UP Civil Law Quizzer.pdf

UP WOMEN IN LAW For there must be courage in wisdom, grace in strength.

PANIC BOOKLET and QUIZZER Civil Law

UP WINLAW Executive Board (2007-2008) President: Angel Manalaysay VP-Academics: May Caniba VP-Externals: Suz Ojeda VP-Finance: Jan Lee VP-Internals: Miles Malaya VP-Publicity: Cha Valdez 4th year Rep: Len Abellar 3rd Year Rep: Weng Salonga 2nd Year Rep: Arianne Reyes Bar Ops Head: Karra dela Paz Updated by: Nash Lopez

TABLE OF CONTENTS Effect and Application of Laws

5

PERSONS & FAMILY RELATIONS Persons Absence Civil Register Use of Surnames Family Relations Marriage Void Marriage Voidable Marriage Legal Separation Property Relations Between Spouses Absolute Community Conjugal Partnership of Gains Separation of Property of the Spouses The Family Paternity and Filiation Illegitimate Children Legitimated Children Adoption Support Parental Authority OBLIGATIONS & CONTRACTS Obligations Kinds of Obligations Extinguishment of Obligations Contracts Essential Elements Defective Contracts Rescissible Contracts Voidable Contracts Unenforceable Contracts Void Contracts PROPERTY Classification of Property Ownership Ownership in General Right of Accession Quieting of Title Ruinous Buildings and Trees in Danger of Falling Co-Ownership Page 2 of 230

8 9 11 12 14 14

25

34

49 51 56 62 63 65

68 69 69 73 78 79 79

Possession Usufruct Different Modes of Acquiring Ownership Occupation Prescription Prescription of Ownership and Other Real Rights Prescription of Actions Donation TORTS & DAMAGES Quasi-Delict Damages Actual or Compensatory Damages Moral Damages Nominal Damages Temperate or Moderate Damages Liquidated Damages Exemplary or Corrective Damages SALES Definition; Characteristics Essential Requisites Form of Sales Formation, Perfection and Consummation of Sales Double Sales Sale by Non-Owner or One Having Voidable Title Loss, Deterioration, Fruits and Other Benefits Remedies for Breach of Contract of Sale Remedies of the Seller Remedies of the Buyer Sale of Movables by Installment (Recto Law) Sale of Immovables (In General) Sale of Immovables (By Installment) Conditions and Warranties Extinguishment Assignment Bulk Sales Law Anti-Dummy Law

81 85 88 88 90

94

100 112 112 115 117 117 117 117

118 120 122 122 126 127 128 129

130 131 131 133 135 139 139 140

CREDIT TRANSACTIONS

For there must be courage in wisdom, grace in strength. Page 230 of 230

General Provisions Commodatum Mutuum Deposit Guaranty Pledge

140 142 143 144 148 152 Page 3 of 230

Real Mortgage Antichresis Chattel Mortgage Concurrence and Preference of Credits

154 155 156 158

AGENCY Nature, Form and Kinds of Agency Obligations of the Agent to the Principal Obligations of the Principal to the Agent Extinguishment of Agency

161 168 169 174

PARTNERSHIP General Provisions Obligations of the Partners Obligations Among Themselves Property Rights Obligations to 3rd Persons Dissolution and Winding Up Limited Partnership

176 180

194 197 TRUSTS

Definition; Characteristics Express Trusts Implied Trusts

198 201 203

SUCCESSION Concept Wills Legitimes Disinheritance Legal Succession Summary of Intestate Shares Validity and Effect of Legacy/Device

To claim property escheated to the State

5 years from the time disqualified person took possession 30 days from issuance of order of distribution 1 month form written notice of sale

Action for declaration of incapacity & for recovery of the inheritance, devise or legacy

10 years

To enforce warranty of title/quality of property adjudicated to co-heir from the time right of action accrues

5 years from partition

To enforce warranty of solvency of debtor of the estate at the time partition is made

187 191

ESTOPPEL Concept of Estoppel Concept of Laches

5 years from delivery to the State 1 month

207 208 213 217 219 227

To report knowledge of violent death of decedent lest he be considered unworthy

Must signify acceptance/repudiation deemed accepted

otherwise,

Right to repurchase hereditary rights sold to a stranger by a co-heir

4 years form partition

Action for rescission of partition on account of lesion Bar Question (2004). In his lifetime, a Pakistani citizen, ADIL, married three times under Pakistani law. When he died an old widower, he left behind six children, two sisters, three homes, and an estate worth at least 30 million pesos in the Philippines. He was born in Lahore but last resided in Cebu City, where he had a mansion and where two of his youngest children now live and work. Two of his oldest children are farmers in Sulu, while the two middle-aged children are employees in Zamboanga City. Finding that the deceased left no will, the youngest son wanted to file intestate proceedings before the Regional Trial Court of Cebu City. The other siblings objected, arguing that it should be in Jolo before a Shari-a court since his lands are in Sulu. But Adil’s sisters in Pakistan want the proceedings held in Lahore before a Pakistani court. Which court has jurisdiction now and is the proper venue for the intestate proceedings? The law of which country shall govern succession to his estate?

Answer: In so far as the properties of the decedent located in the Philippines are concerned, they are governed by Philippine law (Article 18, Civil Code). Under Philippine law, the proper venue for the settlement of the estate is the domicile of the decedent at the time of his death. Since the decedent last resided in Cebu City, that is the proper venue for the intestate settlement of his estate. However, the successional rights to the estate of ADIL are governed by Pakistani law, his national law, under Article 16 of the Civil Code. Credits

UP WINLAW Panic Booklet 2006; UP Law Center Bar Q&A (1997-2006) Page 4 of 230

Page 229 of 230

Legacy/Devise to remove an encumbrance over a thing belonging to testator (Article 932 par2) Legacy/Devise of a thing pledged or mortgaged

L/D – L/D entitled to be reimbursed ii. If thing was acquired gratuitously by L/D – nothing is due iii. If thing was owned by testator at time will was made and L/D acquired the thing from him thereafter – law is silent *Balane – L/D deemed revoked *Tolentino – no intention to revoke (BUT if the testator has not alienated the thing directly to the L/D, but to a 3rd person and the former just acquired it from the latter, there is an intention to revoke) Valid, if the encumbrance can be removed for a consideration

The encumbrance must be removed by paying the debt unless the testator intended otherwise

(Article 934) 8. CONCEPT OF COLLATION: a) 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, but which the law considers as an advance from the inheritance. b) It is the act by virtue of which, the persons who concur in the inheritance bring back to the common hereditary mass the property which they have received from him, so that a division may be effected according to law and the will of the testator. 9. CONCEPT OF PARTITION: It is the separation, division and assignment of a thing held in common among those to whom it may belong the thing itself may be divided, or its value. 10. IMPORTANT PERIODS TO REMEMBER: 1 month or less before Testator, if publicly known to be insane, burden of making a will proof is on the one claiming validity of the will

20 years

EFFECT AND APPLICATION OF LAWS 1. When laws take effect: 15 days after completion of publication in OG or newspaper of general circulation. Exception: The law can provide its own date of effectivity, i.e., it can provide for a period less than or greater than 15 days after publication before the law takes effect. a) Publication is MANDATORY even if the law provides its own date of effectivity b) Internal regulations of admin agencies binding only the agency need not be published. 2. Ignorance of the law excuses no one from compliance therewith (Ignorantia juris neminem excusat) 3. Retroactivity a) General Rule: Rules are not retroactive, except when the law itself expressly provides the contrary b) Exception to the exception (i.e. retroactivity applies) i. Remedial statutes ii. Curative statutes iii. Laws interpreting other laws iv. Laws creating new rights v. Penal laws when favorable to the accused who is not a habitual delinquent 4. Acts violating mandatory or prohibitory laws are void Exception: When law itself provides their validity 5. Requisites for a Valid Waiver: a) person making the waiver must have the right he is waiving b) capacity to make the waiver c) clear and unequivocal manner d) waiver is not contrary to law, public order, public policy, morals or good customs and is not prejudicial to third person 6. Repeal of Laws (a) Express repeal (b) Implied repeal – incompatible provisions between the two laws Rule: Repeal of the repealing law revives the old law unless the contrary is expressly provided in the last law. 7. Stare Decisis: Courts must follow the rule established in earlier decisions of the Supreme Court.

Maximum period testator can prohibit alienation of dispositions Page 228 of 230

Page 5 of 230

8. Penal Laws: Those for public security & safety – obligatory upon all who live or sojourn in the Philippines. 9. Status Laws - Rules: a) Laws relating to family rights and duties or to the status, condition and legal capacity of persons are binding upon Filipino citizens even though living abroad.

b)

Conflicts Rules i.

ii.

iii.

Real property and personal property are governed by the laws of the country where they are situated (Lex situs) Order of succession, amount of successional rights, intrinsic validity of testamentary provisions are governed by the national law of the decedent Forms and solemnities of wills, contracts and other public instruments- lex loci celebrationis

Bar Question (1997). How would you compare the Civil Law system in its governance and trend with that of the Common Law system?

Answer: As regards “governance” – Governance in Civil Law is codal, statutory and written law. It is additionally derived from case law. Common law is basically derived from case law. As regards “trend” – Civil law is now tending to rely more and more on decisions of the courts explaining the laws. Common law is now codifying laws more and more. So they are now merging towards similar systems. Bar Question (1997). In 1977, Mario and Clara, both Filipino citizens, were married in the Philippines. Three years later, they went to the US and established their residence in San Francisco, California. In 1987, the couple applied for, and was granted, US citizenship. In 1989, Mario, claiming to have been abandoned by Clara, was able to secure a decree of divorce in Reno, Nevada, USA. In 1990, Mario returned to the Philippines and married Juana who well Mario’s past life. a. Is the marriage between Mario and Juana valid? b. Would the renvoi doctrine have any relevance to the case?

Answer: a. Yes. In relation to Art. 15 of the Civil Code, Conflict of Laws provides that the recognition of an absolute divorce granted in another state rests on the citizenship of the parties at the time the divorce was granted. (Paras, Phil. Conflict of Laws, p. 259). Applied in this case, the divorce decree issued to Clara and Mario will be recognized as valid here considering that at the time the foreign decree was granted, both Clara and Mario are citizens of the US, a country which grants/allows absolute divorce. Since the marriage between

6.

Individuals, associations, and corporations not permitted by law to inherit

Validity and Effect of Legacy/Devise General Rule: Conveys only interest or part Thing owned in part by owned by testator Exception: if testator otherwise provides – testator (Article 929) a. He may convey more than what he owns the state shld try to acquire the part or interest owned by other parties. If other parties are unwilling to alienate, the estate should give the legatee/devisee the monetary equivalent (analogy with Article 931) b. He may convey less than what he owns (Article 794) General Rule: Thing owned by another a. If testator ordered acquisition of the thing (Articles 930-931) - the order should be complied with. If the owner is unwilling to part with the thing, the legatee/devisee should be given the monetary equivalent b. If testator erroneously believed that the thing belonged to him - legacy/device is void Exception: if testator acquire the thing onerously or gratuitously after making of the disposition, disposition is validated c. If testator knew that the thing did not

belong to him but did not order its acquisition - code is silent but disposition should be considered valid - there is an implied order to acquire and doubts must be resolved in favor of intestacy

Thing already owned to the legatee/devisee

a.

(Articles 932-933)

If thing already belonged to legatee/devisee at time of execution of will – legacy/devise is void

b.

If thing was owned by another person at time of making the will and thereafter it is acquired by legatee/devisee –

1.

If testator erroneously believed that he owned the thing – legacy /devise is void

2.

If testator was not in error i.

Page 6 of 230

If thing was acquired onerously by

Page 227 of 230

Surviving spouse

¼

¼

½

TOTAL

½

½

1

p.

SIBLINGS, NEPHEWS AND NIECES ALONE

Intestate Heir Siblings, nephews, nieces TOTAL q.

SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL ½

TOTAL INTESTATE SHARE 1

½

½

1

SURVIVING SPOUSE, SIBLINGS, NEPHEWS AND NIECES

Intestate Heir Surviving spouse

SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL

TOTAL INTESTATE SHARE ½

½

½

½

1

Siblings, nephews, nieces TOTAL

½

5. DEFINITION OF ACCRETION 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 the one who renounces or cannot receive his share or who died before the testator is added or incorporated to that of his co-heirs, co-devisees, or co-legatees. 7. WHO ARE INCAPABLE OF SUCCEEDING: 1. Priest who heard the confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period 2. Relatives of such priest or minister of the gospel within the 4th degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong 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 4. Attesting witness to execution of will, their spouses, parents, children or any one claiming under such witness, spouse, parents or children 5. Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness Page 226 of 230

Mario and Clara has been validly terminated. Mario and Juana can freely marry each other. b. No. The renvoi doctrine is relevant in cases where one country applies the domiciliary theory and the other the nationality theory, and the issue involved is which of the laws of the two countries should apply to determine the order of succession, the amount of successional rights, or, the intrinsic validity of testamentary provisions. Such issue is not involved in this case. Bar Question (2002). Felipe is a Filipino citizen. When he went to Sydney for vacation, he met a former business associate, who proposed to him a transaction which took him to Moscow. Felipe brokered a contract between Sydney Coals Corp. (Coals), an Australian firm, and Moscow Energy Corp. (Energy), a Russian firm, for Coals to supply coal to Energy on a monthly basis for three years. Both these firms were not doing, and still do not do, business in the Philippines. Felipe shuttled between Sydney and Moscow to close the contract. He also executed in Sydney a commission contract with Coals and in Moscow with Energy, under which contracts he was guaranteed commissions by both firms based on percentage of deliveries for the three-year period, payable in Sydney and in Moscow, respectively, through deposits in accounts that he opened in the two cities. Bothe firms paid Felipe his commission for four months, after which they stopped paying him. Felipe learned from his contacts, who are residents of Sydney and Moscow, that the two firms talked to each other and decided to cut him off. He now files suit in Manila against both Coals and Energy for specific performance. A. Define or explain the principle of “lex loci contractus.”

Answer: Lex loci contractus may be understood in two senses, as follows: (1) It is the law of the place where contracts, wills, and other public instruments are executed and governs their “forms and solemnities,” pursuant to the first paragraph, Article 17 of the New Civil Code; or (2) It is the proper law of the contract; i.e., the system of law intended to govern the entire contract, including its essential requisites, indicating the law of the place with which the contract has its closest connection or where the main elements of the contract converge. As illustrated by Zamalea v. CA (228 SCRA 23 (1993), it is the law of the place where the airline ticket was issued, where the passengers are nationals and residents of, and where the defendant airline company maintained its office. B. Define or explain the rule of “forum non conveniens.”

Answer: Forum non conveniens means that a court has discretionary authority to decline jurisdiction over a cause of action when it is of the view that the action may be justly and effectively adjudicated elsewhere. Page 7 of 230

C. Should the Philippine court assume jurisdiction over the case? Explain. k.

Answer: No, the Philippine courts cannot acquire jurisdiction over the case of Felipe. Firstly, under the rule of forum non conveniens, the Philippine court is not a convenient forum as all the incidents of the case occurred outside the Philippines. Neither are both Coals and Energy doing business inside the Philippines. Secondly, the contracts were not perfected in the Philippines. Under the principle of lex loci contractus,the law of the place where the contract is made shall apply. Lastly, the Philippine court has no power to determine the facts surrounding the execution of said contract. And even if a proper decision could be reached, such would have no binding effect on Coals and Energy as the court was not able to acquire jurisdiction over the said corporations. (Manila Hotel Corp. v. NLRC, 343 SCRA 1, 13-14 (2000)) PERSONS AND FAMILY RELATIONS PERSONS 1. Kinds of Capacity a) Juridical capacity – fitness to be the subject of legal relations b) Capacity to act – power to do acts with legal effect 2. Restrictions on Capacity to act - do not exempt incapacitated persons from certain obligations, e.g. a) Minority b) Insanity or imbecility c) State of being deaf mute d) Prodigality e) Civil interdiction 3. Personality a) Natural persons- determined by birth, extinguished by death b) BUT conceived child shall be considered born for all purposes

favorable to it provided it be born later under the following conditions: i.

If it is alive at the time it is completely delivered from the mother’s womb

ii.

BUT if it had an inter-uterine life of at less than 7 months, if it lives for at least 24 hours after its

ILLEGITIMATE CHILDREN ALONE

Intestate Heir Illegitimate children alone TOTAL l.

SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL ½

TOTAL INTESTATE SHARE 1

½

½

1

ILLEGITIMATE CHILDREN AND SURVIVING SPOUSE SHARE AS LEGITIME 1/3

SHARE AS FREE DISPOSAL 1/6

TOTAL INTESTATE SHARE ½

Surviving spouse

1/3

1/6

½

TOTAL

2/3

1/3

1

Intestate Heir Illegitimate children

m. SURVIVING SPOUSE Intestate Heir Surviving spouse TOTAL n. Intestate Heir Illegitimate parents TOTAL o.

SHARE AS LEGITIME ½ or 1/3

SHARE AS FREE DISPOSAL ½ or 1/3

TOTAL INTESTATE SHARE 1

½ or 1/3

½ or 1/3

1

ILLEGITIMATE PARENTS ALONE SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL ½

TOTAL INTESTATE SHARE 1

½

½

1

ILLEGITIMATE PARENTS AND SURVIVING SPOUSE

complete delivery from the maternal womb Intestate Heir 4. Doubts as to Order of Death Rule applies only to issue of succession (for other issues apply the presumptions in the Rules of Court): As between 2 or more persons called to succeed each

Illegitimate parents

SHARE AS LEGITIME ¼

SHARE AS FREE DISPOSAL ¼

other, if there is doubt as to which of them died first, whoever alleges the death Page 8 of 230

Page 225 of 230

TOTAL INTESTATE SHARE ½

g. Intestate Heir Legitimate parents TOTAL h. Intestate Heir Legitimate parents Illegitimate children TOTAL i.

LEGITIMATE PARENTS ALONE SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL ½

TOTAL INTESTATE SHARE 1

½

½

1

LEGITIMATE PARENTS AND ILLEGITIMATE CHILDREN SHARE AS FREE DISPOSAL

TOTAL INTESTATE SHARE ½

¼

¼

½

Absence

¾

¼

1

Absence - special legal status of one who is not in his domicile, his whereabouts being unknown, and it is uncertain whether he is dead or alive

LEGITIMATE PARENTS AND SURVIVING SPOUSE SHARE AS FREE DISPOSAL

TOTAL INTESTATE SHARE ½

Surviving spouse

¼

¼

½

TOTAL

¾

Legitimate parents

j.

¼

SHARE AS FREE DISPOSAL

Surviving spouse

1/8

1/8

Illegitimate children

¼

TOTAL

7/8

Legitimate parents

1

LEGITIMATE PARENTS, SURVIVING SPOUSE AND ILLEGITIMATE CHILDREN SHARE AS LEGITIME ½

Intestate Heir

5. Juridical Persons - A juridical person is an organic unit resulting from a group of persons or mass or property to w/c the State grants or recognizes personality and capacity to hold patrimonial rights independent of those of component members. a) The state and its political subdivisions b) Other corporations, institutions and entities for public interest or purpose, created by law c) Corporations, partnerships and associations for private interest or purpose

SHARE AS LEGITIME ½

SHARE AS LEGITIME ½

Intestate Heir

of 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.

TOTAL INTESTATE SHARE ½

¼

1. Kinds of Absence a) Physical absence b) Legal absence c) Provisional Absence i. A person disappears from his domicile; ii. His whereabouts are unknown; and a. He did not leave any agent; or b. He left an agent but agent's power has expired 2. Stages of Absence: (1) Temporary or provisional absence w/c happens as soon as a person disappears from his domicile and his whereabouts are unknown, leaving no administrator of his prop. (Articles 381-383); (2) Normal or declared absence w/c is one juridically declared after 2 yrs. since the last news was heard from him, or 5 yrs if he left an administrator (Articles 384-389); (3) Definite or presumptive death w/c takes place when after the period provided by law, a person is presumed dead; the period varies according to circumstances. (Articles 390-396.) (a) ordinary presumptive death (b) qualified presumptive death

¼ 3. The Administration shall Cease in Any of the Following Cases a) when the absentee appears personally or by means of an agent; 1/8 Page 224 of 230

1 Page 9 of 230

b) c)

Stages of Absence Provisional absence

Declaration of Absence

when the death of the absentee is provided and his estate or intestate heirs appear; when a third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title When to file

Who may file

Remedy

No statutory period

spouse

receivership (Art 12, FC) judicial separation of property (Art 12, FC) authority to be sole administrator of the conjugal partnership (Art 12, FC) Declaration of Absence and Appointment of Administrator (Spouse shall be preferred) but only under the following cases: when the absentee has properties which have to be taken cared of or administered by a representative appointed by the Court (Art 384, NCC) when the spouse of the absentee is asking for separation of property (Art 135, FC) when the spouse of the absentee is asking the Court that the administration of all classes in the marriage be transferred to her (Art 142, FC) Action to declare a person presumptively dead is proper only when the spouse of the absentee wants to remarry

without administrator - 2 years from time of disappearance with administrator - 5 years from time of disappearance

Presumption of death

Ordinary absence: - 7 years - 4 years for purposes of remarriage

the spouse voluntary heirs intestate heirs those who may have over the property of the absentee some right subordinated to the condition of the absentee's death

spouse

Exception: Page 10 of 230

Intestate Heir Legitimate child

SHARE AS LEGITIME ½

Illegitimate child

½ share of @ legitimate child

1 for @ illegitimate child (see above)

1 for @ illegitimate child

Surviving spouse

¼

Same share as a legitimate child

TOTAL

Varies depending on no. of illegitimate children

Varies depending on no. of illegitimate children

Legitimes wouldn’t be impaired 1

f.

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

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

LEGITIMATE CHILDREN, ILLEGITIMATE CHILDREN AND SURVIVING SPOUSE

Intestate Heir Legitimate children

SHARE AS LEGITIME ½

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

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

Illegitimate children

½ share of @ legit child

1 for @ illegitimate child (see above)

1 for @ illegitimate child (see above)

Surviving spouse

¼

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

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

TOTAL

Varies depending on no. of illegitimate children

Varies depending on no. of illegitimate children

1

Page 223 of 230

TOTAL

¾ c.

Intestate Heir Legitimate children

¼

1

succession – 10 years 75 years of age – 5 years

LEGITIMATE CHILDREN AND SURVIVING SPOUSE SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL Remaining portion of estate after paying legitimes

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

Surviving spouse

Same as share of @ legitimate child

Legitimes to be divided equally between total no. of children plus the surviving spouse

No. of children plus the surviving spouse (see above)

TOTAL

Varies on no. of children

Varies on no. of children

1

Extraordinary Absence: 4 years (2 years for purposes of remarriage) 4. Period of Absence under Extraordinary Circumstances: 2 years (for purposes of remarriage) or 4 years a) if a person rode an airplane or sea vessel lost in the course of voyage, from the time of loss of the airplane or sea vessel b) if a person joined the armed forces who has taken part in war, from the time he is considered missing in action c) danger of death under other circumstances, from time of disappearance Civil Register

d. LEGITIMATE CHILDREN AND ILLEGITIMATE CHILDREN SHARE AS LEGITIME

SHARE AS FREE DISPOSAL

TOTAL INTESTATE SHARE

Legitimate children

½

Remaining portion of estate after paying legitimes

Whole estate divided by the ratio of 2:1 for each legitimate child as compared to the illegitimate child

Illegitimate children

½ share of @ legitimate child

Legitimes to be divided by the ratio of 2 for @ legitimate child, 1 for @ illegitimate child

1 for @ illegitimate child provided that legitimes wouldn’t be impaired

TOTAL

Varies on no. of children

Varies on no. of children

Intestate Heir

e. ONE LEGITIMATE CHILD, ILLEGITIMATE CHILD, AND SURVIVING SPOUSE Page 222 of 230

1. Matters Recorded in the Civil Register a) birth b) marriage c) death d) legal separation e) annulment of marriage f) judgments declaring marriage void from the beginning; g) legitimation h) adoption i) acknowledgement of natural children j) naturalization k) loss of citizenship l) recovery of citizenship m) civil interdiction n) judicial determination o) voluntary emancipation of a minor; AND p) change of time 2. Requirements of an Adversarial Proceeding i. Presence of opposing parties ii. Notice to indispensable parties iii. Relevant facts have been fully and properly developed iv. Opposing counsel was given an opportunity to demolish the opposite party's case (not ex parte) Page 11 of 230

v. Evidence has been thoroughly weighed and considered vi. Compliance with the publication requirement

Siblings, nephews nieces

All other collaterals and state

Legitimate children, illegitimate children, Legitimate parents and illegitimate parents

Surviving spouse

Other collaterals within 5th degree

Collateral remoter in degree and state

Legitimate children Illegitimate children Legitimate parents Illegitimate parents and Surviving spouse

Collaterals in the same degree

State

No one

Everyone

No one

Use of Surnames

1 2 3 4 5 6

1

2

Child Concerned Legitimate child Legitimated child Adopted child Illegitimate child Conceived prior to the annulment of the marriage Conceived after the annulment of the marriage Wife Valid marriage (before the husband dies)

Mother’s surname

Surname to be Used maiden’s first name and surname + her husband’s surname maiden’s first surname + her husband’s surname e.g. Marife Tan her husband’s full name, but prefixing a word indicating that she is his wife e.g. Mrs. Happy Tan retain the use of her maiden name and surname (use of husband’s surname is not a duty but merely an option of the wife)

Marriage is annulled - wife is the guilty party - wife is the innocent party

3

Surname to be Used Father’s surname Father’s surname Adopter’s surname Mother’s surname, father’s surname if acknowledged Father’s surname

Legally separated

she shall resume her maiden name and surname choices: resume using her maiden name and surname continue employing her husband’s surname, unless: the court decrees otherwise, or the wife of the former husband is married again to another person she shall continue using the name and surname she was employing prior to the legal separation (Tolentino v CA) Page 12 of 230

A MORE DETAILED SUMMARY OF INTESTATE SHARES: a. LEGITIMATE CHILDREN AND LEGITIMATE DESCENDANTS ALONE Intestate Heir Legitimate children TOTAL

b. Intestate Heir Legitimate child Surviving spouse

SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL ½

TOTAL INTESTATE SHARE 1

½

½

1

ONE LEGITIMATE CHILD AND SURVIVING SPOUSE SHARE AS LEGITIME ½

SHARE AS FREE DISPOSAL

TOTAL INTESTATE SHARE ½

¼

¼

½

Page 221 of 230

and legitimate ascendants

and legitimate or illegitimate descendants

legitimate or illegitimate descendants

Illegitimate children and legitimate or illegitimate descendants Surviving spouse

illegitimate parents

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

5

Legitimate siblings, nephews, nieces

illegitimate siblings, nephews, nieces

siblings, nephews, nieces

6

Legitimate collateral relatives

State

State

7

State

3

4

surviving spouse

1. Procedural Requirements for a Petition for Change of Name a) 3 years residency in the province where change is sought prior to the filing; b) must not be filed within 30d prior to an election; c) the petition must be verified

5. CONCURRENCE IN LEGAL OR INTESTATE SUCCESSION Intestate Heir Legitimate children and Legitimate descendants

EXCLUDES Ascendants, collaterals and state

EXCLUDED BY No one

CONCURS WITH Surviving spouse Illegitimate children

Illegitimate children and Descendants

Illegitimate parents, collaterals and state

No one

Legitimate parents and legitimate ascendants

Collaterals and state

Legitimate children

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

Illegitimate parents

Collaterals and state

Surviving spouse

Collaterals other than siblings, nephews and nieces

Legitimate children and illegitimate children No one

Page 220 of 230

Divorce (at least if they allow it later choices: same as widowed spouse or for those who got divorced during the Japanese occupation Between Persons Younger person is obliged to use such additional name of surname as will avoid confusion Between Son may use the word “Junior” e.g. Marife Lomibao-Tan, Jr. Ascendants and Descendants Grandsons and other male descendants, shall either : add a middle name e.g. Happy Chris Tan add the mother’s surname e.g. Happy Lomibao Tan add the Roman numerals II, III and so on 4

Surviving spouse

Legitimate children Illegitimate children Legitimate parents and Illegitimate parents

2. Proper and Reasonable Causes that may Warrant the Grant of a Petition for Change of Name: a) the petitioner’s true and official name is ridiculous; b) the petitioner’s true and official name is tainted with dishonor c) the petitioner’s true and official name is extremely difficult to write or pronounce; d) when the request for change is a consequence of a change of status, such as when a natural child is acknowledged or legitimated; e) when the change is necessary to avoid confusion 3. Elements a) b) c)

of Usurpation of Name there is an actual use of another's name by the defendant the use is unauthorized the use of another's name is to designate personality or to identify a person

4. Remedies available against the usurper to the person whose name has been usurped a) Civil (insofar as private persons are concerned) i. injunction ii. damages (actual and moral) b) Criminal (when public affairs are prejudiced) 5. When Use of Another's Name is Not Actionable Page 13 of 230

a) b) c) d)

when the name is used as stage, screen, or pen name, provided: use of name is in good faith; and by using the name of another, no injury is caused to that person's right when use is motivated by modesty, a desire to avoid unnecessary trouble, or other reason not prohibited by law or morals

the free portion, shall be respected. In sum, the estate of Lamberto will be distributed as follows: Baldo------------------ 450,000 Vilma------------------ 250,000 Elvira------------------ 250,000 Ernie------------------- 50,000 --------------1,000,000

FAMILY RELATIONS Legal Succession

Marriage 1. Definition a) b) c) d) e)

of Marriage 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

2. Essential Requisites of Marriage a) Legal capacity of contracting parties b) Consent freely given in the presence of the solemnizing officer 3. Formal Requisites of Marriage a) Authority of solemnizing officer b) Valid marriage license (except in cases where a marriage license is not required) c) Marriage ceremony d) Authorized Solemnizing Officers i. Incumbent member of the judiciary within the court’s jurisdiction ii. Duly authorized priest, rabbi, imam or the minister of any church or religious sect iii. Ship captain or airplane chief - only in articulo mortis between passenger or crew members while the ship is at sea or the plane is in flight and also during stopover at ports of call iv. Military commander of a unit to which a captain is assigned- only in articulo mortis , between persons within the zone of military operations whether members of the armed forces or civilians and only in the absence of the chaplain v. Consul-general, consul or vice-consul – can solemnize marriage between Filipinos abroad vi. Mayor (Local Government Code of 1991) 4. Marriage Exempt from License Requirements Page 14 of 230

1. CAUSES FOR LEGAL OR INTESTATE SUCCESSION: 1. If a person dies without a will 2. If a person dies with a void will 3. If a person dies with a will which has subsequently lost its validity 4. When the will does not institute an heir to, or dispose of all the property belonging to the testator (legal succession shall take place only with respect to the property of which the testator has not disposed) 5. If the suspensive condition attached to the institution of the heir does not happen or is not fulfilled 6. If the heir dies before the testator, 7. If the heir repudiates the inheritance, there being no substitution, and no right of accretion takes place 8. When the heir instituted is incapable of succeeding, except in cases provided in the Code 2. FUNDAMENTAL UNDERLYING PRINCIPLES IN LEGAL OR INTESTATE SUCCESSION: 1. Rule of Proximity – the relative nearest in degree excludes the farther one 2. Rule of Equal Division – the relatives who are in the same degree shall inherit in equal shares 3. DEFINITION OF RIGHT OF REPRESENTATION It is a right created by fiction of law by virtue of which the representative is raised to the place and degree of the person represented and acquires the rights which the latter would have of he were living or if he would have inherited. 4. ORDER OF LEGAL OR INTESTATE SUCCESSION:

1

2

Legitimate Child Legitimate child and legitimate descendants

ILLEGITIMATE CHILD legitimate child and legitimate descendants

ADOPTED CHILD legitimate child and legitimate descendants

Legitimate parents

illegitimate children

illegitimate children and

Page 219 of 230

5. 6. 7.

The cause must be certain and true, and must be proved by the interested heir if the person disinherited should deny it It must unconditional It must be total

a) b)

c) 4. VACANCY IN SUCCESSION A) CAUSES OF VACANCY IN SUCCESSION: 1. Disinheritance - The testator creates it himself 2. Repudiation - The heir does something 3. Incapacity/Predecease - Something happens to the heir B) HOW 1. 2. 3.

VACANCIES ARE FILLED: Substitution Representation Accretion

5. ORDER OF PAYMENT IN CASE ESTATE IS INSUFFICIENT TO COVER ALL LEGACIES AND DEVICES: 1. Remuneratory legacies or devises 2. Legacies or devises declared by the testator to be preferential 3. Legacies for Support 4. Legacies for Education 5. Legacies or devises of a specific, determinate thing which forms a part of the estate 6. All others pro-rata Bar Question (2000). In his last will and testament, Lamberto 1) disinherits his daughter Wilma because “she is disrespectful towards me and raises her voice talking to me”, 2) omits entirely his spouse Elvira, 3) leaves a legacy of P100,000.00 to his mistress Rosa and P50,000.00 to his driver Ernie and 4) institutes his son Baldo as his sole heir. How will you distribute his estate of P1,000,000.00?

Answer: The disinheritance of Wilma was ineffective because the ground relied upon by the testator does not constitute maltreatment under Article 919(6) of the New Civil Code. Hence, the testamentary provisions in the will shall be annulled but only to the extent that her legitime was impaired. The total omission of Elvira does not constitute preterition because she is not a compulsory heir in the direct line. Only compulsory heirs in the direct line may be the subject of preterition. Not having been preterited, she will be entitled only to her legitime. The legacy in favor of Rosa is void under Article 1028 for being in consideration of her adulterous relation with the testator. She is, therefore, disqualified to receive the legacy of 100,000 pesos. The legacy of 50,000 pesos in favor of Ernie is not inofficious not having exceeded the free portion. Hence, he shall be entitled to receive it. The institution of Baldo, which applies only to Page 218 of 230

d) e)

Marriage in articulo mortis If the residence of either party is so located that there is no means of transportation to enable such party to appear personally before the civil registrar Marriage in articulo mortis in military zones and on planes and ships Marriage among Muslims or among members of ethnic cultural communities in accordance with their customs Marriage between persons who have lived together as husband and wife for at least five years and without any legal impediment to marry each other

5. Flaws in the Marriage Requisites and Effects a) ABSENCE of ANY essential or formal requisites- marriage void ab initio Except: If the marriage is solemnized by unauthorized person, the marriage will still be valid if either or both contracting parties believed in good faith that the solemnizing officer had legal authority [Article 35 (2)] b) Defect in ESSENTIAL Requisites- Voidable c) Irregularity in formal requisite- Valid but party responsible for such irregularity shall be civilly, criminally and administratively liable 6. Other requirements: if either or both parties are: a) 18 years old and above but below 21- needs parental consent, or else marriage voidable b) 21 years old and above but below 25- needs parental advice, even if lacking marriage is still valid. However, suspend the issuance of the marriage license for a period of 3 months from the completion of publication of the application for marriage license. If the parties get married during the 3-month period without a license, the marriage shall be VOID. On the other hand, if they are able to obtain a license during the 3-month period, the marriage will still be valid but may be held civilly and criminally liable. c) 18 years old and above but below 25- marriage counseling, if lacking same effect as above 7. Rule on Marriages Solemnized Abroad a) General Rule: Marriages solemnized outside the RP in accordance with the law of the foreign country shall be valid in the Philippines (lex loci celebrationis) b) Exceptions: i. Marriage between persons below 18 years old ii. Bigamous or polygamous marriage iii. Mistake in identity iv. Marriages void under Article 53 Page 15 of 230

v. Psychological incapacity vi. Incestuous marriages vii. Marriage void for reasons of public policy d)

Qualified divorce law: If a Filipino is married to a foreigner and the latter subsequently obtains a valid divorce abroad capacitating him/her to remarry, the Filipino spouse shall likewise have the capacity to remarry under the Philippine law. Requisites of Art. 26 par. 2: 1) one of the spouses is a foreigner 2) a divorce decree is obtained 3) the divorce decree is obtained at the instance of the foreign spouse 4)

under the divorce decree, the foreigner-spouse acquires the capacity to remarry.

Bar Question (2004). BONI and ANNE met while working overseas. They became sweethearts and got engaged to be married on New Year’s Eve aboard a cruise ship in the Carribbean. They took the proper license to marry in New York City, where there is a Filipino consulate. But as planned the wedding ceremony was officiated by the captain of the Norwegian-registered vessel in a private suite among selected friends. Back in Manila, Anne discovered that Boni had been married in Bacolod City 5 years earlier but divorced in Oslo only last year. His first wife was also a Filipina but now based in Sweden. Boni himself is a resident of Norway where he and Anne plan to live permanently. Anne retains your services to advise her on whether her marriage to Boni is valid under Philippine law? Is there anything else she should do under the circumstances?

Answer: If Boni is still a Filipino citizen, his legal capacity is governed by Philippine Law (Art15 Civil Code). Under Philippine Law, his marriage to Anne is void because of a prior existing marriage which was not dissolved by the divorce decreed in Oslo. Divorce obtained abroad by a Filipino is not recognized. If Boni was no longer a Filipino citizen, the divorce is valid. Hence, his marriage to Anne is valid if celebrated in accordance with the law of the place where it was celebrated. Since the marriage was celebrated aboard a vessel of Norwegian registry, Norwegian law applies. If the Ship Captain has authority to solemnize the marriage aboard his ship, the marriage is valid and shall be recognized in the Philippines. As to the second question, if Boni is still a Filipino, Anne can file an action for declaration of nullity of her marriage to him. 8. Obligations of Husband and Wife a) Live together b) Observe mutual love, respect and fidelity Page 16 of 230

of Mr. Luna as the resevatarios of the reserved property inherited by Mrs. Luna from her child. When Mr. Luna died, his heirs were his wife and the unborn child. The unborn child inherited because the inheritance was favorable to it and it was born alive later though it lived only for five hours. Mrs. Luna inherited half of the 10 Million estate while the unborn child inherited the other half. When the child died, it was survived by its mother, Mrs. Luna. As the only heir, Mrs. Luna inherited, by operation of law, the estate of the child consisting of its 5 Million inheritance from Mr. Luna. In the hands of Mrs. Luna, what she inherited from her child was subject to the reserva troncal for the benefit of the relatives of the child within the third degree of consanguinity and who belong to the family of Mr. Luna, the line where the property came from. When Mrs. Luna died, she was survived by her parents as her only heirs. He parents will inherit her estate consisting of the 5 Million she inherited from Mr. Luna. The other 5 Million she inherited from her child will be delivered to the parents of Mr. Luna as beneficiaries of the reserved property. In sum, 5 Million Pesos of Mr. Luna’s estate will go to the parents of Mrs. Luna, while the other 5 Million Pesos will go to the parents of Mr. Luna as reservatarios. Disinheritance 1. DEFINITION OF DISINHERITANCE - It is the act by which the testator, for just cause, deprives a compulsory heir of his right to the legitime. 2. DIFFERENCES BETWEEN PRETERITION AND DISINHERITANCE: Disinheritance Express deprivation of legitime Always voluntary

PRETERITION Tacit deprivation of legitime

Legal cause is present

Presumed by law to be a mere oversight

Even a compulsory heir may be totally excluded

Compulsory heir is merely restored to his legitime

May also be voluntary but is presumed to be involuntary (as it is an omission to mention an heir or though mentioned, is not instituted as an heir)

3. REQUISITES FOR A VALID DISINHERITANCE: 1. Heir disinherited must be designated by name or in such a manner as to leave no room for doubt as to who is intended 2. It must be for a cause designated by law 3. It must be made in valid will 4. It must be made expressly, stating the cause in the will itself Page 217 of 230

b) c)

If the impairment is partial, then the compulsory heir is entitled to completion of legitime under Article 906 If the impairment is thru donation, then remedy is collation.

5. CONCEPT OF RESERVA TRONCAL The ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another descendant, or a brother or sister, is obliged to reserve such property as he may have acquired by operation of law for the benefit of relatives who are within the third degree and who belong to the line from which said property came

c) d)

Render mutual help and support Either spouse may exercise any legitimate profession or business without the consent of the other. The other spouse may object on valid, serious and moral grounds.

In case of disagreement, the court shall decide whether i. ii.

The objection is proper AND Benefit has accrued to the family before and after the objection. If benefit accrued to the family before the objection, the resulting obligation shall be enforced against the ACP.

If benefit accrued to the family after the objection has been made, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent.

REQUISITES (as provided in Chua v. CFI [1977] & reiterated in Gonzales v. CFI [1981]) 1) that the property was acquired by a descendant from an ascendant or from a brother or sister by gratuitous title 2) that said descendant died without an issue 3) that the property is inherited by another ascendant by operation of law 4) that there are relatives within the 3rd degree belonging to the line from which said property came Bar Question (1999). a) Mr. Palma, a widower, has three daughters D, D-1 and D-2. He executed a Will disinheriting D because she married a man he did not like, and instituting daughters D-1 and D-2 as his heirs to his entire estate of P1,000,000.00. Upon Mr. Palma’s death, how should his estate be divided? Explain. b) Mr. Luna died, leaving an estate of Ten Million (P10,000,000.00) Pesos. His widow gave birth to a child four months after Mr. Luna’s death, but the child died five hours after birth. Two days after the child’s death, the widow of Mr. Luna also died because she suffered from the difficult childbirth. The estate of Mr. Luna is now being claimed by his parents, and the parents of his widow. Who is entitled to Mr. Luna’s estate and why?

