013)] The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of the amount not paid. [Cannu v Galang, G.R. No. 139523, (2005)]

The mere expiration of the period fixed by the parties is not enough in order that the debtor may incur in delay. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.(1169 par 1)

Reciprocal Obligations Neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (1169 par. 3) No delay if neither performs.

Exceptions: Demand is not necessary in order that delay may exist under the circumstances listed in Art 1169 par 2, (1)(3). Demand may be judicial or extrajudicial. W hen demand is not necessary in order that delay m ay exist (Art. 1169 par 2) (1) When demand would be useless, as when the obligor has rendered it beyond his power to perform. OR (2) When from the nature and the circumstances of the obligation it appears that the designation of the time

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when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; OR (3) When the law or the obligation expressly so declare; Note: It is insufficient that the law or obligation fixes a date for performance. It must further state expressly that after the period lapses, default will commence; Kinds of Delay; Requisites and Effects (1) Mora Solvendi (2) Mora Accipiendi (3) Compensatio Morae

Requisites: Obligation must be liquidated, due and demandable

2. Non-performance by the debtor within the period agreed upon 3. Demand, judicial or extra-judicial, by the creditor, unless demand is not necessary under the circumstances enumerated in Art 1169 par (2). There is no mora solvendi in:

Requisites: (1)

Debtor offers performance.

(2)

Offer must be in compliance with the prestation as it should be performed.

(3)

Creditor refuses performance without just cause.

Effects:

(2) The debtor is exempted from risk of loss of the thing, which is borne by the creditor. (3) The expenses incurred by the debtor for the preservation of the thing after the mora shall be chargeable to the creditor. (4) If the obligation bears interest, the debtor does not have to pay from the time of delay. (5) The creditor is liable for damages. (6) The debtor may relieve himself of the obligation by consigning the thing. [Tolentino] Compensatio morae – Delay of both parties in reciprocal obligations.

a) Negative obligations because delay is impossible [De Leon]

Effects:

b) Natural obligations [Tolentino]

1.

Effects: 1.

Mora accipiendi – Delay on the part of the creditor to accept the performance of the obligation

(1) The responsibility of the debtor is reduced to fraud and gross negligence.

Mora solvendi – Delay on the part of the debtor to fulfil his obligation either to give (ex re) or to do (ex persona).

1.

CIVIL LAW

The debtor is liable for damages. [Art. 1170]

2. For determinate objects, the debtor shall bear the risk of loss, even if the loss is due to fortuitous events. [1165 par 3]

Delay of the obligor cancels delay of obligee (and vice versa) hence it is as if there is no default.

2. The liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. [Art. 1192]

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Cessation of the Effects of Mora: (1) Express or implied renunciation by the creditor; (2) Prescription. [Tolentino] Equitable Tem pering under Art. 1192 vs. Under Art. 2215 [Ong v Bognalbal, 2006] Art 1192

Art 2215

“In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. xxx”

“In contracts, quasicontracts, and quasidelicts, the court may equitably mitigate the damages under circumstances other than the case referred to in the preceding article, as in the ff. instances: (1) That the plaintiff himself has contravened the terms of the contract xxx”

Second infractor not liable for damages at all; only the first infractor is liable, but with his liability mitigated

Does not appear to consider which infractor first committed the breach

CIVIL LAW

C.3. FRAUD (DOLO) IN THE PERFORMANCE OF THE OBLIGATION Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. Fraud (dolo) is the deliberate or intentional evasion of the normal fulfilment of an obligation. [De Leon] A waiver of future fraud is void but past fraud may be subject of a valid waiver by the aggrieved party. [De Leon] Distinguished from Causal Fraud Fraud in the

Causal Fraud (dolo causante and dolo incidente)

Performance [Art. 1170]

[Arts. 1338, 1344] Definition

The deliberate and intentional evasion of the normal fulfilment of obligations. [International Corporate Bank v Gueco, 2001]

Every kind of deception for the purpose of leading another party into error and execute a particular act.

W hen Present During the performance of a pre-existing obligation

During the time of birth or perfection of the obligation Purpose

Articles 1192 and 2215 are not irreconcilably conflicting. The plaintiff referred to in Article 2215(1) should be deemed to be the second infractor, while the one whose liability for damages may be mitigated is the first infractor. Furthermore, the directions to equitably temper the liability of the first infractor in Articles 1192 and 2215 are both subject to the discretion of the court, despite the word "shall" in Article 1192, in the sense that it is for the courts to decide what is equitable under the circumstances. (Ong v Bognalbal, 2006)

To evade normal fulfilment of obligation

To secure consent of another to enter the contract(dolo causante) To influence a party regarding an incident to the contract (dolo incidente) Result

Breach of the obligation

Vitiation of consent Remedy

Obligee may recover damages (1344) PAGE 191 OF 574

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corresponds with the circumstances of the persons, of the time and of the place. [Art. 1173]

dolo causante) Damages (both dolo causante or incidente) Obligation Involved Valid obligation

Diligence Required [De Leon]

Voidable obligation (if dolo causante) Valid obligation (if dolo incidente)

(1) By stipulation of the parties (2) By law, in the absence of stipulation

Dolo Causante – that which determines or is the essential cause of the contract Dolo Incidente – refers only to some particular or accident of the obligation In order that fraud may vitiate consent, it must be the dolo causante and not merely the dolo incidente, inducement to the making of the contract. The false representation was used by plaintiff to get from defendant a bigger share of net profits. This is just incidental to the matter in agreement... because despite plaintiff’s deceit, respondent would have still entered into the contract. [Woodhouse vs. Halili, 1953] Requisites Contract:

for

Fraud

to

Vitiate

CIVIL LAW

a

(1) It must have been employed by one contracting party upon the other; (2) It must have induced the other party to enter into the contract; (3) It must have been serious; and (4) It must have resulted in damage or injury to the party seeking annulment. [Tolentino] C.4. NEGLIGENCE (CULPA) IN THE PERFORMANCE OF THE OBLIGATION Art. 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and

(3) Diligence of a good father of a family, if both the contract and law are silent. (1173 par 2) (4) Future negligence may be waived except in cases where the nature of the obligation or the public requires another standard of care (i.e. common carriers) Note: Only future simple negligence may be waived. Future gross negligence may not be waived since such negligence amounts to fraud.

Exceptions: Common Carriers Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. Hotel and Inn-keepers Art. 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.

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Art. 1999. The hotel-keeper is liable for the vehicles, animals and articles which have been introduced or placed in the annexes of the hotel. Art. 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him. Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force.

“Whether or not the defendant, in doing the alleged negligent act, used the reasonable care and caution, which an ordinary and prudent person would have used in the same situation” If not, then he is guilty of negligence. [Mandarin Villa Inc. vs. CA, 1996]

Culpa Aquiliana

defendant’s negligence itself.

Proof of the existence of the contract and of its breach or nonfulfillment is sufficient prima facie to warrant recovery.

The negligence of the defendant must be proved.

Proof of diligence in the selection and supervision of the employees is NOT available as defense.

Proof of diligence in the selection and supervision of the employee is a defense.

[Art. 2201]

Test of Negligence

Culpa Contractual

defendant to pay damages is the breach or nonfulfillment of the contract.

Extent of Dam ages to be Awarded

Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel.

Kinds of Civil Negligence

CIVIL LAW

Good Faith

Bad Faith

Obligor is liable for those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.

Obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. Any waiver or renunciation made in the anticipation of such liability is null and void.

C.5. CONTRAVENTION OF THE TENOR OF THE OBLIGATION

Negligence is merely incidental in the performance of an obligation.

Negligence is substantive and independent.

This refers to a violation of the terms and conditions stipulated in the obligation, which must not be due to a fortuitous event or force majeure. [De Leon]

There is always a preexisting contractual relation.

There may or may not be a pre-existing contractual obligation.

“In any manner contravenes the tenor” means any illicit act, which impairs the strict and faithful fulfillment of the obligation, or every kind of defective performance. [Tolentino]

The source of obligation of

The source of obligation is the

D. LEGAL EXCUSE FOR BREACH: PAGE 193 OF 574

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(8) the object is a generic thing, i.e. the genus never perishes

(1) “FORTUITOUS EVENT” OR

Note: ‘Genus nunquam perit’ only pertains to physical perishing. The genus may still perish legally. [Labitag]

(2) “ACTS OF THE CREDITOR” Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.

Requisites of Exemption Based on Force Majeure (1) The event must be independent of the debtor’s will (fraud or negligence).

1. Fortuitous Event - a happening independent of the will of the debtor and which makes the normal fulfillment of the obligation impossible. [De Leon] (1) Act of God: An accident, due directly or exclusively to natural causes without human intervention, which by no amount of foresight, pains or care, reasonably to have been expected, could have been prevented. (2) Act of Man: Force majeure is a superior or irresistible force, which is essentially an act of man; includes unavoidable accidents, even if there has been an intervention of human element, provided that no fault or negligence can be imputed to the debtor.

(2) The event must be unforeseeable or inevitable. (3) The event renders it impossible for debtor to fulfill his obligation in a normal manner. (4) The debtor must be free from any negligence or participation in the aggravation of the injury to the creditor [Tolentino, 1987; De Leon, 2003] (5) It must be the sole cause, not merely a proximate cause. 2. Act of Creditor: The debtor is also released from liability when the nonperformance of the obligation is due to the act of the creditor himself. [Tolentino]

Liability in case of Fortuitous Event No person shall be responsible for fortuitous events, UNLESS: (1) expressly specified by law [Arts. 552 (2); 1942, 2147, 2148, 2159] (2) liability specified by stipulation (3) the nature of the obligations requires assumption of risk [Art. 1174] (4) debtor is guilty of contributory negligence

concurrent

E. REMEDIES AVAILABLE IN CASE OF BREACH E.1. ACTION FOR SPECIFIC PERFORMANCE (IN OBLIGATION TO GIVE SPECIFIC THING) The creditor has a right to compel the debtor to perform the prestation.

or

(5) debtor has promised to deliver the same thing to two or more persons who do not have the same interest [Art. 1165 par. 3] (6) the thing is lost due to the obligor’s fraud, negligence, delay or contravention of the tenor of the obligation [Art. 1170] (7) the obligation to deliver a specific thing arises from a crime [Art. 1268] PAGE 194 OF 574

Art . 1165, Par. 1 – When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Art. 1170 (indemnification for damages), may compel the debtor to make the delivery.

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E.2. ACTION FOR SUBSTITUTED PERFORMANCE (IN OBLIGATION TO GIVE GENERIC THING) Art . 11 65, Par . 2 – If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. A third person may perform another’s obligation to deliver a generic thing or an obligation to do, unless it is a purely personal act, at the expense of the debtor. Debtor cannot avoid obligation by paying damages if the creditor insists on performance. E.3. RESCISSION (RESOLUTION RECIPROCAL OBLIGATIONS)

IN

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfilment, if the latter should become impossible.

CIVIL LAW

Effect of Rescission under Art 1191 Extinguishes the obligatory relation as if it had never been created, the extinction having a retroactive effect. Both parties must surrender what they have respectively received and return each other as far as practicable to their original situation. [Tolentino] Rescission may take place extrajudicially, by declaration of the injured party. But if the debtor impugns the declaration of rescission, it shall be subject to judicial determination. If the debtor does not oppose the extrajudicial declaration of rescission, such declaration will produce legal effect. The party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. [UP v Delos Angeles, 1970] Under Art 1191, the right to rescind an obligation is predicated on the violation of the reciprocity between parties, brought about by a breach of faith by one of them. Rescission, however, is allowed only where the breach is substantial and fundamental to the fulfillment of the obligation. [Del Castillo Vda de Mistica v Naguiat, 2003; Cannu v Galang, 2005].

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

It will not be permitted in casual or slight breach. [Song Fo v. Hawaiian Philippines] Distinguished from Rescission under Art. 1380

Rescission The unmaking of a contract, or its undoing from the beginning, and not merely its termination [Pryce Corp v Pagcor, G.R. No. 157480, 2005]

Rescission / Resolution [Art. 1191] Based on nonperformance or nonfulfillment of obligation.

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Rescission [Art. 1380] Based on lesion or fraud upon creditors.

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Action is instituted only by the injured party.

Action is instituted by either party or by a third person.

Applies only to reciprocal obligations where one party is guilty of nonfulfillment

Applies to either unilateral or reciprocal obligations even when the contract has been fully fulfilled

In some cases, court may grant a term for performance.

Court cannot grant a period or term within which one must comply.

Non-performance by the other party is important.

Non-performance by the other party is immaterial.

Rescission May be effected: (a) by both parties by mutual agreement, or (b) unilaterally by one of them declaring a rescission without the consent of the other if a legally sufficient ground exists or if a decree of rescission is applied for before the courts Requires mutual restitution to restore the parties to their original situation

E.4. DAMAGES, IN ANY EVENT Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. E.5. SUBSIDIARY CREDITORS

Distinguished from Term ination [Pryce Corp v PAGCOR, 2005] Termination May be effected by mutual agreement or by one party exercising one of its remedies as a consequence of the default of the other

CIVIL LAW

REMEDIES

OF

(a) Accion Subrogatoria Art. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. Right of the creditor to exercise all of the rights and bring all the actions which his debtor may have against third persons. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person. [Art.1177] In order to satisfy their claims against the debtor, creditors have the ff. successive rights: (1) To levy by attachment and execution upon all the property of the debtor, except those exempt from execution; (2) To exercise all the rights and actions of the debtor, except such are inherently personal to him; and

The parties are not restored to their original situation; prior to termination, parties are obliged to comply with their contractual obligations

(3) To ask for the rescission of the contracts made by the debtor in fraud of their rights. Requisites (1) The person to whom the right of action pertains must be indebted to the creditor (2) The debt is due and demandable

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(3) The creditor must be prejudiced by the failure of the debtor to collect his debts due him from third persons, either through malice or negligence (4) The debtors assets (debtor is insolvent)

are

insufficient

(5) The right of action is not purely personal to the debtor Previous approval of the court is not necessary to exercise the accion subrogatoria. (b) Accion Pauliana Art. 117 7. …they may also impugn the acts which the debtor may have done to defraud them. Art. 13 81 (par 3 .) The following contracts are rescissible: (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them. Rescission, which involves the right of the creditor to attack or impugn by means of rescissory action any act of the debtor which is in fraud and to the prejudice of his rights as creditor.

CIVIL LAW

An accion pauliana thus presupposes the following: 1) A judgment; 2) the issuance by the trial court of a writ of execution for the satisfaction of the judgment, and; 3) the failure of the sheriff to enforce and satisfy the judgment of the court. It requires that the creditor has exhausted the property of the debtor. The date of the decision of the trial court is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor of his property. After all, the decision of the trial court against the debtor will retroact to the time when the debtor became indebted to the creditor. [Cheng v CA, 2001] Accion Subrogatoria Not necessary that creditor’s claim is prior to the acquisition of the I. right by the debtor

Credit must exist before the fraudulent act [Tolentino]

No need for fraudulent intent

Fraudulent intent is required if the contract rescinded is onerous

No period for prescription

Prescribes in 4 years from the discovery of the fraud

Requisites [Cheng v CA, 2001] (1) There is a credit in favor of the plaintiff prior to the alienation by the debtor (2) The debtor has performed a subsequent contract conveying patrimonial benefit to third person/s.

Accion Pauliana

Note: Commentators have conflicting views on WoN new debts contracted by the debtor fall under the scope of accion pauliana.

(c) Other Specific Rem edies

(3) The debtor’s acts are fraudulent to the prejudice of the creditor.

Accion Directa

(4) The creditor has no other legal remedy to satisfy his claim

Subsidiary liability of sublessee to the lessor for rent due from the lessee

(5) The third person who received the property is an accomplice to the fraud. PAGE 197 OF 574

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Article 1730. If it is agreed that the work shall be accomplished to the satisfaction of the proprietor, it is understood that in case of disagreement the question shall be subject to expert judgment.

Art. 1652. The sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, the sublessee shall not be responsible beyond the amount of rent due from him, in accordance with the terms of the sublease, at the time of the extra-judicial demand by the lessor.

If the work is subject to the approval of a third person, his decision shall be final, except in case of fraud or manifest error.

Payments of rent in advance by the sublessee shall be deemed not to have been made, so far as the lessor's claim is concerned, unless said payments were effected in virtue of the custom of the place. Vendor has right of action against possessor whose right is derived from the vendee

Principal has right of action against substitute of agent in cases when the agent is liable for acts of appointed substitute Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution.

Art. 1608. The vendor may bring his action against every possessor whose right is derived from the vendee, even if in the second contract no mention should have been made of the right to repurchase, without prejudice to the provisions of the Mortgage Law and the Land Registration Law with respect to third persons. Laborer/materialsman has right of action against owner of piece of work up to the amount owed by the latter to the contractor.

Petitioner cannot invoke the credit of a different creditor to justify the rescission of the subject deed of donation, because the only creditor who may benefit from the rescission is the creditor who brought the action; those who are strangers to the action cannot benefit from its effects. [Siguan vs. Lim, 1999]

Art. 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount owing from the latter to the contractor at the time the claim is made. However, the following shall not prejudice the laborers, employees and furnishers of materials: (1) Payments made by the owner to the contractor before they are due; (2) Renunciation by the contractor of any amount due him from the owner. This article is subject to the provisions of special laws.

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III. Kinds of Civil Obligations

CIVIL LAW (a) Suspensive – Obligation shall only be effective upon the fulfillment of the condition [1181]. The obligee acquires a mere hope or expectancy, protected by law, upon the constitution of the obligation.

A. PURE OBLIGATIONS Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. Its effectivity or extinguishment does not depend upon the fulfillment or nonfulfillment of a condition or upon the expiration of a term or period. A pure obligation is IMMEDIATELY DEMANDABLE.

B. CONDITIONAL OBLIGATIONS

Before Fulfillment The demandability and acquisition/ effectivity of the II. rights arising from the obligation is suspended.

After Fulfillment The obligation arises or becomes effective. The obligor can be compelled to comply with what is incumbent upon him.

The creditor may bring the appropriate actions for the preservation of his right. Anything paid by mistake may be recovered [Art 1188]. However, this excludes fruits and interests.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition.

B.2. DOCTRINE OF CONSTRUCTIVE FULFILLMENT OF SUSPENSIVE CONDITIONS Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

A condition is a future and uncertain event. This includes acquisition of proof/knowledge of a past event unknown to the parties.

Suspensive condition fulfilled when:

B.1. KINDS OF CONDITIONS 1) As to effect on the obligation a. Suspensive b. Resolutory 2) As to cause/ origin a. Potestative b. Casual c. Mixed (1) As to effect

is

deem ed

(1) Obligor intends to prevent obligee from complying with the condition (2) Obligor actually prevents obligee from complying with the condition Doctrine does not apply to: (1) Resolutory conditions (2) External contingency that is lawfully within the control of the obligor [Taylor v Uy Tieng, 1922] (3) Obligor, in preventing the fulfilment of the condition, acts pursuant to a right PAGE 199 OF 574

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B.3. PRINCIPLE OF RETROACTIVITY IN SUSPENSIVE CONDITIONS Art. 1187, par 1.The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. Rationale: Obligation is constituted when its essential elements concur. The condition imposed is only an accidental element.

[Art. 1187 par 1] (b) Resolutory – The obligation is demandable at once, without prejudice to the effects of the happening of the event (1179 par 2). The rights are immediately vested to the creditor but always subject to the threat or danger of extinction by the happening of the resolutory condition [Tolentino]. Before Fulfillment

After Fulfillment

Preservation of creditor’s rights [Art. 1188, par. 1] also applies to obligations with a resolutory condition.

Whatever may have been paid or delivered by one or both of the parties upon the constitution of the obligation shall have to be returned upon the fulfillment of the condition (Art. 1190 par 1). There is no return to the status quo. However, when the condition is not fulfilled, rights are consolidated and they become absolute in character.

This applies to consensual contracts only. This does not apply to real contracts which can only be perfected by delivery. B.4. EFFECTS OF THE HAPPENING OF SUSPENSIVE CONDITIONS To Give

To Do/Not To Do

If reciprocal, the fruits and interests shall be deemed to have been mutually compensated a matter of justice and convenience

In obligations to do or not to do, the court shall determine the retroactive effect of the condition that has been complied with

[Art. 1187, par. 1]

[Art. 1187, par. 2]

If unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstance it should be inferred that the intention of the persons constituting the same was different.

The power of the court includes the determination of whether or not there will be any retroactive effect. This rule shall likewise apply in obligations with a resolutory condition [Art. 1190 par. 3]

CIVIL LAW

(2) As to Cause/Origin a. Potestative – The fulfilment of the condition depends on the sole act or decision of a party. b. Casual – The fulfilment of the condition depends upon chance or upon the will of a third person. (1182) c. Mixed – The fulfilment of the condition depends partly upon the will of a party to the contract and partly upon chance and/or will of a third person.

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Exclusively upon the Creditor’s Will

Condition and obligation are valid.

Exclusively upon the Debtor’s Will in case of a Suspensive Condition

Condition and obligation are void because to allow such condition would be equivalent to sanctioning obligations which are illusory. It also constitutes a direct contravention of the principle of mutuality of contracts. There is nothing to demand until the debtor wishes to.

(Art. 1182)

CIVIL LAW

Loss, Deterioration, or Im provem ent of a Specific Thing Before Fulfillm ent of Suspensive Condition (Art. 1189) or of Resolutory Condition in Obligations to Do or Not to Do [Art. 1190 par 3] Art. 1189.When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition: (1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

Condition and obligation are valid because in such situation, the position of the debtor is exactly the same as the position of the creditor when the condition is suspensive. It does not render the obligation illusory.

(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;

Defendant executed an endorsement saying that she’ll pay her debt if the house in which she lives is sold. Such condition depended upon her exclusive will; thus, it is void. [Osmeña vs. Rama, 1909]

(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

Exclusively upon the Debtor’s Will in case of a Resolutory Condition (Art. 1179, par. 2)

The condition that payment should be made by Hermosa as soon as he receives funds from the sale of his property in Spain is a mixed condition. The condition implies that the obligor already decided to sell the house and all that was needed to make the obligation demandable is that the sale be consummated and the price thereof remitted to the islands. There were still other conditions that had to concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing to purchase the property under the conditions set by the intestate. [Hermosa vs. Longara, 1953]

(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. Art. 1190, par 3. As for the obligations to do and not to do, the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation.

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Positive and Negative Conditions Without Debtor’s Fault/Act

With Fault/Act

Debtor’s

Loss III.

Obligation extinguished.

IV. is Obligation is converted into one of indemnity for damages. Deterioration

V.

Impairment toVI. be Creditor may choose borne by the creditor. between bringing an action for rescission of the obligation OR bringing an action for specific performance, with damages in either case. Improvement

VII.

Improvement atVIII.the debtor’s expense, the debtor shall ONLY have usufructuary rights.

Improvement by the thing’s nature or by time shall inure to the benefit of the creditor.

Positive [Art. 1184]

Negative [Art. 1185]

The condition that some event happen at a determinate time shall extinguish the obligation

The condition that some event will not happen at a determinate time shall render the obligation effective from the moment

(a) as soon as the time expires or (b) if it has become (a) the time indubitable that indicated has the event will not elapsed, or take place. (b) if it has become evident that the event cannot occur. Where no date of fulfilment is stipulated, condition must be fulfilled within a reasonable time or time probably contemplated according to the nature of the obligation [Art. 1185, par 2].

C. OBLIGATIONS WITH A PERIOD OR TERM

Upon the happening of the resolutory condition, the rules of Article 1189 shall be applied to the party who is bound to return (i.e. the creditor in the original obligation). Impossible Conditions Art. 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. The condition not to do an impossible thing shall be considered as not having been agreed upon. In testaments (Art. 873) and donations (Art. 727), an unlawful or impossible condition does not annul the transaction. The condition is merely deemed not written.

Art. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197.

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Period or Term: Interval of time, which either suspends demandability or produces extinguishment.

Effect of Advance Payment or Delivery Art. 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests.

The period must be: future, certain, and possible.[Tolentino] A fortuitous event does not interrupt the running of the period. It only relieves the contracting parties from the fulfillment of their respective obligations during the period. Term/Period Distinguished

and

Term/Period IX.

Interval of time which X. is future and certain Must necessarilyXI. come, although it may not be known when

CIVIL LAW

This is in contrast to payment by mistake of the obligor before the occurrence of the suspensive condition, where fruits and interests may no longer be recovered.

Condition

Loss, Deterioration, or Im provem ent of the Thing Before Period Expires

Condition

Art. 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in Article 1189 shall be observed.

Fact or event which is future and uncertain May or may not happen

Benefit of the Period

XII.

No effect on existence XIII. of the obligation, only its demandability or performance

Gives rise to an obligation or extinguishes one already existing

XIV.

No retroactive effect XV. unless there is an agreement to the contrary

Has retroactive effect

XVI.

When it is left XVII. exclusively to the will of the debtor, the existence of the obligation is not affected

When it is left exclusively to the will of the debtor, the very existence of the obligation is affected

Kinds of Period [Art 1193] (1) Ex die – period with a suspensive effect. Obligation becomes demandable after the lapse of the period.

Art. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. Period for the benefit creditor or debtor Creditor XVIII.

Creditor may demand XIX. the fulfillment or performance of the obligation at any time but the obligor cannot compel him to accept payment before the expiration of the period.

(2) In diem – period with a resolutory effect. Obligation becomes demandable at once but is extinguished after the lapse of the period.

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either

Debtor Debtor may oppose any premature demand on the part of the obligee for the performance of the obligation, or if he so desires, he may renounce the benefit of the period by performing his obligation in advance.

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If the period is for the benefit of the debtor alone, he shall lose every right to m ake use of it (1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; (2) When he does not furnish to the creditor the guaranties or securities which he has promised; (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory; (4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; (5) When the debtor attempts to abscond [Art. 1198] (6) When required by law or stipulation; (7) If parties stipulated an acceleration clause [Tolentino] The obligation immediately becomes due and demandable even if the period has not yet expired. The obligation becomes a pure one. [Tolentino] W hen Courts May Fix Period Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. The courts shall also fix the duration of the period when it depends upon the will of the debtor. In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.

CIVIL LAW

General Rule: The court is not authorized to fix a period for the parties [De Leon] Exceptions: If the Court determines that one of the 3 circumstances are present, it must decide the period “probably contemplated by the parties” [Araneta v. Phil. Sugar Estates, 1967] (a) obligation does not fix a period, but from its nature and circumstances, it can be inferred that a period was intended (b) the period is void, such as when it depends upon the will of the debtor (c) If the debtor binds himself when his means permit him to do so. Art. 1197 does not apply to contract of services and to pure obligations. The court, however, to prevent unreasonable interpretations of the immediate demandability of pure obligations, may fix a reasonable time in which the debtor may pay [Tolentino] The only action that can be maintained by the creditor under Art. 1197 is the action to ask the courts to fix the term within which the debtor must comply with his obligation. The fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith, and such period has arrived. Art. 1197 applies to a situation in which the parties intended a period. [Where] no period was intended by the parties… Their mere failure to fix the duration of their agreement does not necessarily justify or authorize the courts to do so. Based on the reasons [herein], the agreement subsisted as long as the parents and the children mutually benefited from the arrangement. Effectively, there is a resolutory condition in such agreement. When a change in the condition occurs, the agreement may be deemed terminated. [Macasaet v Macasaet, 2004]

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D. ALTERNATIVE OR FACULTATIVE OBLIGATIONS Alternative and Conditions Distinguished Alternative Obligations XX.

XXII.

XXIV.

Of the two or more XXI. prestations, several are due.

Alternative obligations: Several prestations are due but the performance of one is sufficient. [De Leon]

Right of Choice [Art. 1200]

Facultative Obligations

Belongs to the debtor, UNLESS—

Of the two or more prestations, only one is due, while the other/s may be performed in substitution of the one due.

May be compliedXXIII. with by performance of one of the prestations which are alternatively due.

May be complied with by performance of another prestation in substitution of that which is due.

Choice of prestation XXVI. may pertain to debtor, creditor, or third person.

Choice of prestation pertains only to the debtor.

(1) it is expressly granted to the creditor (2) it is expressly granted to a third person Lim itations to the right of choice [Tolentino] (1) indivisible (cannot choose part of one prestation and part of another; See Art. 1199, par. 2) (2) impossible prestations (3) unlawful prestations (4) those which could not have been the object of the obligation W hen choice shall produce effect

XXVII. Loss/impossibility XXX. of all prestations due to fortuitous event shall extinguish the obligation. XXVIII.

XXXI.

I.

Facultative

XXV.

XXIX.

CIVIL LAW

Loss/impossibility of one of the prestations does not extinguish the obligation.

Culpable loss of any XXXII. of the objects alternatively due before the choice is made may give rise to liability on the part of the debtor.

Loss/impossibility of the prestation due to fortuitous event is sufficient to extinguish the obligation. Loss/impossibility of the substitute/s does not extinguish the obligation, provided the obligation which is due subsists Culpable loss of the object which the debtor may deliver in substitution before the substitution is effected does not give rise to any liability on the part of the debtor.

Choice shall produce no effect except from the time it has been communicated. [Art. 1201] Form of notice Notice of selection or choice may be in any form provided it is sufficient to make the other party know that the selection has been made. It can be: (1) oral (2) in writing (3) tacit (4) any other equivocal means [Tolentino] Selection may be implied from the fact of performance [Tolentino] Consent of other party The law does not require the other party to consent to the choice made by the party entitled to choose. The only possible

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exception is when the debtor has chosen a prestation which could not have been the object of the obligation; the creditor’s consent would bring about a novation of the obligation [Ibid.]

CIVIL LAW

Loss of Specific Things or Impossibility of Performance of Prestations in an Alternative Obligation If Debtor’s Choice [Art. 1204]

Consent in obligations with various debtors and creditors In a joint obligation w/ various debtors and creditors, the consent of all is necessary to make the selection effective. If the obligation is solidary, and there is no stipulation to the contrary, the choice by one will be binding personally upon him but not as to the others [Tolentino]. Debtor cannot make delays selection

a

choice,

If the debtor does not select at the time when performance should be effected, the choice can be made for him by the creditor by applying Art. 1167 in obligations to do (debtor considered to have waived his right, subject to equity considerations) [Tolentino].

Debtor is released from the obligation.

The effect of the notice is to limit the obligation to the object or prestation selected. The obligation is converted into a simple obligation to perform the prestation chosen. Once a selection has been communicated, it is irrevocable [Ibid.]

Debtor to perform that which he shall choose from among the remainder.

(2) Only one prestation is practicable [Art. 1202]

Debtor to perform that which the creditor shall choose from among the remainder, without liability for damages.

One prestation remains Debtor to perform that which remains.

If Creditor’s Choice [Art. 1205] Fortuitous Event

Debtor’s Fault

All prestations lost/impossible Debtor is released from the obligation.

is

(1) The person with the right of choice has communicated his choice [Arts. 1201, 1205 par 1]

Creditor shall have a right to indemnity for damages based on the value of the last thing which disappeared or service which become impossible, plus damages other than the value may also be awarded

Som e prestations lost/im possible

Debtor to perform that which remains.

Effect of notice of choice

Debtor’s Fault

All prestations lost/impossible

or

If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. [Art 1203]

Instances when obligation converted into a sim ple obligation

Fortuitous Event

Creditor may claim the price/value of any of them, with indemnity for damages.

Som e prestations lost/im possible Debtor to deliver that which he shall choose from among the remainder.

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Creditor may claim any of those subsisting without a right to damages OR price/value of the thing lost, with right

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Ones which cannot be validly performed in parts [Tolentino]

to damages. One prestation remains Debtor to perform that which remains.

CIVIL LAW

Creditor may claim the remaining thing without a right to damages OR the price/value of the thing lost with right to damages.

Rules (1) Divisibility/indivisibility refers to the performance of the prestation and not to the thing which is the object thereof. The thing may be divisible, yet the obligation may be indivisible.

Facultative obligations: Only one prestation is agreed upon, but the obligor may render another in substitution. [Art. 1206]

(2) When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible [Art.1225, par. 2].

Loss or deterioration of Substitute in Facultative Obligations [Art. 1206]

(3) Even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties.

II.

Before Substitution is Made

After Substitution is Made

If due to bad faith or fraud of obligor: obligor is liable. XXXIII. XXXIV. XXXV. If due to the negligence of the obligor: obligor is not liable. XXXVI.

E. DIVISIBLE OBLIGATIONS

The loss or deterioration of the substitute on account of the obligor’s delay, negligence, or fraud, renders the obligor liable because once the substitution is made, the obligation is converted into a simple one with the substituted thing as the object of the obligation.

AND

INDIVISIBLE

Divisible Obligations Ones which are susceptible of partial performance, that is, the debtor can legally perform the obligation by parts and the creditor cannot demand a single performance of the entire obligation [Tolentino]

(4) In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each particular case. (5) A joint indivisible obligation gives rise to indemnity for damages from the time any one of the debtors does not comply with his undertaking [Art. 1224]. Effect Creditor cannot be compelled to receive partially the prestation in which the obligation consists; neither may the debtor be required to make the partial payment [Art. 1248], UNLESS: (1) The obligation expressly stipulates the contrary. (2) The different prestations constituting the objects of the obligation are subject to different terms and conditions. (3) The obligation is in part liquidated and in part unliquidated.

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Cessation of Indivisibility a) By conversion of the obligation into an obligation to pay damages b) By novation of the obligation c) By death of creditor or the debtor (division among heirs of the deceased)

F. OBLIGATIONS CLAUSE

WITH

A

PENAL

(2) Debtor cannot exempt himself from the performance of the principal obligation by paying the stipulated penalty UNLESS this right has been expressly reserved for him [Art. 1227]. (3) Creditor cannot demand the fulfillment of the principal obligation and demanding the satisfaction of the penalty at the same time UNLESS the right has been clearly granted to him [Art. 1227]. A tacit or implied grant is admissible. a. If the creditor chooses to demand the satisfaction of the penalty, he cannot afterwards demand the fulfillment of the obligation. b. If there was fault on the part of the debtor, creditor may demand not only the satisfaction of the penalty but also the payment of damages. c. If the creditor has chosen to demand the fulfillment of the principal obligation and the performance thereof becomes impossible without his fault, he may still demand the satisfaction of the penalty.

Penal Clause An accessory undertaking to assume greater liability in case of breach. If the principal obligation is void, the penal clause shall also be void. However, the nullity of the penal clause does not carry with it the nullity of the principal obligation [Art.1230]. Purposes of Penalty (1) Funcion coercitiva de garantia - to insure the performance of the obligation. (2) Funcion liquidatoria - to liquidate the amount of damages to be awarded to the injured party in case of breach of the principal obligation (compensatory). (3) Funcion restrictamente penal - to punish the obligor in case of breach of the principal obligation (punitive). Rules on Penalty (1) The penalty shall substitute the indemnity for damages and payment of interest in case of non-compliance [Art. 1226], UNLESS: a. There is an express provision to that effect b. The obligor refuses to pay the penalty c. The obligor is guilty of fraud in non-fulfillment In this case, damages and interest aside from the penalty may be awarded [Tolentino]

CIVIL LAW

Enforcement of the Penalty The enforcement of the penalty can be demanded by the creditor only when the nonperformance is due to the fault or fraud of the debtor. However, the creditor does not have to prove fault or fraud, since the nonperformance gives rise to the presumption of fault. Thus, the burden of proof to show that non-performance was due to force majeure or creditor’s acts lies with the debtor. [Tolentino] Proof of Actual Damage Proof of actual damage suffered by the creditor is NOT NECESSARY in order that the penalty may be enforced [Art. 1228] That proof of actual damages is not necessary is applicable only to the general rule stated in Art. 1226, where penalty shall substitute for damages and interest, but not to the exceptions where interest or damages aside from the penalty may be awarded.

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Liquidated dam ages The penalty is exactly identical with what is known as “liquidated damages” in Art. 2226. In cases where there has been partial or irregular compliance, as in this case, there will be no substantial difference between a penalty and liquidated damages insofar as legal results are concerned and either may be recovered without the necessity of proving actual damages and both may be reduced when proper. [Filinvest v CA, G.R. No.138980, 2005] W hen Penalty m ay be Reduced [Art. 1229]:

CIVIL LAW

IV. Joint and Solidary Obligations A. JOINT OBLIGATIONS The whole obligation, whether capable of division into equal parts or not, is to be paid or performed by several debtors (joint debtors) and/or demanded by several creditors (joint creditors). Each debtor is liable only for a proportionate part of the debt, and each creditor is entitled only to a proportionate part of the credit. [Tolentino]

(1) If the principal obligation has been partly complied with.

Terms used for Joint Obligations

(2) If the principal obligation has been irregularly complied with.

(2) Mancomunada simple

(3) If the penalty is iniquitous or unconscionable, even if there has been no performance.

(4) “We promise to pay”, followed by signatures of two or more persons

(1) Mancomunada (3) Pro rata

Presumption of Joint Obligation The question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolution would depend on such factor as, but not necessarily confined to, the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties, and the like, the application of which, by and large, is addressed to the sound discretion of the court. [Ligutan v CA, G.R. No. 138677, 2002]

An obligation is presumed joint if there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors in one and the same obligation [Art. 1207] Exceptions: (1) When the obligation expressly states that there is solidarity (2) When the law requires solidarity, i.e. quasi-delicts (Art. 2194), joint payees by mistake (Art. 2157), acts under articles 1922 if committed by two or more persons acting jointly (3) When the nature of the obligation requires solidarity (4) When a charge or condition imposed upon heirs or legatees, and the testament expressly makes the charge or condition in solidum (5) When the solidary responsibility is imputed by a final judgment upon several defendants

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Presumption of Divisibility in Joint Obligations Credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors, the credits or debts being considered distinct from one another. [Art.1208] Principal Effects [Tolentino]

of

Joint

Liability

(1) Demand by one creditor upon the debtor, produces the effects of default only with respect to the creditor who demanded and the debtor on whom the demand was made, but not with respect to others. (2) Interruption of prescription by the judicial demand of one creditor upon a debtor does not benefit the other creditors nor interrupt the prescription as to other debtors. (3) Vices of each obligation arising from the personal defect of a particular debtor or creditor do not affect the obligation or right of the others. (4) Insolvency of a debtor does not increase the responsibility of his co-debtors, nor does it authorize a creditor to demand anything from his co-debtors. (5) Defense of res judicata is not extended from one debtor to another. I.

Joint Divisible Obligation

One where a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which, each of the creditors has a right to demand, and each of the debtors is bound to render compliance with his proportionate part of the prestation which constitute the object of the obligation (obligacion mancomunada). II.

Joint Indivisible Obligations

Art. 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be

CIVIL LAW

insolvent, the others shall not be liable for his share. When there are several debtors or creditors, but the prestation is indivisible, the obligation is joint, UNLESS solidarity has been stipulated [Tolentino] W hen Indivisible [Art. 1225] (1) Obligations to give definite things (2) Obligations not susceptible of partial performance (3) Indivisibility is provided by law or intended by the parties, even though object or service may be physically divisible (4) In obligations not to do, when character of prestation requires indivisibility Plurality of Indivisible

Creditors

in

Joint

If one or some of the creditors demands the prestation, the debtor may legally refuse to deliver to them. He can insist that all the creditors together receive the thing, and if any of them refuses to join the others, the debtor may deposit the thing in court by way of consignation. [Tolentino] Plurality of Indivisible

Debtors

in

Joint

The obligation can be performed by them only by acting together. Hence all must be sued. If any of the debtors is not willing to perform, the prestation is converted into an indemnification for damages. [Tolentino] Failure of one debtor to perform in a joint indivisible obligation gives rise to indem nity for dam ages Art. 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises

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shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists.

In case of breach of obligation by one of the debtors, damages due must be borne by him alone.

Joint Indivisible Prescription

Joint Indivisible Obligations In case of breach where one of the joint debtors fails to comply with his undertaking, the obligation can no longer be fulfilled or performed. Thus, the action must be converted into one for indemnity for damages, with each debtor liable only for his part in the price or value of the prestation. Obligations

creditor

or

active

Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and conditions. [Art. 1211]

Sum m ary: in case of breach Joint Divisible Obligations

CIVIL LAW

and

The act of a joint creditor which would ordinarily interrupt the period of prescription would not have an effect on prescription because the indivisible character of the obligation requires collective action of the creditors. Hence, the act of one alone is ineffective to interrupt prescription [Tolentino]

B. SOLIDARY OBLIGATIONS An obligation where there is concurrence of several creditors, or of several debtors, or of several creditors and several debtors, by virtue of which, each of the creditors has the right to demand, and each of the debtors is bound to render, entire compliance with the prestation which constitutes the object of the obligation (obligacion solidaria). Each debtor is liable for the entire obligation (solidary debtor or passive solidarity), and each creditor is entitled to demand the entire

Terms used for Solidary Obligations (1) Mancomunada solidaria (2) Joint and several (3) In solidum (4) Juntos o separamende (5) “I promise to pay”, followed by signatures of two or more persons (6) Individually and collectively (7) Individually liable (8) Individually and jointly liable Distinguished from Indivisibility Art. 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. Solidarity

Indivisibility

Refers to the legal tie (vinculum juris), and consequently to the subjects or parties of the obligation

Refers to the prestation that is not capable of partial performance

More than one creditor or more than one debtor (plurality of subjects)

Exists even if there is only one creditor and/or one debtor

Each creditor may demand the entire prestation and each debtor is bound to pay the entire prestation

Each creditor cannot demand more than his share and each debtor is not bound to pay more than his share

Effect of breach:

Effect of breach: Obligation is

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converted to indemnity for damages

As to Uniformity

All debtors are liable for breach committed by a codebtor

Only the debtors guilty of breach of obligation liable for damages

(2) Non-uniform – Parties are bound by different conditions or terms

All debtors are proportionately liable for insolvency of one debtor

Other debtors are not liable if one debtor is insolvent

Active Solidary creditors)

Solidarity remains

(1) Uniform – Parties are bound by the same conditions or terms

Obligation

(among

Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him.

Kinds of Solidary Obligations As to Source (1) Legal – imposed by law (2) Conventional – agreed upon by parties

A relationship of mutual agency is created among co-creditors.

(3) Real – imposed by the nature of the obligation

Effects of Active Solidarity [Tolentino]

As to Parties Bound (1) Active (solidarity among creditors) – Each creditor has the authority to claim and enforce the rights of all, with the resulting obligation of paying everyone what belongs to him. (2) Passive (solidarity among debtors) – Each debtor can be made to answer for the others, with the right on the part of the debtor-payor to recover from the others their respective shares. (3) Mixed (solidarity among creditors and debtors) – Solidarity is not destroyed by the fact that the obligation of each debtor is subject to different conditions or periods. The creditor can commence an action against anyone of the debtors for the compliance with the entire obligation minus the portion or share which corresponds to the debtor affected by the condition or period.

(1) Death of solidary creditor does not transmit solidarity to his heirs but rather to all of them taken together (joint) (2) Each represents the other in receiving payment and all other advantageous acts (i.e. interrupt prescription and render the debtor in default for the benefit of all creditors) (3) One creditor does NOT represent all others in acts such as novation (even if advantageous), compensation and remission. In this case, even if debtor is released, the other creditors can still enforce their rights against the creditor who made the novation, compensation or remission [Art. 1215, par. 2] (4) The creditor who collects the debt, shall be liable to the others for the share in the obligation corresponding to them. [Art. 1215, par 2] (5) The credit is divided equally among them, unless agreement to the contrary. (6) Debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him who demanded [Art. 1214]

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A solidary creditor cannot assign his rights without the consent of the others [Art. 1213]. Such an assignment produces no effect whatsoever

Effects of Passive Solidarity [Tolentino]

Passive Solidary Obligation

(2) Each debtor may set up his own claims against the creditor as payment of the obligation

Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.

(1) Each debtor can be required to pay the entire obligation, but after payment he can recover from the co-creditors their respective shares

(3) Remission of the entire debt affects all debtors, but when remission is limited to the share of one debtor, the other debtors are still liable for the balance of the obligation a. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors. [Art. 1220]

Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

(4) All debtors are liable for the loss of the thing due, even if only one of them is at fault, or after incurring delay it is lost by fortuitous event

He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.

(5) Interruption of prescription as to one debtor affects all others, but renunciation of prescription already had does not prejudice the others. (Reason: prescription extinguishes the mutual representation among solidary debtors)

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his codebtors, in proportion to the debt of each.

(6) Interests due by delay of one is borne by all of them Defenses Available Debtor [Art. 1222]

Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible.

to

a

Solidary

(1) Those derived from the nature of the obligation

A relationship of mutual guaranty is created among co-debtors.

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a. Defenses inherent in an obligation include nonexistence of the obligation because of absolute simulation or illicit object, nullity due to defect in capacity or consent of all debtors, unenforceability, non-performance of suspension condition or nonarrival of period, extinguishment of the

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(2) Those personal to him a. Personal defenses such as minority, insanity, fraud, violence, or intimidation will serve as a complete exemption of the defendant debtor from liability to the creditor (3) Those pertaining to his own share (4) Those personally belonging to other co-debtors but only as regards that part of the debt for which the latter are responsible. Comparing demand upon Solidary Debtor and Paym ent by a Solidary Debtor Demand Upon a Solidary Debtor

Payment by a Solidary Debtor

The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others so long as the debt has not been fully collected [Art. 1216].

Full payment made by one of the solidary debtors extinguishes the obligation [Art. 1217].

The creditor may proceed against any one of the solidary debtors or all simultaneously [Art. 1216].

If two or more solidary debtors offer to pay, the creditor may choose which offer to accept [Art. 1217].

A creditor’s right to proceed against the surety exists independently of his right to proceed against the principal

The solidary debtor who made the payment shall have the right to claim from his co-debtors the share which corresponds to them with interest, UNLESS barred by prescription or

CIVIL LAW illegality [Art. 1218].

Art 2047 specifically calls for the application of the provisions on solidary obligations to suretyship contracts. In particular, Art 1217 recognizes the right of reimbursement from a co-debtor in favor of the one who paid (i.e., the surety). In contrast, Art 1218 is definitive on when reimbursement is unavailing, such that only those payments made after the obligation has prescribed or became illegal shall not entitle a solidary debtor to reimbursement. [Diamond Builders v Country Bankers, 2007] Loss of the thing or im possibility of perform ance of the passive/mixed solidary obligation [Art. 1221] Without fault of The obligation the extinguished. debtors

shall

be

With fault of any of the debtors

All debtors shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor.

Through a fortuitous event after one incurred in delay

All debtors shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor.

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V. Extinguishment of Obligations

CIVIL LAW

obligee's will. (1166a) Exceptions to Art. 1244: (1) If the obligation is facultative

Art. 1231. Obligations are extinguished:

(2) If the creditor agrees (Dation in payment)

(1) By payment or performance; (2) By the loss of the thing due; (3) By the condonation or remission of the debt; (4) By the confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By novation. Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code.

A. PAYMENT OR PERFORMANCE 1. Paym ent (1) The delivery of money OR (2) The performance of an obligation [Art.1232] 2. Object of Payment Principle of Integrity of Payment Art. 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. Article 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due. In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the

(3) Substantial Performance by Debtor (Creditor only has a right to damages) [Art 1234] Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to receive the prestations in which the obligation consists. Neither may the debtor be required to make partial payments. However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtor may effect the payment of the former without waiting for the liquidation of the latter. Art. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. 3. By whom Payor must have free disposal of the thing due and capacity to alienate it. [Art. 1239] (1) The debtor or his duly authorized agent (2) The debtor’s heir or successor in interest (3) A third person interested in the fulfillment of the obligation (i.e. codebtor, guarantor) whether the debtor consents to it or not, and even without debtor’s knowledge [Art 1302]. This includes payment by a joint debtor [Monte de Piedad v Fernando Rodrigo, 1936] but not a solidary co-debtor. (4) A third person not interested in the obligation; but the creditor is not bound to accept payment by him, unless there is a stipulation to the contrary [Art 1236].

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Note: When payment is made by a 3rd person without the consent of the debtor, such payment has NO EFFECT on the running of the prescriptive period. [Tolentino]

CIVIL LAW

Art. 1238. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which requires the debtor's consent. But the payment is in any case valid as to the creditor who has accepted it.

Payment by a third person Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

4. To whom

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor.

(3) Any person authorized to receive it [Art. 1240]

(1) The person in whose favor the obligation has been constituted; or (2) His successor in interest; or

Payment to a person who is incapacitated to administer his property shall be valid: (1) if he has kept the thing delivered, OR (2) insofar as the payment has beneficial to him. [Art. 1241 par 1]

Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.

Payment made in good faith to any person in possession of the credit shall release the debtor. [Art. 1242]

Articles 1236 and 1237 merely lay down a presumption. However, by virtue of the parties’ freedom to contract, the parties could stipulate otherwise. But such mutual agreement, being an exception to presumed course of events as laid down by Articles 1236 and 1237, must be adequately proven [Carandang v de Guzman, 2006]. Reimbursement Distinguished

&

been

Subrogation

Reimbursement

Subrogation

Personal action to recover amount paid

Includes reimbursement, but also the exercise of other rights attached to the original obligation (e.g. guaranties, securities)

Payment made to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. [Art. 1243] Payment to a third person [Art. 1241 par 2] Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. That payment has redounded to the benefit of the credit must be proved, EXCEPT: (1) If after the payment, the third person acquires the creditor's rights; (2) If the creditor ratifies the payment to the third person; (3) If by the creditor's conduct, the debtor has been led to believe that the third person had authority to receive the payment. [Art. 1241]

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5. W here: Place of Paym ent

a. It is encashed; or

(1) In the place designated in the obligation.

b. It was impaired due to creditor’s fault. [Tolentino]

(2) In the absence of stipulation— a. If obligation is to deliver a determinate thing: wherever the thing might be at the moment the obligation was constituted. b. In any other case: domicile of debtor [Art. 1251] 6. W hen: Tim e of Paym ent Upon demand, EXCEPT-

Extraordinary inflation or deflation Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.

(1) When time is of the essence (2) When the debtor loses the benefit of the period (3) When the obligation is reciprocal

(1) an official declaration of extraordinary inflation or deflation from the BSP

7. Form of Payment

(2) obligation was contractual in nature; and (3) parties expressly agreed to consider the effects of the extraordinary inflation or deflation [Equitable PCI Bank v Ng Sheung, December 19 2007] (Note: the 3rd requisite does not folow the scheme of Article 1250)

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

A.1 APPLICATION OF PAYMENTS Designation of the debt to which should be applied a payment made by a debtor who owes several debts to the same creditor. Requisites:

In the meantime, the action derived from the original obligation shall be held in the abeyance.

Legal Tender: Such currency which in a given jurisdiction can be used in the payment of debts, and which cannot be refused by the creditor. When payment not in legal tender is accepted by the creditor: 1. Demandability of obligation is suspended 2. Produces the effect of payment when:

For extraordinary inflation (or deflation) to affect an obligation, the following requisites must be proven:

(1) There is a plurality of debts (2) Debts are of the same kind (3) Debts are owed to the same creditor and by the same debtor (4) All debts must be due, UNLESS parties so stipulate, or when application is made by the party for whose benefit the term has been constituted (5) Payment made is not sufficient to cover all debts [Art. 1252] Rules on Application (1) Preferential right of debtor - debtor has the right to select which of his debts he is paying.

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(2) The debtor makes the designation at the time he makes the payment. (3) If not, the creditor makes the application, by so stating in the receipt that he issues, unless there is cause for invalidating the contract. (4) If neither the creditor nor debtor exercises the right to apply, or if the application is not valid, the application is made by operation of law.

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A.2. DATION IN PAYMENT Delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation (dacion en pago). Requisites: (1) Existence of a money obligation

(5) If debt produces interest, the payment is not to be applied to the principal unless the interests are covered.

(2) Alienation to the creditor of a property by the debtor with the creditor’s consent

(6) When no application can be inferred from the circumstances of payment, it is applied: (a) to the most onerous debt of the debtor; or (b) if debts due are of the same nature and burden, to all the debts in proportion.

A.3. PAYMENT BY CESSION

(7) Rules of application of payment may not be invoked by a surety or solidary guarantor. Rules on application of payment cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular. There must be full and faithful compliance with the terms of the contract. [Reparations Commission vs. Universal Deep Sea Fishing Corp, 1978] The debtor’s right to apply payment can be waived and even granted to the creditor if the debtor so agrees [Premiere Development v Central Surety, 2009]

(3) Satisfaction of the money obligation

Special form of payment where the debtor assigns/abandons ALL his property for the benefit of his creditors in order that from the proceeds thereof, the latter may obtain payment of their credits. Requisites: (1) There is a plurality of debts (2) There is a plurality of creditors (3) Partial or relative insolvency of debtor (4) Acceptance of the cession by the creditors [Art. 1255] Debtor is released only for the net proceeds unless there is a stipulation to the contrary. Cession and Dation Distinguished

Lim itations: 1. Right of creditor to refuse partial payment [Art. 1248] 2. Rule on satisfaction of interest before the Principal. [Art. 1453] 3. Debtor cannot apply payment to a debt which is not yet liquidated 4. He cannot choose a debt with a period (established for the creditor’s benefit) before the period has arrived. 5. Stipulation as to preference of payment. [Tolentino]

Cession

Dacion en pago

Plurality of creditors

One creditor

Debtor must be partially or relatively insolvent

Debtor not necessarily in state of financial difficulty

Universality of property is ceded

Thing delivered is equivalent of performance

Merely releases debtor for the net proceeds of things ceded or assigned,

Extinguishes obligation to the extent of the value of the thing

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delivered, as agreed upon, proved or implied from the conduct of the creditor

(4) Amount or thing due was placed at the disposal of the court

Involves all properties of debtor

Does not involve all properties of debtor

W hen tender and refusal not required [Art. 1256]

Creditor does not become owner of the ceded property

Creditor becomes owner

(1) Creditor is absent or unknown, or does not appear at the place of payment.

unless there is contrary intention

A.4. TENDER CONSIGNATION

OF

(5) After the consignation has been made, the persons interested were notified thereof

(2) Creditor is incapacitated to receive the thing due at the time of payment. PAYMENT

AND

Tender of payment: Manifestation made by the debtor to the creditor of his desire to comply with his obligation, with offer of immediate performance.

(3) Without just cause, creditor refuses to give receipt. (4) Two or more persons claim the same right to collect (i.e. Interpleader) (5) Title of the obligation has been lost.

(1) Preparatory act to consignation

W hat constitutes valid consignation

(2) Extrajudicial in character

In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfilment of the obligation.

Consignation: Deposit of the object of obligation in a competent court in accordance with the rules prescribed by law whenever the creditor unjustly refuses payment or because of some circumstances which render direct payment to the creditor impossible or inadvisable. (1) Principal act which constitutes a form of payment (2) Judicial in character Requisites of consignation (1) There is a debt due (2) Consignation is made because of some legal cause a. There was tender of payment and creditor refuses without just cause to accept it b. Instances when consignation alone would suffice as provided under Art. 1256 (3) Previous notice of consignation was given to those persons interested in the performance of the obligation

The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment. [Art. 1257] How consignation is m ade Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof. W ho bears the expenses The expenses of consignation, when properly made, shall be charged against the creditor. [Art. 1259]

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W ithdrawal of Consigned Amount Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force [Art. 1260, par 2]. The amount consigned with the trial court can no longer be withdrawn by the debtor because creditor’s prayer in his answer that the amount consigned be awarded to him is equivalent to an acceptance of the consignation, which has the effect of extinguishing debtor’s obligation [Pabugais v Sahijwani, 2004]. Effects of Consignation If accepted by the creditor or declared properly made by the Court: (1) Debtor is released in same manner as if he had performed the obligation at the time of consignation (2) Accrual of interest is suspended from the moment of consignation. (3) Deterioration or loss of the thing or amount consigned, occurring without the fault of debtor, must be borne by creditor from the moment of deposit Any increment or increase in the value of the thing after consignation inures to the benefit of the creditor Note: Unless there is an unjust refusal by a creditor to accept payment from a debtor, Article 1256 cannot apply. The possession of the property by the petitioners being by mere tolerance as they failed to establish the existence of any contractual relations between them and the respondent, the bank deposit made by the petitioners intended as consignation has no legal effect [Llobrera v Fernandez, May 2, 2006].

CIVIL LAW

gives rise to the obligation on the part of the SELLER to enter into a contract of sale. Tender of payment alone is NOT enough [Adelfa Properties v CA]. On the other hand, in an “Option Contract”, tender of payment is enough to perfect the contract of sale Effects of W ithdrawal by Debtor [Arts. 1260- 1261] (1) Before approval of the court - Obligation remains in force. (2) After approval of the court or acceptance by the creditor, with the consent of the latter - Obligation remains in force, but guarantors and co-debtors are liberated. Preference of the creditor over the thing is lost. (3) After approval of the court or acceptance by the creditor, and without creditor’s consent - Obligation subsists, without change in the liability of guarantors and co-debtors, or the creditor’s right of preference.

B. LOSS OF THE THING DUE OR IMPOSSIBILITY OR DIFFICULTY OF PERFORMANCE Loss A thing is lost when it perishes, goes out of commerce or disappears in such a way that its existence is unknown or it cannot be recovered [Art. 1189, no. 2] Effects of Loss [Arts. 1262-1263] Obligation to Deliver a Specific Thing Obligation is extinguished if the thing was destroyed without fault of the debtor and before he has incurred delay.

In a “Contract To Sell”, tender and consignation is necessary to bring into effect the suspensive condition of payment which PAGE 220 OF 574

Obligation to Deliver a Generic Thing Loss of a generic thing does not extinguish an obligation, EXCEPT in case of delimited generic things, where the kind or class is limited itself, and the whole class perishes.

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An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor [Gaisano v Insurance Company, 2006].

CIVIL LAW

Partial loss Art. 1264. The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation.

Actions Against Third Persons Art. 1269. The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss. Other cases where loss is attributed to debtor (1) Law provides that the debtor shall be liable even if the loss is due to fortuitous events [Arts. 1942, 1979, 2147, 2159]. (2) Obligor is made liable by express stipulation. (3) Nature of the obligation requires an assumption of risk. (4) Fault or negligence concurs with the fortuitous event.

Partial loss due to a fortuitous event does not extinguish the obligation. The thing due shall be delivered in its present condition, without any liability on the part of the debtor, UNLESS the obligation is extinguished when the part lost was of such extent as to make the thing useless. Impossibility of Performance [Arts. 1266-1267] When prestation becomes legally or physically impossible (by fortuitous event or force majeure), the debtor is released. Impossibility must have occurred without fault of debtor, and after the obligation has been constituted.

(5) Loss occurs after delay.

Subjective im possibility

(6) Debtor has promised to deliver the same thing to two or more different parties.

Where there is no physical or legal loss, but the thing belongs to another, the performance by the debtor becomes impossible. The debtor must indemnify the creditor for damages.

(7) Obligation arises from a criminal act. (8) Borrower in commodatum: saves his own things and not the thing of the creditor during a fortuitous event.

Partial Impossibility Loss of the thing when in possession of the debtor

Courts shall determine whether it is so important as to extinguish the obligation. (1) If debtor has performed part of the obligation when impossibility occurred, creditor must pay the part done as long as he benefits from it. (2) If debtor received full payment from creditor, he must return excess amount corresponding to part which was impossible to perform.

Loss was due to the debtor’s fault. Burden of explaining the loss of the thing falls upon him, UNLESS due to an earthquake, flood, storm, or other natural calamity [Art. 1265]. In Reciprocal Obligations Extinguishment of the obligation due to loss of the thing or impossibility of performance affects both the creditor and debtor; the entire juridical relation is extinguished.

Doctrine of Unforeseen Events

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Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of all the parties, the obligor may also be released therefrom, in whole or in part.

Total – extinguishes the entire obligation.

2. Partial – refers to only a particular aspect of the obligation, i.e. amount of indebtedness or an accessory obligation.

C. CONDONATION B. As to Form Condonation or Remission of the Debt An act of liberality, by virtue of which, without receiving any equivalent, the creditor renounces the enforcement of the obligation. The obligation is extinguished either in whole or in such part of the same to which remission refers. Requisites:

Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly. One and the other kind shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation.

(1) Debt must be existing and demandable.

1. Express Condonation

(2) Renunciation must be gratuitous.

Made formally: in accordance with forms of ordinary donations. [Art. 1270]

(3) Debtor must accept the remission. [Art.

1270]

An express remission must accepted in order to be effective.

If the renunciation is not gratuitous, the nature of the act changes and it may be:

When the debt refers to movable or personal property, Art 748 will govern; if it refers to immovable or real property, Art 749 applies.

(1) Dation in payment – when the creditor receives a thing different from that stipulated; (2) Novation – when the object or principal conditions of the obligation have changed; (3) Compromise – when the matter renounced is in litigation or dispute and in exchange of some concession which the creditor receives. Although the debtor must accept the remission, nothing prevents the creditor from making a unilateral declaration of his right, abandoning and thereby extinguishing his credit, as expressly allowed by Art 6. Kinds of Condonation:

be

2. Implied Condonation Inferred from the acts of the parties. Presumptions of Condonation: (1) Whenever the private document in which the debt is found is in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved. [Art. 1272] (2) Delivery of a private document evidencing credit made voluntarily by the creditor to the debtor implies the renunciation of the action of creditor against the latter. [Art. 1272]

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(3) Accessory obligation of pledge has been remitted when thing after its delivery is found in the possession of the debtor or third person. [Art. 1274] Effect Art. 1273. Renunciation of the principal debt shall extinguish the accessory obligations, but remission of the latter leaves the principal obligation in force.

D. CONFUSION RIGHTS

OR

MERGER

OF

Confusion: The meeting in one person of the qualities of creditor and debtor of the same obligation. Requisites (1) It should take place between principal debtor and creditor. [Art 1276] (2) The very same obligation must be involved; (3) The confusion must be total, i.e. as regards the whole obligation.

Obligation is not extinguished when confusion takes place in the person of subsidiary debtor (i.e. guarantor), but merger in the person of the principal debtor shall benefit the former. Note: Where, however, the mortgagee acquires ownership of the entire mortgaged property, the mortgage is extinguished; but this does not necessarily mean the extinguishment of the obligation secured thereby, which may become an unsecured obligation.

E. COMPENSATION Compensation: Offsetting of two obligations which are reciprocally extinguished if they are of the same value, or extinguished to the concurrent amount if of different values. Requisites [Art. 1279] (1) Each obligor is bound principally, and at the same time a principal creditor of the other (2) Both debts must consist in a sum of money, or if the things due are fungible, of the same kind & quality Note: The term ‘consumable’ is erroneously used in Art 1279. The appropriate term is ‘fungible’. [Tolentino]

Effects (1) In general Art. 1275. The obligation is extinguished from the time the characters of the debtor and creditor are merged in the same person.

CIVIL LAW

(3) Both debts are due (4) Debts are liquidated and demandable (5) There must be no retention or controversy over either of the debts, commenced by third persons and communicated in due time to the debtor

(2) In case of joint or solidary obligations Confusion in

Confusion in

Joint Obligation

Solidary Obligation

Extinguishes the share of the person in whom the two characters concur [Art 1277]

Extinguishes the entire obligation, but the other debtors may be liable for reimbursement if payment was made prior to remission.

(6) Compensation is not prohibited by law To warrant the application of set off under Article 1278 of the Civil Code, the debtor’s admission of his obligation must be clear and categorical and not one which merely arise by inference or implication from the customary execution of official documents in assuming the responsibilities of a predecessor [Bangko Sentral v COA, 2006].

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Effects

Kinds of Compensation

(1) Both debts are extinguished to the concurrent amount, even though the creditors and debtors are not aware of the compensation.

As to extent

(2) Accessory obligations extinguished.

are

also

Debtor claiming its benefits must prove compensation; once proven, effects retroact from the moment when the requisites concurred. Compensation Distinguished Other Modes of Extinguishment Compensation

from

Confusion

There must always be two obligations.

Involves only one obligation.

There are two persons who are mutually debtors and creditors of each other in two separate obligations, each arising from the same cause.

There is only one person whom the characters of the creditor and debtor meet.

Compensation

Payment

Capacity to dispose and receive the thing is unnecessary since compensation operates by law

Requires capacity to dispose of the thing paid and capacity to receive

May be partial

Must be total performance

Compensation Takes place by operation of law

(1) Total – when two debts are of the same amount (Art. 1281) (2) Partial As to cause (1) Legal (2) Voluntary (3) Judicial (4) Facultative (1) Legal Com pensation – takes place by operation of law from the moment all requisites are present. Since it takes place ipso jure, when used as a defense, it retroacts to the date when all its requisites are fulfilled. Art. 1290. When all the requisites mentioned in article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation. Legal compensation may apply to: i.

Awards of attorney’s fees, against the litigant and not his lawyer [Gan Tion v CA, 1969]

ii. Bank deposits, against the accounts of a depositor whose checks were dishonored [BPI v CA, 1996] Note: While a bank generally has a right of set-off over deposits for the payment of any withdrawals on the part of a creditor, the question of whether the remedy is properly exercised is a separate matter and depends on the bank’s role as the depository bank and as collecting agent for the check. The depositary bank must have acted with the highest degree of care, otherwise it may not

Counterclaim Must be pleaded to be effectual

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OBLIGATIONS setoff.

(2) Voluntary Com pensation – takes place when parties who are mutually creditors and debtors of each other agree to compensate their respective obligations even though one of the requisites of compensation may be lacking

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(6) Damage caused to the partnership by a partner Right of a Guarantor A guarantor may set up compensation as regards what the creditor may owe the principal debtor. [Art. 1280] Effect of Assignment of Rights by the Creditor to a Third Person [Art. 1285]

Art. 1282. The parties may agree upon the compensation of debts which are not yet due. The only requisites of conventional compensation are (1) that each of the parties can dispose of the credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their credits [United Planters v CA, 2009].

With debtor’s consent With debtor’s knowledge but without consent

(3) Judicial Compensation – takes place by judicial decree Art. 1283. If one of the parties to a suit over an obligation has a claim for damages against the other, the former may set it off by proving his right to said damages and the amount thereof. (4) Facultative Compensation - When it can be claimed by one of the parties who, however, has the right to object to it. - Compensation which can only be set up at the option of a creditor, when legal compensation cannot take place because some legal requisites in favor of the creditor are lacking. Obligations which cannot com pensated [Arts. 1287-1288]

be

(1) Contracts of depositum (2) Contracts of commodatum (3) Future support due by gratuitous title (4) Civil liability arising from a penal offense

Without debtor’s knowledge

Debtor cannot set up against assignee compensation pertaining to him against assignor UNLESS he reserved such right at the time he gave his consent Debtor may set up compensation of debts previous to the assignment but not of subsequent ones Debtor may set up compensation of all credits prior and also later to the assignment until he had knowledge of the assignment

F. NOVATION Novation Extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first either by changing the object or principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor. Unlike other modes of extinguishment, it is a juridical act of dual function—it extinguishes an obligation, and at the same time, it creates a new one in lieu of the old. It operates as a relative, not an absolute, extinction.

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Requisites (1) A previous valid obligation (2) Agreement of all the parties to the new obligation (3) Animus novandi or intent to novate (4) Substantial difference between old and new obligations and, consequently, extinguishment of the old obligation (5) Validity of the new obligation

CIVIL LAW

benefit third persons who did not give their consent to the novation OR those who may be affected, upon agreement between the parties. Original or new obligation with suspensive or resolutory condition Art. 1299. If original obligation was subject to a suspensive or resolutory condition, the new obligation shall be under the same condition, unless it is otherwise stipulated.

Effect In General Old obligation is extinguished and replaced by the new one stipulated.

If Original Obligation is Void

If New Obligation is Void

Novation is void if the original obligation was void, EXCEPT when annulment may be claimed only by the debtor, or when ratification validates acts that are voidable [Art. 1298]

New obligation is void, the old obligation subsists, UNLESS the parties intended that the former relations shall be extinguished in any event [Art. 1297]

1. Original obligation is void: No novation. 2. Original obligation voidable: Effective if contract is ratified before novation.

1. New obligation void: No novation 2. New obligation voidable: Novation is effective

Compatible Conditions (a) Fulfillment of both conditions: new obligation becomes demandable (b) Fulfillment of condition concerning the original obligation: old obligation is revived; new obligation loses force

Incompatible Conditions (a) Original obligation is extinguished, while new obligation exists (b) Demandability shall be subject to fulfillment/ nonfulfillment of the condition affecting it

(c) Fulfillment of condition concerning the new obligation: no novation; requisite of a previous valid and effective obligation lacking Kinds of Novation As to form (1) Express – declared in an unequivocal terms (2) Implied – the old and new obligations are on every point incompatible with each other

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Novation is not presumed

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As to essence or object

In the absence of an unequivocal declaration of extinguishment of the pre-existing obligation, only proof of incompatibility between the old and new obligation would warrant a novation by implication. [California Bus Line vs. State Investment, 2003]

(1) Objective/ Real (2) Subjective/ Personal a. Substitution of debtors i. Expromision ii. Delegacion b. Subrogation of a third person to the rights of the creditor

Test of Incompatibility Whether or not the old and new obligation can stand together, each one having an independent existence. No incompatibility exists when they can stand together. Hence, there is no novation. Incompatibility exists when they cannot stand together. Hence, there is novation.

i. Conventional ii. Legal (1) Objective Novation a. Change of the subject matter b. Change of cause or consideration

For there to be implied novation, the changes must be essential, i.e. referring to the object, cause, or principal conditions of the obligation.

c. Change of the principal conditions or terms (2) Subjective Novation a. Substitution of debtors

As to effect (1) Total (2) Partial Total

Partial

(1) Transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or third persons.

A creditor, to whom partial payment has been made, may exercise his right for the remainder, and shall be preferred to the person subrogated in his place in virtue of the partial payment.

(2) Obligation is not extinguished, even if the intention is to pay it. (3) Defenses against the old creditor are retained, unless waived by the debtor.

Expromision

Delegacion

Initiative for change does not emanate from the debtor, and may even be made without his knowledge.

Debtor (delegante) offers or initiates the change, and the creditor (delegatorio) accepts a third person (delegado) as consenting to the substitution.

Requisites (1) Consent of the creditor and the new debtor.

Consent of old debtor, new debtor, and creditor.

(2) Knowledge or consent of the old debtor is not required. Effects (1) Old debtor released

is

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(1) Insolvency of the new debtor revives the obligation of the old debtor if it was anterior and

UP LAW BOC the old debtor did not agree to expromision. (3) If with knowledge and consent of the old debtor, the new debtor can demand reimbursement of the entire amount paid and with subrogation of creditor’s rights.

OBLIGATIONS public, and known to the old debtor. (2) New debtor can demand reimbursement of the entire amount he has paid from the original debtor. He may compel the creditor to subrogate him to all of his rights.

(4) If without knowledge of the old debtor, the new debtor can demand reimbursement only up to the extent that the latter has been benefited without subrogation of creditor’s rights.

CIVIL LAW

i. Conventional Subrogation – takes place by agreement of parties Difference between Conventional Subrogation and Assignment of Credit [Licaros v Gatm aitan, 2001] Conventional subrogation

Assignment of credit

Debtor’s consent is necessary.

Debtor’s consent is not required.

Extinguishes an obligation and gives rise to a new one.

Refers to the same right which passes from one person to another, without modifying or extinguishing the obligation.

Defects/vices in the old obligation are cured.

Defects/vices in the old obligation are not cured.

ii. Legal Subrogation – takes place by operation of law

For subjective novation, it is insufficient that the juridical relation between the parties to the original contract is extended to a third person. If the old debtor is not released, no novation occurs and the third person who has assumed the debtor’s obligation becomes merely a co-debtor or surety or co-surety. [Conchinyan, Jr. v. R&B Surety and Insurance Company, 1987]

Legal subrogation is not presumed, except in the following circumstances:

An accessory surety may not be released if he expressly waives his discharge from the obligation in case of change or novation in the original agreement [Molino v Security Diners International Corp, 2001]. b. Subrogation Transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in a conventional subrogation. [Art. 1303] PAGE 228 OF 574

(1) When creditor pays another creditor who is preferred, even without the debtor’s knowledge (2) When a third person not interested in the obligation pays with the express or tacit approval of the debtor (3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter’s share (Art. 1302)

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CONTRACTS

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I. General Provisions

CIVIL LAW A.2. AUTONOMY (ALSO FREEDOM TO CONTRACT)

Contract - A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service [Article 1305]

A. PRINCIPAL CHARACTERISTICS OF CONTRACTS (MARCO) A. 1. M UTUALITY Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. General rule: Any contract which appears to be heavily weighed in favor of one of the parties or is left solely to the will of one of the parties is void [Floirendo v Metrobank, 2007]. Exception: The legality of contracts which is left to the will of either of the parties may be upheld if there was a finding of the presence of essential equality of the parties to the contracts, thus preventing the perpetration of injustice on the weaker party [GF Equity v Valenzona, 2005] A contract may expressly confer upon one party the right to cancel the contract because the exercise of that right is a fulfillment of the provisions of the contract itself [Taylor v Uy Tieng Pao, 1922] The determination of the performance may be left to a third party as long as: (1) The decision has been made known to both contracting parties [Article 1309] (2) The determination is not evidently inequitable [Article 1310]. If it is inequitable, the court shall decide what is equitable under the circumstances.

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Contracting parties may establish any agreement, term, and condition they may deem advisable, provided they are not contrary to law, morals or public policy. The right to enter into lawful contracts constitutes one of the liberties guaranteed by the Constitution. It cannot be struck down or arbitrarily interfered with without violating the freedom to enter into lawful contracts. [Gateway v Land Bank, 2003] It is necessary for the existence of a contract that two distinct parties enter into it (autocontracts). •

•

The existence of a contract is not determined by the number of persons who intervene in it, but by the number of parties; not by the number of individual wills but by the number of declarations of will. As long as there are two distinct patrimonies, even if they are represented by the same person, the contract will be valid; e.g. an agent representing both the buyer and the seller.

Special disqualifications in freedom to contract Art. 87, FC: Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage. Art. 1490, CC: The husband and the wife cannot sell property to each other, except: (1) When a separation of property was agreed upon in the marriage settlements; or (2) When there has been a judicial separation of property under Article 191. Art. 1491, CC The following persons cannot

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acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:

appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void.

(1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. (6) Any others specially disqualified by law. Art. 1782, CC: Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership

Pactum leonina – one party bears the lion’s share of the risk

Limitations to stipulations/what not to stipulate: Pactum commisorium foreclosure 2088,

CC:

Pactum de non alienundo – a stipulation not to alienate Art. 2130, CC: A stipulation forbidding the owner from alienating the immovable mortgaged shall be void. 2. Contrary to morals 3.Contrary to good customs 4. Contrary to public order 5. Contrary to public policy Public policy is the principle under which freedom of contract or private dealing is restricted by law for the good of the public. In determining whether a contract is contrary to public policy, the nature of the subject matter determines the source from which such question is to be solved [Ferrazzinni v Gsell, 1916] A contract which is neither prohibited by law nor condemned by judicial decision, nor contrary to public morals, contravenes no public policy. In the absence of express legislation or constitutional prohibition, a court, in order to declare a contract void as against public policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the public, is against the public good, or contravenes some established interests of society, or is inconsistent with sound policy and good morals, or tends clearly to undermine the security of individual rights, whether of personal liability or of private property [Gabriel v Monte de Piedad, 1941] A.3. RELATIVITY

1. Contrary to Law

Art.

Art. 1799, CC: A stipulation which excludes one or more partners from any share in the profits or losses is void.

The

–

automatic

creditor

cannot

Art. 1311, para. 1. Contracts take effect only between parties, their assigns and heirs, EXCEPT in case where the rights and obligations arising from the contract are not

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transmissible by their (1) nature, (2) by stipulation, or (3) by provision of law. The heir is not liable beyond the value of the property he received from the decedent

CIVIL LAW

2. Third Person in Possession Object of Contract [Art. 1312]

In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws.

Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation or who has acted beyond his powers, shall be unenforceable, unless it is ratified expressly or impliedly by the person on whose behalf it has been executed, before it is revoked by the other contracting party

3. Fraud of Creditors by Contracting Parties [Art. 1313] Creditors are protected in cases of contracts intended to defraud them. Creditors of the contracting parties may rescind contracts intended to defraud them although they did not intervene therein [Reyes and Puno]

Exceptions to Relativity (Contracts may bind and affect strangers in the ff. cases): 1. Stipulations Pour Autrui par.2]

[Art. 1311,

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment, provided: i.

He communicated his acceptance to the obligor before its revocation (by the original parties).

of

4. Tortious Interference [Art. 1314] Any third person who induces another to violate his contract shall be liable for damages to the other contracting party (even though the third person is not bound by the stipulations). Requisites: i.

ii. The contracting parties must have clearly and deliberately conferred a favor upon the third person (A mere incidental benefit or interest of a person is not sufficient).

Existence of a valid contract

ii. Knowledge of the third person of the existence of the contract iii. Interference by third person without legal justification or excuse

iii. The stipulation favoring the third person is only a part of the contract.

[Lagon v CA, 2005]

iv. No relation of agency exists between any of the parties and the third person favored.

(1) The word "induce" refers to situations where a person causes another to choose one course of conduct by persuasion or intimidation.

Accion directa –the creditor is authorized by the statute to sue on his debtor’s contract

(2) Knowledge alone is not sufficient to make a third person liable for tortuous interference. To sustain a case for tortuous interference, the defendant must have acted with malice or must have been driven by purely impious reasons to injure the plaintiff.

Examples” [Reyes and Puno] (1) Lessor against Sublessee [Art. 1651, 1652] (2) Laborers of Contractor against Owner of the work [Art. 1729]

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A.4. CONSENSUAL Art. 1315. Contracts are perfected by mere consent and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which according to their nature may be keeping in good faith, usage, and law. Exceptions: Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation [Article 1316].

2) Natural – those which are derived from the nature of the contract and ordinarily accompany the same; they are presumed to exist unless the contrary is stipulated 3) Accidental – those which exist only if stipulated

C. CLASSIFICATION OF CONTRACTS (1) To their subject matter a. Things, e.g. sale, deposit b. Services, e.g. agency (2) To formation

A.5. OBLIGATORY FORCE

a. Consensual – consent is sufficient to perfect the contract [Art. 1315]

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

b. Real – delivery, actual or constructive, is required in addition to consent [Art. 1316]

Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them Art. 1315. Contracts are perfected by mere consent and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which according to their nature may be keeping in good faith, usage, and law

c. Solemn or formal – where special formalities are required for perfection [Art. 1356] (3) To relation to other contracts a. Principal – may exist alone; e.g. lease b. Accessory – depends on another contract for its existence, e.g. guaranty c. Preparatory – a preliminary step towards the celebration of a subsequent contract; e.g. agency (4) To form a. Common or informal – may be entered into in whatever form as long as there is consent, object and cause

B. ELEMENTS OF CONTRACTS 1)

Essential – those without which there is no contract Consensual (ordinary)

Essential Elements Additional Elements

Real

Solemn (formal)

b. Special or formal – required by law to be in certain specified form (5) To cause/by equivalence of prestations a. Onerous – there is an exchange of correlative values

Consent Object Cause -

Delivery of the thing to be returned

Formality prescribed by law

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b. Remuneratory – where the outstanding prestation is premised upon services or benefits already received c. Gratuitous – where no correlative prestation is received by one party

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(6) To purpose a. Transfer of ownership, e.g. sale b. Conveyance commodatum

of

Use,

e.g.

(7) To time of fulfillment a. Executed – where the obligations are fulfilled at the time the contract is entered into b. Executory – where fulfillment of obligations does not take place at the time the contract is made

(1) Preparation (conception or “generation”) – when negotiations are in progress (2) Perfection (or birth) – when the parties come to an agreement (3) Consummation (or death) - when the contract is fully executed Essential Requisites

(8) To risk is

b. Aleatory – fulfillment is dependent upon chance (9) To the nature of the vinculum produced a. Unilateral – only one party is bound by the prestation, e.g. commodatum b. Bilateral (synallagmatic)both parties are bound by reciprocal prestations, e.g. sale • All contracts are bilateral in the consent, but not all are bilateral in effects. (10)

Book, by the rules governing the most analogous nominate contracts, and by the customs of the place

D. STAGES OF A CONTRACT

c. Rendition of Service, e.g. agency

a. Commutative – fulfillment predetermined in advance

CIVIL LAW

To their designation/name

a. Nominate – where the law gives the contract a special designation or particular name; e.g. deposit b. Innominate – where the contract has no special name (i) Do ut des (I give so that you may give) (ii) Do ut facias (I give so that you may do) (iii) Facio ut facias (I do so that you may do) (iv) Facio ut des (I do so that you may give) Art. 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles I and II of this

There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation established. [Art. 1318]

which

is

A. CONSENT The meeting of the minds of the parties on the subject matter and cause of the contract. Requisites (1) It must be manifested by the concurrence of the offer and acceptance [Arts. 13191326]. (2) The contracting parties must possess the necessary legal capacity [Arts. 1327-1329]. (3) It must be intelligent, free, spontaneous, and real (not vitiated) [Arts. 1330-1346] A contract is perfected by mere consent. From the moment of a meeting of the offer and the acceptance upon the object and the cause that would constitute the contract, consent arises. However, “the offer must be certain” and “the acceptance seasonable and absolute; if qualified, the acceptance would merely constitute a counteroffer. [Insular Life v. Asset Builders Corp., 2004]

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Offer

Offer terminates upon—

A unilateral proposition which one party makes to the other for the celebration of the contract [Tolentino]

(1) Rejection by the offeree

Requisites of an Offer:

(3) Counter-offer

(1) Definite

(4) Lapse of the time stated in the offer without acceptance being conveyed

(2) Intentional (3) Complete Invitation to (advertisem ents)

(2) Incapacity (death, civil interdiction, insanity, or insolvency) of the offeror or offeree before acceptance is conveyed [Art. 1323]

(5) Revocation of the offer before learning of acceptance make

offers

(1) Business advertisements of things for sale are NOT definite offers, just invitations to make an offer, UNLESS the contrary appears [Art. 1325]. (2) Advertisements for bidders are invitations to make proposals, the advertiser is NOT bound to accept the lowest or highest bid; UNLESS the contrary appears. The bidder is the offeror [Art. 1326]. The Terms and Conditions of the bidding disseminated by PUREFOODS constitutes the "advertisement" to bid on the project. The bid proposals or quotations submitted by the prospective suppliers including respondent FEMSCO, are the offers. The reply of petitioner Purefoods constitutes the acceptance or rejection of the respective offers. [Jardine Davies v. CA, 2000] (3) Statements of intention: no contract results even if accepted. In a letter informing another that the sender was “in a position and is willing to entertain” the purchase of a yacht under some terms, the word “entertain” applied to an act does not mean the resolution to perform said act, but simply a position to deliberate for deciding to perform or not to perform said act. It was merely a position to deliberate whether or not he would purchase the yacht and invitation to a proposal being made to him, which might be accepted by him or not. [Rosenstock v. Burke, 1924]

(6) Supervening illegality before acceptance [Reyes and Puno] Acceptance To produce a contract, the acceptance must not qualify the terms of the offer. It is necessary that the acceptance be unequivocal and unconditional, and the acceptance and the proposition shall be without any variation whatsoever; and any modification or variation from the terms of the offer annuls the latter and frees the offeror. [Tolentino] Requisites of acceptance: (1) Unqualified and unconditional, i.e. it must conform with all the terms of the offer, otherwise it is a counter-offer [Art. 1319] (2) Communicated to the offeror and learned by him [Art. 1319] If made through an agent, the offer is accepted from the time the acceptance is communicated to such agent. [Art. 1322] (3) May be express/implied, but is not presumed Acceptance must be absolute, unconditional, and without variance of any sort from the offer. It must also be made known to the offeror. An acceptance not made in the manner prescribed is not effective but constitutes a counter-offer. [Malbarosa v. CA, 2003]

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CONTRACTS are

perfected

by

mere

Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. [Art. 1315] Exceptions: (1) Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation [Art. 1316] (2) Formal contracts, where the law requires that a contract be in some form or be proved in a certain way; the intent of the parties have to be accompanied by the requisite formality [Art. 1356] Cognition Theory Acceptance made by a letter or telegram does not bind the offeror except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. [Art. 1319, 2nd par.] Option Contract A preparatory contract in which one party grants to the other, for a fixed period, the option to decide whether or not to enter into a principal contract [Art. 1324]

CIVIL LAW acceptance" except when the option is founded upon consideration. However, Art. 1479 modifies the general rule, which applies to "a promise to buy and sell" specifically. This rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price. The option can still be withdrawn, even if accepted, if the same is not supported by any consideration. [Tuazon v. Del Rosario-Suarez, 2010] Capacity to Contract There are two types of void contracts: (1) those where one of the essential requisites of a valid contract as provided for by Article 1318 of the Civil Code is totally wanting; and (2) those declared to be so under Article 1409 of the Civil Code. By contrast, a voidable or annullable contract is one in which the essential requisites for validity under Article 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue influence, or deceit. [Francisco v. Pastor Herrera, 2000] Persons incapacitated to give consent [Art. 1327] (1) Minors, EXCEPT— a. For necessaries [Art.1427] b. Where the minor actively misrepresents his age (estoppel) [Mercado v. Espiritu, 1917]: Minors were held in estoppel through active misrepresentation.

With consideration Offeror cannot unilaterally withdraw his offer.

Without consideration Offeror may withdraw by communicating withdrawal to the offeree before acceptance.

Art. 1324 provides the general rule regarding offer and acceptance: when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before

[Bambalan v. Maramba, 1928]: There is no estoppel if the minority was known by the other party, and there was no active misrepresentation on the part of the minors (2) Insane or demented persons, UNLESS they contract during a lucid interval. [Art. 1328] (3) Deaf-mutes who do not know how to read AND write.

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Persons disqualified to contract

(4) real

(1) Those under civil interdiction transactions inter vivos [Art. 34, RPC]

for

(2) Undischarged insolvents Insolvency Law]

24,

[Sec.

Vices of Consent A contract where consent is given through a. Mistake

(3) Husband and wife cannot donate to each other [Art. 123, FC], nor sell to each other if the marriage is under the regime of Absolute Community of Property [Art.1490] (4) The ff. cannot purchase, whether in public or private sale [Art. 1491]: Prohibited Party Subject Guardian

Property of the ward

Agent

Property of the Principal

Executors and Administrators

Property under administration

Public Officers

Property under their administration

Justices, judges, prosecutors, clerks of court, lawyers

Property attached in litigation

Incapacity to Give Consent vs. Disqualification to Contract Incapacity to Give Consent

Disqualification to Contract

Restrains the exercise of the right to contract

Restrains the very right itself

Based upon subjective circumstances of certain persons

Based upon public policy and morality

Voidable

Void

Consent

b. Violence c. Intimidation d. Undue influence e. Fraud is voidable. [Art. 1330] Mistake Inadvertent and excusable disregard of a circumstance material to the contract [Reyes and Puno] In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. [Art.1331] There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. [Art. 1333] To invalidate consent, the error must be excusable. It must be real error, and not one that could have been avoided by the party alleging it. An error so patent and obvious that nobody could have made it, or one which could have been avoided by ordinary prudence, cannot be invoked by the one who made it in order to annul his contract. A mistake that is caused by manifest negligence cannot invalidate a juridical act. [Tolentino] Requisites: a. The error must be substantial regarding: a. The object of the contract (error in re) which may be:

Requisites of Consent: (1) intelligent

i. Mistake as to the identity of the thing (error in corpore)

(2) free

ii. Mistake as to the substance of the thing (error in substantia)

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iii. Mistake as to the conditions of the thing provided, or iv. Mistake as to the quantity of the thing (error in quantitate) b. The error must be excusable

CIVIL LAW One of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent

c. The error must be a mistake of fact and not of law.

To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind. [Art. 1335]

Mistake which vitiates consent is an error of fact, and not an error of law. Ignorance of the law excuses no one from compliance therewith [Art. 3]; but the modern tendency is to allow an excusable mistake of law to be invoked as vitiating consent. [Tolentino]

The conveyance of several properties by the wife to her husband’s creditors, though reluctant, is still consent. She assented to the requirements of the defendants in order that the civil and criminal actions against them would be dropped. A contract is valid even though one of the parties entered into it against his wishes and desires, or even against his better judgment. [Martinez vs HSBC, 1910]

See also Art. 526, on Possession: Mistake upon a doubtful or difficult question of law may be the basis of good faith. Ignorantia Facti Excusat vs. Ignorantia Legis Nem inem Excusat Mistake of Fact

Mistake of Law

One or both contracting parties believe that a fact exists when in reality it does not, or vice versa

One or both parties arrive at an erroneous conclusion on the interpretation of a question of law or its legal effects

Vitiates consent

Does not vitiate consent EXCEPT when it involves mutual error as to the effect of an agreement when the real purpose is frustrated.

Note: The obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract, when fraud or mistake is alleged, devolves on the party seeking to enforce it. [Art. 1332] Intimidation

Violence •

Serious or irresistible force used to extort consent [Art. 1335]

Requisites: (1) One party is compelled to give his consent by a reasonable and wellgrounded fear of an evil; (2) The evil must be imminent and grave; (3) The evil must be upon his person or property, spouse, descendants or ascendants; (4) The evil must be unjust. If a contract is signed merely because of “fear of displeasing persons to whom obedience and respect are due”, the contract is still valid, for by itself, reverential fear is not wrong. [Paras, Civil Code] Violence

Intimidation

Physical compulsion

Moral compulsion

External or prevents the will to manifest itself

Internal or induces the performance of an act

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Note: Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract. [Art. 1336] Undue Influence When a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. Requisites: (1) Improper advantage (2) Power over the will of another (3) Deprivation of the latter’s will of a reasonable freedom of choice Circumstances to consider: a. Relationship of the parties (family, spiritual, confidential etc.) b. That the person unduly influenced was suffering from infirmity (mental weakness, ignorance etc.) [Art.1337]

CIVIL LAW parties are bound by confidential relations, constitutes fraud. Art. 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. Art. 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former's special knowledge. Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual. Art. 1343. Misrepresentation made in good faith is not fraudulent but may constitute error.

Note: By analogy, undue influence employed by a third person may annul the contract. Test of Undue Influence: Whether or not the influence exerted has so overpowered or subjugates the mind of a contracting party as to destroy his free agency, making him express the will of another rather than his own. [Coso-Fernandez Deza, 1921] Fraud When, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. [Art. 1338] In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. [Art. 1344] Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the

Dolo Causante vs. Dolo Incidente Dolo Causante

Dolo Incidente

Refers to those deceptions or misrepresentations of a serious character employed by one party and without which the other party would not have entered into the contract

Refers to those deceptions or misrepresentations which are not serious in character and without which the other party would have still entered into the contract

Renders the contract voidable

Renders the party liable for damages

Dolo incidente Article 1344)

(Incidental

fraud,

Those which are not serious in character and without which the other party would still have entered into the contract. Dolo causante (Causal fraud)

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Determines or is the essential cause of the consent, while dolo incidente refers only to some particular or accident of the obligation. The effects of dolo causante are nullity of the contract and indemnification of damages, while dolo incidente obliges the person employing it to pay damages. [Tankeh v. DBP, 2013] Fraud to vitiate consent must fulfill two conditions (1) The fraud must be dolo causante or it must be fraud in obtaining the consent of the party. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each case should be considered, taking into account the personal conditions of the victim. (2) The fraud must be proven by clear and convincing evidence and not merely by a preponderance thereof. [ECE Realty v. Mandap, 2014] Note: However, fraud in its general sense (false representation of a fact) coming about in the consummation stage of the sale, as opposed to the negotiation and perfection stages, entitles the aggrieved party to the rescission of the sales contract. [Spouses Tongson v. Emergency Pawnshop, 2010] Sim ulation of Contracts Takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings. It may be absolute or relative [Arts. 1345-1346] The primary consideration in determining the true nature of a contract is the intention of the parties. Such intention is determined not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the parties. [Spouses Lopez v. Spouses Lopez, 2009]

CIVIL LAW

Requisites: (1) A deliberate declaration contrary to the will of the parties; (2) Agreement of the parties apparently valid act, and

to

the

(3) The purpose is to deceive or to hide from third persons although it is not necessary that the purpose be illicit or for purposes of fraud Absolute Simulation

Relative Simulation

(Simulados)

(Disimulados)

No real transaction is intended.

Real transaction hidden.

is

Fictitious contract.

Disguised contract.

Void. (Because there is an absolute lack of declaration of will)

Bound as to hidden agreement, so long as it does not prejudice a third person and is not contrary to law, morals, good customs, public order or public policy.

The characteristic of simulation is the fact that the apparent contract is not really desired or intended to produce legal effects or in any way alter the juridical situation of the parties. Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. Lacking, therefore, in a fictitious and simulated contract is consent which is essential to a valid and enforceable contract. [Manila Banking v. Silverio, 2005] If the parties [merely] state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable between the parties and their

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successors in interest. [Valerio v. Refresca, 2006]

a. In case of marriage settlements under Art. 130, NCC

With respect to a third person acting in good faith, the apparent contract must be considered as the true contract. The declaration that the contract is simulated does not prejudice him.

b. In case of partition of properties inter vivos by the deceased under Art. 1080, NCC [JLT Agro v. Balansag, 2005)]

Note: Relative simulation is presumed by law in case of Art. 1602 (Contracts presumed to be Equitable Mortgages)

B. OBJECT OF CONTRACTS The subject matter; the thing, right or service which is the subject matter of the obligation arising from the contract. [Tolentino] Requisites

(4) Impossible things or services (5) Objects which are indeterminable as to their kind, the genus should be expressed In order that a thing, right, or service may be the object of a contract, it should be in existence at the moment of the celebration of the contract, or at least, it can exist subsequently or in the future. A FUTURE THING may be the object of a contract. Such contract may be interpreted as a: a) Conditional contract, where its efficacy should depend upon the future existence of the thing. b) Aleatory contract, where one of the contracting parties assumes the risk that the thing will never come into existence, e.g. insurance.

(1) Within the commerce of men [Art. 1347] (2) Not legally or physically impossible [Art.1348] (3) In existence or capable of coming into existence [See Arts. 1461, 1493, 1495] (4) Determinate or determinable, without the need of a new contract between the parties [Arts. 1349, 1460, par.2] All things or services may be the object of contracts, EXCEPT: (1) Things which are outside the commerce of men (2) Intransmissible rights (3) Future inheritance authorized by law

except

in

cases

Requisites: a. The succession has not yet been opened; b. The object of the contract forms part of the inheritance; and c. The promissor has an expectancy of a right which is purely hereditary in nature

In case of doubt about the nature of the contract, it must be deemed conditional as doubt shall be resolved in favor of greatest reciprocity of interests.

C. CAUSE OF CONTRACTS The essential and impelling reason why a party assumes an obligation. Motive, on the other hand, is the particular reason for a contracting party which does not affect the other. [Manresa] Requisites: (1) Exists at the time of the contract is entered into [Arts. 1352, 1409, par. 3] (2) Lawful [Id.]. (3) True or real [Art.1353]

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Cause vs. Object Cause

Cause in contracts [Art. 1350] Onerous Contracts

Remuneratory Contracts

Pure Beneficence

The undertaking or the promise of the thing or service by the other party

The service or benefit which is remunerated

Mere liberality of the benefactor

Object

As to Rem uneration The service or benefit which is remunerated

The thing which is given in remuneration

As to Donation The liberality of the donor or benefactor

The thing which is given or donated

As to the Thing Prestation or promise of a thing or service by the other

Moral Obligation as a Cause

The thing or service itself

As to Contracting Parties Different with respect to each part

May be the same for both parties

In Villaroel v. Estrada (1940), where a moral obligation is based upon a previous civil obligation which has already been barred by the statute of limitations at the time the contract is entered into, it constitutes a sufficient cause or consideration to support a contract (natural obligation).

Distinguished from Motive

BUT,

Cause

In Fisher v. Robb (1939), if the moral obligation arises wholly from ethical considerations, it cannot constitute a sufficient cause to support an onerous contract, as when the promise is made on the erroneous belief that one was morally responsible for the failure of an enterprise (moral obligation).

Motive

Proximate reason for contract

Remote reason for the contract

Objective or juridical reason

Psychological and purely personal reason

Always the same for each contracting party

Differs for each contracting party

Illegality affects existence or validity of the contract

Illegality does not affect existence or validity of contract

Effect of Lack of Cause, Unlawful Cause, False Cause and Lesion (Arts. 1352 – 1355) Cause

Note: Motive becomes cause when it predetermines the purpose of the contract.

Lack of Cause – absence or total lack of cause

Effect If there is no cause whatsoever, contract is VOID; a fictitious sale is VOID. Note: Cause must exist at the time of the perfection of the contract; it need not exist later.

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If cause is unlawful, transaction is VOID.

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III. Form of Contracts

Effect If parts of a contract are illegal but the rest are supported by lawful cause, claimant of such has the burden of showing proof; otherwise, the whole contract is VOID.

