UP Civil Law Persons

UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
Bar Operations 2008
CIVIL LAW
Bar Operations Head
Arianne Reyes
Academics Head
Henry Aguda
Ryan Balisacan
Subject Committee
Dianne Ducepec * Michelle Dy *
Jeifan Dizon * Erwin Arandia *
Tin Rondario * Margaret Ching*
Kitchie Pigol * Gem Hirang *
Lora Inguito * Quino Reyes *
Easter Castro * Nino Gonzales *
Peach Raymundo
Information Management
Committee
Chino Baybay [Head] * Simoun
Salinas [Deputy] * Rania Joya
[Design & Lay-out] * Ludee
Pulido [Documentations] * Linus
Madamba * Des Mayoralgo *
Jillian De Dumo * Mike Ocampo
* Abel Maglanque * Edan Marri
R. Caete
PERSONS & FAMILY RELATIONS CIVIL LAW
1 0 0 % U P L A W U P B A R O P S 2 0 0 8 Page 2 of 325
Persons and Family Relations
TABLE OF CONTENTS
I. Civil Personality 3
II. Citizenship and Domicile 6
III. Marriage 6
IV. Void Marriages 8
V. Voidable Marriages 11
VI. Legal Separation 14
VII. Rights and Obligations Between Husband and Wife 16
VIII. Property Relations Between Spouses 16
IX. The Family 25
X. Paternity and Filiation 26
XI. Adoption 29
XII. Support 32
XIII. Parental Authority 32
XIV. Funerals 34
I. CIVIL PERSONALITY
A. CONCEPT AND CLASSES OF PERSONS
Person - any being, natural (Art. 40, CC) or
juridical (Art. 42, CC), susceptible to legal
rights and obligations, and can be a subject of
legal relations.
Kinds of Capacity: (Art. 37, CC)
Juridical Capacity
Capacity to Act
Fitness to be the subject
of legal relations.
Power to do acts
with legal effect
Inherent in every
natural person
Acquired and
may be lost
Lost only through death
Subject to
certain
restrictions
Inherent and
ineffaceable attribute of
man; attaches to him by
the mere fact of his
being a man.
Conditional and
variable, it is
acquired and
may be lost.
Kinds of persons:
1. Natural persons
General Rule:
Birth determines personality (Art 40). Death
extinguishes civil personality (Art 42).
Exception:
A conceived child is considered born for all
purposes that are FAVORABLE to it, provided
it be born later (Art 40, 2nd clause) with the
following circumstances:
a. It is alive at the time it is completely
delivered from the mother's womb.
b. But if the fetus had an intra-uterine life
of less than seven months, it should
survive for at least 24 hours after its
complete delivery. (Art. 41, CC)
Test of life: complete respiration.
Burden of proof:
The presumption is that it was alive and the
burden of proof is on the party who alleges
the contrary.
Geluz v. CA
G.R. No. 16439 (1961)
An unborn fetus is not endowed with
personality. Parents of an unborn fetus
cannot sue for damages on its behalf as the
fetus, having no personality, does not have
rights which it can pass on. The family,
however, can recover moral damages.
Effect of Death:
The effect of death upon the rights and
obligations of the deceased is determined by
law, by contract and by will (Art 42, par. 2).
Doubt as to the order of death:
If they are called to succeed each other,
whoever alleges the death of one prior to the
other, shall prove the same. In the absence of
proof, it is presumed that they died at the
same time, and there will be no transmission
of rights from one to the other. (Art. 43, CC)
Joaquin v. Navarro
93 Phil 257 (1953)
The rule on Art. 43 was not applied in
determining whether the mother or the son
died first. There were eyewitnesses who can
give evidence as to who died first. It is only
applied when it is impossible to determine
who died first that the presumption applies.
2. Juridical persons
Kinds of juridical persons: (Art. 44, CC)
1. The State and its political subdivisions;
2. Other corporations, institutions and
entities for public interest or purpose,
created by law;
3. Corporations, partnerships and
associations for private interest or
purpose to which the law grants a
juridical personality.