Answer: a) This is a case of ineffective disinheritance because marrying a man that the father did not approve of is not a ground for disinheriting D. Therefore, the institution of D-1 and d-2 shall be annulled insofar as it prejudices the legitime of D, and the institution of D-1 and D-2 shall only apply on the free portion in the amount of P500,000.00. Therefore, D, D-1 and D-2 will get their legitimes of P500,000.00 divided into three equal parts and D-1 and D-2 will get a reduced testamentary disposition of P250,000.00 each. Hence, the shares will be: D P166,666.66 D-1 P166,666.66 + P250,000.00 D-2 P166,666.66 + P250,000.00 b) Half of the estate of Mr. Luna will go to the parents of Mrs. Luna as their inheritance from Mrs. Luna, while the other half will be inherited by the parents Page 216 of 230

9. VOID MARRIAGES (imprescriptible) a) Void Ab Initio under Article 35 ii. Contracted by any party below 18 years old iii. Solemnized by unauthorized solemnizing officer (Except if either or both parties believed in good faith that the officer had authority) iv. Solemnized without license (Except when license not required) v. Bigamous or polygamous marriages (Except Article 41 – marriage contracted by a person whose spouse has been absent for 4 years (ordinary absence) or 2 years (extraordinary absence) where such person has a well founded belief that his/her absent spouse was already dead and after the absent spouse is judicially is declared presumptively dead) vi. Mistake in identity b) Subsequent marriage void under Article 53 Rule: A person whose marriage has been annulled may remarry as long as he complies with Art. 52 which requires the ff. after the annulment of the marriage: i. partition and distribution of the spouses’ properties ii. delivery of the presumptive legitime of the children iii. recording in the civil registry and registries of property of the judgment of annulment or absolute nullity, the partition and distribution of the spouses’ properties and the delivery of the children’s presumptive legitime must be recorded in the appropriate civil registry and registries of property

Failure to comply with these requisites will make the subsequent marriage void ab initio. Page 17 of 230

c) Psychological Incapacity - Void under Article 36: Where one party, at the time of the celebration of the marriage, was psychologically incapacitated to comply with the essential marital obligations. i. incapacity exists at the time of the celebration of the marriage ii. incapacity must be permanent (it continues to the time when the case for annulment is being tried) and incurable iii. incapacity must be unknown to the other contracting party iv. the other spouse must not himself/herself be incapacitated

Legitimate parents alone Legitimate parents Illegitimate children Legitimate parents and Surviving spouse

Bar Question (2006). Gemma filed a petition for the declaration of nullity of her marriage with Arnell on the ground of psychological incapacity. She alleged that after 2 months of their marriage, Arnell showed signs of disinterest in her, neglected her and went abroad. He returned to the Philippines after 3 years but did not even get in touch with her. Worse, they met several times in social functions but he snubbed her. When she got sick, he did not visit her even if he knew of her confinement in the hospital. Meanwhile, Arnell met an accident which disabled him from reporting for work and earning a living to support himself. Will Gemma’s suit prosper? Explain.

Legitimate parents Surviving spouse Illegitimate children Illegitimate children alone

1/8

Illegitimate children Surviving spouse

1/3

½

¼

¼

Answer: Gemma’s suit will not prosper. The acts of Arnell complained about do not by themselves constitute psychological incapacity. It is not enough to prove the commission of those acts or the existence of his abnormal behavior. It must be shown that those acts or that behavior was manifestation of a serious mental disorder and that it is the root cause why he is not able to perform the essential duties of married life. It must also be shown that such psychological incapacity, as manifested in those acts or that behavior was existing at the time of the celebration of the marriage. In this case, there was no showing that Arnell was suffering from a serious mental disorder,that his behavior was a manifestation of that disorder, and that such disorder prevented him from complying with his duties as a married person. d) Incestuous Marriage i. Between ascendants and descendants of any degree ii. Between brothers and sisters, whether full or half blood e) Void for Reason of Public Policy i. Between collateral blood relatives up to the 4th civil degree ii. Between step-parents and step-children Page 18 of 230

Surviving spouse alone

½

½

¼

½

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

½ or 1/3 if marriage in articulo

mortis Illegitimate parents alone Illegitimate parents Surviving spouse

½

¼

¼

4. REMEDY OF COMPULSORY HEIR IN CASE OF IMPAIRMENT OF LEGITIME: a) If the impairment is total, then there may be preterition if the compulsory heir preterited is either an ascendant or descendant. Article 854 would come into play (annulment of institution of heir and reduction of devises and legacies) Page 215 of 230

3.

Concurring – those who succeed together with the primary or the secondary compulsory heirs a. Widow or widower (legitimate) b. Illegitimate children and descendants (legitimate or illegitimate)

iii. iv. v. vi.

3. SUMMARY OF LEGITIMES OF COMPULSORY HEIRS: SURVIVING

LEGITIMATE

RELATIVES

CHILDREN &

SURVIVING ILLEGITIMATE LEGITIMATE ILLEGITIMATE CHILDREN PARENTS SPOUSE PARENTS & ASCENDANTS

DESCENDANTS

Legitimate children alone 1 legitimate child surviving spouse

½ (divided by the # of children) ½

Legitimate children Surviving spouse

½ (divided by no. of children)

vii. viii. ix.

Rule on Bigamous Marriage (Article 41) General Rule: Marriage contracted by any person during the subsistence of a previous marriage is VOID. Exception: If before the celebration of the subsequent marriage, the prior spouse had been absent for 4 consecutive years (ordinary absence) or 2 years (extraordinary absence) and the spouse has a well-founded belief that the absent spouse was already dead. In this case, the subsequent marriage is valid but it shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse. Exception to Exception: If both spouses of the subsequent marriage acted in bad faith, such marriage is void ab initio.

¼

Same as the share @ legit child

Legitimate children Illegitimate children

½

1 legitimate child surviving spouse illegitimate children

½

¼ (preferred)

2 or more legitimate children surviving spouse Illegitimate children

½ (divided by no. of children)

Same as the share of @ legit child

Between parents-in law and children-in law Between adopting parent and adoptive child Between surviving spouse of the adopter and the adopted Between surviving spouse of the adopted and the adopter Between adopted and legitimate child of adopter Between adopted children of same adopter Between parties where one with the intention to marry the other, killed that the other person’s spouse or his/her own spouse

½ of the share of @ legit child ½ of the share of @ legit child

½ of the share of @ legit child

Page 214 of 230

10. VOIDABLE MARRIAGES (annullable) a) Grounds for Annulment of Marriage i. Lack of parental consent ii. Insanity of one of the parties iii. Fraud 1) Non-disclosure of conviction by final judgment of crime involving moral turpitude 2) Concealment of pregnancy by another man 3) Concealment of sexually transmissible disease, regardless of nature, existing at the time of marriage 4) Concealment of drug addiction, habitual alcoholism, homosexuality and lesbianism iv. Force, intimidation or undue influence v. Impotency vi. Affliction of sexually transmissible disease found to be serious and which appears incurable b)

Rules on filing the action of annulment

Page 19 of 230

Grounds for annulment

Lack of parental consent

Insanity of one party

Who can file Party under age Parent or guardian Sane spouse

Prescriptive period

Ratification

i.

Brief or Compendious – two or more persons may be

Within 5 years after attaining 21 Before child reaches 21

Free cohabitation after reaching 21

ii.

Reciprocal – if heirs instituted in unequal shares should be

Before death of other party

Free cohabitation after insane regains sanity

Guardian of insane spouse Insane spouse

Anytime before the death of either party

substituted for one; and one person for two or more heirs

Fraud

Injured party

During the lucid interval or after regaining sanity also before death of other party Within 5 years from discovery of fraud

Force, intimidation or undue influence Impotence of one party

Injured party

Within 5 years from the cessation of cause

Potent party

Within 5 years after marriage

Serious STD

Healthy party

Within 5 years after marriage

Free cohabitation after knowledge of fraud Free cohabitation after cause has disappeared Cannot be ratified but action prescribes Cannot be ratified but action prescribes

Effects of Termination of Marriage

Status of children

Voidable bigamous marriage (Art 41) Children of subsequent marriage conceived before its termination – legitimate

Declaration of nullity Illegitimate except Art 36 and Art 53

ACP/CPG shall be liquidated.

Same

Annulment Children conceived or born before annulment decree –

reciprocally substituted, the substitute shall acquire the share of the heir who dies, renounces, or incapacitated, unless it clearly appears that the intention of the testator was otherwise. If there are more than one substitute, they shall have the same share in the substitution as in the institution 2. Fideicommissary Substitution - if the testator institutes an heir with an obligation to deliver to another the property so inherited. The heir instituted to such condition is called the first heir or fiduciary heir, the one to receive the property is the fideicommissary or second heir REQUISITES FOR A FIDEICOMMISSARY SUBSTITUTION: i. A fiduciary or first heir instituted entrusted with the obligation to preserve and to transmit to a fideicommissary substitute or second heir the whole or part of the inheritance ii. Such substitution must not go beyond one degree from the heir originally instituted iii. The fiduciary or first heir and the second heir are living at the time of the death of the testator iv. The fideicommissary substitution must be expressly made v. The fideicommissary substitution is imposed on the free portion of the estate and never on the legitime Legitimes 1. DEFINITION OF LEGITIME It is that part of the testator’s property which he cannot dispose of because the law has reserved it for certain heirs called compulsory heirs 2. CLASSES OF COMPULSORY HEIRS: 1.

Primary – those who have precedence over and exclude other compulsory heirs a. Legitimate children and descendants (legitimate), with respect to their legitimate parents and ascendants

2.

Secondary – those who succeed only in the absence of the primary heirs a. Legitimate parents and ascendants (legitimate), with respect to their legitimate children and descendants

legitimate Property Relations

Spouse who contracted the marriage in bad faith, his/her share in the net profits of community property shall be forfeited in favor of common Page 20 of 230

Same

Page 213 of 230

3. 4.

Compulsory heir omitted must be of the DIRECT LINE The omitted compulsory heir must be LIVING at the time of testator’s death or must at least have been CONCEIVED before the testator’s death Donations

B) EFFECTS OF PRETERITION: 1. The institution of 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 effectual, without prejudice to the right of representation Bar Question (2001). Because her eldest son Juan had been pestering her for capital to start a business, Josefa gave him P100,000. Five years later, Josefa died, leaving a last will and testament in which she instituted only her four young children as her sole heirs. At the time of her death, her only property left was P900,000 in a bank. Juan opposed the will on the ground of preterition. How should Josefa’s estate be divided among her heirs? State briefly the reason(s) for your answer.

Answer: There was no preterition of the oldest son because the testatrix donated P100,000 to him. This donation is considered an advance on the sonis inheritance. There being no preterition, the institutions in the will shall be respected but the legitime of the oldest son has to be completed if he received less. After collating the donation of P100,000 to the remaining property of P900,000, the estate of the testatrix is P1,000,000. Of this amount, one-half or P500,000 is the legitime of the legitimate children and it follows that the legitime of one legitimate child is P100,000. The legitime therefore of the oldest son is P100,000. However, since the donation given him was P100,000, he has already received in full his legitime and will not receive anything more from the decedent. The remaining P900,000, therefore, shall go to the four younger children by institution in the will, to be divided equally among them. Each will receive P225,000. 15. DEFINITION OF SUBSTITUTION: It is the appointment of another heir so that he may enter into the inheritance in default of the heir originally instituted CLASSES OF SUBSTITUTION: 1. Vulgar or Simple – the testator may designate one or more persons to substitute the heir or heirs instituted in case such heir or heirs should: a. die before him (PREDECEASE) b. should not wish, (RENOUNCE) or c. should be incapacitated to accept the inheritance (INCAPACITATED) Page 212 of 230

Propter Nuptias

children or if there are none, children of the guilty spouse by previous marriage or in default, the innocent spouse Shall remain VALID except

Same

Same

Same

Same

Same

Same

If donee contracted the marriage in bad faith, donations propter nuptias made to the donee are revoked by operation of law.

If both spouses acted in bad faith, donations propter nuptias made by one in favor of the other are revoked by operation of law.

Insurance

If one spouse acted in bad faith, innocent spouse may revoke his designation as beneficiary in the insurance policy even if such designation be stipulated irrevocable

Succession

If one spouse contracted the marriage in bad faith, he shall be disqualified to inherit from the innocent spouse both testate and intestate

Distinction between Void and Voidable Marriages

As to nature As to susceptibility to ratification As to effect on property As to effect on children

Void Inexistent from the time of performance Cannot be ratified

No community property, only co-ownership (Art 147)

Children are illegitimate

Exceptions: In case of psycho incapacity (Art 36) Page 21 of 230

Voidable Valid until annulled Can be ratified either by free cohabitation or prescription Absolute community exists unless another system is agreed upon in marriage settlement Children are legitimate if conceived before decree of annulment

As to how marriage may be impugned

Children born of subsequent marriage (Art 53) May be attacked directly or collaterally but for purpose of remarriage, there must be judicial declaration of nullity. Can still be impugned even after death of parties

1. 2. Cannot be attacked collaterally, only directly, i.e. there must be a decree of annulment Can no longer be impugned after death of one of the parties

11. LEGAL SEPARATION a) Grounds for Legal Separation i. Repeated physical violence or grossly abusive conduct directed against petitioner, a common child or a child of the petitioner ii. Physical violence or moral pressure to compel change in religious or political affiliation iii. Attempt to corrupt or induce petitioner to engage in prostitution or connivance in such corruption or inducement iv. Final judgment sentencing respondent to imprisonment of more than 6 years v. Drug addiction or habitual alcoholism vi. Lesbianism or homosexuality vii. Subsequent bigamous marriage viii. Sexual infidelity or perversion ix. Attempt by despondent against the life of the petitioner x. Abandonment for more than one year without justifiable cause b)

c)

Grounds i. ii. iii. iv. v. vi.

to Deny Legal Separation Condonation Consent Connivance Mutual fault Collusion Prescription – action for legal separation must be filed within five years from the time of the occurrence of the cause of action

Effects of Separation i. Spouses are entitled to live separately ii. Marriage bond is not severed iii. Dissolution of property regime Page 22 of 230

3. 4. 5. 6.

If the formalities required by law have not been complied with If the testator was insane, or otherwise mentally incapable of making a will, at the time of its execution If it was executed through force or under duress, or the influence of fear, or threats If it was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person If the signature of the testator was procured by fraud If the testator acted by mistake or did not intend that the instrument should be his will at the time of affixing his signature thereto

12. INSTITUTION OF HEIRS A) DEFINITION OF INSTITUTION OF HEIR: – It is an act by virtue of which a testator designates in his will – the person or persons who are to succeed him in his property and transmissible rights and obligations B) REQUISITES FOR A VALID INSTITUTION OF HEIR: 1. Designation in will of person/s to succeed 2. Will specifically assigns to such person an inchoate share in the estate 3. The person so named has capacity to succeed 4. The will is formally valid 5. No vice of consent is present 6. No preterition results from the effect of such will C) THREE PRINCIPLES IN THE INSTITUTION OF HEIRS: 1. Equality – heirs who are instituted without a designation of shares inherit in equal parts 2. Individuality – heirs collectively instituted are deemed individually named unless a contrary intent is proven 3. Simultaneity – when several heirs are instituted, they are instituted simultaneously and not successively 13. RULES REGARDING A PERSON’S RIGHT TO DISPOSE OF HIS ESTATE:

1.

If one has no compulsory heirs: a. b.

2.

He can give his estate to any person qualified to inherit under him However, he must respect restrictions imposed by special laws

If one has compulsory heirs: a. b.

He can give only the disposable portion to strangers Legitimes of compulsory heirs must be respected

14. PRETERITION A) CONCEPT OF PRETERITION: 1. There must be an omission of one, some or all of the heir/s in the will 2. The omission must be that of a COMPULSORY HEIR Page 211 of 230

3. 4. 5. 6.

Not blind, deaf or dumb Able to read and write Domiciled in the Philippines Have not been convicted of falsification of a document, perjury or false testimony

iv. v.

vi. 8. DEFINITION OF A CODICIL It is a supplementary or addition to a will made after the execution of the will and annexed to be taken as a part thereof by which any disposition in the original will may be explained, added to or altered 9. REQUISITES FOR INCORPORATION BY REFERENCE: 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 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 10. REVOCATION OF A WILL: 1. By implication of law 2. By the execution of a will, codicil or other writing executed as provided in case of wills 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 Bar Question (2003). Mr. Reyes executed a will completely valid as to form. A week later, however, he executed another will which expressly revoked his first will, following which he tore his first will to pieces. Upon the death of Mr. Reyes, his second will was presented for probate by his heirs, but it was denied probate due to formal defects. Assuming that a copy of the first will is available, may it now be admitted to probate and given effect? Why? (5%)

Answer: Yes, the first will may be admitted to probate and given effect. When the testator tore the first will, he was under the mistaken belief that the second will was perfectly valid and he would not have destroyed the first will had he known that the second will is not valid. The revocation by destruction therefore is dependent on the validity of the second will. Since it turned out that the second will was invalid, the tearing of the first will did not produce the effect of revocation. This is known as the doctrine of dependent relative revocation (Molo v. Molo, 90 Phil. 37). 11. GROUNDS FOR DISALLOWANCE OF A WILL: Page 210 of 230

vii.

viii.

d)

Forfeiture of the share of the guilty spouse in the net profits of the ACP/CP Custody of minor children to innocent spouse (subject to Article 213 which provides that parental authority shall be exercised by parent designated by the Court) Guilty spouse is disqualified from intestate succession and provisions made by him in favor of the innocent spouse in a will shall be revoked Innocent spouse may revoke the donation made by him in favor of the offending spouse. However, alienations, liens and encumbrances registered in good faith before the recording of the complaint for revocation in the registries of property shall be respected. Innocent spouse may revoke designation of guilty spouse as beneficiary in insurance policy even if such designation be stipulated as irrevocable

Effects of Reconciliation i. Legal separation proceedings if still pending shall be terminated ii. Final decree of legal separation shall be set aside but the separation of property and any forfeiture of the share of the guilty spouse shall subsist unless the spouses agree to revive their former property regime

Bar Question (2003). Which of the following remedies, i.e., (a) declaration of nullity of marriage, (b) annulment of marriage, (c) legal separation, and/or (d) separation of property, can be aggrieved spouse avail himself/herself of – (i) If the wife discovers after the marriage that her husband has “AIDS” (ii) If the wife goes abroad to work as a nurse and refuses to come home after the expiration of her three-year contract there. (iii) If the husband discovers after the marriage that his wife has been a prostitute before they got married. (iv) If the husband has a serious affair with his secretary and refuses to stop notwithstanding advice from relatives and friends. (v) If the husband beats up his wife every time he comes home drunk.

Answer: (i) Since AIDS is a serious and incurable sexually-transmissible disease, the wife may file an action for annulment of the marriage on this ground whether such fact was concealed or not from the wife, provided that the disease was present at the time of the marriage. The marriage is voidable even though the husband was not aware that he had the disease at the time of marriage. (ii) If the wife refuses to come home for three (3) months from the expiration of her contract, she is presumed to have abandoned the husband and he Page 23 of 230

may file an action for judicial separation of property. IF the refusal continues for more than one year from the expiration of her contract, the husband may file the action for legal separation under Art.55 (10) of the Family Code on the ground of abandonment of petitioner by respondent without justifiable cause for more than one year. TH wife is deemed to have abandoned the husband when she leaves the conjugal dwelling without any intention of returning (Article 101, FC). The intention not to return cannot be presumed during the 3-year period of her contract. (iii) If the husband discovers after the marriage that his wife was a prostitute before they got married, he has no remedy. No misrepresentation or deceit as to character, health, rank, fortune, or chastity shall constitute fraud as legal ground for an action for the annulment of marriage. (Article 46 FC) (iv) The wife may file an action for legal separation. The husband’s sexual infidelity is a ground for legal separation (Article 55, FC). She may also file an action for judicial separation of property for failure of her husband to comply with his marital duty of fidelity (Article 135(4), 101, FC). (v) The wife may file an action for legal separation on the ground of repeated physical violence on her person (Article 55(1), FC). She may also file an action for judicial separation of property for failure of the husband to comply with his marital duty of mutual respect (Article 135(4), Article 101, FC). She may also file an action for declaration of nullity of the marriage if the husband’s behavior constitutes psychological incapacity existing at the time of the celebration of marriage. Bar Question (2006). Gigi and Ric, Catholics, got married when they were 18 years old. Their marriage was solemnized on August 2, 1989 by Ric’s uncle, a Baptist Minister, in Calamba, Laguna. He overlooked the fact that his license to solemnize marriage expired the month before and that the parties do not belong to his congregation. After 5 years of married life and blessed with 2 children, the spouses developed irreconcilable differences, so they parted ways. While separated, Ric fell in love with Juliet, a 16 year-old sophomore in a local college and a Seventh-Day Adventist. They decided to get married with the consent of Juliet’s parents. She presented to him a birth certificate showing she is 18 years old. Ric never doubted her age much less the authenticity of her birth certificate. They got married in a Catholic church in Manila. A year after, Juliet gave birth to twins, Aissa and Aretha. (4) If you were the counsel for Gigi, what action/s will you take to enforce and protect her interests? Explain.

Suggested Answers: (1) As counsel for Gigi, I will file an action for the declaration of nullity of Gigi’s marriage to Ric on the ground of absence of authority of the Baptist Minister Page 24 of 230

C) ADDITIONAL REQUISITES FOR A NOTARIAL WILL IF THE TESTATOR BE DEAF OR A DEAF-MUTE: 1. Testator must personally read the will, if able to do so; 2. Otherwise, he shall designate two persons to read it and communicate to him, in some practicable manner, its contents D) ADDITIONAL REQUISITE FOR A NOTARIAL WILL IF THE TESTATOR IS BLIND: The will shall be read to the testator twice -Once by one of the subscribing witnesses and once by the notary public before whom the will is acknowledged E) REQUISITES FOR HOLOGRAPHIC WILL: 1. In writing 2. In a language or dialect known to the testator 3. Entirely written, dated, and signed by the hand of the testator himself 5. AMENDING A WILL: 1. Notarial – only through a codicil 2. Holographic – in three ways a. Dispositions may be added below the signature, PROVIDED that said dispositions are also dated and signed, and everything is written by the hand of the testator himself b. Certain dispositions or additional matter may be suppressed or inserted PROVIDED that said cancellation is signed by the testator and written by the hand of the testator himself c. Through a codicil which may either be notarial or holographic 6. EFFECT OF INSERTION ON THE VALIDITY OF A HOLOGRAPHIC WILL: (Tolentino) a) If made after the execution of the will, but without the consent of the testator, such insertion is considered as not written because the validity of the will cannot be defeated by the malice or caprice of a third person b) If the insertion after the execution of the will was with the consent of the testator, the will remains valid but the insertion is void c) If the insertion after the execution is validated by the testator by his signature thereon, then the insertion becomes part of the will, and the entire will becomes void, because of failure to comply with the requirement that it must be wholly written by the testator d) If the insertion made by a third person is made contemporaneous to the execution of the will, then the will is void because it is not written entirely by the testator 7. QUALIFICATIONS OF WITNESSES TO A NOTARIAL WILL: 1. Of sound mind 2. Of the age of 18 years or more Page 209 of 230

to solemnize the marriage between Ric and Gigi who were both nonmembers of the Baptist Church.

Wills 1. DEFINITION OF WILL- It is 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 2. TESTAMENTARY CAPACITY: a) All persons who are not expressly prohibited by law b) 18 years old and above c) Of sound mind, at the time of its execution 3. KINDS OF WILLS: a) Notarial – an ordinary or attested will b) Holographic – a handwritten will

(2) As counsel for Gigi, and on the basis of the legal presumption that her marriage to Ric is valid, I will file the ff. actions: (1) Legal separation on the grounds of subsequent bigamous marriage and sexual infidelity; (2) Receivership of the conjugal or community property; (3) Judicial separation of property; (4) Petition for sole administration of the conjugal or community property; (5) Action for damages for abuse of rights; and (6) Action to declare the marriage of Ric and Juliet as null and void and to recover her share in her community of property with Ric, consisting of the portion shared by Ric in whatever property was commonly or jointly acquired by Ric and Juliet. Property Relations Between Spouses

4. REQUISITES OF WILLS A) COMMON REQUIREMENTS TO BOTH WILLS: 1. In writing 2. In a language or dialect known to the testator B) ADDITIONAL REQUISITES FOR VALID NOTARIAL WILL: 1. Subscribed at the end by the testator himself or by the testator’s name written by some other person in his presence, and by his express direction 2. Attested & subscribed by three or more credible witnesses in the presence of the testator and of one another 3. Each and every page, except the last, must be signed by the testator or by the person requested by him to write his name, and by the instrumental witnesses of the will, on the left margin 4. Each and every page of the will must be numbered correlatively in letters placed on the upper part of each page 5. It must contain an attestation clause, stating the following: i. The number of pages used upon which the will is written ii. The fact that the testator signed the will and every page, or caused some other person to write his name, under his express direction, in the presence of the instrumental witnesses iii. All the instrumental witnesses witnessed and signed the will and all its pages in the presence of the testator and of one another 6. It must be acknowledged before a notary public by the testator and the witnesses

1. What Governs Property Relations Between Spouses a) Marriage settlement – future spouses may agree upon the regime of ACP, CPG or complete separation of property or any other regime b) Provision of the Family Code – if there is no marriage settlement or when the regime agreed upon is void, the system of ACP shall govern c) Local custom

General rule: once marriage is celebrated, there is already a property regime and this cannot be changed - except: 1) legal separation (ACP/CPG is dissolved) 2) revival of former property regime upon reconciliation 3) petition of one spouse for separation in case of abandonment or failure to comply with marital obligations 4) judicial dissolution of regime: joint petition or petition by one spouse for cause. (Art 135/136) 2. Requisites a) b) c) d)

If a party executing the settlement needs parental consent, the parent/guardian whose consent is needed must be made a party to the agreement

e)

f) Page 208 of 230

of Valid Marriage Settlement In writing Signed by the parties Executed before the celebration of marriage

If the party executing the settlement is under civil interdiction or any other disability, the guardian appointed by the court must be made a party to the settlement Registration (to bind 3rd persons) Page 25 of 230

3. Donations by Reason of Marriage a) Requisites 1) made before marriage 2) in consideration of marriage 3) in favor of one or both of the betrothed b) Before Marriage General Rule: Future spouses cannot donate to each other more than 1/5 of their present property (excess shall be considered void) Exception: If they are governed by ACP c) During Marriage General Rule: Spouses cannot donate to each other, directly or indirectly (donations made by spouses to each other during the marriage are void) Exception: Moderate gifts on the occasion of any family rejoicing d) Grounds to Revoke Donation Propter Nuptias i. Marriage is not celebrated or is judicially declared void ab initio ii. Marriage without the needed parental consent iii. Marriage is annulled and donee in bad faith iv. If it is with a resolutory condition and the condition is complied with v. In legal separation and donee is the guilty spouse vi. Donee commits acts of ingratitude e) Prescriptive Period for Filing Action for Revocation of Donation Propter Nuptias If marriage is not celebrated (except donations i. contained in the marriage settlement which are automatically rendered void if the marriage does not take place)- 5 years (Art. 1149) from the time marriage is not solemnized on the fixed date ii. If marriage is judicially declared void, it depends:

-if subsequent marriage is void pursuant to Art. 40 in relation to Arts. 52 and 53, because contracted by a spouse before prior void marriage is judicially declared void – by operation of law if donee-spouse contracted subsequent void marriage in bad faith. -Judicially declared void on grounds other than Art. 40 in relation to Arts. 52 and 53 – 5 years from finality of judicial declaration of nullity (if action to recover property) Page 26 of 230

2.

trust) for the benefit of Juana with Juan as trustee of one-half undivided or ideal portion of each of the two lots. Therefore, Juana can file an action for damages against Juan for having fraudulently sold one of the two parcels which he partly held in trust for Juana’s benefit. Juana may claim actual or compensatory damage for the loss of her share in the land; moral damages for the mental anguish, anxiety, moral shock and wounded feelings she had suffered; exemplary damage by way of example for the common good, and attorney’s fees. Juana has no cause of action against the buyer who acquired the land for value and in good faith, relying on the transfer certificate of title showing that Juan is the registered owner of the land. Juana’s suit to have herself declared as sole owner of the entire remaining area will not prosper because while Juan’s act in selling the other lot was wrongful, it did not have the effect of forfeiting his share in the remaining lot. However, Juana can file an action against Juan for partition or termination of the co-ownership with a prayer that the lot sold be adjudicated to Juan, and the remaining lot be adjudicated and reconveyed to her. SUCCESSION

1. DEFINITION OF SUCCESSION It is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance of a person are transmitted through his death to another or others either by his will or by operation of law 2. KINDS OF SUCCESSION a) Testamentary – that which results from the designation of an heir, made in a will executed in the form prescribed by law b) Legal or Intestate – that which takes place by operation of law in the absence of a valid will c) Mixed – that which is effected partly by will and partly by operation of law 3. KINDS OF HEIRS: a) Compulsory – those who succeed by force of law to some portion of the inheritance, in an amount predetermined by law, of which they cannot be deprived by the testator, except by a valid disinheritance b) Voluntary or Testamentary – 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 c) Legal or Intestate – those who succeed to the estate of the decedent who dies without a valid will, or to the portion of such estate not disposed of by will Page 207 of 230

iii. 7. Effect of Laches a) Implied trust may be barred not only by prescription but also by laches. b) Laches constitutes a defense to a suit to declare and enforce an implied trust, and for the purpose of the rule, express repudiation is not required, unless the trustee fraudulently and successfully conceals the facts giving rise to the trust. c) The doctrine of laches, however, is less strictly applied between near relatives than when the parties are strangers to each other. 8. General Rule under Article 1448 a) A resulting trust arises in favor of a person from whom a consideration comes for a reconveyance of property (real or personal) to another, but the trust is rebuttable by proof of a contrary intention of the persons from whom the consideration comes, and such proof may be by parol evidence. The trust results only in favor of one advancing the consideration, and not in favor of one for whose benefit the purchase may have been made. b) Exceptions: ü No trust is implied if the person to whom the legal estate is conveyed is a legitimate or illegitimate child of the payor. The reason is there is a presumption that a gift or donation was intended in favor of the child. ü When an actual contrary intention is proved. 9. Article 1456 – Property acquired through mistake or fraud The mistake referred to in this article is a mistake made by a third person, not that made by a party to the contract. For if made by a party, no trust is created. Similarly, the fraud referred to is extra-contractual.

iv.

When marriage takes place without the required parental consent – 5 years If resolutory condition is complied with – 5 years from happening of condition

v.

When marriage is annulled and donee in bad faith – 5 years from finality of decree

vi.

If donee commits an act of ingratitude – 1 year from

vii.

donor’s knowledge of that fact In cases of legal separation – 5 years from the time the decree of separation has become final

Absolute Community 1. System of Absolute Community: The community property consists of all the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter. 2. Exclusions from Community Property a) Property acquired during the marriage by gratuitous title and its fruits except if its expressly provided by the donor, testator or grantor that they shall form part of the community property b) Property for personal and exclusive use of either spouse (jewelry forms part of the ACP) c) Property acquired before the marriage by one with legitimate descendants by former marriage and its fruits and income

Answers: 1. When, for convenience, the Torrens title to the two parcels pf land were placed in Juan’s name alone, there was created an implied trust (a resulting

3. Charges upon the ACP a) Support of spouses, their common children and legitimate children of either spouse b) Debts and obligations contracted during the marriage by designated administrator - spouse, both spouses or by one with the consent of the other c) Debts and obligations contracted by either spouse without the consent of the other to the extent that it benefited the family d) Taxes, liens, charges and expenses upon community property e) Taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used by the family f) Expenses for professional or vocational course g) Antenuptial debts which redounded to the benefit of the family h) Donated or promised to common legit children for profession, vocational course or self improvement i) Other ante-nuptial debts, support of illegitimate child and liabilities for crime, quasi-delicts in absence of separate property j) Expenses of litigation between spouses unless the suit is found to be groundless

Page 206 of 230

Page 27 of 230

Bar Question (1998). Juan and his sister Juana inherited from their mother two parcels of farmland with exactly the same areas. For convenience, the Torrens certificates of title covering both lots were placed in Juan’s name alone. In 1996, Juan sold to an innocent purchaser one parcel in its entirety without the knowledge and consent of Juana, and wrongfully kept for himself the entire price paid. 1. What rights of action, if any, does Juana have against and/or the buyer? (3%) 2. Since the two lots have the same area, suppose Juana files a complaint to have herself declared sole owner of the entire remaining second lot, contending that her brother had forfeited his share thereof by wrongfully disposing of her undivided share in the first lot, will the suit prosper? (2%)

If the community property is insufficient to cover all these liabilities, except those falling under par. 9, the spouses shall be solidarily liable for the unpaid balance with their separate properties. 4. Administration of community property belongs to both spouses jointly. a) In cases of disagreement, the decision of the husband prevails. b) If the wife decides to go to court, she must do so within 5 years from the date of the contract implementing the husband’s decision. c) Both spouses must approve any dispositions or encumbrances and consent of the other spouse regarding the disposition must be in writing, otherwise, the matter should be brought to court and the court will give the authority, if proper. d) If one spouse acts without the consent of the other or without court approval, such disposition/encumbrance is void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the 3rd person which may be perfected as a binding contract upon acceptance by the spouse or court approval. 5. Termination of ACP/CPG a) Death b) Legal separation c) Annulment d) Judicial separation of property during marriage 6. Procedure for Dissolution of ACP 1. Inventory of all properties 2. Debts and obligation of ACP are paid 3. Remains of the separate properties of the spouses are returned to the owner 4. Net remainder of the ACP is divided equally between husband and wife 5. Presumptive legitimes of children are delivered 6. Adjudication of conjugal dwelling and custody of common children Conjugal Partnership of Gains 1. System of Conjugal Partnership of Gains a) The spouses contribute the following to a common fund: i. Proceeds, products, fruits and income of separate properties of spouses ii. Everything acquired by spouses through their efforts iii. Everything acquired by spouses through chance Page 28 of 230

6. Prescriptibility of Action for Reconveyance based on Implied Trust a) An action for reconveyance of property (real or personal) to enforce an implied trust in one’s favor prescribed in ten (10) years from the time the right of action b) Accrues (the action being based upon an obligation created by law), that is, from the moment the law creates the trust because the socalled trustee does not recognize any trust and has no intention to hold for the beneficiary. c) Where the action for conveyance of real property is based on constructive trust resulting from its fraudulent registration in the name of another (see Article 1456), the action may be filed from the discovery of the fraud or notice thereof, which is deemed to have taken place from the inscription of the instrument and/or issuance of the new certificate of title by virtue thereof. The issuance of said certificate of title constitutes constructive notice to the public. d) In another case, however, where the ownership of the land was sold fictitiously to avoid a foreclosure of mortgage, it was ruled that the tenyear prescriptive period should be counted not from the registration of the simulated sale, but from the date of recording of the release of the mortgage, on which date the cestui que trust was charged with the knowledge of the settlement of the mortgage obligation, the attainment of the purpose for which the trust was created. But if the legitimate owner of the subject property, which was fraudulently registered in the name of another, had always been in possession thereof, the constructive notice rule cannot be applied. The action for reconveyance is in reality an action to quiet title; therefore, the action is imprescriptible. e) but where the rights of the beneficiary are recognized by the trustee, the ten-year prescriptive period commences to run from the time the trustee begins to assert his title or to hold adversely, as when the trustee files an ejectment suit against the beneficiary, or when he registers the deed of assignment of property to him and secures the cancellation of the certificate of title in the name of the former owner and the issuance of new certificate of title in his own name, or when he sells portions of the property. f) Continuous recognition of a resulting trust precludes any defense of prescription or laches in a suit to declare and enforce the trust. g) When a person through fraud succeeds in registering a land in his name, the law creates a constructive trust in favor of the defrauded party. (See Article 1456). The latter is granted the right to recover the property fraudulently registered within a period of ten years. In the computation of time necessary for prescription, the present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor. This rule, however, applies only where there is privity between successive possessors. Page 205 of 230

Created by the intention (through direct and positive acts) of the parties Cannot be proved by parol evidence when it concerns an immovable or any interest therein In order that laches or acquisitive prescription may bar an action to enforce it, an express repudiation made known to the beneficiary is required

Comes into being by operation of law independent of the particular intention of the parties Can be proved by oral evidence when it concerns an immovable or any interest therein Laches constitutes a bar to actions to enforce it, unless there is concealment of the fact giving rise to the trust

4. When is an implied trust converted to express trust? An implied trust may be converted to an express trust by the recognition by the implied trustee of the right to the property of the owner. 5. Acquisition of property through prescription

a)

By trustee: The possession of a trustee is in law possession of the cestui que trust and, therefore, it cannot be a good ground for title by prescription ii. No prescription shall run in favor of a co-owner against his coowners or co-heirs as long as he expressly or impliedly recognizes the co-ownership iii. Express trusts disable the trustee from acquiring for his own benefit the property committed to his management or custody at least while he does not openly repudiate the trust and makes such repudiation known to the beneficiary iv. Trustee may claim title by prescription founded on adverse possession where it appears that: 1. He has performed open and unequivocal acts of repudiation amounting to an ouster of the cestui que

i.

trust 2. 3. 4.

b)

Such positive acts of repudiation have been made known to the cestui que trust The evidence thereon should be clear and conclusive; and The period fixed by law has prescribed (the period commences to run from and after said repudiation and the knowledge thereof by the cestui que trust.

By third persons: Though the statute of limitations does not run between trustee cestui que trust as long as the trust relation subsists, it does not run between the trust and third persons. Thus, a third person who holds actual, open, public, and continuous possession of a land adversely to the trust, acquires title to the land by prescription as against such trust. Page 204 of 230

b)

Exclusive Property in CPG i. That brought into the marriage as his/her own ii. That acquired during the marriage gratuitously iii. That acquired by redemption, barter or exchange with exclusive property iv. That purchased with exclusive money of spouse

c)

What Constitutes CPG i. Those acquired during the marriage with conjugal funds ii. Those obtained from labor, industry, work or profession of either or both spouse iii. Fruits of conjugal property due or received during the marriage and net fruits of separate property iv. Share in the hidden treasure v. Those acquired through occupation vi. Livestock in excess of what was brought to the marriage vii. Those acquired by chance

2. Charges upon the CPG a) Support of the spouses, their common children and legit children of either spouse b) Debts and obligations contracted by one without the consent of the other to the extent that the family benefited c) Debts and obligations contracted during the marriage by administrator- spouse, both spouses or one with the consent of the other d) Taxes, liens, charges, expenses upon conjugal property e) Taxes and expenses for mere preservation of separate property f) Expenses for professional, vocational or self-improvement courses of either spouse g) Antenuptial debts to extent family benefited h) Value of what is donated or promised to common legit children for professional, vocation or self improvement courses i) Expenses of litigation 3. Procedure for Dissolution of CPG a) Inventory of all property b) Amounts advanced by CP as payment for personal debts and obligations of either spouse are credited c) Reimbursement for use of exclusive funds d) Debts and obligations of the CP are paid e) Remains of exclusive properties are returned f) Indemnify loss of deterioration of movables belonging to either spouse used for the benefit of the family Page 29 of 230

g) h) i)

Net remainder of conjugal property is divided equally Delivery of children’s presumptive legitimes Adjudication of conjugal dwelling and custody of children

4. Distinction between ACP and CPG ACP All the properties owned by the spouses at the time of marriage become community property

Upon dissolution and liquidation of the community prop what is divided equally between the spouses or their heirs is the net remainder of the properties of the ACP

CPG Each spouse retains his/her property before the marriage and only the fruits and income of such properties become part of the conjugal properties during the marriage Upon dissolution of the partnership, the separate property of the spouses are returned and only the net profits of the partnership are divided equally between the spouses of their heirs

Bar Question (1998). In 1970, Bob and Issa got married without executing a marriage settlement. In 1975, Bob inherited from his father a residential lot upon which, in 1981, he constructed a two-room bungalow with savings from his own earnings. At that time, the lot was worth P800,000.00 while the house, when finished, cost P600,000.00. In 1989, Bob died, survived only by his wife Issa and his mother, Sofia. Assuming that the relative values of both assets remained at the same proportion: 1. State whether Sofia can rightfully claim that the house and lot are not conjugal but exclusive property of her deceased son. 2. Will your answer be the same if Bob died before August 3, 1988?

Answers: 1. Since Bob and Sofia got married in 1970, then the law that governs is the New Civil Code (Persons), in which case, the property relations that should be applied as regards the property of the spouses is the system of relative community or conjugal partnership of gains (Art. 119, Civil Code). By conjugal partnership of gains, the husband and the wife place in a common fund the fruits of their separate property and the income from their work or industry (Art. 142, Civil Code). In this instance, the lot inherited by Bob in 1975 is his own separate property, he having acquired the same by lucrative title (par. 2, Art. 148, Civil Code). However, the house constructed form his own savings in 1981 during the subsistence of his marriage with Issa is conjugal property and not exclusive property in accordance with the principle of “reverse accession” provided for in Art. 158, Civil Code. 2. Yes, the answer would still be the same. Since Bob and Issa contracted their marriage way back in 1970, then the property relations that will Page 30 of 230

a) b) c) d) e) f) g) h)

Mutual agreement of all the parties Expiration of the term Fulfillment of the resolutory condition Rescission or annulment Physical loss or legal impossibility of the subject matter of the trust Order of the court Merger Accomplishment of the purpose of the trust

9. Effect of Laches a) Cestui que trust is entitled to rely upon the fidelity of the trustee. Laches applies from the trustee openly denies or repudiates the trust and the beneficiary is notified thereof, or is otherwise plainly put on guard against the trustee. b) On the other hand, when it does not appear when the trustee repudiated existence of the fiduciary relation, the same shall be taken to have been made only upon the filing of his answer to the complaint. Implied Trusts 1. Concept: Implied trusts are those which, without being expressed, are deducible from the nature of the transactions as matter of intent, or which are super induced on the transaction by operation of law, is matters of equity, independently of the particular intention of the parties. The doctrine of implied trusts is founded upon equity. As such, trust can never result from acts violative of the law. 2. Kinds: a) Resulting trust – a trust whish is raised or created by the act or construction of law, or in its more restricted sense, it is raised by implication of law and presumed always 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. Examples are those found in Articles 1448 to 1455 of the NCC b)

Constructive trust – a trust raised by construction of law; in a more restricted sense and as contra-distinguished from a resulting trust, it is a trust not created by words, expressly or impliedly evincing a direct intention to create a trust by the construction of equity in order to satisfy the demands of justice; it does not arise by agreement or intention but by operation of law

3. Distinction between Express and Implied Trusts Express Trust

Implied Trust Page 203 of 230

e)

The trustee cannot acquire the property held in trust by prescription as long as the trust is admitted (if he repudiates and this is made known to the party involved, prescription is permitted)

govern is still the relative community or conjugal partnership of gains (Art. 119, Civil Code). It will not matter if Bob died before or after August 3, 1988 (effectivity date of the Family Code), what matters is the date when the marriage was contracted. As Bob and Issa contracted their marriage way back in 1970, the property relation that governs them is still the conjugal partnership of gains. (Art. 158, Civil Code)

4. May a trustee of a trust estate be personally liable? In the absence of an express stipulation in a contract entered into by a trustee for a corporation that the trust estate and not the trustee should be liable on the contract; the trustee is liable in its individual capacity.

Separation of Property of the Spouses

5. When may a trustee sue as such? Before a trustee may sue or be sued alone as such, it is essential that his trust be express.

1. Rule: In the absence of an express declaration in the marriage settlements, the separation of property between the spouses during the marriage shall not take place except by judicial order.