GENERAL RULE: Art. 1356, par. 1. Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present •

Contract with illegal cause may still produce effect in certain cases where parties are not of equal guilt: (1) innocent party cannot be compelled to perform his obligation and he may recover what has already been given; (2) if both parties are guilty, neither can sue the other, the law leaving them as they are (in pari delicto). Falsity of cause – cause is stated but is untrue

Contract with a false cause is merely revocable/voidable. Parties are given a chance to show that a cause really exists, and that said cause is true and lawful.

Lesion or inadequacy of cause – cause is not proportionate to object

CIVIL LAW

Inadequacy of cause shall not invalidate the contract except when: (1) there is fraud, mistake, undue influence (2) when parties intended a donation

Note: Inadequacy of cause may be a badge of fraud.

“Spiritual System” of the Spanish Code: The law looks more on the spirit rather than the form of contracts

EXCEPTION: (1) When the law requires that a contract be in some form in order that it may be valid or enforceable [Art. 1356, par. 2] (2) When the law requires that a contract be proved in a certain way to be enforceable (Statute of Frauds) [Art. 1356, par. 2] (3) When the law requires a contract to be in some form for convenience [Art. 1357 and 1358]

A. KINDS OF FORMALITIES REQUIRED BY LAW A.1. FOR THE VALIDITY OF CONTRACTS (AD ESENTIA / AD SOLIMNITATEM/ SOLEMN CONTRACTS) Formal or Solemn Contract

Special Form Required by Law

Donations of Immovables

Must be in a public instrument [Art. 749]

Donations of Movables

Must be in a written contract if the donation exceeds P500 [Art. 748]

Partnerships where real property is contributed

Must be in public instrument; otherwise the contract of partnership is void [Art. 1771, 1773]

Contracts of

The principal loan and the interest, if any,

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antichresis

must be specified in writing; otherwise, the contract of antichresis is void [Art. 2134]

Agency to sell real property or any interest therein

Authority of the agent must be in writing; otherwise, the sale is null and void [Art. 1874]

Stipulation to pay interest on loans, interest for the use of money

Must be expressly made in writing [Art. 1956]

Stipulation limiting common carrier’s duty of extraordinary diligence to ordinary diligence

Must be (1) in writing, signed by the shipper or owner; (2) supported by a valuable consideration; and (3) reasonable, just, and not contrary to public policy [Art. 1744]

Chattel mortgage

Must be recorded in Chattel Mortgage Register [Art. 2140]

Transfer of large cattle

Requires transfer of the certificate of registration [Rev. Adm. Code, Sec. 523]

A.2. FOR THE PURPOSE OF PROVING THE EXISTENCE OF THE CONTRACT (AD PROBATIONEM/ FRAUDS)

STATUTE

OF

CIVIL LAW agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents: a. An agreement that by its terms is not to be performed within a year from the making thereof; b. A special promise to answer for the debt, default, or miscarriage of another; c. An agreement made in consideration of marriage, other than a mutual promise to marry; d. An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum; e. An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein; f. A representation as to the credit of a third person. 3. Those where both parties are incapable of giving consent to a contract. •

Art. 1403. The following contracts are unenforceable, unless they are ratified: 1.

Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers; 2. Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his

•

This article speaks of contracts that cannot be proved except by written note or memorandum, unless the party charged waives the objection [Rule 123, Sec. 21, Rules of Court] This article applies to executory contracts only [Almirol v Monserrat, 1925]

An oral promise to reduce to writing an agreement that is within the Statute of Frauds is itself unenforceable [Reyes and Puno]

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A.3. FOR THE EFFECTIVITY OF THE CONTRACT AGAINST THIRD PERSONS Art. 1357, Civil Code. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. Art. 1358, Civil Code. The following must appear in a public document: Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains;

CIVIL LAW

Enumerated contracts in Art. 1358 are valid even when not reduced into writing, although parties may have recourse under Art. 1357 to compel execution of the writing, except in the following cases: Solemn Contracts (action under Art. 1357 is not available at all) 2) Real Contracts (action under Art. 1357 is available if there is consent, subject matter, cause, and delivery) 3) Contracts under the Statutes of Fraud (remedy under Art. 1357 is applicable only if the defense of the Statute is waived expressly or impliedly by the party charged • Action under this Article 1357 may be exercised simultaneously with (i.e. need not be separate nor need it precede) the action to enforce the contract, although questions of form must be decided first.

The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; The cession of actions or rights proceeding from an act appearing in a public document. All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405. Article 1357 and 1358 is only needed for convenience, not validity or enforceability. Registration of the instrument only adversely affects third parties [Fule v Court of Appeals, 1998]. Before the contracting parties may be compelled to execute the needed form, the contract should be: (1) Perfected or valid (2) Enforceable under the Statute of Frauds PAGE 245 OF 574

1)

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IV. Reformation of Instruments

CIVIL LAW Reformation of Instrument correctly express the terms of their agreement.

Reformation – remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed [Reyes and Puno] Rationale: It would be unjust and inequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties [Reyes and Puno]

Equity of reformation is ordinarily limited to written agreements, and its purpose is to establish and perpetuate the true agreement.

If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract [Art. 1359, par.2]

Annulment

Presupposes a valid, existing contract, in which there had been a meeting of the minds of the parties but the instrument drawn up and signed by them does not

Presupposes a defective contract in which the minds of the parties did not meet, or the consent of one was vitiated.

Management

(1) The presumption is that an instrument sets out the true agreement of the parties and that it was executed for valuable consideration. Thus, when there is some error or mistake in the contract, the onus probandi is upon the party who insists that the contract should be reformed. (2) While intentions involve a state of mind, subsequent and contemporaneous acts of the parties as well as the evidentiary facts as proved and admitted can be reflective of one’s intention. (3) Expediency and convenience, which was the purpose of the execution of “purchase and sale agreement”, is not a ground for reformation of instrument.

a. There must be a meeting of the minds of the contracting parties b. Their true intention is not expressed in the instrument; c. Such failure to express their true intention is due to mistake, fraud, inequitable conduct, or accident; and d. There is clear and convincing proof of mistake, fraud, inequitable conduct, or accident

The action for reformation of instrument should not be confused with the action for annulment of contract. [Veluz v Veluz, 1968]:

Intended to declare the inefficiency which the contract already carries in itself and to render the contract inefficacious.

[Multi-Ventures Capital Corporation v Stalwart, 2007]

REQUISITES [ART. 1359]:

Reformation of Instrument

Annulment

[Rosello-Bentir v Leanda, 2000]

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(1) The right of reformation is necessarily an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result is that an oral agreement is by court decree made legally effective. (2) The prescriptive period for actions based upon a written contract and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code.

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A. CASES WHERE REFORMATION IS PROPER

CIVIL LAW show their true intention, the former may ask for the reformation of the instrument.

A.1. MISTAKE The mistake should be of fact generally, and not of law [BPI v Fidelity and Surety Co., 1927]

A.4. ACCIDENT

Art. 1361. When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed.

Art. 1364. When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not express the true intention of the parties, the courts may order that the instrument be reformed.

Unilateral

No fraud exists in the sense that neither of the parties took part therein.

Mutual

Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.

A.5. SEVERE PACTO RELATIVE SIMULATION

DE

RETRO

/

Art. 1365. If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper.

Art. 1363. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed.

B. WHO MAY ASK FOR REFORMATION [Art. 1368]

A.2. FRAUD Active

1.

Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument

Either party of his successors in interest, if the mistake was mutual; otherwise, 2. Upon petition of the injured party, or his heirs and assigns

C. CASES WHERE REFORMATION IS NOT PROPER

Passive (concealment) Art. 1363. When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed. A.3. INEQUITABLE CONDUCT Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not

1.

Sim ple donations inter vivos— wherein no condition is imposed— because donation is an act of liberality [Art. 725] and cannot be compelled); 2. W ills—no reformation before the testator dies because the making of a will is strictly personal [Art. 784], a free act [Art. 839], and essentially revocable [Art. 828]; 3. When the real agreement is void— because there is nothing to reform

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CIVIL LAW

Implied Ratification/Estoppel: the party who has brought an action to enforce the instrument cannot subsequently ask for its reformation [Art. 1367]

V. Interpretation of Contract

CARDINAL TEST Intention of the parties, to be derived from the terms/language of the contract. Where the language of a contract is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. Courts cannot make for the parties better or more equitable agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve one of the parties from the terms which he voluntarily consented to, or impose on him those which he did not [Bautista v CA, 2000]. While ordinarily the literal sense of the words employed is to be followed, such is not the

case where they "appear to be contrary to the evident intention of the contracting parties." Intention shall prevail. [Borromeo v Reyes, 1972] Nomenclature is not decisive of the character A contract is what the law defines it to be, and not what it is called by the contracting parties. The Title of the contract does not necessarily determine its nature [Tolentino] Separability Clause Another fundamental rule in the interpretation of contracts is that the terms, clauses and conditions contrary to law, morals and public order should be separated from the valid and legal contract and when such separation can be made because they are independent of the valid contract. A

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lawful promise made for a lawful consideration is not invalid merely because an unlawful promise was made at the same time and for the same consideration. [Kasilag v Rodriguez, 1939]

B. FROM RULE 123, RULES OF COURT Art. 1379 The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts

EXCEPTION: (1) Where the statute expressly or by necessary implication declares the entire contract void (2) Where the terms, clauses, and conditions, by an established connection or by manifest intention of the parties, is inseparable from the principal obligation, and is a condition, juridically speaking, of that the nullity of which it would also occasion [Manresa]

CIVL LAW

NOTE: This is now found in Rule 130, Sections 10-19.

A. RULES ON DOUBTS [ART. 1378]

Rule 130 Sec. 10. Interpretation of a writing according to its legal m eaning The language of a writing is to be interpreted according to the legal meaning it bears in the place of its execution, UNLESS the parties intended otherwise. Sec. 11. Instrum ent construed so as to give effect to all provisions

When it is absolutely impossible to settle doubts by the rules established in the preceding articles: Principal object/s of any contact

Incidental circumstances of gratuitous contracts

Incidental circumstances of onerous contracts

Doubts where it cannot be known what may have been the intention or will of the parties, the contract shall be null and void.

Absolutely impossible to settle doubts by the rules and only refer to incidental circumstances, the least transmission of rights and interests shall prevail.

Absolutely impossible to settle doubts by the rules and only refer to incidental circumstances the doubt shall be settled in favor of the greatest reciprocity of interests.

In the construction of an instrument, where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all. Sec. 12. Interpretation according to intention; general and particular provisions. In the construction of an instrument, the intention of the parties is to be pursued; and when a general and a particular provision are inconsistent, the latter is paramount to the former. So a particular intent will control a general one that is inconsistent with it. Sec. 13. Interpretation according to circumstances. For the proper construction of an instrument, the circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown, so that the judge may be placed in the position of those who language he is to interpret. Sec. 14. Peculiar signification of terms. The terms of a writing are presumed to

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have been used in their primary and general acceptation, but evidence is admissible to show that they have a local, technical, or otherwise peculiar signification, and were so used and understood in the particular instance, in which case the agreement must be construed accordingly. Sec. 15. W ritten words control printed. When an instrument consists partly of written words and partly of a printed form, and the two are inconsistent, the former (written) controls the latter (printed). Sec. 16. Experts and interpreters to be used in explaining certain writings. When the characters in which an instrument is written are difficult to be deciphered, or the language is not understood by the court, the evidence of persons skilled in deciphering the characters, or who understand the language, is admissible to declare the characters or the meaning of the language. Sec. 17. Of Two constructions, which preferred. When the terms of an agreement have been intended in a different sense by the different parties to it, that sense is to prevail against either party in which he supposed the other understood it, and when different constructions of a provision are otherwise equally proper, that is to be taken which is the most favorable to the party in whose favor the provision was made. Sec. 18. Construction in favor of natural right. When an instrument is equally susceptible of two interpretations, one in favor of natural right and the other against it, the former is to be adopted. Sec. 19. Interpretation according to usage.

CIVL LAW

VI. Defective Contracts A. RESCISSIBLE CONTRACTS Contracts which are valid until rescinded. All essential requisites of a contract exist but there is injury or damage to one of the parties or to third persons – external or extrinsic defect consisting of an economic damage or lesion. [Paras] A.1. RESCISSION Process designated to render inefficacious a contract validly entered into and normally binding, by reason of external conditions, causing an economic prejudice to a party or to his creditors [Scaevola]. Remedy granted by law to the contracting parties and to third persons in order to secure reparation for damages caused them by a contract, even if the contract is valid, by means of the restoration of things to their condition prior to the celebration of said contract [Manresa] Relief to protect one of the parties or a third person from all injury and damages which the contract may cause, to protect some preferential right [Aquino v. Tañedo, 1919] Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure reparation for damages caused to them by a contract, even if this should be valid, by means of the restoration of things to their condition at the moment prior to the celebration of said contract. [Tolentino] Lesion The injury which one of the parties suffers by virtue of a contract which is disadvantageous for him. To give rise to rescission, the lesion must be known or coud have been known at the time of making of the contract. [Tolentino]

An instrument may be construed according to usage, in order to determine its true character.

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A.2. CHARACTERISTICS OF RESCISSIBLE CONTRACTS: (1)

(2) (3) (4) (5)

The defect consists in injury or damage either to one of the contracting parties or to third persons; Before rescission, they are valid, and therefore, legally effective; They can be attacked directly only and not collaterally; They can be attacked only by a contracting party or a third person who is injured or defrauded; and They are susceptible of convalidation only by prescription and not ratification

A.3. DISTINGUISHED FROM RESCISSION/RESOLUTION UNDER ART. 1191

Art. 1191 – Rescission or Resolution for Breach of Stipulation

Art. 1381 – Rescission by reason of lesion

Applies only to reciprocal obligations, such that a party’s breach thereof partakes of a tacit resolutory condition which entitles the injured party to rescission.

Applies whether obligations are reciprocal or unilateral and whether the contract has been fully fulfilled

Predicated on breach of faith.

Predicated on injury to economic interests of the party plaintiff/lesion. HOWEVER, not all economic prejudices are recognized by law.

Principal action that is retaliatory in character.

Subsidiary action.

The reparation of damages for the breach is purely secondary.

The cause of action is subordinated to the existence of an economic prejudice. Hence, where the

Art. 1381 – Rescission by reason of lesion defendant makes good the damages caused, the action cannot be maintained or continued.

Mutual restitution when declared proper as between the parties involved Constitutes termination of the obligation and release of the parties from further obligations from each other

Constitutes abrogation of the contract from the beginning and to restore the parties to their relative positions as if no contract has been made Declares the contract void at its inception and puts an end to it as though it never was

[Congregation of the Religious Virgin Mary vs. Orola, 2008] Art. 1191 – Rescission or Resolution for Breach of Stipulation

CIVL LAW

May be demanded only by a party to the contract

May be demanded by a third party prejudiced in the contract

May be denied by court when there is sufficient reason to justify the extension of time

Extension of time does not affect the right to ask for rescission

Non-performance is the only ground for the right to rescission

Various reasons of equity are grounds for rescission

A.4. REQUISITES OF A VALID RESCISSION [ART. 1381-1383, 1385, 1389] Art. 1381. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation of absentees, if the latter suffer the

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OBLIGATIONS AND CONTRACTS in

the

However, even without knowledge or approval from the court, the conveyance of a property subject of litigation may still be valid but is susceptible for rescission under Art. 1381(4).

preceding

(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority;

A definitive judicial determination with respect to the thing subject of litigation is not a condition sine qua non before the rescissory action contemplated under Article 1381(4) of the Civil Code may be instituted. The primordial purpose of Article 1381(4) of the Civil Code is to secure the possible effectivity of the impending judgment by a court with respect to the thing subject of litigation. [Ada v. Baylon, 2012]

(5) All other contracts specially declared by law to be subject to rescission. Requisites before a Contract Entered Into in Behalf of W ards or Absentees May Be Rescinded on the Ground of Lesion: (1) Contract was entered into by a guardian in behalf of his ward or by a legal representative in behalf of an absentee [Arts. 1381, Nos. 1 and 2] Note: A guardian is authorized only to manage the estate of the ward; should he dispose a portion thereof without authority from the court by way of a contract, the same is unenforceable under Art. 1403(1), irrespective of whether there is lesion or not. (2) It was entered into without judicial approval [Art. 1386] (3) Ward or absentee suffered lesion of more than one-fourth of the value of the property which is the object of the contract. [Art. 1381, Nos. 1 and 2] (4) There is no other legal means of obtaining reparation for the lesion. [Art. 1383] Note: for Art. 1381 (4): Any disposition of the thing subject of litigation or any act which tends to render inutile the court’s impending disposition in such case without the knowledge and approval of the litigants or of the court, is unmistakably and irrefutably indicative of bad faith.

CIVL LAW

(5) Person bringing the action must be able to return whatever he may be obliged to restore. [Art. 1385(1)] (6) Object of the contract must not be legally in the possession of a third person who did not act in bad faith [Art. 1385(2)] Requisites before a Contract Entered Into in Fraud of Creditors May Be Rescinded: (1) There is a credit existing prior to the celebration of the contract; (2) There is fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking rescission; (3) Creditor cannot in any legal manner collect his credit; and (4) Object of the contract must not be legally in the possession of a third person who did not act in bad faith. Accion Pauliana The action to rescind contracts in fraud of creditors. Consequently, accion pauliana presupposes a judgment and unsatisfied execution which cannot exist when the debt is not yet demandable at the time the rescissory action is brought. [Tolentino]

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Note: Even secured creditors are entitled to accion pauliana. Art. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible. Requisites before paym ent m ade by Insolvent can be rescinded:

CIVL LAW Rescission

Art. 1191

Art. 1381

Rescission in Reciprocal Obligations (Resolution)

Rescission by Reason of Lesion

A resolutory condition is implied upon breach of one party.

The action is based on a party’s breach of obligation and cannot be instituted except when the party suffering damage has no other legal means to obtain reparation. [Art. 1383]

Grants the injured party the option to pursue, either a rescission or specific performance of the obligation, with payment of damages in either case

Creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interests

(1) It was made in a state of insolvency; (2) Obligation must have been one which debtor could not be compelled to pay at the time such payment was effected. Payment made by an insolvent is rescissible. (Art. 1382), but a debtor can be compelled to pay by the creditor even before the expiration of the period since by his insolvency he has already lost his right to the benefit of such period. [Art. Art. 1198(1)] The conflict can be resolved by considering the priority of dates between the two debts. If the obligation with a period became due before the obligation to the creditor seeking the rescission became due, then the latter cannot rescind the payment even if such payment was effected before the expiration of the period; but if the obligation with a period became due after the obligation to the creditor seeking rescission became due, then the latter can rescind the payment. [Manresa]

This can only be carried out when he who demands rescission can return what he is obliged to restore, also when there are none endangered third persons who did not act in bad faith. Otherwise, damages may be demanded from the person causing the loss. (Art. 1385)

Effects of Rescission It creates an obligation to return the things which were the object of the contract, together with their fruits, and the price with its interests. However, if the object of the contract is in the possession of third persons in good faith, rescission cannot take place and indemnity for damages may be demanded from the person causing the loss [Art. 1385]

Prescribes in 10 years

Prescribes in 4 years

For persons under guardianship and for absentees, the period of four years shall not begin until the termination of the former's incapacity, or until the domicile of the latter is known. [Art. 1389]

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Do all creditors benefit rescission of the contract?

from

the

As a rule, the rescission should benefit only the creditor who obtained the rescission, because the rescission is to repair the injury caused to him by the fraudulent alienation. If a balance is left after satisfying the claim of the creditor who brought the action, other creditors who are qualified to bring an accion pauliana should be given the benefit of rescission, instead of requiring them to bring other rescissory actions. However, creditors who only became such after the fraudulent alienation, cannot benefit from the rescission. Presumption of Fraud When alienation of property presumed in fraud of creditors: a. Alienation by gratuitous title if the debtor has not reserved sufficient property to pay all of his debts contracted before alienation [Art. 1387(1), NCC] b. Alienation by onerous title if made by a debtor against whom some judgment has been rendered in any instance or some writ of attachment has been issued [Art. 1387(2), NCC] The test as to whether or not a conveyance is fraudulent is if it prejudices the rights of the creditors. [Tolentino] Badges of Fraud A conveyance leaving no property for other creditors to attach is an evidence of fraud. [China Banking v. CA, 2000, citing Oria v McMicking, 1912]: 1)

Consideration inadequate;

is

fictitious

2)

Transfer was made while suit had begun or pending;

3)

Sale was upon credit by insolvent debtor;

4)

There was large indebtedness or complete insolvency;

CIVL LAW

5)

Transfer consisted of all or nearly all property especially when insolvent or greatly;

6)

The transfer was made between father and son when other above circumstances present; and

7)

There was failure of vendee to take exclusive possession of all property embarrassed financially.

B. VOIDABLE CONTRACTS Contracts which are valid until annulled, unless ratified. Defect is more or less intrinsic, as in the case of vitiated consent. [Paras] Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud. These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification. Note: Art. 1390 refers to a “proper action in court”. The validity of a voidable contract may only be attacked either by way of a direct action or by way of defense via a counterclaim, and not a special or affirmative defense. [Jurado]

or Voidable/ Annullable Contracts:

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(1) Those where one of the contracting parties is incapable of giving consent to a contract, and (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.

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OBLIGATIONS AND CONTRACTS OF

VOIDABLE

(1) Its defect consists of the vitiation of consent of one of the contracting parties; (2) It is binding until it is annulled; (3) It is susceptible of convalidation by ratification or prescription; and (4) Its defect or voidable character cannot be invoked by third persons. Note: Failure of an heir to obtain authority from his co-heirs does not result in his incapacity to give consent so as to render the contract voidable, but rather, renders the contract valid but unenforceable against Conrado’s co-heirs for having been entered into without their authority. [Heirs of Ureta, Sr. v. Heirs of Ureta, September 14, 2011]

W ho may annulm ent

CIVL LAW institute

action

for

General Rule: Action for annulment may be instituted by all who are thereby obliged principally or subsidiarily. Requisites: i.

Plaintiff must have interest in the contract; ii. The victim and not the party responsible for the vice or defect must assert the same Exception: If a third person is prejudiced in his rights with respect to one of the contracting parties and can show detriment which would postitively result to him from the contract in which he has no intervention. [Teves v. People’s Homesite & housing Corp., 1968] Effects of Annulm ent

Rescission and Annulment Distinguished

If contract has not yet been consummated – parties shall be released from the obligations arising therefrom.

Rescission

Annulment

Merely produces the inefficacy of the contract, which did not essentially exist in the contract

Declares the inefficacy which the contract already carries in itself

Needs ratification to be effective

Requires an act of ratification to be cured

Private interest alone governs

Direct influence of the public interest is involved

May be compatible with the perfect validity of the contract

Based on a vice of the contract which invalidates it

A remedy

A sanction

Equity predominates

The law predominates

May be demanded by third parties affected by the contract

Can be demanded only by parties to the contract

If contract has already been consummated The contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law. [Art. 1398-1402] Obligation of Mutual Restitution When the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him [Art. 1399] Art. 1399 cannot be applied to those cases where the incapacitated person can still return the thing which he has received. Effects of Failure to Make Restitution [Arts. 1400-1402]

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Three W ays or Modes of Convalidating a Voidable Contract [Jurado]

(1) Contract is tainted with a vice susceptible of being cured; (2) Confirmation is effected by the person who is entitled to do so under the law; (3) It is effected with knowledge of the vice or defect of the contract; (4) Cause of the nullity or defect have already disappeared.

(1) By prescription of the action for annulment [Art.1391] (2) By ratification or confirmation [Art. 13921396] (3) By loss of the thing which is the object of the contract through the fraud or fault of the person who is entitled to institute the action for the annulment [Art.1401] Prescription Annulment

of

the

Action

for

The action for annulment shall be brought within four years— (1) From the time the defect of the content ceases, in cases of intimidation, violence or undue influence (2) From the time of discovery of the fraud or mistake (3) From the time guardianship ceases, in actions referring to contracts entered into by minors or incapacitated persons Constructive Notice Discovery or fraud must be reckoned from the time the document was registered in the office of the register of deeds. Registration constitutes constructive notice to the whole world. [Carantes v. CA, 1977] RATIFICATION The act or means by virtue of which efficacy is given to a contract which suffers from a vice of curable nullity [Arts. 1392-1396]

The right to ratify may be transmitted to the heirs of the party entitled to such right. It may likewise be exercised by the guardian of the incapacitated person having such right. [Art. 1394] Ratification does not require the conformity of the contracting party who has no right to bring an action for annulment. [Art. 1385] Effect of Ratification It extinguishes the action for annulment of a voidable contract. [Art. 1392] It cleanses the contract from all its defects from the moment it was constituted [Art. 1396] C. UNENFORCEABLE CONTRACT Unenforceable Contract – contracts that by reason of statutory defects do not confer any action to enforce the same until and unless they are ratified in the manner prescribed by law [J.B.L. Reyes] CHARACTERISTICS: 1.

Cannot be enforced by a proper action in court 2. Susceptible of ratification 3. Cannot be assailed by third persons [Art. 1408]

May be (1) EXPRESS or (2) TACIT – When the person who has the right to invoke it, with the knowledge of the reason which renders the contract voidable and such reason having ceased, executes an act implying an intention to waive his right [Art. 1393]

CIVL LAW

KINDS OF CONTRACTS

Requisites of Ratification Page 256 of 574

1.

UNENFORCEABLE

Unauthorized contracts – those entered into by one who has no authority or legal representation, or who has acted beyond his powers [Art. 1403, par.1] 2. Those which did not comply with the Statute of Frauds [Art. 1403, par.2]

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3. Those where both parties are incapable of giving consent to a contract [Art. Contract entered into without authority

CIVL LAW

1403, par.3] Contracts covered by Statute of Frauds

Contract where both parties are incapable of giving consent

Effect on the Contract

No effect unless ratified. Cannot be enforced by a proper action in court

How to assail

Not by direct action.

Not by direct action.

Not by direct action.

As a defense, by motion to dismiss the complaint on the ground that the contract is unenforceable

As a defense, by motion to dismiss on the ground that the contract is unenforceable;

As a defense, by motion to dismiss the complaint on the ground that the contract is unenforceable

Who can assail cannot be assailed by third persons (Art. 1408)

When How to Cure Defect

Objection to the presentation of oral evidence to prove an oral contract [see Art. 1405]

By person whose name By party against whom the contract was entered the contract is being into / by owner of enforced; or his privies property

By party against whom the contract is being enforced; or his privies; or parents or guardians, as it is a personal defense

When a party asks the court to enforce the contract Ratification by person whose name the contract was entered into

Ratification by party against whom the contract is being enforced failure to object to the presentation of oral evidence to prove an oral contract or by the acceptance of benefits under the contract [Art. 1405]

GENERAL RULES OF APPLICATION OF STATUTE OF FRAUDS (1) The Statute of Frauds is a Rule of Exclusion, i.e. oral evidence might be relevant to the agreements enumerated therein and might therefore be admissible were it not for the fact that the law excludes said oral evidence. (2) The defense of the Statute of Frauds may be waived [Art. 1405] (3) Applies only to executory contracts, not partially or completely executed (consummated) contracts. Page 257 of 574

ratification of party against whom the contract is being enforced; or his privies; or parents or guardians The ratification by one party converts the contract into a voidable contract [Art. 1407]

(4) The Statute of Frauds is exclusive that is, it applies only to the agreements or contracts enumerated therein [Quintos v Morata, 1930] (5) The Statute of Frauds is a personal defense, that is, a contract infringing it cannot be assailed by third persons [Art. 1408] (6) Contracts infringing the Statute of Frauds are not void, they are merely unenforceable [Art. 1403]

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EXCEPTIONS TO APPLICATION STATUTE OF FRAUD

OF

(1) The Statute of Frauds cannot apply if the action is neither for damages because of the violation of an agreement nor for the specific performance of said agreement (2) The Statute of Frauds does not determine the credibility or weight of evidence. It merely concerns itself with the admissibility thereof. (3) The Statute of Frauds does not apply if it is claimed that the contract does not express the true agreement of the parties. As long as the true or real agreement is not covered by the Statute of Frauds, it is provable by oral evidence [Cayuga v Santos]

CIVL LAW

Limketkai Sons Milling, Inc. v CA (1995): Even if parol evidence was initially inadmissible, the same became competent and admissible because of the cross-examination, which elicited evidence proving the evidence of a perfected contract. The cross-examination on the contract is deemed a waiver of the defense of the Statute of Frauds.

D. VOID OR INEXISTENT CONTRACTS Contracts which have no effect at all and cannot be ratified or validated [Paras] Those which, because of certain defects, generally produce no effect at all. They are considered as inexistent from its inception or from the very beginning [De Leon]

[Swedish Match v CA (2004)]: (1) The Statute of Frauds simply provides the method by which the contracts enumerated therein may be proved but does not declare them invalid because they are not reduced to writing. (2) For a note or memorandum to satisfy the Statute, it: (a) Must be complete in itself and cannot rest partly in writing and partly in parol. (b) Must contain the names of the parties, the terms and conditions of the contract, and a description of the property sufficient to render it capable of identification. (c) Must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol evidence. Asia Productions v Pano (1992): The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged.

Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate impossible service;

an

(6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. Characteristics of Void Contracts :

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(1) It does not produce any legal effect; (2) It is not susceptible of ratification;

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(3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced; (4) The action or defense for the declaration of their inexistence or nullity is imprescriptible; [Art. 1410] Note: This provision does not apply to wills. [Gallanosa v. Arcangel, June 21, 1978] and (5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected. [Art. 1421] Note: Article 1421 is subject to exceptions. For instance, the creditors of a party to an illegal contract may, under the conditions set forth in Article 1177 of said Code, exercise the rights and actions of the latter, EXCEPT only those which are inherent in his person, including therefore, his right to the annulment of said contract, even though such creditors are not affected by the same, except indirectly, in the manner indicated in said legal provision. [Pascual v. Secretary of Public Works, December 29, 1960] A contract which is the direct result of a previous illegal contract is also void and inexistent. [Art. 1421] Void v. Inexistent Contracts Void

Inexistent

Those where all the requisites of a contract are present but the cause, object or purpose is contrary to law, morals, good customes, public order or public policy, or the contract itself is prohibited or declared void by law

Those where one or some or all of the requisites essential for the validity of a contract are absolutely lacking

Principle of pari delicto is applicable

Principle of pari delicto is inapplicable

Void

CIVL LAW Inexistent

May produce legal effects

Cannot produce any effect

Covers Art. 1409 nos. 1, 3, 4, 5, 6 and 7

Covers Art. 1409 nos. 2 and 3

The law prohibits the spouses from selling property to each other, subject to certain exceptions. [Art. 1490] Similarly, donations between spouses during marriage are prohibited. The prohibitions apply to common law relations. [Ching v. Goyanko, November 10, 2006] (See: Pactum commissorium, Pactum de non alienado, Pactum leonina) In contracts with separate provisions, the invalidity of one does not automatically render the other invalid. Art. 1420 of the New Civil Code holds that "In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced." Contrary to the suppositions of petitioners, the invalid stipulation is independent from the rest of the terms of the agreement and can easily be separated therefrom without doing violence to the manifest intention of the parties. This being so, the legal terms of the contract can be enforced. [Spouses Litonjua v. L & R Corporation, March 27, 2000] In Pari Delicto Principle delicto, non oritur actio) (1)

(in

pari

When the defect of a void contract consists in the illegality of the cause or object of the contract and both parties are at fault or in pari delicto, the law refuses them any remedy and leaves them where they are. [Arts. 1411-1419]

(2) If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense. [Art. 1412] Exceptions to the Principle of In Pari Delicto:

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(1) Payment of usurious interest [Art. 1413] (2) Payment of money or delivery of property for an illegal purpose, where the party who paid or delivered repudiates the contract before the purpose has been accomplished, or before any damage has been caused to a third person [Art. 1414] [See: Hulst v. PR Builders Inc., September 3, 2007] (3) Payment of money or delivery of property made by an incapacitated person [Art. 1415] (4) Agreement or contract not illegal per se but merely prohibited by law, and the prohibition is designed for the plaintiff’s protection [Art. 1416] Note: When the assailed contracts are void ab initio, Art. 1416 cannot be applied, as in the case of aliens purchasing property despite knowing fully well the constitutional prohibition against foreigners owning land in the Philippines at the time of purchase. [Frenzel v. Catito, July 11, 2003]

CIVL LAW

(1) the contract is not illegal per se but merely prohibited; (2) the prohibition is for the protection of the plaintiffs; and (3) if public policy is enhanced thereby. [Acabal v. Acabal, March 31, 2005] See also: Arts. 1345 and 1346 Non-Existing Cause or Object [Paras] Art. 1409(3) speaks of contracts “whose object or cause did not exist at the time of the transaction.” This is not exactly correct because there can be valid contracts involving future property; example, sale of future or after-acquired property. Thus, Justice J. B. L. Reyes notes: “did not exist at the time of the transaction” should be “could not come into existence because the object may legally be a future thing.”

(5) Payment of any amount in excess of the maximum price of any article or commodity fixed by law [Art. 1417] (6) Contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law [Art. 1418] (7) Contract whereby a laborer accepts a wage lower than the minimum wage fixed by law [Art. 1419] (8) In case of divisible contracts, the legal terms may be enforced separately from the illegal terms [Art. 1420]; and (9) One who lost in gambling because of fraudulent schemes practiced on him. He is allowed to recover his losses [Art. 315(3)(b)] even if gambling is prohibited The principle of in pari delicto adm its of an exception under Art. 1416 of the Civil Code Under this article, recovery for what has been paid or delivered pursuant to an inexistent contract is allowed only when the following requisites are met: Page 260 of 574

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VII. Natural Obligations Those based on equity and natural law, which do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, authorize the retention of what has been delivered or rendered by reason thereof [Art. 1423] Note: The binding tie is the conscience of man In order that there may be a natural obligation there must exist a juridical tie which is not prohibited by law and which in itself could give a cause of action but because of some special circumstances is actually without legal sanction or means of enforcing compliance by intervention of courts. [Tolentino]

FOUR TYPES OF OBLIGATIONS IN JURIDICAL SCIENCE (1) Moral Obligations – duties of conscience completely outside the field of law (2) Natural Obligations – duties not sanctioned by any action but have a relative judicial effect (3) Civil Obligations – juridical obligations that are in conformity with positive law but are contrary to juridical principles and susceptible of being annulled; enforceable by action (4) Mixed Obligations – full juridical effect; falls under civil obligations TWO CONDITIONS NECESSARY NATURAL OBLIGATIONS:

FOR

(1) That there be a juridical tie between two persons; and (2) That this tie is not given effect by law

CIVL LAW

Natural Obligations

Civil Obligations

As to enforceability

Not by court actions, but by good conscience of debtor

Court action or the coercive power of public authority

As to basis

Equity and natural justice

Positive law [Art. 1157]

Natural Obligations

Moral Obligations

There is a juridical tie between the parties which is not enforceable by court action.

No juridical tie whatsoever.

Voluntary fulfillment of such produces legal effects which the court will recognize and protect.

Voluntary fulfillment of such does not produce any legal effect which the court will recognize and protect.

Within the domain of law

Within the domain of morals

The promise made by an organizer of a dog racing course to a stockholder to return to him certain amounts paid by the latter in satisfaction of his subscription upon the belief of said organizer that he was morally responsible because of the failure of the enterprise, is not the consideration required by Art. 1261 of the Civil Code as an essential element for the legal existence of an onerous contract which would bind the promissor to comply with his promise. The promise was prompted by a feeling of pity and is, therefore, purely moral and as such, not demandable in law but only in conscience, over which human judges have no consideration. [Fisher v. Robb, November 2, 1939]

Conversion to Civil Obligations Page 261 of 574

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General Rule: Partial payment of a natural obligation does not make it civil; the part paid cannot be recovered but the payment of the balance cannot be enforced. à applicable only to natural obligations because of prescription or lack of formalities (nullity due to form e.g. Art. 1430) and not to natural obligation subject to ratification or confirmation Note: Payment by mistake is not voluntary and may be recovered. Payment is voluntary when the debtor knew that the obligation is a natural one. The debtor, however, has the burden of proving the mistake. (1) By novation (2) By ratification or confirmation Examples:

Art. 1424. When a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has delivered or the value of the service he has rendered. Art. 1425. When without the knowledge or against the will of the debtor, a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed, but the debtor later voluntarily reimburses the third person, the obligor cannot recover what he has paid.

CIVL LAW

who has spent or consumed it in good faith. (1160A) Art. 1428. When, after an action to enforce a civil obligation has failed the defendant voluntarily performs the obligation, he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. Art. 1429. When a testate or intestate heir voluntarily pays a debt of the decedent exceeding the value of the property which he received by will or by the law of intestacy from the estate of the deceased, the payment is valid and cannot be rescinded by the payer. Art. 1430. When a will is declared void because it has not been executed in accordance with the formalities required by law, but one of the intestate heirs, after the settlement of the debts of the deceased, pays a legacy in compliance with a clause in the defective will, the payment is effective and irrevocable. Note: In Art. 1247, it is not the voluntary payment that prevents recovery, but the consumption or spending of the thing or money in good faith.

Art. 1426. When a minor between eighteen and twenty-one years of age who has entered into a contract without the consent of the parent or guardian, after the annulment of the contract voluntarily returns the whole thing or price received, notwithstanding the fact that he has not been benefited thereby, there is no right to demand the thing or price thus returned. Art. 1427. When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the obligee Page 262 of 574

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VIII. Estoppel

CIVL LAW

LACHES

DEFINITION A condition or state by virtue of which an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon [Art. 1431]

KINDS OF ESTOPPEL

Failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. [Miguel v. Catalino, November 29, 1968] Elements

(1) Estoppel in pais or by conduct [Art. 1433]

(1) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the compaint seeks a remedy;

a. Estoppel by silence [Art. 1437] b. Estoppel by acceptance of benefits (2) Technical Estoppels

(2) Delay in asserting the complainant’s rights, the complainant having had knowledge or notice of the defendant’s conduct and having been afforded an opportunity to institute a suit;

a. Estoppel by Deed – a party to a deed is precluded from asserting as against the other party, material fact asserted therein; (Art. 1433) and b. Estoppel by Record – a party is precluded from denying the truth of matters set forth in a record whether judicial or legislative

(3) Lack of knowledge or notice on the part of the defendant that the complaint would assert the right on which he bases his suit; and

(3) Estoppel by Judgment – a party to a case is precluded from denying the facts adjudicated by a court of competent jurisdiction

(4) Injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred

(4) Estoppel by laches Note: Estoppel is effective only as between the parties thereto or their successors-ininterest. Note: The government is not estopped by mistake or error on the part of its officials or agents. In Manila Lodge No. 761 Benevolent and Protective Order of the Elks v. CA (1976), the sale executed by the City of Manila to Manila Lodge was certainly a contract prohibited by law, and that estoppel cannot be urged even if the City of Manila accepted the benefits of such contract of sale and the Manila Lodge No. 761 had performed its part of the agreement, for to apply the doctrine of estoppel against the City of Manila in this case would be tantamount to enabling it to do indirectly what it could not do directly.

Prescription Concerned with the fact of delay Question or matter of time Statutory Applies in law Cannot be availed of unless it is specifically pleaded as an affirmative allegation Based on a fixed time

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Laches Concerned with the effect of delay Question of inequity of permitting the claim to be enforced Not statutory Applies in equity Being a defense in equity, it need not be specifically pleaded Not based on a fixed time

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IX. Trusts

CIVL LAW

A. GOVERNING RULES

Trusts A fiduciary relationship with respect to property, subjecting the person holding the same to the obligation of dealing with the property for the benefit of another person [Reyes and Puno]

Art. 1442. The principles of the general law of trusts insofar as they are not in conflict with this Code, the Code of Commerce, the Rules of Court and special laws are hereby adopted.

B. PARTIES [Art. 1440] 1.

Trustor – the person who establishes the trust 2. Trustee – one in whom the confidence is reposed as regards property for the benefit of another person 3. Beneficiary or cestui que trust – person for whose benefit the trust has been created

Characteristics of Trust: 1. It is a relationship 2. The relationship is of fiduciary character 3. The relationship is with respect to property, not one involving merely personal duties 4. It involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another 5. It arises as a result of a manifestation of intention to create the relationship Trust as distinguished from other concepts

C. KINDS OF TRUST C.1. EXPRESS TRUST Created by the intention of the trustor or of the parties [Art. 1441] Elements:

Trust

Stipulation pour autrui

Refers to a specific property

Involves any stipulation in favor of a third person

1. 2. 3. 4.

Competent trustor or settlor Trustee Ascertainable trust res / Trust property Sufficiently certain beneficiaries

Trust is created: 1.

Trust

Condition

Performance of trust is enforceable

Performance or accomplishment is not enforceable

Trust

Guardianship or Executorship

Trustees has legal title to the property

Guardians or Executors do not have legal title but mere actual possession and limited powers over the property

By declaration of the trustor or settlor that he holds property in trust 2. By conveyance to the trustee: a. Inter vivos, or b. By testament Proof Required: 1.

No express trusts concerning an immovable or any interest therein may be proved by parol evidence [Art. 1443]. o Trusts over real property are unenforceable unless in writing, although writing is not required for validity, only for proof. 2. Where the trust is over personal property, an oral trust is sufficient between the parties.

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3. But to bind third persons the trust must be in a public instrument [Art. 1358(1) and (3)] Form of Express Trusts Art. 1444. No particular words are required for the creation of an express trust, it being sufficient that trust is clearly intended W ant of Trustee Art. 1445. No trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust To permit the trust to fail for want of trustee is to defeat the intention of the trustor in creating the trust.

CIVL LAW

6. Dissolution by the consent of all the beneficiaries and/or the settlor 7. Merger C.2. IMPLIED TRUST Come into being by operation of law [Art. 1441]. The essential idea involves a certain antagonism between the cestui que trust and the trustee even where the 7trust has not arisen out of fraud or an immoral transaction [J.B.L. Reyes] Proof required Art. 1457. An implied trust may be proved by oral evidence

Acceptance by beneficiary Acceptance by beneficiary is necessary [Art. 1446]. It may be: 1.

Express

2. Implied •

Acceptance by the beneficiary is not subject to the formal rules of donations [Cristobal v Gomez, 1927]

3. Presumed – if the trust imposes no onerous condition upon the beneficiary

Where a trust is to be established by oral proof, the testimony supporting it must be sufficiently strong to prove the right of the alleged beneficiary with as much certainty as if a document proving the trust were shown [Suarez v. Tirambulo, 1933] Examples of Implied Trusts

Termination of Express Trusts 1.

A trust must be proven by clear, satisfactory and convincing evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations [De Leon v. Molo-Peckson, 1962]

1.

Revocation or modification by the trustor under a reserved power

2. Rescission 3. Expiration of the period or happening of the resolutory condition 4. Accomplishment of the purpose or its becoming impossible or illegal 5. Dissolution by the Court if continuation will defeat the purpose of the trust

Resulting Trusts - a trust raised by implication of law and presumed to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance [Salao v. Salao, 1976]

Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by

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another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. Art. 1449. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof.

CIVL LAW

and compel a conveyance thereof to him. Art. 1454. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. Art. 1455. When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong.

Art. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner.

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

Art. 1452. If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. Art. 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated. C.3. CONSTRUCTIVE TRUST

Constructive Trusts - a trust not created by any words, either expressly or impliedly evincing a direct intension to create a trust, but by the construction of equity in order to satisfy the demands of justice [Salao v Salao, 1976]

Express trust is a "continuing and subsisting" trust, not subject to the statute of limitations, at least, until repudiated, in which event the period of prescription begins to run only from the time of the repudiation. [Tamayo v Callejo, 1972] In constructive trusts, the rule is that laches constitutes a bar to actions to enforce the trust, and repudiation is not required, unless there is a concealment of the facts giving rise to the trust. [Fabian v Fabian, 1968]

Art. 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it’s is paid. The latter may redeem the property Page 266 of 574

CIVIL LAW

SALES

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CIVIL LAW

I. Definition and Essential Requisites

A person is not incompetent to contract merely because of advanced years or by reason of physical infirmities [Paragas vs Heirs of D. Balanco, 2005].

A. DEFINITION OF SALES

Exceptions requisite:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. The essence of a contract of sale is the transfer of ownership or that the recipient has the ability to alienate the thing transferred to him.

B. ESSENTIAL REQUISITES CONTRACT OF SALE

OF

A

(1) (2) (3) (4)

to

consent

being

a

Expropriation, Ordinary Execution Sale, Judicial Foreclosure Sale, and Extra-Judicial Foreclosure Sale

Special Case: If sale involves the conjugal property of spouses, consent must be given by both. (2) Object or subject matter Must be determinate or capable of being determinate, licit and within the commerce of man, and possible

(3) Cause or consideration Refers to “price certain in money or its equivalent.”

B.1. ESSENTIAL ELEMENTS OF A VALID CONTRACT OF SALE [Coronel vs CA, 1996; De Leon]

It must be real, certain, and pecuniary. B.2. NON-ESSENTIAL ELEMENTS OF A CONTRACT OF SALE

(1) Consent or meeting of the minds Consent refers to seller’s consent to transfer ownership of, and deliver, a determinate thing, and to buyer’s consent to pay the price certain. Being a consensual contract, the contract of sale is perfected at the moment there is a “meeting of the minds” upon the thing which is the object of the contract and upon the price. [Art. 1475]

(1) Natural – those deemed to exist in certain contracts in the absence of any contrary stipulations. (Ex. Warranty against eviction, hidden defects) (2) Accidental – those which may be present or absent depending on the stipulations of the parties. (Ex. Conditions, interest, penalty)

Requisites: (1) Legal Capacity (2) Offer and acceptance, and (3) No vitiation of consent

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C. STAGES OF CONTRACT OF SALE

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E. CHARACTERISTICS OF A CONTRACT OF SALE

[De Leon] (1) Preparation, conception, negotiation, or generation stage – from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected (2) Perfection or “birth” of the contract – upon the concurrence of the essential elements of the sale; and (3) Consummation or “death” of the contract – begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.

(1) Consensual – perfected by mere consent and without any further acts. (2) Bilateral and Reciprocal – imposes correlative obligations on both parties to the relationship. Consequently, power to rescind is implied. (3) Principal – can stand on its own and does not depend on another contract for validity, as contrasted from an accessory contract. (4) Onerous – imposes valuable consideration as prestation, as distinguished from a gratuitous contract. Consequence: all doubts in construing an onerous contract shall be resolved in that which gives greater reciprocity of interests. [Art. 1378]

D. OBLIGATIONS CREATED Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. (1) Specific or Determ inate Thing – capable of particular designation, e.g. this car, the car with plate no. XNY 200

(5) Commutative – because a thing for value is exchanged for equal value, as contrasted from an aleatory contract. Test: As long as the party believes in all honesty that he is receiving equal for what he gave up for, then commutative character is complied with. (6) Nominate – given a particular name by law E.1. SALE IS TITLE AND NOT MODE Delivery or tradition is the mode to transfer ownership and possession to the buyer.

(2) Generic or Indeterminate Thing – refers only to a class, to a genus, and cannot be pointed out with particularity, e.g. a car (genus nunquam perit)

When a contract of sale is perfected, the seller is merely obligated to transfer ownership and to deliver the property. Transfer of ownership is effected only upon delivery.

NATURE OF OBLIGATIONS CREATED PER DEFINITION IN ART.1458 [Villanueva]

Sale is merely title that creates the obligation on the part of the seller to transfer ownership and deliver possession, but on its own, sale is not a mode that transfers ownership. [Equatorial Realty Dev. v. Mayfair Theater, 2001]

(1) For the SELLER: To transfer ownership and to deliver possession of the subject matter (2) For the BUYER: To pay the price

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F. SALE DISTINGUISHED FROM OTHER CONTRACTS F.1. DONATION Sale

Donation

Onerous

Gratuitous

Perfected by mere consent

Must comply with the formalities required by law. [Art 745, CC]

When the price of the contract of sale is simulated, the sale may be void but the act may be shown to have been in reality a donation or some other contract. [Art.1471, CC] F.2. BARTER Sale Consideration is price in money or its equivalent

Barter Consideration is another thing

Barter is a contract where one of the parties binds himself to give one thing in consideration of the other’s promise to give another thing [Art.1638, CC] If consideration consists partly in money and partly in another thing, the intention of the parties determines whether the contract is one of sale or barter. If manifest intention is not clear: Barter when the value of thing is more than the amount of money or its equivalent; otherwise, sale. [Art.1468] F.3. CONTRACT FOR A PIECE OF WORK Contract for a Piece Sale of Work Goods are manufactured or procured in the ordinary course of business

Goods are manufactured for customer upon his special order

Sale

Contract for a Piece of Work

For the general market, whether on hand or not

For a specific customer

Governed by Statute of Frauds

Not within Statute of Frauds

The fact that the object were made by the seller only when customers placed their orders, does not alter the nature of the contract of sale, for it only accepted such orders as called for the employment of such materials as it ordinarily manufactured or was in a position habitually to manufacture such. [Celestino Co & Co vs. Collector, 1956:] When each product or system executed is always UNIQUE and could not mass-produce the product because of its very nature, such is a contract for a piece of work.[Commissioner vs. Engineering Equipment and Supply Co., 1975] F.4. DACION EN PAGO Sale

Dacion en pago

No pre-existing debt

Pre-existing debt

Creates an obligation

Extinguishes the obligation (mode of payment)

Price is more freely agreed upon, fixed by the parties

Price is value of the thing given

Buyer has to pay the price

Payment is received by the debtor before contract is perfected

There is a novation of the contract of loan into a contract of sale when the creditor agrees to accept a thing in payment of the debt. Hence, if the thing given in payment turns out to belong to another, the creditor’s remedy should be governed by the law on sales, not loan. [Baviera]

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Bilateral prom ise to buy and sell [Asked in 80, 91] A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. [Art 479, CC] Like a sale, the thing must be determinate and the price, certain. F.5. CONTRACT TO SELL Contract of Sale Contract to sell Ownership is transferred upon delivery

Ownership is only transferred upon full payment of price

Non-payment is a resolutory condition

Full payment is a positive suspensive condition, hence non-payment would not give rise to the obligation to transfer ownership

Conditional Contract of Sale

Not unilaterally revocable F.7. LEASE Sale

A subsequent buyer is presumed to be a buyer in bad faith

A subsequent buyer is presumed to be a buyer in good faith

F.6. AGENCY TO SELL Sale

Agency to sell

No transfer ownership

Permanent

Temporary

Seller must be owner at time of delivery

Lessor neet not be owner

Agent delivers the price which he got from his principal

Seller warrants the thing sold

Agent makes no warranty

Lease

Ownership transferred by delivery

Agent receives good as goods of the principal

Agent can’t return the goods

Essentially revocable

of

(2) Conditional – ownership of the object remains with the vendor until fulfillment of the condition/s

Contract to sell

Buyer cannot return the object sold as a general rule

Agency to sell

(1) Absolute – when sale is not subject to any condition and the title immediately passes to the purchaser upon delivery

No perfected sale yet

Buyer pays the price

Sale

G. KINDS OF CONTRACT OF SALE

Sale is already perfected

Buyer receives the goods as owner

CIVIL LAW

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II. Parties to a Contract of Sale

(b) Judicial separation of property. Sale by husband in favor of a concubine after he had abandoned his family and left conjugal home where his wife and children lived and from whence they derived their support, is void. [Ching v. Goyanko, Jr., 2006]

Art. 1489. All persons who have capacity to enter into obligations may enter into a contract of sale

(2) Alienage [Art. 39]

A. KINDS OF INCAPACITY

General Rule: Aliens are disqualified from purchasing or acquiring real property.

(1) Absolute incapacity – when persons cannot bind themselves at all (2) Relative incapacity – only with regard to certain persons and certain class of property (3) Specific incapacity disqualifications

or

Special

The sale entered into by agents, guardians, and executors and adminsitrators shall be voidable, as it affects only private interests.

(1) Minors (2) Insane or Demented (3) Deaf-mutes who do not know how to write (4) Civil Interdiction Incompetents

(3) Trusteeship [Art. 39] A.3. SPECIAL DISQUALIFICATIONS [ARTS. 1491-1492] (AGE-PLJ)

A.1. ABSOLUTE INCAPACITY [ARTS. 1327, 1397, 139]

(5) Judicially-declared 39)

Exception: If acquisition is through hereditary succession

(Art.

(a) Prodigal (b) Imbeciles (c) Absence & presumption of death

The sale entered into by public officers, lawyers, justices and judges, and others specially disqualified by law shall be void, as it affects public interest. (1) Agents - Cannot purchase or acquire property whose administration or sale was entrusted to them Exception: Principal gives consent. (2) Guardian - Cannot purchase property of person under his guardianship

(d) Persons not of unsound mind but by reason of age, disease, weak mind, and other similar causes, cannot take care of themselves and manage their property without outside aid (Easy prey for deceit and exploitation)

Guardianship is a trust of the highest order, and the trustee cannot be allowed to have any inducement or neglect his ward’s interest. [Phil Trust Co v Roldan, 1956] Art. 1491(2) in relation to Art. 1409 does not apply where the sale was under a special power attached to the real estate mortgage, pursuant law. Under Act No. 3135, a mortgagee-creditor is allowed, as an exception, to participate in the bidding under the same condition as any other bidder. [Fiestan v. CA, 1990]

A.2. RELATIVE INCAPACITY: MARRIED PERSONS (1) Husband and wife [Art. 1490] General Rule: Cannot sell property to each other Exceptions:

(3) Executors and Administrators Cannot acquire or purchase property of estate under their administration.

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Does not apply to purchase of hereditary rights, as these are not under their administration.

litigation or levied upon on execution before the court within whose jurisdiction or territory they exercise their respective functions.

The prohibition on executors and administrators does not apply if the principal consents to the sale. [Distajo v. CA, 2000] (4) Public Officers and Employees Cannot acquire or purchase property State/any of its subdivisions, GOCC administration, the administration which was entrusted to them.

of or of

Rationale: to prevent fraud and to surround their profession with prestige. Prohibition applies only on sales or assignment during the pendency of litigation involving the property. [Macariola v Asuncion, 1963] (7) Others law

specially

disqualified

by

Includes judges and government experts who, in any manner whatsoever take part in the sale.

(a) Unpaid sellers with goods in transit from buying the goods

Requisites:

(b) Officer conducting the execution sale of deputies

(a) Properties must belong to the State, any of its subdivisions, or of any GOCC (b) Administration of these properties are entrusted to the public officers/officials (5) Lawyers - Cannot acquire or purchase property or rights in litigation in which they take part by virtue of their profession Lawyers may have undue influence over client; greed may get the better of the sentiments of loyalty and disinterestedness. [Valencia v Cabanting, 1991] Prohibition is definite and permanent and cannot be cured by ratification. [Rubias v Batiller, 1973] Exceptions: An assignment to a lawyer by his client of an interest in the property does not violate Art 1491, where: (a) A judgment has been rendered and has become final; and (b) In case of contingency fee arrangements: the interest of the lawyer may be annotated as an adverse claim on the property awarded to his client [Director of Lands v Ababa, 1979] (6) Justices, Judges, prosecuting attorneys, clerks and other officers and em ployees connected with the adm inistration of justice - Cannot acquire or purchase property or rights in

Art 1492: The prohibitions in the two preceding articles (Arts. 1490, 1491) are applicable to sales in legal redemption, compromises and renunciations. Art 1646: The persons disqualified to buy referred to in articles 1490 and 1491, are also disqualified to become lessees of the things mentioned therein.

B. EFFECTS OF INCAPACITY B.1. ABSOLUTE INCAPACITY (1) If both parties are incapacitated: unenforceable [Art. 1403 (3)] (2) If only 1 party is incapacitated: voidable Exception: If necessaries are sold and delivered to an incapacitated person: pay a reasonable price therefor. [Art 1489] B.2. RELATIVE INCAPACITY Sale between spouses is void. Rationale: (1) To protect 3rd persons who may have contracted with the spouse (2) To avoid undue advantage of the dominant spouse over the weaker spouse.

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(3) To avoid circumvention of the prohibition against donations between spouses. [Medina v CIR, 1961] Such prohibition shall likewise apply to common law spouses. [Calimlim-Canulas v Fortun, 1984] But if already sold to a third person who relied on the title of his immediate seller, reconveyance to the seller spouse is no longer available [Cruz v CA, 1997] B.3. SPECIFIC INCAPACITY/ SPECIAL DISQUALIFICATIONS General Rule: Contracts expressly prohibited by law are VOID and CANNOT BE RATIFIED. Neither can the right to set-up the defense of illegality be waived. [Art. 1409 (7)] Those entered into by public officers/employees, justices and judges, and lawyers in violation of Art. 1491 are inexistent and VOID from the beginning. [Rubias v Batiller, 1973] It is NOT subject to RATIFICATION.

CIVIL LAW

III. Subject Matter A. REQUISITES OF A VALID SUBJECT MATTER [Arts. 1459-1465] For Rights: (1) Transmisible or personal (2) Licit For Things: (1) Licit (2) Existing, Future, Contingent (3) Determinate or determinable A.1. MUST BE LICIT [Art. 1459] The thing is licit when— (1) Within the commerce of man [Art 1347, CC] (2) Example of properties that are not within the commerce of man: (a) Those belonging to the State or its political subdivisions intended for public use or public service. (Art 420)

Exception: Sales entered into by guardians, administrators, and agents (specific incapacities) in violation of Art. 1491 may be RATIFIED by means of and in the form of a new contract when the cause of nullity has ceased to exist. Ratification is valid only from date of execution of the new contract and does not retroact.

(b) Church (c) Narcotics or dangerous drugs except upon prescription (RA 6425, the dangerous drugs act of 1972) (3) When right is not intransmissible [Art 1347] (4) It does not contemplate a future inheritance, unless expressly authorized by law Kinds of illicit things: (1) Per Se – of its nature (2) Per Accidens – due to provision of law. Art 1347, paragraph 2, characterizes a contract entered into upon future inheritance as void. Art. 1347 applies when the following requisities concur: (1) Succession has not yet been opened;

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(2) The object of the contract forms part of the inheritance; and (3) The promissor has, with respect to the object, an expectancy of a right which is purely hereditary in nature. [Vda. de Cabatu v. Spouses Tabu, 2012] Examples of illicit sale (1) Sale of future inheritance is void [Art. 1347] (2) Sale of animals suffering from contagious diseases [Art 1575] (3) Sale of animals if the use or service for which they are acquired has been stated in the contract, and they are found to be unfit therefor [Art 1575] (4) Sale of land in violation of Constitutional prohibition against the transfer of lands to aliens. [Art XII of Constitution] When the subject matter is illicit, the contract of sale is void [Art. 1409 (7)] A.2. EXISTING, FUTURE, CONTINGENT The goods which form the subject of a contract of sale may either be— (1) Existing goods owned or possessed by the seller; (2) Goods to be manufactured, raised, OR acquired by the seller – “Future Goods”; [Art 1462, CC] It is valid only as an executory contract to be fulfilled by acquisition and delivery of goods specified.

Sale of Things Having Potential Existence Emptio Rei Spei

Emptio Rei Speratei

Mere Hope

Vain Hope

Sale of a thing expected or future thing

Sale of a MERE HOPE or expectancy

Sale of a VAIN HOPE or expectancy

Valid

GR: Valid

EXC: Void

Example: Sale of the grain a field may grow in a given time

Example: Sale of a valid lottery ticket

Example: Sale of a fake lottery ticket

Deals with a future thing that is currently not in existence

Deals with a thing that currently exists – the hope or expectancy

Subject to the condition that the thing will exist

Not subject to any condition; The contract comes into existence immediately

Future thing is certain as to itself, but incertain as to quantity and quality In case of doubt, the presumption is in favor of emptio rei speratae since it is more in keeping with the commutative character of the contract. (4) Sale of specific things (a) Sale of things in litigation [Art 1381(4)]

(3) Things having potential existence may be the object of a contract of sale. [Art 1461, CC] A sale may be made of a thing which, though not yet actually in existence is reasonably certain to come into existence as the natural increment or usual incident of something in existence already belonging to the seller, and the title will vest in the buyer the moment the thing comes into existence. [Sibal vs Valndez, 1927] Page 275 of 574

Sale of things under litigation entered into by defendant, without the approval of the litigants or the court, is rescissible. [Art 1381 (4)] But no rescission where the thing is legally in the possession of 3rd persons who did not act in bad faith [Art 1385 (2)] (b) Sale of an undivided interest in a thing [Art 1463] LEGAL EFFECT: Make the buyer a coowner in the thing sold:

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(i) acquire full ownership of his part (ii) may sell his part even without consent of other co-owners (c) Sale of undivided share of a specific mass [Art 1464] The sale of an undivided share in a specific mass of fungible goods makes the buyer a co-owner of the entire mass in proportion to the amount he bought. If later on it was discovered that the mass of fungible goods contain less than what was agreed upon, the buyer becomes owner of whole mass and seller must make up for the difference. [De Leon] (d) Sale of things subject to resolutory condition [Art 1465] Examples: Things acquired under legal or conventional right of redemption; or subject to reserva troncal; pacto de retro sale A.3.DETERMINATE OR DETERMINABLE A thing is determinate when it is particularly designated or physically segregated from all others of the same class. [Art 1460]

CIVIL LAW

IV. Obligations of the Seller A. OBLIGATIONS OF THE VENDOR IN GENERAL (1) To transfer ownership of the thing [Art. 1495] (2) To deliver the thing, with its accessions and accessories, if any [Arts 1164, 1166] (3) To warrant against eviction and against hidden defects [Arts 1545-1581] (4) To take care of the thing, pending delivery, with proper diligence [Art 1163] (5) To pay for the expenses of the deed of sale [Art1487]

B. WHEN SELLER IS NOT THE OWNER General Rule: Ownership is not acquired by the buyer. One cannot give what one does not have. [Art 1505] Exceptions: (1) Seller has a right to transfer ownership Seller need not be the owner of the thing at the time of perfection of the contract. It is sufficient that seller has a right to transfer ownership thereof at the time it is delivered. [Art. 1459]

A thing is determinable when it is capable of being made determinate at the time the contract was entered into without the necessity of a new or further agreement between the parties. [Art 1460]

One who sells something he does not own yet is bound by the sale when he acquires the thing later. [Bucton vs Gabar, 1974]

Art. 1165: If the obligation to deliver is a determinate thing, the creditor has the right to compel specific performance and to recover damages for breach of the obligation. [Jurado]

(2) Estoppel: Owner is, by his conduct, precluded from denying the seller’s authority to sell. [Art. 1434]

Failure to state the exact location of the land does not make the subject matter indeterminate, so long as it can be located. [Camacho v CA, 2007]

General rule: Buyer need not go beyond the Torrens Title

The fact that the exact area of the land specified in the contract of sale is subject to the result of a survey does not render the subject matter indeterminate. [Heirs of Juan San Andres v. Rodriguez, 2000]

(3) Registered land bought in good faith

Exception: When he has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make further inquiry (4) Order of courts; Statutory Sale

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In execution sale, the buyer merely steps into the shoes of the judgment debtor [Rule 39, sec. 33, ROC] (5) When goods are purchased in Merchant’s store, Fair, or Market [Art 1505]

C. SALE BY PERSON VOIDABLE TITLE

HAVING

A

(1) True owner may recover the thing when the ff. requisites concur: (a) Subject matter is movable (b) Owner has either lost the thing or has been unlawfully deprived. [Art 559]

CIVIL LAW

V. Price A. MEANING OF PRICE (Arts. 1469-1474) Price signifies the sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price put to the debit of the buyer and agreed to by him [Inchausti v. Cromwell, 1911]

B. REQUISITES FOR A VALID PRICE (1) Certain or ascertainable at the time of perfection

(2) Reimbursement is necessary before owner can recover when:

(2) In Money or its equivalent

(a) Buyer acted in good faith

(a) N.B.: Example Letters of credit

(b) Acquired at a public auction [Art 559] (3) Recovery no longer possible when:

of

“equivalent”:

(b) If price is partly in money and partly in another thing: Determine manifest intention of the parties to see whether it was barter or sale. [Art 1468]

(a) Buyer in good faith (b) Acquired it at a merchant’s store, fair or market. [Art 1506]

(c) If intention does not clearly appear, it shall be considered a barter if the value of the thing exceed the amount of money or its equivalent. [Art 1468] (3) Real When buyer has an intention to pay and the seller has an expectation to receive the price (a) If simulated: Sale is VOID; BUT act may be shown to have been a donation or some other act or contract. [Art 1471] (b) If Price is false – when the real consideration is not the price stated in the contract: (i) Sale is void (ii) UNLESS proved to be founded on another true and lawful price [Art 1353]

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C. HOW PRICE IS DETERMINED/WHEN CERTAIN (1) Fixed by agreement of the parties

CIVIL LAW

D. INADEQUACY OF PRICE (ARTS. 1355, 1470) General Rule: Does not affect a contract of sale’s validity. [Art. 1470]

(a) Fixing of price cannot be left to the discretion of one of the parties (b) BUT if such is accepted by the other, sale is perfected. [Art 1473] (2) Determination is left to the judgment of a specified person General Rule: Price fixed by 3rd persons designated by the parties is binding upon them

The stipulation in a contract of sale which states that the consideration is “PhP1 and other valuable considerations” does not make the contract void. Gross inadequacy of price does not affect the contract of sale except that it may indicate a defect in consent. [Bagnas v. C.A., 1989] Exceptions: (1) In Voluntary sales

Exceptions:

(a) Where low price indicates a vice of consent, sale may be annulled.

(a) If unable or unwilling: Sale is inefficacious unless parties subsequently agree about the price.

(c) Where price is so low to be shocking to the conscience (fraud, mistake, undue influence), then sale may be set aside.

(b) If in bad faith/by mistake: Courts may fix price (but mere error in judgment cannot serve as basis for impugning price fixed)

(d) Where price is simulated such as when the real intention was a donation or some other contract.

(c) If 3rd person is prevented from fixing price by fault of seller or buyer: Innocent party may avail of remedies (rescission or fulfillment of obligation, with damages)

(2) In Involuntary sales

(d) If 3rd person disregards specific instructions/data/procedure, thereby fixing an arbitrary price

A judicial or execution sale is one made by a court with respect to the property of a debtor for the satisfaction of his indebtedness.

(3) The price is made in reference to another thing, or when the price fixed is the price of the commodity on a definite day, or in a particular exchange or market, or when the amount fixed is above or below the price on such day, exchange or market. [Art 1472]

(a) Where price is so low to be shocking to the conscience, such that a reasonable mind would not be likely to consent to it, then judicial sale will be set aside.

When the price is not certain, the contract is without effect and no obligation arises from it.

(e) Where the parties did not intend to be bound at all, sale is void.

(b) If in event of a resale, a better price can be obtained. (3) Rescissible contracts of sale

Exception: When the thing is already delivered, the buyer must pay a reasonable price therefor. This exception only arises when the means contemplated by the parties for fixing the price have become ineffectual.

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Inadequacy of price is a ground for rescission of conventional sale under Art 1381 (a-b)

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E. WHEN NO PRICE AGREED

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G. EARNEST MONEY

(ART. 1474)

MONEY

VS

OPTION

[ART. 1482] (1) Sale is inefficacious [Art. 1474] (2) But if the thing or part thereof has been delivered and appropriated by the buyer, he must pay a reasonable price therefor. (a) What is a reasonable price is a question of fact dependent on the circumstances of each particular case. [Art 1474] (b) The reasonableness of a price may be determined on the basis of a company’s balance sheet showing the book value or fair market value of its shares. [Philippine Free Press vs. CA, 2005] Generally, the reasonable price is the market price at the time and place fixed by the contract or by law for delivery of goods.

F. FALSE PRICE VS SIMULATED PRICE (1) False Price (Relative Sim ulation) – price stated in the contract is not the true price. Parties intended to be bound.

Earnest M oney – paid in advance of the purchase price agreed upon by the parties in a contract of sale, given by the buyer to the seller, to bind the latter to the bargain. Limson vs. CA, 2001 Option Money Separate and distinct consideration from the purchase price Given when sale is not yet perfected When given, the would-be-buyer is not required to buy, but may even forfeit it depending on the terms of the option Grantee of option is still undecided whether or not to buy or sell the property [Baviera]

Effect: Binds the parties to their real agreement when it does not prejudice 3rd persons and is not intended for any purpose contrary to law, morals, public policy, etc.

False Price Real price is not declared Contract is void if it should not be proved that it was founded upon another casue which is true and lawful [Art 1353]

(2) Sim ulated Price (Absolute Sim ulation) – price stated in the contract is not intended to be paid. Parties never intended to be bound. Effect: Void for lack of cause/consideration, but can be shown as a donation or some other contract. Parties may recover from each other what they may have given under the contract. Disagreement on the manner of payment is tantamount to a failure to agree on the price. [Toyota Shaw vs. CA, 1995]

Earnest Money Part of purchase price [Art 1482] Given only when there is already a sale When given, the buyer is bound to pay the balance

Buyer manifests his earnest desire to buy the property

Non-payment of Price Failure of buyer to pay the price Contract is not void but gives rise to a right to demand fulfillment or cancellation of the obligation

There can be sale even when no price is agreed upon. When the price cannot be determined in accordance with Arts 14691473, the contract is inefficious. Exception: when the thing or part thereof has been delivered to and appropriated by the buyer, in which case the buyer has to pay a reasonable price therefor.

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CIVIL LAW

of

Form and Type (a) Offer must be certain as to the object and price [Art. 1319] (b) Business advertisements of things for sale are not offers but mere invitations to make an offer

A. PREPARATORY [ART. 1479]

Exception: If otherwise provided [Art. 1325]

(1) Offer [Art. 1475] In General: (a) The contract of sale is perfected at the moment there is meeting of the minds upon the thing which is the object of the contract and upon the price. [Art. 1475, par.1]

(c) Advertisements for bidders are simply invitations to make proposals. Advertiser is not bound to accept the highest or lowest bid. Exception: Unless the contrary appears [Art. 1326]

(b) From that moment, the parties may reciprocally demand performance, subject to the provisions of law governing the form of contracts. [Art. 1475, par. 2] (c) A private instrument signed by the defendant reciting that he bought from the plaintiff a property at a specific address for a specific price to be paid as soon as a bill of sale is signed is not a mere draft but a perfected agreement and hence, obligatory, even if there was no statement as to area or price per meter. [Goyena v. Tambunting, 1902]

Fixing terms of offer: The person making the offer may fix time, place, and manner of acceptance [Art. 1321] W hen effective: From the time acceptance is communicated to him or his agent. [Art. 1322] W hen ineffective: Offer becomes ineffective upon death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed [Art 1323] (2) Acceptance

General Rule: Offer may be withdrawn at any time without even communicating such withdrawal to the interested buyer. Exception: When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal. [Art 1324, CC] Exception to the exception: Cannot be withdrawn within a certain period if offer is founded upon a consideration. [Art 1324 and 1479, CC]

(a) The acceptance must be absolute. (b) The acceptance must be plain and unconditional. (c) To bind the offeror, the offeree must comply with the conditions of the offer. Where the acceptance was not in accordance with the terms and conditions of the offer, the offer lapsed even though the offeree later on was willing to accept the terms and conditions of the offer. The acceptance referred to which determines consent is the acceptance of the offer, and not of the goods delivered. [National Grains Authority v. IAC, 1989] An acceptance may contain a request for certain changes in the terms of the offer and yet still be a binding acceptance (but the requests should be mere suggestions only, not counter-offers), so long as clear

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that meaning of acceptance is positively and unequivocally to accept offer, whether such request is granted or not, a contract is formed. [Villonco Realty Company v. Bormaheco, Inc., 1975]

CIVIL LAW

(4) Right of First Refusal As to enforceability If the right to the first offer is embodied in the contract, it should be executed according to the terms stipulated. This juridical relation is not amorphous nor is it merely preparatory. [Equatorial Realty Development vs. Mayfair, 1996]

(3) Option Contract [Arts. 1479, 1324] (a) Definition (i) An accepted unilateral promise to buy or sell supported by a consideration distinct from the price [Art 1479]

W hen the grantee fails to exercise the right Only after the grantee fails to exercise its right of 1st priority under the same terms and conditions within the period agreed upon, could the grantor validly offer to sell the property to a 3rd person under the same terms as offered to the grantee. [Paranaque Kings vs. CA, 1997]

(ii) An option is not of itself a purchase, but merely secures the privilege to buy. (iii) A consideration for an optional contract is just as important as the consideration for any other kind of contract. If there was no consideration for the option, then it cannot be enforced any more than any other contract where no consideration exists. [Baviera]

As to the effects of the violation of the right (a) A sale made in violation of a right of first refusal is valid but rescissible, and may be the subject of an action for specific performance. [Rosencor Devt. Corp. Vs. Inquing, 2001]

(b) Elements of an Option Contract (i) Consent

(b) However, before the sale to the 3rd person may be rescinded, he must have been actually or constructively aware of the right of 1st refusal at the time he bought it.

(ii) Subject matter: an option right or accepted unilateral offer to buy, or an option right or accepted unilateral offer to sell a determinate object for a price certain, including the mannerof payment thereof

(c) The sanction for the enforcement of the right of first refusal against third persons is based on Art. 19 of NCC, as no real right was created on the property.

(iii) Prestation: a consideration separate and distinct from the purchase price for the option given

Distinction from Option Contract Option Contract

(c) Sale vs. Option Contract Sale Bilateral

Sale of property

Option Contract Unilateral: gives right to buy or sell, but imposes no obligation on the option-holder, aside from consideration for the offer

Right of 1st Refusal

Separate consideration is necessary

No need for a separate consideration

Grantee has the right to buy or sell

No right to buy or sell, only a right to match the 1st offer to buy should the grantor decide to sell

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(5) Mutual Prom ise to Buy and Sell [Art. 1479] A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. The promise made by one party is the consideration for the promise made by the other. [Baviera]

CIVIL LAW

(c) Applies only to executory contracts, not to contracts either totally or partially performed. [Iñigo v. Estate of Maloto, 1967] (d) Purpose: to prevent fraud or perjury in the enforcement of obligations (e) Ratified when defense fails to object to the introduction of parol evidence, or ask questions on cross-examination

B. PERFECTION [Arts. 1475, 1319, 1325, 1326]

Perfection of Sale by Auction [Art 1476]

W hen Perfected

(1) Contract is perfected when the auctioneer accepts the bid by the fall of the hammer or gavel or in any other customary manner.

(1) Contract of sale is a consensual contract, hence perfected at the moment of the meeting of the minds of the parties as to the object of the contract and the price. [Art 1475] (2) It is the proof of all the essential elements of the contract of sale, and not the mere giving of earnest money, which establishes the existence of a perfected sale. [Platinum Plans Phils. vs. Cucueco, 2006]

(2) If auction is announced to be “without reserve,” goods cannot be withdrawn from the sale after the bid is made. (3) By taking part in the auction and offering bidding, the buyer voluntarily submitted to the terms and conditions of the auction sale announced in the notice. (4) Puffing/by-bidding is illegal – means employed by owner to increase the price of the bids; illegal.

Effect of Perfection From the moment of the perfection of the contract of sale, the parties may reciprocally demand performance, subject to the provisions of the Statute of Frauds. [Art 1475] Statute of Frauds [Art,1403 (2)] (a) Contract or some memorandum thereof must be in writing and subscribed by the party or his agent, otherwise contract is unenforceable; unless ratified by failure to object to oral evidence or acceptance of benefits under the contract (b) Statute of Frauds covers:

C. CONSUMMATION When parties fulfill their obligations. FORMALITIES OF THE CONTRACT [Art. 1403 (d) (e)] General rule: No form required as to validity provided all the essengtial requisites are present. The sale may be [Art.1483, CC]: (1) Written (2) Oral (3) Partly written and partly oral

(i) Sale of personal property at price not less than 500 pesos (ii) Sale not to be performed within 1 year (iii) Sale of real property or an interest therein [Art 1358]

(4) Inferred from the conduct of the parties Sale is consensual, and thus binding when there is meeting of minds as to price. Such sale is valid despite manner of payment, or

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even breach as to such manner of payment. If real price is not stated in the contract, then the remedy would be reformation of the contract. Payment has no effect on the validity of the sale, for payment merely goes into the performance of the contract. Failure to pay consideration is not lack thereof. [Spouses Buenaventura v. CA, 2003] Continued possession of the object of an oral contract has been held to constitute partial performance, where accompanied by other acts which characterize the continued possession and refer to the contract of sale. A tender of payment, declined by the vendor, has been said to be equivalent to actual payment, for purposes of determining if there has been partial performance. [Ortega v. Leonardo, 1958]

CIVIL LAW

(d) The cession of actions or rights proceeding from an act appearing in a public document. (e) All other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one. But sales of goods, chattels or things in action are governed by Articles, 1403, No. 2 and 1405.

Sale of realty by an agent Agent’s authority must be in otherwise the sale is void [Art.1874]

writing,

Sale of large cattle To be valid, transfer of large cattle must be registered with the municipal treasurer [Sec. 529, Revised Administrative Code] For public convenience: In a public docum ent – to compel third parties [Art 1358] (a) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property; sales of real property or of an interest therein a governed by Articles 1403, No. 2, and 1405; (b) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; (c) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; Page 283 of 574

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VII. Transfer Ownership

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of

OBLIGATIONS OF THE VENDOR (1) To transfer ownership of the thing

CIVIL LAW

GENERAL CONCEPTS Transfer of ownership is effected even if the purchase has been made on credit. Payment of the purchase price is not essential to transfer of ownership as long as the property sold was delivered.

(2) To deliver the thing, with its accessions and accessories, if any

Intention to transfer ownership

(3) To warrant against eviction and against hidden defects

(1) All forms of delivery shall be coupled with intention of delivering the thing sold.

(4) To take care of the thing, pending delivery, with proper diligence

(2) Seller must be owner or authorized by owner of the thing sold

(5) To pay for the expenses of the deed of sale

A. MANNER OF TRANSFER

W hen right to transfer ownership must exist: At the time of delivery and not at the time of perfection of contract of sale.

[ARTS. 1477, 1496-150] General Rule: Ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof [Art 1477] Obligation to transfer ownership and to deliver is implied in every contract of sale [Arts. 1458-1459] Transfer of ownership requires delivery [Art. 1495] Exceptions (1) Contrary stipulation

B. CONCEPT OF DELIVERY B.1. REQUISITES (1) Identity – between what must be delivered and what is actually delivered (2) Integrity – in a condition suitable for enjoyment (3) Intentional B.2. WHAT TO DELIVER (1) Thing sold [Art. 1495] (2) Fruits [Art. 1164 & 1537] – belong to the vendee from day of perfection.

(2) Contract to sell (3) Contract of insurance (4) Sale on acceptance/Trial (5) When seller is not the owner or has voidable title

(3) Accessions and accessories [Art. 1166 & 1537] – in the same condition they were in on day of perfection (a) Improvements by seller at his expense grants him a usufructuary right [Art 1138, 1189] (b) No indemnification (c) But he may remove it to the extent that there is no damage [Art. 1538]

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B.3. WHERE TO DELIVER (1) A hierarchy is followed:

Loss or destruction of the property prior to return falls upon the buyer and makes him responsible for the purchase price.

(a) Stipulation

Sale on Approval vs Sale or Return

(b) Usage of trade (c) Seller’s place of business (office) (d) Seller’s residence (2) In case of specific goods, which the parties knew to be at some other place when the contract was perfected, that place is the place of delivery (3) If goods are at the time of sale are possessed by a third person, then there is no delivery until he acknowledges to the buyer that he holds the goods for the buyer. B.4. WHEN TO DELIVER Absent a stipulation as to time, delivery must be made within a reasonable time; demand or tender of delivery shall be made at a reasonable hour.

C. WHEN DELIVERY TRANSFER TITLE

DOES

Sale on Approval

Sale or Return

Ownership does not pass upon delivery remaining with the seller until buyer signifies his approval.

Ownership passes to buyer on delivery and subsequent return revests ownership in the seller.

Depends on the character or quality of goods

Depends on the will of the buyer

Subject to a suspensive condition

Subject to a resolutory condition

Risk of loss remains with the seller

Risk of loss remains with the buyer

Express Reservation If it was stipulated that ownership in the thing shall not pass to the purchaser until he has fully paid the price then ownership remains with seller even when delivery is made [Art 1478]

NOT

Implied Reservation

(1) Sale on Approval or Trial Title remains with the seller notwithstanding delivery of the goods.

The following are instances when there is an implied reservation of ownership:

(a) Signifies his approval or acceptance to the seller

(a) Goods are shipped, but by the bill of lading goods are deliverable to the seller or his agent, or to the order of the seller or his agent

(b) Does any other act adopting the transaction (i.e. sale to a third person)

(b) Bill of lading is retained by the seller or his agent.

(c) Retains the goods without giving notice of rejection after the time fixed has expired; if no time has been fixed, after the expiration of a reasonable time [Art 1502]

(c) When the seller of the goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer, and the latter does not honor the bill of exchange by returning the bill of lading to the seller.

Buyer becomes the owner when he –

(2) Sale or Return Buyer becomes owner of the property on delivery, BUT has the option to revest ownership in the seller instead of paying the price by returning the goods within the time fixed in the contract, or, if no time is fixed, within a reasonable time. Otherwise, the sale becomes absolute.

(3) W hen Sale Not Valid When the thing sold is a public property

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(4) W hen Seller is Not the Owner General Rule: Ownership is not acquired by the buyer. One cannot give what one does not have. [Art 1505] Exceptions:

the buyer [E.g.: Art 1478 where ownership will only pass after full payment of the price]

transfer

D.2. CONSTRUCTIVE DELIVERY Execution of public instrum ent [Art 1498, first paragraph]

(b) Estoppel: Owner is, by his conduct, precluded from denying the seller’s authority to sell. [Art. 1434]

General Rule: produces the same legal effects of actual delivery.

(a) Seller has ownership

a

Right

to

(c) Registered land bought in good faith (d) Order of courts; Statutory Sale (e) When goods are purchased in Merchant’s store, Fair, or Market [Art 1505] (5) Sale by Person Having a Voidable Title (a) True owner may recover the thing when the ff. requisites concur: (i) Subject matter is movable (ii) Owner has either lost the thing or has been unlawfully deprived. [Art 559] (b) Reimbursement is necessary before owner can recover when: (i) Buyer acted in good faith (ii) Acquired at a public auction [Art 559] (c) Recovery no longer possible when: (i) Buyer in good faith (ii) Acquired it at a merchant’s store, fair or market. [Art 1506]

D. KINDS OF DELIVERY D.1. ACTUAL DELIVERY (1) Deemed made when the thing sold is placed in the control and possession of the vendee [Art. 1497]

Exceptions: (a) The parties intended otherwise. (b) At the time of execution, the subject matter was not subject to the control of the seller, which control must subsist for a reasonable length of time after execution. [Pasagui v Villablanca, 1975] “Control” over thing sold must be such that seller is capable of physically transferring it to buyer. Although parties may stipulate that the execution of a public instrument is equivalent to delivery, this legal fiction holds true only when there is no impediment that may prevent the passing of the property from the vendor to the vendee. [Vda. de Sarmiento v. Lesaca, 1960] If, notwithstanding execution of the instrument, the buyer cannot enjoy material tenancy and make use of the object himself or through another in his name, there is no delivery. [Power Commercial v. CA, 1997] Execution of a public instrument gives rise only to a prima facie presumption of delivery, negated by failure of the buyer to take actual possession of land sold. A person who does not have actual possession cannot transfer constructive possession by execution and delivery of public instrument. [Spouses Santiago v. Villamor, 2012] Sym bolic Delivery

(2) Not always essential to passing of title [Art. 1475]

Delivery of keys of the place or depositary where the movable is stored or kept. [Art 1498]

(3) Parties may agree when and on what conditions the ownership shall pass to

Unless otherwise agreed, when symbolic delivery has been made, the seller is not

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obliged to remove tenants to place the buyer in actual possession of the property as he has already complied with his obligation to transfer ownership of and deliver the thing sold. [Power Commercial and Industrial Corp. v. CA, 1997; Sabio v. The International Corporate Bank, Inc., 2001] Tradition Longa Manu (Long Hand) Delivery of movable property by mere consent or agreement, if the thing sold cannot be transferred to the possession of the buyer at the time of sale. [Art 1499] Example: Seller points to the property without actually transferring physical possession thereof. When an employer assigned all its rights and title to all surplus property salvaged by the contractor, tradition longa manu takes place. Delivery is upon the moment a thing is salvaged. [Board of Liquidators v. Floro, 1960]

CIVIL LAW

(3) By allowing the buyer to use his rights as new owner with the consent of the seller Delivery to a Com m on Carrier General Rule: Delivery to the courier or carrier is tantamount to delivery to buyer, whether carrier is named by buyer or not. The buyer assumes the risk of loss. Exceptions (1) Seller reserved title through the form of the bill of lading, with intent to remain the owner, not merely for the purpose of securing payment, OR (2) Contrary intention appears in the contract (i.e. seller is required to deliver goods to buyer at the point of destination) (3) Delivery by the seller is in breach of the contract

Tradition Brevi Manu (Short Hand)

(4) F.O.B. (Free on Board or Freight on Board) - When seller bears the expenses of transportation up to the F.O.B. point.

Delivery of m ovable property by mere consent or agreement, if the buyer already had it in his possession for any other reason. [Art 1499]

(5) C.I.F. (Cost, Insurance, Freight) - Price quoted includes the costs of the goods, insurance, and freight charges on the goods up to the point of destination.

Happens when the already has possession of the thing sold before the sale by virtue of another title (as lessee, borrower, depositary, etc.)

(6) F.A.S. (Free Alongside) - Seller bears the expenses of transportation until he delivers the goods alongside a vessel at a named port.

Tradition Constitutum Possessorium

E. DOUBLE SALES

Seller continues to be in possession of the property sold not as owner but in some other capacity, like as tenant or lessee.

[ART. 1544] General Rule: Prior tempore, prior jure (“First in time, priority in right”) applies. Requisites

Quasi-traditio

(1) 2 or more valid sales;

Mode of delivery of incorporeal things or rights. Delivery is effected:

(2) Same subject matter;

(1) By execution of public instrument (2) When such is not applicable, by placing the titles of ownership in the possession of the buyer

(3) 2 or more buyers with conflicting interests over the rightful ownership of the thing sold; (4) Same seller. [Cheng v Genato, 1998]:

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RULES GOVERNING SALE OF MOVABLES, IMMOVABLES AND UNREGISTERED LANDS

latter's interest in the property sold as of the time the property was levied upon. [Carumba v. CA, 1970]

Sale of Movables

Sale of Land

Ownership shall be transferred to the person who may have first taken possession in good faith. Sale of Im m ovables: Registered Land Ownership belongs to the person who: (1) In good faith first recorded the sale in the Registry of Property; or (2) If there is no inscription of sale on the title, ownership passes to the person who in good faith was first in possession; or

Immovables:

Unregistered

(a) Instrument or deeds establishing, transmitting, acknowledging, modifying or extinguishing rights with respect to lands not registered under the Land Registration Act or the Spanish Mortgage Law, are required to be registered in the Registry of Property to prejudice 3rd persons, although such registration is understood to be “without prejudice to a third party with a better right”. [PD 1528 Sec 113]

(3) In the absence thereof, to the person who presents the oldest title, provided there is good faith.

(b) Art. 1544 applies to unregistered land subject to a conventional sale (because of Art. 1358) but NOT to unregistered land subject to judicial sale.

Possession refers to any of the modes of possession in Articles 1497-1501

(c) Unregistered by both buyers, the first buyer is preferred.

Oldest Title as to any public document showing acquisition of the land in good faith. To constitute “title,” the transmission of ownership must appear in a public document [Art. 1358 (1)]

(d) If first buyer did not register but second buyer registered property, second buyer is preferred.

Registration includes any entry made in the Primary Entry Book of the registry, including both registration in its ordinary and strict sense and cancellation, annotation, and even marginal notes. [Cheng v. Genato, 1998] Pencilled entries on the title are not considered registration. [AFPMBAI v. Court of Appeals, 1999] Second Sale Made by Virtue Execution and Attachm ent

of

F. PROPERTY REGISTRATION DECREE Requisites for Registration of Deed of Sale in Good Faith 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 who pays a full and fair price for the sale, at the time of the purchase or before he has notice of the claim/interest of some other person in the property. [Agricultural and Home Extension Development Group v CA, 1992]

Art. 1544 does NOT apply in cases where the first sale of an unregistered immovable occurred prior to an execution sale and the General Rule: As a rule, he who asserts the second sale occurred by virtue of an execution status of a purchaser in good faith and for sale. This is because a buyer of unregistered value has the burden of proving such land at an execution sale only steps into the assertion. [Mathay v CA, 1998] shoes of the judgment debtor (the person who sold the property prior to the execution sale). The second buyer merely acquires the Page 288 of 574

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W hen buyer is presumed to be in bad faith (1) Annotation of adverse claim : Places any subsequent buyer of the registered land in bad faith. [Balatbat v CA, 1996]

CIVIL LAW

(c) Documentary tax registration fees – 1.5% of the selling price or zonal value, whichever is higher

(2) Annotation of Lis Pendens: Buyer cannot be considered an innocent purchaser for value where it ignored the lis pendens on the title. (3) A purchaser of a parcel of land cannot close his eyes to facts which should put a reasonable man upon his guard, such as when the property subject of the purchase is in the possession of persons other than the seller. A buyer who could not have failed to know or discover that the land sold to him was in the adverse possession of another is a buyer in bad faith. [Heirs of Ramon Durano v Uy, 2010]

Lis Pendens

Annotation of Adverse Claim

May be cancelled even before the action is finally terminated for causes which may not be attributable to the claimant

May be cancelled only in one instance, i.e., after the claim is adjudged invalid or unmeritorious by the Court

The two are not contradictory or repugnant to one another; nor does the existence of one automatically nullify the other, and if any of the registrations should be considered unnecessary or superfluous, it would be the notice of lis pendens [A. Doronila Resources Development Inc v CA, 1988] Accom panied by vendors duplicate certificate of title, paym ent of capital gains tax, and docum entary tax registration fees Must be accompanied by: (a) Vendor’s duplicate certificate of title (b) Payment of capital gains tax – 6% of the selling price or zonal value, whichever is higher Page 289 of 574

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VIII. Risk of Loss & Deterioration A. RES PERIT DOMINO Res perit domino: Owner bears risk of loss and deterioration Basis: Ownership is not transferred until delivery.

TO

PERFECTION

In the absence of stipulation, there are two conflicting views: (1) Res perit creditori or the buyer bears the risk of loss. This is an exception to the rule of res perit domino. Basis: Art 1504 only covers goods.

[ARTS. 1263, 1189]

B. PRIOR CONTRACT

CIVIL LAW

OF

Seller bears risk of loss and deterioration. Basis: Res perit domino

Pursuant to Article 1262, if the thing is destroyed without the fault of the debtor/seller, the obligation to pay shall subsist. (2) Res perit domino or the seller bears the risk of loss. Basis: The rule on loss is different from the rule on deterioration for the loss would be for the account of the seller, while the deterioration would be for the account of the buyer. In reciprocal obligations, the extinguishment of the obligation due to loss of the thing extinguishes the entire juridical relation.

C. AT TIME OF PERFECTION [ARTS. 1493 AND 1494] Seller bears risk of loss and deterioration.

D.2. DETERIORATION [ART 1189]

Basis: Res perit domino

Total Loss Contract is void because the object did not exist at the time of the transaction.

Impairment is borne by the BUYER if the thing deteriorates without the fault of the seller.

Partial Loss (Or loss which results in substantial change in character)

If it deteriorates through the fault of the seller, the buyer may choose between rescission of obligation and fulfillment, either case with indemnity for damages.

Buyer may withdraw from the contract or Buy the remainder at a proportionate price

E. AFTER DELIVERY General Rule: Buyer bears risk of loss and deterioration.

D. AFTER PERFECTION BUT BEFORE DELIVERY D.1.LOSS General Rule: Stipulations in the contract will govern.

Exceptions [Art 1504 (1) and (2)] (1) Where delivery has been made either to the buyer or to the bailee for the buyer, but ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract; and

(2) Where actual delivery has been delayed through the fault of either the buyer or seller, the goods are at the risk of the party in fault. Page 290 of 574

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IX. Documents of Title

CIVIL LAW

Terms of Document

the

Goods are deliverable to bearer

A. DEFINITION [Art. 1636] A document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document. [Art. 1636]

How negotiated By delivery of the document to another

Endorsed in blank by the person to whose order the goods were supposed to be delivered Goods are deliverable to the order of a specified person

By indorsement of such person [Art. 1509, CC]

Examples: bill of lading, quedan, warehouse receipts, trust receipts, dock warrant

WHO MAY NEGOTIATE IT? [Art.1512]

B. PURPOSE OF DOCUMENTS OF TITLE

(2) Person to whom the possession or custody of the document has been entrusted by the owner

(1) Owner

(1) As evidence of possession or control of goods described therein (2) As a medium of transferring title and possession over the goods described therein without having to effect actual delivery thereof [Villanueva] (3) The custody of a negotiable warehouse receipts issued to the order of the owner, or to bearer, is a representation of title upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner. [Siy Cong Bieng vs. HSBC, 1932]

C. NEGOTIABLE DOCUMENTS OF TITLE A document of title which states that the goods referred to therein will be delivered to the bearer, or to the order of any person named in such document [Art. 1508]

(a) If bailee undertakes to deliver the goods to such person (b) If document is in such form that it may be negotiated by delivery A person to whom a document has been negotiated acquires: (1) Title of person negotiating the document, over goods covered by document (2) Title of depositor/owner over such goods (3) Direct obligation of bailee/carrier to hold possession of goods for him

D. NON-NEGOTIABLE DOCUMENTS OF TITLE Goods described in a non-negotiable document of title are deliverable only to a specified person. A person to whom a document has been negotiated acquires: (1) Title to goods as against the transferor (2) Right to notify the bailee of the transfer thereof

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(3) Right, thereafter, to acquire the obligation of the to hold goods for him

E. WARRANTIES OF DOCUMENTS OF TITLE

SELLER

OF

CIVIL LAW

The levy of an attachment of execution upon the goods by a creditor of the transferor, may defeat the title of the transferee and the right to acquire the obligation of such bailee, when: (1) It was done prior to the notification to such bailee by the transferor of a nonnegotiable document of title or

[ART. 1516] A person who negotiates a document of title warrants: (1) The genuineness of document (2) The legal right to negotiate or transfer (3) That there is no knowledge of any fact which would impair the validity or worth of the document (4) The right to transfer the title to the goods and merchantability or fitness for a particular purpose, whenever such warranties would have been implied

(2) By a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. [Art 1514 (3rd par)] A creditor whose debtor is the owner of a negotiable document of title shall be entitled to such aid from courts in regard to property which cannot be readily attached or levied by ordinary legal process [Art 1520]

He does not warrant that: (1) Common carrier will fulfill its obligation to deliver the goods (2) Previous endorsers will obligation [Art. 1516-1517]

fulfill

their

Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon, unless: (1) Document is first surrendered to the carrier; or (2) Impounded by the court; or (3) Its negotiation is enjoined. [Art. 15191520]

F. RULES ON LEVY/GARNISHMENT OF GOODS [ARTS. 1514, 1519, 1520] Goods in the hands of the carrier covered by a negotiable document cannot be attached or levied upon, unless: (1) Document is first surrendered to the carrier; or (2) Impounded by the court; or (3) Its negotiation is enjoined. [Art. 1519-1520] Page 292 of 574

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X. Remedies Unpaid Seller

SALES

of

CIVIL LAW

an

Buyer can set up the defense that seller at any time before judgment could not or did not intend to deliver the goods. Unless the contrary appears, payment and delivery are presumed to be concurrent acts, and the obligation of each party to perform the contract is dependent upon the simultaneous performance by the other party

A. DEFINITION OF UNPAID SELLER [ART. 1525] A seller is considered to be an unpaid seller if the whole price has not been paid or tendered, or when check received as a conditional payment was dishonored by nonpayment or insolvency of the buyer [Baviera]

If ownership has not yet passed to the buyer, the seller cannot maintain an action for the price, unless it involves (b) or (c).

An seller is unpaid within such definition whether or not title has been passed. Partial payment of the price does not extinguish the unpaid seller’s lien. [De Leon]

Title to goods passes from the moment the goods are placed at the buyer’s disposal when refusal to accept is without just cause.

Term also includes: (1) The agent of the seller to whom the bill of lading was endorsed, (2) The consignor or agent who had paid the price or is responsible for the price

(2) Action for damages [Art. 1596] When ownership has not yet passed and the buyer, without lawful cause, neglects or refuses to ACCEPT and PAY for the goods

(3) Any other person who is in the position of a seller (i.e. buyer who paid the price and had a right to return the goods). [Baviera]

B. JUDICIAL REMEDIES OF UNPAID SELLER (1) Action for the price [Art. 1595] (a) When the ownership of the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the price (b) When the price is payable on a certain day and the buyer wrongfully neglects to pay such price, irrespective of delivery or of transfer of title (c) When the goods cannot readily be resold for a reasonable price, and the buyer wrongfully refuses to accept the goods even before ownership passed.