Governing laws:
Juridical Person Governing law
State Constitution
Political
subdivision
Charter
Public corporation Charter
Private corporation Corporation Code,
Articles of
Incorporation and By-
Laws
Partnerships Stipulations of the
parties and
suppletorily by the
general provisions on
partnership
Juridical persons may acquire and possess
property of all kinds, incur obligations, and
bring civil or criminal actions (Art. 46, CC).
B. CAPACITY TO ACT AND
RESTRICTIONS THEREON
Presumption of Capacity:
Standard Oil Co. v. Arenas
19 Phil 363 (1911)
To prove insanity, it has to be proven that:
(1) The monomania of wealth was habitual
and that it contributed to mental perturbation;
(2) that the act was caused by the
monomania itself; (3) that the monomania
existed at the moment he signed the surety.
Capacity to act is presumed unless previously
declared incapable by the court.
Restrictions/limitations on capacity to
act: (Art. 38, 39, CC,)
1. Minority
2. Insanity or imbecility
3. State of being deaf-mute
4. Prodigality
5. Civil interdiction
6. Family relations
7. Alienage
8. Absence
9. Married women (Art. 2259, CC)
1. Minority
RA 6809 Majority commences at the age of
18 years.
Effect on Contracts:
- Minors cannot give consent to a
contract. (Art. 1327, CC).
- The parents consent is binding on the
minor. (Shields v. Gross, 58 NY 2d 338)
- If one of the parties to a contract is a
minor, the contract is voidable. (Art.
1390, CC)
- If both parties are minors, the contract
is unenforceable. (Art. 1403, CC)
- Persons who are capable cannot allege
the incapacity of the other party. (Art.
1379, CC)
- The minor is not obliged to make
restitution except insofar as he has been
benefited. (Art. 1399, CC)
- If there is active representation by the
minors that they are of legal age, the
contract is valid. (Mercado v. Espiritu, 37
Phil. 215)
- If there is only passive representation,
the contract is not valid. The fraud must
be actual and not constructive. Mere
silence does not constitute fraud.
However, the minors must make
restitution to the extent they profited
from the money received. (Braganza v.
de Villa Abrille, 105 Phil. 456)
Effect on Marriage:
- Marriage contracted by any minor is
VOID.
Effect on Crimes:
- 9 years and below= EXEMPT from
criminal liability. (Art. 12, RPC)
- Over 9 years and under 15 = EXEMPT,
(Art. 12, RPC)
- Unless he acted with
discernment = Penalty is
lowered by at least 2 degrees.
(Art. 68, RPC)
- 15 years and below 18 = MITIGATING
circumstance. (Art. 13, RPC)
2. Insanity
Effect on Contracts:
- Insane persons cannot give consent to a
contract. (Art. 1327, CC)
- Contracts entered into during a lucid
interval are valid. (Art. 1328, CC)
- The incapacitated person is not obliged
to make any restitution except insofar as
he has been benefited. (Art. 1399, CC)
Effect on Crimes:
- Insane persons are EXEMPT from
criminal liability unless they acted during
a lucid interval. (Art. 12, RPC)
Effect on Marriage:
- A marriage is VOIDABLE if either party
was of unsound mind at the time of the
marriage.
- Except: When the insane person, after
coming to reason, freely cohabited with
the other.
Dumaguin v. Reynolds
10 Phil. 381 (1952)
The presumption of mental incapacity in a
person under guardianship for mental
derangement may be rebutted by evidence.
That person may enter a valid contract
provided it is proven
1. That he was not insane at the time he
entered into the contract, and
2. That his mental defect did not affect
his capacity to appreciate the meaning
and significance of the transaction.
3. State of being deaf-mute
- Deaf-mutes cannot give consent to a
contract. (Art. 1327, CC)
- If the testator is a deaf-mute, he must
personally read the will. If unable to
read, he must designate 2 persons to
read it and communicate to him the
contents thereof. (Art. 807, CC)
- Deaf-mutes cant be witnesses to a will.
(Art. 820, CC)
4. Prodigality
Martinez v. Martinez
1 Phil. 182
To make a person legally unfit to run his own
affairs, his acts of prodigality must show:
1. A morbid mind, and
2. A tendency to spend or waste the
estate so as to expose the family to
want or deprive the forced heirs of
their inheritance.