6. Acceptance, Declination, or Renunciation by the Trustee a) In the case of an express trust, acceptance of trust by a trustee is necessary to charge him with the office of the trustee and the administration of the trust and to vest the legal title in him. However, his acceptance of the trust is not necessary to its existence and validity, since if he declines the trust, the courts will appoint a trustee to fill the office that he declines. b) One designated or appointed as trustee may decline the responsibility and thereby be free from any legal or equitable duty or liability in the matter. c) Unless a contrary intention appears in the instrument constituting the trust, declination or refusal or disqualification of a trustee does not operate to defeat or void the trust, nor does it operate to vest legal as well as equitable title in the beneficiary. d) Renunciation of a trust after its acceptance can only be by resignation or retirement with court approval, with agreement of beneficiaries, and on satisfaction of all legal liabilities growing out of the acceptance of the trust. e) When a person administering property in the character of a trustee inconsistently assumes to be holding in his own right, this operates as renunciation of the trust and the beneficiaries of the property are entitled to maintain an action to declare their right and remove the unfaithful trustee.

2. Judicial separation of property may either be voluntary or for sufficient cause. a) Sufficient Cause for Judicial Separation of Property i. Civil interdiction of the spouse of petitioner ii. Judicial declaration of absence iii. Loss of parental authority as decreed by the court iv. Abandonment or failure to comply with family obligation v. Administrator spouse has abused authority vi. Separation in fact for one year and reconciliation is highly improbable 3. Grounds for Revival of Former Property Regime i. When civil interdiction of the prisoner-spouse terminates ii. When the absentee spouse reappears iii. When the court authorizes resumption of administration by the spouse formerly exercising such power iv. When the spouse who has abandoned the conjugal home returns and resumes common life with the other v. When parental authority is judicially restored to the spouse previously deprived thereof vi. When spouses agree to revive their former property regime

7. Acceptance of Trust by the Beneficiary a) This is essential to the creation and validity of a trust. b) Acceptance is presumed if the granting of benefit is purely gratuitous (no onerous condition) EXCEPT if there is proof that he really did not accept. c) Acceptance by the beneficiary of a gratuitous trust is not subject to the rules for the formalities of donations.

4. Ground for Transfer of Administration of Exclusive Property of Either Spouse a) One spouse becomes guardian of the other b) One spouse judicially declared absent c) One spouse sentenced to penalty with civil interdiction d) One spouse becomes a fugitive from justice

8. Termination

5. Unions Governed by Article 147 Page 202 of 230

Page 31 of 230

a)

b)

When a man and a woman capacitated to marry each other live exclusively with each other as husband and wife without the benefit of marriage A man and a woman living together under a void marriage (inapplicable to bigamous marriage)

ground that he would be unjustly enriched if he were permitted to retain it; the duty to convey the property arises because it was acquired through fraud, duress, undue influence, mistake, or through breach of a fiduciary duty, or through the wrongful disposition of another’s property.

Rules: • •

Wages and salaries earned by either spouse during the cohabitation shall be owned by the parties in equal shares Properties acquired by them through their joint work or industry during the cohabitation shall be governed by the rules of co-ownership

Remember: a) Presumption: properties acquired during the cohabitation are presumed to have been acquired through their joint efforts, work or industry b) 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 c) Parties cannot encumber or dispose by acts inter vivos their share in the property acquired during their cohabitation and owned in common, without the consent of the other, until after termination of cohabitation d) In case of void marriage – if only one party is in good faith, the share of the spouse who is in bad faith shall be forfeited e) In favor of their common children f) 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 g) In the absence of such descendants, such share belongs to the innocent party 6. Unions Governed by Article 148 a) Bigamous marriages b) Adulterous relationships c) Relationships in a state of concubinage d) Relationships where both man and woman are married to other persons e) Multiple alliances of the same married man

Rules: •

Only properties acquired by the parties through their actual joint contribution of money, property or industry shall be owned in common in proportion to their respective contributions.

Page 32 of 230

Express Trusts 1. Requisites a) There must be: i. A competent trustor and trustee, ii. An ascertainable trust res, and iii. Sufficiently certain beneficiaries b) The requirement that the express trust be written is only for enforceability, not for validity between the parties; hence, Article 1443 may, by analogy, be included under the Statute of Frauds; c) By implication, for a trust over personal property, an oral agreement is valid and enforceable between the parties; d) Regarding third persons, the trust must be in public instrument registered in the Registry of Property if it concerns real property. e) Creation -There must be a clear intent to create a trust. Thus, no particular or technical words are required. i. By conveyance to the trustee by an act inter vivos or

mortis causa ii.

By admission of the trustee that he holds the property only as a trustee

iii. 2. Capacity a) b) c)

The trustor must be capacitated to convey property The trustee must be capacitated to hold property and to enter into contract The beneficiary must be capacitated to receive gratuitously from the trustor

3. Administration of the Trust a) The trustee must file a bond b) The trustee must make an inventory of the real and personal property in trust c) The trustee must manage and dispose of the estate and faithfully discharge his trust in relation thereto according to law or according to the terms of the trust instrument as long as they are legal and possible d) The trustee must render a true and clear account

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b)

c)

Trustee or the person who takes and holds the legal tile to the trust property, for the benefit of another, with certain powers and subject to certain duties; Beneficiary or cestui que trust or the person has an equitable interest in the property and enjoys the benefit of the administration of the trust by the trustee

•

In the absence of proof to the contrary contributions and the share of the parties to the properties acquired during the cohabitation are presumed equal

•

If one party is validly married to another: o o

11. Character of Office of Trustee a) As principal – The trustee is not an agent of the trust estate or of the cestui que trust, but he acts for himself in the administration of the trust estate, although subject to the terms of the trust and law of trusts. b) As agent – In some cases, however, a trustee has been regarded as an agent of beneficiaries of the trust at least for certain purposes, such as for the purpose of imputing to the beneficiaries of the trust notice given to the trustee. c) As fiduciary – A trustee, like an executor or administrator, holds an office of trust. The duties of the latter are, however, fixed and/or limited by law, whereas those of trustee of an express trust are usually governed by the intention of the trustor or of the parties, if established by contract. 12. Classification of Trust A. From the viewpoint of whether it becomes effective after the death of the trustor or during his life: a) Testamentary trust b) Trust inter vivos (sometimes called “living trusts”) B. From the viewpoint of the creative force bringing it into existence: a) Express trust – which can come into existence only by the manifestation of an intention to create it by the one having legal and equitable dominion over the property made subject to it; b) Implied trust – which comes into existence either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of and even contrary to any such intention; it may either be: i. A resulting trust – which arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest in the property; is founded on the presumed intention of the parties; OR ii. A constructive trust – which is imposed where a person holding title to property is subject to an equitable duty to convey it to another on the Page 200 of 230

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 Bar Question (1997): Luis and Rizza, both 26 years of age and single, live exclusively with each other as husband and wife without the benefit of marriage. Luis is gainfully employed. Rizza is not employed, stays at home, and takes charge of the household chores. After living together for a little over twenty years, Luis was able to save from his salary earnings during that period the amount of P200,000 presently deposited in a bank. A house and lot worth P500,000 was recently purchased for the same amount by the couple. Of the P500,000 used by the common-law spouses to purchase the property, P200,000 had come from the sale of palay harvested from the hacienda owned by Luis and P300,000 from the rentals of a building belonging to Rizza. In fine, the sum of P500,000 had been part of the fruits received during the period of cohabitation from their separate property. A car worth P100,000 being used by the common law spouses, was donated just months ago to Rizza by her parents. Luis and Rizza now decide to terminate their cohabitation and they ask you to give them your legal advice on the following: a. How, under the law, should the bank deposit of P200,000, the house and lot valued at P500,000 and the car worth P100,000 be allocated to them? b. What would your answer be (to the above question) had Luis and Rizza been living together all the time, i.e., since 20 years ago, under a valid marriage?

Answer: a. Art. 147 of the Family Code provides in part that when a man and woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules of 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. 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 Page 33 of 230

efforts consisted in the care and maintenance of the family and of the household. Thus: 1. the wages and salaries of Luis in the amount of P200,000 shall be divided equally between Luis and Rizza. 2. the house and lot valued at P500,000 having been acquired by both of them through work or industry shall be divided between them in proportion to their respective contribution, in consonance with the rules on co-ownership. Hence, Luis gets 2/5 while Rizza gets 3/5 of the P500,000. 3. the car worth P100,000 shall be exclusively owned by Rizza, the same having been donated to her by her parents. b. The property relations between Luis and Rizza, their marriage having been celebrated 20 years ago (under the Civil Code) shall be governed by the conjugal partnership of gains, under which the husband and wife place in a common fund the proceeds, products and fruits and income from their separate properties and those acquired by either or both spouses through their efforts or by chance, and upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouse shall be divided equally between them (Art. 142, Civil Code). Thus: 1. the salary of Luis deposited in the bank in the amount of P200,000 and the house and lot valued at P500,000 shall be divided equally between Luis and Rizza. 2. however, the car worth P100,000 donated to Rizza by her parents shall be considered her own paraphernal property, having been acquired by lucrative title (par. 2, Art. 148, Civil Code).

title in the trustee, whereas it is a characteristic of a bailment that the bailee has possession of, without legal title to the property subject to the bailment. 4. Distinguished from Donation a) A trust is an existing legal relationship and involves the separation of legal and equitable title, whereas a gift is a transfer of property and, except in the case of a gift in trust, involves a disposition of both legal and equitable ownership. b) A trust constituted between two contracting parties for the benefit of a third person is not subject to the rules governing donations of real property. The beneficiary of a trust may demand performance of the obligation without having formally accepted the benefit of the trust in a public document, upon mere acquiescence in the formation of the trust and acceptance under the second paragraph of Article 1311 of the Civil Code. 5. Distinguished from Contract a) A trust always involves an ownership, embracing a set of rights and duties fiduciary in character which may be created by a declaration without consideration, whereas a contract is a legal obligation based on an undertaking supported by a consideration, which obligation may or may not be fiduciary in character. 6. Distinguished from Guardianship or Executorship In trust, the trustee or holder has the legal title to the property; a guardian, administrator, or executor does not have legal title to the property.

The Family 1. Family relations include those between husband and wife, parents and children, among other ascendants and descendants and among brothers and sisters, full or half blood. 2. Suit between members of the same family – it should appear from the verified complaint or petition that earnest efforts towards a compromise have been made but failed a) Allegation of “earnest efforts” is JURISDICTIONAL, if it is absent, the court can dismiss the case

b)

7. Distinguished from Stipulation Pour Autrui a) A trust may exist because of a legal provision or because of an agreement; a stipulation pour autrui can arise only in the case of contracts. b) A trust refers to specific property; a stipulation pour autrui refers to specific property or to other things. 8. Distinguished from Agency A trust and an agency are distinguishable on the basis of the nonrepresentative role of the trustee and the representative role of the agent.

BUT this rule is inapplicable to the following cases i. ii. iii. iv. v. vi.

Civil status or persons Validity of marriage or legal separation Any ground for legal separation Future support Jurisdiction of courts Future legitime

9. Co-ownership as a Trust A co-ownership is a form of a trust, with each co-owner being a trustee for each of the others. 10. Parties to a Trust a) Trustor or the person who creates or established the trust;

3. Definition of Family Home Page 34 of 230

Page 199 of 230

ii.

Delay in asserting complainant’s rights after he had knowledge of the defendant’s conduct and after he has had an opportunity to sue; iii. Lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; iv. Injury or prejudice to the defendant in the event relief is accorded to the complainant.

a)

It is constituted jointly by the husband and the wife or by an unmarried head of the family

b)

It is the dwelling house where they and their family reside, and the land on which it is situated

c)

Under the FC, a family home is deemed constituted from the time it is occupied as a family residence

2. Laches and Prescription Distinguished PRESCRIPTION LACHES Concerned with the Concerned with the fact of delay fact of delay A matter of time Principally a question of inequity founded on some change in the condition of the property or the relation of the parties Statutory Not statutory Applies to law Applies to equity Based on a fixed time Not based on a fixed time

d)

Actual value of the family home shall not exceed P300,000 (URBAN) and P200,000 (RURAL) [Article 157]

e)

The Family Home is Exempt from: 1. Execution 2. Forced Sale 3. Attachment

f)

Exceptions to Exemption of Family Home (Article 155) i. Non-payment of taxes ii. incurred prior to constitution of home iii. Debts secured by mortgages on the premises iv. Debts due laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished materials for the construction of the building

TRUSTS 1. Definition of Trust: a) Trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. b) It is a right, enforceable in equity, to the beneficial enjoyment of property the legal title to which is in another. c) As it is founded in equity, it can never result from act violative of law. 2. Characteristics of Trust a) It is a relationship; b) It is a relationship of fiduciary character; c) It is a relationship with respect to property, not one involving merely personal duties; d) It involves the existence of equitable duties, imposed upon the holder of the title of the property to deal with it for the benefit of another; e) It arises as a result of a manifestation of intention to create the relationship. 3. Distinguished from Bailment A delivery of property in trust necessarily involves a transfer of legal title, or at least a separation of equitable interest and legal title, with the legal Page 198 of 230

g) Beneficiaries of a Family Income i. Husband and wife, or unmarried head of the family ii. Parents, ascendants, brothers & sisters living in home and depend on head of family for support h) Sale, alienation, Donation, Assignment or Encumbrance of the Family Home i. The person who constituted the same must give his/her written consent ii. The spouse of the person who constituted the family home must also give his/her written consent iii. A majority of the beneficiaries of legal age must also give their written consent In case of conflict, the court shall decide iv. i) Requisites for Creditor to Avail of the Right under Article 160 i. He must be a judgment creditor; ii. His claim is not among those excepted under Article155, and

Page 35 of 230

iii.

He has reasonable grounds to believe that the family home is worth more than the maximum amount fixed in Article 157

ii. iii.

Intent or at least expectation that this conduct shall be acted upon by at least influence the other party; Knowledge, actual or constructive, of the real facts

b) In relation to the party claiming the estoppel i. j) Procedure to Avail of Right under Article 160 i. The creditor must file a motion in the court proceeding where he obtained a favorable for a writ of execution against the family home. ii. 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 its constitution. iii. If the creditor proves that the actual value exceeds the maximum amount the court will order its sale in execution. iv. If the family home is sold for more than the value allowed, the proceeds shall be applied as follows: a) First, the obligations enumerated in Article 155 must be paid b) Then the judgment in favor of the creditor will be paid, plus all the costs of execution c) The excess, if any, shall be delivered to the judgment debtor Paternity and Filiation 1. Filiation of Children a) by nature - legitimate or illegitimate b) adoption 2. Legitimate children - conceived or born during the marriage Rule: the presumption is always in favor of legitimacy 3. Children by Artificial Insemination Rule: A child conceived by artificial insemination is considered legitimate under

the following conditions: i. ii.

iii.

The artificial insemination is made on the wife, not on another woman The artificial insemination on the wife is done with the sperm of the husband or of a donor, or both the husband and a donor The artificial insemination has been authorized or ratified by the spouse on a written instrument executed and signed by them before the birth of the child, and Page 36 of 230

ii. iii.

Lack of knowledge or of the means of knowing the truth as to the facts in question; Reliance, in good faith, upon the conduct or statement as to the facts in question; Action or inaction based thereon of such character as to change the position or status of the party claiming the estoppel to his injury, detriment, or prejudice

10. Estoppel against Owner When in a contract between third persons concerning immovable property, one of them is misled by a person with respect to the ownership of real right over the real estate, the latter is precluded from asserting his legal title or interest therein, provided all these requisites are present: a) There must be fraudulent representation or wrongful concealment of facts known to the party estopped; b) The party precluded must intend that the other should act upon the facts as misrepresented; c) The party misled must have been unaware of the true facts; and d) The party defrauded must have acted in accordance with the misrepresentation. § An estoppel operates on the parties to the transaction out of which it arises and their privies. § The government is not estopped by mistake or error on the part of its officials or agents; the erroneous application and enforcement of the law by public officers does not prevent a subsequent correct application of the statute. Laches 1. Nature of Laches a) Laches is failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it. b) Elements of Laches i. Conduct on the part of the defendant or of one under whom he claims, giving rise to the situation complained of; Page 197 of 230

asserted in it; a written instrument is necessary for there to be estoppel by deed Doctrines: • If the deed or instrument is null and void because of the contract, there is no estoppel • Ordinarily, the person estopped must be capacitated; but a minor is clever enough to deceive others, estoppel may result • If a person, who is not a party to the instrument, notarizes the same, he is not in estoppel b) Equitable Estoppel or Estoppel in Pais - It arises when one by his acts, representations or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist, and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts. It takes place in a situation where because if a party’s action or omission, he is denied the right to plead or prove an otherwise important fact. There may be estoppel: i. by conduct or by acceptance of benefits ii. by representation or concealment iii. by silence iv. by omission v. by laches Doctrines: • Conduct because of ignorance or mistake does not result in estoppel • Estoppel by laches bars an action to create a vested right (executory interest) but does not bar an action to protect a vested right (executed interest) • Just because a person is silent does not necessarily mean that he will be in estoppel; there should have been a duty or obligation to speak • A mere promise to perform or to omit at some future time does not necessarily result in estoppel (promissory estoppel); for this to exist, the promise must have been relied upon and prejudice would result unless estoppel is applied 9. Elements of Estoppel in Pais

a) In relation to the party sought to be estopped i.

Conduct amounting to false representation or concealment of material facts or at least calculated to convey the impression that the facts are otherwise than and consistent with those which the party subsequently attempts to assert; Page 196 of 230

iv.

The written instrument is recorded in civil registry together with the birth certificate of the child

4. Presumption regarding the child’s filiation if the marriage is terminated and the mother contracts another marriage within 300 days: Termination of 1st marriage

2nd marriage

180 days after 2nd marriage

presumed conceived during the 1st marriage

300 days after termination of 1st marriage

presumed conceived during the 2nd marriage

5. Impugning the Legitimacy of a Child General Rule: Husband alone can impugn the legitimacy of a child Exception: The heirs of the husband may impugn the child’s filiation in the following cases: i. If the husband dies before the expiration of period for filing the action ii. If the husband dies after filing without desisting iii. If the child was born after the death of the husband a) Grounds to Impugn the Legitimacy of the Child: i. It was physically impossible for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days which immediately preceded the birth of the child because of: a. Physical incapacity of the husband to have sexual intercourse with his wife b. The fact that the husband and wife were living separately in such a way that sexual intercourse was not possible, or c. Serious illness of the husband which absolutely prevented intercourse ii. If its proved that for biological or other scientific reasons, the child could not have been that of the husband, except in the case of children conceived through artificial insemination iii. In case of children conceived through artificial insemination, the written authorization or ratification of either parent was obtained through mistake, fraud, violence, intimidation or undue influence Page 37 of 230

b) Periods for Filing of Action to Impugn the Legitimacy of a Child

The action to impugn the legitimacy of the child shall be brought: i.

If the husband (or his heirs, in proper cases) resides in the city or municipality where the child was born or where his birth certificate was recorded – within 1

year ii.

iii.

If the husband (or his heirs) does not reside in the city or municipality where the child’s birth took place or was recorded but his residence is in the Philippines – within 2 years If the child’s birth took place or was recorded in the Philippines while the husband has his residence abroad, or vice-versa – within 3 years

The period shall be counted from the knowledge of the child’s birth or its recording in the civil register. HOWEVER, if the child’s birth was concealed from or was unknown to the husband or his heirs, the period shall be counted from the discovery or knowledge of the birth of the child or of the act of registration of said birth, whichever is earlier. 6. Action to Claim Legitimacy a) The child can bring the action during his lifetime b) If the child dies after reaching majority without filing an action, his heirs can longer file the action after death c) If the child dies during minority in the state of insanity, his heirs can file the action for him within 5 years form the child’s death d) If the child dies after commencing the action, the action will survive and his heirs will substitute for him e) If the child is a minor or incapacitated or insane, his guardian can bring the action in his behalf 7. Legitimate filiation may be proved by any of the following: a) Records of birth or final judgment b) Admission of legitimate filiation in a public document or in a private handwritten instrument and signed by the parent concerned; c) in the absence of these evidences, the legitimate filiation may be

proved by: i. ii.

Open and continuous possession of the status of a legitimate child Any other evidence allowed by the Rules of Court

8. Rights of Legitimate Children a) Bear surname of parents b) Receive support from parents, ascendants and in proper cases, from brothers and sisters Page 38 of 230

b)

An equitable estoppel may arise, however, even where there is no intention on the part of the person estopped to relinquish any existing right and frequently carries the implication of fraud. It involves the conduct of both parties.

4. Distinguished from Ratification In ratification, the party is bound because he intended to be bound; in estoppel, the party is bound notwithstanding the fact that there was no such intention because the other party will be prejudiced and defrauded by his conduct unless the law treats him as legally bound. 5. Distinguished from Fraud Estoppel exists with or without a contract; fraud presupposes an attempt to enter into a valid agreement or contract. While estoppel may raised as a defense, fraud may properly be a cause of action on account of the vitiated consent that it produces. 6. Admissions: A party may be estopped to insist upon a claim, assert an objection, or take a position which is inconsistent with an admission which he had previously made and in reliance upon which the other party has changed his position. 7. Silence or Inaction a) This is sometimes referred to as estoppel by “standing by” or “laches.” Mere innocent silence will not work an estoppel. There must also be some element of turpitude or negligence connected with the silence by which another is misled to his injury. But one who invokes this doctrine of estoppel must show not only unjustified inaction but also some unfair injury would result to him unless the action is held barred. b) Estoppel by acquiescence is closely related to estoppel by silence. In the former, a person is prevented from maintaining a position inconsistent with one in which he has acquiesced. 8. Kinds of Estoppel a) Technical Estoppels i. Estoppel by record – the preclusion to deny the truth of matters set forth in a record, whether judicial or legislative, and also to deny the facts adjudicated by a court of competent jurisdiction Example: the conclusiveness of a judgment on the parties to a case ii. Estoppel by deed – a bar which precludes one party to a deed and his privies from asserting as against the other party and his privies any right or title in derogation of the deed, or from denying the truth of any material facts Page 195 of 230

c) 10. AMENDMENT/CANCELLATION OF CERTIFICATE Cancelled: 1. Partnership is dissolved other than by reason of expiry of term 2. All limited partners cease to be such Amended: 1. Change in name of partnership, amount/character of contribution of ltd. partner 2. Substitution of ltd. partner 3. Admission of additional ltd. partner 4. Admission of gen. partner 5. Death, insolvency, insanity, civil interdiction of gen. partner & business is continued 6. Change in character of business 7. False/erroneous statement in certificate 8. Change in time as stated in the certificate for dissolution of partnership/return of contribution 9. Time is fixed for dissolution of partnership. Return of contribution if no orig. time specified 10. Change in other statement in certificate

ESTOPPEL Estoppel 1. Estoppel (Article 1431) a) An admission; b) Is rendered conclusive c) Upon the person making it; and d) Cannot be denied or disproved against the person relying thereon 2. Concept of Estoppel Estoppel is a bar which precludes a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative officers or by his own deed or representation, either expressed or implied. It concludes the truth in order to prevent fraud and falsehood, and imposes silence on a party only when in conscience and honesty he should not be allowed to speak. 3. Distinguished from Waiver a) A waiver is a voluntary and intentional abandonment or relinquishment of a known right. It carries no implication of fraud. It involves the act or conduct of only one of the parties. Page 194 of 230

Receive legitimate and other successional rights

Illegitimate Children 1. Periods for Filing the Action to Establish Illegitimate Filiation a) If the action is based on the record of the birth of the child or on admission by the parent of the child’s filiation in a public document or in a private handwritten signed document –during the lifetime of the child b) If the action is based on the open and continuous possession by the child of the status of an illegitimate child, or on other evidences allowed by the Rules of Court and special laws – during the lifetime of the alleged parent 2. Rights of a) b) c)

Illegitimate Children Use the surname of the mother Receive support according to the provision of the FC Receive legitimate (1/2 of that of a legitimate child) and other successional rights

Bar Question (2005). Steve was married to Linda, with whom he had a daughter, Tintin. Steve fathered a son with Dina, his secretary of 20 years, whom Dina named Joey, born on September 20, 1981. Joey’s birth certificate did not indicate the father’s name. Steve died on August 13, 1993, while Linda died on December 3, 1993, leaving their legitimate daughter, Tintin, as sole heir. On May 16, 1994, Dina filed a case on behalf of Joey, praying that the latter be declared an acknowledged illegitimate son of Steve and that Joey be given his share in Steve’s estate, which is now being solely held by Tintin. Tintin put up the defense that an action for recognition shall only be filed during the lifetime of the presumed parents and that the exceptions under Article 285 of the Civil Code do not apply to him since the said article has been repealed by the Family Code. In any case, according to Tintin, Joey’s birth certificate does not show that Steve is his father. a) Does Joey have a cause of action against Tintin for recognition and partition? Explain.

Answer: Yes, Joey has such a cause of action against Tintin. While the Family Code has repealed provisions of the New Civil Code on proof of filiation, said repeal did not impair vested rights. Joey was born an illegitimate child in 1981. As an illegitimate child, he had acquired, at birth, the right to prove his filiation in accordance with the law in force at the time. Under the NCC, an illegitimate child may file an action to compel his recognition even after the death of the putative father when the father died during the minority of the child. While the FC has repealed this provision, it will not operate to prejudice Joey who has already acquired a vested right thereto. Page 39 of 230

b) Are the defenses set up by Tintin tenable? Explain.

Answer: The defenses of Tintin are not tenable. The fact that Joey’s birth certificate does not show that Steve was his father is of no moment. The law does not require such mention. Beside, the NCC provides that when the father did not sign the birth certificate, his name should not be disclosed therein. While it is true that capacity to inherit is determined at the time of death of the decedent and that filiation is an element of capacity to inherit, filiation is determined not at the time of death of the decedent but at the time of the birth of the child who is born with a status. Such status may subsequently change such as in legitimation, but legitimation is deemed to retroact to the time of birth. In the same manner, recognition when given voluntarily by the father, or decreed by the court, retroacts to the time of the child’s birth. c) Supposing that Joey died during the pendency of the action, should the action be dismissed? Explain. Answer: If Joey filed the action and died when the NCC was still in force, his action would be dimissed because the action was not transmissible to the heirs of the illegitimate child (Conde v. Abaya, 13 Phil 249 [1909]). But if the action was filed after the effectivity of the FC, and Joey died during the pendency of the action, it should not be dismissed. Under the FC, an action commenced by a legitimate child to claim his legitimate filiation is not extinguished by death. The FC makes this provision applicable to the action for recognition filed by an illegitimate child. Joey has a right to invoke this provision because it does not impair any vested rights (Art. 175, FC). Legitimated children 1. Requisites for Legitimation a) The child was conceived and born outside of wedlock; b) The parents, at the time of child’s conception, were not disqualified by any impediment to marry each other 2. Legitimation takes place by the subsequent marriage of the child’s parents 3. Effect of legitimation: It confers on the child the rights of legitimate children 4. Effects of legitimation retroact to the time of the child’s birth 5. Legitimation may be impugned only those who are prejudiced in their rights within 5 years from the time the cause of action accrues

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

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

6. LOAN AND OTHER BUSINESS TRANSACTIONS WITH LIMITED PARTNERSHIP 1. Allowed a. Granting loans to partnership b. Transacting business with partnership c. Receiving pro rata share of partnership assets with general creditors if he is not also a general partner 2. Prohibited a. Receiving/holding partnership property as collateral security b. Receiving any payment, conveyance, release from liability if it will prejudice right of 3rd persons 7. REQUITES FOR RETURN OF CONTRIBUTION OF LIMITED PARTNER: 1. All liabilities of partnership have been paid/if not yet paid, at least sufficient to cover them 2. Consent of all members has been obtained 3. Certificate is cancelled/amended as to set forth withdrawal /reduction of contribution 8. LIABILITY OF LIMITED PARTNER AS CREDITOR AS TRUSTEE 1. Deficiency in Specific property stated as contributed but not yet contribution contributed/wrongfully returned 2. Unpaid Money/other property wrongfully paid/ conveyed to him contribution on account of his contribution

Answer: The child is legitimate of the second marriage under Article 168(2) of the Family Code which provides that a “child born after one hundred eighty days

9. DISSOLUTION OF LIMITED PARTNERSHIP Priority in Distribution of Assets: 1. Those due to creditors, including limited partners 2. Those due to limited partners in respect of their share in profits/compensation 3. Those due to limited partners of return of capital contributed 4. Those due to general partner other than capital & profits 5. Those due to general partner in respect to profits 6. Those due to general partner for return of capital contributed

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Bar Question (1999). a) Two (2) months after the death of her husband who was shot by unknown criminal elements on his way home from the office, Rose married her childhood boyfriend, and seven (7) months after said marriage, she delivered a baby. In the absence of any evidence from Rose as to who is her child’s father, what status does the law give to said child? Explain.

partners Name may appear in firm name Prohibition against engaging in business Retirement, death, insolvency, insanity of gen partner dissolves partnership

Name must appear in firm name No prohibition against engaging in business Does not have same effect; rights transferred to legal representative

3. REQUIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP

1.

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

n.

2.

Name of partnership + word "ltd." Character of business Location of principal place of business Name/place of residence of members Term for partnership is to exist Amount of cash/value of property contributed Additional contributions Time agreed upon to return contribution of limited partner Sharing of profits/other compensation Right of limited partner (if given) to substitute an assignee Right to admit additional partners Right of limited partners (if given) to priority for contributions Right of remaining gen partners (if given) or continue business in case of death, insanity, retirement, civil interdiction, insolvency Right of limited partner (if given) to demand/receive property/cash in return for contribution

Certificate must be filed with the SEC

4. WHEN GENERAL PARTNER NEEDS CONSENT/RATIFICATION OF ALL LTD PARTNERS: 1. Do any act in contravention of the certificate 2. Do any act which would make it impossible to carry on the ordinary business of the partnership 3. Confess judgment against partnership 4. Possess partnership property/assign rights in specific partnership property other than for partnership purposes 5. Admit person as general partner 6. Admit person as limited partner - unless authorized in certificate 7. Continue business with partnership property on death, retirement, civil interdiction, insanity or insolvency of gen partner unless authorized in certificate

following the celebration of the subsequent marriage is considered to have been conceived during such marriage, even though it is born within three hundred days after the termination of the former marriage.” b) Nestor is the illegitimate son of Dr. Perez. When Dr. Perez died, Nestor intervened in the settlement of his father’s estate, claiming that he is the illegitimate son of said deceased, but the legitimate family of Dr. Perez is denying Nestor’s claim. What evidence or evidences should Nestor present so that he may receive his rightful share in his father’s estate?

Answer: To be able to inherit, the illegitimate filiation of Nestor must have been admitted by his father in any of the following: (1) the record of birth appearing in the civil register, (2) a final judgment, (3) a public document signed by the father, or (4) a private handwritten document signed by the father (Article 175 in relation to Article 172 of the Family Code). Adoption 1. Who May Adopt: Any person provided he is: a. Of age b. In possession of full civil capacity and legal rights c. In a position to support and care for his legitimate and illegitimate children, in keeping with the means of the family d. At least 16 years older than the person to be adopted, unless: i. The adopter is the natural parent of the child to be adopted, or ii. The adopter is the spouse of the legitimate parent of the person to be adopted 2. Who May a) b) c)

Not Adopt Guardian with respect to ward before final accounting Person convicted of crime involving moral turpitude Alien

Exceptions (an alien may adopt): i. ii. iii. iv.

Former Filipino adopting a relative by blood Alien adopting legitimate child of Filipino spouse Joint adoption by Alien and Filipino spouse of latter’s blood relative Those allowed by rules on inter-country adoption

Bar Question (2001). A German couple filed a petition for adoption of a minor Filipino child with the Regional Trial Court of Makati under the provisions of the Child and Youth Welfare Code which allowed aliens to adopt. Before the petition could be heard, the Family Code, which repealed the Child and Youth Welfare Code, came into effect. Consequently, the Solicitor General filed a motion to

5. SPECIFIC RIGHTS OF LIMITED PARTNERS: Page 192 of 230

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dismiss the petition, on the ground that the Family Code prohibits aliens from adopting. If you were the judge, how will you rule on the motion?

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Creditors have an equitable lien on the consideration paid to the retiring/deceased partner by the purchaser when retiring/deceased partner sold his interest w/o final settlement with creditors

Answer: The motion to dismiss the petition for adoption should be denied. The law that should govern the action is the law in force at the time of the filing of the petition. At that time, it was the Child and Youth Welfare Code that was in effect, not the Family Code. Petitioners have already acquired a vested right on their qualification to adopt which cannot be taken away by the Family Code. (Republic v. Miller G.R. No. 125932, April 21, 1999, citing Republic v. CA, 205 SCRA 356)

•

Rights if retiring/estate of deceased partner:

3. Who May Not Be Adopted a) Person of legal age Exception: An adult may be adopted if he is: i. A child by nature of adopter or of spouse ii. Consistently considered by adopter as his own child during minority b) Alien whose country has no diplomatic relations with the Philippines c) Person previously adopted (not yet revoked)

a. b.

Right to 1. 2. 3.

To have the value of his interest ascertained as of the date of dissolution To receive as ordinary creditor the value of his share in the dissolved partnership with interest or profits attributable to use of his right, at his option Account - may be exercised by: Winding up partner Surviving partner Person/partnership continuing the business

Persons Authorized to Wind Up 1. Partners designated by the agreement 2. In absence of agreement, all partners who have not wrongfully dissolved the partnership 3. Legal representative of last surviving partner

4. General Rule: Husband and Wife must jointly adopt

Exceptions: a) b)

One spouse adopts his/her illegitimate child One spouse adopts legitimate child of the other

5. Written Consent Necessary For Adoption a) Person to be adopted, if 10 years old or over b) Natural parents or legal guardian of the person to be adopted c) Legitimate children of the adopter, 10 years old or over d) Adopted children of the adopter, 10 years old or over e) Illegitimate children of the adopter, 10 years old or over and living with him f) Spouse of the adopted, if married g) Spouse of the adopter, if married 6. Effects of Adoption a) Deemed a legitimate child of the adopter b) Acquired reciprocal rights and obligations arising from parent-child relationship c) Right to use surname of the adopter d) Parental authority of natural parents terminates and vested in adopter e) Remains intestate heir of natural parents and blood relatives 7. Judicial Rescission of Adoption Rule 100, ROC: Rescission and Revocation of Adoption Page 42 of 230

Limited Partnership 1. Characteristics a) Formed by compliance with statutory requirements b) One or more general partners control the business c) One or more general partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond their capital contributions d) May ask for the return of their capital contributions under conditions prescribed by law e) Partnership debts are paid out of common fund and the individual properties of general partners 2. Differences between General And Limited Partner/Partnership GENERAL LIMITED Personally liable for partnership obligations Liability extends only to his capital contributions When manner of mgt. not agreed upon, all No participation in management gen partners have an equal right in the mgt. of the business Contribute cash, property or industry Contribute cash or property only, not industry Proper party to proceedings by/against Not proper party to proceedings partnership by/against partnership Interest not assignable w/o consent of other Interest is freely assignable Page 191 of 230

iii. Rights of partner where dissolution in contravention of agreement 1. Partner who did not cause dissolution wrongfully: a. Apply partnership property to discharge liabilities of partnership b. Apply surplus, if any to pay in cash the net amount owed to partners c. Indemnity for damages caused by partner guilty of wrongful dissolution d. Continue business in same name during agreed term e. Posses partnership property if business is continued 2.

Partner who wrongly caused dissolution: a. If business not continued by others - apply

b.

partnership property to discharge liabilities of partnership & receive in cash his share of surplus less damages caused by his wrongful dissolution If business continued by others - have the value of his interest at time of dissolution ascertained and paid in cash/secured by bond & be released from all existing/future partnership liabilities

iv. Rights of injured partner where partnership contract is rescinded on ground of f fraud/misrepresentation by 1 party: 1. Right to lien on surplus of partnership property after satisfying partnership liabilities 2. Right to subrogation in place of creditors after payment of partnership liabilities 3. Right of indemnification by guilty partner against all partnership debts & liabilities 3. SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS a) Assets of the partnership: 1. Partnership property (including goodwill) 2. Contributions of the partners b) Order of Application of Assets: 1. Partnership creditors 2. Partners as creditors 3. Partners as investors - return of capital contribution 4. Partners as investors - share of profits if any

a) b)

Who may petition? Adoptee only. Grounds: i. ii. iii. iv.

c) d)

Repeated physical and verbal maltreatment Attempt on life Sexual assault/violence Abandonment and failure to comply with parental obligation Remedy of adopter against the erring adoptee: Disinheritance

Effects of rescission: i. ii. iii. iv.

Restoration of previous legal custody (for minors) or appointment of guardians Extinguishment of reciprocal rights Cancellation of amended birth certificate and restoration of original birth certificate The adopted shall revert to his surname prior to the adoption

Bar Question (2000). Sometime in 1990, Sarah, born a Filipino but by then a naturalized American citizen, and her American husband Tom, filed a petition in the Regional Trial Court of Makati, for the adoption of the minor child of her sister, a Filipina. Can the petition be granted?

Answer: It depends. If Tom and Sarah have been residing in the Philippines for at least 3 years prior to the effectivity of RA 8552, the petition may be granted. Otherwise, the petition cannot be granted because th American husband is not qualified to adopt. While the petition for adoption was filed in 1990, it was considered refilled upon the effectivity of RA 8552, the Domestic Adoption Act of 1998. This is the law applicable, the petition being still pending with the lower court. Under the Act, Sarah and Tom must adopt jointly because they do not fall in any of the exceptions where one of them may adopt alone. When husband and wife must adopt jointly, the Supreme Court has held in a line of cases that both of them must be qualified to adopt. While Sarah, an alien, is qualified to adopt under Section 7(b)(i) of the Act for being a former Filipino citizen who seeks to adopt a relative within the 4th degree of consanguinity or affinity, Tom, an alien, is not qualified because he is neither a former Filipino citizen nor married to a Filipino. One of them not being qualified to adopt, their petition has to be denied. However, if they have been residents of the Philippines three years prior to the effectivity of the Act and continues to reside here until the decree of adoption is entered, they are qualified to adopt the nephew of Sarah under Section 7(b) thereof, and the petition may granted.

4. WHEN BUSINESS OF DISSOLVED PARTNERSHIP IS CONTINUED: • Creditors of old partnership are also creditors of the new partnership which continues the business of the old one w/o liquidation of the partnership affairs

8. Inter-Country Adoption Act of 1995 (R.A. 8043) • Inter-country adoption shall only be resorted to after all possibilities for the adoption of the Filipino child within the Philippines have been exhausted.

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Who May be Adopted — Only a legally free child may be the subject of inter-country adoption. In order that the child may be considered for placement, the following documents must be submitted to the ICAB: a) Child study b) Birth certificate/foundling certificate c) Deed of voluntary commitment/decree of abandonment/death certificate of parents d) Medical evaluation/history e) Psychological evaluation, as necessary f) Recent photo of the child. Who may adopt – Any alien or Filipino permanently residing abroad if he/she: 1. is at least 27 yrs of age and at least 16 yrs older than the child to be adopted, unless the adopter is the parent by nature of the child, or the spouse of such parent 2. if married, his/her spouse must jointly file adoption 3. has the capacity to act and assume all right and responsibilities of parental authority under Phil law, and has undergone appropriate counseling from an accredited counselor 4. has not been convicted of a crime involving moral turpitude 5. is eligible to adopt under his/her national law 6. is in a position to provide the proper care and support and to give the necessary moral values and example to all his children, including the child to be adopted 7. agrees to uphold the basic rights of the child as embodied under Phil laws, the U.N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement this Act (R.A. 8043) 8. comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption is allowed under his/her national laws 9. possesses all the qualifications and none of the disqualifications provided herein and in other applicable Philippine laws.

Bar Question (2005). Hans Herber, a German national, and his Filipino wife, Rhoda, are permanent residents of Canada. They desire so much to adopt Magno, an 8-year old orphaned boy and a baptismal godson of Rhoda. Since the accidental death of Magno’s parents in 2004, he has been staying with his aunt who, however, could hardly afford to feed her own family. Unfortunately, Hans and Rhoda cannot come to the Philippines to adopt Magno although they possess all the qualifications as adoptive parents. Is there a possibility for them to adopt Magno? How should they go about it?

Answer: Under RA 8043 establishing the rules for inter-country adoption of Filipino children, the spouses may file an application to adopt a Filipino child with Page 44 of 230

(a)

(b)

b.

Situation 1 i. Had extended credit to partnership prior to dissolution & ii. Had no knowledge/notice of dissolution, or Situation 2 i. Did not extend credit to partnership ii. Had known partnership prior to dissolution iii. Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on

Partner cannot bind the partnership anymore after dissolution: (1) Where dissolution is due to unlawfulness to carry on with business (except: winding up of partnership affairs) (2) Where partner has become insolvent (3) Where partner unauthorized to wind up partnership

affairs, except by transaction with one who: (a) Situation 1 i. Had extended credit to partnership prior to dissolution & ii. Had no knowledge/notice of dissolution, or (b) Situation 2 i. Did not extend credit to partnership prior to dissolution ii. Had known partnership prior to dissolution iii. Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on 2. DISCHARGE OF LIABILITY – i. Dissolution does not discharge existing liability of partner, except by agreement between: (1) partner himself (2) person/partnership continuing the business (3) partnership creditors ii. Rights of partner where dissolution not in contravention of agreement 1. Apply partnership property to discharge liabilities of partnership 2. Apply surplus, if any to pay in cash the net amount owed to partners Page 189 of 230

8. d)

Decree of court under art 1831

GROUNDS FOR DISSOLUTION BY DECREE OF COURT (art 1831): 1. Partner declared insane in any judicial proceeding or shown to be of unsound mind 2. Incapacity of partner to perform his part of the partnership contract 3. Partner guilty of conduct prejudicial to business of partnership 4. Willful or persistent breach of partnership agreement or conduct which makes it reasonably impracticable to carry on partnership with him 5. Business can only be carried on at a loss 6. Other circumstances which render dissolution equitable

Upon application by purchaser of partner's interest: 1. 2.

e)

After termination of specified term/particular undertaking Anytime if partnership at will when interest was assigned/charging order issued

EFFECTS OF DISSOLUTION:

1. AUTHORITY OF PARTNER TO BIND PARTNERSHIP TERMINATED • General Rule: Authority of partners to bind partnership is terminated. Exceptions: 1. Wind up partnership affairs 2. Complete transactions not finished •

Qualifications: 1. With respect to partners a. Authority of partners to bind partnership by new contract is immediately terminated when dissolution is not due to ACT, DEATH or INSOLVENCY (ADI) of a partner (art 1833); b. If due to ADI, partners are liable as if partnership not

dissolved, when the ff. concur: i. ii.

2.