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Measure of damages is the ESTIMATED LOSS directly and naturally resulting in the ordinary course of events from the buyer’s breach. Not only actual damages, but also unrealized profits. [De Leon] This consists of: (a) Where there is available market for goods: Difference between the contract price and the market price at the time the goods ought to have been accepted or if no time was fixed, at the time of refusal to accept Note: If the resale was made with diligence, the resale price is evidence of market value, taking into account whether or not the goods could be readily sold (b) Where labor/expense was necessary for seller to fulfill his obligation: Labor performed and expenses made by seller before receiving notice of buyer’s repudiation or countermand (c) Profit that the seller would have made if sale had been fully performed

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(3) Rescission by giving the buyer notice of the election to rescind [Art. 1597] When the goods have not yet been delivered to the buyer, and the buyer repudiated the contract of sale, or manifested his inability to perform his obligations, or has committed a breach of the contract of sale. Under this rule, rescission would bar an action on the contract because it means cancellation of the contractual obligations between the parties. [Baviera]

CIVIL LAW

C. ALTERNATIVE REMEDIES OF THE UNPAID SELLER UNDER RECTO LAW (a) Specific Performance (b) Cancellation of sale: If vendee fails to pay 2 or more installments. When the seller cancels the sale by repossessing the property sold, he is barred from exacting payment for its price. (c) Foreclosure of Chattel Mortgage: If vendee fails to pay 2 or more installments (i)

If seller chooses this remedy, he shall have no further action to recover any unpaid balance, and any stipulation to the contrary shall be void

(ii)

What Art 1484 (3) prohibits is “further action against the purchaser to recover any unpaid balance of the price;” and although this Court has construed the word “action” to mean “any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy,” there is no occasion at this stage to apply the restrictive provision of the said article because there has not yet been a foreclosure sale resulting in a deficiency. The payment of the sum of P1,250 of Sapinoso was a voluntary act on his part and did not result from a “further action” instituted by Northern Motors. [Motors vs. Sapinoso, 1970]

(iii)

The purpose of the law is to remedy the abuses committed in foreclosure of chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his

The unpaid seller’s right to rescind for non-performance is not absolute. Not allowed to rescind when: (a) There are 3rd persons possessing the objects of the contract to whom no bad faith is imputable (b) Breach is on slight or casual The seller cannot unilaterally and extrajudicially rescind a contract absent express stipulation to do so, except as provided in Art. 1597. (4) Special rule for sale of movables by installments – Recto Law [Arts. 1484, 1485] Applies in cases of: (a) Sale of movables in installment The rule is intended to apply to sales of movables, the price of which is payable in two or more installments, but not to straight-term sales where the price is payable in full, after making a down payment because the law aims to protect improvident buyers who may be tempted to buy beyond their means. [Levy Hermanos vs. Gervacio, 1939] (b) Lease of personal property with option to buy

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original indebtedness. [Bachrach Motor Co., Inc. v. Millan, 1935] (iv)

Remedies are ALTERNATIVE, not cumulative. [Nonato vs. IAC, 1985]

Where the mortgagor unjustifiably refused to surrender the chattel subject of the mortgage upon failure of two or more installments, or if he concealed the chattel to place it beyond the reach of the mortgagee, that thereby constrained the latter to seek court relief, the expenses incurred for the prosecution of the case, such as attorney's fees, could rightly be awarded. [Borbon II v. Servicewide, 1996]

CIVIL LAW

XI. Performance Contract

of

A. DELIVERY OF THING SOLD (1) Sale of m ovables [Arts. 1522, 1537, 1480] (a) When Quantity less than expected (i) Buyer may reject all (ii) Buyer may accept. If buyer accepts with knowledge of seller’s inability to deliver the rest – buyer pays contract price (iii) Buyer may accept, If Buyer has used or disposed prior to knowing seller’s inability to deliver the rest, or buyer does not know of seller’s inability to deliver the rest – buyer pays fair value (b) Quantity more than expected (i) If divisible, buyer may accept only the contracted quantity, and reject the rest – buyer pays contract price (ii) Buyer may accept all – buyer pays for all at contract rate (iii) If indivisible, buyer may reject all (c) Quality different or different goods (i) If divisible, buyer may accept the goods compliant with contract and reject those that are not (ii) If indivisible, buyer may reject all [Art. 1522] (d) Sale of specific mass of goods In the sale of fungibles where the measure or weight has not been agreed upon nor is there a fixed rate based upon a measurement, the subject matter of the sale is a determinate object – the specific mass; seller is merely required to deliver such mass even if actual

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quantity falls short estimate [Art. 1480]

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parties’

(ii) There is no change in price even if area or number turns out to be greater or lesser than that stated [Art. 1542]

(e) Delivery by installments (i) By default, buyer is not bound to accept delivery of goods by installments

(iii) Exception: when the excess or deficiency is no longer reasonable [Asian v Jalandoni, 1923]

(ii) In a contract of delivery by installment to be paid by installment as well, delay or breach may not necessarily mean breach of the entire contract; depending on the circumstances, breach may be severable and the aggrieved party is entitled to damages and not rescission. [Art. 1583]

(iv) Exception to the exception: when buyer expressly assumes risk on actual area of the land. [Garcia v Veloso, 1941] (v) If the price per unit or measure is not provided for in the contract, then the rules of lump sum sale should prevail. [Sta. Ana v Hernandez, 1966]

(2) Sale of im m ovables [Arts. 1539, 1543]

If sale for lump sum, the cause of the contract is the thing sold, independent of number/measure. The law presumes that the purchaser had in mind a determinate price for real estate and the ascertained area and quality. The purchaser intended to buy thing in entirety, not just any unit of measure or number. [De Leon]

(a) Sale at a fixed rate per unit of measure (i) Seller bound to deliver entire land, i.e., the entire area stated in the contract. (ii) If the area is less than that stated, buyer may rescind or demand a proportionate reduction in price.

When there is conflict between the area stipulated in the contract, the area included within the stipulated boundaries prevails, provided such boundaries are certain, and no alteration thereof has been proven.

Buyer may only avail of rescission if the area deficiency is 10% or more of total area [Art. 1539] (iii) If a part of the land is not of the quality stated in the contract, buyer may rescind or demand a proportionate reduction in price. Buyer may only avail of rescission if the inferior value of the part of the land exceeds 10% of the price agreed upon. [Art. 1539]

(3) Inspections Inspections

Acceptance

Right of Inspection – The buyer has reasonable opportunity to examine the goods upon delivery. If there is a stipulation that delivery is preconditioned on payment, then buyer has no right of inspection until he has paid. [Art.1584]

(iv) If the area turns out to be greater than that stated, buyer may accept area included and reject the excess or accept all and pay a proportionate increase in price [Art. 1540]

Exception: in case such right of inspection is permitted by agreement or usage of trade.

(b) Sale for a lump sum (i) Follows the same rule as the sale of a specific mass which is explained above

and

Acceptance (a) Form

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Implied:

Exceptions: Buyer payment when:

(i) Goods are delivered to the buyer and he does any act in relation to the goods delivered that is inconsistent with the ownership of the seller.

(b) It has been stipulated that, notwithstanding any such contingency, the buyer shall be bound to pay [Art. 1590] (i) Suspension may continue until the seller has caused the disturbance or danger to cease

(b) Effect of Refusal to Accept If buyer refuses to accept goods, having the right to do so, he is not bound to return them to the seller, it being sufficient that he notifies the seller of his refusal to accept

(ii) However, a mere act of trespass shall not authorize the suspension of the payment. [Art.1590] (3) Sale of real property

(ii) Unjust refusal to accept still results to transfer of ownership. In such case, title to the goods passes to the buyer from the moment they are placed at his disposal, except if ownership has been reserved by the seller [Art.1588]

B. PAYMENT OF PRICE [Art. 1582] (1) Payment of interest: Buyer is liable for interest when: (a) Interest is stipulated; (c) Thing sold produces fruits or income; (d) Buyer is in default - interest accrues from the time of judicial or extrajudicial demand for payment (2) Suspension of payments: General rule: payment when:

suspend

(a) Seller gives security for the return of the price in a proper case

(ii) After the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that he has rejected them. [Art.1585]

(i) If he voluntarily constitutes himself a depositary of the goods, he shall be liable as such. [Art.1587]

cannot

Buyer may suspend

(a) His ownership or possession of the thing is disturbed; OR (b) He has reasonable grounds to fear such disturbance by a vindicatory action or a foreclosure of mortgage

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(a) In the sale of immovable property, buyer may pay even beyond the expiration of the period agreed upon, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act, despite a stipulation providing for ipso jure rescission [Art.1592] (b) Mere failure to fulfill the contract does not ipso facto entitle the offended party to rescind. A judicial or notarial act is necessary before rescission can take place, whether or not automatic rescission has been stipulated. A letter informing the buyer of automatic rescission is not demand if such letter is not notarized. [De Leon] (c) After demand, court may not grant him a new term [Heirs of Escanlar, et.al. v. CA, 1997] (d) R.A. 6552 (Maceda Law) applies to sale or financing of real estate on installment [Rillo v. Court of Appeals,1997] (i) Buyer is awarded a grace period of 1 month per year of installments paid or 60 days, whichever is higher, within which he may pay without additional interest.

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May be used once every 5 years of the life of the contract or any of its extensions (ii) If contract is to be cancelled, seller must first: (1) Give a 30-day notice of cancellation, and (2) Refund cash surrender value (CSV) to buyer; (3) CSV is equivalent to 50% of total payments made including deposits, options and down-payments plus 5% for every year in excess of 5 years of the life of the contract or any of its extensions. Cancellation of the contract under Section 4 of R.A. 6552 as a two-step process. First, the seller should extend the buyer a grace period of at least 60 days from the due date of the installment. Second, at the end of the grace period, the seller shall furnish the buyer with a notice of cancellation or demand for rescission through a notarial act, effective 30 days from the buyer‘s receipt thereof. [Jestra Development v. Pacifico, 2007]

CIVIL LAW

XII. Warranties A statement or representation made by the seller contemporaneously and as part of the contract of sale, having reference to the character, quality, or title of the goods, and by which he promises or undertakes to ensure that certain facts are or shall be as he then represents. Not every false representation voids the contract, only those matters substantially affecting the buyer’s interest, not matters of opinion, judgment, probability, or expectation. When the buyer undertakes his own investigation, and the seller does nothing to prevent it from being as full as the buyer chooses, the buyer cannot afterwards allege misrepresentations. [Songco v. Sellner, 1917] Condition vs. W arranty Condition

Warranty

Pertains to and affects the existence of the obligation

Goes into the performance of an obligation and may, in itself, be an obligation

Non-happening does not amount to breach of contract

Non-fulfillment constitutes breach of contract

Must be stipulated

Stipulation or operation of law

May attach either to the seller’s duty to deliver thing or some other circumstance

Always relates to the subject matter or the seller’s obligations as to the subject matter

If seller has promised that the condition should happen or be performed, the buyer may treat the nonperformance of the condition as a breach of warranty. [Art.1545]

A. EXPRESS WARRANTIES For there to be express warranty, the following requisites must concur: (APIR) (1) An affirmation of fact or any promise relating to the thing sold; Page 298 of 574

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(2) The natural tendency of such affirmation or promise is to induce the buyer to buy; (3) The buyer buys the thing relying thereon. [Art. 1546] (4) Made before the sale not upon delivery or any other point An express warranty can be made by and also be binding on the seller even in the sale of a second hand article. [Moles v. IAC, 1989] Express W arranty Dealer’s/Trader’s Talk

CIVIL LAW

Express W arranty Representation

Dealer’s or Trader’s Talk

What is specifically represented as true in said document cannot be considered as mere dealer's talk. [Moles v. IAC, 1989]

Affirmation of the value of the thing or statement of only the seller’s opinion is not a warranty unless:

False

Express Warranty

False Representation

Concealment of facts does not necessarily amount to false representation

When concealment of facts comes with an active misstatement of fact or a partial statement of fact such that withholding of that unsaid portion makes that which is stated absolutely false

vs.

Express Warranty

vs.

However, buyer who fails to inspect condition of property despite ample opportunity to do so when there is no opposition on the part of seller to inspect cannot later on allege false representation. [Phil Mftg Co. v Go Jucco, 1926]

1) The seller made it as an expert; 2) It was relied upon by the buyer. [Art.1546] 3) Ordinarily, what does not appear on the face of the written instrument [Moles v. IAC, 1989]

Reason: buyer’s duty to inspect remains despite false representation by the seller; he has the duty to exercise due diligence.

B. IMPLIED WARRANTIES [ART. 1547] An implied warranty is derived by law by implication or inference from the nature of the transaction or relative situation, or circumstances of the parties, irrespective of any intention of the seller to create it. [De Leon]

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(1) Implied Warranty of Title (2) Implied Warranty against Encumbrance/ Non-Apparent Servitudes (3) Implied Warranty against Hidden Defects [Art. 1547] (a) Implied warranty as to Merchantable Quality and Fitness of Goods

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B.2. IMPLIED WARRANTY AGAINST ENCUMBRANCE/NON-APPARENT SERVITUDES Requisites for breach: (1) Thing sold is an immovable (2) Burden or servitude encumbering the thing sold is: (a) Non-apparent to the naked eye

(b) Implied warranty against Redhibitory Defect in the Sale of Animals [Art. 1572]

(b) Not mentioned in the agreement (c) Of such nature that it must be presumed that the buyer would not have bought it had he been aware of it

(c) Quality and Fitness of Goods in Sale by Sample or Description (4) Other Warranties

(d) Not recorded in the Registry of Property unless there is an express warranty that the thing is free from all burdens and encumbrances [Art.1560]

B.1. IMPLIED WARRANTY OF TITLE (1) Implied warranty arises by operation of law and need not be stipulated in the contract of sale. (2) Warranty of Seller’s Right to Sell: Seller warrants his right to sell at the time the ownership is to pass. Inapplicable to a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law. [Art. 1547] (3) Warranty against Eviction: seller warrants that buyer, from the time ownership passes, shall have and enjoy legal and peaceful possession of the thing. Its requisites are: (a) Buyer is deprived of the whole or a part of the thing sold; (b) Eviction is by final judgment (c) Final judgment based on a right prior to the sale or an act imputable to the vendor (d) Seller is summoned and made codefendant in the suit for eviction at the instance of the buyer. [Power Commercial and Industrial Corp. v. CA, 1997]

B.3. IMPLIED WARRANTY HIDDEN DEFECTS Requisites for breach:

AGAINST

(1) The defect renders the thing sold unfit for the use for which it was intended OR diminishes its fitness for such use to such an extent that had the buyer been aware thereof, he would not have bought it or would have paid a lower price; (2) The defect is not patent or visible; (3) The buyer is not an expert who, by reason of his trade or profession, should have known the defect (4) The seller is aware of the hidden fault or defect, OR even if he is not aware thereof, if there is no stipulation to the contrary [Art. 1566] The buyer must also give notice of such redhibitory defect within a reasonable time. The use contemplated must be that which is stipulated, and in absence of stipulation, that which is adopted to the nature of the thing, and to the business of the buyer.

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B.4. IMPLIED WARRANTY AS TO MERCHANTABLE QUALITY AND FITNESS OF GOODS Merchantable Quality (1) Where the goods are brought by description from a seller who deals in goods of that description [Art.1562] (2) In a sale by sample, if the seller is a dealer in goods of that kind and the defect is not apparent on reasonable examination of the sample [Art.1566] Warranty of merchantability is warranty that goods are reasonably fit for the general purpose for which the same are sold. Warranty of fitness is warranty that goods are suitable for the special purpose of the buyer which will not be satisfied by mere fitness for general purposes. In a sale by sample, there is implied warranty that goods are free from defects not apparent on reasonable examination of sample and which render goods unmerchantable. [Mendoza v. David, 2004]

CIVIL LAW

The following sales are void [Art. 1575] (1) Sale of animals suffering from contagious diseases (2) Sale of animals unfit for the purpose for which they are acquired as stated in the contract Veterinarian is liable if he fails to discover or disclose the hidden defect through ignorance or bad faith. [Art 1576] Seller liable if animal dies within 3 days after its purchase due to a disease that existed at the time of sale. [Art 1578]

C. EFFECTS OF WARRANTIES (1) Natural tendency is to induce buyer to purchase the subject matter (2) Buyer purchases subject matter relying thereon (3) Seller liable for damages in case of breach

“Fitness for a particular purpose”: Where the buyer expressly or impliedly makes known to the seller the particular purpose for which the goods are acquired AND it appears that the buyer relied on the seller’s skill or judgment [Art.1562(1)]

D. EFFECTS OF WAIVERS

B.5. IMPLIED WARRANTY AGAINST REDHIBITORY DEFECT IN THE SALE OF ANIMALS [Art. 1572]

(2) Buyer without knowledge of a particular risk and made general renunciation of warranty – not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at the time of eviction)

Redhibitory defect – a hidden defect of animals of such nature that expert knowledge is not sufficient to discover it, even in a case where a professional inspection has been made No warranty in case of [Art. 1574] (1) Animals sold at fairs or public auctions (2) Livestock sold as condemned

Only applicable to waiver of warranty against eviction; parties may increase or decrease warranty against eviction but the effect depends on good/bad faith of the seller: (1) Seller in bad faith and there is warranty against eviction – null and void

(3) Buyer with knowledge of risk of eviction assumed its consequences and made a waiver – vendor not liable (4) Waiver to a specific case of eviction – wipes out warranty as to that specific risk but not as to eviction caused by other reasons

One who purchases real estate with knowledge of defect or lack of title cannot claim he acquired title thereto in good faith, as against true owner of land or of interest therein. [J.M. Tuason v. CA, 1979] Page 301 of 574

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The same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor.

E. BUYER’S OPTIONS IN CASE OF BREACH OF WARRANTY [Art. 1599]

Effects of rescission (a) Buyer no longer liable for price: Entitled to the return of any part of price paid, concurrently with or immediately after an offer to return the goods (b) If seller refuses to accept offer to return goods: buyer deemed as bailee for seller and has right of lien to secure payment of part of price paid (2) Implied W arranty against Eviction [Arts. 1555, 1556] Total Eviction Enforce liability for eviction

(1) Express W arranty Prescriptive period: Period specified in express warranty OR 4 years, if no period is specified (following the general rule on rescission of contracts) Rem edies (a) Accept goods + demand diminution/ extinction of price (b) Accept goods + damages (c) Refuse to accept goods + damages (d) Rescind (Refuse to accept or return or offer to return) + recover price paid Rescission not available when buyer: (a) Knew of breach of warranty when he accepted the goods without protest (b) Fails to notify the seller about election to rescind within a reasonable period of time (c) Fails to return or offer to return the goods to the seller in substantially a good condition as they were when delivered, unless deterioration was due to breach of warranty

Partial Eviction Enforce liability (demand VICED) OR

Demand from seller: (VICED)

Rescind within 6 months from delivery

(a) Value of thing sold at time of eviction

(a) If he would not have bought the thing sold without the part lost;

(b)Income or fruits, if he has been ordered to deliver them to the party who won the eviction suit (c) Costs of eviction suit and in a proper case, suit against seller for warranty

(b) BUT he must return the thing without other encumbrances than those which it had when he acquired it

(d) Expenses of the contract, if buyer has paid them (e) Damages and interests, and ornamental expenses, IF sale was made in bad faith

Measure of damages: Difference between value of goods at the time of delivery and the value they would have had if they had answered to the warranty

Rules: (a) Buyer need not appeal from decision to hold seller liable for eviction (b) When adverse possession commenced before sale, but prescription period completed after transfer: seller is not liable

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(c) If property sold for nonpayment of taxes due and not made known to the buyer before the sale: seller liable (d) Judgment debtor also responsible for eviction in judicial sales, unless it is otherwise decreed in the judgment If there is waiver of warranty: (a) Seller acted in bad faith: Waiver is void, seller liable for eviction (b) Buyer made waiver without knowledge of risks of eviction: Seller liable only for the value of the thing sold at time of eviction

CIVIL LAW

price and expenses BUT NOT damages Prescriptive delivery

Remedies (a) Withdraw from contract + damages (b) Demand a proportionate reduction of the price + damages

(4) Implied W arranty against Hidden Defects [Arts. 1567-1571] (accion

(b) Demand a proportionate reduction of the price (accion quanti minoris) + damages If thing is lost: Due to fortuitous event or fault of buyer

Due to hidden fault If seller aware of defect, buyer may demand: (a) Return of price (b) Refund expenses

of

(c) Damages

(a) Buyer must return animal in the condition in which it was sold and delivered (b) Buyer shall be liable for injury due to his negligence. Prescriptive period: 40 days from delivery

F. WARRANTY IN SALE OF CONSUMER GOODS

If thing is not lost: (a) Withdraw from contract redhibitoria) + damages

If sale is rescinded:

from

(b) Damages: Within 1 year from execution of deed of sale or discovery of the burden or servitude

period: 6 mos from

(5) Implied W arranty against Redhibitory Defects of Anim als

(c) Buyer made waiver with knowledge of risks: Seller not liable; buyer assumed the consequences (3) Implied W arranty against Encum brances [Art. 1560] (a) Rescission: Within 1 year execution of deed of sale OR

Due to fortuitous event or fault of buyer

Due to hidden fault

Demand: (a) Price paid minus value of thing when it was lost (b) Damages, if seller acted in bad faith

[RA 7394, Sec 68] If implied warranty accompanies express warranty, both will be of equal duration. Express Warranty

Implied Warranty

(1) Demand repair within 30 days

(1) Retain the goods and recover damages

Extendible for causes beyond the control of the warrantor

OR

(2) Demand refund of price minus amount directly attributable to the use of the consumer prior to the discovery of the nonconformity

If seller not aware of defect: Buyer may demand Page 303 of 574

(2) Reject the goods, cancel contract and recover from seller so much of the purchase price as has been paid + damages

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XIII. Breach of Contract

(i) Goods are sold stipulation as to credit

without

(ii) Goods are sold on credit, but term of credit has expired

A. GENERAL REMEDIES [ART 1191]

(iii) Buyer becomes insolvent

The following remedies arise from the bilateral nature of the contract of sale:

The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer [Art 1527, par. 2]

(1) Specific performance (2) Rescission General rule: Rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. [Song Fo & Co. vs. HawaiianPhilippine Co., 1925]

W hen unpaid seller loses his lien [Art 1529]

(3) Damages

(a) Seller delivers goods to carrier or other bailee for transmission to the buyer without reserving ownership or right of possession (i.e. under a straight or non-negotiable bill of lading)

Prescriptive periods

(b) Buyer or his agent lawfully obtains possession of goods

(1) 10 years if based on written contract

(c) Seller waives the lien (i) But it is not lost with respect to the remainder of the goods when only partial delivery is made (unless such is symbolic delivery of the whole)

(2) 6 years if based on oral contract

B. REMEDIES OF THE SELLER [ARTS. 1636, 1594] SALE OF MOVABLES Extrajudicial or Self-Help Rem edies – No need to resort to the courts as long as possession of the goods has not yet passed to the buyer

(ii) It is not lost by the mere fact that seller obtained a judgment for the price W hen Lien May Be Revived After Delivery

(1) Possessory Lien Over The Goods Right to retain possession of goods until payment or tender of the whole price, or unless he agrees to sell on credit [Arts. 1526-1529, 1503, 1535] W hen lien available (a) The seller is unpaid (b) The unpaid seller has possession over the thing (c) Ownership of the thing has passed to the buyer (d) Any of the following: [Art 1527] Page 304 of 574

(a) If the buyer refuses to receive the goods after the same are delivered to the carrier or other bailee on his behalf, though the seller has parted with both ownership and possession. Here, the seller may reclaim the goods and revest the lien.[Art 1531, par.1(2)] (b) If the buyer returns the goods in wrongful repudiation of the sale, and the seller, in accepting the goods from the buyer, says he does not assent to the rescission. Possessory lien is lost after the seller loses possession but his lien as an unpaid seller remains. His preference can only be defeated by the government’s claim to

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the specific tax on the goods. [Arts 2241, 2247] (2) Right Of Stoppage In Transitu An extension of the lien for the price; entitles unpaid seller to resume possession of the goods while they are in transit before the goods come in possession of the vendee [Arts. 1530-1532, 1535, 1636[2]] Requisites for the stoppage in transitu

exercise

of

(a) The seller is unpaid (b) The buyer is insolvent (c) The goods are in transit (d) The seller either takes actual possession, or gives notice of claim to the carrier or other person possessing the goods (e) The seller must surrender the negotiable instrument or title, if any, issued by the carrier/bailee

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W hen Goods Are No Longer In Transit [Art 1531, par. 2] (1) Buyer obtained delivery of the goods before they have reached their appointed destination (2) Goods have arrived at the appointed destination, and the carrier/bailee acknowledges to hold the goods on behalf of the buyer (3) Goods have arrived at the appointed destination, but carrier wrongfully refuses to deliver to buyer/his agent Note: If the goods are delivered to a ship, freight train, truck, or airplane chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the carrier as such or as agent of the buyer. How Right Is Exercised [Art 1532] (1) By obtaining actual possession of the goods

(f) The seller must bear the expenses of the delivery of the goods after exercise of such right.

(2) By giving notice of his claim to the carrier/other bailee who has possession of the goods

W hen Goods Are In Transit [Art 1531, first paragraph]

(a) Carrier must redeliver goods to seller, or according to his instructions

(a) From the time of delivery to the carrier or other bailee by the seller, for the purpose of transmission to the buyer, until the buyer or his agent takes such delivery from the carrier.

(b) Carrier not obliged to redeliver until the negotiable document of title, if any, has been surrendered for cancellation

(b) Even when goods have reached their ultimate destination, if buyer rejects them and carrier retains possession To terminate transit by delivery to a middleman, delivery must be to keep, not to transport. In case of misdelivery, the goods are still considered in transit, hence, the seller may still exercise his right pursuant to Article 1523.

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Effect W hen Buyer Has Sold the Goods [Art 1535] General Rule: Seller’s right to stoppage in transitu is not affected even if buyer has sold or disposed of the goods unless the seller has given his assent thereto. Exceptions: (a) When seller thereto

has

given

consent

(b) When a negotiable document of title has been issued for the goods to a purchaser for value in good faith

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(3) Special Right of Resale

Effects of Resale

Available to unpaid seller who has a right of lien or who has stopped the goods in transitu [Art. 1533]

(a) Seller is no longer liable to the original buyer upon the contract of sale or for any profit made by the resale

W hen available

(b) Buyer at resale acquires good title as against the original owner

When the unpaid seller has either a right of lien or has stopped the goods in transitu and under any of the following conditions:

(c) In case resale is at a loss, seller is entitled to recover the difference from the original buyer

(a) The goods are perishable in nature (b) The right to resell is expressly reserved in case the buyer should default

(d) Seller may recover damages from original buyer for breach of contract (4) Special Right to Rescind

(c) The buyer delays in paying the price for an unreasonable time The right to resell the goods is not mandatory, but permissive.

Return of the title over the undelivered goods to the seller, and right to recover damages for breach of contract [Art. 1534] W hen available

How exercised (a) He must do so within a reasonable time and in such manner as to obtain the best price possible. (b) The place of sale shall be at the place of delivery, except if the seller cannot sell the thing at a fair price at the place of delivery. (c) Resale is deemed to be a fair sale if it is undertaken in accordance with established business practices, with no attempt to take advantage of the original buyer. (d) Resale may be in a private or public sale, but seller cannot buy directly or indirectly. (e) For resale to be valid, buyer need not be notified of an intention to resell or the time and place of the resale. Exception: if the ground for resale is failure to pay for an unreasonable amount of time The seller must exercise reasonable judgment in making the sale.

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When the unpaid seller has either a right of lien or has stopped the goods in transitu and under any of the following conditions: (a) Seller expressly reserved his right to rescind in case buyer defaults (b) Buyer has been in default in payment for an unreasonable time Transfer of title shall not be held to have been rescinded by the unpaid seller until he manifests by notice to the buyer or some other overt act an intention to rescind. Communication to buyer of rescission is not always necessary (it can be an overt act). But giving/failure to give notice is relevant in determining reasonableness of time given to the buyer to make good his obligation under contract. [De Leon]

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C. RECTO LAW: SALE OF MOVABLES ON INSTALLMENT – ARTS. 1484-1486

CIVIL LAW

(3) Foreclosure of Chattel Mortgage if vendee fails to pay 2 or m ore installm ents (a) If seller chooses this remedy, he shall have no further action to recover any unpaid balance, and any stipulation to the contrary shall be void.

C.1. WHEN APPLICABLE (1) Sale of m ovables in installm ent The rule is intended to apply to sales of movables, the price of which is payable in 2 or more installments, but not to straight-term sales where the price is payable in full, after making a down payment because the law aims to protect improvident buyers who may be tempted to buy beyond their means. [Levy Hermanos vs. Gervacio, 1939]

(b) The purpose of the law is to remedy the abuses committed in foreclosure of chattel mortgages. It prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing the suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. [Bachrach Motor Co., Inc. v. Millan, 1935]

(2) Lease of personal property with option to buy (a) When lessor has deprived the lessee of the possession or enjoyment of the thing (i.e. lessor files a complaint for replevin against lessee) (b) Also applies when seller assigns his credit to someone else

D. SALE OF IMMOVABLES

C.2. ALTERNATIVE AND EXCLUSIVE REMEDIES The exercise of one remedy bars the exercise of the others.

D.1. RESCISSION BREACH [Art. 1591]

(1) Specific Perform ance

This is applicable to both cash sales and to sales in installments.

General Rule: When the seller has chosen specific performance, he can no longer seek for rescission or foreclosure of the chattel mortgage Exception: If specific performance has become impossible, the seller may still choose rescission [Art 1191] (2) Cancellation of sale if vendee fails to pay 2 or m ore installm ents (a) When the seller cancels the sale by repossessing the property sold, he is barred from exacting payment for its price.

FOR

ANTICIPATORY

Requisites (1) There is delivery of immovable property (2) Vendee has not yet paid the price; and (3) Vendor has reasonable ground to fear the loss of property and the loss of price If there is no such reasonable ground, Art 1191 applies (specific performance or rescission with damages). Court has no discretion to compel the seller to wait for the expiration of the period to pay, or to grant the buyer more time to pay.

(b) It can only be carried out when he who demands rescission can return whatever he may be obliged to restore [Art 1385] Page 307 of 574

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D.2. SPECIFIC PERFORMANCE + DAMAGES OR RESCISSION + DAMAGES [Art. 1191]

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F. MACEDA LAW (RA 6552): SALE OF IMMOVABLES ON INSTALLMENT RA 6552 does NOT apply to: (1) Industrial lots

(1) Seller may choose between specific performance and rescission, with damages in either case. (2) Court has discretion, for a just cause, to give the buyer more time to pay even if the seller chooses rescission. (3) If seller chose specific performance, and such becomes impossible, he may still avail of rescission (4) If absolute sale, seller must make a demand for rescission (a) Judicially, OR

(2) Commercial buildings (3) Sale to tenants under Reform Code [RA 3844]

Agricultural

(4) Sale of lands payable in straight terms [RA 6552, Sec 3] Rights of the Buyer: The law imposes additional requirements on the part of the seller for a valid rescission (1) If buyer has paid at least 2 years of installments:

(b) By a notarial act

(a) Grace period of 1 month per year of installment payment made

(5) Demand necessary even if automatic rescission is stipulated

BUT the buyer may only avail of the grace period once every 5 years

(a) Effect of lack of demand: Buyer can still pay

(b) Refund of Cash Surrender Value (CSV): 50% of total amount paid + 5% for every year after the first 5 years of installments

(b) Effect of demand: Court may not grant buyer a new term

BUT total CSV should not be greater than 90% of total amount paid

E. PD 957, SECTIONS 23 AND 24 Non-forfeiture of paym ents (1) No installment payment made by the buyer shall be forfeited in favor of the owner or developer of the condominium or subdivision project, after due notice, when the buyer desists from paying due to the failure of the developer or owner to develop the project according to the approved plans or within the time limit stated. (2) Buyer’s Remedy: At his option, he may reimburse the total amount paid including amortization interest with interest thereon at the legal rate

(c) Notice of cancellation of demand for rescission by notarial act effective 30 days from the buyer’s receipt thereof and upon full payment of CSV (2) If buyer has paid less than 2 years of installments: (a) Grace period of at least 60 days (b) Notice of cancellation or demand for rescission by notarial act, effective 30 days upon receipt thereof (3) During the grace period, the buyer shall also have the right:

(3) If the buyer fails to pay the installments for reasons other than the failure of the owner or developer to develop the project, his rights shall be governed by RA 6552. Page 308 of 574

(a) To sell or assign his rights, evidenced in a notarial instrument (b) To update his account (c) To pay in advance any installment, or the full unpaid balance of the price, without any interest, and to have

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such full payment of the purchase price annotated in the certificate of title covering the property. Down payments, deposits, or options on the contract shall be included in the total number of installments made.

CIVIL LAW

If thing deteriorates Without fault of seller

Through fault of seller

NO BREACH. Impairment shall be borne by buyer

Rescission damages

The seller may go to court for judicial rescission in lieu of a notarial act of rescission. Cancellation pertains to extrajudicial cancellation. Absence of notice does not bar the filing of an action to cancel the contract. A decision in an ejectment case can operate as notice of cancellation as required by RA6552. However, mere filing of an unlawful detainer suit by the seller does not operate as such notice. [De Leon]

+

OR Specific performance + damages

(2) Remedy for breach of obligation to deliver Delivery of wrong quantity [Art. 1522] Goods are LESS THAN what was contracted

Goods are MORE THAN what was contracted

Reject the goods

Reject the excess

G. REMEDIES OF THE BUYER

OR

OR

General rule: Courts will refuse to decree specific performance with respect to chattels because damages are a sufficient remedy

Accept and pay

Reject the whole, if indivisible OR

Exception: Buyer is entitled to the specific thing which to him has special value and which he cannot readily obtain in the market OR where damages would not furnish a complete and adequate remedy [Baviera] G.1. SALE OF MOVABLES (1) Rem edy for breach of obligation to preserve If thing is lost— Without seller

fault

of

NO BREACH. Obligation is extinguished.

Through fault of seller / Through Fortuitous Event (if seller is liable)

(a) At contract rate if buyer accepts knowing that seller won’t perform in full (b) At fair value if goods were used before knowing that seller won’t be able to perform in full Buyer becomes the owner of the whole mass and the seller is bound to make good the deficiency [Art 1464]

Damages

A thing is lost when it— (a) Perishes (b) Goes out of commerce of man (c) Disappears in such a way that its existence is unknown or it cannot be recovered Page 309 of 574

Accept the whole and pay at contract rate

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G.2. SALE OF IMMOVABLES [Art 1539 – 1543] (1) If at the rate of a certain price per unit of measure or number Less (in area or quality) than what was agreed upon:

More (in area or quality) than what was agreed upon:

CIVIL LAW

XIV. Extinguishment of Sale A. CAUSES [ARTS. 1600, 1231] Generally, extinguished by the same causes as all other obligations [Arts.1600, 1231]

Proportional reduction of price OR

(P-PLAN-C3-R3)

Rescission, if: (a) Lack in area is at least 1/10 of what is stated, or inferior value of thing sold exceeds 1/10 of price

(1) Payment/performance

Reject the excess

(2) Prescription

OR Accept the whole and pay at contract rate

(b) Buyer would not have bought the property has he been aware of the inferior quality or smaller area

(3) Loss of thing due (4) Annulment (5) Novation (6) Condonation/remission (7) Confusion/merger (8) Compensation (9) Rescission

This rule also applies to judicial sales [Art. 1541]

(10) Resolutory condition fulfilled (11) Redemption (Conventional or Legal)

(2) If for a lump sum Everything is within boundaries, even if Not everything is within less or more than the boundaries stated area No

remedy Proportional reduction in price

Where both the OR area and the Rescission boundaries of the immovable are declared, the area covered within the boundaries of the immovable prevails over the stated area. [Rudolf Lietz, Inc. v. CA, 2005]

B. CONVENTIONAL REDEMPTION [ART. 1601] B.1. DEFINITION (1) Vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon. [Art 1601,CC] (2) Available when the seller reserves the right to repurchase the thing sold in the same instrument of sale as one of the stipulations of the contract [Villarica v CA, 1968] B.2. PERIOD General Rule: Follow period stipulated in contract, but should not exceed 10 years.

Prescriptive period: 6 months counted from date of delivery Page 310 of 574

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Exceptions: (1) If no period stipulated but the parties intended a period, then it shall be 10 years from the date of the contract.

CIVIL LAW

B.5. HOW EXERCISED (1) By returning the ff. to the buyer: (PEN) (a) Price of the sale Except if the parties agreed on a redemption price

(2) If no period stipulated, then it shall be four years from the execution of the contract (3) But vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase

(b) Expenses of the contract and other legitimate payments made by reason of the sale; (c) Necessary and useful expenses made on the thing sold (2) Complying with any other stipulation agreed upon, if any.

B.3. BY WHOM EXERCISED (1) Vendor

The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment for the full amount of the repurchase price. [BPI Family Savings Bank, Inc. v. Veloso, 2004]

(2) His heirs, assigns or agents (3) Creditor, if he has exhausted the property of the vendor (4) Co-owners of an immovable, if they sold their interests to the same person, may only redeem their respective shares (a) Vendee cannot be compelled to agree to a partial redemption

B.6. EFFECT OF REDEMPTION (1) The sale is extinguished

(b) If the co-owners sold their interest to the same person who previously bought the share of a co-owner subject to a right of redemption, then the latter may be compelled to redeem the whole property

(2) The seller shall receive the thing free from all charges or mortgages constituted by the buyer BUT he shall respect leases executed by the buyer in good faith and in accordance with local custom. (3) As to fruits:

B.4. FROM WHOM TO REDEEM (1) Vendee a retro

(a) If parties agreed on a distribution, the fruits shall be distributed according to the agreement.

(2) His heirs, assigns or agents (3) Subsequent purchaser of property, even if the right to redeem was not mentioned in the subsequent contract; except if registered land, where the right to redeem must be annotated on the title (4) If several heirs, then the right of redemption can be exercised against each heir for his share of the property

(b) If parties did not agree on a distribution, (i) If there are growing fruits at the time of sale and at the time of redemption: (1) Buyer receives reimbursement if the buyer paid indemnity at the time of the sale (2) Buyer receives no reimbursement or prorating if the buyer did not pay indemnity at the time of sale

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(ii) If there were no growing fruits at the time of sale, but some exist at the time of redemption: fruits prorated (buyer entitled to part corresponding to time he possessed the land in the last year, counted from the anniversary of the date of sale) B.7. EFFECT OF NON-REDEMPTION Ownership is consolidated in the buyer BUT the consolidation shall not be recorded in the Registry of property without a judicial order, after the vendor has been duly heard. B.8. RIGHT TO REDEEM VS OPTION TO PURCHASE Right to Redeem Option to Purchase

CIVIL LAW

C. EQUITABLE MORTGAGE [ARTS. 1602-1604] An equitable mortgage is defined as one which, although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. [Molina v. CA, 2003] A pactum com m issorium is a stipulation enabling the mortgagee to acquire ownership of the mortgaged properties without need of foreclosure proceedings which is a nullity being contrary to the provisions of Article 2088 of the Civil Code. The inclusion of such stipulation in the deed shows the intention to mortgage rather than to sell. [Legaspi v. Spouses Ong, 2005]

Not a separate contract but part of a main contract of sale, and cannot exist unless reserved at the time of the perfection of the main contract of sale

Generally a principal contract and may be created independent of another contract

A pactum commissorium is contrary to the nature of a true pacto de retro sale since ownership of the property sold is immediately transferred to the vendee a retro upon execution of the sale, subject only to the repurchase of a vendor a retro within the stipulated period.

Does not need its separate consideration to be valid and effective

Must have a consideration separate and distinct from the purchase price to be valid and effective [Arts. 1324 and 1479]

C.1. PRESUMPTION THAT A CONTRACT IS AN EQUITABLE MORTGAGE (5P-R) [Art. 1602]

The maximum period for the exercise of the right to repurchase cannot exceed 10 years

The period of the option contract may be beyond the 10year period

(3) Period of redemption extended (or granted anew) upon or after the expiration of the right to repurchase;

Requires in addition a tender of payment of the amount required by law, including consignment thereof if tender of payment cannot be made effectively on the buyer

May be exercised by notice of its exercise to the offeror

(5) Payment of taxes on the thing sold borne by the seller;

(1) Price unusually inadequate; (2) Possession retained by the seller as lessee or otherwise;

(4) Part of the purchase price retained by the seller;

(6) Any other case where it may be fairly inferred that the Real intention of the parties is for the transaction to secure a debt or other obligation.

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The right of repurchase is not a right granted to the seller by the buyer in a subsequent instrument, but one reserved by the seller in the same instrument as the sale contract. Any right granted after the execution of the sale instrument is not a right to repurchase, but some other right like an option to buy. [Roberts v. Papio, 2007]

C.5. PERIOD OF REDEMPTION [ART. 1606]

C.2. REQUISITES FOR PRESUMPTION OF AN EQUITABLE MORTGAGE (1) That the parties entered into a contract denominated as a contract of sale, and

(4) Exception: When the efficacy of the sale is subject to a suspensive condition, period should be counted not from the date appearing on the instrument, but from the date when the condition is fulfilled, marking the consummation of the sale [Tolentino citing Manresa].

(2) That their intention was to secure an existing debt by way of a mortgage. [Molina v. CA, 2003] In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage [Art. 1603] C.3. RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE (1) Circumvention of usury law (2) Circumvention of prohibition against pactum commissorium – creditor cannot appropriate the things given by way of pledge or mortgage since remedy is foreclosure. C.4. REMEDIES OF APPARENT VENDOR (1) If the instrument does not reflect the true agreement: remedy is reformation (2) If decreed to be an equitable mortgage: any money, fruits or other benefit to be received by the buyer as rent or otherwise considered as interest. (3) If decreed as a true sale with right to purchase: seller may redeem within 30 days from finality of judgment, even if the period for redemption has expired.

(1) No stipulation: 4 years from the date of contract (2) W hen there is agreement: Period not to exceed 10 years (3) General Rule: Period starts to run from the date of the execution of the contract

Additional 30 days for Repurchase The last paragraph of Art. 1606 giving the vendor the right to repurchase within 30 days from the time of the rendition of final judgment applies only where the nature and the character of the transaction, whether as a pacto de retro or an equitable mortgage, was put in issue before the court [Gonzales v. De Leon, 4 SCRA 332] When an unrecorded pacto de retro sale was construed as an equitable mortgage, the plaintiff had the right to enforce his lien in a separate proceeding notwithstanding the fact that he had failed to obtain judgment declaring him the sole and absolute owner of the land. [Heirs of Arches v. Diaz, 1973] Where the petition of the buyer in a pacto de retro sale is for a judicial orders pursuant Art. 1607, so that there may be consolidation of ownership since there was failure to redeem during the redemption period, the right of action to foreclose or to collect the indebtedness arises from the court judgment declaring the contract an equitable mortgage.

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D. LEGAL REDEMPTION

C.6. EXERCISE OF THE RIGHT TO REDEEM [ART. 1616]

[ART. 1619]

The seller can avail himself of the right of repurchase by returning to the buyer: (1) the price of the sale

D.1. DEFINITION (1) Right to be subrogated:

(2) the expenses of the contract and any other legitimate payments made by reason of the sale

(a) upon the same terms and conditions stipulated in the contract, (b) in the place of one who acquires a thing by purchase or dation in payment, or by any other transaction whereby ownership is transmitted by onerous title [Art 1619, CC]

(3) the necessary and useful expenses made on the thing sold [Art.1616]. C.7. HOW REDEMPTION IS EXERCISED (1) The vendor de retro must complete the repurchase before the expiration of the redemption period [Panganiban v. Cuevas, 7 Phil 477]. (2) A sincere or genuine tender of payment is enough. The deposit of the amount of the repurchase money with the Clerk of Court was simply and additional security [Legazpi v. Court of Appeals, 1986] (3) When tender of payment cannot be validly made because the buyer cannot be located, it becomes imperative for the seller a retro to file a suit for consignation with the courts of the redemption price [Catangcatang v. Legayada, 1978]. (4) If the offer or tender of payment for repurchase is refused, it is not necessary for the vendor a retro to consign in court or make judicial deposit of the repurchase price [Rosales v. Reyes, 25 Phil 495]. The seller a retro is given no option to require the buyer a retro to remove the useful improvements on the land subject of the sale a retro, unlike that granted the owner of a land under Arts. 546 and 547. Under Art. 1616, the seller a retro must pay for useful improvements introduced by the buyer a retro; otherwise, the latter may retain possession of the land until reimbursement is made. [Gargollo v. Duero, 1961]

(2) Applies to transfers of ownership by onerous title where subrogation is possible. Hence, it cannot apply to barter or to transfer by gratuitous title or hereditary succession. (3) Applies to sales with pacto de retro [Baviera citing MANRESA] D.2. MANNER (1) a formal offer to redeem or (2) filing of an action in court together with the consignation of the redemption price within the reglementary period D.3. PERIOD TO REDEEM To whom granted Co-owner [Art 1620]

Period

30 days from notice (a) In writing

Adjoining owner of Rural Land [Art 1621] Adjoining owner of urban land [Art. 1622]

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(b) By the seller (c) Of the actual execution and delivery of the deed of sale Actual knowledge of the sale is immaterial, absent any showing that the co-owner has been shown a copy of the deed of sale through a written

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To whom granted

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Period

To whom granted

communication. [Doromal v. CA, 1975]

General Banking Law of 2000]

The law did not provide for a particular mode of written notice, thus any compliance with “written notice” should suffice, including the giving of a copy of the deed of sale. [Cronejero v. CA, 1966] Debtor in case a credit or incorporeal right in litigation is sold [Art.1634]

CIVIL LAW

30 days from the date the assignee demands payment from debtor

Taxpayer in case of tax sale [Sec. 215, NIRC]

1 year from date of forfeiture

Judgment debtor, successor–ininterest, or creditor with subsequent lien, in case of execution sale [Rule 39, Sec.27, ROC]

1 year from the date of registration of the certificate of sale

Debtor-mortgagor, successors-ininterest, judicial/judgment creditor, any person having a lien on the property, in case of extrajudicial foreclosure of mortgage [Act No. 3135. Sec. 6.]

1 year from the date of the sale

Debtor-mortgagor in case of judicial foreclosure of real estate mortgage IF the mortgagee is a bank or a banking institution. [The

90 days from finality of judgment

Agricultural lessee w/o knowledge of sale of landholding [Agrarian Land

Period

2 years from the registration of the sale

Reform Code, Sec.12] The notice required in Art. 1623 must be given by the seller, because the seller is in a better position to identify who his co-owners are. Said provision is clear.[Francisco v. Boiser, 2000] D.4. INSTANCES OF LEGAL REDEMPTION (1) Redemption by Co-owners [Art. 1621] A co-owner of a thing may exercise the right of redemption in case the shares of all the co-owners or any of them are sold to a third person (a) Third person refers to all persons who are not heirs of the vendor, by will or intestate succession (b) The right is available not only to original co-owners, but to those who had later acquired the share of the co-owner (c) But the right of redemption may be exercised by a co-owner only when part of the community property is sold to a stranger. When the portion is sold to another co-owner, the right does not arise because a new participant is not added to the co-ownership [Fernandez v. Tarun, 2002] If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. Should two or more co-owners desire to exercise the right, they may also do so in proportion to the share they may respectively have in the thing owned in common.

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The ff. requisites must concur:

CIVIL LAW

(3) Redemption by adjoining landowners of urban land (applies only to small portions of urban land) [Art. 1621]

(a) Co-ownership of a thing (b) Alienation of shares of co-owners or all of the other co-owners (c) Sale must be to a third person or stranger (d) Sale must be before partition (e) Right must be exercised within the period specified in Article 1623 (f) Buyer must be reimbursed the price of the sale Rationale: Public Policy, since coownership is a hindrance to the development and administration of the property. [Baviera] (2) Redemption by Adjoining Landowners of rural land [Art. 1621]

Right of Pre-emption

Right of Redemption

Owner of any adjoining land has a right of pre-emption at a reasonable price when:

If the resale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a reasonable price

(a) Urban land is so small and so situated that a major portion of it cannot be used for any practical purpose w/in a reasonable time; (b) Was bought merely for speculation;

Priority if 2 or more adjoining owners want to redeem: owner whose intended use of the land appears to be best justified

(c) Was resold

The ff. requisites must concur:

Arises before sale

Arises after sale

(a) All lands must be rural lands

No because exists yet

There can rescission of original sale

(b) Lands must be adjacent to each other (c) A piece of rural land is alienated (d) Area does not exceed one hectare (e) Buyer must already own other rural lands

rescission no sale

The action is directed against prospective seller

be the

Action is directed against buyer

(4) Redemption of Credit

W hen not applicable (a) The grantee does not own any rural land (b) Adjacent lands are separated by brooks, drains, roads and other apparent servitudes for the benefit of other estates Order of preference if two or more wishes to exercise the right: (a) Owner with smaller land area (b) If same land area, then the one who first requested the redemption

Available when it is sold while in litigation (From the time the complaint is answered) Not available when the assignment is in favor of: (a) Co-heir/co-owner of right assigned (b) Creditor in payment of his credit (c) Possessor of a tenement or piece of land which is subject to the right assigned How exercised: reimburse the assignee for the: (a) Price paid (b) Judicial expenses incurred (c) Interest on the price from date of payment

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Who may redeem

(5) Under the Public Land Act Coverage:

encumbrancer

(a) Every conveyance of land acquired under a free patent or homestead (b) The ownership of the land must have been transferred to another. If the transaction is a mere promise to sell, there is no right yet to redeem

to the judgment Period to redeem

Extra-judicial foreclosure:

Execution sale:

within 1 year from the date of the sale

within 12 months after the sale

(c) This refers to conveyances made after the prohibited 5 years from the issuance of the patent or grant Period: (a) Within 5 years from the date of conveyance (b) If pacto de retro sale, the period to redeem cannot be less than 5 years W ho may redeem : (a) General Rule: Applicant, widow, or heirs (b) Exception: land is sold to another member of the family of the applicant, or his direct descendant or heir

(a) Amount of the purchase (b) Interest at 1% per month from the time of the sale up to the time of redemption (c) Any assessment or taxes which the purchaser may have paid (7) Under the Agrarian Land Reform Code Lessee’s right of pre-emption The agricultural lessee shall have the preferential right to buy under the same reasonable terms and conditions, in case the lessor decides to hold the landholding

The right to redeem can be exercised against any subsequent purchaser even if the land is registered under the Torrens System because the fact that it was acquired through a homestead or free patent can be seen from the description of the property in the certificate of title. Foreclosure

Conditions: (a) The landholding must be pre-empted by the DAR (b) When two or more lessees, each shall have preferential right only to the extent of the area cultivated by him

and

Who may redeem In extra judicial foreclosure (a) Debtor (b) Successor in interest (c) Judicial or judgment creditor of said debtor (d) Junior

within 1 year after the sale (not available in case of a corporate mortgagor)

Amount of redemption

(c) From whom: Subsequent purchasers

(6) Redemption in Execution Sales

If land is mortgaged in favor of a bank:

Period: 180 days from notice in writing

In execution sales (a) Judgment debtor

Lessee’s right of redem ption

(b) Successor in interest

In case landholding is sold to 3rd person without the knowledge of the lessee, the latter shall have the right to redeem the same at a reasonable price and consideration. [Sec. 12 RA 3844]

(c) Creditor having a lien on the property sold by attachment, judgment or mortgage on the property subsequent

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XV. The Law on Sale of Subdivision and Condominium (PD 957) A. DEFINITIONS Owner shall refer to the registered owner of the land subject of a subdivision or a condominium project. Developer shall mean the person who develops or improves the subdivision project or condominium project for and in behalf of the owner thereof. Dealer shall mean any person directly engaged as principal in the business of buying, selling or exchanging real estate whether on a full-time or part-time basis. Broker shall mean any person who, for commission or other compensation, undertakes to sell or negotiate the sale of a real estate belonging to another. Salesm an shall refer to the person regularly employed by a broker to perform, for and in his behalf, any or all functions of a real estate broker.

B. REQUIREMENTS FOR OWNERS AND DEVELOPERS (1) Registration of projects (subdivision/ condominium) with the NHA (2) Registration of the owner (3) License to sell of owner or dealer with performance bond [PD, exceptions in Sec. 7]

CIVIL LAW

NHA also approves the building thereon in accordance with the National Building Code. B.2. REGISTRATION OF OWNER [SECTION 4, PD 957] The owner or the real estate dealer interested in the sale of lots or units, respectively, in such subdivision project or condominium project shall register the project with the Authority by filing therewith a sworn registration statement. Publication and issuance of registration certificate [Section 4, PD 957] A notice of the filing of the registration statement at the expense of the applicantowner or dealer, in two newspapers general circulation, one published in English and another in Filipino, once a week for two consecutive weeks. Notice shall state that subdivision lots or condominium units are open to inspection during business hours by interested parties. The project shall be deemed registered upon completion of the publication requirement. The fact of registration shall be evidenced by a registration certificate issued to the applicantowner or dealer. B.3. LICENSE TO SELL [SECTION 5, PD 957] The registration certificate does NOT authorize the owner or dealer to sell any unit. They must first obtain a license to sell within two weeks from the registration of the project. The license to sell is issued upon examination of the registration statement filed by the owner or dealer showing that: (1) the owner or dealer is of good repute (2) that his business is financially stable

B.1. REGISTRATION OF PROJECTS [SECTION 4, PD 957] The registered owner of a parcel of land who wishes to convert the same into a subdivision project shall submit his subdivision plan to the National Housing Authority. The same procedure shall be followed in the case of a plan for a condominium project except that

(3) that the proposed sale of subdivision lots or condominium units to the public would not be fraudulent

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Performance bond [Section 6, PD 957] A license to sell can only be issued by the NHA if the owner or dealer files a performance bond guaranteeing the construction and maintenance of the roads, gutters, drainage, sewerage, water system, lighting systems, and full development of the subdivision project or the condominium project and the compliance by the owner or dealer with the applicable laws and rules and regulations. The bond shall be executed in favor of the Republic of the Philippines and shall authorize the Authority to use the proceeds thereof for the purposes of its undertaking in case of forfeiture as provided in this Decree. W hen license to sell and performance bond not required [Section 7, PD 957] A license to sell and performance bond shall not be required in any of the following transactions: (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.

CIVIL LAW

Grounds for revocation of registration certificate and license to sell [Section 9, PD 957] (1) Insolvency of owner/dealer (2) Violation of owner of PD 957 or its IRR or any undertaking of his/its performance bond (3) Has been or is engaged or is about to engage in fraudulent transactions (4) Misrepresentation in any prospectus, brochure, circular or other literature about the subdivision project or condominium project that has been distributed to prospective buyers (5) Bad business repute of owner/dealer (6) Does not conduct his business in accordance with law or sound business principles

C. REQUIREMENT FOR DEALERS, BROKERS, AND SALESMEN (DBS) C.1. REGISTRATION (1) Dealers, brokers, and salesm en (DBS) m ust be registered (Section 11, PD 957) Requisites of registration:

(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 suspension of license to sell [Section 8, PD 957] (1) misleading, incorrect, inadequate, or incomplete information in registration statement

(a) Good reputation and compliance with NHA rules (b) Payment of prescribed fee (c) Filing of bond or other security (amount fixed by NHA) conditioned upon his faithful compliance with provisions of PD 957 W hen term inates

(2) fraud upon prospective buyers on the sale or offering for a sale Note: suspension is confidential unless order of suspension has been violated.

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registration

of

DBS

(a) Termination of employment with dealer or broker (b) Expiration (31st day of Dec each year)

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(2) Revocation of registration as DBS [Section 12, PD 957] Grounds (a) Has violated any provision of this Decree or any rule or regulation made hereunder; or (b) Has made a material false statement in his application for registration; or (c) Has been guilty of a fraudulent act in connection with any sale of a subdivision lot or condominium unit; or (d) Has demonstrated his unworthiness to transact the business of dealer, broker, or salesman, as the case may be. The NHA may suspend the DBS' registration pending hearing of the case. The suspension or revocation of the registration of a dealer or broker shall carry with it all the suspension or revocation of the registration of all his salesmen.

D. CHARACTERISTICS OF SALE OF A CONDOMINIUM OR SUBDIVISION UNIT AND SIMILAR CONTRACTS D.1. REGISTRATION OF SALE, ETC [SECTION 17, PD 957] All contracts to sell, deeds of sale and other similar instruments relative to the sale or conveyance of the subdivision lots and condominium units, whether or not the purchase price is paid in full, shall be registered by the seller in the Office of the Register of Deeds of the province or city where the property is situated.

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D.2. MORTGAGES ON UNIT OR LOT BY OWNER OR DEVELOPER [SECTION 18, PD 957] (1) Need prior written approval of the NHA (2) Must show that proceeds of mortgage will be used for development of the condominium or subdivision (3) Value of each lot or unit determined by the buyer (if there is one) and the buyer shall be notified before release of loan (4) Buyer may pay directly to mortgagee D.3. ADVERTISEMENTS BY THE OWNER OR DEVELOPER [SECTION 19, PD 957] (1) Must reflect real facts, must not mislead or deceive public (2) Owner or developer shall be liable for any misrepresentation as to facilities, etc. (3) Advertisements shall form part of the sales warranties enforceable against the owner or developer (4) Failure to comply with sales warranties is punishable under PD 957 D.4. NON-FORFEITURE OF PAYMENTS (SECTION 23, PD 957) No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. D.5. FAILURE TO PAY INSTALLMENTS [SECTION 24, PD 957] The rights of the buyer in the event of this failure to pay the installments due for

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reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552 [Maceda Law].

XVI. The Condominium Act (RA 4726)

D.6. ISSUANCE OF TITLE [SECTION 25, PD 957] The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit. No fee, except those required for the registration of the deed of sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith.

A. DEFINITION OF A CONDOMINIUM [SECTION 2]

D.7. REALTY TAX [SECTION 26, PD 957] Real estate tax and assessment on a lot or unit shall de paid by the owner or developer without recourse to the buyer for as long as the title has not passed the buyer; Provided, however, that if the buyer has actually taken possession of and occupied the lot or unit, he shall be liable to the owner or developer for such tax and assessment effective the year following such taking of possession and occupancy. D.7. NO OTHER CHARGES [SECTION 27, PD 957] No owner or developer shall levy upon any lot or buyer a fee for an alleged community benefit. Fees to finance services for common comfort, security and sanitation may be collected only by a properly organized homeowners association and only with the consent of a majority of the lot or unit buyers actually residing in the subdivision or condominium project.

A condom inium 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. A.1. OTHER DEFINITIONS [SECTION 3] (1) Unit means a part of the condominium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part or parts of floors) in a building or buildings and such accessories as may be appended thereto. (2) Project means the entire parcel of real property divided or to be divided in condominiums, including all structures thereon, (3) Common areas means the entire project excepting all units separately granted or held or reserved.

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B. TRANSFERS OR CONVEYANCES OF A UNIT OR AN APARTMENT, OFFICE OR STORE, OR OTHER SPACE THEREIN [SECTION 5, RA 4726]

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D. PARTITION BY SALE [SECTION 8]

(a) undivided interests in common areas

This is an action that may be brought by one or more persons owning condominiums in a condominium project for the partition of the project by the sale thereof. The effect is as if the owners of all the condominiums in such project were co-owners of the entire project in the same proportion as their interests as their interests in the common areas.

(b) membership or shareholding in the condominium corporation

A partition by sale can only be done upon showing any of the following:

(2) Proviso: only Filipino citizens or corporations at least 60% of the capital stock are owned by Filipino citizens may be the transferee of common areas in cases where the common areas are owned by the owners of separate units as co-owners (not by condominium corporation)

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

(1) Transfer or conveyance of a unit or a space therein includes the transfer or conveyance of

(3) Exception succession.

to

proviso:

hereditary

Shareholdings in a condominium corporation may be conveyed only in a proper case. Not every purchaser of a condominium unit is a shareholder of a condominium corporation. The Condominium Act leaves to the Master Deed the determination of when the shareholding will be transferred the buyer of the unit. But ownership of a unit is an indispensable requisite to being a shareholder in the corporation. [Sunset View Condominium Corporation v. Campos (1981)]

C. RIGHTS OF A CONDOMINIUM UNIT OWNER (ASIDE FROM RIGHTS ARISING FROM OWNERSHIP) [SECTION 6] (1) Absolute right to sell or dispose of his condominium unless there is a right of first refusal in favor of condominium owners (2) Exclusive right to mortgage, pledge or encumber his condominium and to have the same appraised independently of the other condominiums but any obligation incurred by such condominium owner is personal to him

(2) That damage or destruction to the project has rendered one-half or more of the units therein untenantable and that condominium owners holding in aggregate more than 30% interest in the common areas are opposed to repair or restoration of the project (3) That the project has been in existence in excess of 50 years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than 50% interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project (4) That the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the condominium owners holding in aggregate more than 70% interest in the common areas are opposed to continuation of the condominium regime after expropriation or condemnation of a material portion thereof (5) That the conditions for such partition by sale set forth in the declaration of restrictions, duly registered in accordance with the terms of the Condominium Act, have been met

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E. DECLARATION OF RESTRICTIONS BY OWNER OF PROJECT - PRECONDITION TO CONVEYANCE [SECTION 9] (1) The owner must register with the Register of Deeds a declaration of restrictions before the conveyance of any condominium in the project (2) The restrictions constitute a lien upon each condominium in the project and shall insure to and bind all condominium owners in the project (3) The lien may be enforced by any condominium owner or by the management body of the project

F. ASSESSMENT IN ACCORDANCE WITH DECLARATION OF RESTRICTIONS [SECTION 20] This is the "tax imposition power" of the condominium corporation. If unpaid, the management body may cause a notice of assessment to be registered with the Register of Deeds, which may be released only upon payment of the assessed fees. This lien is superior to all other subsequent liens except real property taxes liens and other liens provided for in the declaration of restrictions.

G. HOW LIEN ENFORCED AFTER NONPAYMENT OF ASSESSED FEES [SECTION 20] Judicial or extra-judicial foreclosure of real property mortgages, where the management body may bid unless disallowed by the declaration of restrictions.

H. INVOLUNTARY DISSOLUTION OF THE CONDOMINIUM CORPORATION [SECTION 12] In case of involuntary dissolution, the common areas held by the corporation shall be transferred pro-indiviso and in proportion to their interest to the members/stockholders of the corporation, subject to the rights of creditors of the corporation. The common areas remain in undivided co-ownership.

CIVIL LAW

I. POWER OF ATTORNEY HELD BY CORPORATION IN CASE OF VOLUNTARY DISSOLUTION OF CONDOMINIUM CORPORATION [SECTION 15] The condominium corporation is deemed to hold a power of attorney from all members/stockholders to sell and dispose of their separate interests in the project. To liquidate, the condominium corporation will sell the entire project as if it owned the whole project itself, subject to the corporate and individual condominium creditors.

J. SALE, EXCHANGE, LEASE, OR DISPOSITION BY CORPORATION OF THE COMMON AREAS [SECTION 16] Generally not allowed unless authorized by affirmative vote of all of the stockholders/ members.

K. STOCKHOLDER/ MEMBER DEMANDING PAYMENT FOR SHARES OR INTEREST AKA APPRAISAL RIGHT [SECTION 17] By-laws of the condominium corporation shall provide that any shareholder/ member demanding payment for his share or interest must also consent to sell his separate interest in the project to the corporation or any buyer of the corporation's choice.

L. REQUIREMENT FOR REGISTRATION OF CONVEYANCE WITH THE REGISTER OF DEEDS [SECTION 18] Certificate of the management body of the project that the conveyance is in accordance with the declaration of restrictions

M. REALTY TAX ON CONDOMINIUMS [SECTION 25]

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I. General Provisions

which are strictly personal (intuitu personae) Examples: • Those relating to family relations • Those arising from public law • Those which involve or require the personal skills, qualifications, characteristics or circumstances of a particular individual • Criminal responsibility

A. DEFINITION Succession – a mode of acquisition by virtue of which the property, rights and obligations, to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law. [Art. 774, CC] KINDS OF SUCCESSION (1) Testamentary – that which results from the designation of an heir, made in a will executed in the form prescribed by law. [Art. 779, CC] (2) Legal or Intestate – that which takes place by operation of law in the absence of a valid will. (3) Mixed – that which is effected partly by will and partly by operation of law. [Art. 780, CC] (4) Compulsory – succession to the legitime and prevails over all other kinds of succession [Balane]

B. OBJECT OF SUCCESSION AND TRANSMISSION

(b) Intransmissible by stipulation (c) Intransmissible by provision of law Examples: • Usufruct [Art. 603] • Agency [Art. 1919] • Commodatum [Art. 1939] (2) Monetary debts left by the decedent are intransmissible in the sense that they are paid from the estate of the decedent and only the net estate or remainder goes to the heirs. If the decedent’s estate is not sufficient to pay his debts, his heirs cannot be held liable for said debts in their personal capacity. [Rules of Court, Rule 88-90] RULE ON TRANSMISSION

SCOPE OF INHERITANCE General rule: (1) All the property, rights and obligations of a person which are not extinguished by his death [Art. 776, CC] (2) Not only the property and the transmissible rights and obligations existing at the time of his death, but also those which have accrued thereto since the opening of the succession [Art. 781, CC] Exceptions: (1) Rights and obligations extinguished by death and are not transmissible [Art. 1311, CC]: (a) Intransmissible by nature: this refers to rights and obligations

General rule: All property rights which have accrued to the hereditary estate since the opening of succession are transmitted to the heirs. Exception: Property acquired after the making of a will shall not pass to the heirs unless it should expressly appear in the will that such was the intention of the testator. [Art. 793, CC] RULES ON OPENING OF SUCCESSION (1) The rights to succession are transmitted from the moment of the death of the decedent. [Art. 777, CC]

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Implications of this principle:

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(a) The law in effect at the time of death of the decedent governs the succession [Art. 2236, CC] (b) The heir becomes the owner of his share as well as all fruits which accrue after the death of the decedent. (c) Upon death of the decedent, heirs may immediately possess, administer and dispose of their shares in the estate (in the absence of existing debts/claims against the estate); (d) Since succession takes place by operation of law at the moment of the death of the decedent, the heirs can sue upon the rights of the decedent, without having to be appointed executor or administrator [Emnace v. CA, G.R. No. 126334 (2001)], and without need of a judicial declaration of their status as heirs [De Vera v. Galauran, 67 Phil 213 (1939)]. Heirs may also be sued without a previous declaration of heirship, provided there is no pending special proceeding for the settlement of estate of the decedent [Gayon v. Gayon, G.R. No. L-28394 (1970)]. (e) The possession of hereditary property is deemed transmitted to the heir without interruption and from the moment of death of the decedent, in case the inheritance is accepted [Art. 533, CC] (f) Estate taxes accrue upon death of the decedent, even if the heirs come into possession only later.

CIVIL LAW

C. SUBJECTS OF SUCCESSION (1) Decedent – person whose property is transmitted through succession, whether or not he left a will. [Art. 775, CC] Testator – a decedent who left a will [Art. 775, CC] (2) Successor – person who succeeds to the property of the decedent. He may be either— (a) Heirs – those who are called to the whole or an aliquot portion of the inheritance either by will or by operation of law [Art. 782, CC]

(2) A person may be “presumed” dead for the purpose of opening his succession. In this case, succession is only of provisional character because there is always a chance that the absentee may still be alive. [Arts. 390-391, CC].

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Kinds of Heirs: (1) Compulsory Heirs – those who succeed by force of law to some portion of the inheritance, in an amount predetermined by law known as the legitime, of which they cannot be deprived by the testator, except by a valid disinheritance. They succeed regardless of a will. (2) Voluntary or Testam entary Heirs – those who are instituted by the testator in his will, to succeed to the portion of the inheritance of which the testator can freely dispose. They succeed by reason of a will. (3) Legal or Intestate Heirs – those who succeed to the estate of the decedent who dies without a valid will, or to the portion of such estate not disposed of by will, or when certain grounds are met. Devisees and Legatees – those who succeed by particular title, i.e., to individual or specified items of personal or real property. (i) Devisees are persons to whom gifts of real property are given by virtue of a will. [Art. 782] (ii) Legatees are persons to whom gifts of personal property are given by virtue of a will. [Art. 782]

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Note: The distinction between heir and legatee/devisee is significant in case of preterition, which annuls the institution of heirs, but does not affect the institution of legatees and devisees to the extent that the legitimes are not impaired. [Art. 854]

CIVIL LAW

II. Testamentary Succession A. WILLS A.1. IN GENERAL Will – an act whereby a person is permitted, with the formalities prescribed by law to control to a certain degree the disposition of his estate to take effect after his death. [Art. 783, CC] I. KINDS OF WILLS (1) Notarial – an ordinary or attested will, which must comply with the requirements of the law [Arts. 804-808, CC] (2) Holographic – a will entirely written, dated and signed by the hand of the testator [Art. 810, CC] II. CHARACTERISTICS OF WILLS (1) Purely personal – the making of a will is non-delegable • making of a will cannot be left in whole or in part of the discretion of a third person, or accomplished through the instrumentality of an agent or attorney [Art. 784, CC] • testator may not make a testamentary disposition in such manner that another person has to determine whether or not it is to be operative [Art. 787, CC] What cannot be delegated to 3rd persons

What may be entrusted to 3rd persons

(1) designation of heirs, devisees and legatees (2) duration/efficacy of designation (3) determination of portions, when referred to by name [Art. 785, CC]

(1) designation of person/institution falling under a class specified by testator (2) manner of distribution of property specified by testator [Art. 786, CC]

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[Arts. 788-795]

Note: testator must first specify the class and the amount of property for proper delegation

Main principle: Testacy is preferred to intestacy and the intent of the testator is paramount and must be given effect as far as legally possible.

(2) Free and intelligent [Art. 839, CC]

(1) Giving effect to the will

(3) Solem n or form al – if the form is defective, the will is void

(a) If the testamentary disposition admits of different interpretations, in case of doubt, that interpretation by which the disposition is to be operative shall be preferred. [Art. 788] (b) The words of a will are to receive an interpretation which will give to every expression some effect, rather than one which will render any of the expressions inoperative. [Art. 791] (c) Of two modes of interpreting a will, that is to be preferred which will prevent intestacy. [Art. 791]

(4) Revocable and am bulatory – will can be revoked at any time before the testator’s death [Art. 828, CC] (5) Mortis causa - takes effect upon the testator’s death (6) Individual – prohibition against joint wills [Art. 818, CC] (7) Executed with anim us testandi – intent to dispose of the property (8) Executed capacity

with

testamentary

(9) Unilateral act – does not involve an exchange of values or depend on simultaneous offer and acceptance (10) Dispositive – disposes of property General rule: Wills contain disposition of the testator’s estate mortis causa. A will disinheriting a compulsory heir is still a dispositive will even in the absence of dispositive provisions because a disinheritance has the effect of disposing the legitime of the disinherited compulsory heir in favor of other compulsory heirs [Seangio v. Reyes, 2006]. Exceptions: (non-dispositive wills) • will recognizing an illegitimate child (11) Statutory grant – permitted only by law, not a constitutional right As it is a statutory grant, a will must be made in accordance with the formalities prescribed by the law [Art. 783, CC; Balane] III. RULES OF CONSTRUCTION AND INTERPRETATION

(2) Words to be taken in their ordinary and grammatical sense unless there is a clear intention to use them in another sense [Art. 790, CC] (3) Technical words are to be taken in their technical sense unless there is a contrary intention or when testator was unacquainted with such technical sense [Art. 790, CC] (4) Severability of provisions – Invalidity of one of several dispositions does not result in invalidity of others unless the testator would not have made such dispositions if the first invalid disposition had not been made [Art. 792, CC] (5) Every devise and legacy shall convey all the interest unless it clearly appears the intention was to convey a less interest [Art. 794, CC] (6) Where there are ambiguities (i.e. imperfect description or no person or property exactly answers to the description, mistakes, omissions), intrinsic or extrinsic evidence may be used to ascertain the intention of the testator

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• Oral declarations of the testator as to

his intention must be excluded. [Art 789, CC]

KINDS OF AMBIGUITIES Patent or Extrinsic Ambiguity

Latent or Intrinsic Ambiguity

one which appears one which cannot be upon the face of the seen from the reading instrument of the will but which appears only upon consideration of extrinsic circumstances Note: There is no real difference in the prescribed solution for either latent or patent ambiguity. In either case, extrinsic evidence or evidence of external circumstances can be considered. Moreover, in either case, the oral declarations of the testator are excluded.

IV. GOVERNING LAWS, IN GENERAL Aspect of the Will Formal Validity

Governing Law Law in force at the time the will was executed [Art. 795, CC]

Intrinsic Validity Law of decedent’s nationality at the time of his death [Arts. 16 and 2263, CC]

Aspects of the Will Governed by the National Law of the Decedent: (1) Order of succession; (2) Amount of successional rights; (3) Intrinsic validity of testamentary provisions; and (4) Capacity to succeed [Art. 16, CC] A.2. TESTAMENTARY CAPACITY AND INTENT TIME OF DETERMINING CAPACITY Capacity to make a will is determined as of the time of making thereof. [Art. 798] Supervening incapacity does not invalidate an effective will nor is the will of an incapable validated by a supervening of capacity [Art. 801, CC]

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REQUISITES FOR CAPACITY TO MAKE A WILL (1) The testator must not be expressly prohibited by law to make a will [Art. 796, CC] (2) The testator must not be under 18 years of age [Art. 797, CC] “Year” shall be understood to be 12 calendar months [Sec. 31, Book 1, Admin Code] (3) The testator must be of sound mind at the time of execution [Art. 798, CC]

TEST OF SOUNDNESS OF MIND: (a) To be of sound mind, it is not necessary that— (i) the testator be in full possession of reasoning faculties (ii) the testator’s mind be wholly unbroken, unimpaired, unshattered by disease, injury or other cause [Art. 799, CC] (b) To be of sound mind, the testator must know: (i) The nature of the estate to be disposed of; (ii) The proper objects of his bounty; (iii) The character of the testamentary act [Art. 799, CC] General rule: Soundness of mind is presumed [Art. 800, CC] Exception: When the testator, one month or less before the execution of the will, was publicly known to be insane A.3. FORM In General [Art. 804, CC] (1) The will must be in writing (2) It must be in a language or dialect known to the testator

APPLICABLE LAWS AS TO FORMAL VALIDITY

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• Formal validity is governed by the law in force at the time the will was executed [Art. 795, CC] • As to the place, forms and solemnities of a will are governed by the law of the country in which the will was executed [Art. 17, CC] • Arts. 815-817 (summarized in the table below) provide for the various governing laws in these instances: (1) A will was made in a foreign country by a Filipino [Art. 815] (2) A will was made in a foreign country by an alien [Art. 816] (3) A will was made in the Philippines by an Alien [Art. 817] Governing Law as to Place of Execution of Will Place of Testator Execution of Governing Law Will Philippines

Philippine Law [Art. 16, CC]

(1) Law of the country in which it is executed [Art. 17,CC]; or (2) Philippine Law [Art. 815, CC]

Philippines

(1) Philippine Law; or (2) Law of the country of which testator is a citizen or subject [Art. 817, CC]

Outside of the Philippines

Formal Requirements for Notarial W ills (1) Subscribed at the end (2) Attestation clause (3) Marginal signatures (4) Page numbers (5) Acknowledged by a notary public (6) Additional requirements for handicapped testators (7) Subscribed by 3 or more witnesses in the presence of the testator and of one another (1) Subscription: Subscribed to, at the end of the will [Art. 805, CC] • By the testator himself; or • By the testator’s name written by a representative in his presence and under his express direction. (2) Attestation Clause: Attested and subscribed by 3 or more credible witnesses in the presence of the testator and of one another [Art. 805, CC] Attestation

Outside of Filipino the Philippines

Alien

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Subscription

Mental act (act of the Mechanical act (act of senses) the hand) Purpose is to render Purpose available proof during identification probate of will, not only of the authenticity of the will but also of its due execution

(1) Law of the place where the will is executed [Art. 17, CC]; or (2) Law of the place where the testator resides; or (3) Law of the testator’s country; or (4) Philippine Law [Art. 816, CC]

ATTESTED OR NOTARIAL WILLS

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of

The attestation clause shall state the following: (1) Number of pages; (2) The fact that the testator or his representative under his express direction signed the will and every page in the presence of instrumental witnesses (3) That the witnesses signed the will and all its pages in the presence of the testator and of one another. The signatures of the witnesses must be at the bottom of the attestation clause [Cagro v. Cagro (1953)]

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The notary public cannot be counted as an attesting witness [Cruz v. Villasor (1973)]

witnesses signed in the presence of the testator and of one another. Substantial Com pliance Rule (as to the form of the attestation clause)

Test of presence: Not whether they actually saw each other sign, but whether they might have seen each other sign had they chosen to do so considering their mental and physical condition and position with relation to each other at the moment of inscription of each signature. [Jaboneta v. Gustilo (1906)]

Substantial compliance rule applies only in cases when such defects and imperfections can be supplied by an examination of the will itself. There must be no bad faith, forgery, fraud, or undue and improper pressure and influence for substantial compliance to be allowed. [Art. 809, CC]

Effect of Om issions (1) Omissions can be supplied by an examination of the will itself, without the need of resorting to extrinsic evidence, will not be fatal and will not prevent allowance of the will. Examples: (a) The fact that the testator/witnesses signed each and every page of the will can be proved also by the mere examination of the signatures appearing on the document itself. Omission of this fact on the attestation clause is not fatal (b) The failure to state in the attestation clause the number of pages of the instrument is ordinarily a fatal flaw. However, such omission will not invalidate the will if the number of pages appears elsewhere in the will itself so that no evidence aliunde is necessary. (2) However, those omissions which cannot be supplied except by evidence aliunde would result in the invalidation of the attestation clause, and consequently, of the will itself.

Example: The signature in the attestation clause is sufficient compliance for marginal signatures because the signature in the attestation clause also authenticates the page which is the purpose of the marginal signatures. The marginal signature, however, is not sufficient compliance with the requirement of signing the attestation clause because the purpose of the marginal signature is only to authenticate the page. The attestation clause has a purpose that is not fulfilled by the marginal signature (attest to the act of signing by testator and witnesses) [Balane]. Note: The doctrine of substantial compliance applies only as to defects in the form or language of the attestation clause. In case of omissions of certain facts which need to be stated, apply the rule on omissions aforestated. [Caneda v. CA, G.R. No. 103554 (1993)]

(3) Marginal Signatures General rule: Testator or his representative shall write his name, and the witnesses shall sign each and every page except the last page [Art. 805, CC]

Example: Whether the testator signed in the presence of the witnesses, or the

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Exceptions: (1) When the will consists of only one page (2) When the will consists of only two pages, the first of which contains all dispositions and is signed at the bottom by the testator and the witnesses, and the second page contains only the attestation clause duly signed at the bottom by the witnesses. [Abangan v. Abangan (1919)] (3) The use of thumbprint was allowed [Matias v. Salud (1957)] (4) 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 v. Icasiano (1964)] (4) Page Numberings: Numbered correlatively in letters placed on the upper part of each page (i.e. Page One of Five Pages). [Art. 805, CC] • Mandatory part: pagination by means of a conventional system • Directory part: pagination in letters on the upper part of each page [Balane] (5) Acknowledged before a notary public by the testator and the witnesses [Art. 806, CC] Notary public cannot be considered a third witness. He cannot acknowledge before himself his having signed the will. To allow such would have the effect of having only two attesting witnesses to the will. [Cruz v. Villasor (1973)]

CIVIL LAW

contents and communicate it to him in some practicable manner. (b) Blind [Art. 808, CC] • The will shall be read to the testator twice - By one of the subscribing witnesses and by the notary public acknowledging the will. •A testator suffering from glaucoma is considered as legally blind [Garcia v. Vasquez (1970)] (7) W itnesses Qualifications [Art. 820, CC] (1) Of sound mind (2) Aged 18 years or over (3) Not blind, deaf or dumb (4) Able to read and write Disqualifications [Art. 821, CC] (1) Person not domiciled in the Philippines (2) Those who have been convicted of falsification, perjury, or false testimony. RULES ON INTERESTED WITNESS [Art. 823, CC]

General Rule

Exception

Devises or legacies in favor of a spouse, parent or child who also attests to the will as a witness shall be void

If there are three other competent witnesses, the device or legacy shall be valid and the interested witness shall be treated as a mere surplusage

Creditors are not incompetent to be witnesses [Art. 824, CC] Supervening incompetency shall not prevent the allowance of the will [Art. 822, CC]

The certification of acknowledgement need not be signed by the notary in the presence of the testator and the witnesses. [Javellana v. Ledesma (1955)] (6) Additional rules for handicapped testators: (a) Deaf Mute [Art. 807, CC] • Testator must personally read the will; or • Testator shall personally designate two persons to read the

HOLOGRAPHIC WILLS Formal Requirements for Holographic W ills (a) In writing [Art. 804, CC] (b) In a language known to the testator [Art.

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804, CC]

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(c) Entirely written, dated and signed in the Disadvantages

Insertion, Cancellation, Erasure or Alteration [Art. 814, CC] Testator must authenticate by his full signature.

No guarantee as to the capacity of the testator

Note: Full signature does not necessarily mean the testator’s full name; it rather means his usual and customary signature. [Balane]

hand of the testator himself [Art. 810, CC]

Advantages Simple and easy to make

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Induces foreigners in this jurisdiction to set No protection against down their last wishes violence, intimidation or undue influence Guarantees the absolute secrecy of May not faithfully the testamentary express the will of the dispositions testator due to faulty expressions

EFFECT OF INSERTION WRITTEN BY ANOTHER PERSON ON THE VALIDITY OF A HOLOGRAPHIC WILL When Made

Effect

After the execution, without consent of testator

Insertion considered not written. Validity cannot be defeated by the malice or caprice of a third person

After execution, with consent

Will is valid, insertion is void

WITNESSES REQUIRED FOR PROBATE [Art. 811, CC] • At least one witness who knows the handwriting and signature of the testator; explicitly declare that it is the testator’s • If contested – at least 3 of such witnesses • In the absence of a competent witness, expert testimony may be resorted to

After execution, validated by testator’s signature

Insertion becomes part of the will. Entire will becomes void because it is not wholly written by the testator

General rule: The holographic will itself must be presented for probate [Gan v. Yap (1958)]

Joint Wills (1) A single testamentary instrument, (2) Which contains the wills of two or more persons, (3) Jointly executed by them, (4) Either for their reciprocal benefit or for the benefit of a third person. - prohibited under Article 819.

Can be easily falsified and concealed

Exception: If there is a photostatic copy or xerox copy of the holographic will, it may be presented for probate [Rodelas v. Aranza (1982)] ADDITIONAL DISPOSITIONS In holographic wills, the dispositions of the testator written below his signature must be dated and signed by him in order to make them valid as testamentary dispositions [Art. 812, CC] When a number of dispositions appearing in a holographic will are signed without being dated, and the last disposition has a signature and date, such date validates the dispositions preceding it, whatever be the time of prior dispositions. [Art. 813, CC]

Contemporaneous to Will is void because it is the execution of the will not written entirely by the testator

Mutual Wills (1) Executed pursuant to an agreement between two or more persons, (2) Jointly executed by them, (3) Either for their reciprocal benefit or for the benefit of a third person. - prohibited under Article 819. Reciprocal Wills (1) Testators name each other as beneficiaries in their own wills, (2) Under similar testamentary plans - valid

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A.4. CODICILS Codicil

(1) It is a supplement or addition to a will, (2) made after the execution of a will, (3) and annexed to be taken as a part of the will, (4) by which any disposition made in the original will is explained, added to, or altered. (5) in order that it may be effective, it shall be executed as in the case of a will. [Arts. 825-826, CC]

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LAW GOVERNING REVOCATION [Art. 829, CC] Place of Testator’s Governing Law Revocation Domicile Philippines Philippines, or Philippine Law some other country

Outside the Philippines

Philippines

Philippine law

Foreign Country

(1) Law of the place where the will was made; or (2) Law of the place in which the testator had his domicile at the time of revocation

A.5. INCORPORATION BY REFERENCE Requisites [Art. 827, CC] (a) The document or paper referred to in the will must be in existence at the time of the execution of the will. (b) The will must clearly describe and identify the same, stating among other things the number of pages thereof. (c) It must be identified by clear and satisfactory proof as the document or paper referred to therein; and (d) It must be signed by the testator and the witnesses on each and every page, except in case of voluminous books of account or inventories. A.6. REVOCATION A will may be revoked by the testator at any time before his death [Art. 828, CC] MODES OF REVOCATION [Art. 830, CC] (1) By implication of law; or (2) By the execution of a will, codicil or other writing executed as provided in the case of wills; or (3) By burning, tearing, canceling, or obliterating the will with the intention of revoking it, by the testator himself, or by some other person in his presence, and by his express direction. The act contemplating revocation must be done at any time before the death of the testator. The right of revocation cannot be waived or restricted. [Art. 828, CC]

DOCTRINE OF DEPENDENT RELATIVE REVOCATION [Molo v. Molo (1951)]

The rule that where the act of destruction is connected with the making of another will so as to fairly raise the inference that the testator meant the revocation of the old to depend upon the efficacy of the new disposition intended to be substituted, the revocation will be conditional and dependent upon the efficacy of the new disposition; and if for any reason, the new will intended to be made as a substitute is inoperative, the revocation fails and the original will remain in full force. The failure of the new testamentary disposition upon whose validity the revocation depends is equivalent to the non-fulfillment of a suspensive condition and hence prevents the revocation of the original will. REVOCATION VS. NULLITY Revocation

Nullity

By the act of the testator

Proceeds from law

Presupposes a valid act

Inherent in the testament, be it an intrinsic or an

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extrinsic defect

A.8. ALLOWANCE AND DISALLOWANCE OF WILLS

Takes place during the lifetime of the testator

Invoked after the testator’s death by his heirs

I. PROBATE REQUIREMENT

Testator cannot renounce the right to revoke

Nullity of a will can be disregarded by the heirs through voluntary compliance therewith

A.7. REPUBLICATION AND REVIVAL The execution of a codicil referring to a previous will has the effect of republishing the will as modified by the codicil. [Art. 836, CC] The testator cannot republish without reproducing in a subsequent will, the dispositions contained in a previous one which is void as to its form. [Art. 835, CC] Reproduction in the codicil is required only when the original will is void as to it form; in all other cases, reference to the original will suffices to republish it through the codicil. [Tolentino] If after making a will, the testator makes a second will expressly revoking the first, the revocation of the second will does not revive the first will, which can be revived only by another will or codicil. [Art. 837, CC] Principle of instanter – Revoking clause in the 2nd will is not testamentary in character but operates to revoke the prior will instanter (immediately) upon the execution of the will containing it. The revocation of the 2nd will does not revive the 1st will which has already become a nullity. REPUBLICATION VS. REVIVAL Republication

Revival

Takes place by an act Takes place by of the testator operation of law Corrects extrinsic and Restores a revoked intrinsic defects will

No will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court [Art. 838, CC] Probate – a proceeding in rem required to establish the validity of a will and in order to pass real or personal property [Art. 838, CC] The testator himself may, during his lifetime petition the court having jurisdiction for the allowance of his will. [Art. 838, CC] MATTERS TO BE PROVED IN PROBATE (1) Identity – Whether the instrument which is offered for probate is the last will and testament of the decedent (2) Due Execution – Whether the will has been executed in accordance with the formalities prescribed by law (3) Capacity – Whether the testator had testamentary capacity at the time of execution of the will SCOPE OF PROBATE PROCEEDINGS [Art. 839, CC] General rule: The probate court cannot inquire into the intrinsic validity of testamentary provisions. Only the extrinsic validity of such wills may be examined. Exceptions: (1) When practical considerations demand that the intrinsic validity of the will be resolved: When the will is intrinsically void on its face (e.g., when there is clearly a preterition) such that to rule on its formal validity would be a futile exercise. [Acain v. Diongson (1987)] (2) Claimants are all heirs and they consent, either expressly or impliedly, to the submission of the question of intrinsic validity to the court. [Valera v. Inserto (1987)] (3) Probate court may pass upon the title to a property, but such determination is provisional and not conclusive, and is

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subject to the final decision in a separate action to resolve title. [Pastor v.CA (1983)] (4) Probate court may decide on the ownership of a property when the estate contains only one property to be adjudicated upon. [Portugal v. PortugalBeltran (2005)] REVOCATION VS. DISALLOWANCE Revocation Voluntary act of the testator

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(3) If the testator acted by mistake or did not intend that the instrument he signed should be his will at the time affixing his signature thereto; (4) If the testator was insane or otherwise mentally incapable of making a will at the time of its execution; (5) If the formalities required by law have not been complied with; or (6) If it was executed through force or under duress, or the influence of fear, or threats. [Art. 839, CC]

Disallowance Given by judicial decree

B. INSTITUTION OF HEIR

With or without cause Must always be for a legal cause May be partial or total Always total, except when the ground of fraud or influence for example affects only certain portions of the will

EFFECT OF FINAL DECREE OF PROBATE, RES JUDICATA ON FORMAL VALIDITY Subject to the right of appeal, the allowance of the will, either during the lifetime of the testator or after his death, shall be conclusive as to due execution. [Art. 838, CC] The probate of a will by the probate court having jurisdiction thereof is usually considered as conclusive as to its due execution and validity, and is also conclusive that the testator was of sound and disposing mind at the time when he executed the will, and was not acting under duress, menace, fraud, or undue influence, and that the will is genuine and not a forgery. [Mercado v. Santos (1938)] II. GROUNDS FOR DENYING PROBATE (1) If the signature of the testator was procured by fraud; (2) If it was procured by undue and improper pressure and influence, on the part of the beneficiary or some other person;

Institution of Heirs – an act by virtue of which the testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligation [Art. 840, CC] A will shall be valid even though it— (1) should not contain an institution of an heir or (2) such institution should not comprise the entire estate or (3) the person so instituted should not accept the inheritance or be incapacitated to succeed. In such cases, the testamentary dispositions made in accordance with law shall be complied with and the remainder of the estate shall pass to the legal heirs. [Art. 841, CC] Extent Of Grant [Art. 842, CC] Freedom of disposition depends upon the existence, kind and number of compulsory heirs. • No compulsory heirs – Testator has full power of disposition • One with compulsory heirs cannot disregard the rights of the latter; may only dispose of the free portion of his estate Effect Of Predecease Of Heir [Art. 856, CC] Any heir who dies before the testator or is incapacitated to succeed or renounces the

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inheritance transmits no rights of the testator to his own heirs. This is without prejudice to the rights of representation. [Tolentino] MANNER OF INSTITUTION Rules on Identity of Heirs [Arts. 843849, CC] The heir must be designated with sufficient clarity • If an unknown person is instituted, the disposition is void (unless by some event, the identity becomes certain) • If a definite class or group of persons is instituted, institution is valid. The heir shall be designated by name or surname. • If there are two or more persons with the same names, indicate some circumstance by which the heir may be known. • Even though the name may have been omitted but there can be no doubt as to who has been instituted, the institution is valid. • If there is error in the name but identity can still be identified through other proof, institution is still valid. • If heir is unidentifiable, none is deemed instituted. MANNER OF DISTRIBUTION Heirs instituted without designation of shares shall inherit in equal parts [Art. 846] • If the institution pertains to some heirs individually and others collectively, the presumption is that all are individually instituted. [Art. 847] • If siblings are instituted (whether full or half-blood), the presumption is that the inheritance is to be distributed equally [Art. 848]. This is different from the rules of distribution in intestate succession. • If parents and children are instituted, they are presumed to have been instituted simultaneously and not successively. [Art. 849] •

Every disposition in favor of an unknown person shall be void, unless by some event

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or circumstance certain.

his

identity

becomes

A disposition in favor of a definite class or group of persons shall be valid. [Art. 845, CC] INTENT OF THE TESTATOR False Cause [Art. 850, CC] The statement of a false cause for the institution of an heir shall be considered as not written unless it appears from the will that the testator would not have made such institution if he had known the falsity of such cause. Falsity of stated cause for institution will set aside or annul the institution if the following are present [Austria v. Reyes (1973)]: (1) The cause for the institution is stated in the will (2) The cause is shown to be false (3) It appears on the face of the will that the testator would not have made such institution if he had known the falsity of the cause. SCOPE OF INSTITUTION [Arts. 852-853, CC] (1) There are more than one instituted heir (2) The testator intended them to get the whole estate or the whole disposable portion (3) The testator has designated a definite portion for each heir (4) Under Art. 852: the total of all portions is less than the whole estate (or free portion) • Therefore, a proportionate increase is necessary • The difference cannot pass by intestacy because the intention of the testator is clear—to give the instituted heirs the entire amount (5) Under Art. 853: The total exceeds the whole estate (or free portion) • Therefore, a proportionate reduction must be made on the remaining part of the estate.

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Preterition The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation. [Art. 854, CC]

Concept [Art. 854, CC] (1) There must be a total omission of one, some or all of the heir/s from the inheritance. [Seangio v. Reyes (2006)] (2) The omission must be that of a compulsory heir. (3) The compulsory heir omitted must be of the direct line. (4) The omitted compulsory heir must be living at the time of the testator’s death or must at least have been conceived before the testator’s death. (a) Compulsory Heirs in the Direct Line A direct line is that constituted by the series of degrees among ascendants and descendants (ascending and descending). [Art. 964, par.2, CC] (b) Dispositions Less Than Legitim e But No Preterition [Balane] If the heir in question is instituted in the will but the portion given to him by the will is less than his legitime – there is no preterition. [Reyes v. Barretto-Datu (1967)] If the heir is given a legacy or devise – there is no preterition. [Aznar v. Duncan (1966)]

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advance on the legitime under Articles 906, 909, 910 and 1062. The remedy, if the value of inheritance, legacy or devise, or donation inter vivos is only for completion of his legitime under Articles 906 and 907. (c) Distinguished Disinheritance

from

Preterition

Disinheritance

• Tacit deprivation of a compulsory heir of his legitime • May be voluntary but the presumption of law is that it is involuntary • Law presumes there has been merely oversight or mistake on the part of the testator • Since preterition annuls the institution of heirs, the omitted heir gets not only his legitime but also his share in the free portion not disposed of by way of legacies and devises

• Express deprivation of a compulsory heir of his legitime • Always voluntary • For some legal cause • If the disinheritance is valid, the compulsory heir disinherited is totally excluded from the inheritance. In case of invalid disinheritance, the compulsory heir is merely restored to his legitime

(d) Effects of Preterition [Art. 854, CC] (1) The institution of the heir is annulled. (2) Devises and legacies shall remain valid as long as they are not inofficious. (3) If the omitted compulsory heir should die before the testator, the institution shall be effective, without prejudice to the right of representation.