5. Civil Interdiction
Civil interdiction deprives the offender during
the time of his sentence of the following
rights (PA-G-MA-MD)
1. Parental authority,
2. Guardianship as to the person or
property of any ward,
3. Marital authority,
4. Management his property
5. Disposition of his property (Art. 34,
RPC)
6. Family Relations
Effect on Crimes:
- No criminal liability if one acts in defense
of spouse, ascendants, descendants,
brothers or sisters, relatives by affinity
and consanguinity within the 4
th
civil
degree provided the requisites in Art. 11
and 12 of RPC are followed.
- Mitigating circumstance: If one acts in
immediate vindication of a grave offense
committed against his spouse,
ascendants, or relatives by affinity
within the same degrees. (Art. 13, RPC)
Effect on Marriage:
- Incestuous and void Marriages
between ascendants and descendants;
between brothers and sisters, whether
full or half blood. (Art. 37, FC)
Effect on Prescription:
- Prescription does not run between
husband and wife. (Art. 1109, CC)
Effect on Property Relations:
- Husband and wife cannot sell property to
each other except:
- When separation of property
was agreed in the marriage
settlements;
- When there has been a judicial
separation of property. (Art.
1490, CC)
7. Alienage
8. Absence
General Rule:
Absence of 7 years + unknown whether the
absentee still leaves = presumed dead for all
purposes.
Except:
For the purpose of opening his succession, in
which case, the absentee is presumed dead
after 10 years. If disappeared after the age
of 75 years, 5 years will be sufficient. (Art.
390, CC)
Rule:
The following are presumed dead for ALL
purposes, including the division of estate
among the heirs: (VA-A-D)
1. A person on board a vessel during a
sea voyage, or an aeroplane which is
missing, who has not been heard of for
4 years since the loss of the vessel or
aeroplane;
2. A person in the armed forces who has
taken part in war, and has been
missing for 4 years;
3. A person who has been in danger of
death under other circumstances and
existence has not been known for 4
years. (Art. 391, CC)
Administration and enjoyment of
conjugal partnership where one spouse is
absent:
- The other spouse may assume sole
powers of administration.
- These powers to NOT include disposition
or encumbrance without court authority
or written consent of the other spouse.
- Effect of want of authority/consent:
VOID disposition or encumbrance.
- BUT, the transaction is construed as a
CONTINUING OFFER on the part of the
consenting spouse and the 3
rd
person.
- It may be perfected as a binding
contract upon the acceptance by the
other spouse or authorization by the
court before the offer is withdrawn by
either or both offerors. (Art. 124, FC)
9. Married Women
General Rule:
A married woman may not sue or be sued
alone without joining her husband.
Except: (Rule 3, Sec. 4, ROC)
1. When they are judicially separated.
2. If they have in fact been separated for
at least 1 year;
3. When there is a separation of property
agreed upon in the marriage
settlements;
4. If the administration of all the property
in the marriage has been transferred to
her;
5. When the litigation is between husband
and wife;
6. If the suit concerns her paraphernal
property;
7. When the action is upon the civil
liability arising from a criminal offense;
8. If the litigation is incidental to the
profession, occupation or business in
which she is engaged;
9. In any of the civil action referred to in
Art. 25-35 CC.
10. In an action upon a quasi-delict.
Note: In cases #7-9, the husband must be
joined as party defendant if Art. 163, par. 3
applies.
II. CITIZENSHIP AND DOMICILE
A. FILIPINO CITIZENS
1. Those who are citizens of the
Philippines at the time of the adoption
of the 1987 Constitution;
2. Those whose fathers or mothers are
citizens of the Philippines;
3. Those born before January 17, 1973,
of Filipino mothers, who elect
Philippine citizenship upon reaching the
age of majority; and
4. Those who are naturalized in
accordance with law. (Art IV, 1, 1987
Consti.)
B. DOMICILE
For Natural Persons:
The place of their habitual residence (Art. 50,
CC).
For Juridical Persons:
The place where their legal representation is
established, or where they exercise their
primary functions, unless there is a law or
other provision that fixes the domicile (Art.
51, CC).
Domicile vs. Residence:
While domicile is permanent (there is intent to
remain), residence is temporary and may be
changed anytime (there is no necessary intent
to remain).