If cause is ACT of partner, acting partner must have knowledge of such dissolution If cause is DEATH or INSOLVENCY, acting partner must have knowledge/ notice

With respect to persons not partners (art 1834) -

a.

Partner continues to dissolution in ff. cases:

bind

partnership

even

after

1. Transactions in connection to winding up partnership affairs/completing transactions unfinished 2. Transactions which would bind partnership if not

dissolved, when the other party/obligee: Page 188 of 230

the Inter-country Adoption Board (ICAB) after they have been determined fit and eligible to adopt by the State Welfare Agency or a licensed adoption agency in Canada. The Canadian agency will forward the required supporting documents to the ICAB for matching with a Filipino child. The spouses, after filing a petition with the ICAB, shall be issued the Placement Authority and when all the travel documents of the child who is declared legally eligible for adoption as determined by the ICAB are ready, the adoptive parents or any one of them shall personally fetch the child in the Philippines for adoption in the court of the foreigner’s country. Support 1. Support consists of everything indispensable for: a) Sustenance b) Dwelling c) Clothing d) Medical attendance e) Education – includes schooling or training for some profession, trade or vocation, even beyond the age of majority f) Transportation – includes expenses going to and from school, or to from place of work 2. Amount of support shall be in proportion to the means of the giver and to the need of the recipient 3. The Following are Obliged to Support Each Other to the Whole Extent: a) Spouses b) Legitimate ascendants and descendants c) Parents and their legitimate children and the children of the latter (legitimate or illegitimate) d) Parents and their illegitimate children and the children of the latter (legitimate or illegitimate) 4. Rules regarding Support to Illegitimate Brothers and Sisters (Whether Full or Half Blood) a) If the one asking for support is below majority age, he is entitled to support from his illegitimate brother or sister to the full extent, without any condition; b) If the one asking for support is already of majority age, he is entitled to support only if his need for support is not due to a cause imputable to his fault or negligence 5. Properties Liable for the Support of the Relatives a) Spouses – absolute community or conjugal property b) Common children of the spouses – absolute community or conjugal property Page 45 of 230

c)

Children of a spouse by another marriage – absolute community or

2.

conjugal property d)

Illegitimate children of either spouse: i. Under the system of absolute community – separate

ii.

iii.

property of the parent-spouse, if the same is insufficient or there is no such property, the absolute community is liable but the support is considered as advances on the share of the parent to be paid by him to the community at the time of liquidation; Under the system of conjugal partnership – separate property of the parent-spouse; if the same is insufficient or there is no such property, the conjugal property is liable if financially capable, but the support paid to the child shall be deducted from the share of the parent-spouse at the time of liquidation of the partnership

Answers: 1. No, a conveyance by a partner of his whole interest in a partnership does not of itself dissolve the partnership in the absence of an agreement. (Art. 1813, Civil Code) 2. Justine cannot interfere or participate in the management or administration of the partnership business or affairs. She may, however, receive the net profits to which Una would have otherwise been entitled. In this case, P120,000. (Art. 1813, Civil Code) Dissolution and Winding Up a)

DISSOLUTION - change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business; partnership is not terminated but continues until the winding up of partnership affairs is completed

b)

WINDING UP - process of settling the business or partnership affairs after dissolution

c)

CAUSES OF DISSOLUTION: 1. Without violation of the agreement between the partners a. By termination of the definite term/ particular undertaking specified in the agreement b. By the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified c. By the express will of all the partners who have not assigned their interest/ charged them for their separate debts, either before or after the termination of any specified term or particular undertaking d. By the expulsion of any partner from the business bonafide in accordance with power conferred by the agreement

Legitimate ascendants, other legitimate and illegitimate descendants, and legitimate and illegitimate brothers and sisters – separate property of the obligor-spouse; if the same is not sufficient or there is none, the absolute community or conjugal property shall be liable if financially capable, which support shall be deducted from the share of the spouse upon liquidation of the ACP or CPG

6. Order of Liability if 2 or More are Obliged to Support: i. Spouse ii. Descendants in nearest degree iii. Ascendants in nearest degree iv. Brothers and sisters 7. Options of the Person Giving Support a) To give a fixed monthly allowance; or b) To receive and maintain the recipient in the giver's home or family dwelling Exception: when there is a legal or moral obstacle thereto

What are the rights of Justine, if any, should she desire to participate in the management of the partnership and in the distribution of a net profit of P360,000.00 which was realized after her purchase of Una’s interest? (3%)

2.

Parental Authority 3. 1. Concept of Parental Authority (Patria Potestas) 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 under certain circumstances. Page 46 of 230

4. 5. 6. 7.

In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time By any event which makes it unlawful for business to be carried on/for the members to carry it on for the partnership Loss of specific thing promised by partner before its delivery Death of any partner Insolvency of a partner/partnership Civil interdiction of any partner Page 187 of 230

Title in name of all partners, Conveyance in name of all partners

Conveyance will pass title

2. PARTNER BY ESTOPPEL; PARTNERSHIP BY ESTOPPEL a) Partner by estoppel - by words or conduct, he does any of the ff.: 1. Directly represents himself to anyone as a partner in an existing partnership or in a non-existing partnership 2. Indirectly represents himself by consenting to another representing him as a partner in an existing partnership or in a non existing partnership b) Elements to establish liability as a partner on ground of estoppel: 1. Defendant represented himself as partner/represented by others as such and not denied/refuted by defendant 2. Plaintiff relied on such representation 3. Statement of defendant not refuted c) Liabilities in estoppel All partners consented to representation No existing partnership & all those represented consented; Not all partners of existing partnership consents to representation No existing partnership & not all represented consented; None of partners in existing partnership consented

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

Person who represented himself liable & those who made/consented to representation separately liable

3. OBLIGATIONS OF PARTNERSHIP TO PARTNERS 1. To refund the amounts disbursed by partner in behalf of the partnership + corresponding interest from the time the expenses are made (loans and advances made by a partner to the partnership aside from capital contribution) 2. To answer for obligations partner may have contracted in good faith in the interest of the partnership business 3. To answer for risks in consequence of its management

2. Characteristics of Parental Authority a) It is a natural right and duty of the parents (Art. 209 FC) b) It cannot be renounced, transferred or waived except in cases authorized by law (Art 210 FC) c) It is jointly exercised by the father and the mother (Art. 211, FC) d) It is purely personal and cannot be exercised through agents e) It is temporary 3. Who Exercises Parental Authority in Case of Absence, Death or Remarriage of Either Parent, or Separation of the Parents a) In case of absence of either parent – parent present b) In case of death of either parent – surviving parent c) In case of remarriage of surviving parent – still the surviving parent, unless the court appoints a guardian over the child d) In case of separation of parents – parent designated by the court i. The court shall take into account all relevant considerations, especially the choice of the child over 7 years old, unless the parent is unfit. ii. Tender years rule- A child under 7 years of age shall not be separated from the mother unless the court finds compelling reasons to order otherwise. e) In case of death, absence or unsuitability of both parents, the surviving grandparent shall exercise substitute parental authority. 4. Order of Substitute Parental Authority i. Surviving grandparent ii. Oldest brother or sister over 21 iii. Child’s actual custodian, over 21 Note: This applies also to appointment of guardian over the child’s property 5. In case of foundlings, abandoned children, neglected children or abused children, summary judicial proceedings shall be instituted so that they may be entrusted to: i. Heads of children’s homes ii. Orphanages, or iii. Similar institutions duly accredited by the proper government agency

Bar Question (1998). Dielle, Karlo and Una are general partners in a merchandising firm. Having contributed equal amounts to the capital, they also agree on equal distribution of whatever net profit is realized per fiscal period. After two years of operation, however, Una conveys her whole interest in the partnership to Justine, without the knowledge and consent of Dielle and Karlo. 1. Is the partnership dissolved? (2%)

6. Special Parental Authority a) The following exercise special parental authority over the minor child while under their supervision, instruction or custody: i. The school, its administrators and teachers, or ii. The individual, entity or institution engaged in child care b) Liability of Those Exercising Special Parental Authority Over the Child -

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They are principally and solidarily liable for damages caused by the acts or missions of the child while under their supervision, instruction or custody. HOWEVER, this liability is subject to the defense that the person exercising parental authority exercised proper diligence. The parents and judicial guardians of the minor or those exercising substitute parental authority over the minor are subsidiarily liable for said acts and omissions of the minor.

Distinction between Substitute Parental Authority and Special Parental Authority Substitute Parental Authority It is exercised in case of death, absence, or if unsuitability of parents. Hence, it is not exercised by the parents of parental authority over the minor children.

Special Parental Authority It is exercised concurrently with the parental authority of the parents and rest on the theory that while the child is in the custody of the person exercising special parental authority, the parents temporarily relinquish parental authority over the child to the latter

2.

Acts of strict dominion or ownership: a.

Assign partnership property in trust for creditors b. Dispose of good-will of business c. Do an act w/c would make it impossible to carry on ordinary business of partnership d. Confess a judgment e. Enter into compromise concerning a partnership claim or liability f. Submit partnership claim or liability to arbitration g. Renounce claim of partnership Acts in contravention of a restriction on authority

Effects of Conveyance of Real Property Belonging to the Partnership

7. Liability of Parents for Torts Committed By Their Minor Children a) Parents and other person exercising parental authority are civilly liable for the torts committed by their minor children, PROVIDED they are living in their company b) This is subject to the appropriate defenses provided by law

Title in partnership name, Conveyance in partnership name

8. Effect of Parental Authority Upon the Property of the Child a) The Father and Mother shall jointly exercise legal guardianship over the property of the minor child without court appointment b) In case of disagreement, the father’s decision shall prevail, unless there is judicial order to the contrary c) If the market value of the property or the annual income of the child exceeds P50,000, the parent is required to furnish a bond of not less than 10% of the value of the child’s property or income

Title in partnership name, Conveyance in partner's name

9. Grounds for Suspension of Parental Authority a) Conviction of parent for crime with civil interdiction b) Treats child with excessive harassment and cruelty c) Gives corrupting orders, counsel or example d) Compels child to beg e) Subjects or allows acts of lasciviousness

Partnership not liable to 3rd persons having actual or presumptive knowledge of the restrictions

Conveyance passes title partnership can recover if: 1.

Title in name of 1/ more partners, Conveyance in name if partner/partners in whose name title stands

Title in name of 1/more/all partners or 3rd person in trust for partnership, Conveyance executed in partnership name of in name of partners

Conveyance was not in the usual way of business, or 2. Buyer had knowledge of lack of authority Conveyance does not pass title but only equitable interest, unless: 1. Conveyance was not in the usual way of business, or 2. Buyer had knowledge of lack of authority Conveyance passes title but partnership can recover if: 1. Conveyance was not in the usual way of business, or 2. Buyer had knowledge of lack of authority Conveyance will only pass equitable interest

10. Grounds for Termination of Parental Authority Page 48 of 230

but

Page 185 of 230

ii. iii.

Right not assignable Right limited to share of what remains after partnership debts have been paid c) Nature of partner's right in the partnership- Share of profits and surplus C. OBLIGATION OF PARTNERS WITH REGARD TO 3RD PERSONS 1.

2.

3.

4.

6.

11. Cases where Parental Authority May be Revived (i.e. “Suspended” Parental Authority) a) Adoption of child b) Appointment of general abandonment c) Judicial declaration of abandonment d) Final judgment divesting parental authority e) Judicial declaration of absence or incapacity or person exercising parental authority

Notice to partner of any matter relating to partnership affairs operates as notice to partnership except in case of fraud:

OBLIGATIONS

Knowledge of partner acting in the particular matter acquired while a partner b. Knowledge of the partner acting in the particular matter then present to his mind c. Knowledge of any other partner who reasonably could and should have communicated it to the acting partner Partners and the partnership are solidary liable to 3rd persons for the partner's tort or breach of trust

Liability of incoming partner is limited to: a.

7. 8.

His share in the partnership property for existing obligations b. His separate property for subsequent obligations Creditors of partnership preferred in partnership property & may attach partner's share in partnership assets Every partner is an agent of the partnership

1. POWER OF PARTNER AS AGENT OF PARTNERSHIP Acts for carrying on in the usual way the business of the partnership

1.

Death of parents Death of child Emancipation of child If the parents exercising parental authority has subjected the child or allowed him to be subjected to sexual abuse, he shall be permanently deprived of parental authority.

Every partnership shall operate under a firm name. Persons who include their names in the partnership name even if they are not members shall be liable as a partner All partners shall be liable for contractual obligations of the partnership with their property, after all partnership assets have been exhausted a. Pro rata b. Subsidiary Admission or representation made by any partner concerning partnership affairs within scope of his authority is evidence against the partnership

a.

5.

a) b) c) d)

Act w/c is not apparently for the carrying of business in the usual way

Every partner is an agent and may execute acts with binding effect even if he has no authority Except: when 3rd person has knowledge of lack of authority Does not bind partnership unless authorized by other partners

Page 184 of 230

OBLIGATIONS AND CONTRACTS

1. An obligation is a juridical necessity to give, to do or not to do (Art. 1156, NCC) 2. Sources of Obligations (Art. 1157, NCC) a) Law - must be expressly or impliedly set forth, cannot be presumed b) Contracts - must be complied with in good faith because it is the “law” between parties c) Quasi-contracts- juridical relation resulting from lawful, voluntary and unilateral act, and which has for its purpose the payment of indemnity to prevent unjust enrichment Kinds: a. Negotiorum gestio- unauthorized management; This takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority b. Solutio indebiti- undue payment ; This takes place when something is received when there is no right to demand it, and it was unduly delivered thru mistake d) Acts or omissions punished by law; and e) Quasi-delicts 3. Three types of obligations.-1) obligation to give 2) obligation to do; and 3) obligation not to do. Page 49 of 230

4. Three Accessory Obligations in Obligation to Give: a. Art. 1163.-- To take care of the thing w/ the diligence of a good father of a family until actual delivery. b. Art. 1164.-- To deliver the fruits to the creditor (fruits produced after obligation to deliver arises.) c. Art. 1166.-- To deliver accessions and accessories.

1.

5. Remedies Available to the Creditor in case of breach a. specific performance b. rescission c. damages, exclusively or in addition to either of both remedies

b. c. d. 4.

6. General Rule: there must be demand before delay may be incurred, except a. express declaration in the obligation or law b. time is of the essence c. demand is useless d. acknowledgment of default 7. Grounds for Liability a. Fraud b. Negligence c. Delay d. Violation of the tenor of the obligation 8. Delay is the non-fulfillment of the obligation w/ respect to time. Kinds of Delay: a. Mora Solvendi -- delay in the performance (on the part of the debtor); b. Mora Accipiendi -- delay in the acceptance (on the part of the creditor); c. Compensation Morae -- mutual delay 9. Loss due to Fortuitous Events (Art. 1174) Balane: General Rule: The happening of a fortuitous event exonerates the debtor from liability.

Exceptions: i. ii. iii.

When the law so specifies - e.g., if the debtor is already in delay (Art. 1165, par. 3.) When the parties so agree When the nature of the obligation requires the assumption of risk, e.g., an insurance contract.

2. 3. a.

5.

Right to associate another person with him in his share without consent of other partners (subpartnership) Right to inspect and copy partnership books at any reasonable hour Right to a formal account as to partnership affairs (even during existence of partnership): If he is wrongfully excluded from partnership business or possession of its property by his copartners If right exists under the terms of any agreement As provided by art 1807 Whenever other circumstances render it just and reasonable Duty to render on demand true and full information affecting partnership to any partner or legal representative of any deceased partner or of any partner under legal disability Duty to account to the partnership as fiduciary

Prohibition Against Engaging in Business INDUSTRIAL PARTNER PROHIBITION Industrial partner cannot engage in business (w/n same line of business with the partnership) unless partnership expressly permits him to do so REMEDY Capitalist partners may: 1. Exclude him from the firm, or 2. Avail themselves of the benefits which he may have obtained 3. Damages, in either case

CAPITALIST PARTNER Capitalist partner cannot engage in business (with same kind of business with the partnership) for his own account, unless there is a stipulation to the contrary Capitalist partner in violation shall: 1. Bring to common fund any profits accruing to him from said transaction, and 2. Bear all losses

Note: It is believed that industrial partners are also entitled to the remedy granted since they are equally prejudiced B. PROPERTY RIGHTS OF A PARTNER

Requisites for exemption from liability due to an "act of God."-- the following

a) Comprises of: 1. His rights in specific partnership property 2. His interest in the partnership 3. His right to participate in the management

must concur: i. the cause of the breach of the obligation must be independent of the will of the debtor;

b) Nature of partner's right in specific partnership property i. Equal right to possession

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Page 183 of 230

h) Rules for Distribution of Profits and Losses DISTRIBUTION OF PROFITS DISTRIBUTION OF LOSSES With According to agreement According to agreement

agreement Without agreement

1.

2.

Share of capitalist partner is in proportion to his capital contribution Share of industrial partner is not fixed - as may be just and equitable under the circumstances

1.

2.

3.

If sharing of profits is stipulated - apply to sharing of losses If no profit sharing stipulated - losses shall be borne according to capital contribution Purely industrial partner not liable for losses

ii. iii.

the event must be either unforseeable or unavoidable; the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and iv. the debtor must be fee from any participation in, or aggravation of the injury to the creditor.

Kinds of Obligations

According to Demandability: a. b.

i) Rights and Obligations with Respect to Management Power of managing Vote of partners partner is irrevocable representing without just/lawful controlling interest cause; Revocable only necessary to revoke when in bad faith power Partner is appointed Power is revocable any manager after constitution of time for any cause

Partner is appointed manager in the articles of partnership

partnership 2 or more persons entrusted with management of partnership without specification of duties/stipulation that each shall not act w/o the other's consent Stipulated that none of the managing partners shall act w/o the consent of others

Manner of management not agreed upon

Each may execute all acts of administration

Concurrence of all necessary for the validity of acts

1.

2.

All partners are agents of the partnership Unanimous consent required for alteration of immovable property

j) Other rights and obligations of partners: Page 182 of 230

In case of opposition, decision of majority shall prevail; In case of tie, decision of partners owning controlling interest shall prevail Absence or disability of any one cannot be alleged unless there is imminent danger of grave or irreparable injury to partnership If refusal of partner is manifestly prejudicial to interest of partnership, court's intervention may be sought

c.

Pure – A pure obligation is one w/c is not subject to a condition or a term. Conditional • A condition is a future and uncertain event upon w/c an obligation or provision is made to depend. Futurity and uncertainty must concur as characteristics of the event. • Suspensive condition (condition precedent) wherein the happening of the event gives birth to an obligation • Resolutory condition (condition subsequent) wherein the happening of the event will extinguish the obligation. • Potestative-depends upon will of debtor • Casual- depends on chance or will of 3rd persons • Mixed-depends partly upon will of the parties and partly in chance or will of third persons • Effect of Impossible conditions: - a positive suspensive condition to do an impossible/ illegal thing-- The obligation is void. - a negative condition (not to do an impossible thing)-Disregard the condition. - a condition not to do an illegal thing (negative)-- This is not expressly provided for in the provision but is implied. The obligation is valid. E.g. "I will sell you a piece of land provided you do not plant marijuana on it." With a term/period – a term is a future and certain event upon w/c the demandability (or extinguishment) of an obligation depends. A term or period is an interval of time, w/c, exerting an influence on an obligation as a consequence of a juridical act, either suspends its demandability or produces its extinguishment. o Suspensive term (ex die -- from the day) or one the arrival of w/c will make the obligation demandable o Resolutory term (in die -- into the day) or one the arrival of w/c will extinguish the obligation. o Rule: debtor shall lose the right to make use period, when: – after the obligation is incurred, he becomes insolvent, unless he gives new guaranty – he does not furnish creditor the promised guaranties and securities Page 51 of 230

by his own acts, he impaired guaranties and securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory – debtor violates any undertaking, in consideration of which the creditor agrees to the period – debtor attempts to abscond General rule: If a period is attached in an obligation, the presumption is that it is for the benefit of both parties. The consequence is that the creditor cannot compel the performance before the arrival of the term; the debtor cannot compel acceptance bef. the arrival of the term. –

o

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

According to Plurality of Objects: a. b.

c.

Single Alternative – where out of 2 or more prestations which may be given, only one is due General rule: right to choose pertains to debtor, except: i. When the choice is expressly granted to the creditor or, ii. When expressly granted to 3rd persons Facultative – where only one prestation is agreed upon, but the obligor may deliver or render another in substitution

According to Plurality of Subjects: a. Joint obligation – one in w/c each of the debtors is liable only for a proportionate part of the debt or each creditor is entitled only to a proportionate part of the credit. • There are as many obligations as there are debtors multiplied by the number of creditors. • Kinds of joint obligations: i. Active joint where the obligation is joint on the creditor's side; ii. Passive joint where the obligation is joint on the debtor's side; and iii. Multiple Joint where there are multiple parties on each side of a joint obligation. • Effects of Joint Liability: Page 52 of 230

2.

Remedy of the other partner is not rescission but specific performance with damages from defaulting partner

c) Obligations with respect to contribution of money and money converted to personal use 1. To contribute on the date fixed the amount he has undertaken to contribute to the partnership 2. To reimburse any amount he may have taken from the partnership coffers and converted to his own use 3. To pay for the agreed or legal interest, if he fails to pay his contribution on time or in case he takes any amount from the common fund and converts it to his own use 4. To indemnify the partnership for the damages caused to it by delay in the contribution or conversion of any sum for his personal benefits d) Obligations with respect to contribution to partnership capital 1. Partners must contribute equal shares to the capital of the partnership unless there is stipulation to contrary 2. Partners (capitalist) must contribute additional capita.l In case of imminent loss to the business of the partnership and there is no stipulation otherwise; refusal to do so shall create an obligation on his part to sell his interest to the other partners e) Obligation of managing partners who collects debt from person who also owed the partnership 1. Apply sum collected to 2 credits in proportion to their amounts 2. If he received it for the account of partnership, the whole sum shall be applied to partnership credit f) Obligation of partner who receives share of partnership credit 1. Obliged to bring to the partnership capital what he has received even though he may have given receipt for his share only g) Risk of Loss of Thing Contributed Specific and determinate things which are not fungible where only the use is contributed Specific and determinate things the ownership of which is transferred to the partnership Fungible things (consumable) Things contributed to be sold Things brought and appraised in the inventory

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Risk is borne by partner Risk is borne by partnership Risk is borne by partnership Risk is borne by partnership Risk is borne by partnership

g)

PARTNERS BY ESTOPPEL - one who is not really a partner but is liable as a partner for the protection of innocent 3rd persons h) CONTINUING PARTNER - one who continues the business of a partnership after it has been dissolved by reason of the admission of a new partner, retirement, death or expulsion of one of the partners i) SURVIVING PARTNER - one who remains after a partnership has been dissolved by death of any partner j) SUBPARTNER - one who is not a member of the partnership who contracts with a partner with reference to the latter's share in the partnership k) OSTENSIBLE - one who takes active part and known to the public as partner in the business l) SECRET - one who takes active part in the business but is not known to be a partner by outside parties m) SILENT - one who does not take any active part in the business although he may be known to be a partner n) DORMANT - one who does not take active part in the business and is not known or held out as a partner 8. RELATIONS CREATED BY A CONTRACT OF PARTNERSHIP a. Relations among the partners themselves b. Relations of the partners with the partnership c. Relations of the partnership with 3rd persons with whom it contracts d. Relations of the partners with such 3rd persons Obligations of the Partners A. OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES a) Obligations with respect to contribution of property: 1. To contribute at the beginning of the partnership or at the stipulated time the money, property or industry which he may have promised to contribute 2. To answer for eviction in case the partnership is deprived of the determinate property contributed 3. To answer to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of actual delivery 4. To preserve said property with the diligence of a good father of a family pending delivery to partnership 5. To indemnify partnership for any damage caused to it by the retention of the same or by the delay in its contribution

i.

•

b.

The demand by one creditor upon one debtor, produces the effects of default only w/ respect to the creditor who demanded and the debtor on whom the demand was made, but not w/ respect to the others; ii. The interruption of prescription by the judicial demand of one creditor upon a debtor, does not benefit the other creditors nor interrupt the prescription as to other debtors iii. The vices of each obligation arising from the personal defect of a particular debtor or creditor does not affect the obligation or rights of the others; iv. The insolvency of a debtor does not increase the responsibility of his co-debtors, nor does it authorize a creditor to demand anything from his co-creditors; v. In the joint divisible obligation, the defense of res judicata is not extended from one If the contrary does not appear, obligations are presumed to be joint.

Solidary obligations – one in w/c the debtor is liable for the entire obligation or each creditor is entitled to demand the whole obligation. • There is solidary obligation only in three cases: (1) When the obligation expressly so states; (2) When the law (e.g. liability of joint tortfeasors) or (3) When the nature of the obligation requires solidarity. • An instrument w/c begins w/ "I," "WE" or "Either of us" promise to pay, when signed by two or more persons, makes them solidarily liable. • Characteristics of Active Solidarity: - Since it is a reciprocal agency, the death of a solidary creditor does not transmit the solidarity to each of his heirs but to all of them taken together (IV Tolentino) - Each creditor represents others in the act of requiring payment, and in all other acts w/c tend to secure the credit or make it more advantageous. Hence, if he receives only a partial payment, he must divide it among the other creditors. He can interrupt the period of prescription or render the debtor in default, for the benefit of all other creditors -

b) Effect of Failure to contribute property promised: 1. Partners becomes ipso jure a debtor of the partnership even in the absence of any demand Page 180 of 230

A credit once paid is shared equally among the creditors unless a different intention appears Debtor may pay any of the creditors but if any demand, judicial or extrajudicial is made on him, he must pay only to one demanding payment (Art. 1214)

Page 53 of 230

-

-

•

One creditor does not represent the others in such acts as novation (even if the credit becomes more advantageous), compensation and remission Each creditor may renounce his right even against the will of the debtor, and the latter need not thereafter pay the obligation to the former

Characteristics of Passive Solidarity: - Each debtor may be required to pay the entire obligation but after payment, he can recover from the co-debtors their respective shares (this is something similar to subrogation) - Interruption of prescription as to one debtor affects all the others; but the renunciation by one debtor of prescription

already had does not prejudice the others, bec the extinguishment of the obligation by prescription extinguishes also the mutual representation among the solidary debtors -

-

-

-

The debtor who is required to pay may set up by way of compensation his own claim against the creditor, in this case, the effect is the same as that of payment The total remission of the debt in favor of a debtor releases all the debtors; but when this remission affects only the share of one debtor, the other debtors are still liable for the balance of the obligation All the debtors are liable for the loss of the thing due, even if such loss is caused by the fault of only one of them, or by fortuitous event after one of the debtors has incurred in delay The interests due by reason of the delay of one of the debtors are borne by all of them

Bar Question (2003). A, B, C, D, and E made themselves solidarily indebted to X for the amount of P50,000. When demanded payment from A, the latter refused to pay on the following grounds: (a) B is only 16 years old. (b) C has already been condoned by X. (c) D is insolvent. (d) E was given by X an extension of 6 months without the consent of the other four co-debtors. State the effect of each of the above defenses put up by A on his obligation to pay X, if such defenses are found to be true. Answer: (a) A may avail the minority of B as a defense, but only for B’s share of P10,000. A solidary debtor may avail himself of any defense which Page 54 of 230

a.

b.

PARTNERSHIP AT WILL - one in which no time is specified and is not formed for a particular undertaking or venture which may be terminated anytime by mutual agreement PARTNERSHIP WITH A FIXED TERM - the term for which the partnership is to exist is fixed or agreed upon or one formed for a particular undertaking

D. As to legality of existence a. DE JURE PARTNERSHIP - one which has complied with all the legal requirements for its establishment b. DE FACTO - one which has failed to comply with all the legal requirements for its establishment E. As to representation to others a. ORDINARY OR REAL PARTNERSHIP - one which actually exists among the partners and also as to 3rd persons b. OSTENSIBLE OR PARTNERSHIP BY ESTOPPEL - one which in reality is not a partnership but is considered a partnership only in relation to those who, by their conduct or omission, are precluded to deny or disprove its existence F. As to publicity a. SECRET PARTNERSHIP - one wherein the existence of certain persons as partners is not avowed or made known to the public by any of the partners b. OPEN OF NOTORIOUS PARTNERSHIP - one whose existence is avowed or made known to the public by the members of the firm G. As to purpose a. COMMERCIAL OR TRADING PARTNERSHIP - one formed for the transaction of business b. PROFESSIONAL OR NON TRADING PARTNERSHIP - one formed for the exercise of a profession 7. Kinds of Partners a) CAPITALIST - one who contributes money or property to the common fund b) INDUSTRIAL - one who contributes only his industry or personal service c) GENERAL - one whose liability to 3rd persons extends to his separate property d) LIMITED - one whose liability to 3rd persons is limited to his capital contribution e) MANAGING - one who manages the affairs or business of the partnership f) LIQUIDATING - one who takes charge of the winding up of partnership affairs upon dissolution Page 179 of 230

5. FORM OF PARTNERSHIP CONTRACT a) GENERAL RULE: No special form is required for the validity of the contract b) EXCEPTIONS: i. Where immovable property/real rights are contributed a. Public instrument is necessary b. Inventory of the property contributed must be made, signed by the parties and attached to the public instrument otherwise it is VOID Where capital is P3,000 or more, in money or property ii. a. Public instrument is necessary b. Must be registered with SEC 6. CLASSIFICATIONS OF PARTNERSHIP A. As to extent of its subject matter a. UNIVERSAL PARTNERSHIP i. UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY comprises the following: a) Property which belonged to each of the partners at the time of the constitution of the partnership b) Profits which they may acquire from all property contributed ii. UNIVERSAL PARTNERSHIP OF PROFITS - comprises all that the partners may acquire by their industry or work during the existence of the partnership

Note: Persons who are prohibited from giving donations or advantage to each other cannot enter into a universal partnership

b. PARTICULAR PARTNERSHIP - has for its objects: i. Determinate things ii. Their use or fruits iii. Specific undertaking iv. Exercise of profession or vocation B. As to liability of partners a. GENERAL PARTNERSHIP - consists of general partners who are liable pro rata and subsidiarily and sometimes solidarily with their separate property for partnership debts b. LIMITED PARTNERSHIP - one formed by 2 or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for the obligations of the partnership

personally belongs to a solidary co-debtor, but only as to the share of that co-debtor. (b) A may avail of the condonation by X of C’s share of P10,000. 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 others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible. (Article 1222, NCC). (c) A may not interpose the defense of insolvency of D as a defense. Applying the principle of mutual guaranty among solidary debtors, A guaranteed the payment of D’s share and of all the other co-debtors. Hence, A cannot avail of the defense of D’s insolvency. (d) The extension of six (6) months given by X to E may be availed of by A as a partial defense but only for the share of E. There is no novation of the obligation but only an act of liberality granted to E alone.

According to Performance: a. b.

Divisible - one susceptible of partial performance Indivisible- one that must be performed in one act.

Exceptions to the Rule on Indivisibility: i. ii. iii.

When the parties so provide. (Art. 1248, par. 1.) When the nature of the obligation necessarily entails performance in parts (e.g. easements) Where the law provides otherwise (e.g. pledge, mortgage)

According to Sanctions for Breach: a. b.

Simple With a penal clause- A penal clause is an accessory undertaking to assume greater liability in case of breach. The purpose is to strengthen the coercive force of the obligation. When a penal clause is present, damages do not have to be proved.

11. Reciprocal Obligations • One where two parties are reciprocally obliged to do or give something • Cause must be identical and obligations should arise simultaneously • Obligation or promise of each party is the consideration for the obligation or promise of the other Compensatio Morae – neither party incurs delay if the other does not or • is not ready to comply in a proper manner of what is incumbent upon him • In a reciprocal obligation, breach by one party is a tacit resolutory condition • Right to rescind i. exists only in reciprocal obligations

C. As to duration Page 178 of 230

Page 55 of 230

ii. iii. iv. v. vi. vii. viii.

can be demanded only if plaintiff is ready, willing, and able to comply, while the other is not not absolute needs judicial approval in certain cases implied to exist, ergo, no need for express stipulation may be waived if availed of, duty of mutual restitution not granted for slight and casual breach but for substantial breach

Disposal/ Transferability of interest

Power to act with 3rd persons

Extinguishment of Obligations a. b. c. d. e. f. g. h. i. j.

Payment or performance Loss of the thing due Condonation or remission of the debt Confusion or merger of the rights of the creditor and debtor Compensation Novation Annulment Rescission Fulfillment of a resolutory condition Prescription

1. Requisites of Payment or Performance: A. As to the prestation 1. Identity of the object, except in dacion en pago and novation 2. Integrity – delivery of the entire prestation due, except in cases of: a. substantial performance in good faith b. waiver of creditor c. application of payments to equally onerous debts 3. Indivisibility B. The payor may be – a. If without need of the creditor's consent i. The debtor himself ii. His heirs or assigns iii. His agent iv. Anyone interested in the fulfillment of the obligation (e.g. guarantor)

Effect of payment by a third person: •

If the payment was w/ the debtor's consent, the effect is subrogation (Articles 1236-1237.) Exception: If the person paying intended it to be a donation. (Art. 1238.) Page 56 of 230

Effect of death

Dissolution

No. of incorporators Commencement of juridical personality

Partner may not dispose of his individual interest unless agreed upon by all partners In absence of stipulation to contrary, a partner may bind partnership (each partner is agent of partnership) Death of partner results in dissolution of partnership May be dissolved at any time by the will of any or all of the partners Minimum of 2 persons From the moment of execution of contract of partnership

Co-owner may freely do so

Co-owner cannot represent the coownership

Death of co-owner does not necessarily dissolve co-ownership May be dissolved anytime by the will of any or all of the co-owners Minimum of 2 persons From date of issuance of certificate of incorporation by the SEC

instance Stockholder has a right to transfer shares without prior consent of other stockholders Management is vested with the Board of Directors

Death of stockholder does not dissolve corporation Can only be dissolved with the consent of the state Minimum of 5 incorporators

4. NO PRESUMPTION OF PARTNERSHIP FROM RECEIPT OF PROFITS: a) As debt by installment b) As wages or rent c) As annuity d) As interest on loan e) As consideration for sale of goodwill of business/other property by installments 5. EFFECTS OF UNLAWFUL PARTNERSHIP i. The contract is void ab initio and the partnership never existed in the eyes of the law ii. The profits shall be confiscated in favor of the government iii. The instruments or tools and proceeds of the crime shall also be forfeited in favor of the government iv. The contributions of the partners shall not be confiscated unless they fall under no. 3 Page 177 of 230

pay the price, Richard gave him a power-of-attorney authorizing him to subdivide the land, sell the individual lots, and deliver the proceeds to Richard, to be applied to the purchase price. Five years later, Richard revoked the power-ofattorney and took over the sale of the subdivision lots himself. Is the revocation valid or not? Why?

If payment was without the debtor's consent, the third person may demand repayment to the extent that the debtor has been benefited. (Art. 1236, par. 2.) b. With the creditor's consent -- Anyone.

Answer: The revocation is not valid. The power of attorney given to buyer is irrevocable because it is coupled with an interest: the agency is the means of fulfilling the obligation of the buyer to pay the price of the land (Article 1927, CC). In other words, a bilateral contract (contract to buy and sell the land) is dependent on the agency.

C. Who may be the payee? a. The obligee proper (Articles 1240, 1626.) b. His successor or transferee (Art. 1240.) c. His agent (ibid.) d. Any third person subject to the following qualifications: i. Provided it redounded to the obligee's benefit and only to the extent of such benefit (Art. 1241, par. 2.) ii. If it falls under Art. 1241, par. 2 nos. 1, 2 & 3, the benefit is deemed to be total. e. Anyone in possession of the credit (Art. 1242.)

PARTNERSHIP General Provisions 1. PARTNERSHIP - by the contract of partnership, 2 or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves 2. ESSENTIAL FEATURES: a) There must be a mutual contribution of money, property, or industry to a common fund b) The object must be lawful c) The purpose or primary purpose must be to obtain profits and divide the same among the parties 3. PARTNERSHIP DISTINGUISHED FROM CO-OWNERSHIP AND CORPORATION PARTNERSHIP CO-OWNERSHIP CORPORATION Creation Created by a Created by law Created by law contract, my mere agreement of the parties Juridical Has a juridical None Has a juridical personality personality personality separate and separate and distinct from that of distinct from that each partner of each partner Purpose Realization of Common Depends on AOI profits enjoyment of a thing or right Duration/ No limitation 10 years maximum 50 years Term of maximum, existence extendible to not more than 50 years in any one Page 176 of 230

•

Note: In all these five (5) cases, it is required that the debt should not have been garnished. (Art. 1243.) D. With respect to the time and place of payment 1. When payment to be made: When due 2. Place (Art. 1251.) a. Primary rule: As stipulated b. Secondary rule: Place where the thing was at the time the obligation was constituted if the obligation is to deliver a determinate thing. c. Tertiary rule: At the debtor's domicile 2. Four Special Kinds of Payments: i. Dacion en pago (Art. 1245.) – property alienated by debtor to creditor in satisfaction of the debt in money. Law on sales shall govern. ii. Application of payments – the designation of a debt which is being paid by the debtor who has several obligations of the same kind in favor of the creditor to whom the payment is made iii. Payment by cession – property is turned over by the debtor to the creditor who acquires the right to sell it and divide the net proceeds among themselves. iv. Consignation – deposit of the object of the obligation in a competent court in accordance with the rules prescribed by law after refusal or inability of the creditor to accept the tender of payment

Requisites of a Valid Consignation: 1) 2)

A debt due That the consignation of the obligation had been made bec. the creditor to whom tender of payment was made refused to accept it, or bec. he was absent or Page 57 of 230

3)

4) 5)

incapacitated, or bec. several persons claimed to be entitled to receive the amount due Previous notice of the consignation had been given to the person interested in the performance of the obligation (Art. 1257) That the amount due was placed at the disposal of the court (consignation proper) That after the consignation had been made the person interested was notifed thereof (second notice)

Necessity of Notice of Revocation As to the agent - express notice always necessary; sufficient notice if • the party to be notified actually knows, or has reason to know, a fact indicating that his authority has been terminated/suspended; revocation without notice to the agent will not render invalid an act done in pursuance of the authority As to 3rd persons - express notice necessary • As to former customers - actual notice must be given to them because • they always assume the continuance of the agency relationship As to other persons - notice by publication is enough •

Causes for Consignation 1) 2) 3) 4)

creditor is absent or unknown, or does not appear at the place of payment creditor incapacitated to accept payment at the time it is due 2 or more persons claim right to collect when the title of the obligation has been lost

3. Loss or Impossibility of Performance – object or prestation perishes, goes out of commerce of man, disappears in such a way that its existence is unknown or cannot be recovered. • Requisites: 1) thing lost is determinate 2) loss without any fault from debtor 3) loss occurred before delay of debtor •

f) May the agency be extinguished at will? i. AGENT may do so but subject to the contractual obligations owing the principal (i.e. fixed period of time for the agency or purpose not yet accomplished); ii. PRINCIPAL may also revoke the agency at will Exceptions: a. Agency coupled with interest b. When a bilateral contract depends upon the agency c. When the agency is the means of fulfilling an obligation already contracted d. When a partner is appointed as manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Exception to the exception: When the agent acts to defraud the principal

Rule of Rebus sic stantibus.--

This doctrine is also called the doctrine of extreme difficulty and frustration of commercial object.

Requisites: i.

The event or change could not have been foreseen at the time of the execution of the contract. ii. The event or change makes the performance extremely difficult but not impossible. iii. The event must not be due to an act of either party. iv. The contract is for a future prestation. If the contract is of immediate fulfillment, the gross inequality of the reciprocal prestation may involve lesion or want of cause. 4. Condonation or Remission – an act of liberality by virtue of w/c, w/o receiving any equivalent, the creditor renounces enforcement of an obligation w/c is extinguished in whole or in part. Requisites: • 1) Existing debt 2) Renunciation must be gratuitous 3) Acceptance by the debtor 4) Capacity of the parties Page 58 of 230

g) Implied Revocation of Agency i principal appoints a new agent for the same business or transaction, only if there is incompatibility); effective as between the principal and the agent only if communicated to the agent; does not prejudice rights of third persons acting in GF without knowledge of the revocation ii principal directly manages the business entrusted to the agent, dealing directly with 3rd persons h) Effect of Extinguishment Without Notice: act of agent deemed valid insofar as 3rd parties acting in good faith and without knowledge of revocation i) Effect of Subsequent Issuance of a SPA: The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power. Bar Question (2001). Richard sold a large parcel of land in Cebu to Leo for P100 million payable in annual installments over a period of ten years, but title will remain with Richard until the purchase price is fully paid. To enable Leo to Page 175 of 230

Extinguishment of Agency a) Modes 1. 2. 3. 4. 5. 6.

revocation withdrawal of the agent death, civil interdiction, insanity or insolvency of the principal or of the agent dissolution of the firm or corporation which entrusted or accepted the agency accomplishment of the object or purpose of the agency expiration of the period for which the agency was constituted

NOTE: list not exclusive; causes particular only to agency; may be extinguished by the modes of extinguishment of obligations in general whenever they are applicable, like loss of the thing and novation b) Presumption of Continuance of Agency: It means that when once shown to have existed, an agency relation will be presumed to have continued, in the absence of anything to show its termination. c) Exceptions to Extinguishment by Death i. if the agency is coupled with an interest ii. if the act of the agent was executed without the knowledge of the death of the principal and the third person who contracted with the agent acted in good faith iii. to avoid damage iv. if it has been constituted in the common interest of the principal and of the agent, or in the interest of a third person who has accepted the stipulation in his favor d) Can the heirs continue the agency? i. General Rule: agency calls for personal services on the part of the agent; rights & obligations intransmissible ii. Exceptions: 1. agency by operation of law, or a presumed or tacit agency 2. agency is coupled with an interest in the SM of the agency (ex. power of sale in a mortgage) e) Revocation – termination of the agency by the subsequent act of the principal Renunciation/Withdrawal - termination of the agency by the subsequent act of the agent

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5. Confusion or Merger of Rights – the meeting in one person of the qualities of the creditor and debtor with respect to the same obligation. Requisites: • 1) It must take place between the creditor and the principle debtor (Art. 1276.) 2) The very same obligation must be involved 6. Compensation – a mode of extinguishing, to the concurrent amount, the obligations of those persons who in their own right are reciprocally debtors and creditors of each other. • Requisites: 1) each of the obligors are bound principally, and that at the same time each is a principal creditor of the other 2) both debts consists of sum of money, or if consumable-same kind and same quality 3) both debts are due 4) both are liquidated and demandable 5) compensation not prohibited by law 6) debt not garnished •

Kinds of Compensation: 1) Legal Compensation (Articles 1279, 1290) - takes place automatically by operation of law once all the requisites are present. 2) Voluntary - agreement of the parties 3) Judicial - pleaded and effective only upon order of the court 4) Facultative Compensation - takes place when compensation is claimable by only one of the parties but not of the other, e.g., Articles 1287, 1288.