If the heir had received a donation inter vivos from the testator – the better view is that there is no preterition. The donation inter vivos is treated as an

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When there are no devises and legacies, preterition will result in the annulment of the will and give rise to intestate succession. [Neri v. Akutin (1941)]

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C. SUBSTITUTION OF HEIRS Substitution - is the appointment of another heir, so that he may enter into the inheritance in default of the heir originally instituted. [Art. 857, CC] The substitute shall be subject to the same charges and conditions imposed upon the instituted heir, unless the testator has expressly provided the contrary, or the charges or conditions are personally applicable only to the heir instituted. [Art. 862, CC] Kinds (1) Brief or Compendious (2) Reciprocal (3) Simple or Common (4) Fideicommissary (1) Brief or Com pendious [Art. 860, CC] Brief – Two or more persons were designated by the testator to substitute for only one heir

in the institution. A will get twice as much as B (because his share of 1/3 in the institution is twice the size of B’s share of 1/6) (3) Sim ple Substitution [Art. 859, CC] The testator may designate one or more persons to substitute the heir/s instituted in case the heirs should: (1) die before him (predecease), (2) should not wish to accept the inheritance (repudiation), or (3) should be incapacitated to accept the inheritance (incapacitated). (4) Fideicommissary Substitution The testator institutes an heir with an obligation to preserve and to deliver to another the property so inherited. The heir instituted to such condition is called the First Heir or the Fiduciary Heir; the one to receive the property is the Fideicommissary or the Second Heir. [Art. 863, CC]

Compendious – One person is designated to take the place of two or more heirs (2) Reciprocal [Art. 861, CC] If the heirs instituted in unequal shares should be reciprocally substituted, the substitute shall acquire the share of the heir who dies, renounces, or is incapacitated, unless it clearly appears that the intention of the testator was otherwise. If there is more than one substitute, they shall have the same share in the substitution as the institution. Example (only 1 substitute): If two heirs are reciprocally substituted, then if one of them dies before the testator dies, renounces, or turns out to be incapacitated, the other will get his share, regardless of whether or not their shares are equal. Example (more than 1 substitute): A is instituted to 1/3, B to 1/6, and C to ½. If C dies before the testator, renounces or turns out to be incapacitated, then the other two will get his shares in the same proportion as

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Requisites: [Arts. 863-865, CC] (a) A Fiduciary or First Heir instituted is entrusted with the obligation to preserve and to transmit to a Fideicommissary Substitute or Second Heir the whole or part of the inheritance. (b) The substitution must not go beyond one degree from the heir originally instituted. (c) The Fiduciary Heir and the Fideicommissary are living at the time of the death of the testator. (d) The fideicommissary substitution must be expressly made. (e) The fideicommissary substitution is imposed on the free portion of the estate and never on the legitime In the absence of an obligation on the part of the first heir to preserve the property for the second heir, there is no fideicommissary substitution. [PCIB v. Escolin (1974)]

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EFFECTS OF PREDECEASE OF THE FIRST HEIR/FIDUCIARY OR THE SECOND HEIR/FIDEICOMMISSARY Situation 1: If the first heir dies followed by the second heir, then the testator dies, who will inherit? The legal heirs. There is no fideicommissary substitution because first and second heirs are not living at the time of the testator’s death. [Art. 863, CC] Situation 2: The testator dies first followed by the second heir. The first heir survived them but subsequently dies, who will inherit? The SH and his heirs under Art. 866, CC. This is because the SH passes his rights to his own heirs when he dies before FH. Situation 3: If the first heir dies, followed by the testator, then the second heir, who will inherit? No specific provision in law, but SH inherits because the T intended him to inherit.

D. TESTAMENTARY DISPOSITIONS WITH A CONDITION, A TERM, AND A MODE 3 KINDS DISPOSITIONS

OF

TESTAMENTARY

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(4) Absolute condition not to contract a subsequent marriage unless imposed on the widow or widower by the deceased spouse, or by the latter’s ascendants or descendants. [Art. 874] (5) Scriptura captatoria or legacy-hunting dispositions - dispositions made upon the condition that the heir shall make some provision in his will in favour of the testator or of any other person. [Art. 875] Reasons for prohibition: (1) The captatoria converts the testamentary grants into contractual transactions; (2) It deprives the heirs of testamentary freedom; (3) It gives the testator the power to dispose mortis causa not only of his property but also of his heir’s. Effect: Entire disposition is void Potestative, Casual and Mixed Conditions (1) Potestative Conditions General rule: Must be fulfilled as soon as the heir learns of the testator’s death Exception: If the condition was already complied with at the time the heir learns of the testator’s death; or if the condition is of such a nature that it cannot be fulfilled again.

(1) Conditional [Art. 871, CC] (2) Dispositions with a term [Art. 885, CC] (3) Dispositions with a mode/modal dispositions [Art. 882, CC]

Constructive Compliance: deemed fulfilled

CONDITIONAL DISPOSITIONS Basis of testator’s right to impose conditions, terms or modes: Testamentary freedom Prohibited conditions: (considered as not imposed) (1) Any charge, condition or substitution whatsoever upon the legitimes. [Art. 872]

(2) Casual or mixed Casual condition – one whose fulfillment depends on chance or the will of a third person.

(2) Impossible and illegal conditions. [Art. 873] (3) Absolute condition not to contract a first marriage. [Art. 874]

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Mixed condition – one whose fulfillment depends partly on the will of the heir and partly on chance or the will of a third person. General rule: May be fulfilled at any time (before or after testator’s death), unless testator provides otherwise.

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Exception: If already fulfilled at the time of execution of will: (1) if testator unaware of the fact of fulfillment – deemed fulfilled (2) if testator aware: • can no longer be fulfilled again: deemed fulfilled • can be fulfilled again: must be fulfilled again. Constructive Compliance: • if casual – not applicable • if mixed – applicable only if dependent partly on the will of a third party not interested.

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testator upon the heir. [Rabadilla v. CA (2000)] Caución Muciana A security to guarantee the return of the value of property, fruits, and interests, in case of contravention of condition, term or mode Instances when it is needed: (1) Suspensive term [Art. 885,CC] (2) Negative potestative condition - when the condition imposed upon the heir is negative, or consists in not doing or not giving something [Art. 879, CC] (3) Mode [Art. 882, par 2, CC]

DISPOSITIONS WITH A TERM A term may either be suspensive or resolutory. (1) If the term is suspensive: Before the arrival of the term, the property should be delivered to the legal or intestate heirs. A caución muciana has to be posted by the heirs. (2) If the term is resolutory: Before the arrival of the term, the property should be delivered to the instituted heir. No caución muciana required as the heir has a right over the property during the period. MODAL DISPOSITIONS Dispositions with an obligation imposed upon the heir, without suspending the effectivity of the institution, as a condition does Must be clearly imposed as an obligation in order to be considered as one. Mere preferences or wishes expressed by the testator are not modes. A mode functions similarly to a resolutory condition. In modal institutions, the testator states (1) the object of the institution, (2) the purpose or application of the property left by the testator, or (3) the charge imposed by the

E. LEGITIME It is that part of the testator’s property which he cannot dispose of because the law has reserved it for his compulsory heirs. [Art. 886, CC] COMPULSORY HEIRS COMBINATIONS

AND

VARIOUS

Classes of Compulsory Heirs [Art. 887, CC] (1) Primary: Those who have precedence over and exclude other compulsory heirs: • Legitimate Children and Legitimate Descendants with respect to their Legitimate Parents and Ascendants (2) Secondary: Those who succeed only in the absence of the primary compulsory heirs: (a) Legitimate Parents and Legitimate Ascendants, with respect to their Legitimate Children and Descendants. (They will inherit only in default of legitimate children and their descendants) (b) Illegitimate Parents with respect to their Illegitimate Children. (They will inherit only in default of the illegitimate and legitimate children and their respective descendants).

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Note that other illegitimate ascendants are not included.

disinheritance [Arts. 972 and 992, CC] • For decedents who are Legitimate Children, only the Legitimate Descendants are entitled to right of representation. • For decedents who are Illegitimate Children, both the Legitimate and the Illegitimate Descendants can represent, only with respect to the decedent’s illegitimate parents.

(3) Concurring: Those who succeed together with the primary or the secondary compulsory heirs: (a) Surviving Spouse (Legitimate) (b) Illegitimate Children and Illegitimate Descendants If the testator is a legitimate child:

(1) LC and descendants (2) In default of No. 1, LP and ascendants (3) SS (4) IC and descendants

If the testator is an illegitimate child:

(1) LC and descendants (2) ILC and descendants (3) In default of Nos. 1-2 ILP only (4) SS

SPECIFIC RULES ON LEGITIMES (1) Direct Descending Line (a) Rule of Preference between lines [Arts. 978 and 985, CC] • Those in the direct descending line shall exclude those in the direct ascending and collateral lines; and • Those in the direct ascending line shall, in turn, exclude those in the collateral line. • Rule of Proximity [Art. 926, CC]: The relative nearest in degree excludes the farther one (b) Right of representation ad infinitum in case of predecease, incapacity, or

(c) If all the Legitimate Children repudiate their legitime, the next generation of Legitimate Descendants may succeed in their own right. (2) Direct Ascending Line (a) Rule of division between lines • The father and the mother shall inherit equally if both living. One parent succeeds to the entire estate of the child if the other parent is dead. [Art. 986, CC] • In default of the mother and the father, the ascendants nearest in degree will inherit. [Art. 987] • If there is more than one relative of the same degree but of different lines, one half will go to the paternal ascendants and the other half to the maternal ascendants. [Art. 987] (b) Rule of equal division • The relatives who are in the same degree shall inherit in equal shares. [Art. 987]

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SUMMARY OF LEGITIMES OF COMPULSORY HEIRS Legend: LC – Legitimate Children Surviving Relatives

ILC - Illegitimate Children LC & SS Descendants

SS – Surviving Spouse

1

LC alone

1/2 of the estate in equal portions

2

1 LC, SS

1/2

3

LC, SS

1/2 in portions

equal Same portion as 1LC

4

LC, ILC

1/2 in portions

equal

5

1 LC, SS, ILC

1/2

LP – Legitimate Parents ILC

ILP – Illegitimate Parents LP & ILP Ascendants

1/4

1/2 share of 1 LC (for each ILC) 1/4 (preferred)

1/2 share of 1 LC (for each child) N.B. The share of the ILC may suffer reduction pro rata because spouse is given preference

6

2 or more LC, 1/2 in SS, ILC portions

equal Same as share of 1LC

7

LP alone

8

LP, ILC

9

LP, SS

1/4

10 LP, SS, ILC

1/8

1/2 share of 1 LC (for each child) 1/2 1/4 in equal portions

1/2 1/2

1/4

11 ILC alone

1/2

1/2 in equal portions

12 ILC, SS

1/3

1/3 in equal portions

13 SS alone

½ Exception: marriage in articulo mortis and testator dies within 3 months from marriage – 1/3 Exception to the exception: have been living together as husband and wife for more than 5 years – 1/2

14 ILP alone 15 ILP, SS

1/2 1/4

1/4

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STEPS IN DETERMINING THE LEGITIME OF COMPULSORY HEIRS (1) Determine the gross value of the estate at the time of the death of the testator. (2) Determine all debts and charges which are chargeable against the estate. (3) Determine the net value of the estate by deducting all the debts and charges from the gross value of the estate. (4) Collate or add the value of all donations inter vivos to the net value of the estate. (5) Determine the amount of the legitime from the total thus found. (6) Impute the value of all donations inter vivos made to strangers against the disposable free portion and restore it to the estate if the donation is inofficious. (7) Distribute the residue of the estate in accordance with the will of the testator. REMEDY OF A COMPULSORY HEIR IN CASE OF IMPAIRMENT OF LEGITIME Extent and Nature of Impairment

Remedy

Total omission of a compulsory heir who is a direct descendant or ascendant (preterition)

Annulment of institution and reduction of legacies and devises [Art. 854, CC]

Testamentary dispositions impairing or diminishing the legitime

Reduction of the disposition insofar as they may be inofficious or excessive [Art. 907, CC]

Partial impairment

Completion of the legitime [Art. 906, CC]

Impairment by inofficious donations

Collation – reduction of donations [Arts. 771 and 911, CC]

RESERVA TRONCAL Art. 891, CC. The ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another ascendant, or a brother or sister, is

CIVIL LAW

obliged to reserve such property as he may have acquired by operation of law for the benefit of relatives who are within the third degree and who belong to the line from which said property came. CONCEPT OF RESERVA TRONCAL (1) A descendant (prepositus) inherits or acquires property from an ascendant or from a brother or sister (origin or mediate source) by gratuitous title (2) The same property is inherited by another ascendant (reservista) or is otherwise acquired by him by operation of law from the said descendant (prepositus) (3) The said ascendant (reservista) must reserve the property for the benefit of the relatives of the deceased descendant within the third civil degree and who belong to the line from which the said property came (reservatarios). Parties: [Balane at 371] (1) Origin or Mediate Source – either an ascendant of any degree of ascent or a brother or sister of the Prepositus; responsible for the 1st transfer (2) Prepositus – the first transferee of the reserved property (3) Reservista – an ascendant of the Prepositus other than the Origin or Mediate Source; the one obligated to reserve the property (4) Reservatarios – within the 3rd degree of consanguinity from the Prepositus [Cabardo v. Villanueva (1922)] belonging to the line from which the property came Requisites for Reserva Troncal [Chua vs. CFI (1977)]: (a) That the property was acquired by a descendant (Prepositus) from an ascendant or from a brother or sister (Origin or Mediate Source) by gratuitous title, (b) That the Prepositus (legitimate*) issue,

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(c) That the property is inherited by another ascendant (Reservista) by operation of law, and (d) That there are relatives within the 3rd degree (Reservatarios) belonging to the line from which said property came. Only legitimate descendants will prevent the property from being inherited by the legitimate ascending line by operation of law [Balane] Three transm issions involved: [Balane at 366-367] (1) 1st transfer – by gratuitous title, from a person to his descendant, brother or sister (2) 2nd transfer – by operation of law, from the transferee in the 1st transfer to another ascendant. This creates the reserva. (3) 3rd transfer – from the transferee in the second transfer to the relatives JURIDICAL NATURE OF RIGHTS Nature of the reservista’s right: [Edroso v. Sablan (1913)] • The reservista’s right over the reserved property is one of ownership • The right of ownership is subject to a resolutory condition, i.e. the existence of reservatarios at the time of the reservista's death • The right of ownership is alienable, but subject to the same resolutory condition. • The reservista’s right of ownership is registrable. Nature of reservatarios’ right: [Sienes v. Esparcia (1961)] • The reservatarios have a right of expectancy over the property. • The right is subject to a suspensive condition, i.e. the expectancy ripens into ownership if the reservatarios survive the reservistas. • The right is alienable but subject to the same suspensive condition. • The right is registrable.

CIVIL LAW

Reserva Minim a vs. Reserva Maxim a (1) The prepositus acquired property gratuitously from an ascendant, a brother or sister (2) In his will, he institutes as his heir his ascendant (who is also a compulsory heir) such that the ascendant receives half of the estate by operation of law as legitime and the other half by testamentary disposition Two Views (1) Reserva Maxima: The entire property will be considered acquired as legitime and therefore wholly reservable (2) Reserva Minim a: One half is reservable, the other half is not subject to reserva troncal [TOLENTINO at 284] Either view is defensible, but Reserva Minima finds wider acceptance in the Philippines [Balane] Extinguishment of the Reserva (1) Loss of the reservable property (2) Death of the reservista (3) Death of all the relatives within the third degree belonging to the line from which the property came (4) Renunciation by the reservatarios (5) Registration of the reservable property under the Torrens system as free (6) Prescription, when the reservista holds the property adversely against the reservatarios, as free from reservation

F. DISINHERITANCE Definition [Art. 915, CC] (1) It is the act by which the testator (2) For just cause (3) Deprives a compulsory heir of his right to the legitime. Requisites of a Valid Disinheritance (a) Heir disinherited must be designated by name or in such a manner as to leave no room for doubt as to who is intended to be disinherited. (b) It must be for a cause designated by law. (c) It must be made in a valid will.

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(d) It must be made expressly, stating the cause in the will itself. (e) The cause must be certain and true, and must be proved by the interested heir if the person should deny it. (f) It must be unconditional. (g) It must be total.

CIVIL LAW

the testator, his or her descendants, or ascendants;

spouse,

(3) When the parent or ascendant has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found to be false;

F.1. DISINHERITANCE OF CHILDREN AND DESCENDANTS [Art. 919, CC]

(4) When the parent or ascendant has been convicted of adultery or concubinage with the spouse of the testator;

(1) When a child or descendant has been found guilty of an attempt against the life of the testator, his or her spouse, descendants, or ascendants;

(5) When the parent or ascendant by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made;

(2) When a child or descendant has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless;

(6) The loss of parental authority for causes specified in this Code;

(3) When a child or descendant has been convicted of adultery or concubinage with the spouse of the testator; (4) When a child or descendant by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made; (5) A refusal without justifiable cause to support the parent or ascendant who disinherits such child or descendant; (6) Maltreatment of the testator by word or deed, by the child or descendant; (7) When a child or descendant leads a dishonorable or disgraceful life; (8) Conviction of a crime which carries with it the penalty of civil interdiction. F.2. DISINHERITANCE OF PARENTS AND ASCENDANTS [Art. 920, CC] (1) When the parents have abandoned their children or induced their daughters to live a corrupt or immoral life, or attempted against their virtue;

(7) The refusal to support the children or descendants without justifiable cause; (8) An attempt by one of the parents against the life of the other, unless there has been a reconciliation between them. F.3. DISINHERITANCE OF A SPOUSE [Art. 921, CC] (1) When the spouse has been convicted of an attempt against the life of the testator, his or her descendants, or ascendants; (2) When the spouse has accused the testator of a crime for which the law prescribes imprisonment of six years or more, and the accusation has been found to be false; (3) When the spouse by fraud, violence, intimidation, or undue influence cause the testator to make a will or to change one already made; (4) When the spouse has given cause for legal separation; (5) When the spouse has given grounds for the loss of parental authority; (6) Unjustifiable refusal to support children or the other spouse.

(2) When the parent or ascendant has been convicted of an attempt against the life of PAGE 346 OF 574

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Sum m ary of Causes of Disinheritance CC 919 CC 920 CC 921 Grounds for Disinheritance Children & Parents & Spouse Descendants Ascendants

CC 1032 Unworthiness

1

Guilty or Convicted of Attempt Against the Life of the Testator, Spouse, Ascendant or ✓ Descendant

✓

✓

✓

2

Accused Testator or Decedent of Crime Punishable by Imprisonment of 6 years or ✓ more, and Found Groundless or False

✓

✓

✓

Causes testator or decedent to Make a Will or Change one by Fraud, Violence, ✓ Intimidation, or Undue Influence

✓

✓

✓

✓

✓

✓

5 Convicted of Adultery or Concubinage ✓ with Spouse of Testator or Decedent

✓

✓

9 Abandonment of Children or Inducing Children to Live Corrupt and Immoral Life or Against Attempted Virtue

✓

✓

10 Loss of Parental Authority

✓

11 Attempt by One Parent Against the Life of the Other Unless there is Reconciliation Between Parents

✓

3

4 Unjustified Refusal to Support Testator

6 Maltreatment of testator by Word and ✓ Deed 7

Leading a Dishonorable or Disgraceful ✓ Life

8 Conviction of Crime which carries the ✓ penalty of Civil Interdiction

✓

✓

12 Spouse Has Given Cause for Legal Separation 13 Failure to Report Violent Death of Decedent Within One Month Unless Authorities Have Already Taken Action

✓

✓

14 Force, Violence, Intimidation, or Undue Influence to Prevent Another from Making a Will or Revoking One Already Made or Who Supplants or Alters the Latter’s Will

✓ ✓

15 Falsifies or Forges Supposed Will of Decedent MODES OF REVOCATION OF DISINHERITANCE

(3) Nullity of the will which contains the disinheritance.

(1) Reconciliation [Art. 922, CC] (2) Subsequent institution of the disinherited heir

Note: The moment that testator uses one of the acts of unworthiness as a cause for disinheritance; he thereby submits it to the rules on disinheritance.

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Thus, reconciliation renders the disinheritance ineffective.

CIVIL LAW

G. LEGACIES AND DEVISES Legacy

RECONCILIATION [Art. 922, CC] Effect of Reconciliation between Offender and Offended Person: If no disinheritance has been made yet, the offended person will be deprived of his right to disinherit. If disinheritance has been effected, it will be rendered ineffectual. RIGHTS OF DESCENDANTS OF PERSON DISINHERITED [Art. 923, CC] Disinheritance gives rise to the right of representation in favor of the children and descendants of the disinherited person with respect to his legitime. This is inconsistent with Art. 1033. In disinheritance, reconciliation is sufficient. It need not be in writing. In unworthiness, however, it needs to be in writing. [Balane] INEFFECTIVE DISINHERITANCE [Art. 918, CC] Instances of Ineffective disinheritance: (1) There is no specification of the cause. (2) The cause is not proved. (3) The cause is not among those specified in the provisions. Effect of Ineffective Disinheritance: if the disinheritance lacks one or other of the requisites mentioned in this article, the heir in question gets his legitime. [Balane] Ineffective Disinheritance

Preterition

Person disinherited Person omitted must may be any compulsory be a compulsory heir in heir the direct line Only annuls the Annuls the entire institution in so far as it institution of heirs prejudices the person disinherited

Devise

A gift of personal property given in a will

A gift of real property given in a will

It is bequeathed

It is devised

PERSONS CHARGED WITH THE DUTY TO GIVE LEGACIES AND DEVISES IN A WILL (1) Compulsory heir, provided, their legitimes are not impaired [Art. 925, CC] (2) Voluntary heir (3) Legatee or devisee can be charged with the duty of giving a sub-legacy or subdevise but only to the extent of the value of the legacy or devise given him [Art. 925, CC] (4) The estate represented by the executor or administrator, if no one is charged with this duty to pay or deliver the legacy or devise in the will • If there is an administration proceeding, it constitutes a charge upon the estate. • If there is no administration proceeding, it is a charge upon the heirs. VALIDITY AND EFFECT OF LEGACY OR DEVISE Legacy or devise of a thing belonging to another [Art. 930, CC] Testator erroneously believed that the property belonged to him

Void

The thing bequeathed afterwards becomes his by whatever title

Effective

Legacy or devise of thing already belonging to the legatee or devisee The thing already belongs to the Ineffective legatee or devisee at the time of the execution of the will [Art. 932, CC] The thing is subject to an encumbrance or interest of another person [Art. 932, CC]

Valid only as to the interest or encumbrance

Legatee or devisee

Ineffective

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subsequently alienates the thing [Art. 933,CC] After alienating the thing, the Ineffective legatee or devisee subsequently reacquires it gratuitously [Art. 933, CC] After alienating the thing, the Legatee or legatee or devisee acquires it by devisee can onerous title [Art. 933, CC] demand reimbursement from the heir or estate

Different Objects of Legacies and Devises [Art. 934-944, CC] Objects of Legacy or Devise Thing pledged or mortgaged to secure a debt

Effect • Estate is obliged to pay the debt • Other charges pass to the legatee or devisee

Credit or remission or release of a • Effective only as regards the credit or debt existing at the time of the debt testator’s death • Legacy lapses if the testator later brings action against the debtor • If generic, comprises all credits/debts existing at time of execution of will Thing pledged by debtor

Only the pledge is extinguished; the debt remains

To a creditor

Shall not be applied to his credit unless the testator so declares

Order of payment of a debt

• If testator does not really owe the debt, the disposition is void • If the order is to pay more than the debt, the excess is not due • This is without prejudice to the payment of natural obligations

Alternative legacies and devises

• The choice is with the heir, or the executor or administrator • If the heir, legatee or devisee dies, the right passes to their heirs • Once made, the choice is irrevocable

Legacy of generic personal property or indeterminate real property

• Legacy is valid even if there are no things of the same kind in the estate • Devise of indeterminate real property valid only if there are immovable property of the same kind in the estate • The choice belongs to the heir, legatee or devisee or the executor or administrator

Legacy of education

• Lasts until the legatee is of age or beyond the age of majority in order that he may finish some professional, vocational or general course provided he pursues his course diligently • If testator did not fix the amount, it is fixed in accordance with the social standing and circumstances of the legatee and the value of the estate

Legacy of support

• Lasts during lifetime of legatee • If the testator used to give the legatee a sum of money for support, give the same amount unless it is markedly disproportionate to the estate PAGE 349 OF 574

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• If testator did not fix the amount, it is fixed in accordance with the social standing and circumstances of the legatee and the value of the estate

Order of Payment in Case the Estate Is Not Sufficient to Cover A ll the Legacies and Devises Art. 911

Art. 950

Order of Preference • • • •

Legitime of compulsory heirs Donations inter vivos Preferential legacies or devises All other legacies or devises pro rata

Remuneratory legacy/devise Preferential legacy/devise Legacy for support Legacy for education Legacy/devise of specific, determinate thing which forms a part of the estate • All others pro rata • • • • •

Application • When the reduction is necessary to preserve the legitime of compulsory heirs from impairment whether there are donations inter vivos or not; or • When, although, the legitime has been preserved by the testator himself there are donations inter vivos.

• When there are no compulsory heirs and the entire estate is distributed by the testator as legacies or devises; or • When there are compulsory heirs but their legitime has already been provided for by the testator and there are no donations inter vivos.

Art. 911, CC governs when there is a conflict between Art. 950, CC governs when the question of reduction compulsory heirs and the devisees and legatees. is exclusively among legatees and devisees themselves.

Delivery of Legacy/Devise [Art. 951, CC] (1) The very thing bequeathed shall be delivered and not its value (2) With all its accessions and accessories (3) In the condition in which it may be upon the death of the testator (4) Legacies of money must be paid in cash Effect of ineffective legacies or devises [Art. 956, CC] In case of repudiation, revocation or incapacity of the legatee or devisee, the legacy or devise shall be merged with the mass of the hereditary estate, except in cases of substitution or accretion.

Revocation of Legacies and Devises [Art. 957, CC] (1) Testator transforms the thing such that it does not retain its original form or denomination (2) Testator alienates the thing by any title or for any cause. Reacquisition of the thing by the testator does not make the legacy or devise valid, unless it is effected by right of repurchase. (3) Thing is totally lost during the lifetime or after the death of the testator (4) Other causes: nullity of will, non-compliance with suspensive condition, sale of the thing to pay the debts of the deceased during the settlement of his estate.

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III. Legal or Intestate Succession A. GENERAL PROVISIONS Intestacy – that which takes place by operation of law in default of compulsory and testamentary succession. Not defined in the Civil Code. INSTANCES WHEN LEGAL OR INTESTATE SUCCESSION OPERATES [Art. 960, CC] (1) If a person dies without a will, or with a void will, or one which has subsequently lost its validity (2) When the will does not institute an heir (3) Upon the expiration of term, or period of institution of heir [Balane] (4) Upon fulfillment of a resolutory condition attached to the institution of heir, rendering the will ineffective [Balane] (5) When the will does not dispose of all the property belonging to the testator. Legal succession shall take place only with respect to the property which the testator has not disposed (mixed succession) (6) If the suspensive condition attached to the institution of the heir does not happen or is not fulfilled (7) If the heir dies before the testator (8) If the heir repudiates the inheritance, there being no substitution, and no right of accretion takes place (9) When the heir instituted is incapable of succeeding, except in cases provided in the Civil Code (10) Preterition – Intestacy may be total or partial depending on whether or not there are legacies or devises [Balane] Note: In all cases where there has been an institution of heirs, follow the ISRAI order: (1) If the Institution fails, Substitution occurs.

CIVIL LAW

(2) If there is no substitute, the right of Representation applies in the direct descending line to the legitime if the vacancy is caused by predecease, incapacity, or disinheritance. (3) The right of Accretion applies to the free portion when the requisites in Art. 1016 are present. (4) If there is no substitute, and the right of representation or accretion is not proper, the rules on Intestate succession shall apply.

The Intestate or Legal Heirs: (1) Relatives (a) Legitimate children (b) Illegitimate children (c) Legitimate parents (d) Illegitimate parents (e) Brothers, sisters, nephews and nieces (BSNN) (f) Other collateral relatives (2) Surviving spouse (3) State (through escheat proceedings) Intestate succession is based on the presumed will of the decedent. That is, to distribute the estate in accordance with the love and affection he has for his family, and in default of these persons, the presumed desire to promote charitable and humanitarian activities. [Balane] FUNDAMENTAL PRINCIPLES IN INTESTATE SUCCESSION (1) Rule of Preference between Lines • Those in the direct descending line shall exclude those in the direct ascending and collateral lines; • Those in the direct ascending line shall, in turn, exclude those in the collateral line. (2) Rule of Proximity • The relative nearest in degree excludes the farther one [Art. 962(1), CC], saving the right of representation when it properly takes place. (3) Rule of Equal Division • The relatives who are in the same degree shall inherit in equal shares. [Arts. 962(2), 987 and 1006, CC]

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Exceptions: [Balane] (a) Rule of preference between Lines (b) Distinction between legitimate and illegitimate filiation. The ratio under present law is 2:1. [Art. 983, in relation to Art. 895 as amended by Art. 176, FC] (c) Rule of division by line in the ascending line [Art. 987 (2), CC] (d) Distinction between full-blood and half-blood relationship among brothers and sisters, as well as nephews and nieces. [Art. 1006 and 1008, CC] (e) Right of representation. (4) Rule of Barrier between the legitim ate fam ily and the illegitim ate fam ily (the ironcurtain rule) The illegitimate family cannot inherit by intestate succession from the legitimate family and vice-versa. [Art. 992, CC] (5) Rule of Double Share for full blood collaterals When full and half-blood brothers or sisters, nephews or nieces, survive, the full blood shall take a portion in the inheritance double that of the halfblood. [Arts. 895 and 983, CC] Note: • If one of the legitimate ascendants, illegitimate parents, legitimate children or illegitimate children survives, the brother, sisters, nephews, and nieces (BSNN) are excluded. • If one of the legitimate ascendants, illegitimate parents, legitimate children, illegitimate children or surviving spouse survives, the other collateral relatives and the state are excluded. • If any of the heirs concur in legitimes, then they also concur in intestacy.

A.1. RELATIONSHIP The number of generations determines the proximity of the relationship. Each generation forms one degree. [Art. 963, CC]

CIVIL LAW

• A direct line is that constituted by the series of degrees among ascendants and descendants. • The direct line is either ascending (brings a person with those from whom he descends) and descending (connecting the head of the family with those who descend from him). [Art. 965, CC] • A collateral line is that constituted by the series of degrees among persons who are not ascendants or descendants, but who come from a common ancestor. Note: It is important to distinguish between direct and collateral, as the direct has preference over the collateral.

In a line, as many degrees are counted as there are generations. [Art. 966, CC] (1) In the direct line, ascent is made up to the common ancestor or progenitor. (2) In the collateral line, ascent is made to the common ancestor. Then descent to the person with whom the computation is to be made. Note: Descending line is preferred over ascending.

Blood relationship is either full or halfblood. [Art. 967, CC] Note: As among brothers and sisters and nephews and nieces, there is a 2:1 ratio for fullblood and half-blood relatives. Direct relatives are preferred. But this distinction does not apply with respect to other collateral relatives.

INCAPACITY [Art. 968, CC] General rule: If there are several relatives of the same degree, and one or some of them are unwilling or incapacitated to succeed, his portion shall accrue to the others of the same degree. Exception: When the right representation should take place.

of

Note: This accretion in intestacy takes place in case of predecease, incapacity, or renunciation among heirs of the same degree. The relatives must be in the same relationship because of the Rule of Preference of Lines.

A series of degrees forms a line. This line may either be direct or collateral. [Art. 964, CC] PAGE 352 OF 574

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REPUDIATION [Arts. 968-969, CC] There is no right of representation in repudiation. If the nearest relative/s repudiates the inheritance, those of the following degree shall inherit in their own right. In case of repudiation by all in the same degree, the right of succession passes on the heirs in succeeding degrees: descending line first, ascending line next, and collateral line next. [Balane] ADOPTION [Art. 189, FC] In adoption, the legal filiation is personal and exists only between the adopter and the adopted. The adopted is deemed a legitimate child of the adopter, but still remains as an intestate heir of his natural parents and other blood relatives. (Note, however, Section 16 of the Domestic Adoption Act [RA 8552], which provides that all legal ties between the biological parent(s) and the adoptee shall be severed and the same shall then be vested on the adopter(s).” A.2. RIGHT OF REPRESENTATION Representation – right created by fiction of law, by virtue of which the representative is raised to the place and the degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited [Art. 970, CC] Effect of Representation The representative heir acquires the rights which the person represented would have if he were living or if he could have inherited. W hen it occurs Representation is allowed with respect to inheritance conferred by law (legitime and intestate based on Art. 923) It occurs only in the following instances: (DIP) (1) Predecease of an heir (2) Incapacity or unworthiness (3) Disinheritance [Art. 923, CC]

CIVIL LAW

A renouncer can represent, but cannot be represented. Rationale is found in Art. 971 which states that “The representative does not succeed the person represented but the one whom the person represented would have succeeded.” Representation in the Direct Descending Line Representation takes place ad infinitum in the direct descending line but never in the direct ascending line. [Art. 972, CC] General rule: Grandchildren inherit from the grandparents by right of representation, if proper. Exception: Whenever all the children repudiate, the grandchildren inherit in their own right because representation is not proper. [Art. 969, CC] Representation in Collateral Line In the collateral line, representation takes place only in favor of the children of the brothers or sisters (i.e., nephews and nieces) whether of the full or half-blood [Art. 972, CC] and only if they concur with at least one uncle or aunt. In this case, they share in the inheritance per stirpes. If the children survive alone, they inherit in their own right and share in equal proportions or per capita. [Art. 975, CC] Right of representation in the collateral line is only possible in intestate succession. It cannot take place in testamentary succession. Per stirpes • Inheritance per stirpes means that the representative/s shall receive only what the person represented would have received, if he were living or could inherit. [Art.975, CC] • If there are more than one representative in the same degree, then it shall be divided equally, without prejudice to the distinction between legitimate and illegitimate, if applicable.

There is no representation in testamentary succession. [Art. 856, CC]

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The Double Heirship Test • In determining whether or not representation is proper, it is necessary that the representative must be a legal heir of both the person he is representing and the decedent. [Art. 973, CC] • But the representative need not be qualified to succeed the person represented. [Art. 971, CC] In the same manner, the person represented need not be qualified to succeed the decedent, as it is his disqualification which gives rise for representation to apply. − Legitim ate children may not be represented by their illegitimate descendants (because of the bar in Art. 992). In contrast, illegitim ate children may be represented by their

CIVIL LAW

legitimate and illegitimate descendants. [Art. 902] − Illustration: A has legitimate son L and illegitimate son I. L has an illegitimate son L-1 while I also has an illegitimate son I-1. I-1 may inherit from A by representation of I (under Art. 902, CC), but L-1 may not inherit from A (because of the barrier under Art. 992, CC) Representation in Adoption • If the adopting parent should die before the adopted child, the latter cannot represent the former in the inheritance of the parents or ascendants of the adopter. The adopted child is not related to the deceased in that case, because filiation created by fiction of law is exclusively between the adopter and the adop

• ted. [Tolentino]

B. ORDER OF INTESTATE SUCCESSION Decedent is a Legitimate Child 1

Decedent is an Adopted Child

Legitimate children or descendants (LCD)

Legitimate children or descendants (LCD)

2 Legitimate parents or ascendants Illegitimate children or (LPA) descendants (LPA)

Illegitimate children or descendants (ICD)

3

Illegitimate parents (IP)

Legitimate or illegitimate parents, or legitimate ascendants, adoptive parents

4 Surviving spouse (SS)

Surviving spouse (SS)

Surviving spouse (SS)

5 Brothers and sisters, nephews, nieces (BS/NN)

Illegitimate brothers and sisters, nephews, nieces (IBS/NN)

Brothers and sisters, nephews, nieces (BS/NN)

6 Legitimate collateral relatives within the 5th degree (C5)

State

State

7

Legitimate children or descendants (LCD)

Decedent is an Illegitimate Child

Illegitimate children or descendants (ICD)

State

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RULES OF EXCLUSION AND CONCURRENCE IN INTESTATE SHARES Intestate Heirs

Excluded By

Excludes

LC + LD

Ascendants, and State

ILC + D

ILP, Collaterals and State No one

SS, LC, LP

LP + LA

Collaterals and State

LC

ILC + SS

ILP

Collaterals and State

LC and ILC

SS

SS

Collaterals other than No one siblings, nephews and nieces, State

Siblings, Nieces

Collaterals No one

Concurs With

Nephews, All other collaterals and LC, ILC, LP, ILP State

SS + ILC

LC, ILC, LP, ILP, Siblings, Nephews, Nieces SS

Other collaterals within Collateral more remote in LC, ILC, LP, ILP and SS 5th degree degree and State

Collaterals in the same degree

State

No one

No one

Everyone

Note: In partial intestacy, the testamentary dispositions can reduce the shares of intestate heirs, provided that their legitimes, if they are also compulsory heirs, are not impaired. More specifically:

(1) The law of legitimes must be brought into operation in partial intestacy. (2) If among the concurring intestate heirs there are compulsory heirs whose legal or intestate portions exceed their respective legitimes, the amount of the testamentary disposition must be deducted from the disposable portion, to be borne by all the intestate heirs in the proportions that they are entitled to receive from such disposable portion as intestate heir. (3) If the legal or intestate share of a compulsory heir is equal to his legitime, then the amount of the testamentary disposition must be deducted only from the legal or intestate shares of the others. (4) If the testamentary dispositions consume the entire disposable portion, then the intestate heirs who are compulsory heirs will get only their legitimes, and those who are not compulsory heirs will get nothing. [Tolentino]

OUTLINE OF INTESTATE SHARES (1) Legitim ate children only Divide entire estate equally among all legitimate children [Art. 979, CC] Legitimate children include an adopted child. (2) Legitim ate children and Illegitim ate children Divide entire estate such that each illegitimate child gets ½ of what a legitimate child gets [Art. 983, CC and Art. 176, FC] Ensure that the legitime of the legitimate children are first satisfied. (3) Legitim ate children and surviving spouse Divide entire estate equally between the legitimate children and the surviving spouse, the latter deemed as one child. The same rule holds where there is only one child. (4) Legitim ate children. Surviving spouse, and Illegitimate children Divide the entire estate such that the surviving spouse is deemed one legitimate child and each illegitimate child getting ½ of what the legitimate child gets. [Art. 996, CC and Art. 176, FC]

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Ensure that the legitime of the legitimate children and the spouse are first satisfied. (5) Legitim ate parents only Divide the entire estate equally. [Art. 985] (6) Legitim ate ascendants only (excluding parents) Divide the entire estate equally but with the observance of the rule of division by line. [Art. 987] (7) Legitim ate parents and illegitim ate children Legitimate parents get ½ of the estate, illegitimate children get the other ½. [Art. 991] (8) Legitim ate parents and surviving spouse Legitimate parents get ½ of the estate; The surviving spouse gets the other ½. [Art. 997] (9) Legitim ate parents, surviving spouse and illegitim ate children Legitimate parents get ½ of the estate; surviving spouse and the illegitimate child each get ¼ each, the latter to share among themselves if more than one. [Art. 1000] (10) Illegitimate children only Divide the entire estate equally. [Art. 988] (11) Illegitimate children and surviving spouse Illegitimate children get ½ of the estate; the surviving spouse gets the other ½. [Art. 998] (12) Surviving spouse only Entire estate goes to the surviving spouse. [Art. 994/995] (13) Surviving spouse and illegitim ate parents Illegitimate parents get ½ and the spouse gets the other ½. [by analogy with Art. 997] (14) Surviving spouse and legitim ate brothers and sisters, nephews and nieces Surviving spouse gets ½ of the estate, while the rest gets the other ½ with the nephews and nieces inheriting by representation if proper. [Art. 1001]

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(15) Surviving spouse and illegitim ate brothers and sisters, nephews and nieces Surviving spouse gets ½ of the estate while the rest gets the other ½ with the nephews and nieces inheriting by representation, if proper; Note that all the other relatives should be “illegitimate” because of the ironcurtain rule. [Art. 994, CC] (16) Illegitimate parents only Entire estate goes to the illegitimate parents. [Art. 993, CC] (17) Illegitimate parents and children of any kind (whether legitimate or illegitim ate child) Illegitimate parents are excluded and do not inherit. For the rule on the respective shares of the children, see numbers 1, 2 or 10, whichever is applicable. (18) Legitim ate brothers and sisters only Divide the entire estate such that full-blood brothers/sisters gets a share double the amount of a half-blood brother or sister. [Art. 1004 and 1006, CC] (19) Legitim ate brothers and sisters, nephews and nieces Divide the entire estate observing the 2 is to 1 ratio for full and half-blood relationships with respect to the brothers and sisters, with the nephews and nieces inheriting by representation, if proper. [Art. 1005 & 1008, CC] (20) Nephews and nieces only Divide the entire estate per capita, observing the 2 is to 1 ratio. [Arts. 975 and 1008, CC] (21) Other collaterals [Arts. 1009 and 1010] Divide entire estate per capita. Collateral relatives must be with the 5th degree of consanguinity. Note: the nearer relative excludes the more remote relatives.

(22) State If there are no other intestate heirs, the State inherits the entire estate through escheat proceedings. [Art. 1011, CC]

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IV. Provisions Common to Testate and Intestate Succession

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It is the mechanism where the share of an heir is increased by vacant shares vacated by heirs who cannot inherit for various reasons. (Rationale: the decedent intended to give the property to nobody but the co-heirs.) There can only be accretion if there is an institution of heirs with respect to specific properties. [Art. 1016, CC]

A. RIGHT OF ACCRETION DEFINITION OF ACCRETION [Art. 1015, CC] It is a right by virtue of which, when two or more persons are called to the same inheritance, devise or legacy, the part assigned to one who renounces or cannot receive his share or who died before the testator is added or incorporated to that of his co-heirs, co-devisees, or co-legatees. BASIS The right of accretion is based upon the presumed will of the decedent. Thus, the testator can expressly provide that there shall be no accretion among persons who would otherwise be entitled thereto. Conversely, the testator may validly provide for accretion in a case where no accretion would take place under the provisions of the law. [Tolentino] REQUISITES [Tolentino p. 497-499] (a) Unity of object and plurality of subjects (two or more persons are called to the same inheritance or same portion thereof)

Among compulsory heirs, there can only be accretion with respect to the free portion. There can be no accretion with respect to the legitimes. [Arts. 1021 and 1018, CC] The heirs to whom the portion goes by the right of accretion take it in the same proportion that they inherit. [Art. 1019, CC] Exceptions [Balane] (1) In testamentary succession, if the testator provides otherwise (2) If the obligation is purely personal, and hence intransmissible The heirs to whom the inheritance accrues shall succeed to all the rights and obligations which the heir who renounced or could not receive it would have had. [Art. 1020, CC] In testamentary succession, when the right of accretion does not take place, the vacant portion of the instituted heirs, if no substitute has been designated, shall pass to the legal heirs of the testator, who shall receive it with the same charges and obligations. [Art. 1022, CC]

(b) Vacancy of share (one of the heirs dies before the testator, or renounces the inheritance, or is incapacitated)

Accretion shall also take place among devisees, legatees and usufructuaries under the same conditions established for heirs. [Art. 1023, CC]

W hen does Accretion Occur? Accretion happens when there is repudiation, incapacity, or predecease of an heir. (RIP)

Note: There can be accretion only when there is no representation, because when there is representation, by legal fiction, it cannot be said that there is a vacant portion. [Tolentino]

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Effect of Predecease, Incapacity, Disinheritance or Repudiation Cause of Vacancy Testamentary Succession

Intestate Succession

Legitime

Free Portion

Predecease

Representation Intestate Succession

Accretion Intestate Succession

Representation Intestate Succession

Incapacity

Representation Intestate Succession

Accretion Intestate Succession

Representation Intestate Succession

Disinheritance

Representation Intestate Succession

-

-

Repudiation

Intestate Succession

Accretion

Accretion

B. CAPACITY TO SUCCEED BY WILL OR INTESTACY REQUISITES FOR CAPACITY TO SUCCEED BY WILL OR BY INTESTACY: [Art. 1024 – 1025, CC] (a) The heir, legatee or devisee must be living or in existence at the moment the succession opens; [Art 1025] and

(4) Relatives of the priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong; (5) Attesting witness to the execution of a will, the spouse, parents, or children, or any one claiming under such witness, spouse, parents, or children;

(b) He must not be incapacitated or disqualified by law to succeed. [Art 1024, par.1]

(6) Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness.

PERSONS INCAPABLE OF SUCCEEDING [Arts. 1027, 739, 1032]

Based on m orality or public policy [Arts. 739 and 1028, CC] (1) Those made in favor of a person with whom the testator was guilty of adultery or concubinage at the time of the making of the will.

Based on undue influence or interest [Art. 1027, CC] (1) Priest who heard the last confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period; (2) Individuals, associations and corporations not permitted by law to inherit; (3) Guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the guardianship have been approved, even if the testator should die after the approval thereof; except if the guardian is his ascendant, descendant, brother, sister, or spouse;

(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. Based on acts of unworthiness [Art. 1032, CC] The following are incapable of succeeding by reason of unworthiness: (1) Parents who have abandoned their children or induced their daughters to

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lead a corrupt or immoral life, or attempted against their virtue; (2) Any person who has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; (3) Any person who has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless; (4) Any heir of full age who, having knowledge of the violent death of the testator, should fail to report it to an officer of the law within a month, unless the authorities have already taken action; this prohibition shall not apply to cases wherein, according to law, there is no obligation to make an accusation; (5) Any person convicted of adultery or concubinage with the spouse of the testator; (6) Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made; (7) Any person who by the same means prevents another from making a will, or from revoking one already made, or who supplants, conceals, or alters the latter's will; (8) Any person who falsifies or forges a supposed will of the decedent. Pardon of Acts of Unworthiness Express

Implied

Made by the execution of a document or any writing in which the decedent condones the cause of incapacity

Effected when the testator makes a will instituting the unworthy heir with knowledge of the cause of incapacity

Cannot be revoked

Revoked when the testator revokes the will or the institution

Effect of Pardon

CIVIL LAW

Once the act of unworthiness has been pardoned, whether expressly or tacitly, the heir is restored to full capacity to succeed the decedent, as if the cause of unworthiness had never existed. Unworthiness vs. Disinheritance Unworthiness

Disinheritance

Unworthiness renders a person incapable of succeeding to the succession, whether testate or intestate

Disinheritance is the act by which a testator, for just cause, deprives a compulsory heir of his right to the legitime [Art. 815, CC]

Determ ination of Capacity [Tolentino p. 539] General Rule: At the death of the decedent [Art. 1034, CC] Exceptions: (1) Those falling under 2, 3, and 5 of Art. 1032 – when the final judgment is rendered (2) Those falling under 4 of Art. 1032 – when the month allowed for the report expired (3) If the institution is conditional – when the condition is complied with

C. ACCEPTANCE AND REPUDIATION OF THE INHERITANCE DEFINITION OF ACCEPTANCE The act by which the person called to succeed by universal title either by the testator or by law manifests his will of making his own the universality of the rights and obligations which are transmitted to him. [Tolentino] DEFINITION OF REPUDIATION The manifestation by an heir of his desire not to succeed to the rights and obligations transmitted to him. [Tolentino] CHARACTERISTICS [Arts. 1041–1042, 1056, CC]

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(1) Acceptance and repudiation must be voluntary and free [Art. 1041, CC]

must first accept the inheritance before he can dispose of it. (b) If the heir renounces the same, even though gratuitously, for the benefit of one or more of his co-heirs – this is actually a donation. The heir must first accept the inheritance before he can donate it. (c) If the heir renounces it for a price in favor of all his co-heirs indiscriminately – this is actually an onerous disposition. The heir must first accept the inheritance before he can dispose of it.

(2) They are irrevocable except if there is vitiation of consent or an unknown will appears [Art. 1056, CC] (3) They have a retroactive effect [Art. 1042, CC] REQUISITES [Art. 1043, CC] (a) Certainty of death of the decedent (b) Certainty of the right to the inheritance Acceptance Involves the confirmation of transmission of successional rights

Repudiation • Renders the transmission of successional rights ineffective • Equivalent to an act of disposition or alienation • Publicity requirement is necessary for the protection of other heirs and creditors

FORMS OF ACCEPTANCE [Arts. 1049 – 1050, CC] (1) Express Acceptance – one made in a public or private document. [Art. 1049 par. 1] (2) Tacit Acceptance – one resulting from acts by which the intention to accept is necessarily implied or from acts which one would have no right to do except in the capacity of an heir. (3) Implied Acceptance - Within thirty days after the court has issued an order for the distribution of the estate in accordance with the Rules of Court, the heirs, devisees and legatees shall signify to the court having jurisdiction whether they accept or repudiate the inheritance; if they do not do so within that time, they are deemed to have accepted the inheritance. [Art 1057, CC]

Note: But if the renunciation should be gratuitous, and in favor of all the co-heirs (to whom the portion renounced should devolve by accretion), the inheritance shall not be deemed as accepted. [Art. 1050] This is a true case of renunciation.

FORMS OF REPUDIATION [Art. 1051, CC] (1) in In a public instrument acknowledged before a notary public; or (2) In an authentic document – equivalent of an indubitable writing or a writing whose authenticity is admitted or proved; or (3) By petition presented to the court having jurisdiction over the testamentary or intestate proceeding HEIRS IN TWO CAPACITIES [Art. 1055, CC] (1) If a person is called to the same inheritance as an heir by will and by law and he repudiates the inheritance in his capacity as a testamentary heir, he will be considered to have also repudiated the inheritance as a legal heir. (2) If he repudiates it as a legal heir, without knowledge of his being a testamentary heir, he may still accept it in the latter capacity.

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IRREVOCABILITY OF ACCEPTANCE OR REPUDIATION General Rule: The acceptance or repudiation of an inheritance, once made, is irrevocable and cannot be impugned. Exceptions: (1) When the acceptance or repudiation suffers from any of the vices which annul consent; and (2) When an unknown will appears. [Art. 1056, CC]

D. COLLATION CONCEPT OF COLLATION To collate is to bring back or to return to the hereditary mass in fact or by fiction property which came from the estate of the decedent, during his lifetime by donation or other gratuitous title but which the law considers as an advance from the inheritance. [Art. 1061, CC] It is the act by virtue of which, the compulsory heir who concurs with other compulsory heirs in the inheritance brings back to the common hereditary mass the property which they may have received from the testator so that a division may be effected according to law and the will of the testator. In reducing inofficious donations, the last to be donated should be the first to be reduced. Rationale for collation: If donations inter vivos will not be collated, then the rule on legitimes shall be circumvented or disregarded. OPERATIONS RELATED TO COLLATION (1) Collation – adding to the mass of the hereditary estate the value of the donation or gratuitous disposition. (2) Imputing or Charging – crediting the donation as an advance on the legitime (if the donee is a compulsory heir) or on the free portion (if the donee is a stranger, i.e., not a compulsory heir). [Balane, p. 522]

CIVIL LAW

(3) Reduction – determining to what extent the donation will remain and to what extent it is excessive or inofficious. (4) Restitution – returning or the act of payment of the excess to the mass of hereditary estate. PERSONS OBLIGED TO COLLATE General rule: Compulsory heirs Exceptions: (1) When the testator should have so expressly provided [Art. 1062, CC] (2) When the compulsory heir should have repudiated his inheritance [Art. 1062, CC] Grandchildren who survive with their uncles, aunts, or first cousins and inherit by right of representation [Art. 1064, CC] Note: Grandchildren may inherit from their grandparents in their own right, i.e., as heirs next in degree, and not by right of representation if their parent repudiates the inheritance of the grandparent, as no living person can be represented except in cases of disinheritance and incapacity. In this case, the grandchildren are not obliged to bring to collation what their parent has received gratuitously from their grandparent.

Surviving spouse is not obliged to collate. WHAT TO COLLATE (1) Any property or right received by gratuitous title during the testator’s lifetime [Art. 1061, CC] (2) All that they may have received from the decedent during his lifetime. [Art. 1061, CC] (3) Expenses incurred by the parents in giving their children a professional, vocational or other career shall not be brought to collation unless the parents so provide, or unless they impair the legitime; but when their collation is required, the sum which the child would have spent if he had lived in the house and company of his parents shall be deducted therefrom. [Art. 1068, CC]

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(4) Any sums paid by a satisfaction of the debts of election expenses, fines, expenses shall be brought [Art. 1069, CC]

parent in his children, and similar to collation.

Note: Only the value of the thing donated shall be brought to collation.

PROPERTIES COLLATION

NOT

SUBJECT

TO

Absolutely no collation Expenses for support, education (only elementary and secondary), medical attendance, even in extraordinary illness, apprenticeship, ordinary equipment, or customary gifts [Art. 1067, CC] Generally not imputable to legitime/ cannot be collated, subject to exceptions (1) Expenses incurred by parents in giving their children professional, vocational or other career unless the parents so provide, or unless they impair the legitime. [Art. 1067, CC] (2) Wedding gifts by parents and ascendants, consisting jewelry, clothing and outfit, except when they exceed 1/10 of the sum disposable by will. [Art. 1070, CC] (3) Neither shall donations to the spouse of the child be brought to collation; but if they have been given by the parent to the spouses jointly, the child shall be obliged to bring to collation one-half of the thing donated. [Art. 1066, CC] Note: Parents are not obliged to bring to collation in the inheritance of their ascendants any property which may have been donated by the latter to their children. [Art. 1065, CC]

E. PARTITION AND DISTRIBUTION OF ESTATE E.1. IN GENERAL Separate, Divide, Assign. Partition is the separation, division and assignment of a thing held in common among those to

CIVIL LAW

whom it may belong. The thing itself or its value may be divided. [Art. 1079, CC] Owned in common. Before partition, the whole estate of the decedent is owned in common by the heirs. [Art. 1078, CC] Thing or value may be divided. [Art. 1079] Acts deemed partition. Every act which is intended to put an end to indivision among heirs and legatees or devisees is deemed a partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction. [Art. 1082, CC] A void partition may be valid if: (1) The will was in fact a partition (2) The beneficiaries of the void will were legal heirs The titles of acquisition or ownership of each property shall be delivered to the coheir to whom said property has been adjudicated. [Art. 1089, CC] JUDICIAL VS. EXTRAJUDICIAL PARTITION Judicial – Partition done by Court pursuant to an Order of Distribution which may or may not be based on a project of partition. Extra-judicial – partition made by the decedent himself by an act inter vivos or by will or by a third person entrusted by the decedent or by the heirs themselves. [Paras] • Partition Inter Vivos: It is one that merely allocates specific items or pieces of property on the basis of the pro-indiviso shares fixed by law or given under the will to heirs or successors. [Art. 1080, CC] W ho May Effect Partition (1) The Decedent, during his lifetime by an act inter vivos or by will [Art.1080, CC] (2) The decedent’s heirs [Art.1083, CC] (3) A competent court [Art. 1083,CC] (4) A third person not an heir designated by the decedent [Art.1081, CC] W ho Can Demand Partition (1) Compulsory heir (2) Voluntary heir upon fulfillment of condition if any [Art. 1084, CC]

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(3) Legatee or devisee (4) Any person who has acquired interest in the estate W hen Partition Cannot Be Dem anded (1) When expressly prohibited by the testator for a period not exceeding 20 years [Art. 1083, CC] (2) When the co-heirs agreed that the estate shall not be divided for a period not exceeding 10 years, renewable for another 10 years (3) When prohibited by law (4) When to partition the estate would render it unserviceable for the use for which it is intended Prohibition to Partition (1) The prohibition to partition for a period not exceeding 20 years can be imposed even on the legitime. (2) If the prohibition to the partition is for more than 20 years, the excess is void. (3) Even if a prohibition is imposed, the heirs by mutual agreement can still make the partition. Effects of Inclusion of Intruder in Partition [Art. 1108, CC] (1) Between a true heir and several mistaken heirs – partition is void. (2) Between several true heirs and a mistaken heir – transmission to mistaken heir is void (1) Through error or mistake, share of true heir is allotted to mistaken heir – partition shall not be rescinded unless there is bad faith or fraud on the part of the other persons interested, but the latter shall be proportionately obliged to pay the true heir of his share. The partition with respect to the mistaken heir is void. [Sempio-Dy] Right of Redemption in Partition Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to

CIVIL LAW

the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor [Art. 1088, CC] Strangers – those who are not heirs on the succession. Legal Redem ption by Co-Heir; Requisites: (a) That there are several heirs of the common inheritance; (b) That one of them sells his hereditary rights; (c) That the sale is made to a stranger, and before the partition has been made; (d) That one or more of the co-heirs demand the repurchase within a period of one month, counted from the time he or they were notified in writing of the sale; and (e) That the buyer is reimbursed the price of the sale. [Garcia v. Calaliman] Note: The redemption can be exercised only by a co-heir.

E.2. EFFECTS OF PARTITION Effect A partition legally made confers upon each heir the exclusive ownership of the property adjudicated to him [Art. 1091, CC] No partition shall be construed so as to prejudice, defeat, or destroy the right or title of any person claiming the real estate involved in the action for partition by title under any other person, or by title paramount to the title of the parties among whom the partition may have been made. [Rule 69, Sec. 12, ROC] A judicial partition in probate proceedings does not bind the heirs who were not parties thereto. [Tolentino] W arranty After the partition has been made, the coheirs shall be reciprocally bound to warrant the title to, and the quality of, each property adjudicated [Art. 1092, CC]

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The reciprocal obligation of warranty shall be proportionate to the respective hereditary shares of the co-heirs. If any one of them should be insolvent, the other co-heirs shall be liable for his part in the same proportion, deducting the part corresponding to the one who should be indemnified. Those who pay for the insolvent heir shall have a right of action against him for reimbursement, should his financial condition improve [Art. 1093, CC] An action to enforce the warranty among the co-heirs must be brought within ten years from the date the right of action accrues. [Art. 1094, CC] If a credit should be assigned as collectible, the co-heirs shall not be liable for the subsequent insolvency of the debtor of the estate, but only for his insolvency at the time the partition is made. [Art. 1095, CC] The warranty of the solvency of the debtor can only be enforced during the five years following the partition. Co-heirs do not warrant bad debts, if so known to, and accepted by the distributee. But if such debts are not assigned to a coheir, and should be collected, in whole or in part, the amount collected shall be distributed proportionately among the heirs. [Art. 1095, CC] End of W arranty The obligation of warranty among co-heirs shall cease in the following cases: (1) The testator himself has made the partition • Unless it appears, or it may be reasonably presumed, that his intention was otherwise, but the legitime shall always remain unimpaired. (2) When it has been so expressly stipulated in the agreement of partition • Unless there has been bad faith (3) When the eviction is due to a cause subsequent to the partition, or has been

caused by the fault of the distributee of the property. [Art. 1096, CC] E.3. RESCISSION AND NULLIFICATION OF PARTITION Causes for Rescission or Annulment (1) A partition may be rescinded or annulled for the same causes as contracts. [Art. 1097, CC] (2) A partition, judicial or extra-judicial, may also be rescinded on account of lesion, when any one of the co-heirs received things whose value is less by at least one-fourth, than the share to which he is entitled, considering the value of the things at the time they were adjudicated [Art. 1098, CC] • This article applies only to cases of partition among-coheirs • Lesion is the injury suffered in consequence of inequality of situation by one party who does not receive the full equivalent for what she gives in a sale or any commutative contract (3) The partition made by the testator cannot be impugned on the ground of lesion, except when the legitime of the compulsory heirs is thereby prejudiced, or when it appears or may be reasonably be presumed, that the intention of the testator was otherwise. [Art. 1099, CC] (4) Preterition of a compulsory heir in the partition [Art. 1104, CC]: • Partition shall not be rescinded unless bad faith or fraud on the part of other heirs is proved. • The culpable heirs shall share in the damages of the prejudiced compulsory heir proportionately. (5) A partition which includes a person believed to be an heir, but who is not, shall be void only with respect to such person. [Art. 1105, CC] The action for rescission on account of lesion shall prescribe after four years from the time the partition was made. [Art. 1100, CC]

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The heir who is sued shall have the option of indemnifying the plaintiff for the loss, or consenting to a new partition Indemnity m ay be m ade: (1) By payment in cash or (2) By the delivery of a thing of the same kind and quality as that awarded to the plaintiff. If a new partition is made, it shall affect neither those who have not been prejudiced nor those who have not received more than their just share [Art. 1101, CC] An heir who has alienated the whole or a considerable part of the real property adjudicated to him cannot maintain an action for rescission on the ground of lesion, but he shall have a right to be indemnified in cash [Art. 1102, CC]

CIVIL LAW

IMPORTANT PERIODS IN PARTITION 1 month or less before making a will 20 years 5 years from delivery to the State

To claim property escheated to the State

1 month

To report knowledge of violent death of decedent lest he be considered unworthy

The omission of one or more objects or securities of the inheritance shall not cause the rescission of the partition on the ground of lesion, but the partition shall be completed by the distribution of the objects or securities which have been omitted. [Art. 1103, CC]

5 years from the time disqualified person took possession 30 days from issuance of order of distribution 1 month form written notice of sale

DIFFERENCE RESCISSION

10 years

OF

NULLITY

FROM

Nullity – the act is supposed to never have existed Rescission – the act is valid at the origin though it afterwards became ineffective

Testator, if publicly known to be insane, burden of proof is on the one claiming validity of the will Maximum period testator can prohibit alienation of dispositions

5 years from partition 4 years from partition

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Action for declaration of incapacity & for recovery of the inheritance, devise or legacy Must signify acceptance/repudiation otherwise, deemed accepted Right to repurchase hereditary rights sold to a stranger by a co-heir To enforce warranty of title/quality of property adjudicated to co-heir from the time right of action accrues To enforce warranty of solvency of debtor of the estate at the time partition is made Action for rescission of partition on account of lesion

CIVIL LAW

AGENCY

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I. Definition of Agency

CIVIL LAW 3. Cause: it is presumed to be for compensation

B. AS A LEGAL RELATIONSHIP A. AS A TYPE OF CONTRACT Art 1868. By a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. A.1. ELEMENTS (STATUTORY): a) A person binds himself to render some service or to do something b) In representation or on behalf of another c) With the consent or authority of the latter A.2. ELEMENTS (JURISPRUDENTIAL) a) There is consent, express or implied of the parties to establish the relationship b) The object is the execution of a juridical act in relation to a third person c) The agent acts as a representative and not for himself d) The agent acts within the scope of his authority

It is possible for an agency to arise even without a contract. In such cases, an agency is more properly described as a legal relationship. It is (a relationship) whereby one party, called the principal, authorizes another, called the agent, to act for and in his behalf in transactions with third persons. [Rallos v. Felix Go Chan, G.R. No. L-24332 (1978)]

C. EFFECTS OF AGENCY 1. Integration (merger) of the personality of the principal and the agent 2. Extension (reproduction) of the personality of the principal through the agent 3. Consequences:

Note: the first two elements reflect the elements given by Article 1868, while the last two elements merely limit the acts of the agent, i.e. violation of these elements does not mean that no agency was created. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions; and on the part of the agent there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. [Victorias Milling v. CA, G.R. No. 117356 (2000)] A.3. BEING A CONTRACT, IT MUST ALSO COMPLY WITH ART. 1318 1.

Consent: But the legal relationship may still arise even without consent 2. Object: The performance of acts by the agent in representation of the principal PAGE 367 OF 574

a) Merger: In an agency relationship, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. [Orient Air Services v. CA, G.R. No. 76931 (1991)] b) Agent is not a real party in interest: The agent is not a party to the contract between the principal and the third person. He is not a real party in interest and cannot therefore sue in his own behalf on a contract for his principal, except if he is an assignee of such contract. [Uy and Roxas v. CA, G.R. No. 120465 (1999)] c) Imputed Knowledge: Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. [Francisco v. GSIS, G.R. No. L-18287 (1963)] The theory of imputed knowledge ascribes knowledge of the agent

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to the principal, not the other way around. [Sunace International v. NLRC, G.R. No. 161757 (2006)]

II. Kinds of Agency

The general rule is that the principal is chargeable with and bound by the knowledge of or notice to his agent, received while the latter was acting as such. The well-established exception is where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy. [Cosmic Lumber v. CA, G.R. No. 114311 (1996)]

A. GENERAL AGENCY

d) Bad faith of the Agent is Bad faith of the Principal [Caram v. Laureta, G.R. No. 72194 (1990)]

Art. 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more specific transactions. To be a General Agent, it is sufficient that the listed authorized transactions apparently cover all that is required to run the business of the principal. It is not necessary that the power granted actually says “all the business of the principal.” [Dominion Insurance v. CA, G.R. No. 129919 (2002)]

B. SPECIAL AGENCY General Agency

Special Agency

The Agent handles all The Agent only of the business of the handles specific principal. aspects of the business.

C. AGENCY COUCHED IN GENERAL TERMS This refers to a type of authority granted to the agent, not to the scope. If the power granted refers to acts of administration, then the agency is properly called an agency couched in general terms.

General Agency

Agency Couched General Terms

This refers to the scope of the agency, i.e. it comprises all of the business.

This refers to the type of authority granted, i.e. only acts of administration.

D. AGENCY REQUIRING POWER OF ATTORNEY D.1. In General PAGE 368 OF 574

in

SPECIAL

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Like agency couched in general terms, this also refers to a type of authority granted to the agent, i.e. acts of strict dominion. Article 1878. Special powers of attorney are necessary in the following cases: (1) To make such payments as are not usually considered as acts of administration; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; (4) To waive any obligation gratuitously; (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations contracted before the agency;

CIVIL LAW instrument. If a power of attorney is denominated as a “general power of attorney” but it contains a specific power to sell, then there is no need to execute a separate SPOA to confer such power to sell. [Veloso v. CA, G.R. No. 102737 (1996)] A SPOA may be oral or written, but if it is oral, it must be duly established by evidence. [Lim Pin v. Liao Tan, G.R. No. L-47740 (1982)] Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell.

Art. 1880. A special power to compromise does not authorize submission to arbitration. D.2. Effect of Absence of Specific Authority D.2.A. In General If an agent performs a transaction under Art 1878 without specific authority therefor, the transaction is unenforceable. However, the agent can still seek the principal’s ratification. [Dungo v. Lopena, G.R. No. L18377 (1962)] D.2.B Sale Of Land Or Any Interest Therein Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Requirements: The authorization must be (a) Written, and (b) Specific

(15) Any other act of strict dominion.

Only specific authorization is required (and it need not be written):

What matters is the specificity of the authority granted, not the name given to the

(a) If the contract is a sale of an immovable other than land

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(b) If the contract transmits ownership over an immovable other than land (c) If the contract transmits ownership over land through a transaction other than a sale

CIVIL LAW

III. Express vs Implied Agency A. EXPRESS

D.2.C Effect of Specific Authorization Where an instrument specifies and defines powers and duties, all such powers and duties are limited and confined to those which are specified and defined, and all other powers and duties are excluded. [BPI v. De Coster, G.R. No. L-23181 (1925)]

Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may be oral, unless the law requires a specific form.

E. AGENCY BY OPERATION OF LAW General Rule: Normally, an agency is established only if there is mutual intent on the part of the principal and agent to establish the agency. [Victorias Milling v. CA, G.R. No. 117356 (2000)] Exceptions: An agency may be established by operation of law, however, in the following cases: (1) In a partnership, every partner is an agent of the partnership for the purpose of its business [Art. 1818]; (2) Agency by estoppel (both statutory and jurisprudential), where the principal’s actions would reasonably lead a third person to conclude that an agency exists; (3) In case of certain necessity or emergency, an agency by necessity may arise. [De Leon]

B. IMPLIED Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. Articles 1869 and 1870 show that an agency relationship may be implied from the acts of the principal or those of the agent. B.1. ACTS OF THE PRINCIPAL The act of the principal which constitutes consent may be in the form of silence, lack of action, or failure to repudiate the agency knowing that another person is acting on his behalf without authority. [See Art 1869] Requisites: (a) The alleged principal should be aware of the acts of the alleged agent (b) The alleged principal has had reasonable opportunity under the circumstances to repudiate the acts of the alleged agent (c) A third party has transacted with the alleged agent without being made aware of the alleged agent’s lack of authority (d) There were no facts or circumstances which may raise any suspicion on the part of the third person that the agent was not authorized

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Where no third party was prejudiced, and it was emphasized in no uncertain terms to the alleged agent that no agency exists (therefore both principal and agent knew that the agent had no authority) then Art 1869 has no room for operation. [Uniland Resources v. DBP, G.R. No. 95909 (199)]

(a) The principal personally delivers his power of attorney to the agent (b) The agent receives it without any objection, and (c) The agent must be aware of the contents of the document containing the powers of attorney

B.2. ACTS OF THE AGENT

(3) Conditions for Applicability of Art. 1872

Acceptance of the agent may be implied from (1) His acts which carry out the agency (2) His silence or inaction according to the circumstances

General Rule: For implied agency to apply, the principal must be present. Exceptions: (a) The principal transmits the power of attorney

Art. 1871. Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. Art. 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except:

- It is accepted by the agent without any objection. (b) The principal entrusts the power of attorney by letter or telegram, and the power of attorney pertains to a business that the agent is habitually engaged in - The agent did not reply.

(1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. Generally, there is no implied acceptance except for the 2 cases. (1) Difference between Art. 1871 and Art. 1872: Under Art 1871, the agent impliedly accepts the agency in the presence of the principal. Under Art 1872, they are both “absent,” i.e. they are not within the presence of each other. (2) Conditions for Applicability of Art. 1871 PAGE 371 OF 574

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IV. Agency By Estoppel A. BASED ON STATUTE Art. 1873 par.1. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person.

CIVIL LAW knowingly allowed the agent to assume such authority (b) The third person, in good faith, relied upon such representation (c) Relying upon such representation, such third person has changed his position to his detriment. Agency by estoppel is similar to the doctrine of apparent authority. It requires proof of reliance upon the representation and that the representation predated the action which relied on the representation. [Litonjua v. Eternit, G.R. No. 144805 (2006)]

A.1. TWO MODES (1) Specific Inform ation If a person specially informs another that he has given a power of attorney to a third person, then that third person becomes his agent with respect to the person who received the special information. (2) Public Advertisem ent If a person states by public advertisement that he has given a power of attorney to a third person, then that third person becomes his agent with respect to any person. A.2. HOW RESCINDED Art. 1873 par.2. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. This is agency by estoppel because no acceptance by the agent is required. By remaining silent and thereby clothing the alleged agent with authority, the alleged principal is barred from questioning the alleged agent’s authority. [Pahud v. CA, G.R. No. 160346 (2009), applying estoppel in general] B. REQUISITES (a) The principal manifested a representation of the agent’s authority or PAGE 372 OF 574

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V. Powers

in bringing the parties together again and finally consummating the transaction.” [Prats v. CA]

A. RIGHTS OF AGENTS

When there is a close, proximate and causal connection between the agent’s efforts and labor and the principal’s sale of his property, the agent is entitled to commission. [Manotok Brothers v. CA]

A.1. COMPENSATION Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. The principal must prove that the agency is not for a fee if he contests it. But in itself, compensation is not an element of an agency contract. Art 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. AGENT

BROKER

Commission is received upon the successful conclusion of the sale.

Commission is earned by merely bringing the buyer and seller together

A.1.A Procuring Cause A procuring cause starts a series of events, which, without break in their continuity, result in the accomplishment of the prime objective of the employment of the broker – a sale. [Philippine Health Care Providers v. Estrada, G.R. 171052 (2008)] The agent is entitled to commission even if the (transaction) is consummated after the revocation of his authority, if the revocation was done in bad faith by the principal to avoid payment of commission. [Infante v. Cunanan]

A.1. C Forfeiture Commission

of

Right

to

An agent who takes a secret profit without revealing the same to his principal is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury, or he obtained better results, or the agency is gratuitous, or that usage or custom allows it. The rule is to prevent the possibility of any wrong, not to remedy an actual damage. [Domingo v. Domingo, G.R. No. L-30573 (1971)] A.2. LEND MONEY TO / BORROW MONEY FROM THE AGENCY Art. 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal. (1) Borrow Money From Conditions: (a) The agent is empowered to borrow money (b) The agent must borrow at the current rate of interest (2) Lend Money To

A.1.B Test Even if the agent is not the procuring cause of the transaction, he may still be awarded a sum of money if he is “somehow instrumental PAGE 373 OF 574

Conditions: (a) The agent is authorized to lend money at interest (b) The principal consents to such arrangement.

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A.3. APPOINT A SUBSTITUTE Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one (2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the principal shall be void. Art. 1893. In the cases mentioned in Nos.1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. (1) W hen Allowed: when the principal

CIVIL LAW (a) The principal is aware that a substitute is acting on his behalf without authority yet he fails to repudiate the substitute’s acts. There may be implied agency. (b) The principal gives the agent the power to appoint a substitute. (4) The Substitute is an Alternate, not a Delegate An agent cannot delegate to another the same agency. Potestas delegate non delegare potest. Re-delegation is detrimental to the principal as the second agent has no privity of contract with the principal... Article 1892 allows the agent to appoint a substitute (not a delegate). [Baltazar v. Ombudsman, G.R. No. 136433 (2006)] A.4. RETAIN IN PLEDGE THE OBJECTS OF AGENCY Art 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency.

does not prohibit it. Presumption: the agent is authorized to appoint a substitute (2) Responsibility

for

Acts

of

the

Substitute General Rule: If the Agent validly appoints a substitute, the Principal is liable for the Substitute’s acts Exception: [Art. 1892] (a) If the agent appoints a substitute although he was not given the power to appoint one (b) If the agent was given the power to appoint a substitute, and the principal did not designate the person he can appoint, but he appoints someone who is notoriously incompetent or insolvent (proven by history or record of failures in similar business ventures in the past).

Should the agent have advanced them, the principal must reimburse him therefore, even if the business or undertaking was not successful, provided the agent is free from fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. Art. 1913. The principal must also indemnify the agent for the damages which the execution of the agency may have caused the latter, without fault or negligence on his part.

(3) Validity of the Substitute’s acts

Art. 1914. The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles.

If the principal prohibits the agent from appointing a substitute, then all the acts of the substitute are void.

Two scenarios under which the Agent may retain in pledge the objects of the agency:

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(a) When the agent advances funds for the execution of the agency, or (b) When the agent has suffered injury caused by the execution of the agency

B. OBLIGATIONS OF AGENTS B.1. ACT WITHIN SCOPE OF AUTHORITY Art. 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (1) In General An agent can bind his principal if he acts within the scope of authority granted to him. Powers of attorney are generally construed strictly. The general rule is that the power of attorney must be pursued within legal strictures, and the agent can neither go beyond it; nor beside it. The act done must be legally identical with that authorized to be done. [Woodchild v. Roxas, G.R. No. 140667 (2004)] Conducive Acts Acts “conducive to the accomplishment of the purpose of the agency” are deemed to be within the agent’s authority. Advantageous Acts Art. 1882. 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. The agent may do acts more advantageous to the principal than what is indicated in the power of attorney. But the principal may later contest whether such act is indeed advantageous to him. However, if a special power of attorney is required for the transaction, then the agent must obtain it. Advantageous and conducive

CIVIL LAW acts do not apply if a SPOA is required. [c.f. Woodchild v. Roxas] Collateral Acts (The agent has the implied authority) to do all of the collateral acts which are the natural and ordinary incidents of the main act or business authorized. [Guinhawa v. People, G.R. No. 162822 (2005)] (2) W ith Respect to Third Persons Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent. The Situation: the principal provided limitations to the authority of the agent orally or through a document other than the written power of attorney. General Rule: The third person can rely completely on the written power of attorney to determine whether the agent’s act is within the limits of his authority. Exception: If the third person is aware of the secret understanding between the principal and the agent. (3) Authority of Corporate Officers The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, bylaws, or relevant provisions of law. [San Juan v. CA, G.R. No. 129459 (1998)] A corporate officer entrusted with the general management and control of its business, has implied authority to make any contract or do any other act which is necessary or appropriate to the conduct of the ordinary business of the corporation. As such officer, he may, without any special authority from

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the Board of Directors, perform all acts of an ordinary nature, which by usage or necessity are incident to his office... Where similar acts have been approved by the directors as a matter of general practice, custom and policy, the general manager may bind the company without formal authorization of the board of directors. [Board of Liquidators v. Kalaw, G.R. No. L-18805 (1967)] B.2. ACT IN INSTRUCTIONS

ACCORDANCE

WITH

Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. The agent must act within the specific limits of his authority (See B.1.) and perform the acts in the manner dictated by the principal. If the principal did not provide instructions as regards the manner, then the agent must do all that a good father of a family would do. Art. 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods. Art. 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware.

CIVIL LAW The agent is bound to carry out his duties as agent once he accepts the authorization granted by the principal. Else, he is liable for damages if the principal suffers injury. An agent is also liable for its own negligent acts or omission in the performance of its duties. Such person is liable for damages caused to the principal by such negligent acts. [British Airways v. CA, G.R. No. 121824 (1998)] (2) Continuing Business Art. 1884 par. 2 He must also finish the business already begun on the death of the principal, should delay entail any danger. (3) In case of W ithdrawal

Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (4) Agent Not Required to Carry Out Agency Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal.

B.4. ADVANCE FUNDS Art. 1886. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to do so except when the principal is insolvent. Conditions:

B.3. CARRY OUT THE AGENCY (1) In General Art. 1884 par. 1 The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer.

(a) There is a stipulation stating that the agent shall advance the necessary funds, and (b) The principal must be solvent

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B.5. PREFER THE PRINCIPAL’S INTEREST OVER HIS OWN (1) In General Art. 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own. Note: Agency is a fiduciary relationship. A breach of that relationship will expose the agent to liability for damages. (2) Over Property Being Adm inistered Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: (2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal has been given; The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject matter of the agency, he is estopped from acquiring or asserting a titled adverse to that of the principal. His position is analogous to that of a trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. [Severino v. Severino, G.R. No. L18058 (1923)]

CIVIL LAW damages to the third person whose contract must be rejected. If the agent acted in bad faith, he alone shall be responsible. Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The Situation: the principal and the agent each contracts with different people for the same thing, and the contracts are incompatible. General Rule [Art. 1544]: (a) The property is a movable, then the person who takes first possession in good faith (PGF) prevails (b) The property is immovable, then the person who first records it in good faith in the register of deeds prevails. If there is no record, the PGF prevails. If there is no PGF, then the person who has the oldest title. (record > PGF > title) Exceptions: the contract “of a prior date” shall prevail if:

(3) Double Sales Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of article 1544. Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable in

(a) None of the buyers had obtained possession over the movable, or (b) None of the buyers had recorded, possessed or has title over the immovable Liability (a) If the Agent was in good faith, then the principal is liable for damages to the third person whose contract won’t be honored

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(b) If the Agent was in bad faith, then he is liable for damages to the third person and to the principal [see Art 1889] B.6. RENDER ACCOUNT/DELIVER Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal.

CIVIL LAW The article has been applied against an agent for negligence which caused damage against itself, thereby preventing it from recovering from the principal what it lost. [Metrobank v. CA, G.R. No. 88166 (1991)]

C. LIABILITY OF AGENTS C.1. WHEN SOLIDARY

Every stipulation exempting the agent from the obligation to render an account shall be void.

Art. 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated.

If an agent receives a secret gift from a client, he must report it and deliver it to the principal.

(1) General Rule: Two or more agents are jointly liable.

The law imposes upon the agent the absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency. If he makes a secret profit, he is guilty of breach of his loyalty, and he forfeits his right to his commission. [Domingo v. Domingo, G.R. No. L-30573 (1971)] B.7. PAY INTEREST Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. Applicability: The agent may only borrow funds from the agent if he has been authorized to lend money at interest [Art 1890]. If he does borrow, then he should pay interest for the amount he borrowed. B.8. LIABILITY FOR FRAUD/NEGLIGENCE Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.

(2) Each of the agents can be held solidarily liable for the non-fulfilment of the agency or for injuries caused by fault or negligence if: (a) The principal simultaneously appoints more than one agent, and (b) There is an express stipulation that such agents are solidarily liable (3) An agent will not be solidarily liable if the fellow agents acted beyond the scope of authority. C.2. WHEN PERSONAL (1) Expressly Bound or In Excess of Authority General Rule: the agent who transacts as an agent is not personally liable to the third person for the obligation entered into Exceptions: (a) When the agent expressly binds himself (b) When the agent exceeds the limits of his authority without giving the person he is transacting with sufficient notice of his powers [Art 1897] (c) When all of the following are present: a. The person transacting with the agent is aware of the limits of the agent’s authority b. The agent exceeded the scope of his authority

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c. The agent exceeded his or her authority, and d. The principal did not ratify the contract Note: In (c), the transaction will be considered void. (2) Acts in His Own Nam e Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. This is called an “Agency with an undisclosed principal.” General Rule: If the agent enters contract without notice to the third party that he was acting as an agent, the agent is directly bound as a party to the contract, and the principal and the third person have no right of action against one another. Exception: When the contract involves things belonging to the principal. The principal may seek damages for such contract. The exception under Art 1883 “does not say that (a third party) does not have, and cannot bring an action against the agent also.” [Beaumont v. Prieto, G.R. No. L-8988 (1916)]

CIVIL LAW

VI. Rights and Obligations of Principal A. OBLIGATIONS A.1. COMPLY WITH THE OBLIGATIONS CONTRACTED BY THE AGENT Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. If the agent acts within the scope of his authority, then the principal must comply. Otherwise, the principal is bound to comply only if he ratifies the agent’s act that was done beyond the scope of his authority. (1) Acts W ithin the Scope of Authority (a) Those expressly specified in the power of attorney (b) Conducive acts (c) Advantageous acts (d) Collateral acts (2) Ratified Acts Art. 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agent's acts. The principal must have full knowledge at the time of ratification of all the material facts and circumstances relating to the unauthorized act of the person who assumed to act as agent. If the material facts were suppressed or unknown, there can be no ratification. [Manila Memorial v. Linsangan, G.R. No. 151319 (2004)]

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By benefitting from the unauthorized act of an agent, the principal is said to have ratified the acts of the agent and is estopped from denying said authority. [Filipinas Life v. Pedroso, G.R. No. 159489 (2008)] However, in some cases, the mere acceptance of benefits is not tantamount to ratification by the principal. (3) W hen Estoppel Applies Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. Even if there was no express authority, the principal is still solidarily liable because he allowed the agent to act as if he had authority. This is not actually estoppel, but implied agency. It is different from agency created by estoppel. (4) Acts by the Agent in His Own Name but Involving Things of the Principal A.2. ADVANCE OR REIMBURSE SUMS NECESSARY Article 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Should the agent have advanced them, the principal must reimburse him therefor, even if the business or undertaking was not successful, provided the agent is free from all fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. Art. 1918. The principal is not liable for the expenses incurred by the agent in the following cases: (1) If the agent acted in contravention of the

CIVIL LAW principal's instructions, unless the latter should wish to avail himself of the benefits derived from the contract; (2) When the expenses were due to the fault of the agent; (3) When the agent incurred them with knowledge that an unfavorable result would ensue, if the principal was not aware thereof; (4) When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. General Rule: the principal must advance or reimburse (with interest) the sums necessary to execute the agency. Exceptions: (1) Expenses incurred through acts which contravene the principal’s instructions, and the principal does not want to derive benefit therefrom (2) Expenses due to the fault of the agent (3) Expenses incurred by the agent with the knowledge that an unfavorable result would ensue, and the principal was unaware (4) If there is a stipulation that expenses would be borne by the agent or that he would be allowed only a certain sum (5) Expenses incurred from acts outside the authority of the agent. Sums to be reimbursed include those from unsuccessful undertakings as well as those initially in contravention of the principal’s instructions but later becomes a source of benefits. A.3. INDEMNIFY THE AGENT FOR INJURY Art. 1913. The principal must also indemnify the agent for all the damages which the execution of the agency may have caused the latter, without fault or negligence on his part. General Rule: The principal must indemnify the agent for damages in the execution of the agency. Exception: When damage was caused due to the fault or negligence of the agent.

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A.4. COMPENSATE THE AGENT Art. 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. Steps to determine whether the agent is entitled to compensation: (1) Determine whether the person is an agent or a broker (2) If he is an agent, determine whether he is the procuring cause, i.e. if there is a close, proximate and causal relation between the agent’s efforts and the sale

B. LIABILITY OF THE PRINCIPAL B.1. IN GENERAL The principal is bound and liable for the acts of the agent done within the scope of his authority (express, conducive, advantageous, and collateral acts), for unauthorized acts which the principal has ratified and for acts which is estopped from denying. B.2. BE SOLIDARILY LIABLE Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. Requisites: (1) Agency relationship exists (2) The agent acts in excess of his authority. (3) The principal allowed the agent to act as though he had full powers. Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency.

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B.3. IF THE CONTRACT INVOLVES THINGS BELONGING TO THE PRINCIPAL Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. General Rule: If the agent acts in his own name, then the contract is between the agent and the third person. Neither the third person nor the principal has a right of action against the other. Except: If the contract involves things belonging to the principal, then the principal is also liable to the third party. (Agency with an Undisclosed Principal). However, it is not the case that the agent escapes liability by simply contracting things belonging to the principal. There are two effects of the exception, according to jurisprudence: (1) Principal and third persons now have a right of action against each other. [Syjuco v. Syjuco, G.R. No. 13471 (1920)] (2) The principal is not bound by the contract if the act is beyond the scope of the agent’s authority. [PNB v. Agudelo, G.R. No. L-39037 (1933)] This operates as an exception to the exception.

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VI. The Third Party and the Agent

(2) The agent cannot establish his own authority, either by his representations or by assuming to exercise it;

A. RIGHTS OF THIRD PARTIES

(4) Even a general authority is not an unlimited one; and

A.1. REQUIRE THE PRESENTATION OF AUTHORITY/INSTRUCTIONS

(5) Every authority must find its ultimate source in some act or omission of the principal.

(3) An authority cannot be established by mere rumor or general reputation;

Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent.

The burden of proof to show that an agency relationship exists is with the third person. Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any excuse. [Bacaltos Coal Mines v. CA, G.R. No. 114091 (1995)]

A.2. RELY ON REPRESENTATIONS BY THE PRINCIPAL Art. 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given.

B. OBLIGATIONS OF THIRD PARTIES Based on Keeler Electric v. Rodriguez, G.R. No. L-19001 (1922), (1) The law indulges in no bare presumptions that an agency exists: it must be proved or presumed from facts; PAGE 382 OF 574

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VII. Modes of Extinguishment

CIVIL LAW General Rule: The principal may revoke the agency at will. Exception: Agency cannot be revoked if it is coupled with an interest, such that: (1) A bilateral contract depends upon it;

A. IN GENERAL

(2) It is the means of fulfilling an obligation already contracted; or

Art. 1919. Agency is extinguished:

(3) A partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.

(1) By its revocation; (2) By the withdrawal of the agent; (3) By the death, civil interdiction, insanity or insolvency of the principal or of the agent; (4) By the dissolution of the firm or corporation which entrusted or accepted the agency; (5) By the accomplishment of the object or purpose of the agency; (6) By the expiration of the period for which the agency was constituted. The provision enumerates only those which are peculiar to agency and is, therefore, not exclusive. Agency may also be extinguished by the modes of extinguishment of obligations in general. [De Leon (2010)] The modes of extinguishment may be classified into three: (1) By agreement (Nos. 5 and 6);

The principal can revoke the agency even if the period fixed in the contract has not yet expired. [CMS Logging v. CA, G.R. No. L41420 (1992)] Art. 1925. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others. Qualifications: The right of the principal to terminate the authority of his agent is absolute and unrestricted, except that he is liable for damages in case: (1) He revokes the agency in bad faith [Danon v. Brimo, G.R. No. 15823 (1921)]; or (2) He revokes the agency before the expiration of the period stipulated in the agency contract.

(2) By subsequent acts of the parties: (a) By the act of both parties or by mutual consent; or

B.2. WHEN REVOCATION IS NOT BINDING ON THIRD PERSONS

(b) By the unilateral act of one of them (Nos. 1 and 2);

(1) W hen Notice is Required

(3) By operation of law (Nos. 3 and 4).

B. REVOCATION

Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (2) W hen a Third Person in Good Faith Has No Knowledge of Revocation

B.1. IN GENERAL Art. 1920. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied.

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

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persons.

B.6. WHEN AGENCY CANNOT BE REVOKED

An agent with general powers is most likely, an agent authorized to transact with the general public in contradistinction to the agent who contracts with specified persons under Art. 1921.

Art. 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.

B.3. APPOINTMENT OF NEW AGENT Art. 1923. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. Revocation takes effect when notice is given to the former agent, not when the new agent is appointed. B.4. DIRECT PRINCIPAL

MANAGEMENT

BY

Art. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. Even if the agency is coupled with an interest (which means that it is irrevocable), it may still be revoked if there is just cause to terminate such agency relationship.

THE

Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. If the principal believes that the agent is in breach of the contract and thereby decides to deal with the business directly, then the agency is said to be revoked. [CMS Logging v. CA] The mere act of direct management by the principal is not enough to revoke the agency without such intention. B.5. SPECIAL AUTHORITY REVOKES THE GENERAL AUTHORITY WHERE A SPECIAL MATTER IS INVOLVED Art. 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. If Agent 1 is given a general agency, and Agent 2 is later given a special agency, then Agent 1 can no longer perform the powers granted to Agent 2 under the special agency.

C. WITHDRAWAL BY THE AGENT Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. General Rule: The agent may withdraw so long as he gives due notice to the principal. If the principal suffers damage because of the withdrawal, then the agent must indemnify him, except if the basis of his withdrawal is because continuing the performance of the agency is impossible without grave detriment to the agent. If the Agent files a complaint against his principal, then he is understood to have renounced the agency because his act was more expressive than words and could not have caused any doubt. [Valera v. Velasco, G.R. No. L-28050 (1928)]

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D. DEATH, CIVIL INTERDICTION, INSANITY OR INSOLVENCY

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E. DISSOLUTION / ACCOMPLISHMENT / EXPIRATION Art. 1919. Agency is extinguished:

D.1. IN GENERAL

xxx

By reason of the very nature of the relationship between the principal and agent, agency is extinguished by the death of the principal or the agent. Any act of an agent after the death of his principal is void ab initio unless the same falls under the exceptions provided for in the aforementioned Articles 1930 and 1931.

(4) By the dissolution of the firm or corporation which entrusted or accepted the agency;

D.2. EXCEPTIONS

Accomplishment

1. Agency Coupled with an Interest.

The fulfillment of the purpose for which agency was created ipso facto terminates agency even though it was expressly made irrevocable. If the purpose has not been accomplished, the agency continues indefinitely for as long as the intent to continue is manifested through words or actions of the parties.

Art. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. 2. Contract between Agent W ithout Knowledge of Death and Third Person in Good Faith Art. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith.

(5) By the accomplishment of the object or purpose of the agency; (6) By the expiration of the period for which the agency was constituted.

Dissolution The dissolution of a partnership or corporation which entrusted (principal) or accepted (agent) the agency extinguishes its juridical existence, except for the purpose of winding up its affairs. It is equivalent to death. Expiration

3. Unfinished business Art. 1884 par.2. He must also finish the business already begun on the death of the principal, should delay entail any danger. D.3. DEATH OF AGENT If the agent dies, his heirs must: (1) Notify the principal thereof; and (2) In the meantime adopt such measures as the circumstances may demand in the interest of the latter [Article 1932].

(1) If created for fixed period, expiration of the period extinguishes agency even if the purpose was not accomplished. (2) If no time is specified, the courts may fix the period as under the circumstances have been probably contemplated by the parties [Art. 1197]. Otherwise, the agency terminates at the end of a reasonable period of time. Either party can terminate the relationship at will by giving notice to the other [De Leon (2010)]. The period contemplated may be implied from terms of agreement, purpose of agency, and the circumstances of the parties.

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PARTNERSHIP

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I. Contract Partnership

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of

Article 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. (1665a)

A. ELEMENTS: (1) Two or more persons bind themselves to contribute money, property, or industry to a common fund, (2) With the intention of dividing the profits among themselves Common Fund The Civil Code requires the parties “bind themselves to contribute” to a common fund. The partnership may therefore exist even before the common fund is created. The common fund may not even come from the partners themselves but may be borrowed from third persons. The form of the common fund may not even be cash or property; it can be in the form of credit or industry. [Lim Tong Lim v Philippine Fishing Gear, G.R. No. 136448 (1999)] Intention to Divide Profits If the common fund’s work is “indispensable, beneficial and economically useful to the business” of the partners and the profit motive is the primordial reason to establish the partnership, even if there are no actual profits, then there is partnership. [AFISCO v CA, G.R. No. 112675 (1999)]

B. ESSENTIAL FEATURES (1) There must be a valid contract; (2) The parties must have legal capacity; (3) There must be a mutual contribution of money, property, or industry to a common fund; (4) The object must be lawful;

CIVIL LAW

(5) The primary purpose must be to obtain profits and to divide the same among the parties; (6) The partnership has a juridical personality separate from individual partners [Article 1768]. B.1. LAWFUL PURPOSE Article 1770 (1). A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners. If there is no lawful purpose, then the partnership agreement is void ab initio. Contracts whose purpose is contrary to law are void from the beginning. [Art1409 (1)]. Article 1770 (2). When an unlawful partnership is dissolved by a judicial decree, the profits shall be confiscated in favor of the State, without prejudice to the provisions of the Penal Code governing the confiscation of the instruments and effects of a crime. Upon the dissolution of an unlawful partnership, the profits are simply confiscated by the State. The previous rule is to give such profits to a charitable institution. The profit and tools/instruments in the partnership with an unlawful purpose will be confiscated in favor of the government but if the partners were not in pari delicto, they may be able to recover their contribution to the partnership instead of it being forfeited as well. B.2. COMMON BENEFIT Article 1770. A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners. A partnership must be established for the common benefit of the partners. This “common benefit” is always pecuniary based on Art 1799. Article 1799. A stipulation which excludes one or more partners from any share in the profits or losses is void.

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B.3. JURIDICAL PERSONALITY Article 1768. The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of article 1772, first paragraph.

C. PARTIES General Rule: Any person capacitated to contract may enter into a contract of partnership. The following persons CANNOT enter into a contract of partnership: (1) Those suffering from civil interdiction; (2) Minors; (3) Insane or demented persons; (4) Deaf-mutes who do not know how to write; (5) Incompetents who are under guardianship. Exceptions : The capacity of the following persons to enter into a contract of partnership, though capacitated to contract generally, are limited: (1) Those who are prohibited from giving each other any donation or advantage cannot enter into a universal partnership [Article 1782]; (2) A corporation cannot enter into a partnership in the absence of express authorization by statute or charter. Although a corporation cannot enter into a partnership contract, it may, however, engage in a joint venture with others [Aurbach vs. Sanitary Wares Manufacturing Corp, G.R. No. 75875 (1989)] On the other hand, there is no prohibition against a partnership being a partner in another partnership [De Leon (2010)].

D. OBJECT D.1. OBJECT OF UNIVERSAL PARTNERSHIP A universal partnership may refer to: (1) All present property : (a) The partners contribute all the property which belongs to them to a common fund, with the intention of

CIVIL LAW

dividing the same among themselves, as well as the profits they may acquire therewith [Article 1778]. (b) The property contributed includes all those belonging to the partners at the time of the constitution of the partnership. (c) A stipulation for the common enjoyment of any other profits may also be made. However, the property which the partners may acquire subsequently by inheritance, legacy or donation cannot be included in such stipulation, except the fruits thereof [Article 1779]. (2) All the profits: (a) It comprises all that the partners may acquire by their industry or work during the existence of the partnership. (b) Only the usufruct over the property of the partners passes to the partnership [Article 1780]. When the articles of universal partnership do not specify its nature (all present property or all the profits), the partnership will be considered as one only of all the profits [Article 1781]. D.2. OBJECT PARTNERSHIP

OF

PARTICULAR

A particular partnership has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation [Article 1783]. D.3. EFFECT OF UNLAWFUL OBJECT If the partnership has an unlawful object or purpose: (1) The contract is void ab initio [Article 1409(1)]. (2) Once dissolved by judicial decree: (a) The profits shall be confiscated by favor of the State; (b) The instruments or tools and proceeds of the crime shall also be forfeited in favor of the State [Article 1770]. (3) The contributions of partners shall not be confiscated unless they are instruments or tools of the crime [De Leon (2010)].

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E. FORM General rule: The contract may be constituted in any form [Article 1771]. Exceptions: (1) Where immovable property or real rights are contributed: (a) The contract must appear in a public instrument; and (b) Attached to such instrument must be an inventory, signed by the parties, of the property contributed [Articles 1771 and 1773]; (2) Where the capital is at least P3,000, in money or property: (a) The contract must appear in a public instrument; and (b) It must be recorded in the Office of the Securities and Exchange Commission (SEC). As to the second, failure to comply with these requirements, however, does NOT affect the liability of the partnership and the partners to third persons [Articles 1768 and 1772].

F. DURATION F.1. COMMENCEMENT Art 1784. A partnership begins from the moment of the execution of the contract, unless otherwise stipulated F.2. TERM As to period, a partnership may either be: (1) For a fixed term or particular undertaking; or (2) At will, the formation and dissolution of which depend on the mutual desire and consent of the parties. Any one of the partners may, at his sole pleasure, dictate the dissolution of the partnership, even in bad faith, subject to liability for damages [Ortega v. CA, G,R, No. 109248 (1995)]. F.3. EXTENSION A partnership term may be extended by: (1) Express renewal; or (2) Implied renewal, when these requisites concur: (a) The partnership is for a fixed term or particular undertaking;

CIVIL LAW (b) It is continued after the termination of the fixed term or particular undertaking without any express agreement [Article 1785].

G.RULES TO DETERMINE EXISTENCE When the intent of the parties is clear, such intent shall govern. When it does not clearly appear, the following rules apply: (1) Persons who are not partners to each other are not partners as to third persons, subject to the provisions on partnership by estoppel. (2) Co-ownership or co-possession does not of itself establish a partnership, even when there is sharing of profits in the use of the property. (3) Sharing of gross returns does not of itself establish a partnership, even when the parties have joint or common interest in any property from which the returns are derived. (4) The receipt by a person of a share in the profits of a business is prima facie evidence that he is a partner. As to the fourth, no such inference is drawn if the profits are received in payment: (1) As a debt by installments or otherwise; (2) As wages of an employee or rent to a landlord; (3) As an annuity to a widow or representative of a deceased partner; (4) As interest on a loan, though the amount of payment vary with the profits of the business; (5) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise [Article 1769].