Bar Question (2002). Stockton is a stockholder of Core Corp. He desires to sell his shares in Core Corp. in view of a court suit that Core Corp. has filed against him for damages in the amount of P10 million, plus attorney’s fees of P1 million, as a result of statements published by Stockton which are allegedly defamatory because it was calculated to injure and damage the corporation’s reputation and goodwill. The articles of incorporation of Core Corp. provide for a right of first refusal in favor of the corporation. Accordingly, Stockton gave written notice to the corporation of his offer to sell his shares of P10 million. The response of Core Corp. was an acceptance of the offer in the exercise of its rights of first refusal, offering for the purpose payment in form of compensation or set-off against the amount of damages it is claiming against him, exclusive of the claim for attorney’s fees. Stockton rejected the offer of the corporation, arguing that compensation between the value of the shares and the amount of damages demanded by the corporation cannot legally take effect. Page 59 of 230

Is Stockton correct? Give reasons for your answer.

Answer: Stockton is correct. There is no right of compensation between his price of P10 million and Core Corp.’s unliquidated claim for damages. In order that compensation may be proper, the two debts must be liquidated and demandable. The case for the P10 million damages being still pending in court, the corporation has as yet no claim which is due and demandable against Stockton. 7. Novation – the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one w/c 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. • Requisites of Novation: 1) There must be a previous valid obligation 2) Agreement of the parties to create the new obligation 3) Extinguishment of the old obligation 4) Validity of the new obligation •

Subjective (Personal) or novation by a change of subject i. Active subjective or a change of creditor; also known as subrogation. a. Conventional - agreement & consent of all parties; clearly established b. Legal - takes place by operation of law; no need for consent; not presumed except as provided for in law:

presumed when -

11. Ratification a) Conditions for Ratification i. The principal must have capacity and power to ratify ii. He must have had knowledge of material facts iii. He must ratify the acts in its entirety iv. The act must be capable of ratification v. The act must be done in behalf of the principal * To be effective, ratification need not be communicated or made known to the agent or the third party. The act or conduct of the principal rather than his communication is the key. But before ratification, the third party is free to revoke the unauthorized contract. b) Effects of Ratification with respect to agent - relieves the agent from liability to the i. third party for the unauthorized transaction, and to his principal for acting without authority; may recover compensation with respect to principal - assumes responsibility for the ii. unauthorized act, as fully as if the agent had acted under original authority but not liable for acts outside the authority approved by his ratification with respect to 3rd persons - bound by ratification to the same iii. extent as if the ratified act had been authorized; cannot raise the question of the agent’s authority to do the ratified act

1.

ii.

creditor pays another preferred creditor even w/o debtor’s knowledge 2. 3rd person not interested in obligation pays w/ approval of debtor 3. person interested in fulfillment of obligation pays debt even w/o knowledge of debtor Passive subjective or a change of debtor a. Expromision - initiative is from 3rd person or new debtor; new debtor & creditor must consent; old debtor released from obligation; subject to full reimbursement & subrogation if made w/ consent of old debtor; if w/o consent or against will , only beneficial reimbursement b. Delegacion - initiative of old debtor; all parties must consent; full reimbursement; if insolvent new debtor – old debtor not responsible because obligation extinguished by valid novation, unless: insolvency

iv. Estoppel of the Government - government neither estopped by the mistake/error of its agents; may be estopped through affirmative acts of its officers acting within the scope of their authority

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c) Distinction Between Ratification & Estoppel Ratification rests on intention affects the entire transaction from the beginning substance of ratification is confirmation of an authorized acts or conduct after it has been done

Estoppel rests on prejudice affects only relevant parts of the transaction substance of estoppel is the principal’s inducement to another to act to his prejudice

d) Distinction Between Apparent Authority & Authority by Estoppel Apparent Authority Authority by Estoppel though not actually granted, where the principal, by his negligence, principal knowingly permits/holds permits his agent to exercise powers not out the agent as possessing the granted to him, even though the principal necessary powers to act in a certain may have no notice or knowledge of the way conduct of the agent Page 173 of 230

demandable, UNLESS he proves, that he exercised due diligence for that purpose 8. Agent’s Right of Retention: specific (only for those goods connected with the agency) and until the principal effects the reimbursement and pays the indemnity 9. Principal’s Liability for Expenses: a) General Rule: principal liable for the expenses incurred by the agent b) Exceptions: i. If the agent acted in contravention of the principal's instructions, unless principal derives benefits from the contract ii. When the expenses were due to the fault of the agent iii. When the agent incurred them with knowledge that an unfavorable result would ensure, if the principal was not aware thereof iv. When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum 10. Agency by Estoppel: there is no agency at all, and the alleged agent seemed to have apparent or ostensible, although not real authority to represent another

a) Who can be under estoppel to deny agency? i. Estoppel of Agent- one professing to act as agent estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in which he is engaged ii.

iii.

Estoppel by the Principal a. As to agent – one knowing another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other b. As to sub-agent – to estop the principal from denying his liability to a third person, he must have known or be charged with knowledge of the transaction and the terms of the agreement between the agent and sub-agent c. As to third persons – one who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency Estoppel of Third Persons – a third person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or 3rd persons in interest Page 172 of 230

already existing & of public knowledge or known to him at time of delegacion Bar Question (1998). 1. Define compensation as a mode of extinguishing an obligation, and distinguish it from payment. 2. X, who has a savings deposit with Y Bank in the sum of P1,000,000.00, incurs a loan obligation with the said Bank in the sum of P800,000.00 which has become due. When X tries to withdraw his deposit, Y Bank allows only P200,000.00 to be withdrawn, less service charges, claiming that compensation has extinguished its obligation under the savings account to the concurrent amount of X’s debt. X contends that compensation is improper when one of the debts, as here, arises from a contract of deposit. Assuming that the promissory note signed by X to evidence the loan does not provide for compensation between said loan and his savings deposit, who is correct?

Answers: 1. Compensation is a mode of extinguishing to the concurrent amount, the obligations of those persons who in their own right are reciprocally debtors and creditors of each other (Tolentino, 1991 ed., p. 365, citing 2 Castan 560 and Francia v. IAC, 162 SCRA 753). It involves the simultaneous balancing of two obligations in order to extinguish them to the extent in which the amount of one is covered by that of the other. (De Leon, 1992 ed., p. 221, citing 8 Manresa, 401). Payment means not only the delivery of money but also performance of an obligation (Article 1232, Civil Code). In payment, capacity to dispose of the thing paid and capacity to receive payment are required for debtor and creditor, respectively; in compensation, such capacity is not necessary, because the compensation operates by law and not by the acts of the parties. In payment, the performance must be complete; while in compensation there may be partial extinguishment of an obligation. (Tolentino, supra). 2. Y Bank is correct. Art. 1287, Civil Code, does not apply. All the requisites of Art. 1279, Civil Code, are present. In the case of Gullas v. PNB (62 Phil. 519), the Supreme Court held: “The Civil Code contains provisions regarding compensation (set off) and deposit. These portions of Philippine law provide that compensation shall take place when two persons are reciprocally creditor and debtor of each other. In this connection, it has been held that the relation existing between a depositor and a bank is that of creditor and debtor. xxx As a general rule, a bank has a right of set off of the deposits in its hands for the payment of any indebtedness to it on the part of a depositor.” Hence, compensation took place between the mutual obligations of X and Y Bank.

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CONTRACTS

Instructions

1. Contracts – Meeting of minds bet 2 parties whereby one binds himself with respect to the other to give something or render some service

7. Commission Agent: One whose business is to receive and sell goods for a commission and who is entrusted by the principal with the possession of goods to be sold, and usually selling in his own name

2. Principal Characteristics: a. Autonomy of wills – parties may stipulate anything as long as not illegal, immoral, etc. b. Mutuality – performance or validity binds both parties; not left to will of one of parties c. Obligatory Force – parties are bound from perfection of contract d. Relativity – binding only between the parties, their assigns, heirs; strangers cannot demand enforcement. Exception to relativity: Accion pauliana, Accion directa, Stipulation pour autrui 3. Requisites for stipulation pour autrui: 1) Parties must have clearly and deliberately conferred a favor upon a 3rd person 2) The stipulation in favor of a 3rd person should be a part of, not the whole contract 3) That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatsoever 4) Neither of the contracting parties bears the legal representation or authorization of 3rd party 5) The third person communicates his acceptance before revocation by the original parties 4. Kinds of Contracts

As to perfection or formation: a) consensual – perfected by agreement of parties b) real – perfected by delivery (e.g. commodatum, pledge, deposit) c) formal/solemn – perfected by conformity to essential formalities (e.g. donation)

As to cause a) b) c)

onerous – with valuable consideration gratuitous – founded on liberality remunerative – prestation is given for service previously rendered not as obligation

As to importance or dependence of one upon another a) principal – contract may stand alone accessory – depends on another contract for its existence; may b) not exist on its own Page 62 of 230

a)

Distinction Between Ordinary Agent & Commission Agent

Ordinary agent acts for and in behalf of his principal Need not have possession of principal’s goods b)

Commission agent act on his own name or in that his principal must be in possession of the goods

Distinction Between Commission Agent & Broker

Commission agent Broker engaged in the purchase and sale for a no custody or possession of the thing principal of personal property which has he disposes; merely a go-between, an to be placed in his possession and intermediary between the sellers and disposal the buyer Has a relation with principal, buyers or maintains no relation with the thing sellers, and property which is the object which he purchases or sells of the transaction c) Obligations of a Commission Agent i. responsible for the goods received by him, as described in the consignment, UNLESS upon receiving them he should make a written statement of the damage and deterioration suffered by the same ii. if goods are of the same kind and mark but belonging to different owners, make a distinction by counter marks and designate the merchandise respectively belonging to each principal iii. cannot, without consent of the principal, sell on credit; should he do, principal may demand payment in cash, but the commission agent entitled to any interest/benefit which may result from such sale iv. if a del credere agent receiving guarantee commission, bears the risk of collection and pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser v. liable for damages if agent does not collect the credits of his principal at the time when they become due and Page 171 of 230

the purchaser directly (NOTE: A broker is never entitled to commission for unsuccessful efforts.) 4. Law on Double Agency: a) disapproved by law for being against public policy and sound morality EXCEPT where the agent acted with full knowledge and consent of the principals b) Compensation for a Double Agent: i. with knowledge of both principals - recovery can be had from both principals ii. without the knowledge of both principals - the agent can recover from neither iii. with knowledge of one principal - as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public policy and good morals 5. Attorney-In-Fact: One who is given authority by his principal to do a particular act not of a legal character. 6. General Agent vs. Special Agent

Scope Authority

of

Nature of Service Authorized Extent to Which Agent May Bind the Principal

Termination of Authority

Construction of Principal’s

GENERAL AGENT all acts connected with the business or employment in which he is engaged involves continuity of service

SPECIAL AGENT specific acts in pursuance of particular instructions or with restrictions necessarily implied from the act to be done no continuity of service

may bind his principal by an act within the scope of his authority although it may be contrary to the latter’s special instructions apparent authority does not terminate by the mere revocation of his authority without notice to the third party

can not bind his principal in a manner beyond or outside the specific acts which he is authorized to perform

merely advisory in nature

duty imposed upon the third party to inquire makes termination of the relationship as between the principal and agent effective as to such third party unless the agency has been entrusted for the purpose of contracting with such third party strictly construed as they limit the agent’s authority

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c)

preparatory – not an end by itself; a means through which future contracts may be made

As to parties obliged: a) unilateral – only one of the parties has an obligation bilateral – both parties are required to render reciprocal b) prestations

As to name or designation: a) nominate b) innominate i. Do ut des – I give that you may give ii. Do ut facias – I give that you may do iii. Facio ut des – I do that you may give iv. Facio ut facias – I do that you may do 5. Stages in a Contract a) Preparation – negotiation b) Perfection/birth c) Consummation – performance 6. Essential Elements: a) Consent – meeting of minds between parties on subject matter & cause of contract; concurrence of offer & acceptance

Note: We follow the theory of cognition and not the theory of manifestation. Under our civil law, the offer and acceptance concur only when the offeror comes to know, and not when the offeree merely manifests his acceptance. •

•

b)

• • Object

Persons who cannot give consent to a contract: Minors, Insane or demented persons, Illiterates/ deaf-mutes who do not know how to write, Intoxicated and under hypnotic spell Disqualified to enter into contracts: those under civil interdiction, hospitalized lepers, prodigals, deaf and dumb who are unable to read and write, those who by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of themselves and manage their property, becoming an easy prey for deceit and exploitation Vices of Consent: violence, intimidation, undue influence Vices of Declaration-simulated contracts – The prestation

Requisites: 1) 2)

Within the commerce of man - either existing or in potency Licit or not contrary to law, good customs Page 63 of 230

3) 4)

c)

Possible Determinate as to its kind or determinable w/o need to enter into a new contract Cause – reason why parties enter into contract

Requisites: 1) 2) 3)

It must exist It must be true It must be licit

7. Form – required in some kinds of contracts only as contracts are generally consensual; form is a manner in which a contract is executed or manifested a. Informal – may be entered into whatever form as long as there is consent, object & cause b. Formal – required by law to be in certain specified form such as: donation of real property, stipulation to pay interest, transfer of large cattle, sale of land thru agent, contract of antichresis, contract of partnership, registration of chattel mortgage, donation of personal prop in excess of 5,000 c. Real – creation of real rights over immovable prop – must be written General Rule: contract is valid & binding in whatever form provided that 3 essential requisites concur except when form is important: 1) for validity (formal/solemn contracts) 2) for enforceability (statute of frauds) 3) for convenience 8. Reformation of Contracts – remedy to conform to real intention of parties due to mistake, fraud, inequitable conduct, accident.

REQUISITES: a. b. c. d. e.

there is a written instrument there is meeting of minds true intention not expressed in instrument clear & convincing proof facts put in issue in pleadings

Note: Action prescribes 10 years from date of execution of instrument. Remedy not available for: 1) simple donation inter vivos 2) 3) 4) 5)

wills when real agreement is void in cases of estoppel when a party has already brought suit to enforce it

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Obligations of the Principal to the Agent ü ü ü ü

ü

Comply with all the obligations agent contracted in representation of the principal Advance sums necessary for the execution of the agency, when agent so requests; liable for reimbursement regardless of the undertaking’s success whenever agent had advanced & has no fault; includes interest Reimburse the agent for all advances made by him provided the agent is free from fault 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 Pay the agent the compensation agreed upon or the reasonable value of the latter’s services

1. Appointment of Sub-agent - Rules: • If there is no prohibition from the principal and the agent appoints a subagent, the agent is responsible for all the acts of the subagent. • If there is a prohibition but nevertheless the agent appoints a subagent, all the subagent’s acts are void as to the principal. • If there is authority to appoint and subagent is not designated by the principal, the agent will be liable for all the acts of the subagent if the subagent is notoriously incompetent or insolvent. • If there is authority to appoint and subagent is designated by the principal, the agent is released from any liability from the acts of the subagent. 2. Responsibility of 2 or More Agents Appointed Simultaneously: a) General Rule: liable jointly b) Exception: solidarity has been expressly stipulated; each of the agents becomes solidarily liable for (1) the non-fulfillment of the agency; of for (2) the fault or negligence of his fellow agent c) Exception to the exception: when one of the other agent/s acts beyond the scope of his authority – innocent agent is NOT liable NOTE however that 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. Any of them also revoke the agency. 3. Broker: negotiate contracts relative to property in behalf of others and for a compensation or fee.

When Broker Entitled to Compensation: whenever he brings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and Page 169 of 230

Obligations of the Agent to the Principal a) GENERAL i. act with utmost good faith & loyalty for the furtherance of principal’s interests ii. obey principal’s instructions iii. exercise reasonable care b) SPECIFIC i. carry out the agency ii. answer for damages which through his non-performance the principal may suffer iii. finish the business already begun on the death of the principal should delay entail any danger (exception to the rule that death extinguishes agency) iv. observe the diligence of a good father in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed v. advance necessary funds if there be a stipulation to do so (except when the principal is insolvent) vi. act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do (NOTE: A departure from the principal’s instructions may be justified by a sudden emergency, or if the instructions are ambiguous, or if the departure is so insubstantial that it does not affect the result and the principal suffers no damage thereby. Further, an agent has the right to disobey the principal’s instructions when the instruction calls for the performance of illegal acts, or where he is privileged to do so to protect his security interest in the subject matter of the agency.) vii. not to carry out the agency if it would manifestly result in loss or damage to the principal viii. answer for damages if there being a conflict between his & principal’s interests, he prefers his own ix. not to loan to himself if he has been authorized to loan money at interest x. render an account of his transactions and deliver to the principal whatever he may have received by virtue of the agency (If the agent fails to deliver and instead converts or appropriates for his own use the money or property belonging to his principal, he may be charged with ESTAFA.) xi. be responsible in certain cases for the act of the substitute appointed by him xii. pay interest on funds he has applied to his own use

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9. Defective contracts: a) Rescissible Contracts – Those which have caused a particular economic damage either to one of the parties or to a 3rd person and which may be set aside even if valid. It may be set aside in whole or in part, to the extent of the damage caused.

Requisites: 1)

2) 3) 4) 5)

Rescissible under the Civil Code: i. Contracts entered into by persons exercising fiduciary capacity (a) Entered into by guardian whenever ward suffers damage by more than 1/4 of value of object (b) Agreed upon in representation of absentees, if absentee suffers lesion by more than ¼ of value of property (c) Contracts where rescission is based on fraud committed on creditor (accion pauliana) (d) Objects of litigation; contract entered into by defendant w/o knowledge or approval of litigants or judicial authority (e) Payment by an insolvent – on debts w/c are not yet due; prejudices claim of others (f) Provided for by law - art 1526, 1534, 1538, 1539, 1542, 1556, 1560, 1567 and 1659

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

b) Voidable Contracts – intrinsic defect; valid until annulled; defect is due to vice of consent or legal incapacity, may be ratified

Kinds: 1)

those where one of the parties is incapable of giving consent to a contract (legal incapacity) i. minors ( below 18 ) ii. insane unless acted in lucid interval iii. deaf mute who can’t read or write iv. persons specially disqualified: civil interdiction v. in state of drunkenness vi. in state of hypnotic spell Page 65 of 230

2)

those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud (vice of consent) Mistake - refers to the subject of the thing i. which is the object of the contract; to the nature of the contract; to the principal conditions in an agreement; Error as to person - when it is the principal consideration of the contract; Error as to legal effect - when mistake is mutual and frustrates the real purpose of parties Violence – serious or irresistible force is ii. employed to wrest consent Intimidation – one party is compelled by a iii. reasonable & well-grounded fear of an imminent & grave danger upon person & property of himself, spouse, ascendants or descendants (moral coercion) iv. Undue influence – person takes improper advantage of his power over will of another depriving latter of reasonable freedom of choice Fraud – thru insidious words or machinations v. of contracting parties, other is induced to enter into contract w/o w/c he will not enter (dolo causante)

c) Unenforceable Contracts – valid but cannot compel its execution unless ratified; extrinsic defect; produce legal effects only after ratified 1.

Unauthorized/No sufficient authority – entered into in the name of another when: a. no authority conferred b. in excess of authority conferred ( ultra vires)

Note: Curable by RATIFICATION 2.

Both parties having no capacity to contract - 2 minor or 2 insane persons

Note: Curable by ACKNOWLEDGMENT 3.

Failure to comply with Statute of Frauds a. b. c.

Agreement to be performed within a year after making contract Special promise to answer for debt, default or miscarriage of another Agreement made in consideration of promise to marry Page 66 of 230

Exception: principal

7. mismanagement of the business by the agent

8. tort committed by the agent

9. agent in good faith but prejudices 3rd parties 10. agent in bad faith and prejudices 3rd persons

takes advantage of a contract or receives benefits made under false representation of his agent c. for the agent’s own benefit – principal still liable; agent’s motive immaterial principal still responsible for the acts contracted by the agent with respect to 3rd persons; principal, however, may seek recourse from the agent principal civilly liable so long as the tort is committed by the agent while performing his duties in furtherance of the principal’s business principal is liable for damages only the agent is liable for damages

NOTE: Agent always liable for fraud but not 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. Bar Question (2003). Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the supermarket. Was there a nominate contract entered into between Jo-Ann and Aissa? In the affirmative, what was it? Explain. (5%) Answer: Yes, there was a nominate contract. On the assumption that Aissa accepted the request of her close friend Jo-Ann to buy some groceries for her in the supermarket, what they entered into was the nominate contract of Agency. Article 1868 of the New Civil Code provides that by the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. Page 167 of 230

scope of authority

3. within the scope of authority but in the agent’s name

4. within the scope of the written power of attorney but agent has actually exceeded his authority according to an understanding between him & the principal

5. with improper motives

6. with misrepresentations by the agent

unenforceable as against the principal but binds the agent to the third person not binding on the principal; principal has no cause of action against the 3rd parties and vice versa

insofar as 3rd persons are concerned (not required to inquire further than the terms of the written power, agent acted within scope of his authority; principal estopped motive is immaterial; as long as within the scope of authority, valid

a. authorized principal still liable b. beyond the scope of the agent’s authority GR: principal not liable Page 166 of 230

when ratified or when the principal allowed the agent to act as though he had full powers when the transaction involves things belonging to the principal 1. remedy of the principal - damages for agent’s failure to comply with the agency 2. remedy of the third person - If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined without litigation who is liable, he can sue both.

(1)3rd person knew agent was acting for his own benefit: principal is not liable to 3rd third person (2) owner is seeking recovery of personal property of which he has been unlawfully deprived

d.

e. f.

Agreement for sale of goods, chattels or things in action at price not less than 500; exception: auction when recorded sale in sales book Agreement for lease of property for more than 1 year & sale of real property regardless of price Representation as to credit of another

d) Void or Inexistent Contracts – of no legal effect a. It produces no effect whatsoever either against or in favor of anyone b. There is no action for annulment necessary as such is ipso jure. A judicial declaration to that effect is merely a declaration c. It cannot be confirmed, ratified or cured d. If performed, restoration is in order, except if pari delicto will apply e. The right to set up the defense of nullity cannot be waived f. Imprescriptible g. Anyone may invoke the nullity of the contract whenever its juridical effects are asserted against him KINDS OF VOID CONTRACT: 1) Lacking in essential elements: no consent, no object, no cause (inexistent ones) OR essential formalities are not complied with (ex. donation propter nuptias – should conform to formalities of a donation to be valid), INCLUDING: a. Those w/c are absolutely simulated or fictitious – no cause b. Those which cause or object did not exist at the time of the transaction – no cause/object c. Those whose object is outside the commerce of man – no object d. Those w/c contemplate an impossible service – no object e. Those w/c intention of parties relative to principal object of the contract cannot be ascertained 2) Prohibited by law – Those expressly prohibited or declared void by law - Contracts w/c violate any legal provision, whether it amounts to a crime or not 3) Illegal/Illicit ones – Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy ; Ex: Contract to sell marijuana

IN PARI DELICTO DOCTRINE – both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts & not to inexistent contracts; does not apply when a superior public policy intervenes Page 67 of 230

iii.

MUTUAL RESTITUTION IN VOID CONTRACTS General Rule: parties should return to each other what they have given by virtue of the void contract in case where nullity arose from defect in essential elements 1. return object of contract & fruits 2. return price plus interest Exception: No recovery can be had in cases where nullity of contract arose from illegality of contract where parties are in pari delicto

d)

PROPERTY •

Requisites: a) Utility b) Individuality/Substantivity c) Susceptibility of appropriation

Classification of Property I. Classification by Mobility a) Immovable property i. By nature – cannot be moved from place to place because of their nature a) land, buildings & all kinds of constructions adhered to soil b) mine, quarries ii. By incorporation – essentially movables but attached to an immovable that it becomes an integral part of it a) trees, plants & growing fruits adhered to soil b) everything attached to an immovable that it will break if separated c) statues, paintings if intended by owner to be integral part of immovable d) animal houses if intended by owner to become permanently attached to immovable iii. By destination – movables but purpose is to partake of an integral part of an immovable a) machinery placed by owner of the tenement & tend directly to meet the needs of such works/industry b) fertilizers – when applied to soil c) docks & floating structures iv. By analogy/by law – contracts for public works, servitude & other real rights over immovable property

e)

f)

the agency should authorize a general and unlimited management Special Powers of Attorney needed: i. To make such payments as are not usually considered as acts of administration ii. To effect novations which put an end to obligations already in existence at the time the agency was constituted iii. 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 iv. To waive any obligation gratuitously v. To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration vi. To make gifts, except customary ones for charity or those made to employees in the business managed by the agent vii. To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration viii. To lease any real property to another person for more than one year ix. To bind the principal to render some service without compensation x. To bind the principal in a contract of partnership xi. To obligate the principal as a guarantor or surety xii. To create or convey real rights over immovable property xiii. To accept or repudiate an inheritance xiv. To ratify or recognize obligations contracted before the agency xv. Any other act of strict dominion Not Included in the Power to Mortgage: i. to sell ii. to execute a second mortgage iii. to mortgage for the agent’s or any 3rd persons’ benefit, UNLESS clearly indicated Power to compromise does not include submission to arbitration.

18. Effects of Acts of Agent ACTS OF THE AGENT EFFECT 1. in behalf of the binds principal; agent principal, within the not personally liable scope of authority

b) Movable property 2. without or beyond Page 68 of 230

contract is Page 165 of 230

EXCEPTION/S agent liable if he (1)expressly makes himself liable; (2)exceeds the limits of his authority without giving the parties sufficient notice of his powers binding on the principal

14. Form of Agency: appointment of an agent may be oral or written; no formal requirements Exception: when the law requires a specific form (e.g. agent’s sale of real property or any interest therein)

i.

susceptible of appropriation that are not included in enumeration in immovable immovable that are designated as movable by special provision of law forces of nature brought under control by science things w/c can be transported w/o impairment of real property where they are fixed obligations which involve demandable sums (credits) shares of stocks of agricultural, commercial & industrial entities although they may have real estate

ii. iii. iv.

15. Form of Acceptance by Agent A. Express - when it is oral or written B. Implied - when it can be inferred from the acts of the agent which carry out the agency, or from his silence of inaction according to the circumstances 1. Between persons who are present – implied acceptance if the principal delivers his power of attorney to the agent and the latter receives it without any objection 2. Between persons who are absent – acceptance not deemed implied from the silence of the agent EXCEPT: a. When the principal transmits his power of attorney to the agent, who receives it without any objection b. 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

v. vi.

II. Classification by Consumability 1. consumable – cannot be utilized w/o being consumed 2. non-consumable III. Classification by Ownership 1. Public dominion – a) intended for public use b) intended for public service of state, provinces, cities & municipalities

Characteristics: 16. Way of Giving Notice of Agency & Its Effect a) By special information - the person appointed as agent is considered such with respect to the person to whom it was given b) By public advertisement - the agent is considered such with regard to any person 17. Power of Attorney a) Definition: instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal; primary purpose is to evidence agent’s authority to third parties within whom the agent deals b) Power of Attorney, How Construed: strictly construed and strictly pursued; held to grant only those specified power. Exception: when strict construction will destroy the very purpose of the power *Sale of a Piece of Land/Any Interest Therein: agent’s authority must be in writing, otherwise sale is void c) Agency Couched in General Terms: covers only MERE ACTS OF ADMINISTRATION even if i. the principal should state that he withholds no power ii. the agent may execute such acts as he may consider appropriate Page 164 of 230

2.

• outside the commerce of men – cannot be alienated or leased • cannot be acquired by private individual through prescription • not subject to attachment & execution • cannot be burdened by voluntary easement Private Ownership – a) patrimonial property of state, provinces, cities, municipalities 1. exist for attaining economic ends of state 2. property of public dominion when no longer intended for public use/service – declared patrimonial b) property belonging to private persons – individually or collectively

Ownership Ownership in General 1.

Definitions of Ownership a) Independent and general right of a person to control a thing particularly in his possession, enjoyment, disposition, and recovery, subject to no restrictions except those imposed by the state or private persons, without prejudice to the provisions of the law. b) Power of a person over a thing for purposes recognized by law & within the limits established by law Page 69 of 230

2.

Attributes: a) b) c) d) e) f)

Jus possidendi – right to possess Jus utendi – right to enjoy Jus fruendi – right to fruits Jus abutendi – right to use and abuse Jus disponendi – right to dispose Jus vindicandi – right to exclude others from possession of the thing

Agent delivers the proceeds of the sale Agent can return the object in case he is unable to sell the same to a third person Agent in dealing with the thing received is bound to act according to the instructions of his principal

owner Buyer pays the price Buyer, as a general rule, cannot return the object sold Buyer can deal with the thing as he pleases, being the owner

12. Distinction Between Agent & Contractor

Actions for possession: 1. movable – replevin (return of a movable) 2. immovable – a) forcible entry – used by person deprived of possession through violence, intimidation (physical possession, 1 year unlawful deprivation) b) unlawful detainer – used by lessor/person having legal right over property when lessee/person withholding property refuses to surrender possession of property after expiration of lease/right to hold property (physical possession, 1 year from unlawful deprivation) c) accion publiciana – plenary action to recover possession d) accion reinvindicatoria – recovery of dominion of property as owner 3. Principle of self help – self defense a) Elements: i. Person exercising rights is owner or lawful possessor ii. There is actual or threatened unlawful physical invasion of his property iii. Use force as may be reasonably necessary to repel or prevent it b) Available only when possession has not yet been lost, if already lost – must resort to judicial process c) May be exercised by 3rd person – negotiorum gestio 4. Right to enclose or fence w/o detriment to servitude constituted 5. Right to surface & everything under it only as far as necessary for his practical interest (benefit or enjoyment)

Agent represents his principal acts under the principal’s control and instruction principal is liable for torts committed by the agent within the scope of his authority

Independent Contractor employed by the employer acts according to his own method employer not liable for torts committed by the independent contractor.

13. Classification of Agency As to manner of creation Express – agent has been actually authorized by the principal, either orally or in writing Implied – agency is 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, or from the acts of the agent which carry out the agency, or from his silence or inaction according to the circumstances As to character

Gratuitous – agent receives no compensation for his services Onerous – agent receives compensation for his services As to extent of business of the principal General – agency comprises all the business of the principal Special – agency comprises one or more specific transactions As to authority conferred

Couched in general terms – agency is created in general terms and 6. Right to hidden treasure found in own property a) hidden and unknown movables w/c consist of money or precious objects b) owner is unknown Page 70 of 230

is deemed to comprise only acts in the name and representation of the principal Simple or Commission – agent acts in his own name but for the account of the principal

Page 163 of 230

c) 7. Nature of Relationship Between Principal & Agent: Fiduciary, based on trust & confidence 8. Distinction Between Agency & Lease of Service

Basis

Agency representation

Lease of Service employment

Powers & agent exercises discretionary lessor ordinarily performs functions powers only ministerial functions Persons involved 3 persons: principal, agent and 2 persons: lessor and lessee the 3rd person with whom the agent contracts Types of relates to commercial or business relates more to the matters transactions of mere manual or transactions mechanical execution involved 9. Distinction Between Agency & Guardianship Agency Agent represents a capacitated person Agent is appointed by the principal and can be removed by the latter. Agent is subject to the directions of the principal. Agent can make the principal personally liable.

Guardianship A guardian represents an incapacitated person. Guardian is appointed by the court and stands in loco parentis. Guardian is not subject to the directions of the ward but must act for the benefit of the latter Guardian has no power to impose personal liability on the ward.

10. Distinction Between Agency & Lease of Property Agency Agent is controlled by the principal. Agency may involve things other than property. Agent can bind the principal.

Lease of property Lessee is not controlled by the lessor. Lease of property involves property.. Lessee cannot bind the lessor.

11. Distinction Between Agency to Sell & Sale Agency to sell Sale Agent receives the goods as the principal’s goods Buyer receives the goods as Page 162 of 230

by chance – if property owner is state – ½ belongs to finder; also if in another’s property; the finder must not be trespasser

Bar Question (1997). Marcelino, a treasure hunter as a hobby, has found a map which appears to indicate the location of hidden treasure. He has an idea of the land where the treasure might be found. Upon inquiry, he learns that the owner of the land, Leopoldo, is a permanent resident of Canada. Nobody, however, could give him Leopoldo’s exact address. Ultimately, anyway, he enters the land and conducts a search. He succeeds. Leopoldo, learning of Marcelino’s “find”, seeks to recover the treasure from Marcelino but the latter is not willing to part with it. Failing to reach an agreement, Leopoldo sues Marcelino for the recovery of the property. Marcelino contests the action. How would you decide the case?

Answer: I would decide in favor of Marcelino since he is considered a finder by chance of the hidden treasure, hence, he is entitled to ½ of the hidden treasure. While he may have had the intention to look for the hidden treasure, still he is a finder by chance since it is enough that he tried to look for it. By chance the law does not mean sheer luck such that the finder should have no intention at all to look for the treasure. By chance means good luck, implying that one who intentionally looks for the treasure is embraced by the provision. The reason is that it is extremely difficult to find hidden treasure without looking for it deliberately. Marcelino is not a trespasser since there is no prohibition for him to enter the premises, hence, he is entitled to half of the treasure. 7. Limitation on Ownership a) general limitations for the benefit of the state (eminent domain, police power, taxation) b) specific limitations imposed by law (servitude, easements) c) specific limitations imposed by party transmitting ownership (will, contract) d) limitations imposed by owner himself (voluntary servitude, mortgages, pledges) e) inherent limitations arising from conflicts with other similar rights (contiguity of property) f) owner cannot make use of a thing which shall injure/prejudice rights of 3rd persons (neighbors) g) acts in state of necessity – law permits injury or destruction of things owned by another provided this is necessary to avert a greater danger (with right to indemnity – vs. principle of unjust enrichment) h) true owner must resort to judicial process – when thing is in possession of another; law creates a disputable presumption of ownership to those in actual possession i. identify property Page 71 of 230

ii.

show that he has better title

8. Property Registration Decree (P.D. 1529) Bar Question (1998). Section 70 of Presidential Decree No. 1529, concerning adverse claims on registered land, provides a 30-day period of effectivity of an adverse claim, counted from the date of its registration. Suppose a notice of averse claim based upon a contract to sell was registered on March 1, 1997 at the instance of the BUYER, but on June 1, 1997, or after the lapse of the 30-day period, a notice of levy on execution in favor of a JUDGMENT CREDITOR, was also registered to enforce a final judgment for money against the registered owner. Then, on June 15, 1997 there having been no formal cancellation of his notice of adverse claim, the BUYER pays to the seller-owner the agreed purchase price in full and registers the corresponding deed of sale. Because the annotation of the notice of levy is carried over to the new title in his name, the BUYER brings an action against the JUDGMENT CREDITOR to cancel such annotation, but the latter claims that his lien is superior because it was annotated after the adverse claim of the BUYER had ipso facto ceased to be effective. Will the suit prosper?

Answer: The suit will prosper. While an adverse claim duly annotated at the back of a title under Section 70 of P.D. 1529 is good only for 30 days, cancellation thereof is still necessary to render it ineffective, otherwise, the inscription thereof will remain annotated as a lien on the property. While the life of an adverse claim is 30 days under P.D. 1529, it continues to be effective until it is canceled by formal petition filed with the Register of Deeds. The cancellation of the notice of levy is justified under Section 108 of P.D. 1529 considering that the levy on execution can not be enforced against the buyer whose adverse claim against the registered owner was recorded ahead of the notice of levy on execution. Bar Question (2000). Regina has been leasing foreshore land from the Bureau of Fisheries and Aquatic Resources for the past 15 years. Recently, she learned that Jorge was able to obtain a free patent from the Bureau of Agriculture, covering the same land, on the basis of a certification by the District Forester that the same is already “alienable and disposable”, Moreover, Jorge had already registered the patent with the Register of Deeds of the province, and he was issued an Original Certificate of Title for the same. Regina filed an action for annulment of Jorge’s title on the ground that it was obtained fraudulently. Will the action prosper?

Answer: An action for the annulment of Jorge’s Original Certificate of Title will prosper on the following grounds: 1) Under Chapter IX of C.A. No. 141, otherwise known as the Public Land Act, foreshore lands are disposable for residential, commercial, industrial, Page 72 of 230

f 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: i. In the order established in Article 2244; ii. Common credits referred to in Article 2245 shall enjoy no preference and shall be paid pro rata regardless of dated (Article 2251). AGENCY Nature, Form and Kinds of Agency 1. Definition: By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. 2. Characteristics: a) consensual b) principal c) nominate d) unilateral; reciprocal (if for compensation) e) preparatory 3. Basis: Representation. The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if they were personally done by the principal. Hence, the distinguishing features of agency are its representative character & its derivative authority. 4. Purpose: extend the personality of the principal through the facility of the agent 5. Capacity of the Parties: a) The principal may be a natural or a juridical person. And he must be capacitated. The rule is if a person is capacitated to act for himself or his own right, he can act through an agent. b) As to the agent, insofar as the third persons are concerned, it is enough that the principal is capacitated. But insofar as his obligations to his principal are concerned, the agent must be able to bind himself. 6. Essential Elements: a) consent of the parties to establish the relationship; b) object of the contract is the execution of a juridical act in relation to third persons; c) agent acts as a representative and not for himself; and d) agent acts within the scope of his authority Page 161 of 230

2. Article 2244 relates to the property of the insolvent that is not burdened with the liens or encumbrances created or recognized by Article 2241 and 2242.

or similar productive purposes, and only by lease when not needed by the government for public service. 2) If the land is suited or actually used for fishpond or aquaculture purposes, it comes under the jurisdiction of the Bureau of Fisheries and Aquatic Resources (BFAR) and can only be acquired by lease. (P.D. 705) 3) Free Patent is a mode of concession under Section 41, Chapter VII of the Public Land Act, which is applicable only for agricultural lands. 4) The certificate of the district forester that the land is already “alienable and disposable” simply means that the land is no longer needed for forest purposes, but the Bureau of Lands could no longer dispose of it by free patent because it is already covered by a lease contract between BFAR and Regina. That contract must be respected. 5) The free patent of Jorge is highly irregular and void ab initio, not only because the Bureau has no statutory authority to issue a free patent over a foreshore area, but also because of the false statements made in his sworn application that he has occupied and cultivated the land since July 4, 1945, as required by the free patent law. Under Section 91 of the Public Land Act, any patent, concession or title obtained thru false representation is void ab initio. In cases of this nature, it is the government that shall institute annulment proceedings considering that the suit carries with it a prayer for the reversion of the land to the state. However, Regina is a party in interest and the case will prosper because she has a lease contract for the same land with the government.

6. Order of Preference of Credits

Right of Accession

a. Those credits which enjoy preference with respect to specific movable, excluded all others to the extent of the value of the personal property to which the preference refers (Article 2246).

1. Accession – owner of thing becomes owner of everything it may produce or those which may be incorporated or united thereto 1. principle of justice 2. accessory follows the principal

5. Order of Preference with Respect to Other Properties of the Debtor i. funeral expenses ii. wages of employees – one year iii. expenses of last illness iv. workmen’s compensation v. support for one year vi. support during insolvency vii. fines in crimes viii. legal expenses - administration ix. taxes x. tort xi. donations xii. appearing in public instrument or final judgment NOTES: 1. In contrast with Articles 2241 and 2242, Article 2244 creates no liens on determinate property which follow such property. What Article 2244 creates are simply rights in favor or certain creditors to have the cash and other assets of the insolvent applied in a certain sequence or order of priority (Republic vs. Peralta, 150 SCRA 37 [1987]).

b. 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 (Article 2247). c. 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 (Article 8). d If there are two or more credits with respect to the same specific real property or real rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the immovable property or real right (Article 2249). e The excess, if any, after the payment of the credits which enjoy preference with respect to specific property, real or personal, shall be added to the free property which the debtor may have, for the payment of the other credits (Article 2250). Page 160 of 230

2. Accession continua – accession to products of the thing General Rule: Owner has the right to all natural, industrial & civil fruits Exception: possession in good faith by another, usufruct, lease, antichresis 3. IMMOVABLES –

Accession Natural (Accretion) a)

Alluvion - owner of lands adjoining banks of river belongs the accretion gradually received from effects of the water's current Requisites: 1. deposit is gradual & imperceptible 2. made through effects of current of water 3. land where accretion takes place is adjacent to banks of river Page 73 of 230

b)

c)

Avulsion – transfer of a known portion of land from one tenement to another by force of current of waters Rights of riparian owner: 1. Right to portion of land transferred if not claimed by owner within 2 years (prescription) 2. Right to trees uprooted if not claimed by owner w/in 6 months; subject to reimbursement for necessary expenses for gathering them & putting them in safe place Change of river bed Right of owner of land occupied by new river course: 1. Right to old bed ipso facto in proportion to area lost 2. Owner of adjoining land to old bed shall have right to acquire the same by paying its value – value not to exceed the value of area occupied by new bed 3. Formation of island in non-navigable river a) owner of margin nearest to islands formed – if nearest to it b) owner of both margins – if island is in the middle (divided into halves longitudinally) 4. building, planting & sowing

Bar Question (2001). For many years, the Rio Grande river deposited soil along its bank, beside the titled land of Jose. In time, such deposit reached an area of one thousand square meters. With the permission of Jose, Vicente cultivated the said area. Ten years later, a big flood occurred in the river and transferred the 1000 square meters to the opposite bank, beside the land of Agustin. The land transferred is now contested by Jose and Agustin as riparian owners and Vicente who claims ownership by prescription. Who should prevail?

Answer: Jose should prevail. The disputed area, which is an alluvion, belongs by right of accretion to Jose, the riparian owner (Art. 457 CC). When, as given in the problem, the very same area was “transferred” by flood waters to the opposite bank, it became an avulsion and ownership thereof is retained by Jose who has two years to remove it (Art. 459, CC). Vicente’s claim based on prescription is baseless since his possession was by mere tolerance of Jose and, therefore, did not adversely affect Jose’s possession and ownership (Art. 537, CC). Inasmuch as his possession is merely that of a holder, he cannot acquire the disputed area by prescription. Bar Question (2003). Andres is a riparian owner of a parcel of registered land. His land, however, has gradually diminished in area due to the current of the river, while the registered land of Mario on the opposite bank has gradually increased in area by 200-square meters. (a) Who has the better right over the 200-square meter area that has been added to Mario’s registered land, Mario or Andres? (b) May a third person acquire said 200-square meter land by prescription? Page 74 of 230

f)

Household furniture and utensils necessary for housekeeping and used for that purpose by the debtor, such as the debtor may select, of a value not exceeding one thousand pesos; g) Provisions for individual or family use insufficient for three months; h) The professional libraries of attorney’s, judges, physicians, pharmacists, dentist, engineers, surveyors, clergymen, teachers and other professionals, not exceeding three thousand pesos in value; i) One fishing boat and net, not exceeding the total value of one thousand pesos, the property of any fisherman, by the lawful use of which he earns a livelihood; j) So much of the earnings of the debtor for his personal services within the month preceding the levy as are necessary for the support of his family; k) Lettered gravestones; l) All moneys, benefits, privileges or annuities accruing or in any manner growing out of any life insurance, if the annual premiums paid do not exceed five hundred pesos, and if they exceed the sum, a like exemption shall exist which shall bear the same proportion to the moneys, benefits privileges and annuities so accruing or growing out of such insurance that said five hundred pesos bears to the whole premiums paid; m) The right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the government; n) Copyrights and other properties especially exempted by law (Section 12, Rule 39) o) Property under legal custody and of the public dominion. 3. Preferred a) b) c) d) e) f) g) h) i) j) k) l) m)

Credits with Respect to Specific Movable Property taxes malversation by public officials vendor’s lien pledge, chattel mortgage mechanic’s lien laborer’s wages salvage tenancy carrier’s lien hotel’s lien crop loan rentals - one year deposit

NOTE: The foregoing enumeration is not an order of preference (Articles 2248 – 2249) Page 159 of 230

Bar Question (2001). To secure a loan obtained from a rural bank, Purita assigned her leasehold rights over a stall in the public market in favor of the bank. The deed of assignment provides that is case of default in the payment, the bank shall have the right to sell Purita’s rights over the market stall as her attorney-in-fact, and to apply the proceeds to the payment of the loan. A. Was the assignment of leasehold rights a mortgage or a cession? Why?

Answer: The assignment was a mortgage, not a cession, of the leasehold rights. A cession would have transferred ownership to the bank. However, the grant of authority to the bank to sell the leasehold rights in case of default is proof that no such ownership was transferred and that a mere encumbrance was constituted. There would have been no need for such authority had there been a cession. B. Assuming the assignment to be a mortgage, does the provision giving the bank the power to sell Purita’s rights constitute pactum commissorium or not? Why?

Answer: No, the clause in question is not a pactum commissorium. It is pactum commissorium when default in the payment of the loan automatically vests ownership of the encumbered property in the bank. In the problem given, the bank does not automatically become owner of the property upon default of the mortgagor. The bank has to sell the property and apply the proceeds to the indebtedness. Concurrence and Preference Of Credits 1. Liability for Obligations The debtor is liable with all his property, present and future, for the fulfillment of his obligations, subject to the exemptions provided by law. 2. Exempt Property a) Family home constituted jointly by husband and wife or by unmarried head of a family, subject to some exemptions b) Right to receive support as well as any money or property obtained as such support c) Tools and implements necessarily used by him in his trade or employment; d) Two horses, or two cows, or two carabaos or other beasts of burden, such as the debtor may select, not exceeding one thousand pesos in value and necessarily used by him in his ordinary occupation; e) His necessary clothing and that of all his family.

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Answer: (a) Mario has a better right over the 200 square meters increase in area by reason of accretion, applying Article 457 of the New Civil Code, which provides that “to the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters”. Andres cannot claim that the increase in Mario’s land is his own, because such is an accretion and not a result of the sudden detachment of a known portion of his land and its attachment to Mario’s land, a process called “avulsion”. He can no longer claim ownership of the portion of his registered land which was gradually and naturally eroded due to the current of the river, because he had lost it by operation of law. That portion of the land has become part of the public domain. (b) Yes, a third party may acquire by prescription the 200 square meters, increase in area, because it is not included in the Torrens Title of the riparian owner. Hence, this does not involve the imprescriptibility conferred by Section 47, P.D. No. 1529. The fact that the riparian land is registered does not automatically make the accretion thereto a registered land. (Grande v. CA, 115 Phil. 521 [1962]; Jagualing v. CA 194 SCRA 607 [1991]). Accession Industrial General Rule: Whatever is built, planted or sown belongs to owner of land; presumption is owner made them at his expense Exception: contrary is proven A. Right of owner of material 1. Right to be indemnified or paid of value of property by owner of land 2. Right to remove materials if he can do so w/o injury to work constructed if owner has not paid 3. Right to damages and demolition even if with injury to work if owner of land is in bad faith B. Right of owner when another builds, plants or sows in his land: (OWNER & BUILDER BOTH IN GOOD FAITH) 1. Appropriate as his own after paying for indemnity 2. Oblige the planter, builder to pay for price of land or rent, except when value of lands is greater than thing built – convert to rent Right of Builder in good faith before payment of indemnity of owner in good faith 1. Right to retain land & building 2. Right not to be compelled to pay for rent 3. Right of retention ceases when obliged to pay for value of and if he fails to do so Page 75 of 230

C. Right 1. 2. 3. 4.

of owner in good faith when builder is in bad faith Right to appropriate what has been built w/o paying indemnity Order demolition of building Compel the builder to pay for price of land or rent Right to damages

D. Right of builder in bad faith when owner is in good faith 1. Right to be reimbursed for necessary expenses preservation of land E. Right 1. 2. 3.

for

of Builder in good faith when owner is in bad faith Right to indemnity for value of building Right to damages Right to demolish w/o payment of indemnity

F. Bad faith on both builder & owner – in pari delicto (no cause of action against each other) G. Right of 3rd person who owns materials 1. Right to be indemnified for value of materials irrespective of good faith or bad faith of builder or owner; if builder has no property, owner is subsidiarily liable 2. When builder is in bad faith & owner in good faith & owner compel builder to remove improvements, owner is not subsidiarily liable 3. When 3rd person is paid by builder, builder may demand from landowner the value of labor & materials Bar Question (1999). a) Because of confusion as to the boundaries of the adjoining lots that they bought from the same subdivision company, X constructed a house on the adjoining lot of Y in the honest belief that it is the land that he bought from the subdivision company. What are the respective rights of X and Y with respect to X’s house?

Answer: The rights of Y, as owner of the lot, and X, as builder of a house thereon, are governed by Art. 448 of the Civil Code which grants to Y the right to choose between two remedies: (a) appropriate the house by indemnifying X for its value plus whatever necessary expenses the latter may have incurred for the preservation of the land, or (b) compel X to buy the land if the price of the land is not considerably more than the value of the house. If it is, then X cannot be obliged to buy the land but he shall pay reasonable rent, and in case of disagreement, the court shall fix the terms of the lease.

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The registration of the chattel mortgage is an effective and binding notice to other creditors of its existence and creates a real right or a lien which being recorded follows the chattel wherever it goes. The registration gives the mortgagee the symbolical possession. 5. Affidavit of Good Faith a) The affidavit of good faith is an oath in a contract of chattel mortgage wherein the parties “severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purpose and that the same is just and valid obligation and one not entered into for the purpose of fraud. b) The absence of the affidavit vitiates a mortgage only as against

third persons without notice like creditors and subsequent encumbrances. 6. Foreclosure of Chattel Mortgage a) Public Sale – if the mortgagor defaults in the payment of the secured debt or otherwise fails to comply with the conditions of the mortgage b) Private Sale – if there is an express stipulation in the contract. 7. Right of Mortgagee to Recover Deficiency a) The creditor may maintain an action for the deficiency although the Chattel Mortgage Law is silent on this point b) The action may be sought within ten (10) years from the time the cause of action accrues. c) If the chattel mortgage is constituted, whether by the debtorvendee or a third person, as security for the purchase of personal property payable in installments, no deficiency judgment can be asked and any agreement to the contrary shall be void (Article 1484). Bar Question (1997). On order to secure a bank loan, XYZ Corporation surrendered its deposit certificate, with a maturity date of 1 September 1997 to the bank. XYZ defaulted on the due repayment of the loan, prompting the bank to encash the deposit certificate. XYZ questioned the above action taken by the bank as being a case of pactum commissorium. The bank disagrees. What is your opinion?

Answer: We submit that there is no pactum commissorium here. Deposits of money in banks and similar institutions are governed by the provisions on simple loans (Art1980, Civil Code). The relationship between the depositor and a bank is one of creditor and debtor. Basically this is a matter of compensation as all the elements of compensation are present in this case. (BPI vs. CA, 232 SCRA 302). Page 157 of 230

a) b)

To bring an action for specific performance To petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of the Rules of Court. The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge

Chattel Mortgage 1. A chattel mortgage is: a) an accessory contract because it is for the purpose of securing the performance of a principal obligation; b) a formal contract because for its validity, registration in the Chattel Mortgage Register is indispensable. c) a unilateral contract because it produces only obligations on the part of the creditor to free the thing from the encumbrance upon fulfillment of the obligation.

b) Suppose X was in good faith but Y knew that X was constructing on his (Y’s) land but simply kept quiet about it, thinking perhaps that he could get X’s house later. What are the respective rights of the parties over X’s house in this case?

Answer: Since the lot owner Y is deemed to be in bad faith (Art. 453), X as the party in good faith may (a) remove the house and demand indemnification for damages suffered by him, or (b) demand payment of the value of the house plus reparation for damages (Art 447, in relation to Art. 454). Y continues as owner of the lot and becomes, under the second option, owner of the house as well, after he pays the sums demanded. 4. MOVABLES – A. Conjunction / adjunction – 2 movable things which belong to different owners are united to form a single object a)

2. Subject Matter of Chattel Mortgage a) Shares of stock in a corporation b) Interest in business c) Machinery and house of mixed materials treated by parties as personal property and no innocent third person will be prejudiced thereby (Makati Leasing and Finance Corporation vs. Weaver Textile Mills, Inc., 122 SCRA 296 [1983]. d) Vessels, the mortgage of which have been recorded with the Philippine Coast Guard in order to be effective as to third persons e) Motor vehicles, the mortgage of which had been registered both with the Land Transportation Commission and the Chattel Mortgage Registry is order to affect third persons f) House which is intended to be demolished g) Growing crops and large cattle (section 7, paragraphs 2 and 3, Act No. 1508) 3. Creation of Chattel Mortgage a) The registration of the personal property in the Chattel Mortgage Register as security for the performance of an obligation. b) Under the Chattel Mortgage Law, if the property as situated in a different province from that in which the mortgagor resides, the registration must be in both registers (Section 4, Act No. 1508); otherwise, the chattel mortgage is void. c) It has been ruled however that if the chattel mortgage is not recorded, it is nevertheless binding between the parties. (Filipinas Marble Corporation vs. Intermediate Appellate Court, 142 SCRA 180 [1986] 4. Effect of Registration

Test to determine w/c one is the principal: i. that to w/c the other intended to be united as ornament or for its use of perfection ii. value iii. volume

b) Rights i. ii.

iii. iv.

v.

If both are in good faith – owner of principal acquired the accessory with indemnification If both are in good faith – may separate them if no injury will be caused; if value of accessory is greater than principal, owner of accessory may demand separation even if damages will be caused to the principal (expenses to be borne by one who caused the conjunction) If owner of accessory is in bad faith – owner of accessory with damages to principal If owner of principal is in bad faith – owner of accessory shall have option of principal paying value of accessory or removal of accessory despite destruction of principal Owner of accessory or principal has right to indemnity when thing adjuncts w/o his consent – may demand that a thing equal is kind, value and price

B. Specification – One employs the materials of another in whole or in part on order to make a thing of a different kind; transformation a) Rights:

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• i.

ii.

iii.

iv.

If person who made the transformation is in good faith - he shall appropriate the thing transformed as his own with indemnity to owner of material for its value If material is more precious than transformed thing – owner of material may appropriate the new thing to himself after indemnity paid to labor or demand indemnity for materials If person who made the transformation is in bad faith, owner of material shall appropriate the work to himself w/o paying maker or demand indemnity for value of materials & damages If transformed thing is more valuable than material, owner of material cannot appropriate

C. Commixtion / confusion – 2 things of the same or different kinds are mixed & are not separable w/o injury

Extrajudicial Foreclosure governed by Act. No. 3135 as amended, if and when the mortgagee is given a specific power or express authority to do so. a. Public auction must be conducted in the province where the property is situated. b. Posting of notice of sale in at least 3 public places therein c. Publication in a newspaper of general circulation d. Personal notice to mortgagor is not required e. Debtor has the right to redeem the property sold within the term of one year from and after the date of the registration of sale (Section 6).

9. Right of Mortgagee to Recover Deficiency If there be a balance due to the mortgagee after applying the proceeds of the sale, the mortgagee is entitled to recover the deficiency. The action to recover a deficiency after foreclosures prescribes after ten (10) years from the time the right of action accrues. Antichresis

a) Rights: i.

ii.

iii.

If both owners are in good faith – Each owner shall acquire a right proportional to the part belonging to him (vis-a-vis the value of the things mixed or confused) If one owner is in bad faith – he shall lose the thing belonging to him plus indemnity for damages caused to owner of other thing mixed with his thing If both in bad faith no cause of action against each other

1. Antichresis is a contract whereby the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing and thereafter to the principal of his credit. 2. Characteristics a) accessory contract b) formal contract because the amount of the principal and of the interest must both be in writing, otherwise the contract of antichresis is void. 3. The fruits of the immovable which is the object of the antichresis must be appraised at their actual market value at the time of the application.

Quieting of Title 1. Action to quiet title a) put end to vexatious litigation in respect to property involved; plaintiff asserts his own estate & generally declares that defendant’s claim is w/o foundation b) When proper: 1. contract has been extinguished or terminated 2. contract has prescribed 3. remove cloud 2. Action to remove cloud a) intended to procure cancellation, delivery, release of an instrument, encumbrance, or claim constituting a on plaintiff’s title which may be used to injure or vex him in the enjoyment of his title Page 78 of 230

4. The property delivered stands as a security for the payment of the obligation of the debtor in antichresis. Hence, the debtor cannot demand its return until the debt is totally paid.

5. Obligations of Antichretic Creditor a) pay the taxes and charges upon the estate. b) apply the fruits, after receiving them to the interest, if owing, and thereafter to the principal (Article 2132) in accordance with the provisions of Article 2133 or 2138 6. Remedy of Creditor in Case of Default Page 155 of 230

Real Mortgage

b)

1. Real Mortgage is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated.

c)

2. The mortgagor, as a general rule, retains possession of the property mortgaged as security for the payment of the sum borrowed from the mortgagee, and pays the latter a certain percent thereof as interest on his principal by way of compensation for his sacrifice in depriving himself of the use of said money and the enjoyment of its fruits, in order to give them to the mortgagor.

Cloud – any instrument which is inoperative but has semblance of title Requisites: 1. Plaintiff must have legal or equitable interest 2. Need not be in possession of property 3. Return to defendant all benefits received – he who wants justice must do justice

Ruinous Buildings and Trees in Danger of Falling

3. The objects of a real mortgage are immovable (Article 415) and alienable real rights imposed upon immovables.

Liability for damages: a) collapse – engineer, architect or contractor b) collapse resulting from total or partial damage; no repair made – owner; state may compel him to demolish or make necessary work to prevent if from falling c) if no action – done by government at expense of owner

4. In order that a mortgage may be validly constituted, it must appear in a public document duly recorded in the Registry of Property NOTE: If the instrument of mortgage is not recorded, the mortgage is nevertheless binding between the parties.

Co-Ownership 1. Co-ownership a) plurality of subjects – many owners b) unity of material (indivision) of object of ownership c) recognition of ideal shares

5. A mortgage creates a real right, a lien inseparable from the property mortgaged, which is enforceable against the whole world. Until discharged, it follows the property wherever it goes and subsists notwithstanding changes of ownership. 6. Effect of Mortgage a) The only right of a mortgagee in case of non-payment of a debt secured by real mortgage would be to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. b) The mortgagor’s default does not operate to vest in the mortgagee the ownership of the encumbered property. 7. Extent of Mortgage General Rule: Not limited to the property itself but also extends to all its accessions, improvements, growing fruits and rents or income (see Article 2102) as well as to the proceeds of insurance should the property be destroyed of the expropriation value of the property should it be expropriated. 8. Foreclosure of Mortgages • Judicial foreclosure governed by Rule 68 of the Rules of Court.

Sources: i. ii. iii. iv. v.

Law Contracts succession fortuitous event/chance – commixtion occupancy – 2 persons catch a wild animal

Distinguished from partnership: • partnership created only by agreement; co-ownership has many sources • purpose of partnership is to obtain profit; co-ownership is collective enjoyment of a thing • in partnership there is juridical personality distinct from individuals, none in co-ownership • partnership can be created for more than 10 years, not in coownership • partners cannot transfer rights w/o consent of other co-partners, not co-ownership • partnership extinguished when partner dies, not in co-ownership • distribution of profits in partnerships may be stipulated, this is not flexible in co-ownership but depends on ideal share/interest 2. Rights of co-owners

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a)

Right to benefits proportional to respective interest; stipulation to contrary is void b) Right to use thing co-owned i. for purpose for which it is intended ii. without prejudice to interest of ownership iii. without preventing other co-owners from making use thereof c) Right to change purpose of co-ownership by agreement d) Right to bring action in ejectment in behalf of other co-owner e) Right to compel co-owners to contribute to necessary expenses for preservation of thing and taxes f) Right to exempt himself from obligation of paying necessary expenses and taxes by renouncing his share in the pro-indiviso interest; but can’t be made if prejudicial to co-ownership g) Right to make repairs for preservation of things can be made at will of one co-owner; receive reimbursement therefrom; notice of necessity of such repairs must be given to co-owners, if practicable h) Right to full ownership of his part and fruits i) Right to alienate, assign or mortgage own part; except personal rights like right to use and habitation j) Right to ask for partition anytime k) Right of pre-emption l) Right of redemption m) Right to be adjudicated thing (subject to right of others to be indemnified) n) Right to share in proceeds of sale of thing if thing is indivisible and they cannot agree that it be allotted to one of them 3. Duties/Liabilities a) Share in charges proportional to respective interest; stipulation to contrary is void b) Pay necessary expenses and taxes – may be exercised by only one coowner c) Pay useful and luxurious expenses – if determined by majority d) Duty to obtain consent of all if thing is to be altered even if beneficial; resort to court if non-consent is manifestly prejudicial e) Duty to obtain consent of majority with regards to administration and better enjoyment of the thing; controlling interest; court intervention if prejudicial – appointment of administrator f) No prescription to run in favor co-owner as long as he recognizes the co-ownership; requisites for acquisition through prescription i. he has repudiated through unequivocal acts ii. such act of repudiation is made known to other co-owners iii. evidence must be clear and convincing g) Co-owners cannot ask for physical division if it would render thing unserviceable; but can terminate co-ownership Page 80 of 230

b)

c)

d)

e)

f)

The possession of the pledgee constitutes his security. Hence, the debtor cannot demand for its return until the debt secured by it is paid. But the right of retention is limited only to the fulfillment of the principal obligation for which the pledge was created. Pledgee has the obligation to take care of the thing pledged with the diligence of a good father of the family. He is entitled to reimbursement of the expenses incurred for its preservation and he is liable for loss or deterioration by reason of fraud, negligence, delay or violation of the terms of the contract. (Articles 1174, 1170). Pledgee is not authorized to transfer possession of the thing pledged to a third person. Exception: stipulation authorizing pledgee to transfer possession. (Article 2100) The pledgee has no right to use the thing pledged or to appropriate the fruits thereof without the authority of the owner. But the pledgee can apply the fruits, income, dividends, or interest, if owing and thereafter to the principal of his credit. Exception: contrary stipulation

The pledgor may ask that the thing pledged be deposited judicially or extrajudicially -1. 2. 3.

g)

h)

i)

j)

if the creditor uses the thing without authority; if he misuses the thing in any other way (Article 2104); if the thing is in danger of being lost or impaired because of the negligence or willful act of the pledge. Pledgor cannot ask for the return of the thing pledged until said obligation is fully paid including interest due thereon and expenses incurred for its preservation (Article 2099). Exception: Pledgor is allowed to substitute the thing pledged which is in danger of destruction or impairment with another thing of the same kind and quality (Article 2107). The possession of the thing pledged by the debtor or owner subsequent to the perfection of the pledge gives rise to a prima facie presumption that the thing has been returned and, therefore, that the pledge has been extinguished. When the thing pledged is later found in the hands of the pledgor or the owner, only the accessory obligation of pledge is presumed remitted, not the principal obligation itself (Article 1274). The sale of the thing pledged extinguishes the principal obligation whether the price of the sale is more or less than the amount due. If the price of the sale is more than the amount due the • creditor, the debtor is not entitled to the excess unless the contrary is provided; • In the same way, if the price of the sale is less, neither is the creditor entitled to recover the deficiency. A contrary stipulation is void (Article 2115). Page 153 of 230

Pledge

h)

1. Pledge is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable (Article 2094) or document evidencing incorporeal rights (Article 2095) for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions.

i)

2. Characteristics a) real b) accessory contract c) unilateral contract d) subsidiary contract

After partition, duty to render mutual accounting of benefits and reimbursements for expenses Every co-owner liable for defects of title and quality of portion assigned to each of the co-owner

4. Rights of 3rd parties a) creditors of assignees may take part in division and object if being effected without their concurrence, but cannot impugn unless there is fraud or made notwithstanding their formal opposition b) non-intervenors – retain rights of mortgage and servitude and other real rights and personal rights belonging to them before partition was made Possession

3. Essential Requirements i. The pledge is constituted to secure the fulfillment of a principal obligation. ii. The pledgor or mortgagor is the absolute owner of the thing pledged or mortgaged iii. 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. iv. The thing pledged must be delivered to the creditor or to a third person by common agreement. 4. Common Provisions Governing Pledge or Mortgage a) Contract may be constituted only by the absolute owner of the thing pledged or mortgaged otherwise, the pledge or mortgage is void, such as that constituted by an impostor b) A mortgage of conjugal property by one of the spouses is valid only as to one-half (1/2) of the entire property. c) While it is true that under Article 2085 it is essential that the mortgagor be the absolute owner of the property mortgaged, a mortgagee has the right to rely upon what appears in the certificate of title and does not have to inquire further. Stated differently, an innocent purchaser for value (like a mortgagee) relying on a torrens title issued is protected. d) A stipulation whereby the thing pledged or mortgaged or under antichresis (Article 2137) shall automatically become the property of the creditor in the event of non-payment of the debt within the term fixed is known as pactum commisorium or pacto commissorio which is forbidden by law and declared null and void (article 2088) 5. Provisions Applicable only to Pledge a) The pledgor retains his ownership of the thing pledged. He may, therefore, sell the same provided the pledgee consents to the sale. Page 152 of 230

1.

Possession – holding of a thing or enjoyment of a right

2.

Elements of possession: a) occupancy – actual or constructive (corpus) b) intent to possess (animus)

3.

How acquired: a. material occupation – possession as a fact 1. physical 2. constructive - tradicion brevi manu (one who possess a thing short of title of owner – lease ); b. tradicion constitutum possesorium (owner alienates thing but continues to possess – depositary, pledgee, tenant) subject to action of our will- possession as a right 1. tradicion simbolica – delivering object or symbol of placing thing under control of transferee (keys) 2. tradicion longa manu – pointing out to transferee the things which are being transferred c. proper acts and legal formalities established for acquiring rights – donation, sale

4.

Rule- cannot be recognized at the same time in 2 different personalities except co-possession

5.

Question arises regarding fact of possession, preference: 1. present possessor preferred 2. 2 possessors – one longer in possession 3. dates of possession the same – one who presents a title 4. both have titles – judicial resolution

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6. What can be subject of possession – things or rights which are susceptible of being appropriated

f) g)

7. Degrees of possession: 1. holding w/o title and in violation of right of owner 2. possession with juridical title but not that of owner 3. possession with just title but not from true owner 4. possession with just title from true owner

h) i)

8. Classes of possession: 1. in concept of owner – owner himself or adverse possessor

j)

Effects: a.

2. 3.

4.

5.

6.

may be converted into ownership through acquisitive prescription b. bring actions necessary to protect possession c. ask for inscription of possession d. demand fruits and damages from one unlawfully detaining property in concept of holder – usufruct, lessee, bailee in oneself – personal acquisition a. he must have capacity to acquire possession b. intent to possess c. possibility to acquire possession in name of another – agent; subject to authority and ratification if not authorized; negotiorum gestio a. representative has intention to acquire for another and not for himself b. person from whom it is acquired has intention of possessing it in good faith – not aware that there exist flaw in title or mode w/c invalidates it; mistake upon doubtful question of law; always presumed; it may be interrupted – by extraneous evidence or suit for recovery of property of true owner in bad faith – aware of defect

k)

Guarantor may either obtain release from the guaranty or demand a security that shall protect him from any proceedings by the creditor and from danger of debtor’s insolvency (Article 2071). c) Effects of Guaranty as Between Co-guarantors i. one who has paid the entire debt may seek reimbursement from each of his co-guarantors the share which is proportionately owing him.

Requisites: a) b)

principal obligation is extinguished b) c) d)

Rules:

2.

Possession of hereditary property is deemed transmitted w/o interruption from moment of death (if accepted) and if not accepted (deemed never to have possessed the same). One who succeeds by hereditary title shall not tack the bad faith of predecessors in interest except when he is aware of flaws affecting title; but effects of possession in good faith shall not benefit him except from date of death of decedent.

payment must have been made by virtue of a judicial demand or because the principal debtor is insolvent

8. Extinguishment of Guaranty a) Being accessory and subsidiary, guaranty is terminated when the

9. Possession through succession 1.

In case of insolvency of the principal debtor; When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; When the debt has become demandable by reason of the expiration of the period for payment; After the lapse of ten 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 ten years; If there are reasonable grounds to fear that the principal debtor intends to abscond; If the principal debtor is in imminent danger of becoming insolvent (Article 2071).

e) f)

creditor has released the guarantor although the principal obligation remains (Article 2078) In case of material alteration Release of one guarantor by the creditor without the consent of the other guarantors benefits all to the extent of the share of the guarantor released (Article 2078). An extension of the term granted by the creditor to the debtor without guarantor’s consent extinguishes the guaranty (Article 2029). If there can be no subrogation because of the fault of the creditor, as when the creditor releases or fails to register a mortgage, the guarantors are thereby released. The same rules applies even though the guarantors be solidarily (Article 2080).

10. Minors/ Incapacitated Page 82 of 230

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ii.

iii.

A compromise between the creditor and the principal debtor benefits the guarantor but does not prejudice him. A compromise which is entered into between the guarantor and the creditor benefits but does not prejudice the principal debtor (Article 2063). Guarantor is likewise entitled to the benefit of division where there are several guarantors of only one debtor and for the same debt. Guarantor’s liability is only joint therefore, they are not liable beyond the shares which they are respectively bound to pay (Article 2065). Exceptions: a) solidarity b) if any of the circumstances in Article 2057 should take place.

b) Between the Debtor and the Guarantor i. The guarantor who pays for a debtor must be indemnified by the latter. The indemnity comprises: a) the total amount of the debt; b) the legal interest thereon from the time the payment was made known to the debtor, even though it did not earn interest for the creditor; c) The expenses incurred by the guarantor after having notified the debtor that payment had been demanded of him; d) Damages, if they are due (Article 2066)

Exceptions: a)

ii.

iii.

Where the guaranty is constituted without the knowledge or against the will of the principal debtor, the guarantor can recover only insofar as the payment had been beneficial to the debtor (Article 2050) b) Payment by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which, however, requires the debtor’s consent. But the payment is in any case valid as to the creditor who has accepted it (Article 1238) c) The right to demand reimbursement is subject to waiver. Guarantor has the right of subrogation against the debtor to enable him to enforce the indemnity granted in Article 2066 and he cannot demand more than what he actually paid (Article 2067).

Guarantor has the right to proceed against the debtor even before payment in the following instances: e)

When he is sued for the payment; Page 150 of 230

– may acquire material possession but not right to possession; may only acquire them through guardian or legal representatives 11. Acquisition a) cannot be acquired through force or intimidation when a possessor objects thereto – resort to courts b) the following do not affect acts of possession ( not deemed abandonment of rights ); possession not interrupted i. acts merely tolerated ii. clandestine and unknown acts iii. acts of violence 12. Rights of possessor: a) Right to be respected in his possession; if disturbed – protected by means established by law; spoliation b) Possession acquired and enjoyed in concept of owner can serve as title for acquisitive prescription i. Possession has to be in concept of owner, public, peaceful and uninterrupted ii. Title short of ownership c) Person in concept of owner has in his favor the legal presumption of just title (prima facie) d) Possession of real property presumes that movables are included e) Co-possessors deemed to have exclusively possessed part which may be allotted to him; interruption in whole or in part shall be to the prejudice of all f) Possessor in good faith entitled to fruits received before possession is legally interrupted (natural and industrial – gathered or severed; civil – accrue daily) g) Possessor in good faith entitled to part of net harvest and part of expenses of cultivation if there are natural or industrial fruits ( proportionate to time of possession ); owner has option to require possessor to finish cultivation and gathering of fruits and give net proceeds as indemnity for his part of expenses; if possessor in good faith refuses – barred from indemnification in other manner h) Possessor has right to be indemnified for necessary expenses whether in good faith or in bad faith; Possessor in good faith has right of retention over thing unless necessary expenses paid by owner i) Possessor in good faith has right to be reimbursed for useful expenses with right of retention; owner has option of paying expenses or paying the increase in value of property which thing acquired by reason of useful expenses j) Possessor in good faith may remove improvements if can be done w/o damage to principal thing- unless owner exercises option of paying; possessor in bad faith not entitled. Page 83 of 230

k)

Possessor in good faith and bad faith may not be entitled to payment for luxurious expense but may remove them provided principal is not injured – provided owner does not refund the amount expended l) Improvements caused by nature or time to inure to the benefit of person who has succeeded in recovering possession m) Wild animals possessed while in one’s control; domesticated – possessed if they retain habit of returning back home n) One who recovers, according to law, possession unjustly lost is deemed to have enjoyed it w/o interruption

13. Liabilities/Duties of Possessor a) Return of fruits if in bad faith – fruits legitimate possessor could have received b) Bear cost of litigation c) Possessor in good faith not liable for loss or deterioration or loss except when fraud and negligence intervened d) possessor in bad faith liable for loss or deterioration even if caused by fortuitous event e) Person who recovers possession not obliged to pay for improvements which have ceased to exist at time of occupation 14. Loss of possession: a) abandonment of the thing – renunciation of right; intent to lose the thing b) assignment made to another by onerous or gratuitous title c) destruction or total loss of the thing or thing went out of commerce d) possession of another if new possession lasted longer that 1 year ( possession as a fact); real right of possession not lost except after 10 years 15. Possession Not Lost: a) Even for time being he may not know their whereabouts, possession of movable is not deemed lost b) When agent encumbered property without express authority – except when ratified c) Possession may still be recovered: i. Unlawfully deprived or lost ii. Acquired at public sale in good faith – with reimbursement iii. Provision of law enabling the apparent owner to dispose as if he is owner iv. Sale under order of the court v. Purchases made at merchant stores, fairs or markets vi. Negotiable document of title 16. Possession is equivalent to title Page 84 of 230

4. Guaranty is an accessory contract therefore there must be a valid principal obligation for guaranty to be valid. Guarantor may secure the performance of voidable, unenforceable, natural, conditional, and future obligations (Article 2052). Guarantor’s liability cannot exceed the principal obligation (Article 2054). 5. Guaranty cannot be presumed. The rule of strictissimi juris commonly refers to an accommodation surety and is not applied in case of compensated sureties. 6. The qualifications of a guarantor are: a) He possesses integrity; b) He has capacity to bind himself; and c) He has sufficient property to answer for the obligation which he guarantees 7. Where the creditor has required and stipulated that a specified person should be a guarantor, the substitution of guarantor may not be demanded (Article 2057) because in such a case the selection of the guarantor is a term of the agreement and as a party, the creditor, is therefore, bound thereby (see Articles 1159, 1306). 7. Effects of Guaranty a) Between the Guarantor and the Creditor i. Guarantor has the right to the benefit of excussion or exhaustion of the debtor’s property before he can be compelled to pay.

Exceptions: a) b) c) d)

e) f)

g) h) i)

if guarantor has expressly renounced excussion if guarantor has bound himself solidarily with the debtor (suretyship) in case of debtor’s insolvency when guarantor has absconded or cannot be sued within the Philippines unless he left a manager or representative if it may be presumed that an execution on the debtor’s property will not satisfy the obligation if guarantor does not set up the benefit of excussion and fails to point out to the creditor available property of the debtor within the Philippines if he is a judicial bondsman and sub-surety where a pledge or mortgage has been given by the guarantor as a special security if guarantor fails to interpose it as a defense before judgment is rendered against him (Saavedra vs. Price, 68 Phil. 669) Page 149 of 230

b)

The loss is cause by the act of a thief or robber done without the use of arms and irresistible force (Article 2001) for in this cause, the hotelkeeper is apparently negligent.

2. Hotelkeeper is not liable in the following cases: a) The loss or injury is caused by force majeure like flood, fire (Article 2000), theft or robbery by a stranger (not by hotelkeeper’s servant or employee) with the use of arms or irresistible force (Article 2001), etc., unless he is guilty of fault or negligence in failing to provide against the loss or injury from said cause (see Article 1170, 1174); b) The loss is due to the acts of the guests, his family, servants or visitors (Article 2002). c) The loss arises from the character of the things brought into the hotel (Article 2002). 3. Stipulations on exemption or diminution of liability is void (Article 2003). 4. Hotelkeeper has a right to retain the things of guests as security for unpaid lodging expenses and supplies. Guaranty 1. Guaranty is a contract whereby a person binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. 2. Characteristics a. b. c. d.

accessory subsidiary and conditional unilateral requires that the guarantor must be a person distinct from the debtor

3. Distinction between Guaranty and Suretyship Guaranty

Suretyship

Guarantor is secondarily liable.

Surety is primarily liable and is therefore not entitled to the exhaustion of the properties of the principal debtor

Guarantor binds himself to pay only when the principal cannot pay.

Surety assumes liability as a regular party to the undertaking and undertakes to pay if the principal does not pay.

Guarantor is an insurer of the debtor’s solvency.

Surety is an insurer of the debt.

Page 148 of 230

a) b) c)

possession is in good faith owner has voluntarily parted with the possession of the thing possessor is in concept of an owner

Usufruct 1. Usufruct – right to enjoy another’s property with correlative duty of preserving its form and substance a) things – movable/immovable b) rights – provided it is not strictly personal 2. Kinds: a) b) c) d) e) f) g) h) i) j)

legal - parents over children voluntary – contracts, wills mixed – prescription total partial simultaneous successive pure conditional With a term

3. Rights of usufructuary: a) Right to civil, natural & industrial fruits of property b) Right to hidden treasure as stranger c) Right to transfer usufructuary rights – gratuitous or onerous; but is coterminus with term of usufruct; fruits proportionate at duration of usufruct; but can’t do acts of ownership such as alienation or conveyance except when property is: i. Consumable ii. intended for sale iii. appraised when delivered; if not appraised & consumable – return same quality (mutuum) d) Right not exempt from execution and can be sold at public auction by owner e) Naked owner still have rights but w/o prejudice to usufructuary; may still exercise act of ownership –bring action to preserve f) Right to fruits growing at time usufruct begins; growing fruits at termination of usufruct belongs to owner g) Right to necessary expenses from cultivation at end of usufruct h) Right to enjoy accessions & servitudes in its favor & all benefits inherent therein i) Right to make use of dead trunks of fruit bearing trees & shrubs or those uprooted/cut by accident but obliged to plant anew Page 85 of 230

j)

Right of usufructuary of woodland – ordinary cutting as owner does habitually or custom of place; cannot cut down trees unless it is for the restoration of improvement of things in usufruct – must notify owner first k) Right to leave dead, uprooted trees at the disposal of owner with right to demand that owner should clear & remove them – if caused by calamity or extraordinary event – impossible to replace them l) Right to oblige owner to give authority & furnish him proofs if usufruct is extended to recover real property or real right m) Right to necessary expenses n) Right to introduce useful & luxurious expenses but with no obligation of reimbursement on part of owner; may remove improvement if can be done w/o damage o) Right to set-off improvements against damages he made against the property p) Right to administer when property is co-owned; if co-ownership cease – usufruct of part allotted to co-owner belongs to usufructuary – not affected q) Right to demand the increase in value of property if owner did not spend for extraordinary repairs when urgent & necessary for preservation of thing

4. Rights of naked owner a) Alienate thing b) Can’t alter form or substance c) Can’t do anything prejudicial to usufructuary d) Construct any works Y make any improvement provided it does not diminish value or usufruct or prejudice right of usufructuary 5. Obligations of usufructuary: a) Pay expenses to 3rd persons for cultivation & production at beginning of usufruct; whose who have right to fruits should reimburse expenses incurred b) Generally, usufructuary has no liability when due to wear & tear, thing deteriorates, obliged to return in that state; except when there is fraud or negligence, then he shall be liable c) Before entering into usufructuary: 1. Notice of inventory of property (appraisal of movables & description) 2. Posting of security • not applicable to parents who are usufructuary of children except when 2nd marriage contracted • excused – allowed by owner, not required by law or no one will be injured • for failure to give security, owner may demand that: a. immovables be placed under administration Page 86 of 230

NOTE: Otherwise, depositary may avail of consignation therefore there is no right to return before expiration of the term designated if deposit is for valuable consideration (Article 1989). 14. Relation between Bank and Depositor Deposits of money in banks, whether fixed, savings and current, are governed by the provisions on mutuum and the relation between a depositor and a bank is that of a creditor and a debtor. 15. Obligations of Depositor a) He is obliged to pay expenses for the preservation of the thing deposited, if deposit is gratuitous. b) He is obliged to pay for losses incurred due to the character of the thing deposited. a) unless depositor was not aware thereof Exceptions: b) depositor was not expected to know the dangerous character of the thing c) unless he notified the depositary of the same; or d) depositary was aware of it without depositor’s advice (Article 1993) NOTE: Depositary has the right to retain the thing deposited in pledge until full payment of what may be due him by reason of the deposit (Article 1994). 16. Necessary Deposit a. Necessary deposit in compliance with a legal obligation i. The judicial deposit of a thing, the possession of which is being disputed in a litigation by two or more persons (Article 538); ii. The deposit with a bank or public institution of public bonds or instruments if credit payable to order or bearer given in usufruct when the usufructuary does not give proper security for their conservation (Article 586); iii. The deposit of a thing pledged when the creditor uses the same without the authority of the owner or misuses it in any other way (Article 2104) iv. Those required in suits as provided in the Rules of Court; and v. Those constituted to guarantee contracts with the government. In this last case, the deposit arises from an obligation of public or administrative character. b. Necessary deposit made on the occasion of a calamity. c. Deposit by travelers in hotels and inns NOTES: 1. Hotelkeeper is liable regardless of the amount in the following cases: a) The loss or injury is caused by his servants or employees as well as by strangers provided that notice has been given and proper precautions taken. (Article 1998); and Page 147 of 230

(b) (c)

pay for damages should the seal or lock be broken through his fault which is presumed unless proven otherwise; and keep the secret of the deposit when the seal or lock is broken, with or without his fault.

8. Depositary is authorized to open the thing deposited which is closed and

sealed when there is: (a) (b)

presumed authority depositary), or in case of necessity.

(keys

having

been

delivered

to

9. Depositary has the obligation to return not only the thing but also all its products, accessions and accessories which are a consequence of ownership. 10. Persons to whom Return of Thing Deposited Must be Made a) to the depositor, to his heirs and successors, or to the person who may have been designated in the contract (Article 1972). b) If the depositor was incapacitated at the time of making the deposit, the property must be returned to his guardian or administrator or the person who made the deposit or to the depositor himself should he acquire capacity (Article 1970). c) Even if the depositor had capacity at the time of making the deposit but he subsequently loses his capacity during the deposit, the thing must be returned to his legal representative (Article 1988). 11. Place of Return of Thing Deposited a) at the place agreed upon by the parties, and b) in the absence of stipulation, at the place where the thing deposited might be even if it should not be the same place where the original deposit was made provided the transfer was accomplished without malice on the part of the depositary. NOTE: Depositor shoulders the expenses for transportation 12. Time of Return of Thing Deposited General Rule: Upon demand or at will, whether stipulated. a) thing is judicially attached Exceptions: possession b) depositary was notified of the to the return or the removal of 1986) 13. Right of Depositary to Return Thing Deposited • if deposit is gratuitous; and • justifiable reasons exist for its return

or not a period has been while in the depositary’s opposition of a third person the thing deposited (Article

b.

NI can be converted into registered certificates or deposited in bank c. Capital & proceeds of sale of movables be invested in safe securities d. Interest on proceeds or property under admin belong to usufructuary e. Owner may retain property as administrator w/ obligation to deliver fruits to usufructuary until he gives sufficient security f. Effect of security is retroactive to day he is entitled to fruits d) Take care of property as a good father of family e) Liable for negligence & fault of person who substitute him f) If usufruct is constituted on animals – duty bound to replace dead animals that die from natural causes or became prey; if all of them perish w/o fault but due to contagious disease / uncommon event – deliver remains saved; if perish in part due to accident – continue on remaining portion; if on sterile animals – as if fungible – replace same kind & quality g) Obliged to make ordinary repairs – wear & tear due to natural use of thing and are indispensable for preservation; owner may make them at expense of usufructuary – during existence of usufruct h) Obliged to make expenses due to his fault; cannot escape by renouncing usufruct i) Pay legal interest from extraordinary expenses made by owner j) Payment of expenses, charges & taxes affecting fruits k) Payment of interest on amount paid by owner charges on capital l) Obliged to notify owner of act of 3rd person prejudicial to rights of ownership – he is liable if he does not do so for damages – as if it was caused through his own fault m) Expenses, cost & liabilities in suits brought with regard to usufructuary – borne by usufructuary 6. Obligations of owner a) extraordinary expenses; usufructuary obliged to inform owner when urgent is the need to make them b) expenses after renunciation of usufruct c) taxes & expenses imposed directly on capital d) if property is mortgaged, usufructuary has no obligation to pay mortgage; if attached, owner to be liable for whatever is lost by usufructuary e) if property is expropriated for public use – owner obliged to either replace it or pay legal interest to usufructuary of net proceeds of the same 7. Extinguishment of usufruct

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Page 87 of 230

a) b) c) d) e) f) g)

death of usufructuary – unless contrary intention appears expiration of period of usufruct merger of usufruct & ownership renunciation of usufructuary – express total loss of thing termination of right of person constituting usufruct prescription – use by 3rd person

8. Loss in part – remaining part shall continue to be held in usufruct 9. Other rules: • Usufruct cannot be constituted in favor of a town, corp. or assoc. for more than 50 years • Usufruct constituted on immovable whereby a building is erected - & building is destroyed – right to make use of land & materials • If owner wishes to construct a new building – must pay usufructuary the value of interest of land & materials • Owner and usufructuary share in insurance if both pays premium; if only owner – then proceeds will go to owner only • Effect of bad use of the thing – owner may demand the delivery of and administration of the thing with responsibility to deliver net fruits to usufructuary • At termination of usufruct: ü thing to be delivered to owner with right of retention for taxes & extraordinary expenses w/c should be reimbursed ü security of mortgage shall be cancelled Different Modes of Acquiring Ownership 1. Different Modes of acquiring ownership: a) Occupation b) Donation c) Prescription d) Succession e) Tradition

ii. iii.