H. KINDS OF PARTNERSHIPS H.1. AS TO EXISTENCE:

THE

LEGALITY

OF

ITS

(1) Partnership de jure is one which has complied with all the requisites for its lawful establishment; (2) Partnership de facto is one which failed to so comply.

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H.2. AS TO ITS OBJECT:

I. KINDS OF PARTNERS

(1) Universal partnership: (a) Of all present property; (b) Of profits; (2) Particular partnership.

(1) Capitalist partner, whose contribution is money or property; (2) Industrial partner, contribution is only his industry; (3) General partner, whose liability to third persons extends to his separate property; (4) Limited partner, whose liability to third persons is limited to his capital contribution; (5) Managing partner, who was designated to manage the affairs or business of the partnership; (6) Liquidating partner, who takes charge of the winding up of partnership affairs; (7) Partner by estoppel, who is not really a partner but is liable as such for the protection of innocent third persons; (8) Continuing partner, who continues the business after dissolution of the partnership by admission of a new partner, or retirement, death or expulsion of existing partners; (9) Surviving partner, who remains a partner after dissolution by death of any partner; (10) Subpartner, who is not a member of the partnership but contracts with a partner with regard to the share of the latter in the partnership; (11) Ostensible partner, who takes active part in the business of the partnership and is known by the public; (12) Secret partner, who takes active part in the business, but is unknown to the third persons as a partner; (13) Silent partner, who does not take active part in the business, but may be known to be a partner by third persons; (14) Dormant partner, who does not take active part in the business and is not known or held out as a partner; (15) Original partner, who has been a partner since the constitution of the partnership; (16) Incoming partner, who is about to be taken as a member into an existing partnership; (17) Retiring partner, who is withdrawing from the partnership.

H.3. AS TO ITS DURATION: (1) For a fixed undertaking; (2) At will.

term

or

particular

H.4. AS TO THE LIABILITY OF THE PARTNERS: (1) General partnership, consisting of general partners only, who are liable pro rata for partnership obligations with all their after exhaustion of partnership assets; (2) Lim ited partnership, includes, aside from general partner/s, limited partners, who are not personally liable for partnership obligations. H.5. AS TO ITS PUBLICITY: (1) Secret partnership, where the existence of certain persons as partners is not made known by the partners; (2) Open or notorious partnership, the existence of which is made known to the public by the partners. H.6. AS TO ITS PURPOSE: 1.

Commercial or trading partnership, for transaction of business; 2. Professional or non-trading partnership, for the exercise of profession. A profession has been defined as “a group of men pursuing a learned art as a common calling in the spirit of public service – no less a public service because it may incidentally be a means of livelihood” [In the Matter of the Petition for Authority to Continue Use of Firm name “Sycip, Salazar, etc.”/“Ozaeta, Romulo, etc.” (1979)].

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Industrial partner

Capitalist partner

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Partnership

Joint venture

Corporations may not enter into a partnership

Corporations may enter into joint ventures

Form of contribution Industry

Money or property

Share in profits Just and share

equitable

According to agreement; if none, in proportion to contribution

Share in losses Exempted as to losses as between partners, but liable to third persons, without prejudice to reimbursement from capitalist partners

According to agreement; if none, in the same proportion as the agreed share in profits; if none, in proportion to contribution

Engagem ent in business Cannot engage in business for himself, unless the partnership expressly permits him to do so; should he do so without permission, the capitalist partners may: [1] exclude him from the firm; or [2] avail themselves of the benefits obtained in violation of the prohibition, with right to damages in either case [Article 1789]

Cannot engage, for his own account, in the same kind of business as that of the partnership, unless there is a stipulation to the contrary; should he do so, he shall bring to the common fund any profits accruing to him from his transactions and shall personally bear all the losses [Article 1808]

J. PARTNERSHIP, DISTINGUISHED FROM OTHER CONTRACTS Partnership

Joint venture

Operates with firm name and legal personality

Operates without firm name and legal personality

Generally relates to a continuing business of various transactions of a certain kind

Usually limited to a single transaction

A joint venture is an agreement between two parties to enter into a commercial undertaking. It may fall under a partnership with a limited purpose. Under Philippine law, a joint venture is a form of partnership and should thus be governed by the laws of partnership [Auerbach vs. Sanitary Wares Manufacturing Corp]. Partnership

Co-ownership

Generally created by either express or implied contract

Generally created by law and may exist even without a contract

Has a separate juridical personality

Has no separate juridical personality

Generally, the purpose is to obtain profits

The purpose is the common enjoyment of a thing or right

Duration has limitation

no

An agreement to keep a thing undivided for more than ten years is not allowed, but may be extended

There is mutual agency between partners

There is no mutual representation among co-owners

Death or incapacity of a partner dissolves the partnership

Death or incapacity of a co-owner does not dissolve the coownership

A partner cannot dispose of his interest, so as to make the assignee a partner, without consent of others

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

Partnership

Corporation

Has juridical personality separate and distinct from its individual members Can only act through agents Composed of an aggregate of individuals

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Corporation

Distributes its profits to those who contributed capital to the business

Partnership

Conjugal partnership of gains

Can only be organized where there is a law authorizing its organization Taxable as in a corporation

Created by voluntary agreement of two or more partners of either sex

Arises in case the spouses, of opposite sex, agree before marriage

Created by agreement

Created by operation of law

Governed by agreement

Governed by law

Involves at least two persons

Except for corporation sole, requires at least 5 incorporators

Has juridical personality

Has no juridical personality

Personality commences from the moment of execution of the contract

Personality commences from the issuance of certificate of incorporation

Commencement date may be stipulated

Commencement is on the date of the celebration of the marriage and any stipulation to the contrary is void

Can exercise any power authorized by partners

Can exercise only powers conferred by the Corporation Code or by its articles of incorporation, and such as are necessary or incidental to the exercise of such powers

Share in profits may be stipulated; otherwise, in proportion to contribution

Share in profits is equal

Management shared by all partners, unless otherwise agreed upon

Administration belongs to the spouses jointly, but decision of husband prevails in case of disagreement

Partner can dispose of interest even without consent of others

Spouse cannot dispose of interest during marriage, even with consent

When management is not agreed upon, every partner may act for the partnership

Management is vested in the board of directors or trustees

Partners are generally liable for partnership debts

Stockholders are liable only to the extent of their shares

A partner cannot dispose of his interest, so as to make the assignee a partner, without consent of others

A stockholder has the right to transfer his shares without consent of others

Duration has no limitation

The term limit is 50 years, but may be extended

May be dissolved at any time by one or all of the partners

May only be dissolved with the consent of the state

Partnership

Voluntary association

Has juridical personality

Has no juridical personality

Organized for profit

Not always organized for profit

Capital is contributed

Capital is not contributed, although fees are collected from members

The partnership is primarily liable; the partners are liable only subsidiarily

The members are liable individually for debts which they authorized or ratified

Share in profits may be stipulated; otherwise, in proportion to contribution

Share in profits is equal

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II. Rights and Obligations of the Partner

CIVIL LAW

the debts of the partnership; (2) Dispose of the goodwill of the business; (3) Do any other act which would make it impossible to carry on the ordinary business of a partnership; (4) Confess a judgment;

A. RIGHTS OF PARTNERS

(5) Enter into a compromise concerning a partnership claim or liability;

A.1. MUTUAL AGENCY

(6) Submit a partnership claim or liability to arbitration;

Art 1803. When the manner of management has not been agreed upon, the following rules shall be observed: (1) All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership, without prejudice to the provisions of Article 1801.

(7) Renounce a claim of the partnership. No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge of the restriction.

(2) None of the partners may, without the consent of the others, make any important alteration in the immovable property of the partnership, even if it may be useful to the partnership. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, the court's intervention may be sought.

An act is binding when:

Art 1818. Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, AND the person with whom he is dealing has knowledge of the fact that he has no such authority.

Duties of 3rd persons:

An act of a partner which is not apparently for the carrying on of business of the partnership in the usual way does not bind the partnership unless authorized by the other partners. Except when authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to: (1) Assign the partnership property in trust for creditors or on the assignee's promise to pay

(1) It is for the purpose of the partnership’s business (2) It is in the usual way of the business (3) It is not in the usual way of the business when: a. Authorized by the other partners b. Ratified by the other partners

(1) To inquire on the existence of a partnership agreement. (2) To ascertain if acts are in the usual way of business Presumptions partnership):

(after

ascertaining

(1) Every partner is a general partner (2) Every partner is an authorized agent of the partnership. A.2 SHARE IN PROFITS Art 1797. The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion. In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what he may have contributed,

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but the industrial partner shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. If besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capital. Art 1799. A stipulation which excludes one or more partners from any share in the profits or losses is void. If there is an agreement as to the distribution of profits and losses, it shall be followed. If there is an agreement as to the distribution of the profits, it will also be followed as to the losses. If there is no agreement, then profits and losses will be divided according to their contribution. General Rule: Industrial partners will receive a just and equitable share.

Exception: The partners agree as to where the partnership books shall be kept. A.5. FORMAL ACCOUNT Art 1809. Any partner shall have the right to a formal account as to partnership affairs: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners; (2) If the right exists under the terms of any agreement; (3) As provided by article 1807; (4) Whenever other circumstances render it just and reasonable. General Rule: A partner does not have a right to a formal accounting. Exceptions: (1) If the partner is wrongfully excluded from:

Exception: He shall receive a share in the profits if such industrial partners also contributed to the capital, aside from its services. A.3. RIGHT TO ASSOCIATE ANOTHER/AUTHORIZE ADMISSION Art 1804. Every partner may associate another person with him in his share, but the associate shall not be admitted into the partnership without the consent of all the other partners, even if the partner having an associate should be a manager.

CIVIL LAW

a. The partnership business; or b. If the partner is wrongfully excluded from possession of partnership property. (2) The right exists under the partnership agreement. (3) In cases where another partner derives any benefit without the consent of the partners from: a. Any transaction connected with the formation, conduct, or liquidation of the partnership; or b. The use of partnership property.

A.4. ACCESS TO BOOKS AND INFORMATION Art 1805. The partnership books shall be kept, subject to any agreement between the partners, at the principal place of business of the partnership, and every partner shall at any reasonable hour have access to and may inspect and copy any of them.

(4) Whenever circumstances render it just and reasonable. (5) The partnership is dissolved. A.6. PROPERTY RIGHTS Art 1810. The property rights of a partner are: (1) His rights in specific partnership property; (2) His interest in the partnership; and

Rule on where to keep partnership books: General Rule: It must be kept at the principal place of business of the partnership.

(3) His right management.

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to

participate

in

the

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partners, has an equal right with his partners to possess specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners;

IN GENERAL The property rights of a partner are: (1) Rights in specific partnership property; (2) Interest in the partnership; and (3) Right to participate in the management [Article 1810]. PROPERTY AND CAPITAL DISTINGUISHED Partnership capital Partnership property With value

constant

Value varies with market conditions

Includes only actually contributed and promised capital

Includes the contributions and property acquired by the partnership

OW NERSHIP PROPERTIES

OF

CERTAIN

(1) The ownership of property used by the partnership depends on the intention of the parties, which may be drawn from an express agreement or their conduct. (a) A partner may allow the property to be used by the partnership without transfer of ownership, contributing only the use or enjoyment thereof. (b) He may also hold title to partnership property, without acquiring ownership thereof [Article 1819]. (2) Property acquired by a partner with partnership funds is presumed to be partnership property. (3) The same presumption also arises when the property is indicated in the partnership books as partnership asset. (4) Other factors may be considered to determine ownership of the property. Rights to Property

Specific

Partnership

Art 1811. A partner is co-owner with his partners of specific partnership property. The incidents of this co-ownership are such that: (1) A partner, subject to the provisions of this Title and to any agreement between the

CIVIL LAW

(2) A partner's right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property; (3) A partner's right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws; (4) A partner's right in specific partnership property is not subject to legal. (1) The partners have equal rights to possess partnership property for partnership purposes. (2) For other purposes, the consent of his partners is necessary. (3) If the partner is excluded, he may ask for: (a) Formal accounting [Article 1809]; or (b) Dissolution by judicial decree [Article 1831]. (4) A partner’s right in such property is not assignable, except when all the partners assign their rights in the same property; (5) The right is not subject to attachment or execution, except on claim against the partnership. In case of such attachment, the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws. (6) The right is not subject to legal support under Article 291 [Article 1811]. Interest in the Partnership Art 1812. A partner's interest in the partnership is his share of the profits and surplus. Art 1813. A conveyance by a partner of his

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whole interest in the partnership DOES NOT of itself dissolve the partnership, OR, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies. In case of a dissolution of the partnership, the assignee is entitled to receive his assignor's interest and may require an account from the date only of the last account agreed to by all the partners.

CIVIL LAW

are not so charged or sold. Nothing in this Title shall be held to deprive a partner of his right, if any, under the exemption laws, as regards his interest in the partnership. The partnership books shall be kept: (1) At a place agreed upon by the partners; (2) When there is no such agreement, at the principal place of business of the partnership. Every partner shall, at any reasonable hour, have access to and may inspect and copy any of them. Any reasonable hour means reasonable hours on business days throughout the year [Pardo v. Lumber Co. (1925)]. A partner’s interest in the partnership is his share of the profits and surplus [Article 1812].

Art 1814. Without prejudice to the preferred rights of partnership creditors under Article 1827, on due application to a competent court by any judgment creditor of a partner, the court which entered the judgment, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon; AND may then or later appoint a receiver of his share of the profits, and of any other money due or to fall due to him in respect of the partnership, and make all other orders, directions, accounts and inquiries which the debtor partner might have made, or which the circumstances of the case may require. The interest charged may be redeemed at any time before foreclosure, or in case of a sale being directed by the court, may be purchased without thereby causing a dissolution: (1) With separate property, by any one or more of the partners; or

ASSIGNMENT OF INTEREST Assignment by a partner of his whole interest in the partnership, of itself: (1) Does not dissolve the partnership; or (2) Does not entitle the assignee to: (a) Interfere in the management or administration of the partnership business or affairs; (b) Require information or account of partnership; or (c) Inspect the partnership books. It merely entitles the assignee to: (1) Receive the profits to which the assigning partner was entitled; (2) In case of fraud in management, avail himself of the usual remedies; (3) In case of dissolution: (a) Receive his assignor’s interest; and (b) Require an accounting from the date only of the last account agreed to by all the partners [Article 1813].

(2) With partnership property, by any one or more of the partners with the consent of all the partners whose interests PAGE 396 OF 574

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CHARGING OF INTEREST PERSONAL CREDITORS

BY

General rule: Partnership creditors are preferred over the personal creditors of the partners as regards partnership property. Exception: On due application by any judgment creditor of a partner, a competent court may: (1) Charge the interest of the partner for the satisfaction of the judgment debt; (2) Appoint a receiver of the share of the profits and of any other money due or to fall due to the partner; and (3) Make all other orders, directions, accounts and inquiries, which the debtor partner might have made, or which the circumstances may require. The interest charged may be redeemed before foreclosure or, in case of sale directed by the court, may be purchased without causing dissolution: (1) With separate property, by one or more of the partners; or (2) With partnership property, by one or more of the partners, will consent of all, except the debtor partner [Article 1814]. RIGHT TO PARTICIPATE MANAGEMENT

IN

THE

Management of the partnership is primarily governed by the agreement of the partners in the articles of partnership. It may be stipulated that the partnership will be managed by: (1) All the partners; or (2) A number of partners appointed as managers, which may be appointed: (a) In the articles of partnership; or (b) After constitution of the partnership. POW ERS OF A MANAGING PARTNER Art 1800. The partner who has been appointed manager in the articles of partnership may execute all acts of administration despite the opposition of his partners, unless he should act in bad faith; and his power is irrevocable without just or lawful cause. The vote of the partners representing the controlling interest shall be

CIVIL LAW

necessary for such revocation of power. A power granted after the partnership has been constituted may be revoked at any time. Art 1801. If two or more partners have been intrusted with the management of the partnership without specification of their respective duties, OR without a stipulation that one of them shall not act without the consent of all the others, each one may separately execute all acts of administration, but if any of them should oppose the acts of the others, the decision of the majority shall prevail. In case of a tie, the matter shall be decided by the partners owning the controlling interest. General rule: The partner designated as manager in the articles may execute all acts of administration despite opposition by the other partners. Exception: He cannot do so when he acts in bad faith. REVOCATION OF MANAGING PARTNER

POW ER

OF

The powers of the managing partner may be revoked: (1) If appointed in the articles of partnership, when: (a) There is just or lawful cause for revocation; and (b) The partners representing the controlling interest revoke such power. (2) If appointed after the constitution of the partnership, at any time and for any cause [Article 1800]. MANAGEMENT BY TW O OR MORE PARTNERS When there are two or more managing partners appointed, without specification of their duties or without a stipulation on how each one will act: (1) Each one may separately execute all acts of administration. (2) If any of them opposes the acts of the others, the decision of the majority prevails.

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(3) In case of a tie, the partners owning the controlling interest will decide [Article 1801]. Requisites: (1) Two or more partners have been appointed as managers; (2) There is no specification of their respective duties; and (3) There is no stipulation that one of them shall not act without the consent of all the others.

CIVIL LAW

(2) An admission or representation made by any partner concerning partnership affairs is evidence against the partnership [Article 1820]. (3) Notice to any partner of any matter relating to partnership affairs is notice to the partnership [Article 1821]. (4) Wrongful act or omission of any partner acting for partnership affairs makes the partnership liable [Article 1822]. (5) Partnership is bound to make good losses for wrongful acts or misapplications of partners [Article 1823].

STIPULATION OF UNANIMITY In case there is a stipulation that none of the managing partners shall act without the consent of others, the concurrence of all is necessary for the validity of the acts. The absence or disability of one cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership [Article 1802]. MANAGEMENT W HEN MANNER NOT AGREED UPON When there is no agreement as to the manner of management, the following rules apply: (1) All the partners are considered agents [mutual agency]. Whatever any one does alone binds the partnership, unless there is a timely opposition to the act, under Article 1801. (2) Any important alteration in the immovable property of the partnership, even if useful to the partnership, requires unanimity. If the alteration is necessary for the preservation of the property, however, consent of the others is not required [De Leon (2010)]. If the refusal is manifestly prejudicial to the partnership, court intervention may be sought [Article 1803]. MUTUAL AGENCY In addition to the Article 1801, there is effectively a mutual agency in the following cases: (1) Partners can dispose of partnership property even when in partnership name [Article 1819].

A.7. CONVEYANCE OF PROPERTY IN PARTNERSHIP NAME Art 1774. Any immovable property or an interest therein may be acquired in the partnership name. Title so acquired can be conveyed only in the partnership name. Art 1819. Where title to real property is in the partnership name, any partner may convey title to such property by a conveyance executed in the partnership name; but the partnership may recover such property unless the partner's act binds the partnership under the provisions of the first paragraph of article 1818, or unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner, in making the conveyance, has exceeded his authority. Where title to real property is in the name of the partnership, a conveyance executed by a partner, in his own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of the first paragraph of Article 1818. Where title to real property is in the name of one or more but not all the partners, and the record does not disclose the right of the partnership, the partners in whose name the title stands may convey title to such property, but the partnership may recover such property if the partners' act does not bind the partnership under the provisions of the first paragraph of Article 1818, unless the purchaser or his assignee, is a holder for

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(b) Damages, from the time he should have complied with his obligation, or from the time he converted the amount to his own use, respectively [Article 1788].

value, without knowledge. Where the title to real property is in the name of one or more or all the partners, or in a third person in trust for the partnership, a conveyance executed by a partner in the partnership name, or in his own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of the first paragraph of Article 1818. Where the title to real property is in the name of all the partners a conveyance executed by all the partners passes all their rights in such property. General Rule: If title is in the partnership name, a partner may therefore convey in the partnership name. Exception: The partnership may recover if (1) it was not in the usual way, or (2) there was no authority + the grantee has knowledge

B. OBLIGATIONS OF PARTNERS B.1. CONTRIBUTION CONTRIBUTION OF PROPERTY With respect to contribution of property, a partner is obliged to: (1) To contribute, at the beginning of the partnership or at the stipulated time, the money, property or industry which he undertook to contribute; (2) In case a specific and determinate thing is to be contributed: (a) To warrant against eviction in the same manner as a vendor; and (b) To deliver to the partnership the fruits of the property promised to be contributed, from the time they should have been delivered, without need of demand [Article 1786]; (3) In case a sum of money is to be contributed, or in case he took any amount from the partnership coffers, to indemnify the partnership for: (a) Interest; and

CIVIL LAW

AMOUNT OF CONTRIBUTION General rule: Partners are to contribute equal shares to the capital of the partnership. Exception: When there is an agreement to the contrary, the contribution shall follow such agreement [Article 1790]. ADDITIONAL CONTRIBUTION

CAPITAL

Requisites: (1) There is an imminent loss of the business of the partnership; (2) The majority of the capitalist partners are of the opinion that an additional contribution to the common fund would save the business; (3) The capitalist partner refuses deliberately [not because of financial inability] to contribute an additional share to the capital; and (4) There is no agreement that even in case of imminent loss of the business, the partners are not obliged to contribute. Any partner who refuses to contribute an additional share to the capital, except an industrial partner, to save the venture, shall be obliged to sell his interest to the other partners, unless there is an agreement to the contrary [Article 1791]. CONTRIBUTION OF INDUSTRY An industrial partner is obliged to contribute his industry at the stipulated time. General rule: An industrial partner cannot engage in business for himself. Should he do so, the capitalist partners, as well as industrial partners [De Leon (2010)] may either: (1) Exclude him from the firm; or (2) Avail themselves of the benefit which he may have obtained.

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Exception: He may engage in business for himself when the partnership expressly permits him to do so [Article 1789]. B.2. ALTERATION PROPERTY Art 1803 (2).

IN

IMMOVABLE

When the manner of management has not been agreed upon, the following rules shall be observed: xxx (2) None of the partners may, without the consent of the others, make any important alteration in the immovable property of the partnership, EVEN IF it may be useful to the partnership. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, the court's intervention may be sought. B.3. BRING TO PARTNERSHIP CAPITAL CREDIT RECEIVED Art 1793. A partner who has received, in whole or in part, his share of a partnership credit, when the other partners 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. A partner, authorized to manage or not, who already received, in whole or in part, his share of a partnership credit, is obliged to bring to the partnership capital what he received when: (1) The other partners have not collected their shares; and (2) The partnership debtor has become insolvent. This obligation exists even when he issued a receipt for his share only [Article 1793]. B.4. RESPONSIBLE FOR DAMAGE SUFFERED BY THE PARTNERSHIP Art 1794. Every partner is responsible to the partnership for damages suffered by it through his fault, and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his

CIVIL LAW

industry. However, the courts may equitably lessen this responsibility if through the partner's extraordinary efforts in other activities of the partnership, unusual profits have been realized. B.5. BEAR RISK OF LOSS OF SPECIFIC AND DETERMINATE THINGS Art 1795. The risk of specific and determinate things, which are not fungible, contributed to the partnership so that only their use and fruits may be for the common benefit, shall be borne by the partner who owns them. If the things contribute are fungible, or cannot be kept without deteriorating, or if they were contributed to be sold, the risk shall be borne by the partnership. In the absence of stipulation, the risk of the things brought and appraised in the inventory, shall also be borne by the partnership, and in such case the claim shall be limited to the value at which they were appraised. If not fungible: risk is borne by the partner who owns them If a) fungible, b) cannot be kept without deteriorating, c) contributed to be sold, d) brought and appraised in the inventory: risk shall be borne by the partnership B.6. SHARE IN LOSSES RULES FOR DISTRIBUTION OF PROFITS AND LOSSES The distribution of profits and losses shall be in accordance with the following rules: (1) They shall be distributed in conformity with the agreement. (2) If only the share in profits has been stipulated, the share in the losses shall be in the same proportion. (3) In the absence of any stipulation: (a) The share in the profits of the capitalist partners shall be in proportion to their contributions. (b) The losses shall be borne by the capitalist partners, also in proportion to the contributions.

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(c) The share of the industrial partners in the profits is that share as may be just and equitable. If he also contributed capital, he will receive a share of the profits in proportion to his contribution; and (d) The industrial partner, who did not contribute capital, is not liable for losses [Article 1797]. B.7. ACCOUNT FOR BENEFITS Obligation to render information: . True and full information of all things affecting the partnership - only on demand. . Accounting for benefits received pertaining to the partnership or related to the use of partnership property. . Hold in trust any profits derived without consent. B.8. LIABLE FOR PARTNERSHIP CONTRACTS The partnership is primarily liable for contracts entered into: (1) In its name and for its account; (2) Under its signature; and (3) By a person authorized to act for it. Upon exhaustion of its assets, all partners are liable pro rata with all their property. Any partner may enter into a separate obligation to perform a partnership contract [Article 1816]. NATURE OF INDIVIDUAL LIABILITY

CIVIL LAW

misapplication of money or property by a partner in the ordinary course of business. (2) A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission, except that his liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary [Article 1826]. In other words, he is not personally liable. II. PRO RATA The partners are liable pro rata. This liability is not increased even when a partner: (1) Has left the country and the payment of his share of the liability cannot be enforced [Co-Pitco v. Yulo (1907)]; or (2) His liability is condoned by the creditor [Island Sales v. United Pioneers (1975)]. LIABILITY PARTNER

OF

AN

INDU STRIAL

An industrial partner, who is not liable for losses, is not exempt from this liability. However, he can recover the amount he has paid from the capitalist partners, unless there is a stipulation to the contrary [Cia. Maritima v. Muñoz (1907)]. STIPULATION AGAINST INDIVIDUAL LIABILITY Any stipulation against this liability is void against third persons but valid among the partners [Article 1817].

I. SUBSIDIARY

RESPONSIBILITY TO PARTNERS

General Rule: The partners are liable subsidiarily. It only arises upon exhaustion of partnership assets [Cia. Maritima v. Muñoz (1907)].

In the absence of any stipulation to the contrary, every partner is an agent of the partnership for the purpose of its business. As such, it is responsible to every partner: (1) For amounts, and the corresponding interest from the time the expenses were made, which he may have disbursed on behalf of the partnership; (2) For obligations he may have contracted in good faith in the interest of the partnership business; and

Exceptions: (1) A third person who transacted with the partnership can hold the partners solidarily [rather than subsidiarily] liable for the whole obligation if the case falls under Articles 1822 or 1823 [Muñasque v. CA (1985)]. The provisions refer to wrongful acts or omission and

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(3) For risks in consequence of the management of the partnership [Article 1796]. B.9. SOLIDARILY LIABLE WITH THE PARTNERSHIP FOR WRONGFUL ACTS OR OMISSIONS An admission or representation by any partner may be used as evidence against the partnership when: (1) It concerns partnership affairs; (2) Such affairs are within the scope of his authority [Article 1820]. LIABILITY OF THE PARTNERSHIP FOR W RONGFUL ACTS OF A PARTNER The partnership is solidarily liable with the partner who causes loss or injury to any person not a partner, or incurs any penalty through any wrongful act or omission: (1) In the ordinary course of the business of the partnership; or (2) Not in such ordinary course of business, but with the authority of his co-partners [Article 1822]. LIABILITY OF THE PARTNERSHIP FOR MISAPPLICATION OF MONEY OR PROPERTY The partnership is liable for losses suffered by a third person whose money or property was: (1) Received by a partner: (a) Acting within the scope of his apparent authority; and (b) Misapplied it; (2) Received by the partnership: (a) In the course of its business; and (b) Misapplied by any partner while it is in the custody of the partnership [Article 1823].

CIVIL LAW

B.10. APPLICATION OF SUMS RECEIVED General Rule: A partner authorized to manage, who collects a demandable sum owed to him in his own name from a person who also owes the partnership a demandable sum, is obliged to apply the sum collected to both credits pro rata, even if he issued a receipt for his own credit only. Requisites: (1) There exist at least two debts, one where the collecting partner is creditor, and the other, where the partnership is the creditor; (2) Both debts are demandable; and (3) The partner who collects is authorized to manage and actually manages the partnership. Exceptions: (1) In case the receipt was issued for the account of the partnership credit only, however, the sum shall be applied to the partnership credit alone. (2) When the debtor declares, pursuant to Article 1252, at the time of making the payment, to which debt the sum must be applied, it shall be so applied [Article 1792].

LIABILITY OF THE OTHER PARTNERS UNDER ARTICLES 1822 AND 1823 All partners are solidarily liable with the partnership for its liabilities under Articles 1822 and 1823 [Article 1824]. This is without prejudice to the guilty partner being liable to the other partners. However, as far as third persons are concerned, the partnership is answerable [De Leon (2010)]. PAGE 402 OF 574

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III. Obligations of the Partnership A. OBLIGATION TO OPERATE UNDER A FIRM NAME Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability of a partner [Article 1815]. General rule: The partners may adopt any firm name desired. Exceptions: (1) They cannot use a name which is “identical or deceptively or confusingly similar to an existing or corporation [or partnership] or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws” [Section 18, Corporation Code]. (2) Use of names of deceased partner in law firms is “permissible provided that the firm indicates in all its communications that said partner is deceased” [Rule 3.02, Code of Professional Responsibility].

B. LIABILITY OF PARTNERS PARTNERSHIP CONTRACTS

FOR

B.1. ACTS APPARENTLY FOR CARRYING ON OF USUAL BUSINESS

THE

General rule: Any act of a partner which is apparently for the carrying on of the usual business of the partnership binds the latter, including the execution of any instrument in the partnership name. Exception: The partnership is not bound when the following concur: (1) The partner has in fact no authority to act; and (2) The person with whom he deals has knowledge of such fact [Article 1818 (1)].

CIVIL LAW

B.2. ACTS NOT APPARENTLY FOR CARRYING ON OF THE USUAL BUSINESS General rule: Acts of a partner which is not apparently for carrying on of the usual business does not bind the partnership. Exception: The partnership is bound if the other partners authorized him to do the act [Article 1818, 2nd par.]. B.3. ACTS OF STRICT DOMINION General rule: One or some of the partners have no authority to do the following acts of strict dominion: (1) Assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts of the partnership; (2) Dispose of the goodwill of the business; (3) Do any other act which makes it impossible to carry on the ordinary business of the partnership; (4) Confess a judgment; (5) Enter into a compromise concerning a partnership claim or liability; (6) Submit a partnership claim or liability to arbitration; (7) Renounce a claim of the partnership. Exceptions: They may do so if: (1) Authorized by all the partners; or (2) The other partners have abandoned the business [Article 1818, 3rd par.]. B.4. ACTS IN CONTRAVENTION OF A RESTRICTION Any act of a partner in contravention of a restriction on authority does not bind the partnership to persons having knowledge of the restriction [Article 1818, 4th par.].

C. CONVEYANCE OF PARTNERSHIP REAL PROPERTY C.1. TITLE IN PARTNERSHIP NAME Any partner may convey the real property in the name of the partnership. The partnership can recover it, except when: (1) The act of the partner binds the partnership, when he has authority to

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carry out the usual business of the partnership, under Article 1818, 1st par.; or (2) If not so authorized, the property has been conveyed by the grantee, or a person claiming under him, to a holder for value and without knowledge that the partner exceeded his authority [Article 1819, 1st par.].

consents to another representing him to anyone as a partner: (1) In an existing partnership; or (2) With one or more persons not actual partners [Article 1825, 1st par.].

A partner authorized to carry out the usual business may convey, in his own name, the equitable interest of the partnership [Article 1819, 2nd par.].

I. PERSONAL REPRESENTATION

C.2. TITLE IN THE NAME OF OTHER PERSONS Where the title is in the name of one or more but not all the partners, and the record does not disclose the right of the partnership: (1) The partners having title may convey title. (2) The partnership may recover it when the partners conveying title have no authority to carry on the usual business of the partnership, unless the purchaser or his assignee is: (a) A holder for value; and (b) Without knowledge that the act exceeded authority [Article 1819, 3rd par.]. Where the title is in the name of one or more or all the partners, or in a third person in trust for the partnership a partner authorized to carry on the usual business may convey equitable title in the partnership name or in his own name [Article 1819, 4th par.]. Where the title is in the names of all the partners, a conveyance executed by all of them passes all the rights to the property [Article 1819, 5th par.].

D. LIABILITY OF THE PARTNERSHIP FOR ADMISSION BY A PARTNER E. LIABILITY IN CASE OF PARTNERSHIP BY ESTOPPEL E.1. PARTNER BY ESTOPPEL A partner by estoppel is a person who, by words spoken or written or by conduct [1] represents himself as a partner or [2]

E.2. LIABILITY ESTOPPEL

OF

A

PARTNER

BY

A partner by estoppel is liable to any such persons: (1) To whom such representation has been made; and (2) Who has, on the faith of such representation, given credit to the actual or apparent partnership [Article 1825, 1st par.]. II. PUBLIC REPRESENTATION If he has made such representation or consented to its being made in a public manner, whether the representation has or has not been [personally] made or communicated to such persons so giving credit by or with his knowledge, and: (1) Partnership liability results, he is liable as though he were an actual member of the partnership. (2) No partnership liability results, he is liable pro rata with the other persons, if any, so consenting to the contract or representation. (3) When there are no such other persons, he is separately liable [Article 1825, 1st par.]. E.3. EFFECT ON EXISTING PARTNERSHIP OR OTHER PERSONS NOT ACTUAL PARTNERS (1) When a person has been represented to be a partner (a) in an existing partnership, or (b) with one or more persons not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation. (2) When all the members of the existing partnership consent to the

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representation, a partnership act or obligation results. (3) In all other cases, it is the joint act or obligation of the person acting and the persons consenting to the representation [Article 1825, 2nd par.]. E.4. NATURE OF LIABILITY Summarizing Article 1825, a partner by estoppel is liable in the following manner: (1) He is liable as though he were a partner when: (a) There is an existing partnership; (b) All the partners consented to the representation; and (c) A partnership liability results. (2) He is liable jointly and pro rata (as though he were a partner in fact) with those who consented to the representation when: (a) There is an existing partnership but not all the partners consented; or (b) There is no existing partnership and all those represented as partners consented to the representation. (3) He is liable separately when: (a) There is an existing partnership but none of the partners consented; or (b) There is no existing partnership and not all of those represented as partners consented to the representation.

F. LIABILITY PARTNER

OF

AN

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G. NOTICE TO OR KNOWLEDGE OF THE PARTNERSHIP The following operate as notice to or knowledge of the partnership: (1) Notice to any partner of any matter relating to partnership affairs; (2) Knowledge of the partner acting in the particular matter acquired while a partner; (3) Knowledge of the partner acting in the particular matter then present to his mind; or (4) Knowledge of any other partner who reasonably could and should have communicated it to the acting partner. These do not apply in case of fraud on the partnership committed by or with the consent of the partner [Article 1821].

INCOMING

A person admitted as a partner is liable: (1) For obligations incurred subsequent to his admission as the other partners are liable; (2) For obligations incurred before his admission, but will be satisfied only out of the partnership property, unless otherwise stipulated that he fully assumes such obligations. Ratio: (1) The new partner partakes of the benefits of the partnership property and an already established business. (2) He has every means of obtaining full knowledge of the debts of the partnership and remedies that amply protect his interest [De Leon (2010)]. PAGE 405 OF 574

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IV. Dissolution A. CONCEPTS Dissolution – the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business. It is different from the winding-up of the business [Article 1828]. It does not terminate the partnership, which continues until the winding up of partnership affairs is completed [Article 1829]. W inding up – the actual process of settling the partnership business or affairs after dissolution. It involves collection and distribution of partnership assets, payment of debts, and determination of the value of the interest of the partners in the partnership. Termination – the point in time when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life [De Leon (2010)].

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Any one of the partners may, at his sole pleasure, dictate the dissolution of the partnership at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages [Ortega v. CA (1995)]. B.2. IN CONTRAVENTION AGREEMENT

OF

THE

Where circumstances do not permit dissolution under any other provision of Article 1830, it may also be dissolved by the express will of any partner at any time. Thus, even if there is a specified term, one partner can cause its dissolution by expressly withdrawing even before the expiration of the period, with or without justifiable cause. If the cause is not justified or no cause was given, the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm [Rojas v. Maglana (1990)]. B.3. BY OPERATION OF LAW

B. CAUSES OF DISSOLUTION B.1. WITHOUT AGREEMENT

VIOLATION

OF

THE

(1) By the termination of the definite term or particular undertaking specified in the agreement; (2) By the express will of any partner, who must act in good faith, when no definite term or particular is specified. (3) By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking; (4) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners [Article 1830(1)]. If, after the expiration of the definite term or particular undertaking, the partners continue the partnership without making a new agreement, the firm becomes a partnership at will [Article 1785].

(1) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership; (2) When a specific thing which a partner had promised to contribute, perishes before delivery, or by the loss of the thing, only the use or enjoyment of which has been contributed; the loss of a specific thing, however, does not dissolve the corporation after its ownership has already been transferred to the partnership; (3) By the death of any partner; (4) By the insolvency of any partner or of the partnership; (5) By the civil interdiction of any partner; B.4. BY DECREE OF COURT A partner may apply for dissolution in court when: (1) A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind; (2) A partner becomes in any other way incapable of performing his part of the partnership contract;

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(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business; (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; (5) The business of the partnership can only be carried on at a loss; (6) Other circumstances render a dissolution equitable. A person who acquires the interest of a partner may likewise apply: (1) After the termination of the specified term or particular undertaking; (2) At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued B.5. OTHER CAUSES (1) When a new partner is admitted into an existing partnership; (2) When any partner retires; (3) When the other partners assign their rights to the sole remaining partner; (4) When all the partners assign their rights in the partnership property to third persons [Article 1840]. The statutory enumeration of the causes of dissolution is exclusive [De Leon (2010)].

C. EFFECTS OF DISSOLUTION C.1. ON AUTHORITY OF THE PARTNERS In general, upon dissolution, the authority of the partners to represent the partnership is confined only to acts necessary to: (1) Wind up partnership affairs; or (2) Complete transactions begun but not then finished [Article 1832, 1st. par.]. C.1.A. W ITH RESPECT TO PARTNERS The authority of partners to act for the partnership is terminated, with respect to partners: (1) When the dissolution is not by the act, insolvency or death of a partner; or

CIVIL LAW

(2) When the dissolution is by such act, insolvency or death, when the partner acting for the partnership has knowledge or notice of the cause [Articles 1832 and 1833]. In other cases, each partner is still liable for his share in the liability created by the partner acting for the partnership [Article 1833]. C.1.B. W ITH RESPECT TO THIRD PERSONS With respect to persons not partners: (1) After dissolution, a partner can bind the partnership by any act appropriate for: (a) Winding up partnership affairs; or (b) Completing transactions unfinished at dissolution. (2) He can also bind it by any transaction which would bind the partnership as if dissolution had not taken place, provided the other party to the transaction: (a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice thereof; or (b) Had not so extended credit but had known of the partnership prior to dissolution, and having no knowledge or notice of dissolution, the fact had not been advertised in a newspaper of general circulation in the place [or in each place if more than one] at which the partnership business was regularly carried on [Article 1834, 1st par.]. Note the character of the notice required: (1) As to persons who extended credit to the partnership prior to dissolution, notice must be actual. (2) As to persons who merely knew of the existence of the partnership, publication in a newspaper of general circulation in the place of business of the partnership is sufficient. C.2. ON LIABILITY FOR TRANSACTIONS AFTER DISSOLUTION The liability of a partner, in general, is the same as in ordinary contracts (pro rata and subsidiary).

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In the following cases, however, the liability shall be satisfied out of the partnership assets alone (i.e., there is no subsidiary liability): 1. When the partner had been, prior to the dissolution, unknown as a partner to the person with whom the contract is made; 2. When the partner had been, prior to the dissolution, so far unknown or inactive in partnership affairs that the business reputation of the partnership could not be said to have been in any degree due to his connection with it [Article 1834]. Any act of a partner after dissolution in no case binds the partnership in the following cases: (1) Where the partnership is dissolved because it is unlawful to carry on the business, unless the act is appropriate for winding up partnership affairs; (2) Where the partner has become insolvent; (3) Or, where the partner has no authority to wind up partnership affairs, except by a transaction with one who: (a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice of his want of authority; or (b) Had not extended credit to the partnership prior to dissolution, and, having no knowledge or notice of his want of authority, the fact of his want of authority has not been advertised [Article 1834]. Article 1834 does not affect the liability under Article 1825 of any person who, after dissolution, represents himself or consents to another representing him as a partner in a partnership engaged in carrying on business [Article 1834]. C.3. ON LIABILITY FOR CONTRACTS AFTER DISSOLUTION BY SPECIFIC CAUSES General rule: A contract entered into by a partner acting for the partnership after dissolution by act, death or insolvency of a partner binds the other partners.

CIVIL LAW

(1) The dissolution being by act of any partner, the partner acting for the partnership had knowledge of the dissolution; or (2) The dissolution being by death or insolvency of a partner, the partner acting for the partnership had knowledge or notice of the death or insolvency [Article 1833]. C.4. ON EXISTING PARTNERS

LIABILITY

OF

General rule: Dissolution does not of itself discharge the existing liability of any partner. Exception: A partner may be relieved when there is an agreement to that effect between: (1) Himself; (2) The partnership creditor; and (3) The person or partnership continuing the business. Such agreement may be inferred from the course of dealing between the creditor having knowledge of the dissolution and the person or partnership continuing the business. In case of dissolution by death, the individual property of a deceased partner is liable for obligations of the partnership incurred while he was a partner, after payment of his separate debts [Article 1835].

D. WINDING UP PARTNERS D.1. WHO MAY WIND UP The following partners have the right to wind up the partnership affairs: (1) Those designated in an agreement; (2) Those who have not wrongfully dissolved the partnership; or (3) The legal representative of the last surviving partner, who was not insolvent. Any partner or his legal representative or assignee may obtain winding up by the court, upon cause shown [Article 1836]. D.2. MANNER OF WINDING UP 1.

Exceptions: PAGE 408 OF 574

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2. Judicial, under the control and direction of the proper court. The action for liquidation of the partnership is personal. The fact that sale of assets, including real property, is involved does not change its character, such sale being merely a necessary incident of the liquidation of the partnership, which should precede and/or is part of its process of dissolution [Claridades v. Mercader (1966)].

E. RIGHTS OF PARTNERS IN CASE OF DISSOLUTION E.1. DISSOLUTION WITHOUT VIOLATION OF THE AGREEMENT Each partner may have: (1) The partnership property applied to discharge the partnership liabilities; and (2) The surplus applied in cash to the net amount owing to the respective partners. This is a right as against his co-partners and all partners claiming through them in respect of their interests in the partnership. It cannot be availed if there is an agreement to the contrary [Article 1837 (1)]. E.2. DISSOLUTION IN CONTRAVENTION OF THE AGREEMENT I. PARTNER W HO DID NOT CAUSE THE DISSOLUTION The partners who did not cause the dissolution wrongfully has the following rights: (1) To demand the right under Article 1837, 1st par.; (2) To be indemnified for damages for breach of the agreement against the partner who caused the dissolution wrongfully [Article 1837(1)]; (3) To continue the business: (a) In the same name; (b) By themselves or jointly with others; (c) During the agreed term for the partnership. For the purpose of continuing the business, the said partners may possess the partnership property provided:

CIVIL LAW

(1) They secure the payment by bond approved by the court; or (2) They pay any partner who has caused the dissolution wrongfully the value of his interest in the partnership, less any damages recoverable, and indemnity against all present or future partnership liabilities [Article 1837(2)]. II. PARTNER W HO CAUSED THE DISSOLUTION The partner who caused the dissolution wrongfully has the following rights: (1) If the business is not continued, all the rights Article 1837, 1st par., subject to liability for damages; (2) If the business is continued, the right, as against his co-partners and all claiming through them, to: (a) Ascertainment, without considering the value of the goodwill of the business, and payment to him in cash the value of his partnership interest, less any damage, or have the payment secured by a bond approved by the court; and (b) Be released from all existing liabilities of the partnership [Article 1837(3)]. The goodwill of a business may be defined to be the advantage which it has from its establishment or from the patronage of its customers, over and above the mere value of its property and capital. The goodwill [which includes the firm name] is part of the partnership assets and may be subject of sale [De Leon (2010)].

F. RIGHTS OF PARTNERS IN CASE OF RESCISSION A partner, who is induced by fraud or misrepresentation to become such partner, may rescind the contract. Without prejudice to any other right, he is entitled: (1) To a lien on, or right of retention of, the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advances contributed by him;

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(2) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the partnership for any payments made by him in respect of the partnership liabilities; and (3) To be indemnified by the person guilty of the fraud or making the representation against all debts and liabilities of the partnership [Article 1838].

G. SETTLING OF ACCOUNTS BETWEEN PARTNERS Subject to any agreement to the contrary, the following rules shall be observed in settling accounts between partners after dissolution. G.1. COMPOSITION ASSETS

OF

PARTNERSHIP

(1) The partnership property; and (2) The contributions of the partners necessary for the payment of all the liabilities [Article 1839(1)]. In accordance with the subsidiary liability of the partners, the partnership property shall be applied first to satisfy any liability of the partnership [Article 1839(3)]. G.2. AMOUNT OF CONTRIBUTION FOR LIABILITIES The rules for distribution of losses shall determine the contributions of the partners [Article 1839(4)]. As such: (1) The contribution shall be in conformity with the agreement. (2) If only the share in profits has been stipulated, the contribution shall be in the same proportion. (3) In the absence of any stipulation, the contribution shall be in proportion to the capital contribution [Article 1797]. G.3. ENFORCEMENT OF CONTRIBUTION The following persons have the right to enforce the contributions: (1) An assignee for the benefit of creditors; (2) Any person appointed by the court; or (3) To the extent of the amount which he has paid in excess of his share of the partnership liability, any partner or his

CIVIL LAW legal representative [Article 1839(5) and (6)].

The individual property of a deceased partner shall be liable for the contributions [Article 1839(7)]. G.4. ORDER OF APPLICATION OF ASSETS The partnership liabilities shall rank, in order of payment, as follows: (1) Those owing to creditors other than partners; (2) Those owing to partners other than for capital and profits; (3) Those owing to partners in respect of capital; (4) Those owing to partners in respect of profits [Article 1839(2)]. G.5. DOCTRINE OF MARSHALING OF ASSETS When partnership property and the individual properties of the partners are in possession of a court for distribution: (1) Partnership creditors have priority on partnership property; (2) Separate creditors have priority on individual property, saving the rights of lien of secured creditors. (3) Anything left from either shall be applied to satisfy the other [Article 1839(8)]. G.6. DISTRIBUTION OF PROPERTY OF INSOLVENT PARTNER Where a partner has become insolvent or his estate is insolvent, the claims against his separate property shall rank in the following order: (1) Those owing to separate creditors; (2) Those owing to partnership creditors; (3) Those owing to partners by way of contribution [Article 1839(9)].

H. RIGHTS OF CREDITORS OF DISSOLVED PARTNERSHIP H.1. AS CREDITORS PARTNERSHIP

OF

THE

NEW

In the following cases, creditors of the dissolved partnership are also creditors of the

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person or partnership continuing the business: (1) When the business is continued without liquidation, and the cause of dissolution is: (a) Admission of a new partner into the existing partnership; (b) Retirement or death of any partner, and his rights to partnership property are assigned to [1] two or more of the partners, or [2] one or more of the partners and one or more third persons; (c) Retirement of all but one partner, and their rights to partnership property are assigned to the remaining partner, who continues the business, either alone or with others; (d) Wrongful dissolution by any partner, and the remaining partners continue the business, either alone or with others; (e) Expulsion of a partner, and the remaining partners continue the business, either alone or with others. (2) When the cause of dissolution is the retirement or death of any partner, and business is continued with the consent of the retired partner or the representative of the deceased partner, without assignment of their rights to partnership property. (3) When the cause of dissolution is the assignment by all the partners or their representatives of their rights in partnership property to one or more third persons who promise to pay the debts and who continue the business of the partnership [Article 1840, 1st par.]. H.2. LIABILITY OF A NEW PARTNER The liability to the creditors of the dissolved partnership of a new partner in the partnership continuing the business shall be satisfied out of the partnership property alone. However, he may, through agreement, assume individual liability [Article 1840, 2nd par.]. H.3. PRIORITY OF CREDITORS DISSOLVED PARTNERSHIP

CIVIL LAW

or the representative of the deceased partner against the person or partnership continuing the business [Article 1840, 3rd par.]. This is without prejudice to the right of creditors to set aside any assignment on the ground of fraud [Article 1840, 4th par.].

I. RIGHTS OF A RETIRED PARTNER OR A REPRESENTATIVE OF DECEASED PARTNER Unless otherwise agreed upon, when any partner retires or dies, and the business is continued without any settlement of accounts as between him or his estate and the person or partnership continuing the business, he or his legal representative, as against such person or partnership, subject to the prior rights of creditors of the dissolved partnership: (1) May have the value of his interest at the date of dissolution ascertained; and (2) Shall receive as an ordinary creditor: (a) An amount equal to the value of his interest in the dissolved partnership with interest; or (b) At his option or at the option of his legal representative, in lieu of interest, the profits attributable to the use of his right in the property of the dissolved partnership [Article 1841].

J. RIGHT TO AN ACCOUNT In the absence of any agreement to contrary, the right to an account of interest shall accrue to any partner, or legal representative at the date dissolution, as against: (1) The winding up partners; (2) The surviving partners; or (3) The person or partnership continuing business [Article 1842].

OF

Creditors of the dissolved partnership have prior right to any claim of the retired partner PAGE 411 OF 574

the his his of

the

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V. Limited Partnership

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C. GENERAL AND LIMITED PARTNERS DISTINGUISHED

(1) A partnership; (2) Formed by two or more persons; (3) Having as members: (a) One or more general partners; and (b) One or more limited partners.

General partner

Limited partner

Extent of liability

The limited partners as such shall not be bound by the obligations of the partnership [Article 1843].

B. CHARACTERISTICS (1) A limited partnership is formed by compliance with the statutory requirements [Article 1844]. (2) The business is controlled or managed by one or more general partners, who are personally liable to creditors [Articles 1848 and 1850]. (3) One or more limited partners contribute to the capital and share in the profits but do not manage the business and are not personally liable for partnership obligations beyond their capital contributions [Articles 1845, 1848 and 1856]. (4) Obligations or debts are paid out of the partnership assets and the individual property of the general partners [Article 1843]. (5) The limited partners may have their contributions back subject to conditions prescribed by law [Articles 1844 and 1957]. A limited partnership has the following advantages: (1) For general partners, to secure capital from others while retaining control and supervision for the business; (2) For limited partners, to have a share in the profits without risk of personal liability.

Personally, but subsidiarily, liable for obligations of the partnership

Liable only to the extent of his capital contributions

Right to participate in m anagem ent Unless otherwise agreed upon, all general partners have an equal right to manage the partnership

No right to participate in management

Nature of contribution Cash, property or industry

Cash or property only, not industry

Proper party in proceedings against partnership Proper party

by

or

Not proper party, unless [1] he is also a general partner; or [2] where the object of the proceedings is to enforce his right against or liability to the partnership

Firm nam e Name may appear in the firm name

Name must not appear in the firm name

Prohibition to engage in other business Prohibited [subject to qualifications]

Not prohibited

Effect of retirem ent, death, insanity or insolvency Dissolves partnership

Does not dissolve partnership; rights transferred to executor or administrator for selling his estate

Assignability of interest Not assignable

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D. GENERAL AND LIMITED PARTNERSHIP DISTINGUISHED General partnership

Limited partnership

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recognized that the firm is a limited partnership; and (2) As between the partners, the partnership remains limited, since they are bound by their agreement [De Leon (2010)].

Creation May be constituted in any form, subject to exceptions

Partners must: [1] sign and swear to a certificate in compliance with Article 1844; and [2] file the certificate for record in the SEC

Com position Only general partners

One or more general, and one or more limited partners

Firm nam e Must contain the word “Company” [SEC Memo Circ No. 14-00], except for professional partnerships May or may not include the name of one or more of the partners

Must include the word “Limited” [SEC Memo. Circ. No. 14-00] Must not include name of limited partners, unless: [1] it is also the surname of a general partner, or [2] prior to the time when the limited partner became such, the business has been carried on under a name in which his surname appeared

Rules governing dissolution Articles1828-1842

Articles 1860-1863

E.2. PURPOSE OF FILING (1) To give actual or constructive notice to potential creditors or persons dealing with the partnership; and (2) To acquaint them with its essential features, including the limited liability of limited partners [De Leon (2010)]. E.3. FIRM NAME General rule: The surname of a limited partner shall not appear in the partnership name. Exceptions: (1) It is also the surname of a general partner; or (2) Prior to the time when the limited partner became such, the business had been carried on under a name in which his surname appeared. A limited partner whose surname appears in a partnership name contrary to this prohibition is liable as a general partner to partnership creditors who extend credit without actual knowledge that he is not a general partner. E.4. FALSE CERTIFICATE

E. FORMATION E.1. GENERAL REQUIREMENTS Two or more persons desiring to form a limited partnership shall: (1) Sign and swear to a certificate stating the items in Article 1844; and (2) File for record the certificate in the SEC [Article 1844]. A limited partnership is formed if there is substantial compliance in good faith with the requirements. When there is failure to substantially comply with the requirements: (1) In relation to third persons, the partnership is general, unless they

STATEMENT

IN

THE

If the certificate contains a false statement, one who suffers loss by reliance thereon may hold liable any party to the certificate who knew the statement to be false: (1) At the time he signed the certificate; or (2) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file a petition for its cancellation or amendment [Article 1847].

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Requisites: (1) The partner knew the statement to be false: (a) At the time he signed the certificate; or (b) Subsequently, but having sufficient time to cancel or amend it, or file a petition for its cancellation or amendment, and he failed to do so; (2) The person seeking to enforce liability has relied upon the false statement in transacting business with the partnership; and (3) The person suffered loss as a result of reliance upon such false statement. E.5. GENERAL AND LIMITED PARTNER AT THE SAME TIME A person may be a general and a limited partner in the same partnership at the same time. This fact must be stated in the certificate. A person who is a general, and also at the same time a limited partner, shall have all the rights and powers, and be subject to all the restrictions of a general partner, except that, in respect to his contribution as a limited partner, he shall have the rights against the other members which he would have had if he were not also a general partner [Article 1853].

F. MANAGEMENT Only general partners have the right to manage the partnership. If a limited partner takes part in the control of the business, he becomes liable as a general partner [Article 1848]. A general partner shall have the rights and powers and be subject to all restrictions and liabilities of a partner in a partnership without limited partners. Thus, he has general authority over the business. However, written consent or ratification by all limited partners is necessary to authorize the general partners to: (1) Do any act in contravention of the certificate; (2) Do any act which would make it impossible to carry on the ordinary business of the partnership;

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(3) Confess a judgment against the partnership; (4) Possess partnership property, or assign their rights in specific property, for other than a partnership purpose; (5) Admit a person as a general partner; (6) Admit a person as a limited partner, unless the right to do so is given in the certificate; (7) Continue the business with partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right so to do is given in the certificate

G. OBLIGATIONS PARTNER G.1. OBLIGATIONS CONTRIBUTION

OF

A

LIMITED

RELATED

TO

The contributions of a limited partner may be cash or other property, but not services [Article 1845]. A limited partner is liable for partnership obligations when he contributes services instead of only money or property to the partnership [De Leon (2010)]. A limited partner is liable to the partnership: (1) For the difference between his actual contribution and that stated in the certificate as having been made; and (2) For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate [Article 1858, 1st par.]. He holds as trustee for the partnership: (1) Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned; and (2) Money or other property wrongfully paid or conveyed to him on account of his contribution [Article 1858, 2nd par.]. These liabilities can be waived or compromised only by the consent of all members. Such waiver or compromise, however, shall not affect the right to enforce said liabilities of a creditor: (1) Who extended credit; or

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(2) Whose claim arose, after the filing or before a cancellation or amendment of the certificate, to enforce such liabilities [Article 1858, 3rd par.].

(2) Appoint a receiver; and (3) Make all other orders, directions and inquiries which the circumstances of the case may require.

Even after a limited partner has rightfully received the return in whole or in part of his capital contribution, he is still liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors: (1) Who extended credit; or (2) Whose claims arose before such return [Article 1858, 4th par.].

The interest so charged may be redeemed with the separate property of any general partner, but may not be redeemed with partnership property [Article 1862].

A person who has contributed capital to a partnership, erroneously believing that he has become a limited partner, but his name appears in the certificate as a general partner or he is not designated as a limited partner, is not personally liable as a general partner by reason of his exercise of the rights of a limited partner, provided: (1) On ascertaining the mistake, he promptly renounces his interest in the profits of the business or other compensation by way of income [Article 1852]; (2) He does not participate in the management of the business [Article 1848]; and (3) His surname does not appear in the partnership name [Article 1846]. G.2. LIABILITY CREDITORS

TO

PARTNERSHIP

General rule: A limited partner is not liable as a general partner. His liability is limited to the extent of his contributions [Article 1843]. Exceptions: The limited partner is liable as a general partner when: (1) His surname appears in the partnership name, with certain exceptions [Article 1846, 2nd par.]. (2) He takes part in the control of the business [Article 1848]. G.3. LIABILITY TO SEPARATE CREDITORS On due application to a court of competent jurisdiction by any separate creditor of a limited partner, the court may: (1) Charge his interest with payment of the unsatisfied amount of such claim;

Note: In a general partnership, the interest may be redeemed with partnership property with the consent of all the partners whose interests are not charged [Article 1814].

H. RIGHTS OF A LIMITED PARTNER H.1. IN GENERAL A limited partner shall have the same rights as a general partner to: (1) Require that the partnership books be kept at the principal place of business of the partnership; (2) To inspect and copy any of them at a reasonable hour; (3) To demand true and full information of all things affecting the partnership; (4) To demand a formal account of partnership affairs whenever circumstances render it just and reasonable; (5) To ask for dissolution and winding up by decree of court; (6) To receive a share of the profits or other compensation by way of income; and (7) To receive the return of his contribution provided the partnership assets are in excess of all its liabilities [Article 1851]. H.2. RIGHT TO TRANSACT BUSINESS WITH THE PARTNERSHIP A limited partner may: (1) Loan money to the partnership; (2) Transact other business with the partnership; and (3) Receive a pro rata share of the partnership assets with general creditors if he is not also a general partner [Article 1854, 1st par.]. Lim itations: A limited partner, with respect to his transactions with the partnership, cannot:

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(1) Receive or hold as collateral security any partnership property; or (2) Receive any payment, conveyance, or release from liability if it will prejudice the right of third persons [Article 1854, 1st par.]. Violation of the prohibition is considered a fraud on the creditors of the partnership [Article 1854, 2nd par.]. H.3. RIGHT TO SHARE IN PROFITS A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated for in the certificate. This right is subject to the condition that partnership assets will still be in excess of partnership liabilities after such payment [Article 1856]. The partnership liabilities being referred to exclude the liabilities to the limited and general partners. Ratio: Otherwise, he will receive a share to the prejudice of third-party creditors. H.4. RIGHT CONTRIBUTION

TO

RETURN

OF

A limited partner may have his contributions withdrawn or reduced when: (1) All the liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been paid or there remains property of the partnership sufficient to pay them; (2) The consent of all members is had, unless the return may be demanded as a matter of right; and (3) The certificate is cancelled or so amended as to set forth the withdrawal or reduction [Article 1857, 1st par.]. The return of his contributions may be demanded, as a matter of right [i.e., even when not all the other partners consent], when (1) and (2) above are complied with: (1) On the dissolution of the partnership; (2) Upon the arrival of the date specified in the certificate for the return; or (3) After the expiration of a 6-month notice in writing given by him to the other

CIVIL LAW partners, if no time is fixed in the certificate for: (a) The return of the contribution; or (b) The dissolution of the partnership [Article 1857, 2nd par.].

General rule: A limited partner, irrespective of the nature of his contribution has only the right to demand and receive cash in return for his contribution. Exceptions: He may receive his contribution in a form other than cash when: (1) There is a statement in the certificate to the contrary; or (2) All the members of the partnership consent [Article 1857, 3rd par.]. H.5. PREFERENCE OF LIMITED PARTNERS General rule: The limited partners stand on equal footing. Exception: By an agreement of all the partners [general and limited] in the certificate, priority or preference may be given to some limited partners over others with respect to: (1) The return of contributions; (2) Their compensation by way of income; or (3) Any other matter [Article 1855]. H.6. RIGHT TO ASSIGN INTEREST The interest of a limited partner is assignable. The assignee may become: (1) A substituted limited partner; or (2) A mere assignee. A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership. He has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, except those liabilities which: (1) The assignee was ignorant of; and (2) Cannot be ascertained from the certificate [Article 1859, 2nd and 6th pars.i. An assignee is only entitled to receive the share of the profits or other compensation by way of income, or the return of contribution,

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to which the assignor would otherwise be entitled. He has no right: (1) To require any information or account of the partnership transactions; (2) To inspect the partnership books [Article 1859, 3rd par.]. An assignee has the right to become a substituted limited partner if: (1) All the partners consent thereto; or (2) The assignor, being empowered to do so by the certificate, gives him that right [Article 1859, 4th par.]. An assignee becomes a substituted limited partner when the certificate is appropriately amended [Article 1859, 5th par.]. H.7. RIGHT TO ASK FOR DISSOLUTION

deceased was so empowered in the certificate. The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner [Article 1861].

J. SETTLEMENT OF ACCOUNTS J.1. ORDER OF PAYMENT

(1)

(2)

A limited partner may have the partnership dissolved and its affairs wound up when: (1) He rightfully but unsuccessfully demands the return of his contribution; or (2) He has a right to contribution but his contribution is not paid because the partnership property is insufficient to pay its liabilities [Article 1857, 4th par.].

(3) (4) (5) (6)

I. DISSOLUTION A limited partnership is dissolved in much the same way and causes as an ordinary partnership [De Leon (2010)]. General rule: The retirement, death, insolvency, insanity or civil interdiction of a general partner dissolves the partnership. Exception: It is not so dissolved when the business is continued by the remaining general partners: (1) Under a right to do so stated in the certificate; or (2) With the consent of all members [Article 1860]. Upon the death of a limited partner, his executor or administrator shall have: (1) All the rights of a limited partner for the purpose of settling his estate; and (2) The power to constitute an assignee as a substituted limited partner, if the

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In settling accounts after dissolution, the liabilities of the partnership shall be entitled to payment in the following order: Those to creditors, including limited partners except those on account of their contributions, in the order of priority as provided by law; Those to limited partners in respect to their share of the profits and other compensation by way of income in their contributions; Those to limited partners in respect to the capital of their contributions; Those to general partners other than for capital and profits; Those to general partners in respect to profits; Those to general partners in respect to capital [Article 1863, 1st par.].

Note: In settling accounts of a general partnership, those owing to partners in respect to capital enjoy preference over those in respect to profits. J.2. SHARE IN THE PARTNERSHIP ASSETS The share of limited partners in respect to their claims for capital, profits, or for compensation by way of income, is in proportion of their contribution, unless: (1) There is a statement in the certificate as to their share in the profits; or (2) There is a subsequent agreement fixing their share [Article 1863].

K. AMENDMENT OR CANCELLATION OF CERTIFICATE K.1. CANCELLATION OF CERTIFICATE The certificate shall be cancelled when: (1) The partnership is dissolved; or

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(2) All limited partners cease to be such limited partners. K.2. AMENDMENT OF CERTIFICATE A certificate shall be amended when: (1) There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner; (2) A person is substituted as a limited partner; (3) An additional limited partner is admitted; (4) A person is admitted as a general partner; (5) A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the business is continued; (6) There is a change in the character of the business of the partnership; (7) There is a false or erroneous statement in the certificate; (8) There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution; (9) A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been specified in the certificate; or (10) The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them [Article 1864].

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order the SEC to record the cancellation or amendment if it finds that the petitioner has a right to have the writing executed. From the moment the amended certificate/writing or a certified copy of a court order granting the petition for amendment has been filed, such amended certificate shall thereafter be the certificate of partnership [Article 1865].

K.3. REQUIREMENTS FOR AMENDMENT OR CANCELLATION To amend or cancel a certificate: (1) The amendment or cancellation must be in writing; (2) It must be signed and sworn to by all the members including the new members, and the assigning limited partner in case of substitution or addition of a limited or general partner; and (3) The writing to amend (with the certificate, as amended) or to cancel must be filed for record in the SEC. When a person required to sign the writing, a person desiring the cancellation or amendment may petition the court to order cancellation or amendment. The court shall PAGE 418 OF 574

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I. Loan

the same thing loaned [Art.1933]

pay an equal amount of the same kind and quality [Art. 1953]

Contract of Loan vs. Contract to Loan

May involve real or personal property [Art.1937]

Refers only to personal property

Contract of Loan

Contract to Loan

Real Contract; Consensual Contract: perfected, not by perfected by mere mere consent, but the consent. delivery of the contract.

CONTRACTS OF LOAN (1) Commodatum – a contract where one party delivers to another something not consumable so that the latter may use the same for a certain sum and return it. [Art. 1933] (2) Mutuum (Sim ple Loan) – a contract where one party delivers to another, money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. [Art. 1933] Commodatum Vs. Mutuum Commodatum Ordinarily involves something not consumable [Art.1936]

Mutuum Involves money or other consumable thing

Ownership is transferred to the borrower

Essentially gratuitous May be gratuitous or [Art.1933] onerous, i.e. with stipulated interest Borrower must return Borrower need only

Bailor may demand the return of the thing loaned before the expiration of the term in case of urgent need [Art.1946]

Lender may not demand its return before the lapse of the term agreed upon

Bailor suffers the loss of the subject matter since he is the owner [Art.1942; Art.1174]

Borrower suffers the loss even if caused exclusively by a fortuitous event and he is not, therefore, discharged from his duty to pay

Purely personal in character [Art 1939]

Not purely personal in character

A. COMMODATUM

Consumable cannot be used in a manner appropriate to their nature without their being consumed. [Art. 418] Ownership of the thing loaned is retained by lender [Art.1933]

Loan for permissive or Loan for temporary use consum ption [Art.1935]

Commodatum – an essentially gratuitous contract where one party delivers to another something not consumable so that the latter may use the same for a certain time and return it. [Art. 1933] A.1. KINDS OF COMMODATUM (1) Ordinary commodatum – the use of the thing by the bailee is for a certain period of time [Art. 1933] (2) Precarium – one where the bailor may demand the thing loaned at will; if any one of the following is present (a) The duration and purpose of the contract is not stipulated (b) The use of the thing is merely tolerated by the owner [Art. 1947] A.2. PARTIES

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The Civil Code refers to the parties in a commodatum as the bailor (creditor) or bailee (debtor). W ho may be a bailor in commodatum? Anyone. The bailor in commodatum need not be the owner of the thing loaned. [Art. 1938] But the bailee may not lend nor lease the thing loaned to him to a third person who is not a member of his household, unless there is a stipulation to the contrary, or unless the nature of the thing forbids such use. [Art. 1939(2)]

thing is loaned in the same contract. [Art. 1945] NOTE: If bailee incurs ordinary or extraordinary expenses which are neither for the use nor the preservation of the thing, he is not entitled to reimbursement. [Art. 1950] A.4. OBLIGATIONS OF THE BAILOR (1) Obligation not to demand the return of the thing until the expiration of the term or after the accomplishment of the use [Art. 1946] Exceptions: (a) When bailor has urgent need of the thing, he may demand its return or temporary use [Art. 1946] (b) Precarium [Art. 1947] (c) If bailee commits any acts of ingratitude in Art. 765: [Art. 1948] i. Bailee committed some offense against the person, honor or property of the bailor, or of his wife or children under his parental authority; ii. Bailee imputes to bailor 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 bailee himself, his wife or children under his authority; iii. Bailee unduly refuses bailor support when bailee is legally or morally bound to give support the bailor.

A.3. OBLIGATIONS OF THE BAILEE (1) Obligation to take care of it with the proper diligence of a good father of a family. [Art. 1163] (2) Obligation to use the thing loaned only for the purpose for which it was loaned and not for any other purpose. [Art. 1935, 1939(2), 1942 [1]] (3) Obligation to not lend the thing to a third person who is not a member of his household. [Art. 1942 (4)] Exceptions: (a) Stipulation to the contrary (b) Nature of the thing forbids such use. [Art. 1939(2)] (4) Obligation to return the thing upon the expiration of the period stipulated or after the accomplishment of the use for which it has been constituted. [Art. 1944, 1946] Exception: Bailee has right of retention for damages when the bailor who, knowing the flaws of the thing loaned, does not advise the bailee of the same. [Arts. 1946, 1944] (5) Obligation to pay for the ordinary expenses for the use and preservation of the thing loaned. [Art. 1941] (6) Obligation to bear equally (with the bailor) the extraordinary expenses arising on the occasion of actual use of the thing by the bailee. [Art. 1949] Exception: Contrary stipulation (7) Obligation to be solidarily liable when there are two or more bailees to whom a

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(2) Obligation to refund the extraordinary expenses during the contract for the preservation of the thing loaned. [Art. 1949] Provided that: Bailee brings the same to the knowledge of the bailor before incurring them, except when they are so urgent that the reply cannot be awaited without danger. (3) Obligation to bear equally (with the bailee) the extraordinary expenses arising on the occasion of actual use of the thing by the bailee. [Art. 1949] Exception: Contrary stipulation

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(4) Obligation to pay damages to the bailee for hidden flaws known to the bailor. [Art. 1951] NOTE: Bailor has no right of abandonment; he cannot exempt himself from payment of expenses or damages to the bailee by abandoning the thing to the latter. [Art. 1952] A.5. LIABILITY FOR DETERIORATION General rule: the bailee is liable for the deterioration of the thing loaned. Exception: when the deterioration of the thing is due only to the use thereof and without his fault. [Art. 1943] A.6. LIABILITY FOR LOSS General Rule: The Bailee is not liable for loss of the thing due to fortuitous event. [Art. 1174] Exceptions: Bailee is liable for loss of the thing, even if it is through a fortuitous event: (1) If he devotes the thing to any purpose different from that for which it has been loaned; (2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the commodatum has been constituted; (3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event; (4) If he lends or leases the thing to a third person, who is not a member of his household; (5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter. [Art. 1942] A.7. RIGHT OF RETENTION

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Exception: the Bailee has the right of retention for damages arising from hidden flaws. [Art. 1944, 1951] A.8. EXTINGUISHMENT (1) Death of either the bailor or the bailee [Art. 1939] (2) Expiration of term or accomplishment of purpose [Art. 1946] (3) Bailor demands the return in case the bailee committed acts of ingratitude (4) Upon demand in case of precarium

B. MUTUUM Mutuum – a contract where one of the parties delivers to another money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid. B.1. OBLIGATIONS OF THE BORROWER (1) Obligation to pay to the creditor an equal amount of the same kind and quality. [Art. 1953] (2) If stipulated, the borrower has the obligation to pay interest. [Art. 1956] B.2. INTEREST AND SUSPENSION OF USURY LAW Interest– the compensation allowed by law or fixed by the parties for the loan or forbearance of money, goods or credits, or the amount imposed by law or by courts as penalty or indemnity for damages (1) Simple interest – Paid for the principal at a certain rate fixed or stipulated by the parties. (2) Compound Interest – that which is imposed upon interest due and unpaid. Compound interest is allowed:

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a) When there is an express written stipulation to that effect [Art.1956] b) Upon judicial demand. However, debtor is not liable to pay compound interest even after judicial demand when there is no stipulation for payment of interest. [Art.2212]

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(3) Legal Interest – that which the law directs to be charged in the absence of any agreement as to the rate between the parties. (4) Lawful Interest – that which the laws allow or do not prohibit. (5) Unlawful or Usurious Interest – paid or stipulated to be paid beyond the maximum fixed by law.

(b)

(c)

B.3. REQUISITES FOR INTEREST TO BE CHARGEABLE (1) Must be expressly stipulated [Art. 1956] Exceptions: (a) The debtor in delay is liable to pay legal interest (6% per annum) as indemnity for damages [Art.2209] (b) Interest accruing from unpaid interest – Interest demanded shall earn interest from the time it is judicially demanded [Art.2212] or where there is an express stipulation [Art.1959] (2) Agreement must be in writing [Art.1956] (3) Must be lawful Rules for award of interest in the concept of actual and com pensatory damages [Nacar v. Gallery Frames, G.R. No. 189871 (2013) modifying Eastern Shipping Lines vs. CA, G.R. No. 97412 (1994) in light of BSP-MB Circular No. 799] (1) W hen the obligation is breached, and it consists in the paym ent of a sum of money, i.e., a loan or forbearance of money, (a) The interest due should be that which may have been stipulated in writing. (b) The interest due shall itself earn legal interest from the time it is judicially demanded. (c) In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. (2) W hen an obligation, not constituting a loan or forbearance of m oney, is breached

(d)

(e)

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at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially [Art. 1169, Civil Code] When such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made [at which time the quantification of damages may be deemed to have been reasonably ascertained]. The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

(3) W hen the judgment of the court awarding a sum of m oney becom es final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. The Usury Law [Act No.2566] – an act fixing rates of interests upon loans and declaring the effect of receiving or taking usurious rates and for other purposes. [Arevalo v. Dimayuga, G.R. No. 26218 (1927)] CB Circular No. 905 abolished interest rate ceilings. With the promulgation of such circular, usury has become “legally inexistent” as the parties can now legally agree on any interest that may be charged on the loan. B.4. ELEMENTS OF USURY (a) A loan or forbearance of money (b) An understanding between parties that the loan shall and may be returned (c) An unlawful intent to take more than the legal rate for the use of money or its

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equivalent (d) The taking or agreeing to take for the use of the loan of something in excess of what is allowed by law. Note: A usurious loan transaction is not a complete nullity but defective only with respect to the agreed interest. [Carpo v. Chua, G.R. Nos. 150773 and 153599 (2005)]

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II. Deposit A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. [Art. 1962]

OBJECT OF DEPOSIT Art. 1966 provides that only movable things may be the object of a deposit. However, Art. 2006 provides that movable as well as immovable property may be the object of sequestration or judicial deposit.

PRINCIPAL PURPOSE Safekeeping of the thing; if safekeeping is NOT the principal purpose, or is only an accessory obligation, there is NO DEPOSIT but some other contract. [Art. 1962]

CONSIDERATION A deposit is generally gratuitous, except: (1) If there is an agreement to the contrary (2) When the depositary is engaged in the business of storing goods [Art. 1965]

KINDS OF DEPOSIT (1) Extrajudicial (a) Voluntary – obligation arises as a consequence of contract; (b) Necessary – obligation arises as a consequence of law or quasi-contract (2) Judicial – obligation arises as a consequence of a law allowing the issuance of a judicial order constituting a deposit

A. VOLUNTARY DEPOSIT Voluntary deposit – an agreement to constitute a deposit is binding, but the deposit itself is a real contract, as it is not perfected until the delivery of the thing. [Art. 1968] A deposit may be made by two or more persons (who believe that they are entitled to the thing deposited with a third person). The Page 424 of 574

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third person is to deliver the thing to the one to whom it belongs. [Art. 1968] How Entered Into: Orally or in writing [Art. 1969] How Perfected: The deposit is perfected upon delivery, which is made by the will of the depositor. [Arts. 1963, 1968] A.1. EXTINGUISHMENT (1) Loss or destruction of thing deposited, or (2) In case of a gratuitous deposit, upon the death of either the depositor or depositary [Art. 1995]. The depositary is not obliged to continue with the contract of deposit (3) By other modes provided in the Civil Code, e.g. novation, merger, etc. [See Art.1231] A.2. OBLIGATIONS OF A DEPOSITARY (1) Depositary is obliged to keep the thing safely and (2) Depositary is obliged to return it to the depositor, heirs, successors or person designated in the contract, when required [Art. 1972], together with all its products, accessories and accessions. [Art. 1983] General rule: The depositary is not liable in the event of loss. The required degree of care however, is greater if the deposit is for compensation. Exceptions: (1) Loss is through his fault or negligence [Art. 1170], even if the thing was insured [Art. 2207]; (2) Loss while in his possession, ordinarily raises presumption of fault on his part. [See Art. 1265] (3) Loss is through a fortuitous event if a) It is stipulated that depositary will be liable; b) Depositary uses the thing without Depositor’s permission; c) Depositary delays its return; d) Depositary allows others to use it. [Art 1979]

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(4) If deposit with a third person is allowed, loss of the thing with a third person who is manifestly careless or unfit [Art. 1973]; (5) Depositary also liable for negligence of employee [Ibid]; A.3. AUTHORITY OF DEPOSITARY (1) Depositary may change way of deposit if he may reasonably presume that the depositor would consent if he knew the situation. He is to notify the depositor thereof and wait for the latter’s decision, unless delay would cause danger. [Art. 1974] (2) Depositary can collect on interest earned by certificates, bonds, securities and instruments when it becomes due. [Art 1975] (3) Depositary cannot make use of the thing deposited without depositor’s consent. [Art 1977] A.4. OBLIGATIONS OF A DEPOSITOR (1) Depositor is obliged to reimburse the depositary for expenses incurred for preservation – if deposit is gratuitous. [Art.1992] (2) Depositor is obliged to pay losses incurred due to character of thing deposited. [Art. 1993] General rule: The depositor shall reimburse the depositary for any loss arising from the character of the thing deposited [Art. 1993] Exceptions: (1) Depositor was not aware of the danger; (2) Depositor was not expected to know the dangerous character of the thing; (3) Depositor notified the depositary of such dangerous character; (4) Depositary was aware of the danger without advice from the depositor.[Ibid.] A.5. AUTHORITY OF DEPOSITOR (1) When there are two or more depositors and they are not solidary and the thing admits of division, one cannot demand more than his share [Art. 1985].

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(2) If he should lose his capacity to contract after having made the deposit, the thing cannot be returned except to persons who may have administration of his property and rights. [Art. 1986].

Made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in hotels and inns [Arts.1996-2004] or by travelers with common carriers [Arts.1734-1735] B.1. KINDS OF NECESSARY DEPOSIT (1) It is made in compliance with a legal obligation, in which case it is governed by the law establishing it, and in case of deficiency, the rules on voluntary deposit, e.g., Arts. 538, 586 and 2104 (2) It takes place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwreck, or other similar events. There must be a causal relation between the calamity and the constitution of the deposit. In this case the deposit is governed by the rules on voluntary deposit. [Art. 2168] (3) Made by passengers with common carriers. [Art.1754] (4) Made by travelers in hotels or inns. [Art. 1998] B.2. DEPOSIT BY TRAVELERS IN HOTELS AND INNS Before keepers of hotels or inns may be held responsible as depositaries with regard to the effects of their guests, the following must concur: (a) They have been previously informed about the effects brought by the guests; and (b) The latter have taken the precautions prescribed regarding their safekeeping. OF

LIABILITY

clothing as are ordinarily used by travelers (2) Include those lost or damaged in hotel annexes such as vehicles in the hotel’s garage. B.4. WHEN HOTEL-KEEPER LIABLE

B. NECESSARY DEPOSIT

B.3. EXTENT ART.1998

CIVIL LAW

UNDER

Regardless of the amount of care exercised, the hotel-keeper is liable when— (1) The loss or injury to personal property is caused by his servants or employees as well as by strangers [Art. 2000]. (2) The loss is caused by the act of a thief or robber done without the use of arms and irresistible force. [Art. 2001] B.5. WHEN HOTEL-KEEPER NOT LIABLE (1) The loss or injury is caused by force majeure, like flood, fire, [Art.2000] theft or robbery by a stranger—not the hotelkeeper’s servant or employee—with the use of firearms or irresistible force [Art.2001] Exception: Hotel-keeper is guilty of fault or negligence in failing to provide against the loss or injury from his cause. [Arts.1170 and 1174] (2) The loss is due to the acts of the guests, his family, servants, visitors [Art.2002] (3) The loss arises from the character of the things brought into the hotel [Art. 2002] The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Such kind of stipulation shall be void. [Art. 2003] B.6. HOTEL-KEEPER’S RETENTION

RIGHT

TO

The hotel-keeper has a right to retain the things brought into the hotel by the guest, as a security for credits on account of— (1) lodging, and (2) supplies usually furnished to hotel guests [Art. 2004]

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The right of retention recognized in this article is in the nature of a pledge created by operation of law.

C. JUDICIAL DEPOSIT Takes place when an attachment or seizure of property in litigation is ordered [Arts. 20052009] C.1. NATURE AND PURPOSE It is auxiliary to a case pending in court. The purpose is to maintain the status quo during pendency of the litigation or to insure the right of the parties to the property in case of a favorable judgment. C.2. DEPOSITARY PROPERTY

OF

SEQUESTERED

A person is appointed by the court [Art. 2007] with the obligations— (1) To take care of the property with the diligence of a good father of the family. [Art. 2008] (2) To continue in his responsibility until the controversy which give rise thereto is ended unless the court so orders. [Art. 2007] C.3. APPLICABLE LAW Judicial deposit law is rem edial or procedural. The Rules of Court shall govern matters not provided for in the Civil Code. [Art. 2009]

CIVIL LAW

III. Guaranty Suretyship

and

Guaranty – a contract whereby a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. [Art. 2047] Suretyship – a relation which exists where one person [principal] has undertaken an obligation and another person (surety) is also under a direct and primary obligation or other duty to a third person (obligee), who is entitled to but one performance, and as between the two who are bound, the one rather than the other should perform. While a surety undertakes to pay if the principal does not pay, the guarantor only binds himself to pay if the principal is unable to pay. [See benefit of excussion, Art. 2058] Guaranty distinguished from Suretyship [Zobel, Inc. vs. CA, G.R. No. 113931 (1998)] Surety

Guaranty

An accessory promise by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation if the debtor does not

A collateral undertaking to pay the debt of another in case the latter does not pay the debt.

A surety is usually bound with his principal by the same instrument, executed at the same time, and on the same consideration. He is an original promissor and debtor from the beginning, and is held, ordinarily, to know every default of his principal.

The contract of guaranty is the guarantor's own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal, and is often supported on a separate consideration from that supporting the contract of the

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Surety

Guaranty principal. The original contract of his principal is not his contract, and he is not bound to take notice of its nonperformance

A surety will not be discharged, either by the mere indulgence of the creditor to the principal, or by want of notice of the default of the principal, no matter how much he may be injured thereby

A guarantor is often discharged by the mere indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal

A surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay

A guarantor is the insurer of the solvency of the debtor and thus binds himself to pay if the principal is unable to pay

A. NATURE GUARANTY

AND

EXTENT

OF

A guaranty is generally gratuitous [Art. 2048] General rule: Guaranty is gratuitous Exception: When there is a stipulation to the contrary On the cause of a guaranty contract A guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto. [Severino v. Severino, et al., G.R. No. 34642 (1931)] Guaranty or surety agreement is regarded valid despite the absence of any direct consideration received by the guarantor or surety, such consideration need not pass directly to the guarantor or surety; a consideration moving to the principal will suffice.

CIVIL LAW

[Art. 2049] Exceptions: (1) With her husband’s consent, bind the community or conjugal partnership property (2) Without husband’s consent, in cases provided by law, such as when the guaranty has redounded to the benefit of the family. A guaranty need not be undertaken with the knowledge of the debtor [Art. 2050] Guaranty is unilateral. It exists for the benefit of the creditor and not for the benefit of the principal debtor Creditor has every right to take all possible measures to secure payment of his credit— guaranty can be constituted even against the will of the principal debtor However, as regards paym ent m ade by a third person— (1) If payment is without the knowledge or against the will of the debtor— (a) Guarantor can recover only insofar as the payment has been beneficial to the debtor [Art. 1236] (b) Guarantor cannot compel the creditor to subrogate him in his rights [Art. 1237] (2) If payment is with knowledge or consent of the debtor: Subrogated to all the rights which the creditor had against the debtor The guaranty must be founded on a valid principal obligation [Art. 2052 (1)] Guaranty is an accessory contract: It is an indispensable condition for its existence that there must be a principal obligation. Hence, if the principal obligation is void, it is also void. A guaranty may secure the perform ance of a voidable, unenforceable, and natural obligation [Art. 2052(2)] A guaranty may secure the performance of a:

General Rule: A married woman who is a (1) Voidable contract – such contract is guarantor binds only her separate property Page 428 of 574

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binding, unless it is annulled by a proper court action (2) Unenforceable contract – because such contract is not void (3) Natural obligation – the creditor may proceed against the guarantor although he has no right of action against the principal debtor for the reason that the latter’s obligation is not civilly enforceable. When the debtor himself offers a guaranty for his natural obligation, he impliedly recognizes his liability, thereby transforming the obligation from a natural into a civil one. A guaranty may secure a future debt [Art. 2053] Continuing Guaranty (1) Not limited to a single transaction but which contemplates a future course of dealings, covering a series of transactions generally for an indefinite time or until revoked. (2) It is prospective in its operation and is generally intended to provide security with respect to future transactions. (3) Future debts, even if the amount is not yet known, may be guaranteed but there can be no claim against the guarantor until the amount of the debt is ascertained or fixed and demandable. Rationale: A contract of guaranty is subsidiary (1) To secure the payment of a loan at maturity – surety binds himself to guarantee the punctual payment of a loan at maturity and all other obligations of indebtedness which may become due or owing to the principal by the borrower. (2) To secure payment of any debt to be subsequently incurred – a guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. (3) To secure existing unliquidated debts – refers to debts existing at the time of the

CIVIL LAW

constitution of the guaranty but the amount thereof is unknown and not to debts not yet incurred and existing at that time. (4) The surety agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born; for example, those securing obligations subject to a condition precedent are valid and binding before the occurrence of the condition precedent. A guaranty may secure the perform ance of a conditional obligation [Art. 2053] (1) Principal obligation subject to a suspensive condition – the guarantor is liable only after the fulfillment of the condition. (2) Principal obligation subject to a resolutory condition – the happening of the condition extinguishes both the principal obligation and the guaranty A guarantor’s liability cannot exceed the principal obligation [Art. 2054] General rule: Guaranty is a subsidiary and accessory contract – guarantor cannot bind himself for more than the principal debtor and even if he does, his liability shall be reduced to the limits of that of the debtor. But the guarantor may bind himself for less than that of the principal. Exceptions: (1) Interest, judicial costs, and attorney’s fees as part of damages may be recovered – creditors suing on a suretyship bond may recover from the surety as part of their damages, interest at the legal rate, judicial costs, and attorney’s fees when appropriate, even without stipulation and even if the surety would thereby become liable to pay more than the total amount stipulated in the bond.

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Interest runs from: • Filing of the complaint (upon judicial demand); or • The time demand was made upon the

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surety until the principal obligation is fully paid (upon extra-judicial demand) Rationale: Surety is made to pay, not by reason of the contract, but by reason of the debtor’s failure to pay when demanded and for having compelled the creditor to resort to the courts to obtain payment. (2) Penalty may be provided – a surety may be held liable for the penalty provided for in a bond for violation of the condition therein. Principal’s liability may exceed guarantor’s obligations [Art. 2054] The amount specified in a surety bond as the surety’s obligation does not limit the extent of the damages that may be recovered from the principal, the latter’s liability being governed by the obligations he assumed under his contract The existence of a guaranty is not presumed [Art. 2055] Guaranty requires the expression of consent on the part of the guarantor to be bound. It cannot be presumed because of the existence of a contract or principal obligation. Rationale: (1) There be assurance that the guarantor had the true intention to bind himself; (2) To make certain that on making it, the guarantor proceeded with consciousness of what he was doing. Contract of guaranty is covered by the Statute of Frauds [See Art. 1403 (2) (b)] Guaranty must not only be expressed but must so be reduced into writing. Hence, it shall be unenforceable by action, unless the same or some note or memorandum thereof be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents. However, it need not appear in a public document.

B. NATURE SURETYSHIP

CIVIL LAW

AND

EXTENT

OF

Liability is contractual and accessory but direct. Liability is limited by the terms of the contract. Liability arises only if principal debtor is held liable (1) In the absence of collusion, the surety is bound by a judgment against the principal even though he was not a party to the proceedings; (2) The creditor may sue, separately or together, the principal debtor and the surety; (3) A demand or notice of default is not required to fix the surety’s liability Exception: Where required by the provisions of the contract of suretyship (4) A surety bond is void where there is no principal debtor because such an undertaking presupposes that the obligation is to be enforceable against someone else besides the surety, and the latter can always claim that it was never his intention to be the sole person obligated thereby. Note: A surety is NOT entitled to the benefit of excussion. The undertaking is to the creditor, not the debtor The surety makes no covenant or agreement with the principal that it will fulfill the obligation guaranteed for the benefit of the principal. The surety’s undertaking is that the principal shall fulfill his obligation and that the surety shall be relieved of liability when the obligation secured is performed; unless otherwise expressly provided. The stipulation in the indemnity agreement allowing the surety to recover even before it paid the creditor is enforceable. In accordance therewith, the surety may demand from the indemnitors even before paying the creditors. [Mercantile Insurance Company v. Ysmael, G.R. No. L-43862 (1989)] Note: Prior demand by the creditor upon the principal is not required. The surety is not

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exonerated by neglect of the creditor to sue the principal.

Exception: When the debtor has left a manager or representative (e) If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation – if such judicial action including execution would not satisfy the obligation, the guarantor can no longer require the creditor to resort to all such remedies against the debtor as the same would be but a useless formality. It is not necessary that the debtor be judicially declared insolvent.

Strictissimi juris rule is applicable ONLY to accommodation surety. Rationale: An accommodation surety 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.

C. EFFECT OF GUARANTY C.1. EFFECTS OF GUARANTY BETWEEN THE GUARANTOR AND THE CREDITOR

The right of guarantors…to demand exhaustion of the property of the principal debtor, exists only when a pledge or a mortgage has not been given as special security for the payment of the principal obligation. [Southern Motors, Inc. v. Barbosa, G.R. No. L-9306 (1956)]

1. The guarantor has the right to benefit from excussion/ exhaustion [Art. 2058] The guarantor cannot be compelled to pay the creditor unless the latter has: (a) Exhausted all of the property of the debtor; and (b) Resorted to all the legal remedies against the debtor. Exceptions to benefit of excussion (1) As provided in Art. 2059: (a) If the guarantor has expressly renounced it. (b) If he has bound himself solidarily with the debtor - here, the liability assumed is that of a surety. The guarantor becomes primarily liable as a solidary co- debtor. In effect, he renounces in the contract itself the benefit of exhaustion. (c) In case of insolvency of the debtor – the guarantor guarantees the solvency of the debtor. If the debtor becomes insolvent, the liability of the guarantor arises as the debtor cannot fulfill his obligation (d) When the debtor has absconded, or cannot be sued within the Philippines – the creditor is not required to go after a debtor who is hiding or cannot be sued in our courts, and to incur the delays and expenses incident thereto.

CIVIL LAW

(2) If he does not comply with Art. 2060: In order that the guarantor may make use of the benefit of excussion, he must: (a) Set it up against the creditor upon the latter’s demand for payment from him; (b) Point out to the creditor: (i) Available property of the debtor – the guarantor should facilitate the realization of the excussion since he is the most interested in its benefit. (ii) Within the Philippine territory – excussion of property located abroad would be a lengthy and extremely difficult proceeding and would not conform with the purpose of the guaranty to provide the creditor with the means of obtaining the fulfillment of the obligation. (iii) Sufficient to cover the amount of the debt (3) If he is a judicial bondsman and subsurety [Art. 2084] (4) Where a pledge or mortgage has been given by him as a special security (5) If he fails to interpose it as a defense before judgment is rendered against him.

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Notice to the guarantor is mandatory in the action against the principal debtor. The guarantor, however, is not duty bound to appear in the case, and his nonappearance shall not constitute default, w/ its consequential effects.

2. The creditor has the right to secure a judgm ent against the guarantor prior to the excussion General rule: An ordinary personal guarantor (NOT a pledgor/mortgagor), may demand exhaustion of all the property of the debtor before he can be compelled to pay. Exception: The creditor may, prior thereto, secure a judgment against the guarantor, who shall be entitled, however, to a deferment of the execution of said judgment against him, until after the properties of the principal debtor shall have been exhausted, to satisfy the latter’s obligation. 3. The creditor has the duty to make prior demand for payment from the guarantor [Art. 2060] The demand is to be made only after judgment on the debt. 4. The guarantor has the duty to set up the benefit of excussion [Art. 2060] As soon as he is required to pay, guarantor must also point out to the creditor available property (not in litigation or encumbered) of the debtor within the Philippines. 5. The creditor has the duty to resort to all legal rem edies [Arts. 2058, 2061] After the guarantor has fulfilled the conditions required for making use of the benefit of excussion, it becomes the duty of the creditor to: (1) Exhaust all the property of the debtor pointed out by the guarantor; (2) If he fails to do so, he shall suffer the loss for the insolvency of the debtor, but only to the extent of the value of the said property 6. The creditor has the duty to notify the guarantor in the action against the debtor [Art. 2062]

CIVIL LAW

Rationale: To give the guarantor the opportunity to allege and substantiate whatever defenses he may have against the principal obligation, and chances to set up such defenses as are afforded him by law 7. A compromise shall not prejudice the person not party to it [Art. 2063] A compromise between creditor and principal debtor benefits the guarantor but does not prejudice him. A compromise between guarantor and the creditor benefits but does not prejudice the principal debtor. 8. Co-guarantors are entitled to the benefit of division [Art. 2065] General Rule: The benefit of division applies only when there are several guarantors and one debtor for a single debt. A co-guarantor is liable only to the extent of his share in the obligation as divided among all the co-guarantors. Exception: (1) Liability will be solidary if it has been expressly stipulated. (2) Also, the circumstances enumerated in Art. 2059 will preclude application of the benefit of division. C.2. EFFECTS OF GUARANTY BETWEEN THE DEBTOR AND THE GUARANTOR 1. The guarantor who pays has the right to be subrogated to the rights of the creditor [Art. 2067] A guarantor who pays the debt is entitled to every remedy which the creditor has against the principal debtor, to enforce every security and all means of payments; to stand in the place of the creditor not only through the medium of the contract, but even by means of the securities

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entered into without the knowledge of the surety; having the right to have those securities transferred to him though there was no stipulation for it, and to avail himself of all securities against the debtor.

(a) When he is sued for the payment; (b) In case of insolvency of the principal debtor; (c) When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; (d) When the debt has become demandable, by reason of the expiration of the period for payment; (e) After the lapse of 10 years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than 10 years; (f) If there are reasonable grounds to fear that the principal debtor intends to abscond; (g) If the principal debtor is in imminent danger of becoming insolvent.

However, if a guarantor has compromised with the creditor for the payment of the obligation, then the guarantor cannot demand more than what he has really paid. 2. The guarantor has the duty to notify the debtor before paying the creditor [Art. 2068; see also Arts. 1236 and 1237] Should payment be made without notification, and supposing the debtor has already made a prior payment, the debtor would be justified in setting up the defense that the obligation has already been extinguished by the time the guarantor made the payment. The guarantor will then lose the right of reimbursement and consequently the right of subrogation. 3. The guarantor cannot demand reim bursem ent for paym ent m ade by him before the obligation has becom e due [Art. 2069] General rule: Since a contract of guaranty is only subsidiary, the guarantor cannot be liable for the obligation before the period on which the debtor’s liability will accrue. Any payment made by the guarantor before the obligation is due cannot be indemnified by the debtor. Exception: Prior consent or subsequent ratification by the debtor 4. The guarantor may proceed against the debtor even before payment has been made [Art. 2071] General rule: Guarantor has no cause of action against the debtor until after the former has paid the obligation. Exceptions [Art. 2071]:

CIVIL LAW

When any of these grounds for exceptions are present, then the guarantor may (1) obtain release from the guaranty, or (2) demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor. Rationale: To enable the guarantor to take measures for the protection of his interest in view of the probability that he would be called upon to pay the debt. As such, he may, in the alternative, obtain release from the guaranty; or demand security that shall protect him from any proceeding by the creditor, and against the insolvency of the debtor. Art. 2066 and 2071 Distinguished Art. 2066

Art. 2071

Provides for the enforcement of the guaranty/surety against the debtor after he has paid the debt

Provides for the protection before he has paid but after he has become liable, but before payment of the debt

Gives a right of action after payment

Protective remedy before payment

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Substantive Right

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Preliminary remedy

C.3. EFFECTS OF GUARANTY AS BETWEEN CO-GUARANTORS (a) The one who pays may demand from each of the others the share proportionally owing to him (b) If any of the guarantors is insolvent, his share shall be borne by the others, including the payer, in the same proportion [Art. 2073] Requisites for the applicability of Art. 2073 (1) Payment has been made by guarantor; (2) The payment was made because

one

(a) Of the insolvency of the debtor, or (b) By judicial demand (3) The paying guarantor seeks to be indemnified only to the extent of his proportionate share in the total obligation.