Liable if the loss occurs through his fault or negligence Not allowed to deposit the thing with a third person Exception: contrary stipulation iv. Depositary is liable for the loss of the thing deposited if: 4.1 he transfers the deposit with a third person without authority although there is no negligence on his part and the third person 4.2. he deposits the thing with a third person who is manifestly careless or unfit although authorized, even in the absence of negligence; or 4.3. the thing is lost through the negligence of his employees whether the latter are manifestly careless or not NOTE: Depositary is not responsible for loss of thing without negligence of the third person with whom he was allowed to deposit the thing if such third person is not manifestly careless or unfit v. Obliged to first notify the depositor and wait for the latter’s decision if he will change the way or manner of the deposit. Exception: If delay will cause danger vi. If thing deposited should earn interest, the depositary is under obligation (1) to collect the interest as it becomes due and (2) to take such steps as may be necessary to preserve its value and the rights corresponding to it. The depositary is bound to collect not only the interest but also the capital itself when due. vii. Depositary has the obligation not to commingle things deposited if so stipulated, even if they are of the same kind and quality (Article 1976). viii. Depositary is under obligation not to make use of the thing deposited (because deposit is for safekeeping of the subject matter and not for its use); otherwise he shall be liable for damages. Exceptions: a) express permission of the depositor b) preservation of the thing deposited required its use (article 1977)

Occupation

6. Depositary is liable for loss through a fortuitous event even without his fault. (a) if it is so stipulated; (b) is he uses the thing without the depositor’s permission; (c) if he delays its return; (d) if he allows others to use it, even though he himself may have been authorized to use the same (article 1979)

1. Requisites a) There should be a corporeal thing (tangible) which must have a “corpus” (body) & that thing should have no owner

7. Depositary has the obligation to: (a) return the thing deposited when delivered closed and sealed, in the same condition;

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Page 145 of 230

2. Terms: MODE – Proximate cause of ownership ( sales, donation) TITLE – Remote cause of ownership; merely constituted the means

b) Bar Question (2004). The parties in a contract of loan of money agreed that the yearly interest rate is 12% and it can be increased if there is a law that would authorize the increase of interest rates. Suppose OB, the lender, would increase by 5% the rate of interest to be paid by TY, the borrower, without a law authorizing such increase, would OB’s action be just and valid? Why? Has TY a remedy against the imposition of the rate increase? Explain.

Answer: OB’s action is not just and valid. The debtor cannot be required to pay the increase in interest there being no law authorizing it, as stipulated in the contract. Increasing the rate in the absence of such law violates the principle of mutuality of contracts.

c) d)

2. Things susceptible to occupation a) things that are w/o owner; abandoned (res nullius) stolen property cannot be subject of occupation b) animals that are the object of hunting & fishing

Kinds of animals:

1. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safety keeping it and of returning the same.

a) b)

c)

c) d)

Real Contract If gratuitous, it is unilateral because only the depository has an obligation. If onerous, it is bilateral. Principal purpose of the contract of deposit is the safekeeping of the thing delivered. Contract of deposit is generally gratuitous. 1) Contrary stipulation Exceptions: 2) Depository is in the business of storing goods 3) Property saved from destruction during calamity without owner’s knowledge; just compensation should be given the depository.

3. Kinds of Deposit a. Judicial b. Extrajudicial 1) Voluntary 2) Necessary 4. Voluntary Deposit – defined as one wherein the delivery is made by the will of the depositor. 5. Obligations of the Depositary i. To keep the thing safely and to return it when required, even though a specified term may have been stipulated in the contract. Page 144 of 230

wild – considered res nullius when not yet captured; when captured & escaped – become res nullius again ii. domesticated animals – originally wild but have been captured & tamed; now belong to their capturer; has habit of returning to premises of owner; becomes res nullius if they lose that habit of returning & regain their original state of freedom iii. domestic/tame animals – born & ordinarily raised under the care of people; become res nullius when abandoned by owner hidden treasure (only when found on things not belonging to anyone) i.

Deposit

2. Characteristics:

There must be actual occupancy; thing must be subjected to one’s control/disposition There must e an intention to occupy Accomplished according to legal rules

3. Animals: a) Swarm of bees owner shall have right to pursue them to another’s land (owner to identify latter for damages, if any) land owner shall occupy/retain the bees if after 2 days, owner did not pursue the bees b.) Domesticated animals may be redeemed within 20 days from occupation of another person; if no redemption made, they shall pertain to the one who caught them c) Pigeons & fish when they go to another breeding place, they shall be owned by the new owner provided they are not enticed 4. Movables: 1) Treasure found on another’s property consist of (1) money, precious objects & 2) hidden & owner is unknown finding must be by chance in order that stranger may be entitled to ½ of the treasure 2) Movable found w/c is not treasure must be returned to owner if finder retains the thing found – may be charged with theft if owner is unknown, give to mayor; mayor shall announce finding of the movable for 2 weeks in way he deems best Page 89 of 230

-

of owner does not appear 6 months after publication, thing found shall be awarded to finder if owner appears, he is obliged to pay 1/10 of value of property to finder as price if movable is perishable or cannot be kept w/o deterioration or w/o expenses it shall be sold at public auction 8 days after the publication

5. What cannot be acquired by occupation -Ownership of a piece of land, because when a land is without an owner, it pertains to the state; land that does not belong to anyone is presumed to be public land; BUT when a property is private and it is abandoned – can be object of occupation

Prescription – mode by which one acquires ownership and other real rights thru lapse of time; also a means by which one loses ownership, rights & actions; retroactive from the moment period began to run 1. Kinds: a) Acquisitive b) Extinctive 2. Who a) b) c)

may acquire by prescription: person who are capable of acquiring property by other legal modes state minors – through guardians of personally

3. Against whom prescription run: a) minors & incapacitated person who have guardians b) absentees who have administrators c) persons living abroad who have administrators d) juridical persons except the state with regards to property not patrimonial in character e) between husbands & wife f) between parents & children (during minority/insanity) g) between guardian & ward (during guardianship) h) between co-heirs/co-owners i) between owner of property & person in possession of property in concept of holder 4. Things subject to prescription: all things within the commerce of men a) private property b) patrimonial property of the state 5. Things not subject to prescription: Page 90 of 230

b)

If he devotes thing to any purpose different from that for which it has been loaned. 2. Bailee cannot retain the thing loaned as security for claims he has against the bailor, even though by reason of extraordinary expenses. 3. Obligations of Bailor a) To allow the bailee the use of the thing loaned for the duration of period stipulated or until the accomplishment of the purpose for which commodatum was constituted. a. Urgent need during which time the Exceptions: commodatum is suspended. b. Precarium -1. if duration of the contract has not been stipulated 2. if use or purpose of the thing has not been stipulated 3. if use of thing is merely tolerated by the bailor b) To refund extraordinary expenses for the preservation of the thing loaned provided bailor is notified before the expenses were incurred. Urgent need hence no notice is necessary. Exception: c) To refund 50% of the extraordinary expenses arising from actual use of the thing loaned (i.e. caused by fortuitous event) Contrary stipulation Exception: d) To pay damages to bailee for known hidden flaws in the thing loaned. NOTE: Bailor has the right to demand return of the thing if bailee commits any act of ingratitude. Simple Loan Or Mutuum 1. Definition: Mutuum is a contract whereby one of the parties delivers to another party money or other consumable thing with the understanding that the same amount of the same kind and quality shall be paid. 2. Rules on Interest: In order that interest may be charged, it must be expressly stipulated in writing (Article 1956). Exceptions:

1. Debtor in delay is liable to pay legal interest as indemnity for damages even in the absence of stipulation for the payment of interest (Article 2209) 2. Interest due shall earn interest (compounding interest) from the time it is judicially demanded although the obligation may be silent upon this point (Article 2212) or when there is express stipulation (Article 1959). Page 143 of 230

Commodatum 1. Characteristics: a) Gratuitous, otherwise it is a lease (Article 1935) b) Purpose is the temporary use of the thing loaned (Article 1935) c) right to use is limited to the thing loaned and not to its fruits (Article 1935) unless there is stipulation to the contrary (Article 1940) d) Subject matter is generally non-consumable things but may cover consumables if the purpose of the contract is for exhibition. e) Bailor need not to be the owner; it is sufficient that he has possessory interest over subject matter (Article 1938). f) Commodatum is purely personal in character hence death of either bailor or bailee extinguishes the contract (Article 1939)

a) b) c) d)

public domain in transmissible rights movables possessed through a crime registered land

6. Renunciation of prescription • Persons with capacity to alienate may renounce prescription already obtained but not the right to prescribe in the future • May be express or tacit • Prescription is deemed to have been tacitly renounced; renunciation results from the acts w/c imply abandonment of right acquired • Creditors & persons interested in making prescription effective may avail themselves notwithstanding express or tacit renunciation

Prescription of Ownership and Other Real Rights General Rule: Bailee can neither lend nor lease the object of the contract to a third person. Exception: Member of bailee’s household Exception to the exception: contrary stipulation or nature of thing forbids such use 2. Obligations of the Bailee a) Bailee is liable for ordinary expenses for the use and preservation of the thing loaned. General Rule: Bailee is not liable for loss or damage due to a fortuitous event (because the bailor retains ownership) a) Bailee devote thing to a different purpose Exceptions: b) Bailee keeps thing longer than the period stipulated or after the accomplishment of the use for which commodatum was constituted. c) Thing loaned was delivered with appraisal of its value (unless there is express stipulation to the contrary) d) Bailee lends thing to a third person not a member of his household e) Bailee, if being able to save either the thing borrowed or his own thing chose to save the latter b) Bailees are solidarily liable when the thing is loaned to two or more bailees in the same contract. NOTE: 1. General Rule: Bailee is not liable for ordinary wear and tear due to use of the thing loaned. a) If he is guilty of fault or negligence Exceptions: Page 142 of 230

1. Kinds of Acquisitive prescription a) ordinary b) extra-ordinary for ordinary prescription: possession in good faith just title within time fixed by law - 4 years for movables - 8 years for immovables d) in concept of an owner e) public, peaceful, uninterrupted 3. Requisites for extra-ordinary prescription: a) just title is proved b) within time fixed by law - 10 years for movables - 30 years for immovables

2. Requisites a) b) c)

c) d)

in concept of an owner public, peaceful, uninterrupted

4. Good Faith - Reasonable belief that person who transferred thing is the owner & could validly transmit ownership - Must exist throughout the entire period required for prescription 5. Just Title (True and Valid) – must be proved & never presumed a) Titulo Colorado b) Titulo Putativo Page 91 of 230

-

title must be one which would have been sufficient to transfer ownership if grantor had been the owner through one of the modes of transferring ownership but there is vice/defect in capacity of grantor to transmit ownership

6. In Concept of Owner - possession not by mere tolerance of owner but adverse to that of the owner - claim that he owns the property 7. Public, Peaceful, Uninterrupted - Must be known to the owner of the thing - Acquired & maintained w/o violence - Uninterrupted (no act of deprivation by others) in the enjoyment of property 8. Interruption a) Natural - through any cause, possession ceases for more than 1 year - if 1 year of less – as if no interruption b) Civil - produced by judicial summons; except when 1. void for lack of legal solemnities 2. plaintiff desists from complaint/allows proceedings to lapse 3. possessor is absolved from complaint c) express or tacit renunciation d) possession in wartime

b)

Bailee (Comodante) – the recipient; the party who receives the possession or custody of the thing thus delivered.

3. Loan in General a) Characteristics: i. Real Contract Unilateral Contract ii. b) Kinds of Loan: Commodatum – where the bailor (lender) delivers to i. the bailee (borrower) a non-consumable thing so that the latter may use it for a certain time and return the identical thing; Mutuum – where the bailor (lender) delivers to the ii. bailee (borrower) money or other consumable thing upon the condition that the latter shall pay same amount of the same kind of quality. Distinctions between Commodatum and Mutuum Commodatum (Hiram)

Mutuum (Utang)

1.

subject matter is non-consumable things

1.

subject matter is money or other consumable things

2.

ownership retained by lender

2.

ownership transferred to borrower

3.

essentially gratuitous

3.

may be gratuitous or onerous

9. Rules in Computation of Period: • Present possessor may tack his possession to that of his grantor or predecessor in interest • Present possessor presumed to be in continuous possession I intervening time unless contrary is proved • First day excluded, last day included

4.

borrower must return the same thing loaned

4.

borrower need only pay the same amount of the same kind and quality

5.

may involved real or personal property

5.

involves only personal property

10. Tacking Period - there must be privity between previous & present possessor - possible when there is succession of rights - if character of possession different: v predecessor in bad faith or possessor in good faith – use extraordinary prescription

6.

loan for use or temporary possession

6.

loan for consumption

7.

right to demand the return of the thing loaned before expiration of term in case of urgent need

7.

no right to demand return before the lapse of the term agreed upon

Bar Question (1998). In 1965, Renren bought from Robyn a parcel of registered land evidenced by a duly executed deed of sale. The owner presented the deed of sale and the owner’s certificate of title to the Register of Deeds. The

8.

loss is shouldered by bailor since he is the owner

8.

borrower suffers the loss even if the loss is caused exclusively by a fortuitous event

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3. Not covered: a) with waiver of seller’s creditor b) receiver, assignee in insolvency proceeding 4. Duty of law a) b) c) d)

of seller to perform the following when transaction is within the coverage make sworn statement of listing of creditors delivery of sworn statement to buyer apply the proceeds pro-rata to claims of creditors shown in verified statement written advance disclosure to creditors

5. Effects of Non-Compliance Failure to: Prepare & deliver sworn listing of creditors Apply proceeds pro-rata to listed creditors Make advance written disclosure transactions to creditors Register sworn statement with DTI

of

Include or omit names of creditors & correct amount due in the statement Sale for no consideration

On Transaction Fraudulent & void Fraudulent & void Not void Not void Void Void

On Seller Criminal Liability Criminal Liability No Criminal Liability No Criminal Liability Criminal Liability Criminal Liability

ANTI-DUMMY LAW 1. Penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved only for Filipinos 2. Management, operation as officers, employees or laborers 3. Control or non-control position CREDIT TRANSACTIONS General Provisions

entry was made in the day book and corresponding fees were paid as evidenced by official receipt. However, no transfer of certificate of title was issued to Renren because the original certificate of title in Robyn’s name was temporarily misplaced after fire partly gutted the Office of the Register of Deeds. Meanwhile, the land had been possessed by Robyn’s distant cousin, Mikaelo, openly, adversely and continuously in the concept of owner since 1960. It was only in April 1998 that Renren sued Mikaelo to recover possession. Mikaelo invoked a) acquisitive prescription and b) laches, asking that he be declared owner of the land. Decide the case by evaluating these defenses.

Answers: a) Renren’s action to recover possession of the land will prosper. In 1965, after buying the land from Robyn, he submitted the Deed of Sale to the Registry of Deeds for registration together with the owner’s duplicate copy of the title, and paid the corresponding registration fees. Under Section 56 of P.D. No. 1529, the Deed of Sale to Renren is considered registered from the time the sale was entered in the Day Book (now called the Primary Entry Book). For all legal intents and purposes, Renren is considered the registered owner of the land. After all, it was not his fault that the Registry of Deeds could not issue the corresponding transfer certificate of title. Mikaelo’s defense of prescription can not be sustained. A Torrens title is imprescriptible. No title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession. (Section 47, P.D. No. 1529) The right to recover possession of registered land likewise does not prescribe because possession is just a necessary incident of ownership. b) Mikaelo’s defense of laches, however, appears to be more sustainable. Renren bought the land and had the sale registered way back in 1965. From the facts, it appears that it was only in 1998 after an inexplicable delay of 33 years that he took the first step asserting his right to the land. It was not even an action to recover ownership but only possession of the land. By ordinary standards, 33 years of neglect or inaction is too long and may be considered unreasonable. As often held by the Supreme Court, the principle of imprescriptibility sometimes has to yield to the equitable principle of laches which can convert even a registered land owner’s claim into a stale demand. Mikaelo’s claim of laches, however, is weak insofar as the element of equity is concerned, there being no showing in the facts how he entered into the ownership and possession of the land. Prescription of Actions

1. Credit transactions include all transactions involving the purchase of loan of goods, services or money in the present with a promise to pay or deliver in the future. 2. Parties to a Bailment a) Bailor (Comodatario) – the giver, the party who delivers the possession or custody of the thing bailed. Page 140 of 230

1. By lapse of time fixed by law v 30 years action over immovables from time possession is lost v 10 years mortgage action upon written contract Page 93 of 230

v v

v v

v

8 years 6 years 5 years 4 years 1 year -

upon obligation created by law upon a judgement action to recover movables from time possession is lost upon an oral contract upon a quasi-contract actions where periods are not fixed by law upon injury to rights of plaintiff upon a quasi-delict for forcible entry & detainer for defamation

2. Rights not extinguished by prescription: a) demand right of way b) abate public /private nuisance c) declare contract void d) recover property subject to expressed trust e) probate of a will f) quiet title Bar Question (2000). In an action brought to collect a sum of money based on a surety agreement, the defense of laches was raised as the claim was filed more than seven years from the maturity of the obligation. However, the action was brought within the ten-year prescriptive period provided by law wherein actions based on written contracts can be instituted. Will the defense prosper? Reason.

Answer: No, the defense will not prosper. The problem did not give facts from which laches may be inferred. Mere delay in filing an action, standing alone, does not constitute laches (Agra v. PNB, 309 SCRA 509). Donation 1. Characteristics: a) Unilateral – obligation imposed on the donor b) Consensual – perfected at time donor knows of acceptance

Bar Question (2000). Ambrosio died, leaving his three daughters, Belen, Rosario and Sylvia a hacienda which was mortgaged to the Philippine National Bank. Due to the failure of the daughters to pay the bank, the latter foreclosed the mortgage and the hacienda was sold to it as the highest bidder. Six months later, Sylvia won the grand prize at the lotto and used part of it to redeem the hacienda from the bank. Thereafter, she took possession of the hacienda and refused to share its fruits with her sisters, contending that it was owned exclusively by her, having bought it from the bank with her own money. Is she correct or not? Answer: Sylvia is not correct. The 3 daughters are the co-owners of the hacienda being the only heirs of Ambrosio. When the property was foreclosed, the right of redemption belongs also to the 3 daughters. When Sylvia redeemed the entire property before the lapse of the redemption period, she also exercised the right of redemption of her co-owners on their behalf. As such she is holding the shares of her two sisters in the property, and all the fruits corresponding thereto, in trust for them. Redemption by one co-owner inures to the benefit of all (Adille v. CA, 157 SCRA 455). Sylvia, however, is entitled to be reimbursed the shares of her two sisters in the redemption price. Assignment 1. Sale of credits & other incorporeal things 2. Effect of Assignment a) lack of knowledge or consent of debtor not essential for validity but has legal effects b) assignment of rights made w/o knowledge of debtor – debtor may set up against assignee the compensation w/c would pertain to him against assignor of all credits prior to assignment and of later ones until he had knowledge of the assignment c) debtor has consented to assignment – cannot set up compensation unless assignor was notified by debtor that he reserved his right to the compensation may still set up d) debtor has knowledge but no consent compensation of debts previous to assignment but not the subsequent ones. Bulk Sales Law 1. Rationale: Protect creditor of merchant stores

2. Requisites of Donation: a) Reduction in patrimony of donor b) Increase in patrimony of donee c) Intent to do act of liberality d) Donor must be owner of property donated Page 94 of 230

2. Three types of transactions covered: a) Sale of goods other than in ordinary course of business b) Sale of all or substantially all of business c) Sale of all or substantially all of fixtures & equipments Page 139 of 230

a)

b)

c)

d)

e)

Among co-heirs • any of the heirs sell his hereditary rights to stranger before partition • any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse buyer of the price of the sale • co-heirs has 1 month from receipt of notice in writing Among co-owners • any or all of co-owners sells their shares to 3rd person • any co-owner may exercise right of redemption by paying reasonable price of property to the buyer • if 2 or more co-owners desire to exercise right of redemption, they may only do so in proportion to the share they respectively have in thing owned in common Among adjoining owners of: Rural land - where piece of rural land has an area not exceeding 1 hectare, adjoining owner has right to redeem unless grantee does not own a rural land - if 2 or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller area shall be preferred - if 2 or more adjacent lot owners desire to exercise right to redeem & both have same lot area, one who first requested shall be granted Urban land - when piece of land is small & cannot be used for any practical purpose & bought merely for speculation, owner of adjoining land can redeem - 2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intended use is best justified shall be preferred. Sale of credit in litigation • When a credit or other incorporeal right in litigation is sold, debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor plus judicial costs, interest Debtor may exercise right within 30 days from the date assignee • demands payment from him Other Instances When Right of Legal Redemption is Granted: ü Redemption of homesteads ü Redemption in tax sales ü Redemption by judgment debtor ü Redemption in extrajudicial foreclosure ü Redemption in judicial foreclosure of mortgage

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3. Requirements of a donation: a) subject matter – anything of value; present property & not future, must not impair legitime b) causa – anything to support a consideration: generosity, charity, goodwill, past service, debt c) capacity to donate & dispose & accept donation d) form – depends on value of donation 4. Kinds of Donation according to Effectivity: Donation Inter Vivos Disposition and acceptance to take effect during lifetime of donor and donee Already pertains to the donee unless there is a contrary intent Formalities required - follow law on donations and certain kinds of donations & law on obligations and contracts (suppletory) Irrevocable at the instance of the donor; may be revoked only by reasons provided by law Revoked only for reasons provided for by law (except onerous donations)

Donation Mortis Causa Disposition happens upon the death of donor Even if there is a term of effectivity and effectivity is upon the death of the donor, still entitled to fruits Formalities required - follow law on succession to be valid, and donation must be in the form of a will Revocable ad mutuum (exclusive will of donor)

**In case of doubt with regards to nature of donation: inter vivos 5. Acceptance a) acceptance must be made personally or thru agent b) donation may be made orally or in writing Ø movable: 5,000 & below – may be oral or written, if oral it must be with simultaneous delivery of thing/document & acceptance need not be in writing above 5,000 - must be written and accepted also in writing Ø immovable - must be in a public instrument & acceptance must also be in a public instrument (in same instrument or in other instrument) Bar Question (2000). Anastacia purchased a house and lot on installments at a housing project in Quezon City. Subsequently, she was employed in California and a year later, she executed a deed of donation, duly authenticated by the Philippine Consulate in Los Angeles, California, donating the house and lot to her friend Amanda. The latter brought the deed of donation to the owner of the project and discovered that Anastacia left unpaid installments and real estate Page 95 of 230

taxes/ Amanda paid these so that the donation in her favor can be registered in the project owner’s office. Two months later, Anastacia died, leaver her mother Rosa as her sole heir. Rosa filed an action to annul the donation on the ground that Amanda did not give her consent in the deed of donation or in a separate public instrument. Amanda replied that the donation was an onerous one because she had to pay unpaid installments and taxes; hence her acceptance may be implied. Who is correct?

Answer: Rosa is correct because the donation is void. The property donated was an immovable. For such donation to be valid, Article 749 of the New Civil Code requires both the donation and the acceptance to be in a public instrument. There being no showing that Amanda’s acceptance was made in a public instrument, the donation is void. The contention that the donation is onerous and therefore need not comply with Article 749 for validity is without merit. The donation is not onerous because it did not impose on Amanda the obligation to pay the balance on the purchase price or the arrears in real estate taxes. Amanda took it upon herself to pay those amounts voluntarily. For a donation to be onerous, the burden must be imposed by the donor on the donee. In the problem, there is no such burden imposed by the donor on the donee. The donation not being onerous, it must comply with the formalities of Article 749.

•

•

6. Badges of mortis causa: a) Title remains with donor (full or naked ownership)& conveyed only upon death b) Donor can revoked ad mutuum c) Transfer is void if transferor survives transfer Bar Question (1998). Ernesto donated in a public instrument a parcel of land to Demetrio, who accepted it in the same document. It is there declared that the donation shall take effect immediately, with the donee having the right to take possession of the land and receive its fruits but not to dispose of the land while Ernesto is alive as well as for ten years following his death. Moreover, Ernesto also reserved in his deed his right to sell the property should he decide to dispose of it at anytime – a right which he did not exercise at all. After his death, Ernesto’s heirs seasonably brought an action to recover the property, alleging that the donation was void as it did not comply with the formalities of a will. Will the suit prosper?

•

How is Redemption Effected: 1. Seller a retro must first pay the following: a. the price of the thing sold 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. Valid tender of payment is sufficient 3. Mere sending of notice without valid tender is insufficient 4. Failure to pay useful & unnecessary expenses entitles vendee to retain land unless actual reimbursement is made Rules In Case of Multi-Parties: 1. When an undivided thing is sold because co-owners cannot agree that it be allotted to one of them – vendee a retro may compel the vendor to redeem the whole thing 2. When an undivided thing is sold by co-owners / co-heirs, vendors a retro may only exercise his right over his respective share; vendee a retro may demand that they must come to an agreement first and may not be compelled to consent to a partial redemption 3. When rights of co-owners over an undivided thing is sold as regards to their own share – vendee retro cannot compel one to redeem the whole property 4. Should one of the co-heirs/co-owners succeed in redeeming the property – such vendor a retro shall be considered as trustee with respect to the share of the other co-owners/coheirs. Fruits - What controls is the stipulation between parties as regards the fruits. - If none: • at time of execution of the sale a retro there are visible or growing fruits – there shall be no pro-rating at time of redemption if no indemnity was paid by the vendee a retro at time of execution sale a retro there be no fruits but • there are fruits at time of redemption – pro-rated between vendor a retro & vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land.

Answer: Yes, the suit will prosper as the donation did not comply with the formalities of a will. In this instance, the fact that the donor did not intend to transfer ownership or possession of the donated property to the donee until the donor’s death, would result in a donation mortis causa and in this kind of disposition, the formalities of a will should be complied with, otherwise, the donation is void. In this instance, donation mortis causa embodied only in a public instrument without the formalities of a will could not have transferred ownership of disputed property to another.

4. Legal Redemption The right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by purchase or by dation in payment or by other transaction whereby ownership is transmitted by onerous title.

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*Conventional redemption – only extinguishes obligations pertaining to contract of sale, not extinguish contract itself; only applies to contract of sale *Legal redemption – only applies to contract of sale 2. Conventional Redemption • seller reserved the right to repurchase thing sold • coupled with obligation to return price of the sale, expenses of contract & other legitimate payments and the necessary & useful expenses made on the thing sold • right is exercised only be seller in whom right is recognized in the contract or by any person to whom right was transferred; must be in the same contract

7. Kinds of donation INTER VIVOS 1) pure/simple 2) remuneratory 3) conditional 4) onerous Pure/Simple a) Consideration Merits of donee

3. Equitable Mortgage • A contract with right to repurchase is equitable mortgage if the

following requisites concur: i. ii. iii.

•

• •

•

price of sale with right to repurchase is unusually inadequate seller remains in possession as lessee or otherwise upon or after expiration of right to repurchase, another instrument extending the period of redemption or granting new period is executed iv. buyer retains for himself a part of the purchase price v. seller binds himself to pay taxes on thing sold vi. real intention of parties is to secure the payment of a debt or performance of other obligation In case of doubt – in determining whether it is equitable mortgage or sale a retro (with right of repurchase) – it shall be construed as equitable mortgage Remedy available to vendor: ask for reformation of contract Period of Redemption: 1. No period agreed upon – 4 years from date of contract 2. When there is agreement – should not exceed 10 years; if it exceeded, valid only for the first 10 years. 3. When period to redeem has expired & there has been a previous suit on the nature of the contract – seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro: rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan. 4. When period has expired & seller allowed the period of redemption to expire – seller is at fault for not having exercised his rights so should not be granted a new period. Effect when no redemption made: no automatic transfer of ownership; under present art 1607: there must be judicial order before ownership of real property is consolidated in the buyer a retro Page 136 of 230

b) law to apply/ forms Law on donations

c) form of acceptance Required d) reservation w/regards to personal support & legitime Applicable e) warranty against eviction & hidden defects In bad faith only f) revocation Applicable

Remuneratory

Conditional

Onerous

Liberality or merits of donee or burden/ charge of past services provided they do not constitute demandable debt

Valuable consideration is imposed but value is less than value of thing donated

Valuable consideration given

Law on donations

Extent of burden

Law on obligations imposed>oblicon excess>donation

Required

Required

Required

Applicable

Applicable

Not Applicable

In bad faith only

In bad faith only

Applies

Applicable

Applicable

Applicable

•

Who may give donations - All persons who may contract and dispose of their property

•

Who may accept donations: 1. natural & juridical persons w/c are not especially disqualified by law 2. minors & other incapacitated a) by themselves Page 97 of 230

if pure & simple donation if it does not require written acceptance b) by guardian, legal representatives if needs written acceptance 1. natural guardian – not more than 50,000 2. court appointed - more than 50,000 3. conceived & unborn child, represented by person who would have been guardian if already born •

Who are disqualified to donate: 1. guardians & trustees with respect to property entrusted to them 2. husband & wife 3. between paramours/persons guilty of adultery 4. between parties guilty of same criminal offense 5. made to public officers, wife, descendant, ascendant

•

Other persons disqualified to receive donations: 1. priest who heard confession of donor during his last illness 2. relatives of priest within 4th degree, church, order, community where priest belongs 3. physician, nurse, etc. who took care of donor during his last illness 4. individuals, corporations, associations not permitted

•

What may be given: All or part of donor’s present property provided he reserves sufficient means for the support of the ff: a) himself b) relatives who by law are entitled to his support c) legitimes shall not be impaired Ø when w/o reservation or if inofficious, may be reduced on petition of persons affected Ø except: conditional donation & donation mortis causa Ø Future property may not be donated.

8. Double Donations: Rule: Priority in time, priority in right Ø If movable – one who first take possession in good faith Ø If immovable – one who recorded in registry of property in good faith - no inscription, one who first took possession in good faith - in the absence thereof, one who can present oldest title 9. Revocation of Donations - applies only to donation inter vivos - not applicable to onerous donations Ø With regards to donations made by person without children or descendants at time of donation: 1. If donor should have legitimate, legitimated or illegitimate children 2. If child came out to be alive & not dead contrary to belief of donor Page 98 of 230

unmerchantable which would examination of the sample

not

be

apparent

on

reasonable

4. Effects of Waiver • Parties may increase or diminish implied warranty against eviction; but effect depends on good faith or bad faith on the part of the seller: a) seller in bad faith & there is waiver against eviction – null & void b) buyer without knowledge of a particular risk, made general renunciation of warranty – not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction) c) buyer with knowledge of risk of eviction assumed its consequences & made a waiver – vendor not liable (applicable only to waiver of warranty against eviction) • When goods delivered to buyer, he cannot rescind sale if: 1. he knew of the breach of warranty when he accepted goods without protest 2. he fails to notify seller within reasonable time of election to rescind 3. he fails to return or offer to return goods to seller in substantially as good condition as they were in at time ownership was transferred 4. when goods deteriorated, buyer can still return them in that condition if such is due to breach or warranty 5. Buyer’s Option in Case of Breach of Warranty a) Accept goods & set up breach of warranty by way of recoupment in diminution or extinction of the price. b) Accept goods & maintain action against seller for damages c) Refuse to accept goods & maintain action against seller for damages d) Rescind contract of sale & refuse to receive goods/return them when already received. Extinguishment 1. Grounds: a. payment or performance b. loss of the subject matter c. condonation or remission d. confusion or merger of rights of creditor and debtor e. compensation f. novation g. annulment h. rescission i. fulfillment of a resolutory condition j. prescription Page 135 of 230

c)

basis of eviction is a right prior to sale or an act imputable to vendor d) seller has been summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer iii. Warranty against encumbrances (non- apparent) – Requisites: a) immovable sold is encumbered with non–apparent burden or servitude not mentioned in the agreement b) nature of non–apparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof iv. Warranty against hidden defects a) subject matter may be movable or immovable b) nature of hidden defect is such that it should render the subject matter unfit for the use of which it was intended or should diminish its fitness c) had the buyer been aware, he would not have acquired it or would have given a lower price Defects in Animals • Even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not sufficient to discover it - defect shall be considered as REDHIBITORY • If vet fails to discover through ignorance or bad faith, he is liable for damages Sale of animals on teams (2 or more) • - when only one is defective, only one is redhibited & not the others - exception: when it appears buyer would not have purchased the team without the defective one - apply to sale of other things •

Sale of animals at fair or public auction

• •

Sale of animals with contagious disease = void Sale of unfit animals

-

no warranty against hidden defects

3. Specific Implied Warranties in the Sale of Goods a) Warranty as to fitness & quality – Requisites: 1. buyer makes known to seller the particular purpose for which goods are acquired and it appears that the buyer relied on the seller’s skill or judgment 2. goods are bought by description from seller who deals in goods of that description b) Sale of Goods by sample - If seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from defect rendering them Page 134 of 230

Ø Ø

3. If donor subsequently adopts a minor child Action for revocation based on failure to comply with condition in case of conditional donations Action for revocation by reason of acts of ingratitude: 1. Donee commits offense against person, honor, property of donor, spouse, children under his parental authority 2. Donee imputes to donor any criminal offense or any cat involving moral turpitude even if he should prove it unless act/crime has been committed against donee himself, spouse or children under his parental authority 3. Donee unduly refuses to give support to donor when legally or morally bound to give support to donor

BIRTH OF CHILD Ipso jure revocation, no need for action, court decision merely Declaratory Extent: portion which may impair legitime of heirs Property must be returned

NON-FULFILLMENT OF CONDITION Needs court action

Extent: whole portion but court may rule partial revocation only Property in excess

Alienation/mortgages done prior to recording in Register of Deeds: If already sold or cannot be returned – the value must be returned If mortgaged – donor may redeem the mortgage with right to recover from donee Fruits to be returned at filing of action for revocation Prescription of action is 4 years from birth, etc.

Alienations/mortgages imposed are void unless registered with Register of Deeds

Action cannot be renounced

Action cannot be renounced in advance Right of action at instance of donor but may be transmitted to heirs Action does not extend to

Right of action transmitted to heirs Action extends to donee’s

Fruits to be returned at filing of complainant Prescription is 4 years from non-fulfilment

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INGRATITUDE Needs court action

Extent: Whole portion returned Property to be returned Prior ones are void; demand value of property when alienated and can’t be recovered or redeemed from 3rd persons

Prescription is 1 year from knowledge of fact and it was possible to bring action

Heirs can’t file action

heirs •

donee’s heirs

Exception to rule on intransmissibility of action with regards to revocation due to ingratitude: 1. personal to the donor; general rule is heir cannot institute if donor did not institute 2. heirs can only file in the ff cases: a) donor has instituted proceedings but dies before bringing civil action for revocation b) donor already instituted civil action but died, heirs can substitute c) donee killed donor or his ingratitude caused the death of the donor d) donor died w/o having known the ingratitude done e) criminal action filed but abated by death 3. can only make heirs of donee liable if complaint was already filed when donee died

10. Inofficious donations: • shall be reduced with regards to the excess • action to reduce to be filed by heirs who have right to legitimate at time of donation • donees/creditors of deceased donor cannot ask for reduction of donation • if there are 2 or more donation: recent ones shall be suppressed • if 2 or more donation at same time – treated equally & reduction is pro rata but donor may impose preference which must be expressly stated in donation TORTS and DAMAGES

Answer: Under the same law, Bernie may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests at the legal rate. He may also ask the Housing and Land Use Regulatory Board to apply penal sanctions against DEVLAND consisting of payment of administrative fine of not more than P20,000.00 and/or imprisonment for not more than 20 years. c) Supposing DEVLAND had fully developed the subdivision but Bernie failed to pay further installments after 4 years due to business reverses. Discuss the rights and obligations of the parties.

Answer: Under R.A. No. 6552 (Maceda Law), DEVLAND has the right to cancel the contract but it has to refund Bernie the cash surrender value of the payments on the property equivalent to 50% of the total payments made. Conditions & Warranties CONDITION Purports to existence of obligation

WARRANTY Purports to performance of obligation

Condition must be stipulated to form part of the obligation

Need not be stipulated; may form part of obligation by provision of law

May attach itself to obligation of seller to deliver possession & transfer ownership

Relates to the subject matter itself or to obligation of the seller as to the subject matter of the sale

1. Express Warranties – Requisites: i. ii.

Quasi-Delict 1. Article 2176, Civil Code: 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 provision of this Chapter. 2. Elements of Quasi-Delict a) act or omission b) damage or injury is caused to another c) fault or negligence is present d) causal connection between damage done and act/omission e) there is no pre-existing contractual relations between the parties Page 100 of 230

iii.

it must be an affirmation of fact or any promise by seller relating to the subject matter of sale natural tendency of affirmation or promise is to induce buyer to purchase subject matter buyer purchases the subject matter relying thereon • when breached, seller is liable for damages

2. Implied Warranties – deemed included in all contracts of sale whether parties are actually aware or not, whether they were intended or not; by operation of law i. ii.

Warranty that seller has a right to sell Warranty against eviction – Requisites of breach of warranty against eviction: a) buyer is evicted in whole or in part from the subject matter of sale b) there is a final judgement Page 133 of 230

a.

b.

2.

Pay without interest the balance within grace period of 1 month for every year of installment payment • Grace to be exercised once every 5 years When no payment - cancelled; buyer entitled to 50% of what he has paid + if after 5 years of installments, 5% for every year but not to exceed 90% of total payments made • Cancellation to be effected 30 days from notice & upon payment of cash surrender value

Buyer paid less than 2 years installment

1st Grace period is 60 days from date installment became due b. 2nd grace period of 30 days from notice of cancellation/demand for rescission • buyer can still pay within the 30 day period • with interest c. No payment after 30 day period, can cancel. Purpose of law : Protect buyers in installments against oppressive conditions a.

• •

Other rights: 1. 2. 3. 4. 5.

3. Distinguished from other sources of obligation: CONTRACT QUASI DELICT Vinculum Juris Contract Negligent act/ omission (culpa, imprudence)

Sell rights to another Reinstate contract by updating during grace period & before actual cancellation Deed of Sale to be done by notarial act To pay in advance any installment or the full balance of price anytime without interest Have full payment annotated in certificate of title

Bar Question (2005). Bernie bought on installment a residential subdivision lot from DEVLAND. After having faithfully paid the installments for 48 months, Bernie discovered that DEVLAND had failed to develop the subdivision in accordance with the approved plans and specifications within the time frame in the plan. He thus wrote a letter to DEVLAND informing it that he was stopping payment. Consequently, DEVLAND cancelled the sale and wrote Bernie, informing him that his payments are forfeited in its favor. a) Was the action of DEVLAND proper? Explain.

Answer: Assuming the land is a residential subdivision project under P.D. No. 957 (The Subdivision and Condominium Buyers Protective Decree), DEVLAND’S action is not proper since under Section 23 of the said law, no installment payment shall be forfeited to the owner/developer when the buyer, after due notice, desists from further payment due to failure of the owner-developer to develop the subdivision according to the approved plans and within the time limit for complying with the same. b) Discuss the rights of Bernie under the circumstances. Page 132 of 230

Proof Needed Defense Available

Pre-existing contract Burden of Proof

Preponderance of Evidence Exercise of extraordinary diligence (in contract of carriage), Force Majeure

There is pre-existing contract Contractual partyProve the ff: 1. existence of a contract 2. breach

Preponderance of Evidence Exercise of diligence of a good father of a family in the selection and supervision of employees No pre-existing contract Victim - Prove the ff.: 1. damage 2. negligence 3. causal connection between negligence and damage done

DELICT Act/omission committed by means of dolo (deliberate, malicious, in bad faith) Proof beyond reasonable doubt

No pre-existing contract Prosecution Accused is presumed innocent until the contrary is proved.

4. Civil Liability in Quasi-Delict v. Delict QUASI-DELICT

Liability of Employer

DIFFERENCE Solidary

DELICT Subidiary

Reservation Requirement

Civil aspect of the quasi-delict is impliedly instituted with criminal action, but under 2000 Crimpro Rules it is independent and separate

Civil aspect is Impliedly instituted with criminal action

Effect of judgement of acquittal in a criminal case involving same act/omission

Not a bar to recover civil damages EXCEPT when judgement pronounces that the negligence from which damage arise is non-existent

Not a bar to recover civil damages

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5. What must be proved a) Negligence - In action for culpa aquiliana, plaintiff must prove negligence of defendant

Exception: 1. In cases where negligence is presumed or imputed by law this is only rebuttable/presumption juris tantum 2. Principle of res ipsa loquitur (the thing speaks for itself) b) c)

grounded on the difficulty in proving thru competent evidence, public policy considerations Damage/injury Causal connection between negligence and damage (to be actionable) -Defendant’s negligence must be the proximate cause of the injury sustained by the plaintiff to enable plaintiff to recover. Thus, if plaintiff’s own conduct is the cause of the injury there can be no recovery.

If plaintiff's negligence is only contributory – he is considered partly responsible only, may still recover from defendant but must be reduced by the courts in proportion to his own negligence Concept of proximate cause – the adequate and efficient cause which in the natural order of events and under the particular circumstances surrounding the case, would naturally produce the event 6. Defenses a) CONTRIBUTORY NEGLIGENCE - the theory here is that the plaintiff was also negligent together with the defendant; to constitute a defense, proximate cause of injury/damage must be the negligence of defendant b) CONCURRENT NEGLIGENCE - the theory here is that both parties are equally negligent; the courts will leave them as they are; there can be no recovery c) DOCTRINE OF LAST CLEAR CHANCE - even though a person’s own acts may have placed him in a position of peril and an injury results, the injured is entitled to recover if the defendant thru the exercise of reasonable care and prudence might have avoided injurious consequences to the plaintiff. •

This defense is available only in an action by the driver or owner of one vehicle against the driver or owner of the other vehicle involved; cannot be invoked by a common carrier against a passenger in an action for breach of contract of carriage

•

Elements: 1.

plaintiff was in a position of danger by his own negligence Page 102 of 230

2. When is the law applicable: Sale of movables on installment a) Sale on installment: payment by several partial payments in small amount b) Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per installment and at the same time remedy abuse of commercial houses c) Nature of remedies: alternative & not cumulative d) Coverage: sale and financing transaction & contracts of lease with option to purchase e) Action : Judicial and Extrajudicial Sale of Immovables (In General) 1. Remedies of Seller a) Anticipatory breach Seller has reasonable grounds to fear loss of immovable sold & its price – sue for RESCISSION b) Non – payment of price-RESCISSION 2. Remedies of Buyer a) Disturbed in possession or with reasonable grounds to fear disturbance – SUSPEND PAYMENT b) In case of subdivision or condo projects: If real estate developer fails to comply with obligation according to approved plan: i. RESCIND ii. SUSPEND PAYMENT UNTIL SELLER COMPLIES Sale Of Immovables (By Installment) 1. Law applicable • Article 1592, CC – Applies only to contract of sale • Maceda Law – applies to COS & CTS & Financing 2. Maceda Law (RA 6552) • Coverage: REAL ESTATE – defined space vs. CONDO – not defined space (w/ common areas) 1. contract of sale 2. contract to sell 3. financing transactions Excluded: • 1. industrial 2. commercial 3. sale to tenants under agrarian laws • Rights Granted to Buyers: 1. Buyer paid at least 2 years installment Page 131 of 230

i.

Goods are in transit Ø From the time goods are delivered to carrier for purpose of transmission to buyer Ø Goods rejected by buyer & carrier continues to possess them v When are goods no longer in transit? Ø Reached point of destination Ø Before reaching destination, buyer obtains delivery of the goods Ø Goods are supposed to have been delivered to buyer but carrier refused ii. Buyer is insolvent (failure to pay when debts become due) b) How right is exercised: i. Obtain actual possession of goods ii. Give notice of claim to carrier / bailee in possession thereof v Notice by seller to buyer is not required; notice to carrier

2. 3.

d)

is essential 4. Special Right to Resell the Goods Requisites: i. goods are perishable ii. stipulated the right of resale in case buyer defaults in payment iii. buyer in default for unreasonable time iv. notice by seller to buyer not essential

e)

5. Special Right to Rescind Requisites: i. Expressly stipulated ii. Buyer is in default for unreasonable time **Notice needs to be given by seller to buyer

f)

Remedies of the Buyer

g)

1. When Seller fails to deliver, buyer may seek SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN GOODS ON PAYMENT OF DAMAGES

h)

Sale of Movables on Installment (Recto Law) 1. Remedies a) b) c)

of Seller (1484) Exact fulfillment should the buyer fail to pay Cancel the sale if buyer fails to pay 2 or more installments Foreclose on chattel mortgage if buyer fails to pay 2 or more installments v If buyer chooses foreclosure, no further action against buyer to recover any unpaid balance of the price Page 130 of 230

i) j) k)

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

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

l)

Page 103 of 230

civil action arising from the RPC but plaintiff cannot recover damages 2x for same act or omission of the defendant m) ACT OR OMISSION IS NOT THE PROXIMATE CAUSE OF THE DAMAGE n) OTHER GROUNDS – Motion to Dismiss a. lack of jurisdiction over person of defendant b. lack of jurisdiction over subject matter c. venue improperly laid d. plaintiff has no legal capacity to sue e. there is another action pending between same parties for same cause f. cause of action is barred by prior judgement /statute of limitations g. pleading asserting claim states no cause of action h. claim set forth in pleading has been paid, waived, abandoned, extinguished i. claim is unenforceable under the provision of statute of fraud j. condition precedent for filing claim has not been complied with

7. Persons Liable for Quasi-Delict a. TORTFEASOR - Whoever by act or omission causes damage to another, there being no fault or negligence is obliged to pay for the damage done (art 2176). b. PERSONS VICARIOUSLY LIABLE – the obligation imposed in 2176 is demandable not only for one’s own act or omission but also for those persons for whom one is responsible (art 2180). • •

Vicarious liability – law on imputed negligence; a person who himself is not guilty of negligence is made liable for conduct of another Reason: - public policy – deeper pocket/capacity to pay - violation of duty on account of relationship – he is negligent 1)

PARENTS - The father, and in case of his death or incapacity, the mother are responsible for damage caused by minor children who live in their company

Note: Father and Mother shall jointly exercise parental authority over common children. In case of disagreement, father's decision shall prevail (art 211). 2)

GUARDIANS - Guardians are liable for damages caused by the minor or incapacitated persons who are: i. under their authority & Page 104 of 230

a.

b. 4.

Loss – 2 views: Paras: BUYER Tolentino: SELLER Deterioration & fruits – Buyer bears loss.

After delivery Res perit domino • • Owner is buyer so buyer bears risk of loss • Delivery extinguishes ownership vis-a-vis the seller & creates a new one in favor of the buyer

Remedies of Parties For Breach Of Contract Of Sale Remedies of the Seller 1. Subject Matter: MOVABLES (IN GENERAL) Requisites: a. Subject matter – goods b. Seller is unpaid – not completely paid or received negotiable instrument under a condition & condition has been breached by reason of dishonor c. Physical possession is with seller Remedies 1. Possessory lien 2. Stoppage in transitu 3. Special right of re-sale Can only be exercised when the 2 4. Special right to rescind prior rights have been exercised 2. Possessory Lien o Seller not bound to deliver if buyer has not paid him the price o Right to retain; cannot be availed when seller does not have custody o Exercisable only in following circumstances: 1. goods sold without stipulation as to credit 2. goods sold on credit but term of credit has expired 3. buyer becomes insolvent o

Instances when possessory lien lost: 1.

2. 3.

seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to possess them buyer or his agent lawfully obtains possession of goods waiver

3. Stoppage In Transitu a) Requisites: Page 129 of 230

c. d.

2.

sale is made under statutory power of sale or under order of a court of competent jurisdiction sale is made in a merchant’s store in accordance with code of commerce & special laws

Sale by Seller with Voidable Title a) Perfection Stage: Valid sale – buyer acquires title of goods b) Consummation Stage: Valid sale – if title has not yet been avoided, buyer buys goods under following condition: i. in good faith ii. for value iii. without notice of seller’s defect of title

ii. 3)

OWNERS & MANAGERS OF ESTABLISHMENT/ENTERPRISE Owners & managers of establishment or enterprise are responsible for damages caused by their employees: i. in the service of the branches in which the latter are employed OR ii. in occasion of their function

4)

EMPLOYERS - Employers shall be liable for damages caused by their employees & household helpers i. employee selected by employer or through another ii. Services rendered in accordance with orders which employer had authority to give iii. acting w/in the scope of their assigned task iv. illicit act of employee was on the occasion or by reason of the functions entrusted to him v. even though the former are not engaged in any business or industry (unlike in RPC – subsidiary liability of employer attaches in case of insolvency of employer for as long as the employer is engaged in business/industry)

3. Title as to Movable Properties a) Rule: POSSESSION IS EQUIVALENT TO TITLE

Requisites:

b)

c)

i. Possession of a movable ii. In good faith Exception: i. Owner loses movable – owner can recover w/o reimbursing price ii. Owner is unlawfully deprived – owner can recover w/o reimbursing price Exception to Exception: i. Movable is bought at public sale – owner can only recover after reimbursing price ii. Movable acquired in good faith & for value from auction

Defenses available to employers: a) exercise of due diligence ins election and supervision of employees b) act/omission was made outside working hours and in violation of company's rules and regulations 5)

STATE - The state is responsible when it acts through a special agent, but not when the same is caused by an official to whom task done properly pertains in which case art 2176 is applicable • A special agent is one who receives a definite and fixed act or commission, foreign to the exercise of the duties of his office if he is a special official.

6)

SCHOOLS, ADMINISTRATOR, TEACHER - Teachers or heads of establishments of arts & trades shall be liable for damages caused by their: i. pupils, students & apprentices ii. as long as they remain in their custody

Loss, Deterioration, Fruits & Other Benefits Who Bears Risk of Loss/Deterioration/Fruits 1.

2.

3.

Before perfection Res perit domino • • Owner is seller so seller bears risk of loss At Perfection Res perit domino • • Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale • Seller cannot anymore comply with obligation so buyer cannot be compelled also After Perfection but before delivery Page 128 of 230

live in their company

NOTE: Family Code, art 218 - The school, its administration & teachers or the individual, entity or institution engaged in child care shall have special parental authority & responsibility over the minor child under their supervision, instruction or custody (authority & responsibility shall apply Page 105 of 230

to all authorized activities whether inside or outside the premises or the school, entity or institution). Family Code, art 219 - those given the authority & responsibility shall be solidarily & principally liable for damages caused by act/omission of the unemancipated minor; parents, judicial guardian or person exercising substitute parental authority over said minor shall be subsidiarily liable. Difference between Articles 218 & 2180 Art 218 School, admin, teachers engaged in child care are made expressly liable Liability of school, admin, teachers is solidary and parents are made subsidiary liable Students involved must be minor

•

•

Art 2180 Teachers, head of establishment in Arts and trades are made expressly liable No such express solidary nor subsidiary liability is stated

Students minor

involved

not

necessarily

Liability of the School general rule: schools are not liable as party defendants exception: a) FC 218 – schools are expressly made liable b) St. Francis case ruling – school’s liability as employer c) PSBA case ruling – school has liability based on contract WON Article 2180 apply to school of arts & trades only? No. applies to all including academic institution per weight of jurisprudence based on obiter of Justice JBL Reyes in the Exconde case 1.

basis of liability of teacher – principle of loco parentis (stand in place of parents)

2.

so long as they remain in their custody • not literal anymore; before: boarding & living with teacher due to peculiar characteristic of trade & arts school •

as long as they are in the protective, supervisory capacity of teacher – special parental authority, includes recess time, for any legitimate reason for a child’s presence in school

2. When does the general rule apply? When not all requisites embodied in 1544 concur. 3.

Special Rule – 1544 • Requisites: a) exactly same subject matter b) exactly same immediate seller c) buyers represent conflicting interest d) both sales are valid e) • Rules on double sales under 1544 a) MOVABLE - first to posses in good faith = owner b) IMMOVABLE 1. First to register in good faith 2. No inscription, first to possess in good faith 3. No inscription & no possession in good faith – person who presents oldest title in good faith

Bar Question (2001). One June 15, 1995, Jesus sold a parcel of registered land to Jaime. On June 30, 1995, he sold the same land to Jose. Who has a better right if: a) the first sale is registered ahead of the second sale, with knowledge of the latter. Why?

Answer: The first buyer has the better right if his sale was first to be registered, even though the first buyer knew of the second sale. The fact that he knew of the second sale at the time of his registration does not make him as acting in bad faith because the sale to him was ahead in time, hence, has a priority in right. What creates bad faith in the case of double sale of land is knowledge of a previous sale. b)

The second sale is registered ahead of the first sale with knowledge of the latter? Why?

Answer: The first buyer is still to be preferred, where the second sale is registered ahead of the first sale but with knowledge of the latter. This is because the second buyer, who at the time he registered his sale knew that the property had already been sold to someone else, acted in bad faith. Sale By Non-Owner Or By One Having Voidable Title

Bar Question (2001). After working overtime upto midnight, Alberto an executive of an insurance company drove a company vehicle to a favorite Videoke bar where he had some drinks to “unwind.” At 2:00am, he drove home, but in doing so, he bumped a tricycle, resulting in the death of its driver. May the insurance company be held liable for the negligent act of Alberto? Why?

1. General Rule: Sale by non-owner, buyer acquires no better title than seller had. Exceptions: a. owner by his conduct is precluded from denying seller’s authority (ESTOPPEL) b. contrary is provided for in recording laws (PD 1529)

Page 106 of 230

Page 127 of 230

• ii.

Not applicable to judicial sales

Sold for lump sum • •

When price per unit not indicated If area delivered is either greater or lesser – price will not be adjusted accordingly

10. Time & Place of Delivery Rules: o follow stipulation in contact, or o follow usage in trade, or o seller’s place of business or his residence o specific goods – place where the thing is o at reasonable hour 11. Effect of Delivery: Title to thing is transferred/ownership is transferred Except: If contrary is stipulated as in the case of: a. contract to sell b. sale on acceptance/approval c. sale or return d. implied reservation of ownership 12. Who Bears Expenses of Delivery – Seller 13. Sale by Description/Sample:

There is acceptance BY BUYER when: a. b. c.

He intimates to seller that he has accepted, Thing delivered & he does any act inconsistent with ownership of seller, OR He retains without intimating to seller that he has rejected.

14. Sale of Goods on installment: a. Goods must be delivered in full, except when stipulated b. When not examined by buyer – not accepted until examined or at least had reasonable time to examine

Answer: The insurance company is not liable because when the accident occurred, Alberto was not acting within the assigned tasks of his employment. It is true that under Art. 2180 (par.5), employers are liable for damages caused by their employees who are acting within the scope of their assigned tasks. However, the mere fact that Alberto was using a service vehicle of the employer at the time of the injurious accident does not necessarily mean that he was operating the vehicle within the scope of his employment. In Castilex Industrial Corp. v. Vasquez, Jr. (321 SCRA 393 (1999), the Supreme Court held that notwithstanding the fact that the employee did some overtime work for the company, the former was, nevertheless, engaged in his own affairs or carrying out a personal purpose when he went to a restaurant at 2:00am after coming out from work. The time of the accident (also 2:00am) was outside normal working hours. Bar Question (2003). If during class hours, while the teacher was chatting with other teachers in the school corridor, a 7-year old male pupil stabs the eye of another boy with a ballpen during a fight, causing permanent blindness to the victim, who could be liable for damages for the boy’s injury: the teacher, the school authorities, or the guilty boy’s parents? Explain.

Answer: The school, its administrators, and teachers have special parental authority and responsibility over the minor child while under their supervision, instruction or custody (Article 218, FC). They are principally and solidarily liable for the damages caused by the acts or omissions of the unemancipated minor unless they exercised the proper diligence required under the circumstances (Article 219, FC). In the problem, the teacher and the school authorities are liable for the blindness of the victim, because the student who caused it was under their special parental authority and they were negligent. They were negligent because they were chatting in the corridor during the class period when the stabbing incident occurred. The incident could have been prevented had the teacher been inside the classroom at that time. The guilty boy’s parents are subsidiarily liable under Article 219 of the Family Code. 8. Persons Expressly Made Liable By Law (even without fault)

15. Acceptance of goods in general, absent contrary express stipulation, does not discharge seller from liability in case of breach of warranties (unless no notice or failure to give it within reasonable time)

a.

POSSESSOR OF AN ANIMAL OR WHOEVER MAKES USE OF THEM EVEN IF THE ANIMAL IS LOST OR ESCAPED

Except: 1. 2.

16. When buyer has a right to refuse goods, no need to return; shall be considered as depositary; unless there is stipulation to the contrary b.

Double Sales 1. General Rule: FIRST IN TIME, PRIORITY IN RIGHT

OWNER OF MOTOR VEHICLE - In motor vehicle mishap, the owner is

solidarily liable with the driver if: 1.

Page 126 of 230

Force majeure Fault of the injured/damaged person

he was in the vehicle, and Page 107 of 230

2.

could have misfortune

through

due

diligence

prevented

the

c.

MANUFACTURERS & PROCESSORS OF FOODSTUFFS, DRINKS, TOILET ARTICLES & SIMILAR GOODS - they are liable for death and injuries caused by any noxious or harmful substances used although no contractual relation exists between them and the consumers

d.

DEFENDANT IN POSSESSION OF DANGEROUS WEAPONS OR SUBSTANCES, SUCH AS FIREARMS AND POISON - there is prima facie presumption of negligence on the part of defendant if death or injury results from such possession Exception: The possession or use thereof is indispensable in his occupation or business

e.

PROVINCES, CITIES & MUNICIPALITIES - shall be liable for damages for the death or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision

f.

PROPRIETOR OF BUILDING OR STRUCTURE - responsible for the damages resulting from any of the ff.: 1) total or partial collapse of building or structure if due to lack of necessary repairs 2) 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 3) by excessive smoke, which may be harmful to persons or property 4) by falling of trees situated at or near highways or lanes, if not caused by force majeure 5) by emanations from tubes, canals, sewers or deposits of infectious matter, constructed without precautions suitable to the place

g.

ENGINEER, ARCHITECT OR CONTRACTOR - if damage of building or structure is caused by defect in construction which happens within 15 years from construction; action must be brought within 10 years from collapse

h.

HEAD OF FAMILY THAT LIVES IN A BUILDING OR PART THEREOF - liable for damages caused by things thrown or falling from the same

9. Principles Page 108 of 230

ii.

Destination Point – when goods reach the port of

destination even if not disembarked yet from the vessel, there is delivery to the buyer c) CIF – COST, INSURANCE, FREIGHT i. when buyer pays for services of carrier – delivery to carrier is delivery to buyer; carrier is agent of the buyer ii. When buyer pays seller the price – from moment the vessel is at port of destination, there is already delivery to buyer. 9. Completeness of Delivery a. as to MOVABLES – delivery of thing plus accessories & accessions in the condition in which they were upon the perfection of the contract including its fruits i. if LESS – buyer has 2 options: a) reject b) accept 1. when accepts with knowledge that seller is not going to perform contract in full, he must pay at price stipulated 2. when accepts & consumes before knowledge that buyer will not perform contract in full, liable only for fair value of goods delivered ii. if MORE – buyer has 3 options: a) accept per contract & reject the rest b) accept the whole – pay price stipulated c) reject whole if subject matter is indivisible iii. if MIXED WITH GOODS OF DIFFERENT DESCRIPTION – buyer has 2 options: a) accept good w/c are in accordance with contract & reject the rest b) reject goods entirely – if indivisible b.

as to IMMOVABLES i. Sold per unit or number • with statement of its area, rate at certain price • deliver all that may have been stated in the contract • if impossible, remedies of buyer: Ø LESS IN AREA a) rescission b) proportional reduction of price – LACK IN AREA SHOULD NOT BE MORE THAN 1/10 OF AREA AGREED UPON Ø GREATER IN AREA a) accept per stipulation & reject the rest b) accept whole area – pay at contract rate Page 125 of 230

•

•

When deviations allowed: a. anything that refers to price is material b. small items are insignificant, does not make acceptance unconditional A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in other customary manner.

a)

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

ELEMENTS: i. ii. iii.

5. Earnest Money - money given as part of purchase price - its acceptance is proof that contract of sale exists

There is a legal right or duty Which is exercised in bad faith For the sole intent of prejudicing or injuring another

2. GENERAL SANCTION (Art. 20) – for all other provisions of law which do not especially provide their own sanction

ELEMENTS: i. ii.

6. Consummation: Delivery and transfer of ownership 7. Different kinds of delivery (tradicion): a) Actual- when thing sold is placed in the control & possession of the buyer b) Constructive i. Traditio Longa Manu - delivery of thing by mere agreement, as possession cannot be transferred at the time of sale (ex. when seller points to the thing being sold without actually delivering it) Traditio Brevi Manu - before contract of sale, the ii. would-be buyer was already in possession of the subject matter of sale (ex. as lessee) iii. Symbolic delivery - as to movables only (ex. delivery of the keys to a car) Constitutum possessorium - at the time of perfection iv. of contract, seller continues to hold possession but no longer as owner - merely as a holder v. Execution of public instrument Exceptions: a. when there is stipulation to contrary, execution does not produce effect of delivery b. when at the time of execution of instrument, subject matter was not subject to control of the seller 8. Delivery through Carrier - Terms: a) FAS – FREIGHT ALONG SIDE When goods delivered alongside the ship, there is already delivery to the buyer (twin effects deemed fulfilled) b) FOB – FREIGHT ON BOARD i. Shipping Point – goods are delivered at point of shipment; delivery to carrier by placing goods on vessel is delivery to buyer Page 124 of 230

In the exercise of his legal right or duty Willfully or negligently causes damage to another

3. CONTRA BONOS MORES (ART 21)

ELEMENTS: i. ii. iii.

There is an act which is legal But which is contrary to morals, good custom, public order or public policy And it is done with intent to injure

b)

UNJUST ENRICHMENT (Arts. 22, 23, 2142 & 2143) Accion in Rem Verso: action for recovery of what has been paid • without just cause Requisites: • i. Defendant has been enriched ii. Plaintiff suffered a loss iii. Enrichment of defendant is without just or legal ground iv. Plaintiff has no other action based on contract, quasi contract, crime or quasi-delict • Distinguished from solutio indebeti: Mistake is an essential element in solutio indebeti but not in accion in rem verso.

c)

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

d)

VIOLATION OF RIGHT OF PRIVACY AND FAMILY RELATIONS (Art. 26) every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The ff. acts though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: 1. prying into the privacy of another's residence Page 109 of 230

2. 3. 4.

e)

f)

g)

meddling with or disturbing the private life or family relations of another intriguing to cause another to be alienated from his friends vexing or humiliating another on account of his religious beliefs, lowly station in life. Place of birth, physical defect, or other personal condition

DERELICTION OF OFFICIAL DUTY OF PUBLIC OFFICERS • May be brought by any person suffering from material or moral loss because a public • servant refuses or neglects, without just cause to perform his official duty (art 27). • REQUISITES: 1. defendant is a public officer charged with the performance of a duty in favor of the plaintiff 2. he refused or neglected without just cause to perform such duty (ministerial) 3. plaintiff sustained material or moral loss as consequence of such non-performance 4. the amount of such damages, if material UNFAIR COMPETITION - Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or other unjust, oppressive or highhanded method (Art 28) MALICIOUS PROSECUTION

b. c. d. e. f.

nominate principal; but can be attached to other principal contracts onerous commutative unilateral – vs contract of sale which is bilateral

3. Right of First Refusal • creates a promise to enter into a contract of sale and it has no separate consideration, not subject to specific performance because there is no contractual relationship here & it is not an obligation to give (not a real contract) New doctrine: May be subject to specific performance • Effect of new doctrine: Turned the world of policitacion upside • down because while valid option contract is not subject to specific performance, right of first refusal which does not even have a separate consideration may be subject to specific performance Bar Question (1998). In a 20-year lease contract over a building, the lessee is expressly granted a right of first refusal should the lessor decide to sell both the land and the building. However, the lessor sold the property to a third person who knew about the lease and in fact agreed to respect it. Consequently, the lessee brings an action against both the lessor-seller and the buyer (a) to rescind the sale and (b) to compel specific performance of his right of first refusal in the sense that the lessor should be ordered to execute a deed of absolute sale in favor of the lessee at the same price. The defendants contend that the plaintiff can neither seek rescission of the sale nor compel specific performance of a “mere” right of first refusal. Decide the case.

ELEMENTS: 1. 2. 3. 4.

that the defendant was himself the prosecutor/ he instigated its commencement that it finally terminates in his acquittal that in bringing it the prosecutor acted without probable cause, and that he was actuated by legal malice, that is, by improper and sinister motive

h)

VIOLATION OF RIGHTS AND LIBERTIES OF ANOTHER PERSON

i)

NUISANCE a. Definition – any act, omission, establishment, condition of property, or anything else which: 1. injures or endangers the health or safety to 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 streets, or any body of water Page 110 of 230

Answer: The action filed by the lessee, for both rescission of the offending sale and specific performance of the right of first refusal which was violated, should prosper. The ruling in Equatorial Realty Development, Inc. v. Mayfair Theater Inc. (264 SCRA 483), a case with similar facts, sustains both rights of action because the buyer in the subsequent sale knew the existence of right of first refusal, hence in bad faith. 4. Perfection: Offer & Acceptance • Meeting of Minds 1. Offer – certain 2. Acceptance – absolute Qualified acceptance – merely a counter-offer which needs to be • absolutely accepted to give rise to perfected contract of sale Business ads are mere invitations to make an offer except when it • appears to be otherwise Acceptance by letter/telegram – binds only at time it came to • knowledge of SELLER; prior thereto – offer may still be withdrawn • Acceptance must be of the exact terms to be considered absolute Page 123 of 230

a.

b. c.

Judicial sale • Shocking to conscience of man • Higher price can be obtained at re-sale Rescissible contracts due to lesion Sales with right to repurchase (raises presumption of equitable mortgage) – Remedy is reformation

b.

2. Particular form is required under the statute of frauds: a. valid & binding between parties b. not binding to 3rd persons only

hinders or impairs use of property

NUISANCE PER SE - denounced as nuisance by common

2.

NUISANCE PER ACCIDENS - those which are in their

law or by statute nature not nuisances, but may become so by reason of their locality, surroundings, or the manner in which they may be conducted, managed, etc.

Form of Sales 1. Form not important in validity of sale - Sale being consensual, may be oral or written, perfected by mere consent as to price & subject matter

5. Kinds: 1.

c.

REMEDIES AGAINST PUBLIC NUISANCES 1. Prosecution under the RPC or any local ordinance 2. Civil action 3. Abatement, without judicial proceeding

d.

Who May Avail of Remedies 1. Public officers 2. Private persons - if nuisance is specially injurious to himself; the ff. steps must be made: i. demand be first made upon owner or possessor of the property to abate the nuisance ii. that such demand has been rejected iii. that the abatement be approved by the district health officer and executed with the assistance of local police iv. that the value of destruction does not exceed P3,000

e.

Remedies Against Private Nuisances 1. Civil action 2. Abatement, without judicial proceedings

f.

Doctrine of Attractive Nuisance A class of cases within the general rule that one is liable for the injury resulting to another from failure to exercise the degree of care commiserate with the circumstances The attractiveness of the premises or of the dangerous instrumentality to children of tender years is to be considered as an implied invitation, which takes the children who accepted it out of the category of a trespasser and puts them in the category of invitees, towards whom the owner of the premises or instrumentality owes the duty of ordinary care.

3. When form is important for validity; exception by specific provision of law: a. power to sell a piece of land granted to an agent – otherwise VOID b. sale of large cattle; must also be registered with Municipal treasurer – otherwise VOID c. sale of land by non-Christian if not approved by Governor – VOID 4. When form is important for enforceability (STATUTE OF FRAUDS) a. Sale to be performed 1 year after b. Agreement to sell things with value of 500 and up c. Sale of real property or any interest therein

Exceptions: i. ii. iii.

When there is a note or memorandum in writing & subscribed to by party or his agent (contains essential terms of the contract) When there has been partial performance/execution (seller delivers with intent to transfer title/receives price) when there has been failure to object to presentation of evidence (oral) - constitutes waiver

Formation, Perfection and Consummation of a Contract of Sale 1. Three Stages in the Life of a Contract of Sale a) Policitacion/Negotiation Stage – offer is floated, acceptance is floated but they do not meet; the time when parties indicate their interest but no concurrence of offer & acceptance b) Perfection – concurrence of all requisites; meeting of the minds c) Consummation – parties perform their respective undertakings 2. Option Contract – Characteristics: a. not the contract of sale by itself; distinct Page 122 of 230

Bar Question (2006). A drug lord and his family reside in a small bungalow where they sell shabu and other prohibited drugs. When the police found the illegal trade, they immediately demolished the house because according to them, Page 111 of 230

it was a nuisance per se that should be abated. Can this demolition be sustained? Explain.

•

Answers: (1) No, the demolition cannot be sustained. The house cannot be considered as nuisance per se. To be considered a nuisance per se, the act, occupation, or structure must be nuisance at all times and under any circumstances, regardless of the location or surrounding. Since the demolished house was not a nuisance during the times that it was not used for selling drugs, it cannot be considered nuisance per se. Moreover, in the abatement of a nuisance, whether judicially or extra-judicially, the abatement should not inflict unnecessary damage or injury. In this case, what may be considered as nuisance per se is not structure of the house but the use of the house for the selling of shabu. However, the demolition of the house is not necessary to abate the sale of shabu in that community. To demolish the house is an unnecessary damage and injury. (2) The selling of the shabu is not a public nuisance but a grave threat to the welfare of the community. As such it can be enjoined and all instruments thereof be destroyed by the law enforcers. The sale of the shabu in that community is facilitated by the house which hides the pernicious activity from the law enforcers. This being the case, the house may be considered as an instrument of the crime and the law enforcers are justified in demolishing the house in the exercise of the police powers of the State. Damages Kinds of Damages: (“mental”)

moral, exemplary, nominal, temperate, actual, liquidated

Exception to General Rule: a) Minors *Status of contract: VOIDABLE only, therefore ratifiable b) Sale between spouses Exceptions: i. separation of property agreed (marriage settlement) ii. judicial separation of property c) Guardian with regard to property of ward during period of guardianship d) Agent with regard to property of principal e) Executor/administrator with regard to the estate of the deceased f) Public officers with regard to the property of the State g) Officer of court & employee – with regard to the property in litigation

2. Subject Matter of Sale • To be a valid subject matter, the following must concur: a) Existing, Future & Contingent i. sale of things having potential existence (emptio rei speratae)valid ii. Sale of hope (emptio spei)- every sale of a future thing is subject to the condition that they will come into existence - aleatory in character but valid - sale of empty hope is void b) Licit – must be within the commerce of men Void if subject-matter is: i. Contrary to law ii. Simulated/fictitious iii. Outside commerce of men iv. Impossible service c) Determinate or determinable

Actual/Compensatory 3. Price 1. CONCEPT: Adequate compensation for a. the value of loss suffered b. profits which obligee failed to obtain 2. WHAT MUST BE DONE TO COLLECT ACTUAL DAMAGES: a. Plead or allege the loss i. General Damages - natural, necessary and logical consequences of a particular wrongful act which result in injury; need not be specifically pleaded because the law itself implies or presumes that they resulted from the wrongful act ii. Special Damages - damages which are the natural, but not the necessary and inevitable result of the wrongful act; need to be pleaded Page 112 of 230

• •

Price – signifies the sum stipulated as equivalent of the thing sold Characteristics of Valid Price a) Must be real b) Must be in money or its equivalent c) Must be certain or ascertainable at the time of the perfection of the contract d) Manner of payment provided for

•

Gross inadequacy of price in ordinary sale does not render contract void unless it is shocking to conscience of man.

Exceptions: Page 121 of 230

vi. vii.

TEST: essential clauses of whole instrument (art 1466 – motherhood statement, not good law) Agency is a personal contract; sale is a real contract (to give) – rescission is not available in agency

Bar Question (2000). A foreign manufacturer of computers and a Philippine distributor entered into a contract whereby the distributor agreed to order 1,000 units of the manufacturer’s computers every month and to resell them in the Philippines at the manufacturer's suggested prices plus 10%. All unsold units at the end of the year shall be bought back by the manufacturer at the same price they were ordered. The manufacturer shall hold the distributor free and harmless from any claim for defects in the units. Is the agreement one for sale or agency?

b. c.

Pray for the relief that claim for loss be granted Prove the loss

3. WHEN LOSS NEED NOT BE PROVED: a. Liquidated damages previously agreed upon; liquidated damages take the place of actual damages except when additional damages incurred b. If damages other than actual are sought c. Loss is presumed (ex: loss if a child or spouse) d. Forfeiture of bonds in favor of the government for the purpose of promoting public interest or policy (ex: bond for temporary stay of alien) CONTRACTS & QUASI CONTRACTS

Answer: The contract is one of agency not sale. The notion of sale is negated by the following indicia: (1) the price is fixed by the manufacturer with the 10% mark-up constituting the commission; (2) the manufacturer reacquires the unsold units at exactly the same price; and (3) warranty for the units was borne by the manufacturer. The foregoing indicia negate sale because they indicate that ownership over the units was never intended to transfer to the distributor.

1.

Damages in case of Good faith a. b.

2.

Natural and probable consequence of breach of obligation, and Parties have forseen or could have reasonably forseen at time obligation was constituted

Damages in case of bad faith a.

e)

f)

Dacion en pago dacion: contract where property is alienated to i. satisfy/extinguish obligation to pay debt ii. in dacion: novates creditor-debtor relationship into sellerbuyer iii. in dacion: delivery is required (real contract) Lease i.

in sale: obligation to absolutely transfer ownership of thing; in lease: use of thing is for a specified period only with an

ii. iii.

in sale: consideration is price; in lease: consideration is rent in sale: seller needs to be owner of thing to transfer ownership; in lease: lessor need not be owner

obligation to return

g)

Lease with option to buy - in reality, a contract of sale but designated as lease in name only; it is a sale by installments

Essential Requisites of a Contract of Sale 1. Consent

Parties to a Contract of Sale •

General Rule: All parties with capacity to contract can enter into a valid contract of sale Page 120 of 230

it is sufficient that damages may be reasonably attributed to the nonperformance of the obligation CRIMES & QUASI-CRIMES • defendant is liable for all damages that are natural and probable consequence of the act/omission complained of • not necessary that damages have been forseen or could have been reasonably forseen 4. VALUE OF LOSS SUFFERED (DANO EMERGENTE) - Destruction of things, fines or penalties; medical & hospital bills, attorney's fees, interests, cost of litigation Damages recoverable: a. Medical & Hospital Bills b. Loss or impairment of earning capacity (in case of physical disability) c. Damages for death i. Minimum amount: P50,000 ii. Loss of earning capacity unless deceased had permanent physical disability not caused by defendant so that deceased had no earning capacity at time of death iii. Support, if deceased was obliged to give support (for period not more than 5 years) iv. Moral damages d. Attorney's fees - as a general rule, attorney's fees (other than judicial costs) are not recoverable, except: i. stipulation between parties Page 113 of 230

ii. iii.

iv. v. vi. vii. viii. ix. x. xi. e. f.

when exemplary damages are awarded when defendant's act/omission compelled plaintiff to litigate with 3rd persons or incur expenses to protect his interest malicious prosecution clearly unfounded civil action or proceeding against plaintiff defendant acted in gross & evident bad faith in refusing to satisfy plaintiff's just & demandable claim legal support actions recovery of wages of household helpers, laborers & skilled workers actions for indemnity under workmen's compensation and employer liability laws separate civil action to recover civil liability arising from crime when double judicial costs are awarded

iii.

donation is governed by law on donation; sale is governed by law on sales

b)

Barter i. ii. iii.

in barter, the consideration is the giving of a thing; in sale, it is giving of money as payment both are governed by law on sales; both are species of the genus sales if consideration consists party in money & partly by thing – look at manifest intention;

if intention is not clear (1468): a.

value of thing is equal or less than amount of money –

sale c)

Judicial costs Interest - discretionary on part of the court

5. UNREALIZED PROFITS (LUCRO CESSANTE) - future earnings

b. value of thing is more than amount of money – barter Contract for piece of work Test in article 1467: • contract for delivery of an article which the vendor in the ordinary course of business manufactures or procures for general market (whether on hand or not) – sale • goods are to be manufactured specially for a customer and upon special order and not for the general market – contract

for piece of work. 6. WHEN DAMAGES MITIGATED: a. Contributory negligence b. In contracts, quasi-contracts and quasi-delict 1. plaintiff has contravened the terms of contract 2. plaintiff derived some benefit as result of contract 3. in case where exemplary damages are to be awarded, that the defendant acted upon the advise 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 Bar Question (2003). If a pregnant woman passenger of a bus were to suffer an abortion following a vehicular accident due to the gross negligence of the bus driver, may she and her husband claim damages from the bus company for the death of their unborn child? Explain. (5%)

Rules: Timing test – under art 1467; Inchausti; whether the thing • transferred would have never existed but for the order – •

•

d)

Agency i.

ii.

Answer: No, the spouses cannot recover actual damages in the form of indemnity for the loss of life of the unborn child. This is because the unborn child is not yet considered a person and the law allows indemnity only for loss of life of persons. The mother, however, may recover damages for the bodily injury she suffered from the loss of the fetus which is considered part of her internal organs. The parents may also recover damages for injuries that are inflicted directly upon them, e.g., moral damages for mental anguish that attended the Page 114 of 230

iii. iv.

v.

contract for piece of work (abandoned) Habituality test – enunciated in Celestino v CIR; contract of sale if manufacturer engages in activity without need to employ extraordinary skills and equipment; contract for piece of work is sale of service; contract of sale is sale of things. Nature of the object test – enunciated in EEI v CIR; each product’s nature of execution differs from the others; products are not ordinary products of manufacturer. to sell in sale, buyer pays for price of object; in agency to sell, agent not obliged to pay for price, merely obliged to deliver price received from buyer. in sale, buyer becomes owner of thing; in agency; principal remains owner even if object delivered to agent in sale, seller warrants; in agency, agent assumes no risk/liability as long as within the authority given in sale, not unilaterally revocable; in agency, may be revoked unilaterally because fiduciary & even if revoked w/o ground n sale, seller receives profit; in agency, agent not allowed to profit Page 119 of 230

2. Its amount need not be proved, because its determination depends upon the amount of the compensatory damages that may be awarded to the claimant.

loss of the unborn child. Since there is gross negligence, exemplary damages can also be recovered. (Geluz v. CA, 2 SCRA 801 [1961]).

3. It need not also be alleged, because it is merely incidental or dependent upon what the court may award as compensatory damages.

Moral Damages 1. “PBMF-MWSS” a. Physical suffering b. Besmirched reputation c. Mental anguish d. Fright e. Moral shock f. Wounded feelings g. Social humiliation h. Serious anxiety

4. When recovered a. 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. b. Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. c. 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.

2. Sentimental value of real or personal property may be considered in adjudicating moral damages

5. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated.

3. The social and economic/financial standing of the offender and the offended party should be taken into consideration in the computation of moral damages

6. A stipulation whereby exemplary damages are renounced in advance shall be null and void. SALES

4. Moral damages is awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone, by reason of defendant's culpable action and not intended to enrich a complainant at the expense of defendant.

1. Contract of Sale – One of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. 2. Characteristics of Contract of Sale: a) Nominate - law gave it a name b) Principal - can stand on its own; unlike accessory contract c) Bilateral - imposes obligation on both parties d) Onerous - with valuable consideration e) Commutative - equal value is exchanged for equal value f) Consensual - meeting of minds makes a perfect contract of sale but needs delivery to consummate. g) Title & not a mode - title gives rise to an obligation to transfer; it is a mode w/c actually transfers ownership 3. Distinguished from other Contracts: a) Donation i. donation is gratuitous; sale is onerous ii. donation is formal contract; sale is consensual Page 118 of 230

5. IN WHAT CASES MAY MORAL DAMAGES BE RECOVERED (enumeration not

exclusive): a. b. c. d. e. f. g. h. i.

Criminal offense resulting in physical injuries Quasi-delicts causing physical injuries Seduction, abduction, rape or other acts of lasciviousness Adultery and concubinage Illegal or arbitrary detention or arrest Illegal search Libel, slander or other form of defamation Malicious prosecution Acts mentioned in art 309 of the RPC relating to disrespect of the dead and interference with funeral j. Acts and actions referred to in arts 21, 26, 27, 28, 29, 30, 32, 34 and 35 k. The parents of the female seduced, abducted, raped, or abused l. Spouse, descendants, ascendants and brother and sisters for acts mentioned in art 309 m. Art 2220 - in cases of willful injury to property or breaches of contract where defendant acted fraudulently or in bad faith Page 115 of 230

Bar Question (2004,2005). DT and MT were prominent members of the frequent travelers’ club of FX Airlines. In Hong King, the couple were assigned seats in the Business Class for which they had bought tickets. On checking in, however, they were told they were upgraded by computer to First Class for the flight to manila because the Business Section was overbooked. Both refused to transfer despite better seats, food, beverage and other services in First Class. They said they had guests in Business Class they should attend to. They felt humiliated, embarrassed and vexed, however, when the stewardess allegedly threatened to offload them if they did not avail of the upgrade. Thus they gave in, but during the transfer of luggage DT suffered pain in his arm and wrist. After arrival in Manila, they demanded an apology from FX’s management as well as indemnity payment. When none was forthcoming, they sued the airline for a million pesos in damages. Is the airline liable for actual and moral damages? Why or why not? Explain briefly.

Answer: FX Airlines committed breach of contract when it upgraded DT and MT, over their objections, to First Class because they had contracted for Business Class passage. However, although there is a breach of contract, DT and MT are entitled to actual damages only for such pecuniary losses suffered by them as a result of such breach. There seems to be no showing that they incurred such pecuniary loss. There is no showing that the pain in DT’s arm and wrist resulted directly from the carrier’s acts complained of. Hence, they are not entitled to actual damages. Moreover, DT could have avoided the alleged injury by requesting the airline staff to do the luggage transfer as a matter of duty on their part. There is also no basis to award moral damages for such breach of contract because the facts of the problem do not show bad faith or fraud on the part of the airline (Cathay Pacific v. Vasquez, 399 SCRA 2007 [2003]). However, they may recover moral damages if the cause of action is based on Article 21 of the Civil Code for the humiliation and embarrassment they felt when the stewardess threatened to offload them if they did not avail of the upgrade. Bar Question (2006). 1. Under Article 2219 of the Civil Code, moral damages may be recovered in the cases specified therein, several of which are enumerated below. Choose the case wherein you cannot recover moral damages. Explain. a) A criminal offense resulting in physical injuries b) Quasi-delicts causing physical injuries c) Immorality or dishonesty d) Illegal search e) Malicious prosecution

Answers: (1) Moral damages may not be recovered in (c) immorality or dishonesty because it is not included in the enumeration of Art. 2219 of the CC. Page 116 of 230

(2) Moral damages may be recovered in all of the five instances enumerated above. While “immorality” and “dishonesty” are not included in Art. 2219 of the Civil Code, the same article provides that moral damages may be recovered “in the following analogous cases”. Art. 2219 (10) provides and includes: “Acts and actions referred to in Art. 21...”. Art 21 provides: “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 damages. Immorality or dishonesty is analogous to acts contrary to morals and therefore covered by Art 2219. Nominal Damages 1. Concept: 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 2. ELEMENTS: a. Plaintiff has a right b. Right of plaintiff is violated c. Purpose is not to identify but vindicate or recognize right violated 3. RULE: It cannot co-exist with compensatory damages. An award of nominal damages precludes the award of temperate or moderate damages. Temperate or Moderate Damages 1. Amount: More than nominal but less than compensatory where some pecuniary loss has been suffered but its amount can't be proved with certainty due to the nature of the case. 2. REQUISITES: a. Some pecuniary loss b. Loss is incapable of pecuniary estimation c. Must be reasonable Liquidated Damages 1. Those agreed upon by the parties to a contract, to be paid in case of breach thereof 2. WHEN LIQUIDATED DAMAGES MAY BE EQUITABLY REDUCED: a. iniquitous or unconscionable b. partial or irregular performance Exemplary or Corrective Damages 1. CONCEPT: imposed by way example or correction for the public good, in addition to the moral, temperate, liquidated to compensatory damages Page 117 of 230