If one guarantor is released without the consent of the others, the release would benefit the co-guarantors to the extent of the proportionate share of the guarantor released [Art. 2078]. A guarantor is released if the creditor, without the guarantor’s consent, extends the time within which the debtor may perform his obligation [Art. 2079]. This is to protect the interest of the guarantor should the debtor be insolvent during the period of extension and deprive the guarantor of his right to reimbursement. The guarantors are released if by some act of the creditor they cannot be subrogated to the rights, mortgages and preferences of the latter. [Art. 2080] In order to constitute an extension discharging the surety, it should appear that the extension was for:

For purposes of proportionate reimbursement, the other guarantors may interpose such defenses against the paying guarantor as are available to the debtor against the creditor, except those that are personal to the debtor [Art. 2074]

(1) a definite period, (2) pursuant to an enforceable agreement between the principal and the creditor, and (3) that it was made without the consent of the surety or with a reservation of rights with respect to him. [Filipinas Textile Mills v. CA, G.R. No. 119800 (2003)]

D. EXTINGUISHMENT OF GUARANTY

E. LEGAL AND JUDICIAL BONDS

Once the obligation of the debtor is extinguished in any manner provided in the Civil Code, the obligation of the guarantor is also extinguished [Art. 2076].

Bond – an undertaking that is sufficiently secured, and not cash or currency.

However, there may be instances when, after the extinguishment of the guarantor’s obligation (as in the case of a release from the guaranty), the obligation of the debtor still subsists.

Qualifications of personal bondsman [Art. 2082 in relation to Art. 2056]

Bondsm an – a surety offered in virtue of a provision of law or a judicial order.

(1) He possesses integrity; (2) He has capacity to bind himself; (3) He has sufficient property to answer for the obligation which he guarantees.

Although the guarantor generally has to make payment in money, any other thing of value, if accepted by the creditor, is valid Pledge or mortgage in lieu of bond payment and therefore releases the [Art. 2083] guarantor (dacion en pago) [Art. 2077]. Page 434 of 574

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Guaranty or suretyship is a personal security. Pledge or mortgage is a property or real security. If the person required to give a legal or judicial bond should not be able to do so, a pledge or mortgage sufficient to cover the obligation shall be admitted in lieu thereof. Bondsm an not entitled to excussion [Art. 2084] A judicial bondsman and the sub-surety are not entitled to the benefit of excussion. Reason: They are not mere guarantors, but sureties whose liability is primary and solidary. Effect of negligence of creditor Mere negligence on the part of the creditor in collecting from the debtor will not relieve the surety from liability.

CIVIL LAW

IV. Pledge Pledge – is a contract constituted to secure the fulfillment of a principal obligation where the thing pledged, which may be a movable, or an incorporeal right evidenced by a document, is placed in the possession of the creditor or a third person by common agreement. [Art. 2093 in relation to Art. 2085] The pledgor must be the absolute owner of the thing pledged, and he must have the free disposal of the property, and in the absence thereof, that he be legally authorized for the purpose. [Art. 2085 (2) and (3)]

A. CHARACTERISTICS (1) Real – perfected upon the delivery of the thing pledged [Art. 1316] (2) Accessory – cannot exist independently (i.e., without a principal obligation) (3) Unilateral – obligation on the part of the creditor to return the thing pledged upon the fulfillment of the principal obligation (4) Subsidiary– obligation incurred does not arise until the fulfillment of the secured principal obligation

B. KINDS (1) Voluntary or Conventional – created by agreement of the parties. (2) Legal – created by operation of law. LEGAL PLEDGE / PLEDGE BY OPERATION OF LAW [ARTS. 2121-2122] (1) Necessary expenses shall be refunded to every possessor, but only a possessor in good faith may retain the thing until he has been reimbursed. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the Page 435 of 574

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expenses or of paying the increase in value which the thing may have acquired and by reason thereof [Art. 546] (2) He who has executed work upon a movable has a right to retain it by way of pledge until he is paid. This is called the mechanic’s lien. [Art. 1731] (3) The agent may retain the things which are the objects of agency until the principal effects the reimbursement and pays the indemnity. This is called the agent’s lien. [Art. 1914] (4) The laborer’s wages shall be a lien on the goods manufactured or the work done. [Art. 1707] NOTE: (1) In legal pledges, the remainder of the price of the sale shall be delivered to the obligor. [Art. 2121] (2) Public auction of legal pledges may only be executed after demand of the amount for which the thing is retained. It shall take place within one month after the demand, otherwise the pledgor may demand the return of the thing pledged, provided s/he is able to show that the creditor did not cause the public sale without justifiable grounds. [Art. 2122]

C. ESSENTIAL REQUISITES Common to pledge and mortgage [Art. 2085] (1) Constituted to secure the fulfillment of a principal obligation. (2) Pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. (3) The persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. (4) Cannot exist without a valid obligation. (5) Debtor retains the ownership of the thing given as a security. (6) When the principal obligation becomes due, the thing pledged or mortgaged may be alienated for the payment to the creditor. [Art. 2087]

PROVISIONS PLEDGE

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APPLICABLE

ONLY

TO

(1) Transfer of possession to the creditor or to third person by common agreement is essential [Art. 2093]. (2) All movables within the commerce of man may be pledged as long as they are susceptible of possession [Art. 2094]. (3) Incorporeal rights may be pledged. The instruments representing the pledged rights shall be delivered to the creditor; if negotiable, must be indorsed [Art. 2095]. (4) Pledge shall take effect against 3rd persons only if the following appear in a public instrument: (a) Description of the thing pledged. (b) Date of the pledge [Art. 2096]. (5) The thing pledged may be alienated by the pledgor or owner only with the consent of the pledgee. Ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation, but the latter shall continue to have possession [Art. 2097]. (6) Creditor has the right to retain the thing in his possession or in that of a third person to whom it has been delivered, until the debt is paid [Art. 2098]. (7) Special laws apply to pawnshops and establishments engaged in making loans secured by pledges. Provisions of the Civil Code shall apply subsidiarily to them. [Art. 2123] In case of doubt as to whether a transaction is a pledge or a dation in payment, the presumption is in favor of pledge, the latter being the lesser transmission of rights and interests. [Manila Banking Corp. v. Teodoro, G.R. No. 53955 (1989)]

D. REQUISITES FOR PERFECTION (1) For the pledge to take effect between the parties, the thing pledged is placed in the possession of the creditor or a third person [Art. 2093] (2) For the pledge to take effect as against third persons, a description of the thing pledged and the date of the pledge

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should appear in a public instrument [Art. 2096]

E. OBLIGATIONS OF PLEDGEE (1) The pledgee cannot deposit the thing pledged with a 3rd person, unless there is a contrary stipulation [Art. 2100 (1)]. (2) Pledgee is responsible for the acts of his agents or employees with respect to the thing pledged [Art. 2100 (2)]. (3) General Rule: Has no right to use the thing or to appropriate its fruits without authority from the owner. If he does so, or misuses it in any way, the owner may ask that the thing be judicially or extrajudicially deposited. [Art. 2104] Exception: When the preservation of the thing pledged requires its use, it must be used by the creditor only for that purpose. (4) May cause the public sale of the thing pledged if, without fault on his part, there is danger of destruction, impairment or diminution in value of the thing. The proceeds of the auction shall be a security for the principal obligation [Art. 2108].

F. RIGHTS OF PLEDGOR (1) Takes responsibility for the flaws of the thing pledged [Art. 2101 in relation to Art. 1951]. (2) Cannot ask for the return of the thing against the will of the creditor, unless and until he has paid the debt and its interest, with expenses in a proper case [Art. 2105]. (3) Subject to the right of the pledgee under Article 2108, pledgor is allowed to substitute the thing which is in danger of destruction or impairment without any fault on the part of the pledgee with another thing of the same kind and quality [Art. 2107]. (4) May require that the thing be deposited with a 3rd person, if through the negligence or willful act of the pledgee the thing is in danger of being lost or impaired [Art. 2106]. The pledgee can temporarily entrust the physical possession of the chattels pledged

CIVIL LAW

to the pledgor without invalidating the pledge. The pledgor is regarded as holding the pledged property merely as trustee for the pledgee. The type of delivery will depend upon the nature and the peculiar circumstances of each case. [Yuliongsiu v. PNB, G.R. No. L-19227 (1968)] A pledgee cannot become the owner of, nor appropriate to himself, the thing given in pledge. If by the contract of pledge the pledgor continues to be the owner of the thing pledged during the pendency of the obligation, it stands to reason that in case of loss of the property, the loss should be borne by the pledgor. [PNB v. Atendido, G.R. No. L6342 (1954)]

G. FORECLOSURE G.1. REQUIREMENTS IN SALE OF THE THING PLEDGED BY A CREDITOR, IF CREDIT IS NOT PAID ON TIME [Art. 2112] (1) Debt is due and unpaid. (2) Sale must be at a public auction. (3) Notice to the pledgor and owner, stating the amount due. (4) Sale must be made with the intervention of a notary public. (5) If at the first auction the thing is not sold, a second one with the same formalities shall be held. (6) If at the second auction, there is no sale either, the creditor may appropriate the thing pledged but he shall give an acquittance (release) for his entire claim.

G.2. EFFECTS OF THE SALE OF THE THING PLEDGED [Art. 2115] (1) Extinguishes the principal obligation, whether the proceeds of the sale is more or less than the amount due. (2) General Rule: If the price of sale is more than amount due, the debtor is not entitled to the excess Exception: Unless the contrary is provided.

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(3) If the price of sale is less, the creditor is not entitled to recover the deficiency. A contrary stipulation is void.

H. PLEDGE AS DISTINGUISHED FROM CHATTEL MORTGAGE [ARTS. 2140, 1484] Chattel Mortgage

Pledge

Delivery of Personal Property Not required

Delivery is required for validity

Registration in the Chattel Mortgage Register Necessary for validity of the CM against third persons

Not necessary; Public document is enough to bind third persons

EFFECT ON PLEDGE The nullity of the pactum commissorium does not affect the validity of the contract of pledge. The creditor may recover the credit from the proceeds of a foreclosure sale effected in accordance with law [GomezSomera].

J. EQUITABLE MORTGAGE It is a contract that reveals the intention of the parties to charge property as security for a debt, but contains nothing impossible or contrary to law [Gomez-Somera]. ESSENTIAL REQUISITES (1)

Parties entered into a contract denominated as a contract of sale (2) The true intention is to secure an existing debt by way of mortgage

Right to Excess of Proceeds of Sale The excess goes to the debtor/ mortgagor

The excess goes to the pledgee/creditor, unless otherwise stipulated

Right to Recover Deficiency Creditor/ mortgagee can recover from the debtor/ mortgagor, except if covered by Recto Law

Creditor/ mortgagee is not entitled to recover any deficiency after the property is sold, notwithstanding contrary stipulation

The provisions of the Civil Code on pledge, insofar as they are not in conflict with the Chattel Mortgage Law shall be applicable to chattel mortgages [Art. 2141]

I. PACTUM COMMISSORIUM ELEMENTS: (1)

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V. Real Mortgage

payment of the full amount of the principal obligation. [Gomez-Somera]

Mortgage – a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation (real security transaction), immediately making immovable property or real rights answerable to the principal obligation in case it is not complied with at the time stipulated.

C. CHARACTERISTICS

A. OBJECTS OF REAL MORTGAGE [Art. 2124] 1. Immovables 2. Alienable real rights over immovables. Future property CANNOT be an object of mortgage; however: (a) A stipulation subjecting to the mortgage

improvements which the mortgagor may subsequently acquire, install or use in connection with real property already mortgaged belonging to the mortgagor is valid. (b) A stipulation in a registered (or recorded) real estate mortgage that all property taken in exchange or replacement by the mortgagor (after-acquired property) shall be come subject to the mortgage is binding. [Gomez-Somera]

B. OBLIGATIONS SECURED General Rule: A real estate mortgage is limited to the principal obligations mentioned in the contract (within its four corners). [Lim Julian v. Lutero, G.R. No. L25235 (1926)] Exception: A real estate mortgage may contain a dragnet or blanket mortgage clause which subsumes all debts, whether past or future. [Philippine Bank of Communications v. CA, G.R. No. 118552 (1996)] Note: This clause will be strictly construed and its inclusion makes the mortgage a continuing security, not to be discharged by repayment of the amount named but by

C.1. CHARACTERISTICS COLLATERAL

OF

THE

As a general rule, the mortgagor retains possession of the property. He may deliver said property to the mortgagee without altering the nature of the contract of mortgage. Mortgage creates an encumbrance over the property, but ownership of the property is not parted with. It merely restricts the mortgagor’s jus disponendi over the property. The mortgagor may still sell the property, and any stipulation to the contrary (pactum de non alienando) is void [Art. 2130] However, a stipulation prohibiting the mortgagor from entering into second or subsequent mortgages is valid since there is no law prohibiting it. [Litonjua et al. v. L&R Corporation, et al., G.R. No. 130722 (1999), citing Philippine Industrial Co. v. El Hogar & Vallejo, G.R. No. L-20482 (1923)] C.2. CHARACTERISTICS MORTGAGE

OF

THE

A registered real estate mortgage is a right in rem, a lien that a creditor has on the property; therefore, it is inseparable from the collateral and until discharged, it follows the property. [Gomez-Somera] A real estate mortgage that is unregistered binds the parties to the contract and it only gives the mortgagee the right to demand the execution and recording of the mortgage. To bind third parties, a real estate mortgage must be recorded in the Registry of Property. It is not an essential requisite that the principal of the credit bears interest, or that the interest as compensation for the use of the principal and the enjoyment of its fruits be in the form of a certain percentage thereof.

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Mortgage extends to the natural accessions, to the improvements of growing fruits and the rents or income not yet received when the obligation becomes due, including indemnity from insurance, and/or amount received from expropriation for public use [Art. 2127] (a) Applies only when the accessions and accessories subsequently introduced belongs to the mortgagor. (b) To exclude them, there must be an express stipulation, or the fruits must be collected before the obligation becomes due. (c) Third persons who introduce improvements upon the mortgaged property may remove them at any time The right to alienate the real estate mortgage credit is the right of the mortgagee to assign its rights under the principal obligation secured. Although the mortgagee does not become the owner of the collateral, it owns the real estate mortgage and may alienate the same. [Art. 2128; Gomez-Somera] Alienation or assignment of mortgage credit is valid even if it is not registered.

D. KINDS (1) Voluntary – constituted by the will of the owner of the property on which it is created (2) Legal – required by law to be executed in favor of certain persons: (a) Persons in whose favor the law establishes a mortgage have no other right than to demand the execution and recording of the document in which the mortgage is formalized [Art. 2125] (b) The bondsman who is to be offered in virtue of a provision of law or of a judicial order shall have the qualifications prescribed in Art 2056 [integrity, capacity to bind himself, and sufficient property to answer for the obligation], and in other laws [Art. 2082] (c) If the person bound to give a bond should not be able to do so, a pledge or mortgage considered sufficient to recover his obligation shall be

CIVIL LAW

admitted in lieu thereof [Art. 2083] (3) Equitable – One which, although lacking the proper formalities of a mortgage, shows the intention of the parties to make the property a security for the debt. (a) Lien created by equitable mortgage ought not to be defeated by requiring compliance with formalities necessary to the validity of voluntary real estate mortgage. Ex.: Pacto de retro (b) Provisions governing equitable mortgage: Arts. 1365, 1450, 1454, 1602, 1603, 1604 and 1607.

E. PRINCIPLE OF INDIVISIBILITY OF PLEDGE/MORTGAGE [Arts. 2089 to 2090] A mortgage directly and immediately subjects the property upon which it is imposed. It is indivisible even though the debt may be divided, and such indivisibility is likewise unaffected by the fact that the debtors are not solidarity liable. [Dayrit v. CA, G.R. No. L-29388 (1970)] Where only a portion of the loan is released, the mortgage becomes enforceable only as to the proportionate value of the loan. [Central Bank v. CA, G.R. No. L-45710 (1985)] Indivisibility applies only as to pledgors/mortgagors who are themselves debtors in the principal obligation, and NOT to accommodation pledgors/ mortgagors. W hen several things are pledged or mortgaged, each thing for a determinate portion of the debt, the pledges or mortgage, are considered separate from each other. But when the several things are given to secure the same debt in its entirety, all of them are liable for the debt, and the creditor does not have to divide his action by distributing the debt among the various things pledged or mortgaged. Even when only a part of the debt remains unpaid, all the things are still liable for such balance. [Tolentino] The question is whether or not the written instrument in controversy was a mortgage or

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a conditional sale. The correct test, where it can be applied, is the continued existence of a debt or liability between the parties. If such exists, the conveyance may be held to be merely a security for the debt or an indemnity against the liability. [Reyes v. Sierra, G.R. No. L-28658 (1979), citing Cuyugan v. Santos, G.R. No. L-10265 (1916)]

F. ESSENTIAL REQUISITES COMMON TO PLEDGE AND MORTGAGE (a) Constituted to secure the fulfillment of a principal obligation. (b) Pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. (c) The persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. Note: Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. [Art. 2085] (d) Cannot exist without a valid obligation. (e) Debtor retains the ownership of the thing given as a security. (f) When the principal obligation becomes due, the thing pledged or mortgaged may be alienated for the payment to the creditor. [Art. 2087] (g) Must be recorded in the Registry of Property in order to be validly constituted. [Art. 2125] Note: The mortgage would still be binding between the parties even if the instrument is not recorded.

G. FORECLOSURE OF MORTGAGE Foreclosure – is the remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation secured by the mortgage. In general, an action for foreclosure of a mortgage is limited to the amount mentioned in the mortgage, except when the mortgage contract intends to secure future loans or advancements.

CIVIL LAW

Mortgage may be used as a “continuing security” which secures future advancements and is not discharged by the repayment of the amount in the mortgage. Acceleration clause allowed Acceleration clause, or the stipulation stating that on the occasion of the mortgagor’s default, the whole sum remaining unpaid automatically becomes due and demandable, is ALLOWED. Kinds of foreclosure 1. Judicial Foreclosure 2. Extrajudicial Foreclosure Judicial Foreclosure vs. Extrajudicial Foreclosure Judicial Extrajudicial Court intervenes No court intervention There is equity of There is right of redemption – period redemption – period starts from the start from date of finality of the registration of judgment until order certificate of sale of confirmation Decisions are Not appealable appealable No need for a Special power of special power of attorney in favor of attorney in the the mortgagee is contract of required in the mortgage contract G.1. JUDICIAL FORECLOSURE [Rule 68, Rules of Court] (1) May be availed of by bringing an action in the proper court which has jurisdiction over the area wherein the real property involved or a portion thereof is situated (2) If the court finds the complaint to be well- founded, it shall order the mortgagor to pay the amount due with interest and other charges within a period of not less than 90 days nor more than 120 days from the entry of judgment Note: The mortgagor may exercise the equity of redemption during this period of

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(3)

(4)

(5) (6)

(7)

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grace in order to extinguish the mortgage and retain ownership of the collateral by paying the mortgage obligation. [Top Rate International Services, Inc. v. IAC, G.R. Nos. L-67496 and L-68257 (1986)] It is this equity of redemption that is conferred on the mortgagor’s successorsin-interest or on third persons acquiring rights over the collateral from the mortgage subsequent. Although these subsequent or junior lienholders acquire the equity of redemption, this right is strictly subordinate to the superior lien of the first mortgagee. [Gomez-Somera] If the mortgagor fails to pay at time directed, the court, upon motion, shall order the property to be sold to the highest bidder at a public auction. Upon confirm ation of the sale by the court, also upon motion, it shall operate to divest the rights of all parties to the action and to vest their rights to the purchaser subject to such rights of redemption as may be allowed by law. Note: A foreclosure sale is not complete until it is confirmed. Thus, after the foreclosure sale but before its confirmation, the court may grant the judgment debtor or mortgagor the equity of redemption. Before the confirmation, the court retains control of the proceedings; execution on judgment The proceeds of the sale shall be applied to the payment of the: (a) costs of the sale; (b) amount due the mortgagee; (c) claims of junior encumbrancers or persons holding subsequent mortgages in the order of their priority; and (d) the balance, if any shall be paid to the mortgagor Sheriff’s certificate is executed, acknowledged and recorded to complete the foreclosure

Nature of proceedings

judicial

foreclosure

(1) Quasi in rem action. Hence, jurisdiction

may be acquired through publication.

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(2) Foreclosure is only the result or incident

of the failure to pay debt. (3) Survives death of mortgagor.

G.2. EXTRAJUDICIAL FORECLOSURE A real estate mortgage may be extrajudicially foreclosed only if there is a special power inserted or attached to the document in which the real estate mortgage appears and only in accordance with the provisions of Act No. 3135. [Gomez-Somera] [Act No. 3135] (1) Applies to mortgages where the authority to foreclose is granted to the mortgagee. (2) Authority is not extinguished by death of mortgagor or mortgagee. This is an agency coupled with interest. (3) Public sale should be made after proper notice to the public; otherwise, it is a jurisdictional defect which could render the sale voidable. General Rule: Statutory provisions governing posting of notice must be strictly complied with and even slight deviations will invalidate the notice. Exception: If the objectives are attained, immaterial errors and mistakes may not affect the sufficiency of the notice. [Metropolitan Bank and Trust Company v. Wong, G.R. No. 120859 (2001) discussing Olizon v. CA, G.R. No. 107075 (1994)] (4) There is no need to notify the mortgagor, where there is no contractual stipulation therefor. Proper notice consists of: (a) posting notice in three public places and/or (b) publication in newspaper of general circulation Purpose of notice is to obtain the best bid for the foreclosed property (5) Surplus proceeds of foreclosure sale belong to the mortgagor. (6) Debtor (who must be a natural person) has the right to redeem the property sold within 1 year from and after the date of sale. (a) If the mortgagee is a bank,

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quasi-bank or trust entity and the debtor is a juridical person, then there is no right of redemption. However, juridical mortgagors may redeem the property before the registration of the TCT to the buyer, which is similar to the equity of redemption. The TCT must be registered within three m onths after the foreclosure. (b) The mortgagor can only legally transfer the right to redeem and the use of the property during the period of redemption. (7) Remedy of party aggrieved by foreclosure is a petition to set aside sale and the cancellation of writ of possession. However, if the mortgagee is a bank, the mortgagor is required to post a bond equal to the value of the mortgagee’s claim. (8) Republication of the notice of sale is necessary for the validity of the postponed extrajudicial sale (9) In foreclosure of real estate mortgage under Act 3135, the buyer at auction may petition the land registration court for a writ of possession pending the one-year period of redemption of the foreclosed property. G.3. NATURE OF POWER OF FORECLOSURE BY EXTRAJUDICIAL SALE (1) Conferred for mortgagee’s protection. (2) An ancillary stipulation. (3) A prerogative of the mortgagee.

Note: (a) Both

should be distinguished from execution sale governed by Rule 39, ROC. (b) Foreclosure retroacts to the date of registration of mortgage. (c) A stipulation of upset price, or the minimum price at which the property shall be sold to become operative in the event of a foreclosure sale at public auction, is null and void. G.4. RIGHT TO SURPLUS OR DEFICIENCY

CIVIL LAW

The mortgagor is entitled to the surplus, if any, after payment of the proceeds of the sale. Right of the Mortgagee (1) Mortgagee is entitled to recover deficiency. This extends to judicial foreclosure of mortgage arising out of the settlement of estate. (2) If the deficiency is embodied in a judgment, it is referred to as deficiency judgment. (3) Action for recovery of deficiency may be filed even during redemption period. (4) Action to recover prescribes after 10 years from the time the right of action accrues.

G.5. EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE SALE (1) Where

there is right to redeem, inadequacy of price is immaterial because the judgment debtor may redeem the property. Exception: Where the price is so inadequate as to shock the conscience of the court, taking into consideration the peculiar circumstances. (2) Property may be sold for less than its fair market value, upon the theory that the lesser the price the easier it is for the owner to redeem. (3) The value of the mortgaged property has no bearing on the bid price at the public auction, provided that the public auction was regularly and honestly conducted. A suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action because its purpose is precisely to enforce the mortgage contract. [Caltex v. IAC, G.R. No. 74730 (1989)]

H. WAIVER OF SECURITY BY CREDITOR (1) Mortgagee

may waive the right to foreclose his mortgage and maintain a personal action for recovery of the indebtedness. (2) Mortgagee cannot have both remedies. This is because he only has one cause of action, the non-payment of the mortgage debt.

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I. REDEMPTION It is a transaction by which the mortgagor

Requisites for a Valid Redem ption:

reacquires the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created

(1) Redemption must be made within 12 months from the date of the registration of the sale in the Office of the Register of Deeds (a) For natural persons: one year from the registration of the TCT (b) For juridical persons: three months from foreclosure (before registration) (2) Payment of the purchase price of the collateral involved, plus 1% interest per month, together with the amount of any assessments or taxes if any, paid by the purchaser after the sale Note: Under RA 8791, the amount is the amount due under the mortgage deed (3) Written notice of the redemption must be served on the officer who made the sale and a duplicate filed with the Register of Deeds of the province.

KINDS: (1) Equity of redemption – in judicial foreclosure of real estate mortgage under the ROC, it is the right of the mortgagor to redeem the mortgaged property by paying the secured debt within the 120 day period from entry of judgment or after the foreclosure sale, but before the sale of the mortgaged property or confirm ation of sale A formal offer to redeem preserves the right of redemption, e.g., by filing an action to enforce the right to redeem (2) Right of redemption – in extrajudicial foreclosure of real estate mortgage, the right of the mortgagor to redeem the property within a certain period after it was sold for the satisfaction of the debt. (If the mortgagee is a bank, the redemption period expires after registration of the sale.) (a) For natural persons – one year from the registration of the TCT (b) For juridical persons – three months from the foreclosure (c) Formal offer to redeem must be with tender of redemption price to preserve right of redemption In a judicial foreclosure sale, the right of redemption must be allowed by law. The references in Rule 68 and Rule 39 to the right of redemption are not grants of this statutory prerogative. To claim a right of redemption in judicial foreclosure, there must be a specific law that allows it. Example: RA 8791 (General Banking Law of 2000)

Equity Redemption

of

Right Redemption

of

Sec. 3, Rule 68

Act No. 3135

Right to redeem the property after default in the performance of the obligation but before the foreclosure sale

Right to redeem the property within 1 year from the date or registration of the certificate of sale

Applies to judicial foreclosure of real estate and chattel mortgage

Applies to extrajudicial foreclosure of real estate mortgage

The rule up to now is that the right of a purchaser at a foreclosure sale is merely inchoate until after the period of redemption has expired without the right being exercised. The title to land sold under mortgage foreclosure remains, in the mortgagor or his grantee until the expiration of the redemption period and conveyance by the master's deed. [Medida v. CA, G.R. No. 98334 (1992)]

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VI. Antichresis

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D. AS DISTINGUISHED FROM OTHER CONTRACTS Antichresis

Antichresis – a real security transaction that arises by contract, where the antichretic creditor acquires the right to receive the fruits of an immovable of the antichretic debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal. [Art. 2132, NCC]

Pledge

Kind of property Real property

Personal property Perfection

Mere consent

A. CHARACTERISTICS

Delivery of thing pledged

Antichresis

(1) Accessory contract – it secures the

performance of a principal obligation (2) Formal contract – it must be in a specified form to be valid [Art. 2134, NCC] Note: The obligation to pay interest is not the essence of the contract of antichresis; antichresis is only applicable to securing the payment of interest-bearing loans. It is susceptible of guaranteeing all kinds of obligations, pure or conditional.

Real mortgage Possession

Delivered to creditor

Right to the fruits Creditor acquires only the right to receive fruits

The amount of the principal and the interest must be specified in writing; otherwise, the contract of antichresis shall be void [Art. 2134, NCC] There must be an express agreement that the 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.

C. OBJECT OF THE CONTRACT An antichresis can cover only the fruits of an immovable property. Delivery of the immovable is necessary for the creditor to receive the fruits, not to make the contract binding.

Creditor does not have the right to receive fruits, but a real right over the property is created

Paym ent of taxes and charges Creditor is generally obliged to pay

B. FORMAL REQUISITES

Retained by debtor

Creditor has no obligation to pay

Application of fruits First applied to the payment of interest, and then to principal

Mortgagee has no such obligation

D. OBLIGATIONS OF ANTICHRETIC CREDITOR (1) To pay taxes and charges on the estate, including necessary expenses [Art. 2135, NCC] Note: The creditor may avoid said obligation by: (a) Compelling the debtor to reacquire enjoyment of the property (b) By stipulation to the contrary (2) To apply all the fruits, after receiving them, to the payment of interest, if owing, and thereafter to the principal (3) To render an account of the fruits to the debtor (4) To bear the expenses necessary for its preservation and repair

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E. REMEDIES OF CREDITOR IN CASE OF NON-PAYMENT OF DEBT (1) Action for specific performance (2) Petition for the sale of the real property as in a foreclosure of mortgage under Rule 68 of the Rules of Court [Art. 2137, NCC] (a) The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge [Tavera v. El Hogar Filipino, Inc., G.R. 45963 (1939)] (b) A stipulation authorizing the antichretic creditor to appropriate the property upon the non-payment of the debt within the agreed period is void [Art. 2088, NCC] There is a right of retention in favor of the creditor, which is used as a means of extinguishing the obligation. The debtor cannot reacquire enjoyment of the immovable until he pays what he owes to the creditor. [Ortiz v. Kayanan, et al., G.R. No. L32974 (1979)] Because of the right of the creditor to judicially foreclose, antichresis is generally viewed as a species of real estate mortgage, in which the mortgagee retains possession of the collateral and takes the fruits of the property in lieu of interest on the debt. [Gomez-Somera]

CIVIL LAW

VIII. Quasi-Contracts A quasi-contract is that juridical relation resulting from a lawful, voluntary and unilateral act, and which has for its purpose the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another [Art. 2142]

A. NEGOTIORUM GESTIO (UNAUTHORIZED MANAGEMENT) Negotiorum gestio – takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority [Art. 2144]. As a rule, reimbursement must be made to the gestor (i.e., one who carried out the business) for necessary and useful expenses. The obligation does not arise: (1) When the property or business is not neglected or abandoned; (2) If in fact the manager has been tacitly authorized by the owner. In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404 regarding unauthorized contracts shall govern. In the second case, the rules on agency in Title X of this Book shall be applicable. [Art. 2144] A.1. OBLIGATIONS OF A GESTOR (1) Perform his duties with all the diligence of a good father of a family (2) Pay the damages which through his fault and negligence may be suffered by the owner of the property/business under his management [Art. 2145] (3) Be liable for the acts of the persons to whom he delegated all or some of his duties. This is without prejudice to the direct obligation of the delegate to the owner of the business. [Art. 2146]

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(a) If he undertakes risky operations which the owner was not accustomed to embark upon (b) If he has preferred his own interest to that of the owner (c) If he fails to return the property or business after demand of the owner (d) If he assumed management in bad faith [Art. 2147] (e) If he is manifestly unfit to carry on the management (f) If by his intervention he prevented a more competent person from taking up the management. [Art. 2148] Note: The gestor shall not be liable for (e) and (f) if the management was assumed to save the property or business from imminent danger. (5) Be personally liable for contracts which he entered into with third persons, even though he acted in the name of the owner, and there shall be no right of action between the owner and third persons.

CIVIL LAW

the latter may have suffered in the performance of his duties The above obligations shall be incumbent upon the owner if the management had for its purpose the prevention of an imminent and manifest loss, although no benefit may have been derived. [Art. 2150] If the owner did not derive any benefit and there was no imminent and manifest danger to the property or business, the owner would still be liable for the abovementioned obligations and expenses, provided: (1) The gestor has acted in good faith; and (2) The property or business is intact, ready to be returned to the owner. [Art. 2151] A.3. EFFECT OF RATIFICATION The ratification of the management by the owner of the business produces the effects of an express agency, even if the business may not have been successful. [Art. 2149] A.4. EXTINGUISHMENT OF MANAGEMENT

The gestor shall NOT be personally liable for such contracts, provided:

(1) When the owner repudiates or puts an

(a) The owner has expressly or tacitly ratified the management, or

(2) When the gestor withdraws from the

(b) When the contract refers to things pertaining to the owner of the business. [Art. 2152]

(3) By the death, civil interdiction, insanity or

Note: The responsibility of two or more gestors shall be solidary, unless the management was assumed to save the thing or business from imminent danger. A.2. OBLIGATIONS OF THE OWNER OF THE PROPERTY OR BUSINESS Although the management was not expressly ratified, the owner who enjoys the advantages of the same shall: (a) Be liable for the obligations incurred in

his interest

end thereto management, subject to Art. 2144 insolvency of the owner or the gestor. [Art. 2153]

B. SOLUTIO PAYMENT)

INDEBITI

Solutio indebiti – takes place when something is received when there is no right to demand it, and it was unduly delivered through mistake. The recipient has the duty to return it [Art. 2154]. This situation covers payment by reason of a mistake in the construction or application of a doubtful or difficult question of law [Art. 2155]

(b) Reimburse the gestor for the necessary

and useful expenses and for the damages

(UNDUE

WHEN DEBT NOT YET DUE

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If the payer was in doubt whether the debt was due, he may recover if he proves that it was not due. [Art. 2156]

(2) For the return of the price or assign the

RESPONSIBILITY PAYEES

MORE

EXEMPTION FROM THE OBLIGATION TO RESTORE THE PAYMENT UNDULY MADE

When there has been payment of what is not due, their responsibility is solidary.

A person who, believing in good faith that the payment was being made of a legitimate and subsisting claim,

OF

TWO

OR

WHEN MONEY OR THING DELIVERED IS OWNED BY THIRD PERSON The payee cannot demand that the payor prove his ownership of the thing delivered. Nevertheless, should he discover that the thing has been stolen and who its true owner is, he must advise the latter. If the owner, in spite of such information, does not claim it within the period of one month, the payee shall be relieved of all responsibility by returning the thing deposited to the payor. If the payee has reasonable grounds to believe that the thing has not been lawfully acquired by the payor, the former may return the same. [Art. 2158] LIABILITY OF PAYEE If in bad faith, he shall be liable:

action to collect the sum if he has alienated the same. [Art. 2160]

(1) destroyed the document, or (2) allowed the action to prescribe, or (3) gave up the pledges, or (4) cancelled the guaranties for his right shall be exempt from the obligation to restore. The person who paid unduly may proceed only against the true debtor or the guarantors with regard to whom the action is still effective. [Art. 2162] PRESUMPTION OF PAYMENT BY MISTAKE, DEFENSE The presumption arises if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause.

(1) For legal interest if a sum of money is

involved, or

C. OTHER QUASI-CONTRACTS

(2) For the fruits received or which should

have been received if the thing produces fruits, and

(1) When, without the knowledge of the

person obliged to give support, it is given by a stranger, the latter shall have a right to claim the same from the former, unless it appears that he gave it out of piety and without intention of being repaid. [Art. 2164]

(3) For any loss or impairment of the thing

for any cause, and (4) For damages to the person who delivered

the thing, until it is recovered. [Art. 2159]

(2) When funeral expenses are borne by a

third person, without the knowledge of those relatives who were obliged to give support to the deceased, said relatives shall reimburse the third person, should the latter claim reimbursement. [Art. 2165]

If in good faith, he shall be liable: (1) For the impairment or loss of the thing

certain and determinable or its accessories and accessions insofar as he has thereby been benefited.

(3) When the person obliged to support an

orphan, or an insane or other indigent Page 448 of 574

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person unjustly refuses to give support to the latter, any third person may furnish support to the needy individual, with right of reimbursement from the person obliged to give support. The provisions of this article apply when the father or mother of a child under eighteen years of age unjustly refuses to support him. [Art. 2166]

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calamity, anyone who objects to the plan and refuses to contribute to the expenses but is benefited by the project as executed shall be liable to pay his share of said expenses. [Art. 2174] (12)Any person who is constrained to pay the

(4) When through an accident or other cause

a person is injured or becomes seriously ill, and he is treated or helped while he is not in a condition to give consent to a contract, he shall be liable to pay for the services of the physician or other person aiding him, unless the service has been rendered out of pure generosity. [Art. 2167] (5) When during a fire, flood, storm, or other

calamity, property is saved from destruction by another person without the knowledge of the owner, the latter is bound to pay the former just compensation. [Art. 2168] (6) When the government, upon the failure of

any person to comply with health or safety regulations concerning property, undertakes to do the necessary work, even over his objection, he shall be liable to pay the expenses. [Art. 2169] (7) When by accident or other fortuitous

event, movables separately pertaining to two or more persons are commingled or confused, the rules on co-ownership shall be applicable. [Art. 2170] (8) The rights and obligations of the finder of

lost personal property shall be governed by Articles 719 and 720. [Art. 2171] (9) The right of every possessor in good faith

to reimbursement for necessary and useful expenses is governed by Article 546. [Art. 2172] (10)When

a third person, without the knowledge of the debtor, pays the debt, the rights of the former are governed by Articles 1236 and 1237. [Art. 2173]

(11)When in a small community a nationality

of the inhabitants of age decide upon a measure for protection against lawlessness, fire, flood, storm or other Page 449 of 574

taxes of another shall be entitled to reimbursement from the latter. [Art. 2175]

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IX. Concurrence and Preference of Credits Concurrence of credits – implies possession by two or more creditors of equal rights or privileges over the same property or all of the property of the debtor, and the value of such property is insufficient to pay in full all the claims. Preference of credits – is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent’s assets, as opposed to a lien, which creates a charge on a particular property. [DBP v. NLRC, G.R. No. 86932 (1990)] Preference – is the right held by a creditor to be preferred in the payment of his claim above others out of the debtor’s assets.

A. WHEN RULES ON PREFERENCE APPLICABLE (1) (2) (3) (4) (5)

There are two or more creditors With separate and distinct claims Against the same debtor Who has insufficient property, and Such debtor is insolvent

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which the liens attach, is concerned. [GomezSomera] Pro-rating – total am ount to be paid is equal to: Credit ------------------ x value of property Total amount of concurring debts NB: Sec. 136 of RA 10142 (FRIA) creates a special preference of credit in favor of traderelated claims upon trade-related assets. This special preferred credit enjoys absolute priority over all other claims, including taxes. [Gomez-Somera] Article 2241 refers only to specific immovable property. It does not cover claims for the payment of money, which is generic property and not specific or determinate. [Cordova v. Reyes Daway Lim Bernardo Lindo Rosales Law Offices, G.R. No. 146555 (2007)] (2) Ordinary Preferred Credits These enjoy a preference, excluding the credits that are later in order, but only as against the value of the property not otherwise subjected to any special preferred credit.

B. CLASSIFICATION OF CREDITS (1) Special Preferred Credits These are considered as mortgages or pledges of real or personal property, or liens within the purview of legal provisions governing insolvency. [Art. 2243, NCC]

Art. 2244 does not create a lien on specific property; rather, it creates rights in favor of certain creditors to have the free property of the debtor applied in accordance with an order of preference. [Gomez-Somera]

Special preferred credits exclude all other claims to the extent of the value of the affected property.

NB: Article 110 of the Labor Code does not create a lien in favor of workers or employees for unpaid wages upon the properties of the employer. The first preference in Article 110 instead modifies the order of preference in Article 2244 by removing the one-year limitation and by moving claims for unpaid wages from second priority to first priority in the order of preference in 2244. [GomezSomera]

These take precedence over ordinary preferred credits insofar as the property, to

For Articles 2242 and 2249 to apply, there must be first some proceedings where the

Taxes in Art. 2241 and 2242 shall first be satisfied. [Art. 2243] Note: Only taxes in 2241 and 2242 enjoy a preference; for all other claims, there is only a concurrence of credits. [Gomez-Somera]

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claims of all the preferred creditors may be bindingly adjudicated [De Barretto v. Villanueva, G.R. No. L-14938, resolution (1962)]. This applies to cases involving either specific immovable or specific movable property. [DBP v CA, G.R. No. 126200 (2001)] Taxes and assessments in 2244 do not have the overriding preference that 2241 and 2242 create. [Gomez-Somera] (3) Common Credits These enjoy no preference, as there is only a concurrence of credits, which must be paid pro rata regardless of dates [Arts. 2245, 2251]. These are not liens and do not attach to any specific property of the debtor. [GomezSomera] B.1. SPECIAL PREFERRED CREDITS ON SPECIFIC MOVABLE PROPERTY Art. 2241. With reference to specific movable property of the debtor, the following claims or liens shall be preferred: (1) Duties, taxes and fees due thereon to the State or any subdivision thereof; (2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them; (3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity; neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally; (4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value thereof;

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(5) Credits for the making, repair, safekeeping or preservation of personal property, on the movable thus made, repaired, kept or possessed; (6) Claims for laborers' wages, on the goods manufactured or the work done; (7) For expenses of salvage, upon the goods salvaged; (8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest; (9) Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses, until their delivery and for thirty days thereafter; (10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests; (11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested; (12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased and on the fruits of the same, but not on money or instruments of credit; (13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon the price of the sale. In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully taken, the creditor may demand them from any possessor, within thirty days from the unlawful seizure. Trade-related claim preference over trade-related assets Sec 136. RA 10142. …trade-related claims of clients or customers of a securities market participant which, for purposes of investor protection, are hereby deemed to have absolute priority over all other claims of whatever nature or kind insofar as traderelated assets are concerned.

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B.2. SPECIAL PREFERRED CREDITS ON SPECIFIC IMMOVABLE PROPERTY AND REAL RIGHTS Art. 2242. With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right: (1) Taxes due upon the land or building; (2) For the unpaid price of real property sold, upon the immovable sold; (3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; (4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals or other works, upon said buildings, canals or other works; (5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged; (6) Expenses for the preservation or improvement of real property when the law authorizes reimbursement, upon the immovable preserved or improved; (7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits; (8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided; (9) Claims of donors or real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; (10)Credits of insurers, upon the property insured, for the insurance premium for two years. B.3. ORDINARY PREFERRED CREDITS Art 2244. With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named:

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(1) Proper funeral expenses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court; (2) Credits for services rendered the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency; (3) Expenses during the last illness of the debtor or of his or her spouse and children under his or her parental authority, if they have no property of their own; (4) Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment; (5) Credits and advancements made to the debtor for support of himself or herself, and family, during the last year preceding the insolvency; (6) Support during the insolvency proceedings, and for three months thereafter; (7) Fines and civil indemnification arising from a criminal offense; (8) Legal expenses, and expenses incurred in the administration of the insolvent's estate for the common interest of the creditors, when properly authorized and approved by the court; (9) Taxes and assessments due the national government, other than those mentioned in Articles 2241, No. 1, and 2242, No. 1; (10) Taxes and assessments due any province, other than those referred to in Articles 2241, No. 1, and 2242, No. 1; (11) Taxes and assessments due any city or municipality, other than those indicated in Articles 2241, No. 1, and 2242, No. 1; (12) Damages for death or personal injuries caused by a quasi-delict; (13) Gifts due to public and private institutions of charity or beneficence; (14)Credits which, without special privilege, appear in [a] a public instrument; or (b) in a final judgment, if they have been the subject of litigation. These credits shall have preference among themselves in the order of priority of the dates of the instruments and of the judgments,

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respectively. W orker preference bankruptcy

in

case

of

PD 442 Labor Code, as amended, Art. 110. In the event of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid. B.4. COMMON CREDITS Art. 2245. Credits of any other kind or class, or by any other right or title not comprised in the four preceding articles, shall enjoy no preference.

C. ORDER CREDITS

OF

PREFERENCE

OF

(1) Credits which enjoy preference with respect to specific movables exclude all others to the extent of the value of the personal property to which the preference refers [Art. 2246]. (2) If there are two or more credits with respect to the same specific movable property, they shall be satisfied pro rata, after the payment of duties, taxes and fees due the State or any subdivision thereof [Art. 2247] (3) Those credits which enjoy preference in relation to specific real property or real rights exclude all others to the extent of the value of the immovable or real right to which the preference refers [Art.2248]. (4) If there are two or more credits with respect to the same specific real property or real rights, they shall be satisfied pro rata, after the payment of the taxes and assessment of the taxes and assessments upon the immovable property or real right [Art. 2249]. (5) The excess, if any, after the payment of the credits which enjoy preference with respect to specific property, real or personal, shall be added to the free

CIVIL LAW

property which the debtor may have, for the payment of other credits [Art. 2250]. (6) Those credits which do not enjoy any preference with respect to specific property, and those which enjoy preference, as to the amount not paid, shall be satisfied according to the following rules: (a) Order established by Art. 2244 (b) Common credits referred to in Art. 2245 shall be paid pro rata regardless of dates [Art. 2251]. Articles 2241 and 2242 jointly with Articles 2246 to 2249 establish a two-tier order of preference. The first tier includes only taxes, duties and fees due on specific movable or immovable property. All other special preferred credits stand on the same second tier to be satisfied pari passu and pro rata, out of any residual value of the specific property to which such other credits relate. [Republic v. Peralta, G.R. No. 56568 (1920)]

D. EXEMPT PROPERTY (1) Present property (a) Family home [Arts. 152, 153 and 155] (b) Right to receive support, as well as money or property obtained by such support, shall not be levied upon on attachment or execution. [Art. 205] (c) Rule 39, Sec. 13 (d) Sec 118, Public Land Act [CA 141, as amended] (2) Future property: (a) A debtor who obtains a discharge from his debts on account of insolvency, is not liable for the unsatisfied claims of his creditors with said property [Sec. 68 and 69, Insolvency Law, Act 1956] (3) Property in custodia legis and of public dominion

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LAND TITLES AND DEEDS

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LAND TITLES AND DEEDS

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LAND TITLES AND DEEDS

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I. Torrens System

Estate – An estate, strictly speaking, represents the nature, extent, degree, and quantity of a person’s interest in land.

LAND TITLE – It is the evidence of the right of the owner or the extent of his interest, by which he can maintain control, and as a rule, assert right to exclusive possession and enjoyment of the property. [Pena, Registration of Land Titles and Deeds, p. 3]

TYPES OF ESTATE:

Title and Certificate Distinguished Title

of

(1) Freehold Estate – Indicates title of ownership (a) Fee Simple – An absolute title in perpetuity; Title to land is conferred upon a man and his heirs absolutely and without any limitation imposed upon the estate

Title

(b) Fee Tail – One designed to pass title from grantee to his heirs, in the intent of the grantor being to keep the property in the grantee’s line of issue

Certificate of Title

Definition Lawful cause or It is a mere evidence ground of possessing of ownership; it is not that which is ours. the title to the land itself.1 That which constitutes a just cause of exclusive possession, or which is the foundation of ownership of property.

(c) Life Estate – One held for the duration of the life of the grantee; In some cases, it may terminate earlier as by forfeiture (2) Less-than-Freehold Estate – Signifies some sort of right short of title (a) Estate for Years – In the nature of a lease; grantee or lessee takes over possession of the land for a period agreed upon but the grantor retains the legal title to the property (b) Tenancy from period to period – Also in the nature of a lease which may run from month to month or from year to year, with the peculiarity of automatic renewal from time to time, unless expressly terminated by either party

The title is a conclusive evidence of ownership and it cannot be attacked collaterally. DEED – A written instrument executed in accordance with law, wherein a person grants or conveys to another certain land, tenements or hereditaments.

(c) Tenancy at will – Another form of lease agreement where a person is permitted to occupy the land of another without any stipulation as to period, but either party reserves the right to terminate the occupation at will or at any time

ELEMENTS OF A DEED: (a) Grantor (b) Grantee (c) Words of Grant (d) Description of the property involved (e) Signature of the grantor (f) At least two (2) witnesses (g) Notarial acknowledgment

1

LAND REGISTRATION – A judicial or administrative proceeding whereby a person’s claim of ownership over a particular land is determined and confirmed or recognized so that such land and the ownership thereof may be recorded in a public registry.

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LAND TITLES AND DEEDS

Nature of Land Registration – Judicial proceedings for the registration of lands throughout the Philippines shall be in rem and shall be based on the generally accepted principles underlying the Torrens system [Sec. 2, par. 1, PD 1529]

(3) As held in Legarda v. Saleeby [31 Phil. 590 (1915)] (a) To quiet title to the land and to stop forever any question as to the legality of said title (b) To relieve the land of unknown claims

It is therefore binding on the whole world because “by the description in the notice (of initial hearing of the application for registration) “To Whom It May Concern,” all the world are made parties defendant.” [Aquino, Land Registration and Related Proceedings, p. 3, citing Esconde v. Borlongay, 152 SCRA 603, 1987] LAWS IMPLEMENTING REGISTRATION (1)

(c) To guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized (d) To give every registered complete peace of mind

(f) To avoid conflicts of title in and to real estate and to facilitate transactions

Public Land Act [CA 141, as amended]

(3) Cadastral Act [Act 2259, as amended] (4) Indigenous Peoples Rights Act of 1997 [RA 8371] (5) Emancipation amended]

Decree

[PD

27,

(4) As held in Capitol Subdivisions, Inc. v. Province of Negros Occidental [7 SCRA 60 (1963)] (a) To avoid possible conflicts of title in and to real property, and

as

(b) 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

(6) Comprehensive Agrarian Reform Law of 1988 [RA 6657, as amended] To simplify and streamline land registration proceedings, Presidential Decree No. 1529 was issued on June 11, 1978, otherwise known as the Property Registration Decree, governing registration of lands under the Torrens system as well as the recording of transactions relating to unregistered lands, including chattel mortgages. This Decree consolidates, in effect, all pre-existing laws on property registration with such appropriate modifications as are called for by existing circumstances. [Pena, p. 9]

Object of Registration – Only real property or real rights may be the object of registration under the existing land registration laws. CLASSIFICATION OF LANDS: (1) Private or public (2) Alienable or inalienable (3) Registered or unregistered (4) Registrable or Non-registrable

PURPOSES OF LAND REGISTRATION

owner

(e) To issue a certificate of title to the owner which shall be the best evidence of his ownership of the land

LAND

(2) Property Registration Decree [PD 1529, as amended]

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(1) Constructive notice to the whole world. [Sec. 52, PD 1529] (2) To notify and protect the interests of strangers to a given transaction, who may be ignorant thereof [Sapto, et al. v. Fabiana, 103 Phil. 683, 1958] PAGE 456 OF 574

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Registrable lands are: (1) Alienable public agricultural lands, •

If the land is in the public domain, the land must be classified as alienable and disposable. It must be classified as such at the time of filing the application for registration. [Republic v. CA and Naguit, 2005]

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universal guaranty. This certificate of title should better be known as certificate of title and encumberances. In the words of Torrens himself the main object is “to simplify, quicken, and cheapen the transfer of real estate and to render title safe and indefeasible.” [The Philippine Torrens System by Florencio Ponce 1964]

(2) Private lands

ADVANTAGES

Non-registrable lands - those found in the Civil Code dealing with non-registrable properties (e.g. property of public dominion)

(1) Secures title (2) Protection against fraud (3) Simplified dealings

Torrens System - A system for registration of land under which, upon landowner’s application, the court may, after appropriate proceedings, direct the issuance of a certificate of title. [Black’s Law Dictionary]; those systems of registration of transactions with interest in land whose declared object is, under governmental authority, to establish and certify to the ownership of an absolute and indefeasible title to realty, and to simplify its transfer. [Grey Alba v De la Cruz, G.R. No. L-5246 (1910)] The boldest effort to grapple with the problem of simplification of title to land was made by Mr. (afterwards Sir Robert) Torrens, a layman, in South Australia in 1857. . . . In the Torrens system title by registration takes the place of "title by deeds" of the system under the "general" law. A sale of land, for example, is effected by a registered transfer, upon which a certificate of title is issued. The certificate is guaranteed by statute, and, with certain exceptions, constitutes indefeasible title to the land mentioned therein. The object of the Torrens system, then, is to do away with the delay, uncertainty, and expense of the old conveyancing system. The Torrens system was introduced in the Philippines by Act No. 496, which took effect on Jan. 1, 1903. This was later amended and superseded by PD 1529 which took effect on June 11, 1978.

(4) Restoration of the estates to its just value, whose depreciation is caused by some blur, technical defect (5) Barred the recurrence of faults in the title [Legarda v. Saleeby] Nature: Judicial in nature. Purpose: The real purpose of the Torrens system of registration is to quiet title to land; to put a stop forever to any question of the legality of the title, except claims which may arise subsequent thereto. [AGCAOILI at 9] ADMINISTRATION SYSTEM

OF

THE

TORRENS

Administration of the Torrens System (1) Land Registration Authority • The agency charged with the efficient execution of the laws relative to the registration of lands • Under the executive supervision of the DOJ • Consists of an Administrator assisted by 2 Deputy Administrators (2) Register of Deeds

The underlying principle of the Torrens system is security with facility in dealing with land. This is made possible by defining the absolute status of a given property in a certificate of title with a governmental and PAGE 457 OF 574

• Constitutes a public repository of records of instruments affecting registered or unregistered lands and chattel mortgages in the province or city wherein such office is situated

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• Headed by the Register of Deeds, assisted by a Deputy CERTIFICATE OF TITLE The Torrens Title – Certificate of ownership issued by the Register of Deeds naming and declaring the owner of the real property described therein free from all liens and encumbrances, except such as may be expressly noted thereon or otherwise reserved by law (1)

Original Certificate of Title (OCT) – It is the first certificate of title issued in the name of the registered owner by the Register of Deeds covering a parcel of land which had been registered under the Torrens System, by virtue of judicial or administrative proceedings

(2) Transfer Certificate of Title (TCT) – The subsequent certificate of title pursuant to any deed of transfer or conveyance to another person. The Register of Deeds shall make a new certificate of title and give the registrant an owner’s duplicate certificate. The previous certificate shall be stamped “cancelled.”

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all courts of the Philippines, and shall be conclusive as to all matters contained therein, principally the identity of the owner of the covered land thereby and identity of the land. A Torrens title, once registered, cannot be defeated, even by adverse, open and notorious possession. A registered title under the Torrens system cannot be defeated by prescription. The title, once registered, is notice to the whole world. All persons must take notice. No one can plead ignorance of the registration. [Egao v. CA, 1989] EFFECT OF REGISTRATION UNDER THE TORRENS SYSTEM (1) Land is placed under the operation of the Torrens system (2) Claims and liens of whatever character existing against the land prior to the issuance of the certificate of title are cut off by such certificate and the certificate so issued binds the whole world, including the government

(3) Patents – Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree [PD 1529, Sec. 103, par. 1] (a) Patents only involve public lands which are alienated by the Government pursuant to the Public Land Act (CA 141, as amended] (b) The patent (even if denominated as deed of conveyance) is not really a conveyance but a contract between the grantee and the Government and evidence of authority to the Register of Deeds to make registration. (c) The act of registration is the operative act to affect and convey the land. Probative Value: A Torrens Certificate of Title is valid and enforceable against the whole world. It may be received in evidence in PAGE 458 OF 574

(a) It is an elemental rule that a decree of registration bars all claims and rights which arose or may have existed prior to the decree of registration. By the issuance of the decree, the land is bound and title thereto quieted, subject only to certain exceptions under the property registration decree. [Heirs of Alejandra Delfin, namely, Leopoldo Delfin, et al. v. Avelina Rabadon, G.R. No. 165014, July 31, 2013] (b) Exceptions: (i) Those claims certificate

noted

on

the

(ii) Liens, claims, or rights arising or existing under the laws and the Constitution, which are not by law required to appear on record in the Register in order to be valid (iii) Unpaid real estate taxes levied and assessed within 2 years immediately preceding the acquisition of any right over the land by an innocent purchaser for value

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(3) Title to the prescriptible

LAND TITLES AND DEEDS

land

becomes

non-

CIVIL LAW

Exceptions: (1) The grantor,

(a) Even adverse, notorious, and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title [JM Tuason and Co. Inc. v. CA, 1979] (b) The fact that the title to the land was lost does not mean that the land ceased to be registered land before the reconstitution of its title. It cannot perforce be acquired by prescription. [Ruiz v. CA, 1977] (4) Land becomes incontrovertible and indefeasible. A decree of registration and registered title cannot be impugned, enlarged, altered, modified, or diminished either in collateral or direct proceeding after the lapse of the 1-year period prescribed by the law. (a) Exceptions: (i) If previous valid title of the same land exists (ii) When the land covered is not capable of registration (iii) When acquisition of certificate is attended by fraud (5) Torrens certificate is presumed valid and devoid of flaws. Note: Registration is not equivalent to legal title • Under the Torrens system, registration only gives validity to the transaction or creates a lien upon the land. It merely confirms, but does not confer, ownership [Lu v. Manipon, GR No. 147072, 2002] EFFECT OF NON-REGISTRATION If a purchaser, mortgagee or grantee should fail to register his deed the conveyance, in light of our existing registration laws, shall not be valid against any person unless registered.

(2) His heirs and devisees, and (3) Third persons having actual notice or knowledge thereof. It is a settled rule that lands under a Torrens title cannot be acquired by prescription or adverse possession. Section 47 of P.D. No. 1529, the Property Registration Decree, expressly provides that no title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession. [Dream Village Neighborhood Association, Inc., represented by its Incumbent President Greg Seriego v. Bases Conversion Development Authority, G.R. No.192896, July 24, 2013.] DEALINGS IN LAND BEFORE ISSUANCE OF DECREE: With the filing of an application for registration, the land described therein does not cease to become open to any lawful transaction. If the transaction takes place before the issuance of the decree of registration, Section 22 of PD 1529 provides that the instrument is to be presented to the RTC, together with a motion praying that the same be considered in relation with the pending application. However, if the motion is filed after the decision of adjudication has become final but before the issuance of the decree by the Administrator of Land Registration Authority, the court shall require the interested party to pay the fees prescribed as if such instrument had been presented for registration in the office of the Register of Deeds. [Pena, p. 7273] LACHES, WHEN APPLICABLE: Laches sets in if it would take 18 years for a person to file an action to annul the land registration proceedings, especially so if the registrant has already subdivided the land and sold the same to innocent third parties. A party’s long inaction or passivity in asserting his rights over disputed property precludes him from recovering the same. [Heirs of Teodoro dela Cruz vs. CA, 298 SCRA 172; Aurora Ignacio v. Valeriano Basilio, et al., G.R. No. 122824, Sept. 26, 2001]

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II. The Regalian Doctrine

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lagoons.

A western legal concept that was first introduced by the Spaniards into the country through the laws of the Indies and the Royal Cedulas whereby the Philippines passed to Spain by virtue of “discovery” and conquest. Consequently, all lands became the exclusive patrimony and dominion of the Spanish Crown. [Agcaoili]

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.

Sec. 2, Art. Constitution

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

XII

of

the

1987

All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of waterpower, beneficial use may be the measure and limit of the grant. The State shall protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish workers in rivers, lakes, bays, and

The principle of State ownership of lands and all other natural resources had its roots in the 1935 Constitution, which expressed the overwhelming sentiment in the Convention in favor of the principle of State ownership of natural resources and the adoption of the Regalian doctrine as articulated in Sec. 1, Art XIII. The 1973 Constitution reiterated the Regalian Doctrine in Sec. 8, Art. XIV. The present Constitution provides that, except for agricultural lands of the public domain which alone may be alienated, forest or timber, and mineral lands, as well as all other natural resources must remain with the State, the exploration, development, and utilization of which shall be subject to its full control and supervision albeit allowing it to enter into co-production, joint venture, or production-sharing agreements, or into agreements with foreign-owned corporations involving technical or financial assistance for large-scale exploration, development, and utilization. [Secs. 2 and 3, Art. XII; La BugalB’laan Tribal Association, Inc. v. Ramos] The Regalian Doctrine is enshrined in the 1987 Constitution [Art 12, Sec 2 & 3] which states that all lands of public domain belong to the State, thus private title to land must be traced to some grant, express or implied, from the State, i.e. The Spanish Crown or its

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successors, the American Colonial government and thereafter the Philippine Republic It does not negate native title to lands held in private ownership since time immemorial. [Cruz v. Sec. of Environment and Natural Resources] Native title recognizes ownership of land by Filipinos independent of any grant from the Spanish crown on the basis of possession since time immemorial [cf: Cariño v. Insular Government] Lands embraced by native title are presumed to have been held prior to the Spanish conquest and never to have been public land.

A. EFFECTS (1) All lands of public domain belong to the State, and that the State is the source of any asserted right to ownership in land and charged with the conservation of such patrimony [Republic v. IAC, GR No. 71285] (2) Under the Regalian doctrine, all lands of whatever classification and other natural resources not otherwise appearing to be clearly within private ownership are presumed to belong to the State which is the source of any asserted right to ownership of land. [Repubic v Remnan Enterprises, Inc. G.R. No. 199310] (3) The burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person applying for registration (or claiming ownership), who must prove that the land subject of the application is alienable or disposable. To overcome this presumption, incontrovertible evidence must be established that the land subject of application (or claim) is alienable or disposable. [Valiao v Republic, G.R. No. 170757]

CIVIL LAW

B. CONCEPT OF NATIVE TITLE, TIME IMMEMORIAL POSSESSION A recognized exception to the theory of jura regalia, the ruling in Cariño v. Insular Government, institutionalized the recognition of the existence of native title to land, or ownership of land by Filipinos by virtue of possession under a claim of ownership since time immemorial and independent of any grant from the Spanish Crown [Agcaoili] Lands under native title are not part of public domain, “lands possessed by an occupant and his predecessors since time immemorial, such possession would justify the presumption that the land had never been part of the public domain or that it had been private property even before the Spanish conquest [Republic v. CA, GR No. 130174] CERTIFICATE OF ANCESTRAL DOMAIN TITLE: A formal recognition, when solicited by Indigenous Cultural Communities/ Indigenous People (ICCs/IPs) concerned, shall be embodied in a Certificate of Ancestral Domain Title (CADT), which shall recognize the title of the concerned ICCs/IPs over the territories identified and delineated [Sec. 11, IPRA] Ancestral Domains refer to all areas generally belonging to ICCs/IPs comprising lands, inland waters, coastal areas, and natural resources therein, held under a claim of ownership, occupied or possessed by ICCs/IPs, by themselves or through their ancestors, communally or individually since time immemorial, continuously to the present except when interrupted by war, force majeure or displacement by force, deceit, stealth or as a consequence of government projects or any other voluntary dealings entered into by government and private individuals/corporations, and which are necessary to ensure their economic, social and cultural welfare. It shall include ancestral lands, forests, pasture, residential, agricultural, and other lands individually owned whether alienable and disposable or otherwise, hunting grounds, burial grounds, worship areas, bodies of water, mineral and other natural resources, and lands which may no longer be exclusively occupied by ICCs/IPs but from

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which they traditionally had access to for their subsistence and traditional activities, particularly the home ranges of ICCs/IPs who are still nomadic and/or shifting cultivators Certificate of Ancestral Domain Title (CADT) refers to a title formally recognizing the rights of possession and ownership of ICCs/IPs over their ancestral domains identified and delineated in accordance with this law [Sec. 3(c), IPRA] Certificate of Ancestral Lands Title (CALT) refers to a title formally recognizing the rights of ICCs/IPs over their ancestral lands. Individually-owned ancestral lands, which are agricultural in character and actually used for agricultural, residential, pasture, and tree farming purposes, including those with a slope of eighteen percent (18%) or more, are hereby classified as alienable and disposable agricultural lands [Sec. 12, IPRA] Native title, however, is a right of private ownership particularly granted to ICCs/IPs over their ancestral lands and domains. The IPRA categorically declares ancestral lands and domains held by native title as never to have been public land. [Cruz v. Sec. of Environment and Natural Resources, 2000, GR No. 135385]

CIVIL LAW

III. Citizenship Requirement A. INDIVIDUALS Art. XII, Sec. 3, 1987 Constitution provides, in part: Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant. The Krivenko Doctrine - The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of public domain. Private land may be transferred or conveyed only to individuals or entities ‘qualified to acquire lands of public domain’ [II Bernas] The 1935 Constitution reserved the right for Filipino citizens or corporations at least sixty percent of the capital of which was owned by Filipinos. Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence they have also been disqualified from acquiring private lands. [Krivenko v. Register of Deeds, GR No. L-630, 1947] General Rule: Non-Filipinos cannot acquire or hold title to private lands of public domain, except only by way of legal succession [Halili v. CA, GR No. 113539, Sec. 2, 5 Art XII Constitution] Exceptions:

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(1) Aliens by way of hereditary succession [Sec. 7, Art. XII, 1987 Constitution] (2) Natural born citizens who have lost their citizenship: For business use: limited to 5,000 sq. m. for urban land and 3 hectares for rural land [RA No. 7042 as amended by RA No. 8179] But where a Filipino citizen naturalized as a citizen in a foreign country has “reacquired” his Philippine citizenship under the terms of RA 9225 (August 29, 2003) otherwise known as the “Citizenship Retention and Reacquisition Act of 2003,” the area limitations may no longer apply since the law expressly grants him the same right, as any Filipino citizen, to “enjoy full civil and political rights” upon the reacquisition of his Filipino citizenship [AGCAOILI at 189]. (3) Aliens, although disqualified to acquire lands of public domain, may lease private land for a reasonable period provided, that such lease does not amount to a virtual transfer of ownership. They may also be given an option to buy property on the condition that he is granted Philippine citizenship. [Llantino v. Co liong Chong, GR No. 29663] (4) Lands acquired by an American citizen prior the proclamation of Philippine Independence on July 4, 1946 but after the passage of the 1935 Constitution may be registered, based on the ordinance appended to the 1935 Constitution. [Moss v. Director of Lands, GR No. L-27170] (5) Land sold to an alien which is now in the hands of a naturalized citizen can no longer be annulled [De Castro v. Tan, GR No. L-31956]. The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. The purpose of the prohibition ceases to be applicable. [Barsobia v. Cuenco, GR No. L-33048]

CIVIL LAW

B. CORPORATIONS Private corporations may not hold alienable lands of the public domain except by lease for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. [1987 Constitution, Art. XII, Sec. 3] Lim itations to Ownership of Land by Corporations: (1) For private lands: •

At least 60% Filipino [Sec. 2, Art. XII, 1987 Constitution; Agcaoili]

•

Restricted as to extent reasonably necessary to enable it to carry out the purpose for which it was created

•

If engaged in agriculture, it is restricted to 1,024 hectares

(2) For patrimonial property of the State [Sec. 3, Art. XII, 1987 Constitution] •

Lease only for a limited period of 25 years

•

Limited to 1,000 hectares

•

Applies to both Filipino and Foreign Corporations

•

This limitation does not apply where the corporation acquired the land, the same was already private land [Rep. v IAC and Acme]

A corporation sole may acquire and register private agricultural land [RC Apostolic Administrator of Davao v. LRC, GR No. L-8415 (1957)]: A corporation sole, which consists of one person only, is vested with the right to purchase and hold real estate and register the same in trust for the faithful or members of the religious society or church for which the corporation was organized

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IV. Original Registration

(2) Involuntary on the part of the claimant but they are compelled to substantiate their claim or interest

Original Registration - This is a proceeding brought before the land registration court to determine title or ownership of land on the basis of an application for registration or answer by a claimant in a cadastral registration.

B. WHO MAY APPLY: (1) Under Sec. 14, PD 1529

A decree of registration merely confirms, but does not confer ownership. [City Mayor of Parañaque City v. Ebio, G.R. No. 178411, (2010)] Registration does not vest title or give title to the land, but merely confirms and thereafter protects the title already possessed by the owner, making it imprescriptible by occupation of third parties. The registration does not give the owner any better title than he has. He does not obtain title by virtue of the certificate. He secures his certificate by virtue of the fact that he has a fee simple title. [Legarda v. Saleeby, G.R. No. L-8936, (1915)] Distinguished from subsequent (1) Original Registration – When right of ownership or title to land is for the first time made of public record (2) Subsequent Registration – Any transaction affecting such originally registered land, if in order, may be registered in the Office of the Register of Deeds concerned

A. KINDS REGISTRATION:

OF

ORIGINAL

(1) Voluntary – by filing with the proper court under: (a) PD 1529, Property Registration Decree (b) CA 141, Public Land Act (c) RA 8371, IPRA (2) Involuntary Proceedings

CIVIL LAW

– as in Cadastral

(1) This is compulsory registration initiated by the government to adjudicate ownership of the land PAGE 464 OF 574

(a) Those who by themselves or through their predecessors-ininterest, have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier. (b) Those who have acquired ownership of private lands by prescription under the provisions of existing laws. (c) Those who have acquired ownership of private lands or abandoned river beds by right or accession or accretion under the existing laws. (d) Those who have acquired ownership of land in any other manner provided for by law (see: Republic represented by Mindanao Medical Center v CA, G.R. No. 40912 (19760] (i) If land is owned in common, ALL co-owners shall file the application jointly (ii) If land has been sold under pacto de retro, the vendor a retro may file an application for the original registration of the land, provided, however that should the period for redemption expire during the pendency of the registration proceedings and ownership to the property consolidated in the vendee a retro, the latter shall be substituted for the applicant and may continue the proceedings. (iii) A trustee on behalf of his principal may apply for original registration of any land held in

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trust by him, unless prohibited by the instrument creating the trust. (2) Under Sec. 12, CA 141; Any person who: (a) Is a citizen of the Philippines over the age of 18, or the head of a family (b) Does not own more than 24 hectares of land in the Philippines, or has not had the benefit of any gratuitous allotment of more than 24 hectares of land since the occupation of the Philippines by the United States (c) NOTE: they may enter a homestead of not exceeding 24 hectares of agricultural land of the public domain

CIVIL LAW

JURISDICTION W here to File: The court that should take cognizance of a registration case is that which has territorial jurisdiction over the property. General Rule: RTC of the province, city, or municipality where the property is situated The RTC shall have exclusive jurisdiction over all applications original for registration of title, with power to hear and determine all questions arising upon such applications or petition. [Sec. 2, par. 2, P.D. No. 1529] Exception: Delegated jurisdiction to the MTC, MeTC, and MCTC by the Supreme Court in cadastral and land registration cases IF: (1) There is no controversy over the land, OR (2) Its value is less than P100,000 [Sec. 34, BP 129]

(3) Under RA 8371 (a) Sec. 11 – Formal recognition of ancestral domains by virtue of Native Title may be solicited by ICCs/IPs concerned (b) Sec. 12 – Option to secure certificate of title under CA 141 or Land Registration Act 496 (i) Individual members of cultural communities with respect to individually-owned ancestral lands who, by themselves or through their predecessors-in -interest, have been in continuous possession and occupation of the same in the concept of owner since time immemorial or for a period of not less than thirty (30) years immediately preceding the approval of this Act and uncontested by the members of the same ICCs/IPs shall have the option to secure title to their ancestral lands (ii) Option granted shall be exercised within 20 years from the approval of RA 8371

C. PROCEDURE IN ORDINARY LAND REGISTRATION STEP 1: Survey of the land by the Bureau of Lands or a duly registered private surveyor Note: No plan of such survey, whether it be original or subdivision, may be admitted in land registration proceedings until approved by the Director of Lands [Sec. 1858, Administrative Code] STEP 2: Filing of application for registration by the applicant; (a) Form of the application (1) In writing (2) Signed by the applicant/s or person duly authorized in his behalf (3) Sworn before any officer authorized to administer oath for the province or city where the application was actually signed (4) Application is presented in duplicate (b) Contents of the application:

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(1) A description of the land

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(2) The citizenship and civil status of the applicant, whether single or married, and, if married, the name of the wife or husband, and, if the marriage has been legally dissolved, when and how the marriage relation terminated. It shall also state: (3) The full names and addresses of all occupants of the land and those of the adjoining owners, if known, and, if not known, it shall state the extent of the search to find them. (4) Whether the property is conjugal, paraphernal or exclusively owned by the applicant.

CIVIL LAW

such just and reasonable terms as the court may order; (2) However, Sec. 23, PD 1529 mandates that there is a need to comply with the required publication and notice as in an original application if the amendment is substantial as in: (i) A change in the boundaries (ii) An increase in the area of the land applied for; or (iii) The inclusion of an additional land (e) Special Cases:

(c) Documents to accompany the application [from Regulations in Ordinary Land Registration Cases]

(1) If the land is bounded by a road, the applicant must state in his application if he claims any portion of the land within the limits of the road, or if he likes to have the boundaries determined. [Sec. 20, PD 1529]

(1) Tracing-cloth plan duly approved by the Director of Lands, together with two blueprint or photographic copies thereof;

(2) If the applicant is a non-resident, he shall appoint an agent or representative who is a Philippine resident. [Sec. 16, PD 1529]

(2) Three copies of the corresponding technical descriptions;

(3) Intestate Estate of Don Mariano San Pedro v. CA (1996): A person claiming ownership of real property must clearly identify the land claimed by him.

(3) Three copies certificate;

of

the

surveyor’s

(4) All original muniments of title in the possession of the applicant which prove his rights, to the title he prays for or to the land he claims; and (5) Certificate in quadruplicate of the city or provincial treasurer of the assessed value of the land, at its last assessment for taxation, or, in the absence thereof, that of the next preceding year. However, in case the land has not been assessed, the application may be accompanied with an affidavit in quadruplicate of the fair market value of the land, signed by three disinterested persons. (d) Amendments to the Application (1) Sec. 19, PD 1529 permits the applicants to amend the application at any stage of the proceedings upon PAGE 466 OF 574

(4) In re: Application for Land Registration v. Republic (2008): An applicant in a land registration case must prove the facts and circumstances evidencing the alleged ownership of the land applied for. General statements which are mere conclusions of law and not factual proof of possession are unavailing. The deeds in its favor only proved possession of its predecessors-in-interest as early as 1948. (The law now stands that a mere showing of possession for 30 years is not sufficient. Open, continuous, exclusive, and notorious (OCEN) possession must be shown to have started on June 12, 1945 or earlier.)

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STEP 3: Setting of the date for the initial hearing of the application by the Court;

CIVIL LAW

registration proceedings are actions in rem. [Dir. Of Lands v. CA, 276 SCRA 276]

The application and the date of initial hearing together with all the documents or other evidences attached thereto are transmitted by the Clerk of Court to the Land Registration Authority (LRA)

(e) Once the registration court had acquired jurisdiction over a certain parcel, or parcels, of land in the registration proceedings in virtue of the publication of the application, that jurisdiction attaches to the land or lands mentioned and described in the application. If it is later shown that the decree of registration had included land or lands not included in the original application as published, then the registration proceedings and the decree of registration must be declared null and void insofar — but only insofar — as the land not included in the publication is concerned. [Benin v. Tuason, 57 SCRA 531]

STEP 5: Publication of a notice of the filing of the application and date and place of hearing

STEP 6: Service of notice upon contiguous owners, occupants and those known to have interest in the property by the Sheriff;

(a) Publication shall be sufficient to confer jurisdiction upon the court. [Sec. 23, PD 1529]

(a) Mailing:

(a) The Court shall issue an order setting the date and hour of the initial hearing within 5 days from filing of the application (b) The initial hearing shall be 45 – 90 days from the date of the order [Sec. 23, PD 1529] STEP 4: Transmittal to the LRA

(b) Form and contents of the notice: (1) Addressed to all persons appearing to have an interest in the land involved (2) Requires all persons concerned to appear in court on the date and time indicated to show cause why the application for registration should not be granted (c) The public shall be given notice of the initial hearing of the application by publication (1) The Commissioner of Land Registration (CLR) shall cause it to be published once in the Official gazette AND once in a newspaper of general circulation (2) This is sufficient to jurisdiction to the court

confer

(d) It is not necessary to give personal notice to the owners or claimants of the land sought to be registered to vest the court with authority over the res. Land PAGE 467 OF 574

(1) Within 7 days from publication, the CLR shall mail a copy of the notice (2) Copies of the notice shall be mailed to: (i) Every person named in the notice whose address is known. (ii) the Secretary of Public Highways, to the Provincial Governor, and to the Mayor of the municipality or city, in which the land lies, if the applicant requests to have the line of a public way or road determined (iii) Secretary of Agrarian Reform, the Solicitor General, the Director of Lands, the Director of Mines and/or the Director of Fisheries and Aquatic Resources, (as appropriate) if the land borders on a river, navigable stream or shore, or on an arm of the sea where a river or harbor line has been established, or on a lake, or if it otherwise appears from the application or the proceedings that a tenant-farmer or the

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national government may have a claim adverse to that of the applicant

(2) It shall state the “interest claimed by the party filing the same” (e) Effect of Failure to Answer:

(b) Posting:

(1) If no one appears/files an answer, upon motion, the court shall order a default to be recorded.

(1) CLR shall cause the sheriff or his deputy to post the notice at least 14 days before the hearing:

(2) By the description in the notice "To all Whom It May Concern", all the world are made parties defendant and shall be concluded by the default order.

(2) In a conspicuous place on each parcel of land included in the application and in a conspicuous place on the bulletin board of the municipal building of the municipality or city in which the land or portion thereof is situated.

(3) Where an appearance has been entered and an answer filed, a default order shall be entered against persons who did not appear and answer.

(3) The court may also cause notice to be served to such other persons and in such manner as it may deem proper. (c) Notice of application and initial hearing by publication is sufficient and the mere fact that a person purporting to have a legitimate claim in the property did not receive personal notice is not a sufficient ground to invalidate the proceedings although he may ask for the review of the judgment or the reopening of the decree of registration, if he was made the victim of actual fraud. [Republic v. Abadilla, CA; G.R. No. 6902-R, Oct. 6, 1951] STEP 7: Filing of answer or opposition to the application by any person whether named in the notice or not; (a) W ho may file? Any person claiming an interest, whether named in the notice or not

(4) Absence of opposition does not justify outright registration. [Director of Lands vs. Agustin, 1921] (f) Effects of Default: (1) With respect to the Applicant – he has the right to present or adduce evidence ex parte (2) With respect to those covered by the default order – they have no legal standing in court; therefore, they are no longer allowed to participate and no opportunity to present evidence (g) For relief from an order of default, see Sec. 3, Rule 18, Rules of Court STEP 8: Hearing of the case by the court (a) Applicable procedural law: (1) Reception of evidence is governed by PD 1529

(b) W hen to file? On or before the date of initial hearing, or within such further time as may be allowed by the court.

(2) Rules of Court shall, insofar as not inconsistent with the provisions of the Decree, be applicable to land registration and cadastral cases by analogy or in a suppletory character and whenever practicable and convenient [Sec. 34, PD 1529]

(c) W hat shall it contain? It shall state all the objections and the interest claimed by the party the remedy desired. (d) How shall it be m ade? It shall be signed and sworn to by him or by some other duly authorized person. Sec. 25, PD 1529 provides for the requisites of an opposition:

CIVIL LAW

(b) Sec. 27, PD 1529: Court may either:

(1) It shall set forth “all the objections to the application” and PAGE 468 OF 574

(1) Hear the parties and their evidence, or (2) Refer the case or any part thereof to a referee

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(a) Referee shall hear the parties, receive their evidence, and submit his report thereon to the Court within 15 days after termination of such hearing (b) Hearing before a referee may be held at any convenient place within the province or city as may be fixed by him and after reasonable notice thereof shall have been served to the parties concerned (c) Upon receipt of the report the Court may: (i) Adopt the same (ii) Set aside the report (iii) Modify the report (iv) Refer back or recommit the case to the referee for presentation of evidence STEP 9: Promulgation of judgment by the Court; (a) This is the adjudication, determination, and resolution of the issue of ownership

becomes final upon the expiration of 30 days counted from receipt of notice of judgment. Note: This has been MODIFIED to the lapse of 15 days counted from receipt of notice of judgment as per Sec. 39, BP 129 STEP 10: Issuance of the decree (a) If the court finds after hearing that the applicant or adverse claimant has title as stated in his application or adverse claim and proper for registration, a decree of confirmation and registration shall be entered (b) The Court declares the decision final and instructs the LRA to issue a decree of confirmation and registration within 15 days from entry of judgment • Note: It is not the court that issues the decree, but the LRA (c) One year after issuance of the decree, it becomes incontrovertible and amendments of the same will not be allowed except in cases of clerical errors (1) Court retains jurisdiction over the case until after the expiration of 1 year from the issuance of the decree of registration. [Gomez v. CA, 1988]

(b) Forms of Judgment: (1) Dism issal of the application – with prejudice or without prejudice (2) Partial Judgment – in a case where only a portion of the land subject of registration is contested, the court may render partial judgment provided that a subdivision plan showing the contested and uncontested portions approved by the Director of Land is previously submitted to said court. [Sec. 28, PD 1529] (3) Judgm ent Confirming Title Judgment may be rendered confirming the title of the applicant, or the oppositor as the case may be, to the land or portions thereof upon finding that the party concerned has sufficient title proper for registration. [Sec. 29, PD 1529]

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(2) Note: While a decision in land registration proceeding becomes final after the expiration of thirty days from the date of service of its notice, the decree of registration does not become final until after the lapse of one year from the date of its issuance and entry. STEP 11: Entry of the decree of registration (a) Decree is entered in the LRA (b) Every decree of registration shall:

(c) Finality of Judgm ent - Sec. 30, par. 1, PD 1529 provides that the judgment PAGE 469 OF 574

(1) Bear the day of the year, hour, and minute of its entry, (2) Be signed by the Administrator of the Land Registration Authority in his ex officio capacity as Clerk of Court in land registration matters (3) State whether the owner is:

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(i) Married or unmarried, and if married, the name of the husband or wife, provided that if the land adjudicated is conjugal property, it shall be issued in the names of both spouses. (ii) If the owner is under disability, it shall state the nature of the disability, (iii) If the owner is a minor, his age (4) Contain a description of the land as finally determined by the court, (5) Set forth the estate of the owner, and also, in such manner as to show their relative priority, all particular estates, mortgages, easements, liens, attachments and other encumbrances, including rights of tenant-farmer, if any, to which the land or owner’s estate is subject, (6) Contain any other matter properly to be determined

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required by law [Sec. 4, PD 1073 amending Sec. 48(b) and (c) of Public Land Act] (4) If he claims private ownership not because of his possession, he must prove the basis of such claim by submitting muniments of title. Proving Private Ownership: (1) Spanish titles are inadmissible and ineffective proof of ownership in land registration proceedings filed AFTER Aug. 16, 1976 [PD 892 as discussed in Santiago v. SBMA, GR No. 156888, 2006] (2) Tax declaration and receipts are not conclusive but have strong probative value when accompanied by proof of actual possession. [Municipality of Santiago vs. CA, 1983] (3) Other proofs such as testimonial evidence

STEP 12: Sending of copy of the decree of registration to the corresponding Register of Deeds (Registrar of Land Titles and Deeds) STEP 13: Transcription of the decree of registration (a) It is transcribed in the registration book of the Registrar of Land Titles and Deeds (b) Registrar issues owner’s duplicate OCT of the applicant by the Registrar of Land Titles and Deeds, upon payment of the prescribed fees.

D. EVIDENCE NECESSARY Proofs necessary in land registration (1) Proofs that land has been declassified from the forest zone, is alienable or disposable, and is registrable (e.g. Presidential proclamation, legislative acts) (2) Identity of the land (e.g. survey plan) (3) Possession and occupation of the land for the length of time and in the manner PAGE 470 OF 574

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V. Subsequent Registration

one affected with public interest. The general rule does not apply. (2) When party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make inquiry. [Leung Yee v. Strong Machinery, 1918]

Subsequent registration - a proceeding where incidental matters AFTER original registration may be brought before the land registration court by way of motion or petition filed by the registered owner or a party n interest

A. NECESSITY REGISTRATION

AND

EFFECTS

(3) When purchaser is in bad faith; e.g. he had full knowledge of a previous sale. [Jamoc v. CA, 1991] (4) When a person buys land from one whose rights over the land is evidenced only by a deed of sale and an annotation in the certificate of title but no TCT. [Quiniano v. CA, 1971]

OF

[Sec. 51 and 52, PD 1529] The deed, mortgage, lease, or other voluntary instrument, except a will shall ONLY operate as: (1) A contract between the parties and (2) Evidence of authority to the Register of Deeds to make registration. The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned. Also, by registration, it creates constructive notice to the world. General Rule: A forged deed is an absolute nullity and conveys no title.

TWO TYPES OF DEALINGS (1) Voluntary Dealings – these are deeds, instruments, documents which are the results of free and voluntary acts of parties thereto. (2) Involuntary Dealings – these refer to writ, order, or process issued by the court of record affecting registered land, also other instruments which are not willful acts of the registered owner, executed without his knowledge or consent.

Exception: If there is good faith, a TCT has already been issued to the purchaser, the latter being an innocent purchaser for value according to Sec. 39, PD 1529, then the title is good. General Rule: A person dealing with registered property need not go beyond, but only has to rely on, the title. [Campillo v. PNB, 1969] He is charged with notice only of such burdens and claims which are annotated on the title, for registration is the operative act that binds the property. Exception: investigate?

When

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should

a

purchaser

(1) Banks are required to exercise more care and prudence in dealing with registered lands for their business is PAGE 471 OF 574

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Voluntary Dealings

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Voluntary Dealings

Involuntary Dealings

Spouses Labayen v. Leonardo Serafica, (2008): At the time of the filing of the petition for cancellation of encumbrance, the lease contract already lost its efficacy. Thus, there is no basis to save its annotation on defendant’s title. The fact that the cancellation of the lease contract was forged is of no moment, for there was no violation of a right.

AFP Mutual Benefit Association v. Santiago, (2008): Entry of the attachment in the books is sufficient notice to all persons. Hence, the fact that the deed of sale was already annotated is of no moment with regard to third persons. The preference created by the levy on attachment is not diminished by the subsequent registration of the deed of sale.

Involuntary Dealings

Presentation of the owner’s duplicate certificate of title is required to notify; mere entry in the day book of the Register of Deeds (ROD) is insufficient

Entry in the day book of ROD is sufficient notice to all persons

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 of the ROD and at the same time he surrenders or presents the owner’s duplicate certificate of title covering the land sold and pays the registration fees.

Lenin v. Bass, (1952): Entry thereof in the day book of the ROD is sufficient notice to all persons even if the owner’s duplicate certificate of title is not presented to the ROD.

Villasor v. Camon, (1951): It is necessary to register the deed or instrument in the entry book of the ROD and a memorandum thereof shall also be made in the owner’s duplicate certificate and its original

Dir. Of Lands v. Reyes, (1976): Entry in the day book of the ROD is sufficient notice to all persons of an adverse claim without the same being annotated at the back of the certificate of title

A. VOLUNTARY DEALINGS Registration of Voluntary Instrum ents in General Process of Registration [Sec. 55, PD 1529] (1) The deed or other instrument must contain:

voluntary

(a) The following details of the grantee or other person acquiring or claiming interest: (1) Full name (2) Nationality (3) Residence (4) Postal address (5) Civil status (if married, include name in full of spouse) (b) If grantee is a corporation: It must contain a recital showing that such corporation or association is legally qualified to acquire private lands

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(2) File instrument creating or transferring interest and certificate of title with Register of Deeds together with: (a) Owner’s duplicate - the issuance of a new transfer certificate without presentation of an owner’s duplicate is unwarranted and confers no right on the purchaser [PNB v. Fernandez, 1935] (b) Payment of fees & documentary stamp tax

Registration of Dealings Less than Ownership [Sec. 54, PD 1529] If an instrument does not divest ownership or title from owner or from transferee of the registered owners, then NO NEW CERTIFICATE shall be entered or issued. Process of Registration for Dealings less than Ownership (1) Filing of the instrument with the Register of Deeds (2) A brief memorandum thereof is made:

(c) Evidence of full payment of real estate tax (d) Document of transfer – 1 copy additional for city/provincial assessor (3) Payment of fees and DST (a) After payment of entry fee the Register of Deeds shall enter the instruments in a primary entry book [Sec. 56, PD 1529] (b) The national, provincial and city governments are exempted from payment of entry fees

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(a) On the certificate of title by the Register of Deeds and signed by him, and (b) On the owner’s duplicate Cancellation or extinguishment of such interests shall be registered in the same manner. Registration of Deeds of Sale and Transfers (a) If ENTIRE property is the subject [Sec. 57, PD 1529] (1) Owner executes and registers the deed which must be sufficient in form.

(c) RA 456 prohibits registration of documents affecting real property which is delinquent in the payment of real estate taxes. Further, if evidence of such payment is not presented with 15 days from the date of entry of said document in the primary entry book of the register of deeds the entry shall be deemed cancelled.

(2) A new certificate of title is issued and Register of Deeds prepares and delivers to grantee his owner's duplicate certificate (3) Register of Deeds notes upon the OCT and the duplicate certificate the date of transfer, the volume and page of the registration book where the new certificate is registered

(4) Entry of the Instrument in the Primary Entry Book:

(4) The original and the owner's duplicate of the grantor's certificate shall be stamped "cancelled".

Instruments are regarded as registered from the time the Register of Deeds enters them in the book

(5) The deed of conveyance shall be filed and indorsed with the number and the place of registration of the certificate of title of the land conveyed.

(5) TCT shall then be issued

(b) If ONLY A PORTION of property is the subject [Sec. 58, PD 1529] PAGE 473 OF 574

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(1) Include a plan which shows all the portions already subdivided with verified and approved technical description.

(1) A memorandum by the words “in trust” or “upon condition” or other apt words is made if a deed or other instrument is filed in order to:

(2) That plan with the certified copy of the technical descriptions shall be filed with the Register of Deeds for annotation in the TCT.

(a) Transfer registered land in trust, or upon any equitable condition or limitation expressed therein, or

(3) Register of Deeds shall issue a TCT and cancel the grantor's certificate partially OR it may be cancelled totally and a new one issued describing therein the remaining portion

(b) Create or declare a trust or other equitable interests in such land without transfer [Sec. 65, PD 1529] (2) A memorandum by the words “with power to sell,” or “power to mortgage” or other apt words is made when: The instrument creating or declaring a trust or other equitable interest contains an EXPRESS POWER to sell, mortgage, or deal with the land in any manner

(c) If there are SUBSISTING encumbrances and annotations: •

They shall be carried over in the new certificate or certificates; except when they have been simultaneously discharged.

Registration of M ortgages and Leases [Sec. 60, PD 1529] Sec. 60, PD 1529 provides that mortgages and leases shall be registered in the manner provided in Sec. 54 (Dealings less than ownership) The deed shall take effect upon the title only from the time of registration. When a deed of mortgage is presented, the Register of Deeds will enter upon the OCT and upon the owner’s duplicate a memorandum thereof and shall sign said memorandum.

However, if an implied or constructive trust is claimed, person claiming such must execute a sworn statement thereof with the Register of Deeds, containing a description of the land, the name of the registered owner and a reference to the number of the certificate of title. Such claim shall not affect the title of a purchaser for value and in good faith before its registration. [Sec. 68, PD 1529]

B. INVOLUNTARY DEALINGS The following involuntary dealings affecting registered land must be registered: (1) Attachments [Sec. 69, PD 1529] (2) Adverse claim [Sec. 70, PD 1529] (3) Sale on execution or for taxes or for any assessment [Sec. 74, PD 1529] (4) Notice of lis pendens [Sec. 76, PD 1529]

Registration of Powers of Attorneys [Sec. 64, PD 1529] Powers of attorney and revocations shall be registered with the Register of Deeds of the province or city where the land lies.

Registration of Attachm ent

Any instrument revoking such power shall be registered in like manner.

Attachment is a writ issued at the institution or during progress of an action commanding the sheriff to attach the property, rights, credits or effects of the defendant to satisfy demands of the plaintiff.

Registration of Trusts

Kinds

Registration is by memorandum:

(1) Preliminary PAGE 474 OF 574

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(2) Garnishment

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Exception: If petitioner is an heir

(3) Levy on execution

(2) No evidence is submitted to show that he has present or possible future interest in land

Process of Registration (1) Copy of writ in order to preserve any lien, right or attachment upon registered land shall be filed with the Register of Deeds where the land lies, containing number of certificate of title of land to be affected or description of land [PD 1529, Sec 69] (2) Register of Deeds to index attachment in names of both plaintiff & defendant or name of person whom property is held or in whose name stands in the records (a) If duplicate of certificate of title is not presented: (i) Register of Deeds shall within 36 hours send notice to registered owner by mail stating that there has been registration & requesting him to produce duplicate so that memorandum be made

Registration of Adverse Claim A claim is adverse when: [Sec. 70, par. 1, PD 1529] (1) Claimant’s right or interest in registered land is adverse to the registered owner, and (2) Such right arose subsequent to date of original registration, and (3) No other provision is made in the Decree for the registration of such right or claimant Requisites for adverse claim :

(3) Although notice of attachment is not noted in duplicate, notation in book of entry of Register of Deeds produces effect of registration already Effect of registration of attachment (1) Creates real right

of

an

(1) The adverse claimant must give a statement of the following in writing: (a) His alleged right or interest

(ii) If owner neglects or refuses – Register of Deeds shall report matter to court. (b) Court after notice shall enter an order to owner to surrender certificate at time & place to be named therein.

registration

(b) How and under whom such alleged right or interest is acquired (c) The description of the land in which the right or interest is claimed and (d) The number of the certificate of title (2) The statement must be: (a) Signed by the adverse claimant (b) Sworn before a notary public (3) The statement must also state his residence or the place to which all notices may be served upon him. [Lozano v Ballesteros, G.R. No. 49470 (1991)]

(2) Has priority over execution sale (3) But between 2 attachments – one that is earlier in registration is preferred Duty of Register of Deeds - Duty is ministerial but may refuse registration in the following circumstances: (1) Title to land is not in the name of defendant PAGE 475 OF 574

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Duration of an adverse claim

Note: No need to register tax lien because it is automatically registered once the tax accrues. However sale of registered land to foreclose a tax lien needs to be registered.

(a) 30 days from the date of registration. (b) After that the annotation of adverse claim may be cancelled upon filing of a verified petition by the party in interest. (a) When cancelled, no second adverse claim based on the same ground may be registered by the same claimant. Adverse claim is not ipso facto cancelled after 30 days, hearing is necessary. [Sajonas v CA, G.R. No. 102377 (1996)] Registration of Execution and Tax Delinquency Sales Execution sale (1) To enforce a lien of any description on registered land, any execution or affidavit to enforce such lien shall be filed with Register of Deeds where the land lies (2) Register in the registration book & memorandum upon proper certificate of title as adverse claim or as an encumbrance (3) To determine preferential rights between 2 liens: priority of registration of attachment Tax sale (a) Sale of land for collection of delinquent taxes and penalties due the Government (b) In personam (all persons interested shall be notified so that they are given opportunity to be heard) (1) Notice to be given to delinquent tax payer at last known address (2) Publication of notice must also be made in English, Spanish & local dialect & posted in a public & conspicuous place in place wherein property is situated & at the main entrance of the provincial building (c) Sale cannot affect rights of other lien holders unless they are given the right to defend their rights: due process must be strictly observed (d) Tax lien superior to attachment

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Process of Registration (1) Officer’s return shall be submitted to Register of Deeds together with duplicate title (2) Register in the registration book (3) Memorandum shall be entered in the certificate as an adverse claim or encumbrance (4) After the period of redemption has expired & no redemption (2 years from registration of auction sale) is made: cancellation of title & issuance of a new one (5) Before cancellation, notice shall be sent to registered owner: to surrender title & show cause why it shall not be cancelled Note: Actual knowledge of a person is equivalent to registration as against him Registration of Notice Lis Pendens Purpose of notice of lis pendens: To keep the subject matter within the power of the court until the entry of final judgment. It therefore creates merely a contingency & not a lien. W hen notice of lis pendens is proper: (1) To recover possession of real estate (2) To quiet title (3) To remove clouds upon the title thereof (4) For partition (5) Other proceedings of any kind in court directly affecting the title to land or the use or occupation thereof or the buildings thereon W hen notice of lis pendens is NOT proper: (1) Proceedings for the recovery of money judgments (2) Attachments

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(3) Proceedings on the probate of wills

Effect of registration

(4) Administration of the estate of deceased persons

(1) Impossibility of alienating the property in dispute during the pendency of the suit – may be alienated but purchaser is subject to final outcome of pending suit

(5) Levies on execution (6) Foreclosure Process of Registration: Memorandum or Notice stating

By

(2) Register of Deeds is duty bound to carry over notice of lis pendens on all new titles to be issued

(1) The institution of the action or proceeding

Cancellation of lis pendens

(2) The court wherein the same is pending

[Sec. 77, PD 1529]

(3) The date of the institution of the action

(1) Before final judgment – court may order cancellation after showing that notice is only for the purpose of molesting an adverse party or it is not necessary to protect the rights of the party who caused it to be registered

(4) Reference to the number of the certificate of title (5) Adequate description of the land affected and registered owner thereof Other parties who need to register (1) Assignee in involuntary proceeding for insolvency (a) Duty of the officer serving notice to file a copy of the notice to the Register of Deeds where the property of debtor lies

(2) Register of Deeds may also cancel upon verified petition of the party who caused such registration (3) Deemed cancelled when certificate of clerk of court stating manner of disposal of proceeding is registered

(b) Assignee elected or appointed by court shall be entitled to entry of new certificate of registered land upon presentment of copy of assignment with bankrupt’s certificate of title (duplicate) (c) New certificate shall note that it is entered to him as assignee or trustee in insolvency proceedings (2) Government in eminent domain (b) Copy of judgment shall be filed in the Register of Deeds which states description of property, certificate number, interest expropriated, nature of public use (c)

Memorandum shall be made or new certificate of title shall be issued

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VI. Cadastral Registration Nature: It is a proceeding in rem, initiated by the filing of a petition for registration by the government, not by the persons claiming ownership of the land subject thereof, and the latter are, on the pain of losing their claim thereto, in effect compelled to go to court to make known their claim or interest therein, and to substantiate such claim or interest.

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Ordinary Registration

Cadastral Registration

dismissed without prejudice

prove that he is entitled to the land, the land becomes public land.

Res judicata DOES NOT apply

There IS res judicata. Procedure in Cadastral Registration: Sec. 35 and 36, PD 1529

Unlike other kinds of registration, this is compulsory as it is initiated by the government.

STEP 1: Determination of the President that public interest requires title to unregistered lands be settled and adjudicated

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.

• President then orders the Director of Lands to conduct cadastral survey

DISTINGUISHED REGISTRATION

FROM

ORDINARY

Ordinary Registration

Cadastral Registration

Voluntary

Compulsory

Applicant is a person claiming title to the land

Applicant is the Director of Lands

Usually involves private land; it may also refer to public agricultural lands if the object of the action is judicial confirmation of imperfect or incomplete title (in which case CA 141 applies)

All classes of land are covered (private and public alienable lands)

Applicant comes to court to confirm his title and seek registration of the land in his name

Government asks the court to settle and adjudicate the title of the land

If the applicant fails to prove his title, application may be

In cadastral registration, if the applicant cannot

STEP 2: Director of lands shall make a cadastral survey STEP 3: Director of Lands gives notice to interested persons Contents of the Notice: (a) Day on which the survey will begin (b) Full and accurate description of the lands to be surveyed STEP 4: Publication of notice (a) Published once in the Official Gazette (b) A copy of the notice in English or the national language shall be posted in a conspicuous place on the bulletin board of the municipal building of the municipality in which the lands or any portion thereof is situated STEP 5: A copy of the notice shall also be sent to: (a) Mayor of the municipality (b) Barangay captain

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(c) Sangguniang Panlalawigan Sangguniang Bayan concerned

LAND TITLES AND DEEDS

and

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(2) Declare land as a public land (3) Order correction of technical description

STEP 6: Geodetic engineers or other Bureau of Land employees in charge of the survey shall give notice reasonably in advance of the date of the survey They shall also mark the boundaries of the lands with monuments STEP 7: Interested persons should communicate with the geodetic engineer if he requests for any information about the land STEP 8: Actual survey and plotting of the land STEP 9: Director of Lands represented by Solicitor General shall institute original registration proceedings (a) Petition is filed in the appropriate RTC where the land is situated (b) Contents of the Petition:

(4) Order the issuance of new title in place of the title issued under voluntary registration proceedings (5) Determine the priority of overlapping title (6) Order the partition of the property STEP 12: Decision STEP 13: Issuance of the decree and certificate of title Note: Reopening of cadastral cases no longer allowed RA 931, effective June 20, 1953 for five (5) years, authorizing the reopening of cadastral cases under certain conditions and which had been extended until Dec. 31, 1968, is no longer in force. Courts are thus without jurisdiction or authority to reopen a cadastral proceeding since Dec. 31, 1968. [Aquino, p. 107, citing Republic v. Estenzo, 158 SCRA 282, 1988]

(1) That public interest requires that the title to such lands be settled and adjudicated and praying that such titles be so settled and adjudicated (2) Description of the lands (3) Accompanied by a plan thereof (4) Such other data as may serve to furnish full notice to the occupants of the lands and to all persons who may claim any right or interest therein STEP 10: Publication, mailing posting STEP 11: Hearing Jurisdiction of the Cadastral Court: (1) Adjudicate title to any claimant thereto PAGE 479 OF 574

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VII. Judicial Confirmation of Imperfect Title

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continuous, exclusive, and notorious possession and occupation of alienable and disposable lands of public domain under a bona fide claim of acquisition since June 12, 1945 or prior thereto since time immemorial [Sec. 48, CA 141, as amended by Sec. 4, PD 1073]

Applicable law: CA 141, as amended

(2) Filipino citizens who by themselves or their predecessors-in-interest have been, prior to effectivity of PD 1073 on Jan. 25, 1977, in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership for at least 30 years, or at least since Jan. 24, 1947 [RA 1942]

No title or right to, or equity in, any lands of the public domain may be acquired by prescription or by adverse possession or occupancy except as expressly provided by law. [Sec 57, CA 141] The Public Land Act recognizes the concept of ownership under the civil law. This ownership is based on adverse possession and the right of acquisition is governed by the Chapter on judicial confirmation of imperfect or incomplete titles.

(3) Natural born citizens of the Philippines who have lost their citizenship and who has legal capacity to enter into a contract under Philippine laws may be a transferee of private land up to a maximum area of 5,000sqm, in case of urban land, or 3 hectares in case of rural land to be used by him for business or other purposes [Sec. 5, RA 8179]

W hen applicable: This applies only to alienable and disposable agricultural lands of the public domain. Under Sec. 6 of CA 141, the President, shall classify the lands of the public domain into: (a) Alienable or disposable; (b) Timber, and

(4) Natural-born citizens of the Philippines, who have lost their Philippine citizenship, who have acquired disposable and alienable lands of the public domain from Filipino citizens who had possessed the same in the same manner and for the length of time indicated in numbers (1) and (2) above.

(c) Mineral lands, The rule on confirmation of imperfect title does not apply unless and until the land classified as, say, forest land, is released in an official proclamation to that effect so that if may form part of the disposable agricultural lands of the public domain. [Bracewell vs. CA, 2000] The law, as presently phrased, requires that possession of lands of the public domain must be from June 12, 1945 or earlier, for the same to be acquired through judicial confirmation of imperfect title [Republic v. Doldol, 1998]

(b) Corporations

W ho may apply: (a) Individuals: (1) Filipino citizens who by themselves or through their predecessors-ininterest have been in open, PAGE 480 OF 574

(1) Private domestic corporations or associations which had acquired lands from Filipino citizens who had possessed the same in the manner and for the length of time indicated in numbers (1) and (2) above. Notwithstanding the prohibition in the 1973 and 1987 Constitutions against private corporations holding lands of the public domain except by lease not exceeding 1000 hectares, still a private corporation may

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institute confirmation proceedings under Sec. 48, (b) of the Public Land Act if, at the time of institution of the registration proceedings, the land was already private land. On the other hand, if the land was still part of the public domain, then a private corporation cannot institute such proceedings. [Dir. Of Lands v. IAC and ACME, 146 SCRA 509, 1986]

A. FILING OF THE APPLICATION: Period of Filing is EXTENDED: RA No. 9176 extended the period to file an application for judicial confirmation of imperfect or incomplete title to December 31, 2020. Prior to RA 9176 the deadline for filing was on Dec. 31, 1987.

followed in judicial confirmation of imperfect or incomplete title. C. EVIDENCE NECESSARY SUBSTANTIATE APPLICATION:

TO

The applicant must prove: (1) That the land applied for has been declassified and is a public agricultural land, is alienable and disposable, or otherwise capable of registration. Specifically, the following may be presented: (a) Presidential proclamation (b) Executive Order (c) Administrative Order issued by the DENR Secretary

Scope of the Application: RA 9176 also limited the area subject of the application to 12 hectares. Prior to RA 9176, the maximum area applied for was 144 hectares.

(d) Bureau of Forest Development Land Classification Map (e) Certification by the Director of Forestry

Applicant must Prove:

(f) Investigation reports of Bureau of Lands Investigator

(1) The land is alienable and disposable land of public domain at the time of filing of application); and (2) S/he must havebeen in open, continuous, exclusive, and notorious (OCEN) possession and occupation of the land for the length of time and in the manner and concept provided by law [Dir. Of Lands v. Buyco, 1992]

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(g) Legislative act or statute (2) The identity of the land; the following may be submitted: (a) Survey plan (b) Tracing cloth plan and blue print copies of plan (c) Technical description of the land

B. PROCEDURE CONFIRMATION:

IN

(d) Tax declarations

JUDICIAL

(e) Boundaries and area

Sec. 48, par.1, of CA 141 as amended provides, “The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor under the Land Registration Act…”

(3) Possession and occupation of the land for the length of time and in the manner required by law

Hence, the procedure in original registration discussed in the previous section is also PAGE 481 OF 574

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VIII. Remedies It is important to take note of the following concepts in studying remedies: Innocent Purchaser for Value – one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person’s claim [Rosales v Burgos, G.R. No. 143573] Extrinsic or Actual fraud – any fraudulent act of the successful party in a litigation which is committed outside the trial of a case against the defeated party, or his agents, attorneys or witnesses, whereby said defeated party is prevented from presenting fully and fairly his side of the case. [Sterling Investment Corporation v Ruiz, G.R. No. L-30694]

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Unlike ordinary civil actions, the adjudication of land in a cadastral or land registration proceeding does not become final in the sense of incontrovertibility until after the expiration of one (1) year after the entry of the final decree of registration. As long as a final decree has not been entered by the LRA and the period of 1 year has not elapsed from date of such decree, the title is not finally adjudicated and the decision in the registration proceeding continues to be under the control and sound discretion of the court rendering it. [Gomez v. CA, 168 SCRA 503, (1988)] Petition to Reopen or Review Decree of Registration – Sec. 32, PD 1529 (a) To whom available: Only to an aggrieved party who has been deprived of land or any estate or interest therein by decree of registration

An aggrieved party in a registration proceeding may avail himself of the following remedies:

(b) W hen to file: Any time after the rendition of the court’s decision and before the expiration of 1 year from entry of decree of registration

(1) Motion for New Trial [see Rule 37, ROC]Relief from Judgment [see Rule 38, ROC]

(1) Upon expiration of the 1 year period, every decree becomes incontrovertible

(2) Appeal

(2) The Court held that the petition may be filed at any time after rendition of the court’s decision (no need to wait for actual entry in the LRA) and before expiration of one year from entry of the final decree of registration. [Rivera v. Moran, 48 Phil. 836; Director of Lands v. Aba, et al., 68 Phil. 85.]

(3) Petition for Review of Decree of Registration (4) Action for Reconveyance (5) Quieting of Title (6) Cancellation of Title (7) Action for Damages (8) Action for Compensation from the Assurance Fund

(c) Sole and ONLY Ground: Actual Fraud

(9) Reversion Annulment of Judgment [see Rule 47, ROC] Appeal – Sec. 30, PD 1529 as amended by BP 129 provides that an appeal may be taken from the judgment of the court as in ordinary civil cases. • Period in Sec. 30, PD 1529 has been modified to 15 days as per Sec. 39, BP 129

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(1) Actual fraud proceeds from an intentional deception practiced by means of misrepresentation or concealment of material fact (2) The fraud must consist in an intentional omission of fact required by law to be stated in the application or a wilful statement of a claim against the truth

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(d) Requisites for Petition to Reopen or Review

[Balbin v Medalla, G.R. No. L-46410] or not later than 10 years in the case of an implied trust [New Regent Sources, Inc. v Tanjuatco, G.R. No. 168800]

(1) The petitioner must have an estate or interest in the land; (2) He must show actual fraud in the procurement of the decree of registration; (3) That the action is filed within one year from the issuance and entry of the decree of registration; and (4) That the property has not been transferred to an innocent purchaser for value; and [Agcaoili citing Walstrom v Mapa, G.R. No. 38387]

Quieting of Title – remedy for the removal of any cloud of doubt or uncertainty with respect to real property (a) Who may file: See Sec. 1, Rule 63, ROC (b) Requisites: (1) Plaintiff or complainant has a legal or an equitable title to or interest in the real property subject of the action; and

Action for Reconveyance:

(2) The deed, claim, encumbrance or proceeding claimed to be casting a cloud on his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.

(a) When to file: (1) Before issuance of decree, or within/after 1 year from entry (2) If based on implied trust, 10 years; (3) If based on express trust and void contract, or if the plaintiff is in possession of the land, imprescriptible (4) If based on fraud, 4 years from the discovery (b) It does not reopen proceedings but a mere transfer of the land from registered owner to the rightful owner [Esconde v. Barlongay, 1987] (c) Requisites: (1) The action must be brought in the name of a person claiming ownership or dominical right over the land registered in the name of the defendant;

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Cancellation of Title – It is initiated by a private party usually in a case where there are two titles issued to different persons for the same lot. [Agcaoili, 2015] Action for Damages - It can be availed of when reconveyance is no longer possible as when the land has been transferred to an innocent purchaser for value [Ching v. CA, 1990] Action for Compensation from the Assurance Fund (a) Requisites:

(2) The registration of the land in the name of the defendant was procured through fraud or other illegal means; (3) The property has not yet passed to an innocent purchaser for value; and (4) The action is filed after the certificate of title had already become final and incontrovertible but within 4 years from the discovery of the fraud PAGE 483 OF 574

(1) That a person sustains loss or damage, or is deprived of any estate or interest in land; (2) On account of the bringing of land under the operation of the Torrens System arising after original registration; (3) Through fraud, error, omission, mistake or misdescription in a certificate of title or entry or

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memorandum in the registration book; (4) Without negligence on his part; and (5) Is barred or precluded from bringing an action for the recovery of such land or estate or interest therein. [AGCAOILI at 619] Reversion - Instituted by the government, thru the Solicitor General in all cases where lands of public domain are held in violation of the Constitution or were fraudulently conveyed.

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IX. Petitions and Motions After Original Registration All petitions or motions after original registration shall be filed and entitled in the original case in which the decree of registration was entered [Sec 108, PD 1529] (a) Lost Duplicate Certificate (1) Person in interest must file a sworn statement that the certificate is lost or destroyed before the Register of Deeds

Indefeasibility of title, prescription, laches, and estoppel do not bar reversion suits.

(2) A petition will then be filed for the issuance of new title (3) Court will order issuance of new title after due notice and hearing, with memorandum that it is issued in place of a lost certificate (b) Petition seeking surrender of duplicate title (1) In voluntary and involuntary conveyances; when the duplicate cannot be produced, the party must petition the court to compel surrender of duplicate certificate of title to Register of Deeds (2) After hearing, court may order issuance of a new certificate and annul the old certificate (c) Amendment and alteration of certificate of title (1) A certificate of title cannot be altered or amended except in a direct proceeding in court which is summary in nature (2) No amendment or alteration of decree is permitted except upon order of the court (3) No time limit to file petition (4) Grounds: (i)

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New interest that does not appear on the instrument have been created

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(ii)

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Interest have been terminated or ceased

(iii) Omission or error was made in entering certificate (iv) Name of person on certificate has been changed (v)

Registered owner has married

(vi) Marriage has terminated (vii) Corporation has dissolved and has not conveyed the property within 3 years after its dissolution (viii) Allowable corrections as long as the rights or interest of persons are not impaired (d) Reconstitution of Certificate of title (1) The restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition, under the custody of the Register of Deeds (2) To have the same reproduced after proper proceedings in the same form they were when the loss or destruction occurred [Heirs of Pedro Pinote v. Dulay, 1990] (3) Kinds: (i) Judicial (1) A petition is filed before the RTC (2) Petition is published in the Official Gazette for 2 consecutive issues and posted on main entrance of municipality for at least 30 days before hearing (3) Hearing is then conducted (4) Court may then order reconstitution if meritorious (ii) Administrative, which may be availed only in case of: (1) Substantial loss or destruction of original land titles due to fire, flood, or other force majeure as determined by the LRA PAGE 485 OF 574

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(2) Number of certificates of title lost or damaged should be at least 10% of the total number in possession of the Register of Deeds (3) In no case shall the number of certificates of title lost or damaged be less than 500; AND (4) Petitioner must have the duplicate copy of the certificate of title [RA 6732]

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X. Dealings with Unregistered Lands

(3) The Register will then determine if it can be registered: (a) If, on the face of the instrument, it appears that it is sufficient in law, the Register of Deeds shall forthwith record the instrument

No deed, conveyance, mortgage, lease, or other voluntary instrument affecting land not registered under the Torrens system shall be valid, except as between the parties thereto, unless such instrument shall have been recorded in the manner herein prescribed in the office of the Register of Deeds for the province or city where the land lies. [Sec. 113, par. 1, PD 1529] EFFECTS OF TRANSACTIONS COVERING UNREGISTERED LAND (1) As between the parties – The contract is binding and valid even if not registered (2) As among third persons – There must be registration for the transaction to be binding against third persons PRIMARY ENTRY REGISTRATION BOOK

BOOK

AND

The Register of Deeds for each province or city shall keep a Primary Entry Book and a Registration Book. (1) The Primary Entry Book shall contain, among other particulars: (a) Entry number (b) Names of the parties (c) Nature of the document (d) Date, hour and minute it was presented and received

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(b) In case the Register of Deeds refuses its administration to record, he shall advise the party in interest in writing of the ground or grounds for his refusal • The latter may appeal the matter to the Commissioner of Land Registration Recording by the Register of Deeds is ministerial. Recording made under this section shall be without prejudice to a third party with a better right. [Sec. 113, PD 1529] Better right – refers to a right which must have been acquired by a third party independently of the unregistered deed, such, for instance, as title by prescription, and that it has no reference to rights acquired under that unregistered deed itself. [Pena at 600] Involuntary dealings in unregistered lands PD 1529 now permits the registration of involuntary dealings in unregistered lands. Tax sale, attachment and levy, notice of lis pendens, adverse claim and other instruments in the nature of involuntary dealings with respect to unregistered lands, if made in the form sufficient in law, shall likewise be admissible to record under Sec. 113. [Sec. 113 (d), PD 1529]

(2) The Registration Book – Provides spaces whereon the annotation is made after the instrument has been entered in the Primary Entry Book Process of Registration (1) Registration is by way of annotation (2) The instrument dealing with unregistered land is presented before the Register of Deeds PAGE 486 OF 574

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XI. Non-Registerable Properties

(c) Waters rising continuously or intermittently on lands of public dominion

All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. [Sec. 2, Art. XII, 1987 Constitution]

(e) Rain waters running through ravines or sand beds, which are also part of public dominion;

(d) Lakes and lagoons formed by Nature on public lands, and their beds

(f) Subterranean waters on public lands (g) Waters found within the zone of operation of public works, even if constructed by a contractor

With the exception of agricultural lands, all other natural resources shall not be alienated. [Sec. 2, Art. XI, 1987 Constitution] The classification of public lands is an exclusive prerogative of the Executive Department of the Government and not of the courts. In the absence of such classification, the land remains as unclassified land until it is released therefrom and rendered open to disposition. [Aquino, p. 41, citing Dir. Of Lands and Dir. Of Forest Development v. CA, 129 SCRA 689, 1984] Civil Code provisions dealing with non-registrable properties (1) Properties of public dominion [Art. 420, Civil Code] (a) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (b) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (2) Waters under Art. 502, Civil Code (a) Rivers and natural beds (b) Continuous or intermittent waters of springs and brooks running in their natural beds and the beds themselves

(h) Waters rising continuously or intermittently on lands belonging to private persons, to the State, to a province, or to a city or municipality from the moment they leave such lands (i) The waste waters of fountains, sewers, and public establishments Specific kinds of properties or lands

non-registrable

(1) Forest or timberland, public forest, forest reserves (2) National parks – Under the present Constitution, national parks are declared part of the public domain, and shall be conserved and may not be increased nor diminished, except by law [Rep. v AFP Retirement and Separation Benefits System, G.R. No. 180463, (2013)] (3) Mangrove swamps - Mangrove swamps or mangroves should be understood as comprised within the public forests of the Philippines as defined in Sec. 1820, Administrative Code of 1917. [Dir. Of Forestry v. Villareal, G.R. No. L-32266 (1980)] (4) Mineral lands - Both under the 1987 Constitution and Sec. 2 of the Public Land Act, mineral lands are not alienable and disposable. [Lepanto Consolidated Mining Co. v. Dumyung, G.R. No. L-31666, (1979)] (5) Foreshore land and seashore and reclaim ed lands- Seashore, foreshore, and/or portions of territorial waters and

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beaches, cannot be registered. Even alluvial formation along the seashore is part of public domain. [Aquino, p. 45, citing Dizon v. Rodriguez, 13 SCRA 704, 1965] (6) Lakes - Lakes are part of public dominion. [Art. 502(4), Civil Code] (7) Creeks and Streams – A dried up creek bed is property of public dominion [Fernando v Acuna, G.R. No. 161030 (2011) (8) Military or Naval Reservations The reservation made segregates it from the public domain and no amount of time in whatever nature of possession could have ripen such possession into private ownership. [Republic v. Marcos, G.R. No. L-32941, (1973)]

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The land registration court has no jurisdiction over non-registrable property and cannot validly adjudge the registration of title thereof in favor of a private applicant. [Pena, p. 105] Thus, where it has so been adjudged, the river not being capable of private appropriation or acquisition by prescription, the title thereto may be attacked, either directly or collaterally, by the State which is not bound by any prescriptive period provided by the Statute of Limitation. [Pena citing Martinez v. CA, GR No. L-31271, (1974)]

(9) W atershed - The Constitution expressly mandates the conservation and utilization of natural resources, which includes the country’s watershed. [Tan v. Dir. Of Forestry, G.R. No. L-24548, (1983)] (10) Grazing lands - While the 1987 Constitution does not specifically prove that grazing lands are not disposable, yet if such lands are part of a forest reserve, there can be no doubt that the same are incapable of registration. [Aquino, p. 49, citing Dir. Of Lands v. Rivas] (11) Previously titled land - Proceeds from the indefeasibility of the Torrens title. (12) Alluvial deposit along river when man-made - Such deposit is really an encroachment of a portion of the bed of the river, classified as property of the public domain under Art. 420, par. 1 and Art. 502 (1) of the Civil Code, hence not open to registration. [Republic v. CA, 132 SCRA 514, 1984] (13) Reservations for public and sem ipublic purposes – Sec. 14, Chapter 4, Book III of EO No. 292 provides that the President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of public domain, the use of which is not otherwise directed by law.

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I. Preliminary Considerations

A.2. ACCORDING TO SCOPE (1) General – Tort liability is based on any of the three categories: intentional, negligent, strict liability

A. DEFINITION OF TORT A.1. ACCORDING COMMISSION

TO

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MANNER

OF

(1) Negligent Tort – consists in the failure to act according to the standard of diligence required under the attendant circumstances. It is a voluntary act or omission which results in injury to others, without intending to cause the same. Note: While the term “tort” has been used interchangeably with the term “quasi-delict”, the latter merely represents an area of tort law concerned with damage resulting from fault (by doing a positive act constituting negligence) or negligence (by omitting to do an act due to negligence) of the defendant. (2) Intentional Tort – perpetrated by one who intends to do that which the law has declared to be wrong. It is conduct where the actor desires to cause the consequences of the act, or that he believes that the consequences are substantially certain to result therefrom. (3) Strict Liability – one is liable independent of fault or negligence. It only requires proof of a certain set of facts. Liability here is based on the breach of an absolute duty to make something safe. It most often applies to ultra-hazardous activities or in product liability cases. It is also known as “absolute liability” or liability without fault.” Strict liability is imposed by articles 1314, 1711, 1712, 1723, 2183, 2184, 2187, 2189, 2190, 2191, 2192, 2193.

(2) Specific – Includes trespass, assault, battery, negligence, products liability, and intentional infliction of emotional distress

B. DEFINITION OF QUASI-DELICT Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. Quasi-delict, known in Spanish legal treatises as culpa aquiliana, is a civil law concept while torts is an Anglo-American or common law concept. Torts is much broader than culpa aquiliana because it includes not only negligennce, but intentional criminal acts such as assualt and battery, false imprisonment and deceit. In the general scheme of the Philippine legal system envisioned by the Commission responsible for drafting the New Civil Code, intentional and malicious acts with certain exceptopms, are to be governed by the Revised Penal Code while negligent acts or omissions are to be covered by Article 2176 of the Civil Code. In between these opposite spectrums are injurious acts which, in the absence of Article 21, would have been beyond redress. Thus, Article 21 fills that vacuum [Baksh v. CA, G.R. No. 97336 (1993)]. The concept of quasi-delict does not cover intentional acts. The liability arising from from extra-contractual culpa is always based upon a voluntary act or omission, which, without willful intent, but by mere negligence or inattention, has caused damage to another [Cango v Manila Railroad, G.R. No. 12191 (1918)] The concept of quasi-delict is so broad that it includes not only injuries to persons but also

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damage to property [Cinco v Canonoy, G.R. No. L-33171 (1979)]

C. CULPA AQUILIANA DISTINGUISHED FROM CRIME A quasi-delict is a separate source of obligation under Article 1157. Art. 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for the same act or omission of the defendant. RPC, Art. 100. Every person criminally liable for a felony is also civilly liable. A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. However, the same negligent act causing damage may produce civil liability arising from a crime under Article 100 of the Revised Penal Code, or create an action for quasi-delict [Barredo v Garcia, G.R. No. 48006 (1942)] An act or omission causing damage to another may give rise to two separate civil liabilities on the part of the offender—for civil liability ex delicto, and independent civil liabilities. The choice is with the plaintiff who makes known his cause of action in his initiatory pleading or complaint [LG Foods v Philadelfa, G.R. No. 158995 (2006)]

D. CULPA AQUILIANA DISTINGUISHED FROM CULPA CONTRACTUAL; PRESENCE OF CONTRACTUAL RELATIONS

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or omission itself which creates the vinculum juris, whereas in contractual relations, the vinculum exists independently of the breach of voluntary duty assumed by the parties when entering into the contractual relation [Cangco v. Manila Railroad, supra]. D.2. AS TO BURDEN OF PROOF When the source of the obligation upon which the plaintiff’s cause of action depends is a negligent act or omission, the burden of proof rests upon the plaintiff to prove the negligence—if he does not his action fails. But when the facts averred show a contractual undertaking by defendant for the benefit of the plaintiff, and it is alleged that the plaintiff has failed or refused to perform the contract, it is not necessary for the plaintiff to specify in his pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of its nonperformance is sufficient prima facie to warrant a recovery. [Cangco v. Manila Railroad, supra] D.3. AS TO APPLICABILITY OF DOCTRINE OF PROXIMATE CAUSE

THE

The doctrine of proximate cause [to establish the fault or negligence of the defendant] is applicable only in actions for quasi-delict, not in actions involving breach of contract [Calalas v. CA, G.R. No. 122039 (2000)]. D.4. AS TO THE DEFENSE OF AN EMPLOYER FOR THE NEGLIGENCE OF AN EMPLOYEE As it is not necessary for the plaintiff in an action for breach of contract to show that the breach was due to the negligent conduct of the defendant or his servants, proof on the part of the defendant that the negligence or omission of his servants or agents caused the breach of contract would not constitute a defense to the action [Cangco v. Manila Railroad, supra].

D.1. AS TO SOURCE In culpa aquiliana or non-contractual obligation, it is the wrongful or negligent act PAGE 491 OF 69

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Presence of Contactual Relations The Supreme Court held there may instances where there can be a quasi-delict even when there is a contract between the parties. The test (whether a quasi-delict can be deemed to underlie the breach of a contract) can be stated thusly: Where, without a pre-existing contract between two parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact that the parties are contractually bound is no bar to the application of quasi-delict provisions to the case [Far East v. CA, G.R. No. 108164 (1995)].

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II. Quasi-Delict Elements: [PNR v. Brunty, G.R. No. 169891 (2006)] (a) Damage to the plaintiff (b) Negligence defendant

by

act/omission

of

the

(c) Connection of the cause and effect between the fault/negligence of the defendant and the damage incurred by the plaintiff.

A. NEGLIGENCE Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do [Layugan v. IAC, G.R. No. 73998 (1988)]. The diligence with which the law requires the individual to at all times govern his conduct varies with the nature of the situation in which he is placed and the importance of the act which he is to perform [Jorge v Sicam, G.R. No. 159617 (2007)]. To determine whether there has been negligence by the defendant, this 2-step analysis may be used: 1) determine the diligence required of the actor under the circumstances, and 2) determine whether the actor has performed the diligence required. PAGE 492 OF 69

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Failing the second step would lead to the conclusion that the defendant has been negligent.

banking that requires high standards of integrity and performance.’ This fiduciary relationship means that the bank’s obligation to observe high standards of integrity and performance is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family [Consolidated Bank v CA, G.R. No. 138569 (2003)].

By jumping into the sea, the employee failed to exercise even slight care and diligence and displayed a reckless disregard of the safety of his person. His death was caused by his notorious negligence. Notorious negligence has been held to be tantamount to gross negligence which is want of even slight care and diligence [Ameda v Rio, G.R. No. L-6870 (1954)].

(3) Experts (In General) Those who undertake any work calling for special skills are required not only to exercise reasonable care in what they do but also possess a standard minimum of special knowledge and ability. In all employments where peculiar skill is requisite, one who offers his services is understood as holding himself out to the public as possessing the degree of skill commonly possessed by others in the same employment [Far Eastern Shipping, G.R. No. 130068 (1998)].

A.1. DEFAULT STANDARD OF CARE: GOOD FATHER OF A FAMILY Test: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent man would have used in the same situation? If not, then he is negligent. Negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him, but is determined in the light of human experience and the facts involved in the particular case. Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences [Picart v Smith, G.R. No. L12219 (1918)]. A.2. STANDARD OF CARE NEEDED IN SPECIFIC CIRCUMSTANCES

When a person holds himself out as being competent to do things requiring professional skill, he will be held liable for negligence if he fails to exhibit the care and skill of one ordinarily skilled in the particular work which he attempts to do [Culion v Philippine Motors, G.R. No 32611 (1930)]. (4) Doctors

(1) Operators of Motor Vehicles Because of inherent differences between motorists and cyclists, the former being capable of greater speed and destruction, operators of motor vehicles have a higher standard in his duty of care [Anonuevo v CA, G.R. No. 130003 (2004)]. (2) Banks The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791 (RA 8791), which took effect on 13 June 2000, declares that the State recognizes the ‘fiduciary nature of PAGE 493 OF 69

Whether or not a physician has committed an ‘inexcusable lack of precaution’ in the treatment of his patient is to be determined according to the standard of care observed by other members of the profession in good standing under similar circumstances bearing in mind the advanced state of the profession at the time of treatment of present state of medical science. It is in this aspect of medical malpractice that expert testimony is essential to establish not only the standard of care of the profession but also that the physician’s conduct in the treatment and care falls below such standard [Cruz v CA, GR. No. 122445 (1997)]

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(5) Pharmacists The profession of pharmacy, it has been said again and again, is one demanding care and skill. Even under the first conservative expression, "ordinary care" with reference to the business of a druggist…must be held to signify "the highest practicable degree of prudence, thoughtfulness, and vigilance, and most exact and reliable safeguards consistent with the reasonable conduct of the business in order that human life may not constantly be exposed to the danger flowing from the substitution of deadly poisons for harmless medicine. [US v Pineda, G.R. No. L-12858 (1918)]” Mistake is negligence and care is no defense [Mercury Drug v De Leon, G.R. No. 165622 (2008)]. (6) Possessor of Extremely Dangerous Instrumentalities [A] higher degree of care is required of someone who has in his possession or under his control an instrumentality extremely dangerous in character, such as dangerous weapons or substances. Such person in possession or control of dangerous instrumentalities has the duty to take exceptional precautions to prevent any injury being done thereby. Unlike the ordinary affairs of life or business which involve little or no risk, a business dealing with dangerous weapons requires the exercise of a higher degree of care [Pacis v Morales, G.R. No. 169467 (2010)]. (7) Children The conduct of an infant of tender years is not to be judged by the same rule, which governs that of an adult. …The care and caution required of a child is according to his maturity and capacity only, and this is to be determined in each case by the circumstances of the case [Taylor v Manila Railroad, G.R. No. 4977 (1910)]. No contributory negligence can be imputed to children below 9 years old [Jarco Marketing v CA, G.R. No. 129792 (1999)].

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The degree of care required to be exercised must vary with the capacity of the person endangered to care for himself. …The standard of conduct to which a child must conform for his own protection is that degree of care ordinarily exercised by children of the same age, capacity, discretion, knowledge and experience under the same or similar circumstances [Ylarde v Aquino, G.R. No. L-33722 (1988)]. A.3. PRESUMPTIONS OF NEGLIGENCE i. IN MOTOR VEHICLE MISHAPS (1) Liability of the owner Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have, by the use of the due diligence, prevented the misfortune. xxx If the owner was not in the motor vehicle, the provisions of article 2180 are applicable. Art. 2186. Every owner of a motor vehicle shall file with the proper government office a bond executed by a government-controlled corporation or office, to answer for damages to third persons. The amount of the bond and other terms shall be fixed by the competent public official. “Owner” shall mean the actual legal owner of the motor vehicle, in whose name such vehicle is duly registered with the LTO. Registration of motor vehicles is required not because it is the operative act which transfers ownership in vehicles, but because it is the means by which the owner can be identified so that if any accident occurs, or damage or injury is caused in the operation of the vehicle, responsibility can be fixed. The owner is solidarily liable with the driver for motor vehicle mishaps when: (a) The owner was IN the vehicle at the time, AND (b) The owner could have, by the use of due diligence, prevented the misfortune.

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Note: If the owner was NOT inside the vehicle, Art. 2180 applies. The presumption is against the owner of the motor vehicle. He has the burden of proving due diligence. Thus, once a driver is proven negligent in causing damage, the law presumes the vehicle owner equally negligent and imposes upon the latter the burden of proving proper selection and supervision of employee as a defense. As held in Vargas v. Langcay [G.R. No. 17459 (1962)], “the registered owner/operator of a passenger vehicle is jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries or death sustained in the operation of said vehicles. Regardless of who the actual owner of a vehicle is, the operator of record continues to be the operator of the vehicle as regards the public and third persons and as such is directly and primarily responsible for the consequences incident to its operation, so that in contemplation of law, such owner/operator of record is the employer of the driver, the actual operator and employer being considered merely as his agent.” The registered owner of a motor vehicle is primarily liable for the damage or injury caused to another, but he has a right to be indemnified by the real owner of the amount he was required to pay. This rule applies both to private and to common carriers with respect to their passengers [Tamayo v Aquino, G.R. No. L-12634 (1959)]. The law does not require that a person must possess a certain measure of skill or proficiency either in the mechanics of driving or in the observance of traffic rules before he may own a motor vehicle. The test of his negligence, within the meaning of Article 2184, is his omission to do that which the evidence of his own senses tells him he should do in order to avoid the accident. And as far as perception is concerned, absent a minimum level imposed by law, a maneuver that appears to be fraught with danger to one passenger may appear to be entirely safe and commonplace to another. Were the law to require a uniform standard of perceptiveness, employment of professional drivers by car owners who, by their very inadequacies, have

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real need of drivers' services, would be effectively proscribed [Caedo v Yu Khe Tai, G.R. No. L-20392 (1968)]. The owner of the motor vehicle is not liable for the misfortune unless the negligent acts of the driver are continued for such a length of time as to give the owner a reasonable opportunity to observe them and to direct his driver to desist therefrom. The act complained of must be continued in the presence of the owner for such a length of time that the owner, by his acquiescence, makes his driver’s act his own [Chapman v Underwood, G.R. No. L-9010 (1914)]. (2) Liability of the driver Art. 2184. xxx It is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months. Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation. Article 2184 establishes a presumption of negligence on the part of the driver based on previous violations of traffic regulations. Article 2185 establishes a presumption of negligence on the basis of simultaneous violations. Despite the presumption of negligence arising from the traffic regulation violation, the claimant must still prove that such negligence was the proximate cause in order to successfully claim for damages [Sanitary Steam v CA, G.R. No. 119092 (1998)]. Article 2185 was not formulated to compel or ensure obeisance by all to traffic rules and regulations. It does not apply to nonmotorized vehicles, in recognition of the unequal footing of standards applicable to motor vehicles as opposed to other types of vehicles [Añonuevo v. CA, supra].

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ii. POSSESSION OF DANGEROUS WEAPONS OR SUBSTANCES Art. 2188. There is prima facie presumption of negligence if the death or injury results from his possession of dangerous weapons or substances, such as firearms and poison, except when the use or possession thereof is indispensable in his occupation or business. iii. COMMON CARRIERS Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article (calamity, act of public enemy in war, act of owner of the goods, character of the goods, order of competent public authority), if the goods are lost destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required under Art. 1733. Art. 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration. iv. RES IPSA LOQUITUR The doctrine of res ipsa loquitur (“the thing or the transaction speaks for itself”) is a rule of evidence (not of substantive law) peculiar to the law of negligence. The doctrine treats the injury itself as proof of negligence. Elements: [Ramos v. CA, G.R. No. 124354 (1999)]

CIVIL LAW

Basis The res ipsa loquitur doctrine is based in part upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge, and therefore is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence [DM Consunji v. CA, G.R. No. 137873 (2001)]. Effect The fact of the occurrence of an injury, taken with the surrounding circumstances, raise a presumption of negligence, or make out a plaintiff’s prima facie case, and present a question of fact for defendant to meet with an explanation [Ramos v CA, supra]. In medical malpractice cases, when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical testimony is dispensed with because the injury itself provides the proof of negligence. The reason is that the general rule on the necessity of expert testimony applies only to such matters clearly within the domain of medical science, and not to matters that are within the common knowledge of mankind which may be testified to by anyone familiar with the facts. Note: For the res ipsa loquitur doctrine to apply, it must appear that the injured party had no knowledge as to the cause of the accident, or that the party to be charged with negligence has superior knowledge or opportunity for explanation of the accident.

(a) The accident is of a kind which ordinarily does not occur in the absence of someone’s negligence;

A.4. PERSONS LIABLE

(b) It is caused by an instrumentality within the exclusive control of the defendant or defendants; and

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. xxx

(c) The possibility of contributing conduct, which would make the plaintiff responsible, is eliminated.

(1) The direct tortfeasor

The tortfeasor may be a natural or juridical person. For natural persons, apply requisites

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of Art. 2176 and for juridical persons, apply vicarious liability provisions.

Under Article 2180 Persons Vicariously Liable

(2) Persons vicariously liable Art. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible.

Employers

Employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry

State

Special agent

xxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent the damage. Also referred to as the “doctrine of imputed negligence”. The rationale is to extend liability by legal fiction to those in a position to exercise absolute or limited control over the direct tortfeasor. The doctrine does not apply where moral culpability can be imputed directly, as when there is actual intent to cause harm to others. The liability of the vicarious obligor is primary and direct (solidarily liable with the tortfesor), not subsidiary. His responsibility is not conditioned upon the insolvency of or prior recourse against the negligent tortfeasor. Under Article 2180 Persons Vicariously Liable

Owners and managers of an establishment or enterprise

Teachers or heads Pupils and students or of establishments apprentices, so long as of arts and trades they remain in their custody (a) Persons exercising authority

parental

Art. 2180 (2). The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company. FC, Art. 221. Parents and other persons exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company and under their parental authority subject to the appropriate defenses provided by law.

Actor

Father and, in Minor children who live in case of his death their company or incapacity, the mother Guardians

Actor

Minors or incapacitated persons who are under their authority and live in their company Employees in the service of the branches in which the latter are employed or on the occasion of their functions

FC, Art. 216. In default of parents or a judicially appointed guardian, the following person shall exercise substitute parental authority over the child in the order indicated: (1) The surviving grandparent, as provided in Art. 214; (2) The oldest brother or sister, over twentyone years of age, unless unfit or disqualified; and (3) The child's actual custodian, over twentyone years of age, unless unfit or disqualified. Whenever the appointment or a judicial guardian over the property of the child

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becomes necessary, the same order of preference shall be observed. FC, Art. 217. In case of foundlings, abandoned neglected or abused children and other children similarly situated, parental authority shall be entrusted in summary judicial proceedings to heads of children's homes, orphanages and similar institutions duly accredited by the proper government agency. Art 2180, par 2 of the Civil Code which holds the father liable for damages has been modified by the Family Code and PD 603. Art. 211 of the FC declares joint parental authority of the mother and father over common children. The parent(s) exercising parental authority are liable for the torts of their children. W ho are liable for minors? (1) Parents/Adoptive parents (2) Court-appointed guardians (3) Substitute Parental Authorities (a) Grandparents (b) Oldest qualified sibling over 21 years old (c) Child’s actual custodian, provided he is qualified and over 21 years old. (4) Special Parental Authorities (a) School (b) Administrators (c) Teachers (d) Individual, entity, or institution engaged in child care Illegitimate children Responsibility is with the mother whom the law vests with parental authority. Basis of adopters

liability

of

parents

and

Parental liability is anchored upon parental authority coupled with presumed parental dereliction in the discharge of the duties accompanying such authority. The parental dereliction is, of course, only presumed and the presumption can be overturned under Article 2180 of the Civil Code by proof that

CIVIL LAW

the parents had exercised all the diligence of a good father of a family to prevent the damage [Tamargo v. CA, G.R. No. 85044 (1992)]. Meaning of “Minority” Par. 2 and 3 of Art. 2180 speak of minors. Minors here refer to those who are below 21 years of age, not below 18 years. The law reducing the majority age from 21 to 18 years old did not amend these paragraphs. Basis is FC, Art. 236 (3), as amended by RA 6809, provides, “Nothing in this Code shall be construed to derogate from the duty or responsibility of parents and guardians for children and wards below 21 years of age mentioned in the second and third paragraphs of 2180 of the Civil Code.” Art. 2180 (3). Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company. The liability of guardians with respect to their wards is governed by the same rule as in the liability of parents with respect to their children below 21 years and who live with them “Incompetent” ROC):

includes

(Rule

92,

(1) Those suffering the penalty of civil interdiction, (2) Prodigals, (3) Deaf and dumb who are unable to read and write (4) Unsound mind, even though they have lucid intervals (5) Being of sound mind, but by reason of age, disease, weak mind, and other similar causes, cannot take care of themselves or manage their property Liability of m inor or insane tortfeasor without a parent or guardian He shall be answerable with his own property in an action against him where a guardian ad litem shall be appointed. [Art. 2182]

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(b) Teachers and schools Art. 2180 (7). Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody.

CIVIL LAW

Basis of liability of teachers and heads of establishm ents of arts and trades They stand, to a certain extent, in loco parentis and are called upon to exercise reasonable supervision over the conduct of the child.

FC, Art. 218. The school, its administrators and teachers, or the individual, entity or institution engaged in child are shall have special parental authority and responsibility over the minor child while under their supervision, instruction or custody.

“Custody” means the protective and supervisory custody that the school, its head and teachers exercise over the pupils, for as long as they are in attendance in school, which includes recess time [Palisoc v. Brillantes, G.R. No. L-29025 (1971)].

Authority and responsibility shall apply to all authorized activities whether inside or outside the premises of the school, entity or institution.

As long as it is shown that the student is in the school premises pursuant to a legitimate student objective, in the exercise of a legitimate right, or the enjoyment of a legitimate student privilege, the responsibility of the school authorities over the student continues [Amadora v CA, G.R. No. L-47745 (1988)].

FC, Art. 219. Those given the authority and responsibility under the preceding Article shall be principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor. The parents, judicial guardians or the persons exercising substitute parental authority over said minor shall be subsidiarily liable. The respective liabilities of those referred to in the preceding paragraph shall not apply if it is proved that they exercised the proper diligence required under the particular circumstances. All other cases not covered by this and the preceding articles shall be governed by the provisions of the Civil Code on quasi-delicts. Under Article 2180, the teacher is liable for the acts or omissions of the pupils and students, and so is the head of establishment of arts and trades for the apprentices, so long as they remain in custody, regardless of age. Under the Family Code, liability attaches to the school, its administrators and teachers, or the individual or entity engaged in child care, so long as the child is under their supervision, instruction, or custody, and the child is below 18 years old.

(c) Owners/managers of establishments/employers Art. 2180 (4). The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Art. 2180 (5). Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. “Owners and managers of an establishment or enterprise” does not include a manager of a corporation. (Spanish term “directores” connotes “employer.” But manager of a corporation is not an employer, but rather merely an employee of the owner.) [Philippine Rabbit v. Philam Forwarders, G.R. No. L25142 (1975)]. The liability imposed upon employers with respect to damages occasioned by the negligence of their employees to whom they are not bound by contract is based on the

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employer’s own negligence, such as when he places a powerful automobile in the hands of a servant whom he knows to be ignorant of the method of managing such vehicle [Cangco v. Manila Railroad, supra]. This Court still employs the "control test" to determine the existence of an employeremployee relationship between hospital and doctor. Under the "control test", an employment relationship exists between a physician and a hospital if the hospital controls both the means and the details of the process by which the physician is to accomplish his task. The Court earlier ruled that there was employer-employee relationship between the doctor and employee but reversed itself upon motion for reconsideration. They still held the hospital liable on the basis of agency and corporate responsibility [Professional Services v. CA and Agana, G.R. No. 126297 (2010)]. “Within the scope of their assigned task” in Art. 2180 includes any act done by an employee in furtherance of the interests, or for the account of the employer at the time of the infliction of the injury or damage [Filamer v CA, G.R. No. 75112 (1990)].

CIVIL LAW

Both provisions apply to employers: the fourth paragraph, to owners and managers of an establishment or enterprise; and the fifth paragraph, to employers in general, whether or not engaged in any business or industry. The fourth paragraph covers negligent acts of employees committed either in the service of the branches or on the occasion of their functions, while the fifth paragraph encompasses negligent acts of employees acting within the scope of their assigned task. The latter is an expansion of the former in both employer coverage and acts included. Negligent acts of employees, whether or not the employer is engaged in a business or industry, are covered so long as they were acting within the scope of their assigned task, even though committed neither in the service of the branches nor on the occasion of their functions. For, admittedly, employees oftentimes wear different hats. They perform functions which are beyond their office, title or designation but which, nevertheless, are still within the call of duty [Castilex Industrial Corp. v. Vasquez, G.R. No. (1999)]. D EFENSE OF DILIGENCE IN SELECTION AND SUPERVISION

Basis of liability Employer’s negligence in (1) The selection of their employees (culpa in eligiendo) (2) The supervision over their employees (culpa in vigilando) Presumption of Negligence The presentation of proof of the negligence of its employee gives rise to the presumption that the defendant employer did not exercise the diligence of a good father of a family in the selection and supervision of its employees [Lampesa v. De Vera, G.R. No. 155111 (2008)]. D ISTINCTION B ETWEEN T HE 4 T H A ND 5 T H P ARAGRAPHS O F A RT . 2180

Due diligence in the supervision of employees includes the formulation of suitable rules and regulations for the guidance of employees and the issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his or her employees and the imposition of necessary disciplinary measures upon employees in case of breach or as may be warranted to ensure performance of acts as indispensable to the business of and beneficial to their employee [Metro Manila Transit v. CA, G.R. No. 104408 (1993)]. Due diligence in the selection of employees require that the employer carefully examined the applicant for employment as to his qualifications, his experience and record of service.

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Criminal Negligence The vicarious liability of the employer for criminal negligence of his employee is governed by RPC 103. Conviction of the employee conclusively binds the employer. Defense of due diligence in the selection and supervision of the employee is not available. The employer cannot appeal the conviction [Fernando v. Franco (1971)]. Note: The liability of the employer under Art. 103 RPC is subsidiary. Registered Owner Rule The registered owner of the vehicle is primarily responsible to the public for whatever damage or injury the vehicle may have caused, even if he had already sold the same to someone else. The policy is the easy identification of the owner who can be held responsible so as not to inconvenience or prejudice the third party injured [Cadiente v. Macas (2008)]. The registered owner, however, has the right to be indemnified by the real or actual owner of the amount that he may be required to pay as damages for the injury caused to the plaintiff [Orix Metro Leasing v. Mangalinan (2012)]. This rule applies even if the vehicle is leased to third persons. The liability of the registered owner is subject to his right of recourse against the transferee or buyer.

assumes a limited liability for the acts of its special agents. (2) Art. 2189 provides for state liability for damages caused by defective condition of public works. (3) Local Government Code provides for the liability of local government units for wrongful exercise of its proprietary (as opposed to its governmental) functions. The latter is the same as that of a private corporation or individual. [Mendoza v. De Leon (1916)] A special agent is one who receives a definite and fixed order or commission, foreign to the exercise of the duties of his office if he is a special official. This concept does not apply to any executive agent who is an employee of the active administration and who on his own responsibility performs the functions which are inherent in and naturally pertain to his office [Merritt v. Government of the Philippine Islands, G.R. No. 11154 (1960)]. A corporate body performing nongovernmental functions becomes liable for the damage caused by the accident resulting from the tortious act of its driver-employee. Such corporate body assumes the responsibility of an ordinary employer and as such, becomes answerable for damages [Fontanilla v. Maliaman, G.R. No. 55963 (1991)]. (3) Joint tortfeasors

(d) The State 1987 Constitution, Art. XVI, Sec. 3. The State may not be sued without its consent. Art. 2180 (3). The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable. Instances where the State gives its consent to be sued

Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary. Definition of “Joint Tortfeasors” They are all persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet in the commission of a tort, or who approve of it after it is done, if done for their benefit [Filipinas Broadcasting Network v. AMEC-BCCM, G.R. No. 141994 (2005)].

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Applicability of the provision

result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinary prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom [Bataclan v. Medina, supra].

The provision applies when there are 2 or more persons who have participated in the commission of a single quasi-delict. The injury must be indivisible.

B. CAUSE Concept of Proximate Cause

Differentiated from :

In order that civil liability for negligence may arise, there must be a direct causal connection between the damage suffered by the plaintiff and the act or omission of the defendant. Where the particular harm sustained was reasonably foreseeable at the time of the defendant’s misconduct, his act or omission is the legal cause thereof. Foreseeability is the fundamental basis of the law of negligence. To be negligent, the defendant must have acted or failed to act in such a way that an ordinary reasonable man would have realized that certain interests of certain persons were reasonably subjected to a general but definite class of risks. [JARENCIO]

(1) Concurrent Cause – Several causes producing the injury, and each is an efficient cause without which the injury would not have happened. The injury is attributed to any or all the causes, and recovery may be had against any or all of those responsible. As a general rule, that negligence in order to render a person liable need not be the sole cause of an injury. It is sufficient that his negligence, concurring with one or more efficient causes other than the plaintiff’s, is the proximate cause of the injury. Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination the direct and proximate cause of a single injury to a third person, it is impossible to determine in what proportion each contributed to the injury and either of them is responsible for the whole injury. Where their concurring negligence resulted in injury or damage to a third party, they become joint tortfeasors and are solidarily liable for the resulting damage [Far Eastern Shipping v. CA, G.R. No. 130068 (1998)].

Two definitions of proximate cause: (1) Proximate cause immediately resulting in injury: defined as “that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred” [Bataclan v. Medina, G.R. No. 10126 (1957)]. (2) Proximate cause not immediately resulting in injury but sets in motion a chain of events, also known as Proxim ate Legal Cause: that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the chain immediately effecting the injury as a natural and probable

(2) Remote Cause – a cause which would have been a proximate cause, had there been no efficient intervening cause after it and prior to the injury.

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A prior and remote cause cannot be made the basis of an action if such remote cause did nothing more than furnish the condition or give rise to the occasion by which the injury was made possible, if there intervened between such prior or remote cause and the injury a distinct, successive, unrelated, and efficient cause

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of the injury, even though such injury would not have happened but for such condition or occasion [Manila Electric v. Remonquillo, G.R. No. L-8328 (1956)].

CIVIL LAW

The damage or injury must be a natural and probable result of the act or omission. (3) Substantial factor

(3) Intervening Cause The test of determining whether or not the intervening cause is sufficient to absolve a prior cause of the injury is as follows: whether the intervention of a later cause is a significant part of the risk involved in the defendant’s conduct, or is so reasonable connected with it that the responsibility should not be terminated. In the affirmative, such foreseeable intervening forces are within the scope of the original risk, and hence of the defendant’s negligence. In the negative, there exists an efficient intervening cause that relieves the defendant of liability. If the intervening cause is one which in ordinary human experience is reasonably to be anticipated, or one which the defendant has reason to anticipate under the particular circumstances, the defendant may be negligent, among other reasons, because of failure to guard against it. There is an intervening cause combining with the defendant’s conduct to produce the result, and the defendant’s negligence consists in failure to protect the plaintiff against that very risk [Phoenix Construction v. IAC, G.R. No. L-65295 (1987)]. Tests to Determine Proxim ate Cause

If the actor’s conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresees nor should have foreseen the harm or the manner in which it occurred, does not prevent him from being liable. [Philippine Rabbit v. IAC, G.R. No. L-66102-04 (1990)] (4) Mixed considerations There is no exact formula to determine probable cause. It is based upon mixed considerations of logic, common sense, policy and precedent [Dy Teban v. Jose Ching, supra]. (5) Cause v. condition The distinction between cause and condition has already been almost entirely discredited. So far as it has any validity at all, it must refer to the type of case where the forces set in operation by the defendant have come to rest in a position of apparent safety, and some new force intervense. But even in such cases, it is not the distinction between “cause” and “condition” which is important, but the nature of the risk and the character of the intervening cause [Phoenix Construction v. IAC, supra]. (6) Last clear chance

(1) But for / Sine qua non rule

The Doctrine of Last Clear Chance

Whether such negligent conduct is a cause without which the injury would not have occurred or is the efficient cause which set in motion the chain of circumstances leading to the injury. [Bataclan v. Medina, supra] (2) Sufficient link The Supreme Court has adopted a relaxation of the “but for” test in Dy Teban v. Jose Ching [G.R. No. 161803 (2008)]. Plaintiff, however, must establish a sufficient link between the act or omission and the damage or injury. That link must not be remote or farfetched; otherwise, no liability will attach. PAGE 503 OF 69

Also known as: "doctrine of discovered peril” or “doctrine of supervening negligence” or “humanitarian doctrine”. The antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the supervening negligence of the defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence [PNR v. Brunty, supra]. If both parties are found to be negligent; but, their negligence are not contemporaneous, the person who has the last fair chance to avoid the

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impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party [Picart v Smith, supra]. Simply stated, it covers successive acts of negligence: Primary negligence of the defendant

CIVIL LAW

Last clear chance applies only if the person who allegedly had the last opportunity to avert the accident was aware of the existence of peril or should, with exercise of due care, have been aware of it. The doctrine can never apply where the party charged is required to act instantaneously, and if the injury cannot be avoided by application of all means at hand after the peril is or should have been discovered [Pantranco v. Baesa, G.R. No. 79051-51(1989)]. The doctrine of last clear chance applies in a suit between the owners and drivers of colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. It will be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence [Bustamante v. CA, G.R. No. 89880 (1991)].

Contributory negligence of the plaintiff

Subsequent negligence of the defendant in failing to avoid the injury to the plaintiff Note:

C. DEFENSES

• If plaintiff is the proximate cause: no recovery can be made. • If plaintiff is not the proximate cause: Recovery can be made but such will be mitigated. • If negligence of parties is equal in degree, then each bears his own loss. The doctrine of last clear chance finds no application in a case where the proximate cause of the injury has been established [PNR v Brunty, supra]. The doctrine is not applicable in the following cases: The doctrine of last clear chance does not apply in a case of culpa contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from liability. Such contributory negligence or last clear chance by the plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not exculpate the defendant from his breach of contract [Consolidated Bank v. CA, G.R. No. 138569 (2003)].

C.1. DUE DILIGENCE TO PREVENT THE DAMAGE UNDER ARTICLE 2180 Art. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible. xxx (8) The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. The presumption of negligence on the part of the master or employer, either in the selection of servant/employee or in the supervision, when an injury is caused by the negligence of a servant/employee may be rebutted if the employer shows to the satisfaction of the court that in the selection and supervision, he has exercised the care and diligence of a good father of a family [Ramos v. PEPSI, G.R. No. L-22533 (1967)].

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C.2. ACTS OF PUBLIC OFFICERS When what is involved is a duty owing to the public in general, an individual cannot have a cause of action the public officer although he may have been injured by the action or inaction of the officer, except when the individual suffers a particular or special injury [Vinzons-Chato v Fortun, G.R. No. 141309 (2008)].

Art. 5. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity. RPC, Art. 11. The following do not incur any criminal liability: (5) Any person who acts in the fulfillment of a duty or in the lawful exercise of a right or office (8) Any person who acts in obedience to an order issued by a superior for some lawful purpose C.4. DAMNUM ABSQUE INJURIA There can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. Right to recover damages does not arise from the mere fact that the plaintiff suffered losses. To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong [Custodio v. CA, G.R. No. 116100 (1996)]. Damage

Illegal Loss, hurt, invasion of a harm legal right resulting from the injury

One who made use of his own legal right does no injury, thus, whatever damages are caused to another should be borne solely by him under the principle of damnum absque injuria. This principle, however, does not apply when there is an abuse in the exercise of a person’s right [Amonoy v. Gutierrez, G.R. No. 140420 (2001)]” C.5. PLAINTIFF’S NEGLIGENCE IS THE PROXIMATE CAUSE

C.3. AUTHORITY OF LAW

Injury

CIVIL LAW

Damages Recompense or compensation awarded

Art. 2179. When the plaintiff’s own negligence was the proximate cause of his injury, he cannot recover damages. xxx This defense of plaintiff’s negligence as proximate cause is absolute, for it bars recovery on the part of the plaintiff. In Manila Electric v. Remoquillo, supra, the Court did not allow recovery by Magno, ruling that his death was primarily caused by his own negligence and in some measure by the too close proximity of the “media agua” to the electric wire. If the plaintiff in a negligence action, by his own carelessness contributed to the principal occurrence, that is, to the accident, as one of the determining causes thereof, he cannot recover [Bernardo v. Legaspi, G.R. No. 9308 (1914)]. C.6. CONTRIBUTORY NEGLIGENCE OF THE PLAINTIFF Art. 2179. xxx But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. Art. 2214. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover. Contributory negligence is defined as conduct on the part of the injured party, which contributed as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own

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protection [Valenzuela v. CA, GR. No. 115024 (1996)].

C.8. PLAINTIFF’S ASSUMPTION OF RISK / VOLENTI NON FIT INJURIA

Contributory negligence does not defeat an action if it can be shown that the defendant might, by the exercise of reasonable care and prudence, have avoided the consequences of the injured party's negligence. Where the plaintiff contributes to the principal occurrence as one of its determining factors, he cannot recover. Where, in conjunction with the occurrence, he contributes only to his own injury, he may recover the amount that the defendant responsible for the event should pay for such injury, less a sum deemed a suitable equivalent for his own imprudence [MH Rakes v. Atlantic, G.R. No. L-1719 (1907)].

The doctrine of volenti non fit injuria (that to which a person assents is not presumed in law as injury) refers to self-inflicted injury or to the consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not negligent in doing so. This is so because, in theory, the plaintiff’s acceptance of the risk has wiped out the defendant’s duty, and as to the plaintiff the defendant’s negligence is not a legal wrong.

The defense of contributory negligence does not apply in criminal cases committed through reckless imprudence, since one cannot allege the negligence of another to evade the effects of his own negligence [Genobiagon v. CA, G.R. No. 40452 (1989)].

(a) That the plaintiff had actual knowledge of the danger;

C.7. FORTUITOUS EVENT Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which, could not be foreseen, or which, though foreseen, were inevitable. Elements of caso fortuito [Juntilla v. Fontanar, G.R. No. L-45637 (1985)]: (a) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will; (b) It must be impossible to foresee the event or if it can be foreseen, it must be impossible to avoid;

Requisites:

(b) That he understood and appreciated the risk from the danger; and (c) That he voluntarily exposed himself to such risk The defense is not applicable in the following cases: A person is excused from the force of the rule (volenti non fit injuria), that when he voluntarily assents to a known danger he must abide by the consequences, if an emergency is found to exist or if the life or property of another is in peril or when he seeks to rescue his endangered property [Ilocos Norte v. CA, G.R. No. 53401 (1989)]. The doctrine does not find application to the case because even if respondent Reyes assumed the risk of being asked to leave the pary, petitioners, under Articles 19 and 21 of the Civil Code, were still under the obligation to treat him fairly in order not to expose him to unnecessary ridicule and shame [Nikko Hotel v. Roberto Reyes, G.R. No. 154259 (2005)].

(c) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) The obligor must be free from any participation in the aggravation of the injury resulting to the creditor. PAGE 506 OF 69

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C.9. PRESCRIPTION Art. 1146. The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff; (2) Upon a quasi-delict; However, when the action arises from or out of any act, activity, or conduct of any public officer involving the exercise of powers or authority arising from Martial Law including the arrest, detention and/or trial of the plaintiff, the same must be brought within one (1) year.

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C.11. EMERGENCY RULE OR SUDDEN PERIL DOCTRINE An individual, who suddenly finds himself in a situation of danger and is required to act without much time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to undertake what subsequently and upon reflection may appear to be a better solution, unless the emergency was brought by his own negligence [Valenzuela v. CA, supra].

Art. 1150. The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall be counted from the day they may be brought. Prescription periods: • 4 years for quasi-delict • 1 year for defamation It is clear that the prescriptive period must be counted when the last element occurs or takes place, the time of the commission of an act or omission violative of the right of the plaintiff, which is the time when the cause of action arises. Thus, the prescription period begins from the day the quasi-delict is committed [Kramer v. CA, G.R. No. 83524 (1989)]. C.10. WAIVER Art. 6. Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with a right recognized by law. Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.

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III. Intentional Torts

CIVIL LAW

A. HUMAN RELATIONS TORTS A.1. ABUSE OF RIGHT

Liability for personal acts or omission is founded on that indisputable principle of justice recognized by all legislators that when a person by his act or omission causes damage or prejudice to another, a juridical relation is created by virtue of which the injured person acquires a right to be indemnified and the person causing the damage is charged with the corresponding duty of repairing the damage. The reason for this is found in the obvious truth that man should subordinate his acts to the precepts of prudence and if he fails to observe them and cause damage to another, he must repair the damage [MANRESA].

Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Generally, the exercise of any right must be in accordance with the purpose for which it was established. It must not be excessive or unduly harsh; there must be no intention to injure another. There is abuse of right when: (1) The right is exercised for the only purpose of prejudicing or injuring another (2) The objective of the act is illegitimate (3) There is an absence of good faith Elements [Albenson v. CA, G.R. No. 88694 (1993)]: (a) There is a legal right or duty; (b) Which is exercised in bad faith; (c) For the sole intent of prejudicing or injuring another.

Case

Legal Right and Injury

Doctrine

Velayo v. Shell (1959) Right to transfer credit.

The standards in NCC 19 are The transfer of credit from Shell Philippines implemented by NCC 21. to Shell USA was deemed a violation of NCC 21 as it allowed Shell to attach properties of their creditor CALI to the prejudice of its other creditors.

Globe v. CA (1989)

Right to dismiss an employee. The dismissal itself was not illegal but it was the manner of dismissal which was deemed in violation of Article 19, as such was based on unfounded accusations of dishonesty.

University of the East Academic freedom. v. Jader (2000) The conscious indifference of the school in not informing its student that he could not graduate formed the basis for the award of damages. PAGE 508 OF 69

When a right is exercised in a manner which does not conform with the norms in NCC 19, and results in damage to another, a legal wrong is thereby committed. The law, therefore, recognizes a primordial limitation on all rights. The conscious indifference of a person to the rights or welfare of the others who may be affected by his act or omission can support a claim for damages.

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Case

CIVIL LAW

Doctrine

Legal Right and Injury

Amonoy v. Gutierrez (2001)

Right to demolish another’s house on his own property.

The principle of damnum absque injuria does not apply when the exercise of the legal right is Amonoy obtained a judgment in his favor for Gutierrez to vacate. A demolition order suspended or extinguished pursuant was issued but the court suspended it with to a court order. The exercise of a right ends when the right disappears, a TRO. Amonoy proceeded with the demolition. In a complaint for damages, he and it disappears when it is abused, especially to the prejudice of others. claims the principle of damnum absque injuria.

Nikko Hotel Manila Garden v. Reyes (2005)

Right to forbid uninvited guests from entering the party. Ruby Lim’s throwing out of complainant Reyes, as a gatecrasher in a private party, was merely in exercise of her duties as Executive Secretary of the hotel where the party was held, and did not constitute a violation of Article 19.

A.2. ACTS CONTRARY TO LAW Art. 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same. The provision is intended to provide a remedy in cases where the law declares an act illegal but fails to provide for a relief to the party injured. [JARENCIO] NCC 20 does not distinguish, and the act may be done willfully or negligently. Requisites (a) The act must be willful or negligent; (b) It must be contrary to law; and (c) Damages must be suffered by the injured party. Salvador was misdiagnosed with Hepatitis, as a result of which she lost her job. During trial, it was proven that the clinic was operating under substandard conditions, in violation of the Clinical Laboratory Law, DOH Administrative Order No. 49-B, and the Philippine Medical Technology Act of 1969. The Court held that violation of a statutory duty is negligence, and that Article 20 provides the legal basis for award of

Article 19, known to contain what is commonly referred to as the principle of abuse of rights, is not a panacea for all human hurts and social grievances. The object of this article is to set certain standards which must be observed not only in the exercise of one’s rights but also in the performance of one’s duties.

damages to a party who suffers damage whenever one commits an act in violation of some legal provision [Garcia v. Salvador, G.R. No. 168512 (2007)]. A.3. ACTS CONTRARY TO MORALS Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. This article is designed “to expand the concept of torts and quasi-delict in this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically enumerate and punish in statute books”. [Baksh v. CA, supra]. Elements: [Albenson v. CA, supra]. (a) There is an act which is legal; (b) But which is contrary to morals, good customs, and public policy; and (c) It is done with intent to injure.

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CIVIL LAW

Examples of acts contrary to morals:

or that he commencement;

(1) Breach of Prom ise to M arry and Moral Seduction

(c) That in bringing the action, the prosecutor acted without probable cause (d) That the prosecutor was actuated or impelled by legal malice, that is, by improper or sinister motive. The mere dismissal of the criminal complaint by the fiscal’s office did not create a cause of action for malicious prosecution, because the proceedings therein did not involve an exhaustive examination of the elements of malicious prosecution. To constitute such, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person and that it was initiated deliberately by the defendant knowing that his charges were false and groundless [Que v. IAC, G.R. No. 66865 (1989)]. Malicious prosecution involves not only criminal but civil and administrative suits as well [Magbanua v. Junsay, supra]. (3) Public Humiliation Lolita’s family filed a case against Alfonse Pe, a married man, for allegedly seducing Lolita and causing great damage to the name of her parents, brothers, and sisters. The Court sustained the claim, finding an injury to Lolita’s family in a manner contrary to morals, good customs and public policy as contemplated in Article 21 of the new Civil Code [Pe v. Pe, G.R. No. L-17396 (1962)].

However, when for one whole year, the plaintiff, a woman of legal age, maintained sexual relations with the defendant, with repeated acts of intercourse, there is here voluntariness. No case under Article 21 is made [Tanjanco v. CA, G.R. No. L-18630 (1966)].

It is against morals, good customs and public policy to humiliate, embarrass and degrade the dignity of a person. Everyone must respect the dignity, personality, privacy and peace of mind of his neighbors and other persons (Article 26, Civil Code) [Grand Union v. Espino, G.R. No. L-48250 (1979)].

(2) Malicious Prosecution Malicious prosecution is the institution of any action or proceeding, either civil or criminal, maliciously and without probable cause. Elements: [Magbanua v. Junsay, G.R. No.132659 (2007)] (a) The fact of the prosecution or that the prosecution did occur and that the defendant was himself the prosecutor

its

(b) That the action finally terminated with an acquittal;

Mere breach of promise to marry is not an actionable wrong. But to formally set a wedding and go through all the abovedescribed preparation and publicity, only to walk out of it when the matrimony is about to be solemnized, is quite different. This is palpably and unjustifiably contrary to good customs xxx [Wassmer v. Velez, G.R. No. L-20089 (1964)]. Where a man's promise to marry is in fact the proximate cause of the acceptance of his love by a woman and his representation to fulfill that promise thereafter becomes the proximate cause of the giving of herself unto him in a sexual congress, proof that he had, in reality, no intention of marrying her and that the promise was only a subtle scheme or deceptive device to entice or inveigle her to accept him and to obtain her consent to the sexual act, could justify the award of damages pursuant to Article 21 not because of such promise to marry but because of the fraud and deceit behind it and the willful injury to her honor and reputation. It is essential, however, that such injury should have been committed in a manner contrary to morals, good customs or public policy [Baksh v. CA, supra].

instigated

(4) Oppressive Dismissal

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The right of an employer to dismiss an employee is not to be confused with the

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manner in which this right is to be exercised and the effects flowing therefrom. If the dismissal was done antisocially or oppressively, then there is a violation of Article 1701, which prohibits acts of oppression by either capital or labor against the other, and Article 21, which makes a person liable for damages if he willfully causes loss or injury to another in a manner that is contrary to morals, good customs, or public policy. When the manner in which the company exercised its right to dismiss was abusive, oppressive and malicious, it is liable for damages [Quisaba v. Sta. Ines, G.R. No. L-38000 (1974)].

CIVIL LAW

violation or frustration of law or opposition to public policy, either directly or indirectly. Enrichment at the expense of another is not per se forbidden. It is such enrichment without just or legal cause that is contemplated here. Just and legal cause is always presumed, and the plaintiff has the burden of proving its absence. The restitution must cover the loss suffered by the plaintiff but it can never exceed the amount of unjust enrichment of the defendant if it is less than the loss of the plaintiff. Requisites: (a) That the defendant has been enriched;

A.4. UNJUST ENRICHMENT

(b) That the plaintiff has suffered a loss;

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

(c) That the enrichment of the defendant is without just or legal ground; and (d) That the plaintiff has no other action based on contract, crime or quasi-delict. A.5. VIOLATION OF HUMAN DIGNITY

Art. 23. Even when an act or event causing damage to another’s property was not due to the fault or negligence of the defendant, the latter shall be liable for indemnity if through the act or event he was benefited.

Art. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief:

Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

(1) Prying into the privacy of another’s residence; (2) Meddling with or disturbing the private life or family relations of another;

Art. 2143. The provisions for quasi contracts in this Chapter do not exclude other quasicontracts which may come within the purview of the preceding article.

(3) Intriguing to cause another to be alienated from his friends;

One person should not be permitted to unjustly enrich himself at the expense of another, but should be required to make restitution of, or for property or benefits received, retained, or appropriated where it is just and equitable that such restitution be made, and where such action involves no

(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition. Article 26 specifically applies to intentional acts which fall short of being criminal offenses. It itself expressly refers to tortious conduct which "may not constitute criminal offenses." The purpose is precisely to fill a

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gap or lacuna in the law where a person who suffers injury because of a wrongful act not constituting a crime is left without any redress. Under Article 26, the person responsible for such act becomes liable for "damages, prevention and other relief." In short, to preserve peace and harmony in the family and in the community, Article 26 seeks to eliminate cases of damnum absque injuria in human relations [MVRS Publications v. Islamic Da'wah Council, G.R. No. 135306 (2003)]. The principal rights protected under this provision are the following: (1) The right to personal dignity (2) The right to personal security (3) The right to family relations (4) The right to social intercourse (5) The right to privacy (6) The right to peace of mind Note: Coverage of Art. 26 is not limited to those enumerated therein, the enumeration being merely examples of acts violative of a person’s rights to dignity, personality, privacy and peace of mind. Other “similar acts” are also covered within the scope of the article.

CIVIL LAW

memory, to protect the feelings of the living heirs. Reasonableness of Expectation of Privacy Test: [Ople v. Torres, G.R. No. 127685 (1998)] (1) Whether by one’s conduct, the individual has exhibited an expectation of privacy (2) Whether this expectation is one that society recognizes and accepts as reasonable The general rule is that the right to privacy may only be invoked by natural persons. Juridical persons cannot invoke this because the basis to this right is an injury to the feelings and sensibilities of the injured party, and a corporation has none of those. The exception is where the right to privacy is invoked along with the right against unreasonable searches and seizures. “An individual’s right to privacy under Article 26(1) of the Civil Code should not be confined to his house or residence as it may extend to places where he has the right to exclude the public or deny them access” [Sps. Hing v. Choachuy, G.R. No. 179736 (2013)]. Types of invasion of privacy

V IOLATION OF P ERSONAL D IGNITY In order to be actionable it is not necessary that the act constitutes a criminal offense. The remedy afforded by the law is not only the recovery of damages. “Prevention and other relief” is also available. In other words, injunction and other appropriate reliefs may also be obtained by the aggrieved party. V IOLATION OF P RIVACY Privacy is the right to be let alone, or to be free from unwarranted publicity, or to live without unwarranted interference by the public in matters in which the public is not necessarily concerned. This right is purely personal in nature, such that it can be invoked only by the person actually injured, it is subject to a proper waiver, and it ceases upon death. However, the privilege may be given to heirs of a deceased to protect his

(1) Publication of embarrassing private facts – The interest here is the right to be free from unwarranted publicity, wrongful publicizing of private affairs and activities, as these are outside the ambit of legitimate public concern. Public figures enjoy a limited right to privacy as compared to ordinary individuals [Ayer v. Capulong, G.R. No. 82380 (1988)]. (2) Intrusion upon plaintiff’s private affairs

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• This is not limited to situations where the wrongdoer physically trespasses into one’s property. • Generally, there is no invasion of privacy when journalists report something that occurs in the public realm, except when the acts of the journalist are to an extent that it constitutes harassment.

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• RA 4200: It is illegal for any person not authorized by both parties to any private communication to secretly record such communication. (3) Publicity which puts one in a false light in the public eye – The interest here is in not being made or forced to appear before the public in an objectionable false light or position. Tort of putting in false light

Defamation

CIVIL LAW

one or more third persons [Prosser and Keeton]. K INDS : (1) Family relations (2) Social relations (3) Economic relations (4) Political relations Family Relations A LIENATION OF AFFECTION

The embarrassment of a person being portrayed as something he is not

Concerns the reputational harm to a person

Statement should be actually made in public

Publication is satisfied even if communicated to only one specific third person

This is a cause of action in favor of a husband against one who wrongfully alienates the affection of his wife, depriving him of his conjugal rights to her consortium, that is, her society, affection, and assistance. Elements: (a) Wrongful conduct of the defendant: intentional and malicious enticing of a spouse away from the other spouse

(4) Commercial appropriation of likeness of image – It consists of appropriation, for the defendant’s benefit or advantage (ex. used in defendant’s advertisement), of the plaintiff’s name or likeness (picture or portrait).

(b) Loss of affection or consortium Note: Complete absence of affection between the spouses is not a defense. (c) Causal connection between such conduct and loss

D ISTURBANCE OF P EACE OF M IND

There is no evidence that the parents of Vicenta, out of improper motives, aided and abetted her original suit for annulment, or her subsequent divorce; she appears to have acted independently, and being of age, she was entitled to judge what was best for her and ask that her decisions be respected. Her parents, in so doing, certainly cannot be charged with alienation of affections in the absence of malice or unworthy motives, which have not been shown, good faith being always presumed until the contrary is proved [Tenchavez v. Escaño, G.R. No. L-19671 (1965)].

The disturbance of the mental and emotional tranquility of the plaintiff by the defendant is a legal injury in itself and, therefore, a sufficient cause of action for damages, injunction, and other relief. A person, however, cannot be held liable for damages for the mental or emotional disturbance of the plaintiff which was due to the latter’s susceptibility to such disturbance, where the defendant had no knowledge of such peculiar susceptibility. The tendency of the law is to secure an interest in mental comfort only to the extent of the ordinary sensibilities of men.

L OSS OF CONSORTIUM

Interference with Relations An interference with the continuance of unimpaired interests founded upon the relation in which the plaintiff stands toward

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The plaintiff Aleko E. Lilius also seeks to recover the sum of P2,500 for the loss of what is called Anglo-Saxon common law "consortium" of his wife, that is, "her

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services, society and conjugal companionship", as a result of personal injuries which she had received from the accident now under consideration. Inasmuch as a wife's domestic assistance and conjugal companionship are purely personal and voluntary acts which neither of the spouses may be compelled to render, it is necessary for the party claiming indemnity for the loss of such services to prove that the person obliged to render them had done so before he was injured and that he would be willing to continue rendering them had he not been prevented from so doing [Lilius v. Manila Railroad Company, G.R. No. L39587 (1934)]. C RIMINAL CONVERSATION (A DULTERY ) Interference with the marital relations by committing adultery with one of the spouses. This is obvious enough in the case of rape but also applies where the adulterous spouse consented to or initiated the intercourse. [PROSSER AND KEETON, p. 917] Social Relations (1) Meddling with or disturbing family relations Art. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief; xxx 2) Meddling with or disturbing the private life or family relations of another; Developed as an offshoot of the action for enticing away a servant and depriving the master of the proprietary interest in [the servant’s] services until there has been a gradual shift of emphasis away from “services” and toward a recognition of more intangible elements in the domestic relations, such as companionship and

CIVIL LAW

affection. [PROSSER AND KEETON, p. 916] I NTRIGUING TO CAUSE ANOTHER TO BE ALIENATED FROM HIS FRIENDS

A person who committed affirmative acts intended to alienate the existing friendship of one with his friends is liable for damages. A man is a social being and for being so, he needs friends to socialize with and to depend upon in case of need. To alienate him wrongfully or with malice from his friends is to cause him suffering for which he is entitled to damages. Econom ic Relations Art. 1314. Any person who induces another to violate his contract with another person shall be liable for damages to the other contracting party. Tort liability may be imposed upon a defendant who intentionally and improperly interferes with the plaintiff’s rights under a contract with another person if the interference causes the plaintiff to lose a right under the contract or makes the contract rights more costly or less valuable. This law of interference of contract is part of a larger body of tort law aimed at protection of relationships [PROSSER AND KEETON]. Elements of tort interference: [So Ping Bun v. CA, G.R. No. 120554 (1999)] (a) Existence of a valid contract (b) Knowledge on the part of the third person of the existence of contract; and (c) Interference of the third person is without legal justification or excuse. Everyone has a right to enjoy the fruits and advantages of his own enterprise, industry, skill and credit. He has no right to be protected against competition; but he has a right to be free from malicious and wanton interference, disturbance or annoyance. If disturbance or loss comes as a result of competition, or the exercise of like rights by others, it is damnum absque injuria, unless some superior right by contract or otherwise is interfered with. Thus, a plaintiff loses his

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cause of action if the defendant provides a sufficient justification for such interference, which must be an equal or superior right in themselves. The defendant may not legally excuse himself on the ground that he acted on a wrong understanding of his own rights, or without malice, or bona fide, or in the best interests of himself [Gilchrist v. Cuddy, G.R. No. 9356 (1915)]. Bad faith/Malice is required to make the defendant liable for damages in cases of tortuous interference [So Ping Bun v. CA, supra]. A.6 DERELICTION OF DUTY Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken. This applies only to acts of nonfeasance or the nonperformance of some acts which a person is obliged or has responsibility to perform. The duty of the public servant must be ministerial in character. If the duty is discretionary, he is not liable unless he acted in a notoriously arbitrary manner. The defense of good faith is not available because an officer is under constant obligation to discharge the duties of his office, and it is not necessary to show that his failure to act was due to malice or willfulness. Requisites: [Amaro v. Sumanguit, G.R. No. L-14986 (1962)] (a) Defendant is a public officer charged with a performance of a duty in favor of the plaintiff;

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A.7. UNFAIR COMPETITION Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage.

B. INDEPENDENT CIVIL ACTIONS Rule 111, Sec. 3, ROC. In the cases provided for in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence. In no case, however, may the offended party recover damages twice for the same act or omission charged in the criminal action. B.1. VIOLATION OF CIVIL AND POLITICAL RIGHTS Art. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: (1) Freedom of religion (2) Freedom of speech (3) Freedom to write for the press or to maintain a periodical publication (4) Freedom from detention

arbitrary

or

illegal

(5) Freedom of suffrage (6) The right against deprivation of property without due process of law

(b) He refused or neglected without just cause to perform the duty;

(7) The right to just compensation when property is taken for public use

(c) Plaintiff sustained material or moral loss as a consequence of such nonperformance;

(8) The right to equal protection of the laws

(d) The amount of such damages, if material.

(9) The right to be secure in one’s person, house, papers and effects against unreasonable searches and seizures

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(10) The liberty of abode and of changing the same (11) The right to privacy of communication and correspondence (12) The right to become a member of associations and societies for purposes not contrary to law (13) The right to take part in a peaceable assembly and petition the government for redress of grievances (14) The right to be free from involuntary servitude in any form (15) The right of excessive bail

the

accused

against

(16) The right of the accused to be heard by himself and counsel, to be informed of the nature and the cause of the accusation against him, to have a speedy and public trial, to meet the witnesses face to face, to have compulsory process to secure the attendance of witnesses on is behalf; (17) Freedom from being compelled to be a witness against one’s self, or from being forced to confess his guilt, or from being induced by a promise of immunity or reward to make such confession, except when the person confessing becomes a State witness. (18) Freedom from excessive fines, or cruel and unusual punishment, unless the same is imposed or inflicted in accordance with a statute which has not been judicially declared unconstitutional; (19) Freedom of access to the courts In any of the cases referred to in this article, whether or not the defendant’s act or omission constitutes a criminal offense, the aggrieved party has a right to commence an entirely separate and distinct civil action for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be instituted) and may be proved by a preponderance of evidence. The indemnity shall include moral damages. Exemplary damages may also be adjudicated.

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The responsibility herein set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal code or any other penal statute. Article 32 speaks of a particular specie of an “act” that may give rise to an action for damages against a public officer, and that is, a tort for impairment of rights and liberties. [Vinzons-Chato v. Fortune, supra] Article 32 is clear that not only public officers but also private individuals can incur civil liability for violation of rights enumerated therein. Because the provision speaks of an officer, employee or person “directly or indirectly” responsible for the violation of the constitutional rights and liberties of another, it is not the actor alone who must answer for damages under Article 32. It is not even necessary that the defendant should have acted with malice or bad faith, otherwise, it would defeat its main purpose, which is the effective protection of individual rights. [Silahis v. Soluta, G.R. No. 163087 (2006)] B.2. DEFAMATION, FRAUD, PHYSICAL INJURIES Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence. The civil action for damages that Article 33 allows to be instituted is ex-delicto. This is manifest from the provision which uses the expressions “criminal action” and “criminal prosecution”. Quoting Tolentino, the Court ruled that this provision is an exception to the general rule that the civil action for recovery of civil liability arising from the offense charged is impliedly instituted with the criminal action. Where the offense is defamation, fraud, or physical injuries, a civil action may be filed independently of the criminal action, even though no reservation is made [Madeja v. Caro, G.R. No. 51183 (1983)].

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(1) Defam ation – the offense of injuring a person’s character, fame or reputation through false or malicious statements. Defamation is an invasion of a relational interest since it involves the opinion which others in the community may have, or tend to have, of the plaintiff. Elements of libel pursuant to RPC, Art. 353: (a) An allegation or imputation of a discreditable act or condition concerning another (b) Publication of the imputation (c) Identity of the person defamed (d) Existence of malice Where the defamation is alleged to have been directed at a group or class, it is essential that the statement must be so sweeping or all-embracing as to apply to every individual in that group or class, or sufficiently specific so that each individual in the class or group can prove that the defamatory statement was specifically pointed to him [MVRS Publications, Inc. v. Islamic, supra]. In determining whether certain utterances are defamatory, the words used are to be construed in their entirety and taken in their plain, natural and ordinary meaning, as they would naturally be understood by persons hearing or reading them, unless it appears that they were used and understood in another sense. When malice in fact is proven, assertions and proofs that the libelous articles are qualifiedly privileged communications are futile, since being qualifiedly privileged communications merely prevents the presumption of malice from attaching in a defamatory imputation [Yuchengco v. Manila Chronicle, G.R. No. 184315 (2009)]. (2) Fraud – Estafa under RPC, 315; Article 33 does not cover violations of B.P. 22. (3) Physical Battery)

Injuries

(Assault

and

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Battery Battery is the actual infliction of any unlawful or unauthorized violence on the person of another, irrespective of its degree. The law protects the interest of the individual in freedom from bodily harm or any impairment of the physical integrity of the body. Assault Assault is an intentional, unlawful offer of physical injury to another by force unlawfully directed toward the person of another, under such circumstances as to create a well-founded fear of imminent peril, coupled with the apparent present ability to effectuate the attempt if not prevented. The law seeks to protect the interest of the individual in freedom from offensive bodily touching although no actual harm is done. Defamation and fraud (in Art. 33) are used in their ordinary sense because there are no specific provisions in the Revised Penal Code using these terms as names of offenses defined therein, so that these two terms defamation and fraud must have been used not to impart to them any technical meaning in the laws of the Philippines, but in their generic sense. With these apparent circumstances in mind, it is evident that the term “physical injuries” could not have been used in its specific sense as a crime defined in the Revised Penal Code, for it is difficult to believe that the Code Commission would have used terms in same article—some in this general and others in its technical sense. In other words, the term “physical injuries” should be understood to mean bodily injury, not the crime of physical injuries, because the terms used with the latter are general terms [Carandang v. Santiago and Valenton, G.R. No. L-8238 (1955)]. Paje was acquitted of the charge of homicide and double serious physical injuries through reckless imprudence on the ground that the collision was a pure accident and the negligence charged against him did not exist. In a separate civil action to enforce civil liability filed by

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the heirs of the deceased, the Court ruled that criminal negligence is not one of the three crimes mentioned in Article 33, which authorizes the institution of an independent civil action. Although in the case of Dyogi v. Yatco, the Court held that the term “physical injuries” includes homicide, it is borne in mind that the charge against Paje was for reckless imprudence resulting in homicide, and the law penalizes the negligent or careless act, not the result thereof [Corpus v. Paje, G.R. No. L-26737 (1969)]. B.3. NEGLECT OF DUTY Art. 34. When a member of a city or municipal police force refuses or fails to render aid or protection to any person in case of danger to life or property, such peace officer shall be primarily liable for damages, and the city or municipality shall be subsidiarily responsible therefor. The civil action herein recognized shall be independent of any criminal proceedings, and a preponderance of evidence shall suffice to support such action.

CIVIL LAW

B.4. CATCH-ALL ACTION

INDEPENDENT

CIVIL

Art. 35. When a person, claiming to be injured by a criminal offense, charges another with the same, for which no independent civil action is granted in this Code or any special law, but the justice of the peace finds no reasonable grounds to believe that a crime has been committed, or the prosecuting attorney refuses or fails to institute criminal proceedings, the complaint may bring a civil action for damages against the alleged offender. Such civil action may be supported by a preponderance of evidence. Upon the defendant's motion, the court may require the plaintiff to file a bond to indemnify the defendant in case the complaint should be found to be malicious. If during the pendency of the civil action, an information should be presented by the prosecuting attorney, the civil action shall be suspended until the termination of the criminal proceedings.

Art. 34 covers a situation where: (1) There is danger to the life or property of a person; (2) A member of a city or municipal police force who is present in the scene refused or failed to render aid or protection to the person; and (3) Damages are caused whether to the person and/or property of the victim. Nature of liability (1) Of the police officer – Primary (2) City or municipality – Subsidiary The defense of having observed the diligence of a good father of a family to prevent the damage is not available to the city/municipality.

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IV. Liability Attached to Specific Persons

(3) Act of third persons

A. STRICT LIABILITY

Art. 2189. Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by, any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision.

A.1. POSSESSOR OR USER OF ANIMALS Art. 2183. The possessor of an animal or whoever may make use of the same is responsible for the damage which it may cause, although it may escape or be lost. This responsibility shall cease only in case the damage should come from force majeure or from the fault of the person who has suffered damage. Since the law makes no distinction, this is applicable to both wild (in case the wild animal is kept) and domestic animals. It is enough that defendant is the possessor, owner, or user of the animal at the time it caused the damage complained of, to hold him liable therefor. Possession of the animal, not ownership, is determinative of liability under Art. 2183. The obligation imposed by said article is not based on the negligence or on the presumed lack of vigilance of the possessor or user of the animal causing damage. It is based on natural equity and on the principle of social interest that he who possesses animals for his utility, pleasure, or service, must answer for any damage which such animal may cause. The contention that the defendant could not be expected to exercise remote control of the animal is not acceptable. In fact, Art. 2183 holds the possessor liable even if the animal should “escape or be lost” and so be removed from his control. It is likewise immaterial that the animal was tame and was merely provoked by the victim. The law does not speak only of vicious animals but covers even tame ones as long as they cause injury [Vestil v. IAC, G.R. No. 74431 (1989)]. Possible liability

defenses

against

(1) Force Majeure (2) Fault of person suffering damage

this

A.2. PROVINCES, MUNICIPALITIES

CITIES,

AND

It is not even necessary that the defective roads or streets belong to the province, city or municipality for liability to attach. The article only requires that either control or supervision be exercised over said street or road [Guilatco v. Dagupan, G.R. No. 61516 (1989)]. A.3. PROPRIETOR STRUCTURE

OF

BUILDING

OR

Art. 2190. The proprietor of a building or structure is responsible for the damages resulting from its total or partial collapse, if it should be due to the lack of necessary repairs. Art. 2191. Proprietors shall responsible for damages caused:

also

be

(1) By the explosion of machinery which has not been taken care of with due diligence, and the inflammation of explosive substances which have not been kept in a safe and adequate place; (2) By excessive smoke, which may be harmful to persons or property; (3) By the falling of trees situated at or near highways or lanes, if not caused by force majeure; (4) By emanations from tubes, canals, sewers or deposits of infectious matter, constructed without precautions suitable to the place. Art. 2192. If damage referred to in the two preceding articles should be the result of any defect in the construction mentioned in

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article 1723, the third person suffering damages may proceed only against the engineer or architect or contractor in accordance with said article, within the period therein fixed.

defects not discoverable by ordinary or reasonable means [Gotesco Investment Corp. v. Chatto, G.R. No. 87584 (1992)].

Ownership of a building imposes on the proprietor thereof the duty to maintain it in good condition at all times to the end that it may not collapse either totally or partially as to cause damage or injury to another’s person or property. This duty obtains whether the building is leased or held in usufruct. Considering, however, that the lessee or usufructuary has direct and immediate control of the building, the law imposes on him the duty to notify the proprietor of such urgent or extraordinary repairs. And where the proprietor’s failure to make the necessary repairs was due to the failure of the lessee or usufructuary to notify him, the proprietor is entitled to indemnification for damages he may have been required to pay to the parties.

Art. 1723. The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract. If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor.

Liability does not attach to the proprietor if the damage was caused by any defect in the construction mentioned in Article 1723, in which case the action should be against the engineer or architect.

A.4. ENGINEER OR COLLAPSED BUILDING

ARCHITECT

OF

Acceptance of the building, after completion, does not imply waiver of any of the cause of action by reason of any defect mentioned in the preceding paragraph. The action must be brought within ten years following the collapse of the building.

Under Article 2190, the plaintiff is required to prove:

Engineer or architect who drew up the plans and specifications is liable if the building collapses within 15 years due to:

(a) The total or partial collapse of a building or structure

(1) A defect in specifications; or

(b) That the defendant is the proprietor

(2) Due to the defects in the ground.

(c) That the collapse was due to the lack of necessary repairs

Contractor is liable if the edifice falls within 15 years due to:

Note: There is no requirement to prove negligence.

(1) Defects in the construction;

Under Article 2191, with the exception of No. 1, negligence is also not an issue.

(3) Due to any violation of the terms of the contract.

The owner or proprietor of a place of public amusement impliedly warrants that the premises, appliances and amusement devices are safe for the purpose for which they are designed, the doctrine being subject to no other exception or qualification than that he does not contract against unknown

Here, the plaintiff need only prove that such conditions (defects) exist, and need not prove that negligence of the defendant be the cause of the conditions.

those

plans

and

(2) The use of materials of inferior quality furnished by the contractor; or

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A.5. OWNERS OF OTHER EMPLOYERS

TORTS

ENTERPRISES

OR

Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries to their laborers, workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap was due to the employee's own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for compensation. When the employee's lack of due care contributed to his death or injury, the compensation shall be equitably reduced.

CIVIL LAW

Situations covered: (1) Death or injury arising out of or in the course of employment – here, the employer is liable even if the event which caused the death or injury was purely accidental or due to a fortuitous event (2) Illness or disease caused by their employment or as the result of the nature of the employment Defenses available to the em ployer: (1) When death or injury is not caused by a fellow worker • The mishap due to the employee’s own notorious negligence or voluntary act, or drunkenness (2) When death or injury is caused by a fellow worker • General rule: The employer is solidarily liable with the fellow worker causing the death or injury

Art. 1712. If the death or injury is due to the negligence of a fellow worker, the latter and the employer shall be solidarily liable for compensation. If a fellow worker's intentional malicious act is the only cause of the death or injury, the employer shall not be answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiff's fellow worker. Alarcon, a teacher, hired Urzino and Azaña to dig a well on his land; in the course of which Urzino died of asphyxia. The Court found that under the principle of ejusdem generis, said “other employers” mentioned in Article 1711 must be construed to refer to persons who belong to a class analogous to “owners of enterprises”, such as those operating a business or engaged in a particular industry or trade, requiring its managers to contract the services of laborers, workers and/or employees. Alarcon, not owning any enterprise, did not fall under the category of “other employers” [Alarcon v. Alarcon, G.R. No. L-15692 (1961)].

• Exception: If the only cause of the death or injury was the fellow worker’s intentional or malicious act • Exception to the exception: If it is shown that the employer did not exercise due diligence in the selection and supervision of the fellow worker causing the death or injury A.6. HEAD OF A FAMILY FOR THINGS THROWN OR FALLING Art 2193. The head of a family that lives in a building or a part thereof, is responsible for damages caused by things thrown or falling from the same. The purpose of the law is to relieve the injured party of the difficulty of determining and proving who threw the thing or what caused it to fall, or that either was due to the fault or negligence of any particular individual. Lessee is considered as the head of the family. It is enough that he lives in and has control over it [Dingcong v. Kanaan, G.R. No. L-47033 (1941)].

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A.7. PRODUCTS LIABILITY

W ho may recover

i. MANUFACTURERS / PROCESSORS OF FOODSTUFFS

Although the article used the term “consumer”, such term includes a “user” and “purchaser” of the injuriously defective food product or toilet article. The person who may recover need not be the purchaser of the foodstuff or toilet article.

Art. 2187. Manufacturers and processors of foodstuffs, drinks, toilet articles and similar goods shall be liable for death or injuries caused by any noxious or harmful substances used, although no contractual relation exists between them and the consumers. Under the foregoing provision, liability is not made to depend upon fault or negligence of the manufacturer or processor. The provision likewise dispensed with any contractual relation between the manufacturer and the consumer, thereby clearly implying that liability is imposed by law as a matter of public policy. Proof of negligence under this provision is not necessary; as such, traditional contract and warranty defenses as (1) lack of privity; (2) lack of reliance on a warranty; (3) lack of notice to the defendant of the breach of warranty; and (4) disclaimer of implied warranties are inapplicable. Requisites of liability (a) Defendant is a manufacturer or possessor of foodstuff, drinks, toilet articles and similar goods; (b) He used noxious or harmful substances in the manufacture or processing of the foodstuff, drinks or toilet articles consumed or used by the plaintiff; (c) Plaintiff’s death or injury was caused by the product so consumed or used; and (d) The damages sustained and claimed by the plaintiff and the amount thereof. Burden of proof The burden of proof that the product was in a defective condition at the time it left the hands of the manufacturer and particular seller is upon the injured plaintiff.

ii. CONSUMER ACT – RA 7394, SECS. 92107 (CH. 1) Consumer Act Provisions Article 4. Definition of Terms. (n) "Consumer" means a natural person who is a purchaser, lessee, recipient or prospective purchaser, lessor or recipient of consumer products, services or credit. (as) "Manufacturer" means any person who manufactures, assembles or processes consumer products, except that if the goods are manufactured, assembled or processed for another person who attaches his own brand name to the consumer products, the latter shall be deemed the manufacturer. In case of imported products, the manufacturer's representatives or, in his absence, the importer, shall be deemed the manufacturer. Article 92. Exemptions. – If the concerned department finds that for good or sufficient reasons, full compliance with the labeling requirements otherwise applicable under this Act is impracticable or is not necessary for the adequate protection of public health and safety, it shall promulgate regulations exempting such substances from these requirements to the extent it deems consistent with the objective of adequately safeguarding public health and safety, and any hazardous substance which does not bear a label in accordance with such regulations shall be deemed mislabeled hazardous substance. Article 97. Liability for the Defective Products. – Any Filipino or foreign manufacturer, producer, and any importer, shall be liable for redress, independently of fault, for damages caused to consumers by defects

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resulting from design, manufacture, construction, assembly and erection, formulas and handling and making up, presentation or packing of their products, as well as for the insufficient or inadequate information on the use and hazards thereof. A product is defective when it does not offer the safety rightfully expected of it, taking relevant circumstances into consideration, including but not limited to: (a) presentation of product

CIVIL LAW

to consumers by defects relating to the rendering of the services, as well as for insufficient or inadequate information on the fruition and hazards thereof. The service is defective when it does not provide the safety the consumer may rightfully expect of it, taking the relevant circumstances into consideration, including but not limited to: (a) the manner in which it is provided; (b) the result of hazards which reasonably be expected of it;

(b) use and hazards reasonably expected of it;

may

(c) the time when it was provided.

(c) the time it was put into circulation. A product is not considered defective because another better quality product has been placed in the market. The manufacturer, builder, producer or importer shall not be held liable when it evidences: (a) that it did not place the product on the market;

A service is not considered defective because of the use or introduction of new techniques. The supplier of the services shall not be held liable when it is proven: (a) that there is no defect in the service rendered; (b) that the consumer or third party is solely at fault.

(b) that although it did place the product on the market such product has no defect; (c) that the consumer or a third party is solely at fault. Article 98. Liability of Tradesman or Seller. – The tradesman/seller is likewise liable, pursuant to the preceding article when: (a) it is not possible to identify the manufacturer, builder, producer or importer; (b) the product is supplied, without clear identification of the manufacturer, producer, builder or importer; (c) he does not adequately preserve perishable goods. The party making payment to the damaged party may exercise the right to recover a part of the whole of the payment made against the other responsible parties, in accordance with their part or responsibility in the cause of the damage effected. Article 99. Liability for Defective Services. – The service supplier is liable for redress, independently of fault, for damages caused

Article 100. Liability for Product and Service Imperfection. – The suppliers of durable or nondurable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with the information provided on the container, packaging, labels or publicity messages/advertisement, with due regard to the variations resulting from their nature, the consumer being able to demand replacement to the imperfect parts. If the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his option: (a) the replacement of the product by another of the same kind, in a perfect state of use; (b) the immediate reimbursement of the amount paid, with monetary updating, without prejudice to any losses and damages; (c) a proportionate price reduction. The parties may agree to reduce or increase

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the term specified in the immediately preceding paragraph; but such shall not be less than seven (7) nor more than one hundred and eighty (180) days. The consumer may make immediate use of the alternatives under the second paragraph of this Article when by virtue of the extent of the imperfection, the replacement of the imperfect parts may jeopardize the product quality or characteristics, thus decreasing its value. If the consumer opts for the alternative under sub-paragraph (a) of the second paragraph of this Article, and replacement of the product is not possible, it may be replaced by another of a different kind, mark or model: Provided, That any difference in price may result thereof shall be supplemented or reimbursed by the party which caused the damage, without prejudice to the provisions of the second, third and fourth paragraphs of this Article. Article 101. Liability for Product Quantity Imperfection. – Suppliers are jointly liable for imperfections in the quantity of the product when, in due regard for variations inherent thereto, their net content is less than that indicated on the container, packaging, labeling or advertisement, the consumer having powers to demand, alternatively, at his own option: (a) the proportionate price (b) the supplementing of weight or measure differential; (c) the replacement of the product by another of the same kind, mark or model, without said imperfections; (d) the immediate reimbursement of the amount paid, with monetary updating without prejudice to losses and damages if any. The provisions of the fifth paragraph of Article 99 shall apply to this Article. The immediate supplier shall be liable if the instrument used for weighing or measuring is not gauged in accordance with official standards.

CIVIL LAW

Article 102. Liability for Service Quality Imperfection. – The service supplier is liable for any quality imperfections that render the services improper for consumption or decrease their value, and for those resulting from inconsistency with the information contained in the offer or advertisement, the consumer being entitled to demand alternatively at his option: (a) the performance of the services, without any additional cost and when applicable; (b) the immediate reimbursement of the amount paid, with monetary updating without prejudice to losses and damages, if any; (c) a proportionate price reduction. Reperformance of services may be entrusted to duly qualified third parties, at the supplier's risk and cost. Improper services are those which prove to be inadequate for purposes reasonably expected of them and those that fail to meet the provisions of this Act regulating service rendering. Article 103. Repair Service Obligation. – When services are provided for the repair of any product, the supplier shall be considered implicitly bound to use adequate, new, original replacement parts, or those that maintain the manufacturer's technical specifications unless, otherwise authorized, as regards to the latter by the consumer. Article 104. Ignorance of Quality Imperfection. – The supplier's ignorance of the quality imperfections due to inadequacy of the products and services does not exempt him from any liability. Article 105. Legal Guarantee of Adequacy. – The legal guarantee of product or service adequacy does not require an express instrument or contractual exoneration of the supplier being forbidden. Article 106. Prohibition in Contractual Stipulation. – The stipulation in a contract of a clause preventing, exonerating or reducing

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the obligation to indemnify for damages effected, as provided for in this and in the preceding Articles, is hereby prohibited, if there is more than one person responsible for the cause of the damage, they shall be jointly liable for the redress established in the pertinent provisions of this Act. However, if the damage is caused by a component or part incorporated in the product or service, its manufacturer, builder or importer and the person who incorporated the component or part are jointly liable.

CIVIL LAW

Sangco: A person who creates or maintains a nuisance is liable for the resulting injury to others regardless of the degree of care or skill exercised to avoid the injury. The creation or maintenance of a nuisance is a violation of an absolute duty. Liability for Negligence v. Liability for Nuisance Negligence Basis

A.8. NUISANCE Art. 694. A nuisance is any act, omission, establishment, business, condition of property, or anything else which: (1) Injures or endangers the health or safety of others; or (2) Annoys or offends the senses; or (3) Shocks, defies or disregards decency or morality; or (4) Obstructs or interferes with the free passage of any public highway or street, or any body of water; or

Art. 697. The abatement of a nuisance does not preclude the right of any person injured to recover damages for its past existence. Art. 698. Lapse of time cannot legalize any nuisance, whether public or private. Nuisance is a condition and not an act or failure to act, so that if a wrongful condition exists, the person responsible for its existence is responsible for the resulting damages to others.

Liability attaches regardless of the skill exercised to avoid the injury

Condition Act of the act complained of is already done which caused injury to the plaintiff

There is continuing harm being suffered by the aggrieved party because of the maintenance of the act or thing which constitutes the nuisance

Remedy

Abatement

(5) Hinders or impairs the use of property. Art. 696. Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefor in the same manner as the one who created it.

Liability is based on lack of proper care and diligence

Nuisance

Action for damages

Easement against Nuisance Art. 682. Every building or piece of land is subject to the easement which prohibits the proprietor or possessor from committing nuisance through noise, jarring, offensive odor, smoke, heat, dust, water, glare and other causes. Art. 683. Subject to zoning, health, police and other laws and regulations, factories and shops may be maintained provided the least possible annoyance is caused to the neighborhood. The provisions impose a prohibition upon owners of buildings of land from committing therein a nuisance or using such buildings or lands in a manner as will constitute a nuisance. It is based on the maxim sic utere tuo ut alienum non laedas (so use your own as not to injure another’s property).

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The general rule is that everyone is bound to bear the habitual or customary inconveniences that result from the proximity of others, and so long as this level is not surpassed, he may not complain against them. But if the prejudice exceeds the inconveniences that such proximity habitually brings, the neighbor who causes such disturbances is held responsible for the resulting damage, being guilty of causing nuisance. There can be no doubt that commercial and industrial activities which are lawful in themselves may become nuisances if they are so offensive to the senses that they render the enjoyment of life and property uncomfortable. It is no defense that skill and care have been exercised and the most improved methods and appliances employed to prevent such result. In this case, the Court ruled that causing or maintaining disturbing noises or sounds may constitute an actionable nuisance [Velasco v. Manila Electric Co., G.R. No. 18390 (1971)].

industries in populous neighborhoods; from acts of public indecency, keeping disorderly houses, and houses of ill fame, gambling houses, etc. Nuisances have been divided into two classes: Nuisances per se, and nuisances per accidens. To the first belong those which are unquestionably and under all circumstances nuisances, such as gambling houses, houses of ill fame, etc. The number of such nuisances is necessarily limited, and by far the greater number of nuisances are such because of particular facts and circumstances surrounding the otherwise harmless cause of the nuisance. For this reason, it will readily be seen that whether a particular thing is a nuisance is generally a question of fact, to be determined in the first instance before the term nuisance can be applied to it [Iloilo Ice and Cold Storage Co. v. Municipal Council, G.R. No. L-7012 (1913)]. (3) Public nuisance

Types of Nuisance: (1) Nuisance per se It is recognized as a nuisance under any and all circumstances because it constitutes a direct menace to public health and safety and, for that reason, may be abated summarily under the undefined law of necessity. To become a nuisance per se, the thing must, of itself, because of its inherent qualities, without complement, be productive of injury, or, by reason of the matter of its use or exposure, threaten or be dangerous to life or property. (2) Nuisance per accidens It becomes a nuisance depending upon certain conditions and circumstances, and its existence being a question of fact, it cannot be abated without due hearing thereon in a tribunal authorized to decide whether such a thing does in law constitute a nuisance. A nuisance is, according to Blackstone, "Any thing that works3 hurt, inconvenience, or damages." They arise from pursuing particular trades or

Art. 695. Nuisance is either public or private. A public nuisance affects a community or neighborhood or any considerable number of persons, although the extent of the annoyance, danger or damage upon individuals may be unequal. A private nuisance is one that is not included in the foregoing definition. A public nuisance is the doing of or the failure to do something that injuriously affects safety, health, or morals of the public, or works some substantial annoyance, inconvenience or injury to the public. It causes hurt, inconvenience, or damage to the public generally, or such part of the public as necessarily comes in contact with it in the exercise of a public or common right. Art. 699. The remedies against a public nuisance are: (1) A prosecution under the Penal Code or any local ordinance: or (2) A civil action; or (3) Abatement, without judicial proceedings.

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Art. 700. The district health officer shall take care that one or all of the remedies against a public nuisance are availed of. Art. 701. If a civil action is brought by reason of the maintenance of a public nuisance, such action shall be commenced by the city or municipal mayor. Art. 702. The district health officer shall determine whether or not abatement, without judicial proceedings, is the best remedy against a public nuisance. Art. 703. A private person may file an action on account of a public nuisance, if it is specially injurious to himself.

CIVIL LAW

constitutes the nuisance, without committing a breach of the peace or doing unnecessary injury. However, it is indispensable that the procedure for extrajudicial abatement of a public nuisance by a private person be followed. Art. 707. A private person or a public official extrajudicially abating a nuisance shall be liable for damages: (1) If he causes unnecessary injury; or (2) If an alleged nuisance is later declared by the courts to be not a real nuisance. (5) Attractive Nuisance General Rule: When people come to the lands or premises of others for their own purposes, without right or invitation, they must take the lands as they see them.

Art. 704. Any private person may abate a public nuisance which is specially injurious to him by removing, or if necessary, by destroying the thing which constitutes the same, without committing a breach of the peace, or doing unnecessary injury. But it is necessary:

Exception: Attractive Nuisance doctrine. One who maintains on his premises dangerous instrumentalities or appliances of a character likely to attract children at play, and who fails to exercise ordinary care to prevent children from playing therewith or resorting thereto, is liable to a child of tender years who is injured thereby, even if the child is technically a trespasser in the premises. The principle reason for the doctrine is that the condition or appliance in question although its danger is apparent to those of age, is so enticing or alluring to children of tender years as to induce them to approach, get on or use it, and this attractiveness is an implied invitation to such children [Hidalgo Enterprises v. Balandan, G.R. No. L-3422 (1952)].

(1) That demand be first made upon the owner or possessor of the property to abate the nuisance; (2) That such demand has been rejected; (3) That the abatement be approved by the district health officer and executed with the assistance of the local police; and (4) That the value of the destruction does not exceed three thousand pesos. (4) Private nuisance It is one which violates only private rights and produces damage to but one or a few persons, and cannot be said to be public. Art. 705. The remedies against a private nuisance are: (1) A civil action; or (2) Abatement, without judicial proceedings. Art. 706. Any person injured by a private nuisance may abate it by removing, or if necessary, by destroying the thing which

When Applicable/Not Applicable: [De Leon on Torts and Damages] • The danger to the child must be caused by the attraction itself, or by something with which the attraction brings the child in contact. • Protects a meddling child, but not a danger which was created by the child himself.

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• Limited to latent dangers, and is no basis for recovery where peril is obvious or patent. • Does not apply to natural dangers.

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• The age and maturity of the injured child and the reason for the child’s presence are important considerations in the application of the doctrine.

Sum m ary of Strict Liability Person Strictly Liable

For What

Defenses or Exceptions

Possessor of an animal or For the damage the animal may cause • Force majeure whoever makes use of them • Fault of the person who even if the animal is lost or suffered damage escaped Owner of Motor Vehicle

Motor vehicle mishaps

• Solidary liability only if the owner was in the vehicle and if he could have prevented it thru due diligence • If not in vehicle, apply Art. 2180 for his liability as employer

Manufacturers and processors of foodstuffs, drinks, toilet articles and similar goods

Death and injuries caused by any noxious or harmful substances used

Absence of contractual relation not a defense

Defendant in possession of Death or injury results from such dangerous weapons/ possession substances such as firearms and poison

Possession or use thereof is indispensable in his occupation or business

Provinces, Cities and Municipalities

The death or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works

The defective public work is not under the LGU’s control or supervision

Proprietor of building/ structure

(a) Total or partial collapse of Responsibility for collapse building or structure if due to lack should be due to the lack of of necessary repairs necessary repairs (b) Explosion of machinery which has not been taken cared of with due diligence, and the inflammation of explosive substances which have not been kept in a safe and adequate place (c) By excessive smoke, which may be harmful to persons or property (d) By falling of trees situated at or near highways or lanes, if not PAGE 528 OF 69

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Person Strictly Liable

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For What

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Defenses or Exceptions

caused by force majeure (e) By emanations from tubes, canals, sewers or deposits of infectious matter, constructed without precautions suitable to the place Engineer or Architect

If within 15 years from completion of the structure, the same should collapse by reason of:

Action not brought within 10 years from collapse

(a) Defects in the plans or specifications; or (b) Defects in the ground. If within the same period, the edifice falls on account of: (a) Defects in the construction; (b) Used of materials of inferior quality furnished by him; or (c) Violation of the terms of the contract and he supervised the construction. Contractor

If within 15 years from the completion Action not brought within 10 of the structure, the edifice falls on years from collapse account of: (a) Defects in the construction; (b) Used of materials of inferior quality furnished by him; or (c) Violation of the terms of the contract

Head of the Family that lives in a building or any part thereof

Liable for damages caused by things thrown or falling from the same

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I. Damages

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C. TYPES OF DAMAGES Art. 2197. Damages may be:

A. DEFINITION Damages may be defined as the pecuniary compensation, recompense, or satisfaction for an injury sustained, or as otherwise expressed, the pecuniary consequences, which the law imposes for the breach of some duty or the violation of some right [People v. Ballesteros, G.R. No. 120921]. The recompense or compensation awarded for the damage suffered [Custodio v CA, G.R. No. 116100].

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

Actual or compensatory; Moral; Nominal; Temperate or moderate; Liquidated; or Exemplary or corrective.

According to Purpose

(1) For adequate reparation of the injury a) Compensatory damages (reparation of pecuniary losses)

B. WHEN ALLOWED

b) Moral (reparation for non-pecuniary

The obligation to repair the damages exists whether done intentionally or negligently and whether or not punishable by law [Occena v Icamina, G.R. No. 82146 (1990)] The mere fact that the plaintiff suffered losses does not give rise to a right to recover damages. To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong [Custodio v CA, G.R. No. 116100].

losses: injury to feelings; physical suffering, etc.)

(2) For vindication of the right violated: a) Nominal damages

(3) For less than adequate reparation: a) Moderate

(4) For deterring future violations:

Injury vs. Damage vs. Damages Injury is the illegal invasion of a legal right. Dam age is the loss, hurt, or harm, which results from the injury. Dam ages are the recompense or compensation awarded for the damage suffered [Custodio v CA, supra]. Elements for recovery of damages

(1) Right of action (2) For a wrong inflicted by the defendant (3) Damage resulting to the plaintiff PAGE 531 OF 574

a) Exemplary or corrective

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II. Actual & Compensatory Damages

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The damages must be proven by com petent evidence (adm issible or probative)

Compensatory damages are damages in satisfaction of, or in recompense for, loss or injury sustained. The phrase “actual damages” is sometimes used as synonymous with compensatory damages. Requisites To seek recovery of actual damages, it is necessary to prove the actual amount of loss with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable [Asilo, Jr. v. People and Sps. Bombasi, G.R. No. 159017-18 (2011)]. W hen is a person entitled? (1) When there is a pecuniary loss suffered by him; (2) When he has alleged and prayed for such relief [Manchester Dev’t Corp v. CA, G.R. No. L-75919 (1987)]; (3) When he has duly proved it; (4) When provided by law or by stipulation. No proof of pecuniary loss is necessary for: moral, nominal, temperate, liquidated or exemplary damages. The assessment of such damages is discretionary upon the court, except liquidated ones. (Art. 2216) Alleged and proved with certainty Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

There must be pleading and proof of actual damages suffered for the same to be recovered. In addition to the fact that the amount of loss must be capable of proof, it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. The burden of proof of the damage suffered is, consequently, imposed on the party claiming the same, who should adduce the best evidence available in support thereof… In the absence of corroborative evidence, it has been held that self-serving statements of account are not sufficient basis for an award of actual damages [Oceaneering Contractors v Baretto, G.R. No. 184215 (2011)]. Actual or compensatory damages cannot be presumed, but must be proven with a reasonable degree of certainty [MCC Industrial Sales Corp. v Ssangyong Corp., G.R. No. 170633 (2007)]. Damages must be proved with reasonable accuracy, even when not denied [Valencia vs. Tantoco, G.R. No. L-7267 (1956)]. Degree of certainty required as to: fact, cause and am ount of dam ages Damages are not rendered uncertain just because they cannot be calculated with absolute exactness or because the consequences of the wrong are not precisely definite in pecuniary amount. The principle, which will disallow recovery of damages when their existence rests solely on speculation, applies both to the fact and cause of damages. (1) The requirement of certainty does not prevent the drawing of reasonable inferences from the fact and circumstance in evidence. (2) Events which occur after the wrong complained of may serve to render the damage sufficiently certain. (3) The damages must be susceptible of ascertainment in some manner other than by mere speculation, conjecture or surmise and by reference to some fairly

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definite standard, such as market value, established experience or direct inference from known circumstances. Where, however, it is reasonably certain that injury consisting of failure to realize otherwise reasonably expected profits had been incurred, uncertainty as to the precise amount of such unrealized profits will not prevent recovery or the award of damages [Talisay-Silay v. Associacion, G.R. No. 91852 (1995)].

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EXTENT OR SCOPE OF ACTUAL DAMAGES Source

Extent of Liability

Art. 2201

-If the obligor acted in GOOD FAITH, he shall be liable for natural and probable consequences of the breach, which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.

Components

Contracts and Quasicontracts

Actual damage covers the following: (1) Value of loss; unrealized profit (2) Attorney’s fees and expenses of litigation (3) Interest LOSS COVERED: In General Art. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain.

Art. 2202

In other words, indemnification for damages is not limited to damnum emergens (actual loss) but extends to lucrum cessans (a cession of gain or amount of profit lost). The award of damages for loss of earning capacity is concerned with the determination of losses or damages sustained by the [plaintiffs], as dependents and intestate heirs of the deceased, and that said damages consist, not of the full amount of his earnings, but of the support they received or would have received from him had he not died in consequence of negligence of [defendant’s] agent… Only net earnings, and not gross earnings are to be considered. That is, the total of the earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses [Candano Shipping Lines, Inc. v Sugata-on, G.R. No. 163212 (2007)].

Crimes and Quasidelicts

-If the obligor acted with FRAUD, BAD FAITH, MALICE or WANTON ATTITUDE, he shall be responsible for all damages which may be reasonably attributed to the breach. Liability extends to all damages which are the natural and probable consequence of the act or omission complained of WON the damage was foreseen or could have been reasonably foreseen by the defendant is irrelevant

IN CONTRACTS AND QUASI-CONTRACTS Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. Art. 2214. In quasi delicts, the contributory negligence of the plaintiff shall reduce the

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moral damages [Spouses Zalamea v. CA, G.R. No. 104235 (1993)].

damages that he may recover. Art. 2215. In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the damages under circumstances other than the case referred to in the preceding article, as in the following instances: (1)

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That the plaintiff himself has contravened the terms of the contract;

(2) That the plaintiff has derived some benefit as a result of the contract; (3) In cases where exemplary damages are to be awarded, that the defendant acted upon the advice of counsel; (4) That the loss would have resulted in any event; (5) That since the filing of the action, the defendant has done his best to lessen the plaintiff's loss or injury. The damages recoverable upon breach of contract are, primarily, the ordinary, natural and in a sense the necessary damages resulting from the breach. Other damages, known as special damages, are recoverable where it appears that the particular conditions which made such damages a probable consequence of the breach were known to the delinquent party at the time the contract was made [Daywalt vs. Recoletos et al., G.R. No. L-13505 (1919)]. Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it partakes of the nature of fraud…BPI-FB acted out of the impetus of self-protection and not out of malevolence or ill will. BPI-FB was not in the corrupt state of mind contemplated in Article 2201 and should not be held liable for all damages now being imputed to it for its breach of obligation [BPI Family Bank v. Franco, G.R. No. 123498 (2007)]. That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight in spite of confirmed tickets cannot be disputed. Overbooking amounts to bad faith, entitling the passengers concerned to an award of

IN CRIMES AND QUASI-DELICTS Art. 2202. In crimes and quasi delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant. In case of crimes, damages are to be increased or decreased according to aggravating or mitigating circumstances present. Interest, as part of damages, may be adjudicated in a proper case, in the Court’s discretion. Contributory negligence of the plaintiff, in case of quasi-delicts, shall reduce the damages to which he may be entitled. However, in case of crimes, there is no mitigation for contributory negligence of the plaintiff. The indemnity authorized by our criminal law as civil liability ex delicto for the offended party, in the amount authorized by the prevailing judicial policy and aside from other proven actual damages, is itself equivalent to actual or compensatory damages in civil law. The principal consideration for the award of damages is the penalty provided by law or imposable for the offense because of its heinousness, not the public penalty actually imposed on the offender… Hence, notwithstanding the fact that the imposable public penalty against the offender should be lowered due to his minority, there is no justifiable ground to depart from the jurisprudential trend in the award of damages in the case of qualified rape, considering the compensatory nature of the award of civil indemnity and moral damages [People v Sarcia, G.R. No. 169641 (2009)].

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EARNING CAPACITY, BUSINESS STANDING Art. 2205. Damages may be recovered: (1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; (2) For injury to the plaintiff's business standing or commercial credit. LOSS OR CAPACITY

IMPAIRMENT

OF

EARNING

The Court did not award actual damages because it was found that plaintiff’s employment was lost even before the injury upon which she was suing. The Court equated loss of employment with loss of earning capacity [Gatchalian v. Delim, G.R. No. 56487 (1991)]. The plaintiff need not be actually engaged in gainful employment to recover damages due to loss or impairment of earning capacity. In determining the amount of damages to be awarded, the Supreme Court considered the plaintiff’s age, probable life expectancy, the state of his health, and his mental and physical condition before the accident… Taking into account [the plaintiff’s] outstanding abilities, he would have enjoyed a successful professional career in banking [Mercury Drug v Huang, G.R. No. 172122 (2007)]. INJURY TO BUSINESS COMMERCIAL CREDIT

STANDING

OR

Loss of goodwill should be proven with the same standard of proof as other compensatory damages [Tanay Recreation Center v. Fausto, G.R. No. 140182 (2005)]. FORMULA CAPACITY

FOR

THE

NET

EARNING

Net earning capacity = Life expectancy * (Gross annual income – Reasonable living expenses) [People vs. Aringue, G.R. No. 116487 (1997)].

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As a rule, documentary evidence should be presented to substantiate the claim for loss of earning capacity [Tan, et al. vs. OMC Carriers, Inc., G.R. No. 190521 (2011)]. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work, no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws. DEATH BY CRIME OR QUASI-DELICT Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.

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recovered, except:

Mere commission of the crime shall entitle the heirs of the deceased to such damages.

(1) When exemplary damages are awarded;

AS TO THE LOSS OF EARNING CAPACITY General Rule: Shall be awarded in every case, and that claimant shall present documentary evidence to substantiate claim for damages. Exceptions:

(1) If the deceased was self-employed and earning less than the minimum wage; or

(2) The deceased was a daily wage worker earning less than the minimum wage. Additional Exception: Testimonial evidence suffices to establish a basis for which the court can make a fair and reasonable estimate of the loss of earning capacity [Pleyto v. Lomboy, G.R. No. 148737 (2004)] Note: Such an exception to documentary proof requirement only exists as to the loss of earning capacity. In Rape Cases No statutory basis but in several cases the court awards compensatory damages to victims of rape. Civil indemnity, in the nature of actual and compensatory damages, is mandatory upon the finding of the fact of rape. [People v. Astrologo, G.R. No. 169873 (2007)]. The SC held that it could not be proven that the age of the victim was such that it would support a penalty of death. Thus, it imposed reclusion perpetua instead. But SC said that this should not affect the civil liability to be imposed, and maintained the same at Php. 75,000 [People v. Bartolini, G.R. No. 179498 (2010)].

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. In all cases, the attorney's fees and expenses of litigation must be reasonable. General Rule Attorney’s fees and costs of litigation are recoverable IF stipulated. Exceptions If there is no stipulation, they are recoverable only in the following cases: (1) By reason of malice or bad faith

ATTORNEY’S FEES AND EXPENSES OF LITIGATION Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be PAGE 536 OF 574

(a) When exemplary awarded

damages

are

(b) In case of a clearly unfounded civil action (c) Where defendant acted in gross and evident bad faith

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(d) When at least double judicial costs are awarded (2) By reason of plaintiff’s indigence in (a) Actions for legal support (b) Actions for recovery of wages of laborers, etc. (c)

Actions for compensation

workmen’s

(3) By reason of crimes in

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claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause [Bank of America v. Philippine Racing Club, G.R. No. 150228 (2009)]. Interest

(a)

Criminal cases prosecution

of

malicious

(b)

Separate actions to recover civil liability arising from crime

(4) By reason of equity (a)

Where the defendant’s act compelled plaintiff to litigate with third persons

(b)

Where the Court deems it just and equitable

Note: In all cases, attorney’s fees and costs of litigation must be reasonable. Even if expressly stipulated, attorney’s fees are subject to control by the Courts. Attorney’s fees in CC 2208 is an award made in favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who may enforce the judgment for attorney's fees by execution [Quirante v. IAC, G.R. No. 73886 (1989)]. Attorney's fees cannot be recovered except in cases provided for in CC 2208 [MERALCO v. Ramoy, G.R. No. 158911 (2008)]. Attorney’s fees and expenses of litigation are recoverable only in the concept of actual damages, not as moral damages nor judicial costs. Hence, such must be specifically prayed for…and may not be deemed incorporated within a general prayer for "such other relief and remedy as this court may deem just and equitable [Briones v Macabagdal, G.R. No. 150666 (2010)]." For CC 2208 (2), an adverse decision does not ipso facto justify an award of attorney’s fees to the winning party. Even when a

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract. Art. 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court. Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. Art. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty. Interest accrues when: (1) The obligation consists in the payment of a sum of money (2) Debtor incurs in delay (3) There being no stipulation to the contrary No interest may be recovered on unliquidated (not fixed in amount) claims or damages, except when the demand can be established

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with reasonable certainty at the Court’s discretion. Compounding of interest Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent on the point. Note that interest due can earn only at 6%, whether the rate of interest of the principal is greater than 6%.

BASE (a) When the obligation is breached, and it consists in the PAYMENT OF A SUM OF MONEY, i.e., a loan or forbearance of money, the interest due should be-

(b) Furthermore, the INTEREST DUE shall itself earn (c) When an obligation, NOT constituting a loan or forbearance of money, is breached, an interest on the AMOUNT OF DAMAGES awarded may be imposed at the discretion of the court.

Determ ination of legal interest (1) When an obligation, regardless of its source (i.e., law, contracts, quasicontracts, delicts or quasi-delicts) is breached, the contravenor can be held liable for damages. (2) With regard particularly to an AWARD OF INTEREST in the concept of actual and compensatory damages, the RATE of interest, as well as the ACCRUAL thereof, is imposed, as follows [Eastern Shipping Lines v. CA, (1994) as modified by Nakar v. Gallery Frames, G.R. No. 189871 (2013)]:

RATE

ACCRUAL

(a)That which may have been stipulated in writing. (b) In the absence of stipulation, the rate of interest shall be 6% per annum (legal interest) Legal interest

To be computed from default, i.e., from JUDICIAL or EXTRAJUDICIAL demand under and subject to the provisions of Article 1169 of the Civil Code.

6% per annum.

If claim or damages are LIQUIDATED, from default, i.e., from judicial or extrajudicial demand. (Art. 1169, Civil Code)

From the time it is JUDICIALLY demanded.

If UNLIQUIDATED, from the time the demand can be established with reasonable certainty. Hence, the interest shall begin to run only FROM THE DATE THE JUDGMENT OF THE COURT IS MADE (at which time the quantification of damages may be deemed to have been reasonably ascertained).

The actual base for the computation of legal interest shall be on the amount finally adjudged. (d) When the JUDGMENT of the court awarding a sum of money becomes final and executory, whether or not the case consists in the payment of a sum of money Note:

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6% per annum

From FINALITY UNTIL ITS SATISFACTION, this period being deemed to be an equivalent to a forbearance of credit.

Start of Delay

The new rate of legal interest (6%) in Nacar does not apply to judgments that have become final and executory prior to July 1, 2013.

(1) Extrajudicial: Demand letter (2) Judicial: Filing of complaint (3) Award

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Duty to Minim ize Art. 2203. The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. Article 2203 of the Civil Code exhorts parties suffering from loss or injury to exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. One who is injured then by the wrongful or negligent act of another should exercise reasonable care and diligence to minimize the resulting damage. Anyway, he can recover from the wrongdoer money lost in reasonable efforts to preserve the property injured and for injuries incurred in attempting to prevent damage to it [Lim and Gunnaban vs. CA, G.R. No. 125817 (2002)]. Burden of Proof The defendant has the burden of proof to establish that the victim, by the exercise of the diligence of a good father of a family, could have mitigated the damages. In the absence of such proof, the amount of damages cannot be reduced. Note: The victim is required only to take such steps as an ordinary prudent man would reasonably adopt for his own interest.

CIVIL LAW

III. Moral Damages Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission. Art. 2218. In the adjudication of moral damages, the sentimental value of property, real or personal, may be considered. Moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted [Visayan Sawmill v. CA, G.R. No. 83851 (1993)]. Mental suffering means distress or serious pain as distinguished from annoyance, regret or vexation [Bagumbayan Corp. v. IAC, G.R. No. L-66274 (1984)]. Mental anguish is intense mental suffering. Generally, damages for mental anguish are limited to cases in which there has been a personal physical injury or where the defendant willfully, wantonly, recklessly, or intentionally caused the mental anguish. W hen awarded Awarded when injury consists of: (1) Physical suffering (2) Besmirched reputation (3) Mental anguish (4) Fright (5) Moral shock (6) Wounded feelings (7) Social humiliation (8) Serious anxiety (9) Similar injury

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THOUGH INCAPABLE COMPUTATION

PECUNIARY

also applies to contracts when breached by tort.

If such is the proximate result of defendant’s act or omission.

(5) In culpa criminal, moral damages could be lawfully due when the accused is found guilty of physical injuries, lascivious acts, adultery or concubinage, illegal or arbitrary detention, illegal arrest, illegal search, or defamation.

REQUISITES DAMAGES

FOR

OF

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AWARDING

MORAL

The conditions for awarding moral damages are [Sulpicio Lines v. Curso, G.R. No. 157009 (2010)]: (a) There must be an injury, whether physical, mental, or psychological, clearly substantiated by the claimant; (b) There must be a culpable act or omission factually established; (c) The wrongful act or omission of the defendant must be the proximate cause of the injury sustained by the claimant; and (d) The award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. GENERAL PRINCIPLES OF RECOVERY: (1) Moral damages must somehow be proportional to the suffering inflicted. (2) In culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of his contractual obligation and, exceptionally, when the act of breach of contract itself is constitutive of tort resulting in physical injuries. (3) By special rule in Article 1764, in relation to Article 2206, moral damages may also be awarded in case the death of a passenger results from a breach of carriage. (4) In culpa aquiliana or quasi-delict, (a)

when an act or omission causes physical injuries, or

(b)

where the defendant is guilty of intentional tort, moral damages may aptly be recovered. This rule

(6) Malicious prosecution can also give rise to a claim for moral damages. The term "analogous cases," referred to in Article 2219, following the ejusdem generis rule, must be held similar to those expressly enumerated by the law. (7) Although the institution of a clearly unfounded civil suit can at times be a legal justification for an award of attorney's fees, such filing, however, has almost invariably been held not to be a ground for an award of moral damages. [Expertravel & Tours vs. CA., G.R. No. 130030 (1999)]. (8) The burden rests on the person claiming moral damages to show convincing evidence for good faith is presumed. In a case involving simple negligence, moral damages cannot be recovered. [Villanueva v. Salvador (2006)]. (9) Failure to use the precise legal terms or "sacramental phrases" of "mental anguish, fright, serious anxiety, wounded feelings or moral shock" does not justify the denial of the claim for damages. It is sufficient that these exact terms have been pleaded in the complaint and evidence has been adduced [MirandaRibaya v. Bautista (1980)]. (10) Even if the allegations regarding the amount of damages in the complaint are not specifically denied in the answer, such damages are not deemed admitted. [Raagas, et al. v. Traya et al (1968)]. (11) An appeal in a criminal case opens the whole case for review and this 'includes the review of the penalty, indemnity and damages’. Even if the offended party had not appealed from said award, and the only party who sought a review of the decision of said court was the accused, the court can increase damages awarded. [Sumalpong v. CA (1997)].

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(12) It can only be awarded to natural persons. The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and mental anguish, which can be experienced only by one having a nervous system. The statement in People vs. Manero and Mambulao Lumber Co. vs. PNB that a corporation may recover moral damages if it "has a good reputation that is debased, resulting in social humiliation" is obiter dictum [ABSCBN v. CA, G.R. No. 128690 (1999)]. While it is true that besmirched reputation is included in moral damages, it cannot cause mental anguish to a corporation, unlike in the case of a natural person, for a corporation has no reputation in the sense that an individual has, and besides, it is inherently impossible for a corporation to suffer mental anguish [NAPOCOR v. Philipp Brothers (2001)]. WHEN RECOVERABLE Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage;

CIVIL LAW

damages. The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of t his article, in the order named. IN CRIMINAL OFFENSE RESULTING IN PHYSICAL INJURIES Under paragraph (1), Article 2219 of the Civil Code, moral damages may be recovered in a criminal offense resulting in physical injuries. In its generic sense, "physical injuries" includes death [People v. Villaver (2001)]. In a case where the father of a family was stabbed to death, the SC said that “a violent death invariably and necessarily brings about emotional pain and anguish on the part of the victim’s family… For this reason, moral damages must be awarded even in the absence of any allegation and proof of the heirs’ emotional suffering [Arcona v CA, G.R. No. 134784 (2002)].” IN QUASI-DELICTS CAUSING PHYSICAL INJURIES In culpa aquiliana, or quasi-delict, moral damages may be recovered (a) when an act or omission causes physical injuries, or (b) where the defendant is guilty of intentional tort. The SC held that an employer that is vicariously liable with its employee-driver may also be held liable for moral damages to the injured plaintiff [B.F. Metal v. Lomotan, G.R. No. 170813 (2008)]. IN SEDUCTION, ABDUCTION, RAPE AND OTHER LASCIVIOUS ACTS

(5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in article 309; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral

Anent the award of damages, civil indemnity ex delicto is mandatory upon finding of the fact of rape while moral damages is awarded upon such finding without need of further proof because it is assumed that a rape victim has actually suffered moral injuries entitling the victim to such award. If without factual and legal bases, no award of exemplary damages should be allowed [People v. Calongui (2006)]. In a case where the offender-father was convicted of simple rape instead of qualified

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rape due to the prosecution’s failure to specifically allege the age and minority of the victim-daughter, but such was nonetheless established during the trial, the award of civil indemnity and moral damages in a conviction for simple rape should equal the award of civil indemnity and moral damages in convictions for qualified rape. Truly, [the victim’s] moral suffering is just as great as when her father who raped her is convicted for qualified rape as when he is convicted only for simple rape due to a technicality [People v. Bartolini, supra].

bad faith. If damage results from the filing of the complaint, it is damnum absque injuria [Mijares v. CA (1997)].

Where there are multiple counts of rape and other lascivious acts, the SC awarded moral damages for each count of lascivious acts and each count of rape [People v. Abadies (2002)].

IN ACTS REFERRED TO IN ARTS. 21, 26, 27, 28, 29, 32, 34 &35, NCC

Note: Recovery may be had by the offended party and also by her parents. IN ILLEGAL OR ARBITRARY DETENTION OR ARREST Since the crime committed in this case is kidnapping and failure to return a minor under Article 270 of the Revised Penal Code, the same is clearly analogous to illegal and arbitrary detention or arrest, thereby justifying the award of moral damages [People v. Bernardo (2002)].

The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously [Barreto vs. Arevalo (1956)].

Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. Art. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: (1) Prying into the privacy of another's residence: (2) Meddling with or disturbing the private life or family relations of another; (3) Intriguing to cause another to be alienated from his friends;

IN CASE OF MALICIOUS PROSECUTION As a rule, no moral damages is imposed for litigation, because the law could not have meant to impose a penalty on the right to litigate. A person's right to litigate, as a rule, should not be penalized. This right, however, must be exercised in good faith. Absence of good faith in the present case is shown by the fact that petitioner clearly has no cause of action against respondents but it recklessly filed suit anyway and wantonly pursued pointless appeals, thereby causing the latter to spend valuable time, money and effort in unnecessarily defending themselves, incurring damages in the process [Industrial Insurance v. Bondad, G.R. No. 136722 (2000)]. Moral damages cannot be recovered from a person who has filed a complaint against another in good faith, or without malice or

(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition. VIOLATION OF HUMAN DIGNITY The law seeks to protect a person from being unjustly humiliated. Using this provision, the SC awarded moral damages to the plaintiff, a married man, against the defendant, who confronted the plaintiff face-to-face, invading the latter’s privacy, to hurl defamatory words at him in the presence of his wife and children, neighbors and friends, accusing him of having an adulterous relationship with another woman [Concepcion v. CA (1998)].

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Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken. REFUSAL OR NEGLECT OF DUTY Under CC 27, in relation to CC 2219 and 2217, a public officer may be liable for moral damages for as long as the moral damages suffered by [the plaintiff] were the proximate result of [defendant’s] refusal to perform an official duty or neglect in the performance thereof. In fact, under Articles 19 and 27 of the Civil Code, a public official may be made to pay damages for performing a perfectly legal act, albeit with bad faith or in violation of the "abuse of right" doctrine [Concepcion v. CA, supra]. Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage. Art. 29. When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted. Such action requires only a preponderance of evidence. Upon motion of the defendant, the court may require the plaintiff to file a bond to answer for damages in case the complaint should be found to be malicious. If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court shall so declare. In the absence of any declaration to that effect, it may be inferred from the text of the decision whether or not the acquittal is due to that ground. Art. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner

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impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: (1) Freedom of religion; (2) Freedom of speech; (3) Freedom to write for the press or to maintain a periodical publication; (4) Freedom from arbitrary or illegal detention; (5) Freedom of suffrage; (6) The right against deprivation of property without due process of law; (7) The right to a just compensation when private property is taken for public use; (8) The right to the equal protection of the laws; (9) The right to be secure in one's person, house, papers, and effects against unreasonable searches and seizures; (10) The liberty of abode and of changing the same; (11) The privacy of communication and correspondence; (12) The right to become a member of associations or societies for purposes not contrary to law; (13) The right to take part in a peaceable assembly to petition the government for redress of grievances; (14) The right to be free from involuntary servitude in any form; (15) The right of the accused against excessive bail; (16) The right of the accused to be heard by himself and counsel, to be informed of the nature and cause of the accusation against him, to have a speedy and public trial, to meet the witnesses face to face, and to have compulsory process to secure the attendance of witness in his behalf; (17) Freedom from being compelled to be a witness against one's self, or from being forced to confess guilt, or from being induced by a promise of immunity or reward to make such confession, except when the person confessing becomes a State witness; (18) Freedom from excessive fines, or cruel and unusual punishment, unless the same is imposed or inflicted in accordance with a statute which has not been judicially declared unconstitutional; and

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(19) Freedom of access to the courts. In any of the cases referred to in this article, whether or not the defendant's act or omission constitutes a criminal offense, the aggrieved party has a right to commence an entirely separate and distinct civil action for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be instituted), and mat be proved by a preponderance of evidence. The indemnity shall include moral damages. Exemplary damages may also be adjudicated. The responsibility herein set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal Code or other penal statute. VIOLATION RIGHTS

OF

CIVIL

AND

CIVIL LAW

Art. 35. When a person, claiming to be injured by a criminal offense, charges another with the same, for which no independent civil action is granted in this Code or any special law, but the justice of the peace finds no reasonable grounds to believe that a crime has been committed, or the prosecuting attorney refuses or fails to institute criminal proceedings, the complaint may bring a civil action for damages against the alleged offender. Such civil action may be supported by a preponderance of evidence. Upon the defendant's motion, the court may require the plaintiff to file a bond to indemnify the defendant in case the complaint should be found to be malicious. If during the pendency of the civil action, an information should be presented by the prosecuting attorney, the civil action shall be suspended until the termination of the criminal proceedings.

POLITICAL

The purpose of [CC 32] is to provide a sanction to the deeply cherished rights and freedoms enshrined in the Constitution. Under [CC 32], it is not necessary that the public officer acted with malice or bad faith. To be liable, it is enough that there was a violation of the constitutional rights of petitioner, even on the pretext of justifiable motives or good faith in the performance of one's duties [Cojuangco v. CA, (1999)]. Article 32 of the Civil Code provides that moral damages are proper when the rights of individuals, including the right against deprivation of property without due process of law, are violated [Meralco v Spouses Chua (2010)]. Art. 34. When a member of a city or municipal police force refuses or fails to render aid or protection to any person in case of danger to life or property, such peace officer shall be primarily liable for damages, and the city or municipality shall be subsidiarily responsible therefor. The civil action herein recognized shall be independent of any criminal proceedings, and a preponderance of evidence shall suffice to support such action.

Please refer to previous discussions on the provisions. Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. IN WILLFUL INJURY TO PROPERTY To sustain an award of damages, the damage inflicted upon [plaintiff’s] property must be malicious or willful, an element crucial to merit an award of moral damages under Article 2220 of the Civil Code [Regala v. Carin, G.R. No. 188715 (2011)]. IN BREACH OF CONTRACT IN BAD FAITH Moral damages may be recovered in culpa contractual where the defendant acted in bad faith or with malice in the breach of the contract. However, a conscious or intentional design need not always be present since negligence may occasionally be so gross as to amount to malice or bad faith. Bad faith, in the context of Art. 2220 of the Civil Code,

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includes gross negligence. Thus, we have held in a number of cases that moral damages may be awarded in culpa contractual or breach of contract when the defendant acted fraudulently or in bad faith, or is guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations [Bankard, Inc. v. Feliciano, G.R. No 141761 (2006)].

collateral line as a source of the right to recover moral damages. The usage of the phrase analogous cases in the provision means simply that the situation must be held similar to those expressly enumerated in the law in question [Sulpicio Lines v Curso, supra].

As an exception [to the requirement of bad faith], moral damages may be awarded in case of breach of contract of carriage that results in the death of a passenger [Sulpicio Lines v. Curso, supra].

The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and mental anguish, which can be experienced only by one having a nervous system. [ABSCBN v. CA, supra].

WHO MAY RECOVER MORAL DAMAGES Art. 2219. Moral damages may be recovered in the following and analogous cases:

JURIDICAL PERSONS

(1) A criminal offense resulting in physical injuries;

FACTORS CONSIDERED IN DETERMINING AMOUNT

(2) Quasi-delicts causing physical injuries;

The amount of damages awarded in this appeal has been determined by adequately considering the official, political, social, and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other. The SC further considered the present rate of exchange and the terms at which the amount of damages awarded would approximately be in U.S. dollars, the defendant being an international airline. Senate President Lopez, for his social standing and prestige, received P100,000; his wife Maria Lopez received P50,000 for her discomfort, and the fact that she was already sick and suffering a flu when she left the Philippines via defendant’s plane; and the Montelibanos received P25,000 each, for being immediate family members of Senator Lopez, and as such they likewise shared his prestige and humiliation [Lopez v. Pan American, G.R. No. L-22415 (1966)].

(3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in article 309; (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages. The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named. RELATIVES OF INJURED PERSONS Article 2219 circumscribes the instances in which moral damages may be awarded. The provision does not include succession in the

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IV. Nominal Damages Nominal damages consist in damages awarded, not for purposes of indemnifying the plaintiff for any loss suffered, but for the vindication or recognition of a right violated by the defendant. REQUISITES AND CHARACTERISTICS (1) Invasion or violation of any legal or property right.

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produced no actual present loss of any kind.” Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. When granted by the courts, they are not treated as an equivalent of a wrong inflicted but simply a recognition of the existence of a technical injury. A violation of the plaintiff’s right, even if only technical, is sufficient to support an award of nominal damages. Conversely, so long as there is a showing of a violation of the right of the plaintiff, an award of nominal damages is proper [Gonzales v. PCIB, G.R. No. 180257 (2011)].

(2) No proof of loss is required. (3) The award is to vindicate the right violated. WHEN AWARDED Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has been invaded.

NATURE AMOUNT

AND

DETERMINATION

OF

The assessment of nominal damages is left to the discretion of the trial court according to the circumstances of the case. Generally, nominal damages by their nature are small sums fixed by the court without regard to the extent of the harm done to the injured party. However, it is generally held that a nominal damage is a substantial claim, if based upon the violation of a legal right; in such a case, the law presumes damage although actual or compensatory damages are not proven [Gonzales v. People, G.R. No. 159950 (2007)].

Art. 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns. One does not ask for nominal damages, and it is in lieu of the actual, moral, temperate, or liquidated damages. Nominal damages are incompatible with actual, temperate and exemplary damages. Nominal damages cannot co-exist with actual or compensatory damages [Armovit v. CA (1990)]. Nominal damages "are recoverable where a legal right is technically violated and must be vindicated against an invasion that has PAGE 546 OF 574

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V. Temperate Damages Art. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty. Art. 2225. Temperate damages must be reasonable under the circumstances. These damages are awarded for pecuniary loss, in an amount that, from the nature of the case, cannot be proved with certainty. REQUISITES (1) Actual existence of pecuniary loss (2) The nature and circumstances of the loss prevents proof of the exact amount (3) They are more than nominal and less than compensatory. (4) Causal connection between the loss and the defendant’s act or omission. (5) Amount must be reasonable. In cases where the resulting injury might be continuing and possible future complications directly arising from the injury, while certain to occur are difficult to predict, temperate damages can and should be awarded on top of actual or compensatory damages; in such cases there is no incompatibility between actual and temperate damages as they cover two distinct phases [Ramos v. CA, supra].

CIVIL LAW

Courts are authorized to award temperate damages even in cases where the amount of pecuniary loss could have been proven with certainty, if no such adequate proof was presented. The allowance of temperate damages when actual damages were not adequately proven is ultimately a rule drawn from equity, the principle affording relief to those definitely injured who are unable to prove how definite the injury [Republic v. Tuvera, G.R. No. 148246 (2007)]. FACTORS IN DETERMINING AMOUNT The SC awarded temperate damages where from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is convinced that the plaintiff suffered some pecuniary loss. [De Guzman v. Tumolva, G.R. No. 188072 (2011)]. WHERE NO RECEIPTS WERE PROVIDED Where the amount of actual damages cannot be determined because no receipts were presented to prove the same but it is shown that the heirs are entitled thereto, temperate damages may be awarded, fixed atP25,000.00. Considering that funeral expenses were obviously incurred by the victim’s heirs, an award ofP25,000.00 as temperate damages is proper [People v. Surongon (2007)].

Temperate damages are incompatible with nominal damages hence, cannot be granted concurrently [Citytrust Bank v. IAC (1994)]. Temperate damages are included within the context of compensatory damages. [Tan v. OMC Carriers, supra]. The SC awarded temperate damages in lieu of actual damages for loss of earning capacity where earning capacity is plainly established but no evidence was presented to support the allegation of the injured party’s actual income [Pleno v. CA, G.R. No. 56505 (1988)]. PAGE 547 OF 574

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VI.Liquidated Damages Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof. Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. Liquidated damages are those damages agreed upon by the parties to a contract to be paid in case of breach thereof. It differs from a penal clause in that in the latter case the amount agreed to be paid may bear no relation to the probable damages resulting from the breach. Basically, a penalty is “ad terrorem,” while liquidated damages are “ad reparationem.”

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effect, for what could be the liquidated damages resulting from such a breach. The obligor would then be bound to pay the stipulated indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach [Suatengco v. Reyes (2008)]. General Rule: The penalty shall substitute the indemnity for damages and the payment of the interests in case of breach. Exceptions (1) When there is a stipulation to the contrary. (2) When the obligor is sued for refusal to pay the agreed penalty. (3) When the obligor is guilty of fraud. The amount can be reduced if: (1) it is unconscionable as determined by the court (2) there is partial or irregular performance.

REQUISITES AND CHARACTERISTICS (1) Liquidated damages must be validly stipulated. (2) There is no need to prove the amount of actual damages. (3) Breach of the principal contract must be proved. RULES GOVERNING BREACH OF CONTRACT Art. 2228. When the breach of the contract committed by the defendant is not the one contemplated by the parties in agreeing upon the liquidated damages, the law shall determine the measure of damages, and not the stipulation. Liquidated damages are those agreed upon by the parties to a contract to be paid in case of breach thereof. The stipulation on attorney’s fees contained in the said Promissory Note constitutes what is known as a penal clause. A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability on the part of the obligor in case of breach of an obligation. It functions to strengthen the coercive force of obligation and to provide, in PAGE 548 OF 574

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Civil Code because the requirement of specificity in the information affected only the criminal liability of the accused, not his civil liability [People v. Dadulla (2011)].

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. In common law, these damages were termed “punitive.” The grant of temperate damages paves the way for the award of exemplary damages. Under Article 2234 of the Civil Code, a showing that the plaintiff is entitled to temperate damages allows the award of exemplary damages [Canada v All Commodities Marketing (2008)]. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions [PNB v. CA (1996)]. WHEN RECOVERABLE IN CRIMINAL OFFENSES; NCC ART. 2230 Art. 2230. In criminal offenses, exemplary damages as a part of the civil liability may be imposed when the crime was committed with one or more aggravating circumstances. Such damages are separate and distinct from fines and shall be paid to the offended party.

Being corrective in nature, exemplary damages, therefore, can be awarded, not only in the presence of an aggravating circumstance, but also where the circumstances of the case show the highly reprehensible or outrageous conduct of the offender. As in this case, where the offender sexually assaulted a pregnant married woman, the offender has shown moral corruption, perversity, and wickedness. He has grievously wronged the institution of marriage. The imposition then of exemplary damages by way of example to deter others from committing similar acts or for correction for the public good is warranted in quasidelicts [People v. Alfredo (2010)]. IN QUASI-DELICTS; NCC ART. 2231 Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. While CC 2231 provides that for quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith [Globe Mackay v. CA (1989)]. IN CONTRACTS AND QUASI-CONTRACTS; NCC ART. 2232

Award of exemplary damages is part of the civil liability, not of the penalty.

Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

Damages are paid to the offended party separately from the fines.

Requisites

Although an aggravating circumstance not specifically alleged in the information, albeit established at trial, cannot be appreciated to increase the criminal liability of the accused, the established presence of one or two aggravating circumstances of any kind or nature entitles the offended party to exemplary damages under Article 2230 of the

Art. 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. Art. 2234. While the amount of the exemplary damages need not be proved, the

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plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages.

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awarded; hence, they are not recoverable as a matter of right. (3) The defendant must be guilty of other malice or else negligence above the ordinary. (4) Plaintiff is not required to prove the amount of exemplary damages.

Art. 2235. A stipulation whereby exemplary damages are renounced in advance shall be null and void. Requisites to recover exemplary damages and liquidated damages agreed upon The plaintiff must show that he/she is entitled to moral, temperate or compensatory damages:

(a)

But plaintiff must show that he is entitled to moral, temperate, or compensatory damage; that is, substantial damages, not purely nominal ones. This requirement applies even if the contract stipulates liquidated damages.

(b)

The amount of exemplary damage need not be pleaded in the complaint because the same cannot be proved. It is merely incidental or dependent upon what the court may award as compensatory damages.

DAMAGES IN CASE OF DEATH RE. CRIMES AND QUASI-DELICTS

If arising from

When exemplary damages are granted The crime was committed with an aggravating circumstance/s

Art. 2230

Crimes

Art. 2231

Quasidelicts

Defendant acted with gross negligence

Art. 2232

Contracts and Quasicontracts

Defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner

General Principles (1) Exemplary damages cannot be awarded alone: they must be awarded IN ADDITION to moral, temperate, liquidated or compensatory damages. (2) The purpose of the award is to deter the defendant (and others in a similar condition) from a repetition of the acts for which exemplary damages were

Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death; (2) If the deceased was obliged to give support according to the provisions of Article 291, the recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court; (3) The spouse, legitimate and illegitimate descendants and ascendants of the

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of the deceased and for moral damages are recoverable separately from and in addition to the fixed sum of P12,000.00 corresponding to the indemnity for the sole fact of death, and that these damages may, however, be respectively increased or lessened according to the mitigating or aggravating circumstances, except items 1 and 4 above, for obvious reasons [Heirs of Raymundo Castro v. Bustos (1969)].

deceased may demand moral damages for mental anguish by reason of the death of the deceased. In death caused by breach of conduct by a common crime When death occurs as a result of a crime, the heirs of the deceased are entitled to the following items of damages: (1) As indemnity for the death of the victim of the offense — P12,000.00, without the need of any evidence or proof of damages, and even though there may have been mitigating circumstances attending the commission of the offense. (2) As indemnity for loss of earning capacity of the deceased — an amount to be fixed by the Court according to the circumstances of the deceased related to his actual income at the time of death and his probable life expectancy, the said indemnity to be assessed and awarded by the court as a matter of duty, unless the deceased had no earning capacity at said time on account of permanent disability not caused by the accused. If the deceased was obliged to give support, under Art. 291, Civil Code, the recipient who is not an heir, may demand support from the accused for not more than five years, the exact duration to be fixed by the court.

At present, the SC allows civil indemnity of Php. 50,000 in cases of homicide [De Villa v. People (2012)] and Php. 75,000 in cases of murder [People v. Camat (2012)]. The omission from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the legislative intent to exclude them from the recovery of moral damages for mental anguish by reason of the death of the deceased. Inclusio unius est exclusio alterius [Sulpicio Lines v. Curso, supra].

(3) As moral damages for mental anguish, — an amount to be fixed by the court. This may be recovered even by the illegitimate descendants and ascendants of the deceased. (4) As exemplary damages, when the crime is attended by one or more aggravating circumstances, — an amount to be fixed in the discretion of the court, the same to be considered separate from fines. (5) As attorney's fees and expresses of litigation, — the actual amount thereof, (but only when a separate civil action to recover civil liability has been filed or when exemplary damages are awarded). (6) Interests in the proper cases. (7) It must be emphasized that the indemnities for loss of earning capacity PAGE 551 OF 574

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VIII. Graduation of Damages

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preceding article, instances:

as

in

the

following

(1) That the plaintiff himself has contravened the terms of the contract; (2) That the plaintiff has derived some benefit as a result of the contract;

Rules IN CRIMES Art. 2204. In crimes, the damages to be adjudicated may be respectively increased or lessened according to the aggravating or mitigating circumstances. IN QUASI-DELICTS Art. 2214. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover.

(3) In cases where exemplary damages are to be awarded, that the defendant acted upon the advice of counsel; (4) That the loss would have resulted in any event; (5) That since the filing of the action, the defendant has done his best to lessen the plaintiff's loss or injury. GROUNDS FOR MITIGATION OF DAMAGES FOR CONTRACTS:

CONTRIBUTORY NEGLIGENCE The alleged contributory negligence of the victim, if any, does not exonerate the accused in criminal cases committed through reckless imprudence, since one cannot allege the negligence of another to evade the effects of his own negligence [Genobiagon v. CA, supra]. If so, the disobedience of the plaintiff in placing himself in danger contributed in some degree to the injury as a proximate, although not as its primary cause [Rakes v. Atlantic, G.R. No. L-1719 (1907)].

(1) Violation of terms of the contract by the plaintiff himself; (2) Obtention or enjoyment of benefit under the contract by the plaintiff himself; (3) Defendant acted upon advice of counsel in cases where exemplary damages are to be awarded such as under Articles 2230, 2231, and 2232; (4) Defendant has done his best to lessen the plaintiff’s injury or loss. FOR QUASI-CONTRACTS:

PLAINTIFF’S NEGLIGENCE Even if Manila Electric is negligent, in order that it may be held liable, its negligence must be the proximate and direct cause of the accident [Manila Electric v. Remonquillo, supra]. Both of the parties contributed to the proximate cause; hence, they cannot recover from one another [Bernardo v. Legaspi, supra]. IN CONTRACTS, QUASI-CONTRACTS AND QUASI-DELICTS Art. 2215 In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the damages under circumstances other than the case referred to in the

(1) In cases where exemplary damages are to be awarded such as in Art. 2232; (2) Defendant has done his best to lessen the plaintiff’s injury or loss. FOR QUASI-DELICTS: (1) That the loss would have resulted in any event because of the negligence or omission of another, and where such negligence or omission is the immediate and proximate cause of the damage or injury; (2) Defendant has done his best to lessen the plaintiff’s injury or loss.

PAGE 552 OF 574

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DAMAGES

The SC deemed CC 2215(2) inapplicable where the harm done to private respondents outweighs any benefits the plaintiffs may have derived from being transported to Tacloban instead of being taken to Catbalogan, their destination and the vessel's first port of call, pursuant to its normal schedule [Sweet Lines v. CA (1983)]. RULE WHEN CONTRACTING PARTIES ARE IN PARI DELICTO Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault." In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other."

CIVIL LAW

labor laws (Arts. 1418-1419, Civil Code). LIQUIDATED DAMAGES Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. COMPROMISE Art. 2031. The courts may mitigate the damages to be paid by the losing party who has shown a sincere desire for a compromise.

This rule, however, is subject to exceptions that permit the return of that which may have been given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code); (b) the debtor who pays usurious interest (Art. 1413, Civil Code); (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code); (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code); (e) the party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code); and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code) and PAGE 553 OF 574

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DAMAGES

IX. Miscellaneous Rules

CIVIL LAW

improper. Anyway, ten thousand pesos cannot, in common sense, be deemed “nominal”.

DAMAGES THAT CANNOT CO-EXIST ACTUAL AND LIQUIDATED NOMINAL WITH OTHER DAMAGES Art. 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns. The propriety of the damages awarded has not been questioned, Nevertheless, it is patent upon the record that the award of P10,000 by way of nominal damages is untenable as a matter of law, since nominal damages cannot co-exist with compensatory damages [Vda. De Medina v. Cresencia (1956)]. Since the court below has already awarded compensatory and exemplary damages that are in themselves a judicial recognition that Plaintiff’s right was violated, the award of nominal damages is unnecessary and

Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof.

DAMAGES THAT MUST CO-EXIST Exemplary with moral, temperate, liquidated or compensatory There is no basis for awarding exemplary damages either, because this species of damages is only allowed in addition to moral, temperate, liquidated, or compensatory damages, none of which have been allowed in this case, for reasons herein before discussed [Francisco v. GSIS (1963)].

PAGE 554 OF 574

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PRIVATE INTERNATIONAL LAW

CIVIL LAW

CIVIL LAW

PRIVATE INTERNATIONAL LAW

PAGE 555 OF 574

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PRIVATE INTERNATIONAL LAW

I. Introduction

CIVIL LAW

in dealing with a legal situation, the law of some other state or nation will be recognized, given effect, or applied.

A. SCOPE OF CONFLICTS OF LAWS: NATURE, DEFINITION AND IMPORTANCE

(5) The law concerning the rights of persons within the territory and dominion of one nation by reason of acts, private or public, done within the dominion of another nation.

A.2. DIVERSITY OF LAWS, CUSTOMS AND PRACTICES No law has any effect, of its own force, beyond the limits of the sovereignty from which its authority is derived. The extent to which the law of one nation, as put in force within its territory, whether by executive order, by legislative act, or by judicial decree, shall be allowed to operate within the dominion of another nation, depends upon what our greatest jurists have been content to call “the comity of nations.”

A.3. OBJECT, FUNCTION AND SCOPE The object and function of conflict of laws is to provide rational and valid rules or guidelines in deciding cases where either the parties, events or transactions are linked to more than one jurisdiction. i. Scope •

Adjudicatory jurisdiction o

“Comity,” in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws... [Hilton v Guyot, 159 US 113, 1895]

•

Choice-of-law o

•

A.2. DEFINITION (1) That part of municipal law which governs cases involving a foreign element. (2) Those universal principles of right and justice which govern the operation and effect of laws of another state or country. (3) That part of law which comes into play when the issue before the court affects some fact or event, or transaction that is so closely connected with a foreign system of law as to necessitate recourse to that system. (4) That part of the law of each state or nation which determines whether, PAGE 556 OF 574

Refers to the probable sources from which the applicable law of the controversy may be derived.

Recognition and enforcement of foreign judgments o

Private international law

Determines the circumstances that allow for a legal order to impose upon its judiciary the task of deciding multi-state and multinational disputes

Deals with the study of situations which justify recognition by the forum court of a judgment rendered by a foreign court or the enforcement of such within the forum.

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II. Jurisdiction Choice of Law

PRIVATE INTERNATIONAL LAW

CIVIL LAW

and

agents. [International Shoe Co. v. Washington] §

Under International Shoe, minimum contacts must exist between the forum and the defendant.

§

Under the case of Shaffer v Heitner (433 US 186, 1977), the minimum contacts must exist among the forum, defendant and the cause of action.

A. JURISDICTION •

•

Judicial Jurisdiction – power or authority of a court to try a case, render judgment and execute it in accordance with law Legislative Jurisdiction – the ability of the state to promulgate laws and enforce them on all persons and property within its territory.

ii. Jurisdiction over the Property

A.1. BASIS OF EXERCISE OF JUDICIAL JURISDICTION

•

i. Jurisdiction over the Person •

Jurisdiction over the person is acquired by the voluntary appearance of a party and his submission to authority.

•

Over the person of the PLAINTIFF – the moment he invokes the aid of the court by filing a suit.

•

iii. Jurisdiction Matter

Over the person of the DEFENDANT – when he enters his appearance OR is served with the legal process within the state (either through personal or substituted service of summons). o

Exception: if he appears for the purpose of protesting the jurisdiction of the court.

•

Non-resident plaintiff – deemed to consent to the court’s exercise of jurisdiction over subsequent proceedings arising out of his original cause of action including counterclaims filed by the defendant.

•

Traditional Approach – Presence in the state

•

Modern Approach – Minimum contacts and fundamental fairness test [International Shoe Co. v. Washington, 326 US 310, 1945] o

Results either from the seizure of the property under a legal process or from the institution of legal proceedings wherein the court’s power over the property is recognized and made effective. over

the

Subject

•

Subject matter jurisdiction or competence is “more than the general power conferred by law to take cognizance of cases of a general class to which the case belongs.”

•

It is necessary that said power be properly invoked by filing a petition.

•

Subject matter jurisdiction cannot be conferred by consent of the parties and a decision is void and may be set aside either directly or collaterally, where the court exceeds its jurisdiction and power in rendering it.

A.2. WAYS OF DEALING WITH A CONFLICTS PROBLEM i. Dism iss the Case Doctrine of Forum Non Conveniens •

Minimum Contacts – this includes “its presence in the state through acts of authorized PAGE 557 OF 574

Definition: Even if the court assumes jurisdiction over the parties and the subject matter, it may decline to try the case on

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CIVIL LAW

B. CHOICE OF LAW

the ground that the controversy may be more suitably tried elsewhere.

B.1. APPROACHES TO CHOICE OF LAW

ii. Assum e Jurisdiction Assumption of jurisdiction DOES NOT mean that the court will apply forum law.

i. Traditional Approaches Vested-Rights Theory

However, the presence of any one of the following factors would justify the application of internal law: (1) A specific law of the forum decrees that internal law should apply o

•

An act done in a foreign jurisdiction gives rise to the existence of a right if the laws of that state provides so.

•

This right vests in the plaintiff and he carries it with him to be enforced in any forum he chooses to bring suit.

•

The forum refers to the law of the place of occurrence of the “last act” necessary to complete the cause of action.

Examples: (a) Article 16 of the Civil Code real and personal property are subject to the law of the country where they are situated. (b) Article 829 – revocation of a will done outside the Philippines maybe valid if done according to the law of the place where the will was made or lex domicile

ii. Modern Approaches Place of Relationship •

Most

Significant

Identifies a plurality of factors

(c) Article 819 – prohibits Filipinos from making joint wills even when done abroad.

o

The needs of the interstate and international system

o

Relevant policies concerned states

(2) The proper foreign law was not properly pleaded and proved

o

The relevant policies of other interested states and the relative interests of those in the determination of the particular issue

o

The protection of justified expectations of the parties

(b) Doctrine of Processual Presumption – absent contrary proof, foreign law is presumed to be the same as Philippine law.

o

The basic policies underlying the particular field of law

o

Certainty, predictability uniformity of result

(3) The case under any of the exceptions to the application of foreign law. [Supra.]

o

Ease in the determination and the application of the law to be applied

(a) Foreign law must be proved as a fact through Rules of Evidence (e.g. official publication or copy, which has been consularized)

•

the

and

In torts o

PAGE 558 OF 574

of

The place where the injury occurred

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o

The place where the negligent conduct occurred

o

The domicile, resident nationality of the parties

o

•

PRIVATE INTERNATIONAL LAW

The place where relationship between parties is entered.

CIVIL LAW

C. THE PROBLEM CHARACTERIZATION

or

C.1 CHARACTERIZATION AND THE SINGLE-ASPECT METHOD

the the

o

Characterization - The process by which a court at the beginning of the choice-of-law process assigns a disputed question to an area in substantive law.

o

Traditional approach - Singleaspect method (concentrates on one element of a situation in order to connect the case to a particular legal community)

o

Modern approach – Multiaspect method (all important factors of the case are analyzed and the applicable law is arrived at by “rationally elaborating and applying the policies and purposes underlying the particular legal rules that come in question as well as the needs of interstate or international intercourse”)

o

The Philippines follows the single aspect method.

In contracts o

The law chosen by the parties

o

In the absence thereof; §

the place of contracting

§

the place of negotiation

§

the place performance

§

the domicile, residence, nationality, place of incorporation and place of business of the parties

of

Interest Analysis o

Looks at the policy behind the laws of the involved state and the interest each state had in applying its own law.

Comparative Impairment o

i. Subject-Matter Characterization

Weighs conflicting interests and apply the law of the state whose interest would be more impaired if its laws were not followed.

•

Classification by a court of a factual situation into a legal category.

ii. Substance-Procedure Dichotomy

Functional Analysis o

OF

This approach looked into the general policies of the state beyond those reflected in its substantive law and to policies and values “relating to effective and harmonious intercourse between states.”

•

Directs the court to the extent it will apply foreign law.

•

If the issue is substantive, the court MAY apply foreign law. But if it procedural, it is supposed to follow the law of the forum.

Statute of Frauds o

PAGE 559 OF 574

The Statute of Frauds is considered as substantive if the words of the law relate to

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o

PRIVATE INTERNATIONAL LAW

forbidding the CREATION of obligation.

the matter to the law of the forum or a third state.

In contrast, one that forbids ENFORCEMENT of the obligation is categorized as procedural.

•

Remission – reference is made back to the law of the forum

•

Transmission – reference is made to a third state

Statutes of Lim itation Borrowing Statute

and

D.2. VARIOUS WAYS OF DEALING WITH THE PROBLEM OF RENVOI

General Rule: Statutes of limitations were classified as procedural because they barred only the legal remedy without impairing the substantive right involved. •

(1) Reject the renvoi - Forum conflict rules is deemed to refer only to the internal law of that state (i.e. that which would apply to a domestic case with no conflict-of-laws complications)

Exception: If the statute provides a shorter period for certain types of claims that fall within a wider classification covered by a general statute of limitations. (Specificity Test)

(2) Accept the renvoi – looks into not just the internal law of the foreign state, but also the choice-of-law rules applicable in multi-state cases.

Borrowing statutes •

(3) Desistance or m utual disclaim er of jurisdiction (e.g. Forum court looks at foreign law; foreign law does not apply to non-residents; therefore, no one has applicable laws; Forum court then applies forum law)

Bars the filing of a suit in the forum if it is already barred by the statute of limitations in the place where the cause of action arose. (Philippines has passed a borrowing statute)

(4) Foreign Court Theory – the forum court would assume the same position that the foreign court would take were the case litigated in the foreign court.

C.2 DEPECAGE Phenomenon where “different aspects of a case involving a foreign element may be governed by different systems of laws.” •

A case may be dissected into different issues, each analyzed as to which law shall apply.

•

When such issue by issue analysis results in the application of different laws to different issues, then depecage occurs.

•

CIVIL LAW

E. NOTICE AND PROOF OF FOREIGN LAW E.1. EXTENT OF JUDICIAL NOTICE

Depecage is the effect of issue by issue analysis.

•

The party whose cause of action or defense depended upon the foreign law has the burden of proving the foreign law.

•

Such foreign law is treated as a question of fact to be properly pleaded and proved in conformity with the law of evidence of the state where it is presented.

•

A judge is not authorized to take judicial notice of a foreign law and is presumed to know only domestic law.

D. THE PROBLEM OF RENVOI D.1. DEFINITION Procedure whereby a jural matter presented is referred by the conflict of laws rules of the forum to a foreign state, the conflict of laws rule of which, in turn, refers PAGE 560 OF 574

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PRIVATE INTERNATIONAL LAW

III. Personal Law

E.2. PROOF OF FOREIGN LAW Methods to prove foreign law •

Official publication of the law (and consularized)

A. NATIONALITY

•

Copy of the law attested by the officer having the legal custody of the record or by his deputy. (and consularized)

A.1. IMPORTANCE OF A PERSONAL LAW

•

An individual’s personal law follows him wherever he is and governs those transactions which affect him most closely.

Expert witness

Effect of Failure to Plead and Prove Foreign Law •

Dismiss the case for inability to establish a cause of action

•

Assume that the foreign law is the same as the law of the forum (doctrine of processual presumption)

•

CIVIL LAW

Importance Philippines

E.3. EXCEPTIONS TO THE APPLICATION OF FOREIGN LAW The foreign law is contrary to an important public policy of the forum

•

The foreign law is procedural in nature

•

Issues are related to property (Lex Situs)

•

The issue involved in the enforcement of foreign claim is fiscal or administrative

•

The foreign law or judgment is contrary to good morals (Contra Bonus Mores)

•

The application of foreign law will work undeniable injustice to the citizens of the forum

•

The foreign character

law

is

penal

•

The application of the foreign law might endanger the vital interests of the state

Nationality

in

the

Regulates

Apply the law of the forum

•

of

•

Civil status

•

Capacity

•

Condition

•

Family rights and duties

•

Laws on succession

•

Capacity to succeed

A.2. DETERMINATION NATIONALITY

OF

Who are Filipino Citizens •

Those who are citizens of the Philippines at the time of the adoption of the Constitution (1987)

•

Those whose fathers or mothers are citizens of the Philippines

•

Those born before January 17, 1973 of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority

•

Those who are accordance with law

naturalized

in

i. Natural-Born Citizens

in

•

Natural-born citizens are those who are citizens of the Philippines without having to perform any act to acquire or perfect citizenship.

•

The Philippines follows the jus sanguinis principle which means the rule of descent or blood.

ii. Citizens by Naturalization PAGE 561 OF 574

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PRIVATE INTERNATIONAL LAW

B. DOMICILE

(4) The burden of proving a change of domicile is upon whoever alleges that a change has been secured.

B.1. DEFINITION

(a) Without overwhelming evidence to show a change of domicile, the court will decide in favor of the continuance of an existing domicile.

Domicile is defined by municipal law (Philippine Law) and private international law. Under m unicipal law •

•

Art. 50 of the Civil Code provides: “For the exercise of civil rights and the fulfillment of civil obligations, the domicile of natural persons is the place of their habitual residence.”

B.3. KINDS OF DOMICILE •

For juridical persons: domicile is determined by the law creating or recognizing it. In the absence thereof it shall be understood to be the place where their legal representation or place of business is.

•

•

•

The place with which a person has a settled connection for certain legal purposes, either because his home is there or because that place is assigned to him by law.

•

The place of his true, fixed permanent home and principal establishment, and to which, whenever he is absent, he has the intention of returning.

Domicile of origin o

Under private international law

•

CIVIL LAW

Refers to a person’s domicile at birth (domicile of parents)

Domicile of choice o

Voluntary domicile

o

The place freely chosen by a person sui juris

Constructive domicile o

By operation of law, a domicile is assigned to a person legally incapable of choosing their own domicile. (e.g. minors and mentally disabled)

C. PRINCIPLES ON STATUS AND CAPACITY

To acquire a domicile, there must be concurrence of intention to make it one’s domicile and physical presence.

PERSONAL

C.1. DEFINITION Personal status •

Includes capacity

•

Embraces such matters as:

B.2. GENERAL RULES ON DOMICILE Rules on Domicile

both

condition

and

(1) No person shall be without a domicile

(1) The beginning and end of human personality

(2) A person cannot have simultaneous domiciles.

(2) Capacity to have rights in general

two

(3) Capacity to transactions

(a) However, domicile may vary depending on the purpose (e.g. domicile for divorce will be different from domicile for the purpose of running for public office.)

engage

in

legal

(4) Protection of personal interests (5) Family relations, particularly the relations between: (a) Husband and wife

(3) It establishes a connection between a person and a particular territorial unit

(b) Parent and child (c) Guardian and ward PAGE 562 OF 574

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PRIVATE INTERNATIONAL LAW

(6) Transactions especially

of

family

law,

(1) There is a rebuttable presumption that a person is dead when he has been absent for a number of years

(a) Marriage

(2) A person’s unexplained absence is judicially investigated and established which results in legal effects similar to those of death

(b) Divorce (c) Separation (d) Adoption

(3) A judicial decree shall have to be issued declaring the person dead before the legal effects of death take place.

(e) Legitimation (f) Emancipation (7) Succession intestate)

CIVIL LAW

(both

testate

and

The Philippines follows the first.

C.5. NAME Capacity •

Juridical capacity – the fitness of a man to be the subject of legal relations.

•

Capacity to act – the power to do acts with juridical effects.

•

The union of both produces complete civil capacity.

Philippine law provides that: “no person can change his name or surname without judicial authority.” Exceptions (according to Jurisprudence): (1) That the name is ridiculous or tainted with dishonor or extremely difficult to pronounce. (2) When the change is necessary to avoid confusion

C.2. LEGISLATIVE JURISDICTION DISTINGUISHED FROM JUDICIAL JURISDICTION

(3) When the right to a new name is a consequence of a change in status

Status, once established by the personal law of the party, is given UNIVERSAL RECOGNITION.

(4) A sincere desire to adopt a Filipino name to erase signs of a former alien nationality which unduly hamper social and business life.

C.3. BEGINNING PERSONALITY

Whether an alien’s change of name is valid DEPENDS SOLELY ON HIS PERSONAL LAW.

•

•

AND

END

OF

The determination of the exact moment personality begins is referred to the individual’s personal law.

C.6. AGE OF MAJORITY

A declaration of death issued by a competent court is considered valid for all purposes. Upon the death of a person, some of his rights and obligations are totally extinguished while others are passed on to his successors.

C.7. CAPACITY

Age of majority is determined by the individual’s personal law.

C.4. ABSENCE Three ways of addressing conflict of laws problem regarding absence:

PAGE 563 OF 574

•

Capacity to act is governed by his personal law.

•

The incapacities attached to his legal status go with him wherever he is.

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IV. Choice Problems A. CHOICE-OF-LAW RELATIONS

PRIVATE INTERNATIONAL LAW

of

Law

CIVIL LAW

of public officers, necessary to formation of a legally valid marriage.”

the

In the Philippines, these are enumerated in Art 3 of the Family Code:

IN

(1) Authority of the solemnizing officer

FAMILY

(2) A valid marriage license except in cases provided in Chapter 2 of this Title; and (3) A marriage ceremony which takes place with the appearance of the contracting parties before the solemnizing officer and their personal declaration that they take each other as husband and wife in the presence of not less than two witnesses of legal age.

A.1. MARRIAGE Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. [Art. 15, Civil Code] This follows the principle of LEX NATIONALII.

All marriages solemnized outside the Philippines in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country... [Art. 26, par. 1, Family Code]

i. Philippine Policy on Marriage and the Fam ily In case of doubt, courts will apply FORUM law because marriage is greatly influenced by the values of society. (Prof. Elizabeth Pangalangan)

This follows the principle of lex loci celebrationis.

This policy is expressed in various laws, e.g.:

Exceptions to the rule of lex loci celebrationis (these involve the question capacity to marry, which is a substantive requirement for marriage):

Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State. [Sec. 2, Art. XV of the 1987 Constitution]

(1) Either/both parties are below 18 years old

In case of doubt, all presumptions favour the solidarity of the family. Thus, every intendment of law or facts leans toward the validity of marriage, the indissolubility of the marriage bonds, the legitimacy of children, the community of property during the marriage, the authority of parents over their children, and the validity of defense for any member of the family in case of unlawful aggression. [Art. 220, Civil Code]

(2) Bigamous or polygamous marriages (3) Subsequent recording:

marriage

without

(a) The judgment of nullity of the first marriage (b) Partition and distribution of the properties of the spouses (c) Delivery of the presumptive legitimes

children’s

(4) Mistake as to identity of the contracting party

ii. Extrinsic Validity of Marriage

(5) One of the parties was psychologically incapacitated to comply with the essential marital obligations

Extrinsic validity covers questions relating to formalities or “external conduct required of the parties or of third persons especially PAGE 564 OF 574

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(6) Incestuous

•

(7) Void by reason of public policy

Intrinsic validity refers to the general ability of a person to marry (e.g. age requirement and parental consent).

•

This is controlled by the parties’ personal laws.

•

Marriages celebrated by a Consular Official - Formal and intrinsic requirements under Philippine law shall be followed.

•

•

Relations

Includes mutual fidelity, respect, cohabitation, support and the right of the wife to use the husband’s family name.

•

If decree is obtained by alien spouse capacitating him to marry, Filipino spouse shall have capacity to marry. (Art. 26, Family Code)

Property Relations of Spouses

•

In the absence thereof, the internal law of the state in which both spouses fix their habitual residence.

AND

•

Grounds are based on the defects at the time of the celebration of the marriage

•

Traditional approach: Grounds follow LEX LOCI CELEBRATIONIS

•

Modern Approach: Grounds follow LAW OF THE MARITAL DOMICILE.

According to the Hague Convention: Internal law designated by the spouses before the marriage

Divorce

This will be recognized in the Philippines under the principle of international comity, provided it does not violate a strongly held policy of the Philippines.

A.3. ANNULMENT DECLARATION OF NULLITY

Governed by the national law of the parties.

by

Decrees of absolute divorce are not valid if obtained by Filipinos abroad

the

•

Obtained

•

•

Between

Decrees

ii. Validity of Foreign Between Foreigners

iv. Effects of Marriage Personal Spouses

Grounds for divorce and dictated by the LEX FORI.

i. Divorce Filipinos

iii. Intrinsic Validity of Marriage •

CIVIL LAW

A.4. PARENTAL RELATIONS •

Legitimacy of the child is submitted to the personal law of the parents (in the Philippines, national law of the parents).

At least one Filipino spouse; •

Property relations Philippine law

governed

by

i. Determ ination of Legitim acy of a Child Kinds of filiations

A.2. DIVORCE AND SEPARATION •

Absolute – termination of legal relationship between spouses by an act of law

•

Limited – separation from bed and board

(1) Natural (a) Legitimate – governed by the personal law of the father (b) Illegitimate – governed by the personal law of the mother (2) Adopted PAGE 565 OF 574

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ii. Parental Authority over the Child •

Most countries follow the personal law of the father.

•

In the Philippines, joint exercise of parental authority by the father and mother (Art. 211 of the Family Code).

CIVIL LAW

they are not contrary to law, morals, good customs, public order, or public policy. [Art. 1306, Civil Code] • Testate or intestate succession and capacity to succeed (lex nationalii)

B.5. SITUS OF CERTAIN PROPERTIES i. Situs of Personal Property for Tax Purposes

A.5. ADOPTION •

Process of adoption - governed by LEX DOMICILII

•

Mobilia sequuntur personam

•

However, it yields to established facts of legal ownership, actual presence and control elsewhere and cannot be applied if it would result in inescapable and patent injustice.

B. CHOICE OF LAW IN PROPERTY B.1. THE CONTROLLING LAW •

In the Philippines, both movables and immovables are governed by LEX SITAE

•

Conflict arises when property is located in a foreign country and the foreign country has a law that distinguishes between real and personal property.

ii. Situs of Debts •

B.2. CAPACITY TO TRANSFER OR ACQUIRE PROPERTY •

C. CHOICE OF LAW IN CONTRACTS

Real property – law of the place where the property is located

C.1. EXTRINSIC CONTRACTS •

B.3. EXTRINSIC AND INTRINSIC VALIDITY OF CONVEYANCES •

Unsettled in Philippine jurisdiction, however, Prof. Pangalangan suggests that the law which governs the contract from which the debt arises shall also govern the transfer of the debt.

Formalities and effects of conveyance – Governed by lex situs

VALIDITY

OF

LEX LOCI CELEBRATIONIS (Art. 17 of the Civil Code)

C.2. INTRINSIC CONTRACTS

VALIDITY

OF

i. Lex Loci Contractus

B.4. EXCEPTION TO LEX SITUS RULE •

The transaction does not affect transfer of title to/ownership of the land (lex intentionis/lex voluntatis)

•

Contracts where real property is offered by way of a security for the performance of an obligation such as a loan. (loan is covered by rules on ordinary contracts though mortgage is governed by lex situs)

•

Looks into where “the last act is done which is necessary to bring the binding agreement into being so far as the acts of the parties are concerned.”

ii. Lex Loci Solutionis All matters relating to the: (1) Time (2) Place and manner of performance

The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided

(3) Sufficiency of performance (4) Valid excuses for non performance PAGE 566 OF 574

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iii. Lex Loci Intentionis

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Aliens

•

Philippine basis

•

Lex nationalii

•

Hence, LEX LOCI INTENTIONIS applies unless it is contrary to law, morals, good customs, public order or public policy of the Philippines.

•

Lex domicilii

•

Lex loci celebrationis

D.2. INTRINSIC VALIDITY OF WILLS C.3. CAPACITY CONTRACTS •

TO

ENTER

INTO

•

Governed by the personal law of the parties (either LEX NATIONALII or LEX DOMICILII)

D.3. INTERPRETATION OF WILLS •

C.4. CHOICE OF LAW ISSUES IN CONFLICTS CONTRACTS CASES

Questions of venue, not jurisdiction

•

Includes arbitration, not only choice of court.

i. Done outside the Philippines, by a person not have dom icile in the Philippines •

Lex loci celebrationis

•

Lex domicilii

ii. Done outside the Philippines, by a person domiciled in the Philippines

ii. Contracts with Arbitration Clause •

Arbitration clause – a provision in a contract stipulating that any dispute arising from the contract shall be submitted to a particular body for arbitration

•

Drafted by only one dominant party

•

The only participation of the other party would be to affix his signature

D.1. EXTRINSIC VALIDITY OF WILLS Filipino nationals Lex nationalii

•

Lex loci celebrationis

•

Lex loci actus

Disallowance is essentially procedural in character – governed by the law of the forum

•

However, the court will look into the law of the foreign state where the will was made as to whether the extrinsic requirements in the execution of the will have been complied with.

D.6. ADMINISTRATION OF ESTATES

D. CHOICE OF LAW IN WILLS, SUCCESSION AND ADMINISTRATION OF ESTATES

•

Lex domicilii

•

Adhesion contracts Not negotiated by the parties

•

D.5. PROBATE

C.5. ADHESION CONTRACTS •

Governed by the national law of the decedent (Art. 16 of the Civil Code)

D.4. REVOCATION

i. Choice of Forum Clause •

Governed by the national law of the decedent (Art. 16 of the Civil Code)

PAGE 567 OF 574

•

Nationality and domicile does not affect administration

•

Authority of the administrator or executor is limited to the authority of the court that appointed such.

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E. CHOICE OF LAW IN TORTS AND CRIMES

•

E.1. LEX LOCI DELICTI COMMISSI •

Law of the place where the alleged tort was committed

•

Choice-of-Law

•

o

Common Law – vested rights theory (place of injury)

o

Civil Law – Tortious conduct

CIVIL LAW

Since the crime is an “affront against the sovereignty and good order of the state within whose jurisdiction it occurs, each state must attend to the vindication of its own sovereignty.”

E.5. LEX LOCI DELICTI Law of the place where the crime was committed

Traditional View on Jurisdiction – an actor liable by LEX LOCI DELICTI is liable everywhere

•

An act is punishable if it has been made punishable as a crime by law.

•

Developments in public international law now includes acts considered as a crime under international law.

Exceptions to lex loci delicti:

E.2. MODERN THEORIES ON FOREIGN TORT LIABILITY

(1) Crimes committed by state officials, diplomatic representatives and officials of recognized international organizations

i. The Most Significant Relationship •

Considers the state’s contacts with the occurrence and the parties.

(2) Crimes committed on board foreign vessels even if it is within the territorial waters of the coastal state, except: (Art. 27 of UNCLOS)

ii. Interest Analysis •

Considers the relevant concerns the state may have in the case and its interest in having its law applied on that issue.

(a) Consequences coastal state

(d) If such measures are necessary for the suppression of illicit traffic in narcotic drugs or psychotropic substances.

Tortious liability is transitory the liability resulting from the conduct is “deemed personal to the perpetrator of the wrong, following him whithersoever he may go, so that compensations may be exacted from him in any proper tribunal which may obtain jurisdiction of the defendant’s person, the right to sue not being confined to the place where the cause of action arises.”

E.4. DISTINGUISHING TORTS AND CRIMES

(3) Crimes committed by Philippine nationals abroad under Art. 2 of the RPC. (a) On a Philippine ship or airship (b) Forgery or counterfeit any coin or currency note of the Philippine Islands or obligations and securities issued by the Government of the Philippine Islands

BETWEEN

•

Crime is territorial

•

Crime is an injury to the state

the

(c) Requested by the master of the ship or diplomatic agent or consular officer of the flag state

Considers justice and social expediency

E.3. FOREIGN TORT CLAIMS •

to

(b) Disturbs the peace or good order of the country

iii. Cavers’ Principle of Preference •

extends

(c) Introduction of those mentioned above into the Philippines

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(d) Public officers or employees committing an offense in the exercise of their functions

iv. Jurisdiction Corporations

(e) Crimes against national security and the law of nations, defined in Title One of Book Two of the RPC.

F. CHOICE OF LAW AFFECTING CORPORATIONS AND OTHER JURIDICAL ENTITIES

state

ii. Exceptions to Incorporation Test Constitutional Restrictions •

where

the

and

•

Foreign corporations doing business in the Philippines are bound by Philippine law. (Sec. 129 of the Corporation Code), except for (1) Provisions for creation, formation, organization or dissolution

it

Rule

(2) Provisions which fix the relations liabilities, responsibilities or duties of stockholders, members, or officers of the corporation

is

of

(3) Service upon foreign corporations doing business in the Philippines may be made on

Statutory

(a) Resident agent (b) If none:

A state may exclude a foreign corporation from doing business within its territory, or prescribe any conditions as a prerequisite.

(i) Government designated by law (iii) Agent within Philippines

Courts may pierce the veil of corporate identity and look into the nationality of the controlling stockholders to determine the “citizenship” of the corporation

(iv) Through channels

•

Art. 51 of the Civil Code states: When the law creating or recognizing them, or any other provision does not fix the domicile of juridical persons

•

the

diplomatic

v. Right of Foreign Corporation to Bring Suit

iii. Domicile or Residence of Foreign Corporations

•

official

(ii) Any of its officers or

Control Test During W ar •

Foreign

A foreign corporation shall be recognized and allowed to transact business in any state which gives its consent.

i. Personal law of a Corporation Law of the incorporated

over

•

F.1. CORPORATIONS •

CIVIL LAW

Prerequisite for filing a suit before Philippine courts: o

the place where their legal representation is established or

License to transact business in the Philippines (Sec. 133 of the Corporation Code)

vi. Exceptions Requirement

where they exercise their principal functions

to

the

License

Isolated Transactions

A foreign corporation is granted a license to operate in the Philippines, it acquires domicile here.

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(2) Not of a character or business to indicate a purpose to engage in business (3) Does not constitute “doing business” as contemplated by law

•

To determine the entitlements and limitations applicable to the partnership – law of the domicile applies

•

To determine the legal capacity of foreign corporations to contract – personal law applies

(4) Isolated if there is no: (a) Continuity of conduct

o

(b) Intention to establish a continuous business within the state Action to Protect Trademark, Trade Name, Goodwill, Patent or for Unfair Competition •

Based on equity considerations

Agreements Fully Outside the Philippines

CIVIL LAW

Transacted

But Philippine law remains applicable to: §

The creation establishments Philippines

of in

their the

§

The mercantile operations

§

The jurisdiction of the courts of the Philippines

•

To determine the existence of the partnership – personal law applies

•

of

To determine the grounds for dissolution and termination of the partnership – personal law applies

Under the Foreign Business Registration Act and Foreign Investments Act, acts that constitute doing business includes:

Extraterritorial enforcem ent of in personam judgments against partnership

•

Based on the policy of stabilizing commercial transactions.

vii. Definition and “Transacting Business”

Scope

(1) Soliciting orders, service contracts, opening offices (2) Appointing representatives distributors either

•

There is jurisdiction over the partnership or unincorporated association if under the circumstances, there is jurisdiction over an individual

•

A judgment against a partnership or association is enforceable against its assets in every state.

or

(a) Domiciled in the Philippines (b) Stay in the country for 180 days or more (3) Participating in the management, supervision, or control of any domestic business, firm, entity, or corporation in the Philippines (4) Any other act that implies a continuity of commercial dealings or arrangements (5) The exercise of some functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization

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V. Foreign Judgments A. RECOGNITION ENFORCEMENT OF JUDGMENTS

A.3. POLICIES UNDERLYING RECOGNITION AND ENFORCEMENT Res judicata

AND FOREIGN

A.1. DISTINCTION BETWEEN RECOGNITION AND ENFORCEMENT Foreign Judgment •

All decisions rendered outside the forum

•

Encompasses judgments, decrees, and orders of (1) foreign governments and (2) sister states in a federal government Occurs when the successful plaintiff fails to obtain satisfaction of a judgment in the court which granted it

•

The plaintiff may try to enforce the judgment in another state where the defendant can be located

Prevents parties from litigating issues that have been determined by a valid local judgment

•

Applies in the Philippines to foreign judgments through sec. 40, Rule 39

(1) Proceedings in personam (a) Consent of the parties

Occurs when the defendant wins, and asserts that decision in order to preclude the plaintiff from filing a suit on the same claim in another forum

(b) Relation of the parties or events to the forum (2) Proceeding in rem (a) State power over the property found within the territory ii. The Judgm ent Must Be Valid Under the Laws of the Court that Rendered It

Comity In order to obtain a reciprocal treatment from the courts of other countries, we are compelled to take foreign judgments as they stand and to give them Full Faith and Credit

iii. The Judgm ent Must be Final and Executory to Constitute Res Judicata in Another Action

Obligation of foreign judgment •

•

Bases of jurisdiction

A.2. BASES OF RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS •

Those who have contested an issue shall be bound by the result of the contest

i. The Foreign Judgm ent was Rendered by a Judicial or QuasiJudicial Tribunal which had Jurisdiction Over the Parties and the Case in the Proper Judicial Proceedings

Recognition •

•

A.4. REQUISITES FOR RECOGNITION OR ENFORCEMENT

Enforcement •

CIVIL LAW

•

Derived from the vested rights theory

PAGE 571 OF 574

The foreign judgment creates no obligation on the forum court to recognize or enforce it if it is merely interlocutory or provisional, contemplating a fuller investigation leading to a later final decision.

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iv. The State W here the Foreign Judgment was Obtained Allows Recognition or Enforcem ent of Philippine Judgments •

Reiteration of international comity

v. The Judgm ent M ust be for a Fixed Sum of Money •

Unless the foreign judgment specifies performance or delivery, there is nothing for the forum court to enforce.

vi. The Foreign Judgm ent M ust Not be Contrary to the Public Policy or Good Morals of the Country W here it is to be Enforced vii. The Judgm ent M ust Not Have Been Obtained by Fraud, Collusion, Mistake of Fact or Mistake of Law

A.5. PROCEDURE ENFORCEMENT

FOR

When a foreign judgment is recognized, it is not instantaneously executed as a judgment. A petition should be filed in the proper court attaching an authenticated copy of the foreign judgment to be enforced. •

Authentication calls for the Philippine consul assigned to the country where the foreign judgment was decreed to certify that had been rendered by a court of competent jurisdiction.

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SUMMARY OF CONFLICTS OF LAW RULES Nationality Domicile Personal Status and Capacity

Art. 15 CC and Art. 16 CC Art. 50 CC and Art. 51 CC Personal law (Nationality or Domicile) FAMILY RELATIONS Extrinsic Validity: Lex loci celebrationis (Art. 26 FC, 1st par.) Exceptions: Art. 35(1), (4), (5), (6), FC; Art. 36, FC; Art. 37 FC; Art. 38, FC Intrinsic Validity: Personal law Marriage Lex nationalii (Art. 15 CC) or Lex domicilii Personal relations of the spouses – Personal law (lex nationalii or lex domicilii) (Art. 15, CC) Property relations – see Art. 80 FC Generally, lex rei sitae Lex fori for grounds of divorce In the Philippines, see Art. 26 FC Divorce and Separation Lex nationalii or lex domicilii as basis for And adjudicative jurisdiction Grounds for Legal Separation (matrimonial jurisdiction or domicile of one spouse) Traditional approach: LEX LOCI CELEBRATIONIS Annulment and Declaration of Nullity Modern approach: LEX DOMICILII (marital domicile) Determination of legitimacy: PERSONAL LAW (lex nationalii or lex domicilii) Parental relation Parental authority: PERSONAL LAW of father Adoption: PERSONAL LAW PROPERTY Immovables Lex situs Movables Lex domicilii, lex situs, lex loci actus BUT in the Philippines Lex situs, be it real or personal property Extrinsic Validity: LEX SITUS (Art. 16(1), CC) Conveyances Intrinsic Validity: LEX SITUS (Art. 16(1), CC) Unless we can prove LEX INTENTIONIS CONTRACTS LEX LOCI CELEBRATIONIS (Art. 17 CC) Extrinsic Validity Exception: LEX INTENTIONIS LEX LOCI CONTRACTUS Intrinsic Validity LEX LOCI SOLUTIONIS LEX INTENTIONIS PERSONAL LAW, which can either be lex nationalii Capacity to enter into contract or lex domicilii (Art. 15, CC) PAGE 573 OF 574

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Interpretation LEX INTENTIONIS W ILLS, SUCCESSIONS, ADMINISTRATION OF ESTATES Filipino makes a will abroad Lex Nationalii; Lex Loci Celebrationis Extrinsic Validity Alien makes a will in the Philippines Lex Nationalii; Lex Domicilii; Lex Loci Celebrationis Intrinsic Validity Lex Nationalii (Art. 16, par. 2 CC) Lex nationalii (based on nationality principle) Interpretation of Wills If terms are clear and unambiguous, lex intentionis If done outside by one not domiciled in the Philippines Lex loci celebrationis or Lex domicilii If done outside by one domiciled in the Philippines Revocation Lex loci actus or Lex domicilii If done within the Philippines Lex loci actus – so Philippine law (in accordance with civil code provsions) LEX FORI Probate LEX LOCI CELEBRATIONIS If there is an effective choice of law – courts of the place where the trust is being administered If there is no effective choice of law – law that will Trusts sustain the validity of the trust (place of administration or domicile) For testamentary trusts – follow rules on wills TORTS AND CRIMES Situs of the tort place of injury or place LEX LOCI DELICTI COMMISSI of conduct For crimes LEX LOCI DELICTI CORPORATIONS AND JURIDICAL ENTITIES Personal law of corporations Place of incorporation (domicile)

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