Requisites of Domicile:
1. Physical Presence
2. Intent to remain permanently
Kinds of Domicile:
1. Domicile of Origin
Domicile of parents of a person at
the time he was born.
2. Domicile of Choice
Domicile chosen by a person,
changing his domicile of origin.
A 3rd requisite is necessary
intention not to return to ones
domicile as his permanent place.
3. Domicile by Operation of Law (i.e.,
Article 69, domicile of minor)
Construction of residence:
- Although residence and domicile are
used interchangeably, they are NOT
synonymous in connection with
citizenship, jurisdiction, limitations,
school privileges, probate and
succession. (Uytengsu v. Republic,
1954)
- As used in the Naturalization Law,
residence means actual and
substantial residence, not domicile.
(Uytengsu v. Republic, 1954)
- HOWEVER, in election law, residence is
synonymous with domicile.
(Romualdez-Marcos v. Comelec, 1995)
III. MARRIAGE
A. DEFINITION AND NATURE OF
MARRIAGE
Definition of Marriage:
1. A special contract
2. of permanent union
3. between a man and a woman
4. entered into in accordance with law
5. for the establishment of conjugal and
family life.
6. It is the foundation of the family and
7. an inviolable social institution
8. whose nature, consequences, and
incidents are governed by law and not
subject to stipulation,
9. except that marriage settlements may fix
the property relations during the marriage
within the limits provided by this Code.
(Art. 1, FC)
Breach of promise to marry:
Tanjanco v. CA
18 SCRA 994
Breach of promise to marry is not an
actionable wrong. The fact that the woman
agreed to have sexual intercourse for a year
does not constitute seduction but mutual
passion.
Wassmer v. Velez
12 SCRA 648
While mere breach is not an actionable wrong,
Velez is still liable under Art. 21 of the Civil
Code which provides that when a person
willfully causes loss or injury contrary to good
custom, he shall compensate the latter for
damages (costs of the wedding preparations).
It is the abuse of right which can be a cause
for moral or material damages.
Trinidad v. CA
289 SCRA 188 (1998)
Absence of a marriage certificate is not proof
of absence of marriage. To prove the fact of
marriage, the following would constitute
competent evidence: (1) the testimony of
witnesses to matrimony; (2) the couples
public cohabitation; and (3) birth and
baptismal certificates of children born during
the union.
Presumption of marriage:
In case of doubt, all presumptions favor the
solidarity of the family. Thus, every
intendment of law or facts leans towards the
validity of marriage, the indissolubility of the
marriage bonds, etc. (Art. 221, FC)
B. ESSENTIAL REQUISITES OF MARRIAGE
1. Legal Capacity of contracting parties
who must be Male and Female;
2. Consent freely given in the presence of
the solemnizing officer. (Art. 2, FC)
Jones v. Hallahan
501 S.W. 2d 588
A license to enter into a same-sex marriage is
a nullity since the parties are incapable of
entering into a marriage as the term is
defined. Marriage is defined by law as one
entered into by a man and a woman.
People v Santiago
51 Phil 68
When a person only married another to avoid
prosecution because he raped her the same
morning, the marriage is void for absence of
consent on the part of the rapist. It was a
mere ruse for him to escape criminal liability.
Effects of absence of and defect in the
requisites of marriage: (Art. 4, FC)
Absence Defect Irregularity
Essential Void* Voidable
Formal Void* No effect on
validity but
party
responsible
will be
liable.
*Except when it is solemnized by an
unauthorized person with either or both
contracting parties having good faith that he
had authority to do so (Art 35, par. 2)
C. FORMAL REQUISITES OF MARRIAGE
(SO-ML-MC)
1. Authority of the solemnizing officer;
2. A valid marriage license;
3. Marriage ceremony (Art 3, FC)
a. Authority of solemnizing officer
Who are authorized to solemnize
marriages? (JPSMCM)
1. Any incumbent member of the judiciary
within the courts jurisdiction (Art. 7, par.
1);
2. Any priest, rabbi, imam, or minister of any
church or religious sect
a. Must be authorized by his church or
religious sect.
b. Must be registered with the civil
registrar general.
c. Must act within the limits of the
written authority granted by the
Church.
d. At least one of the parties must be a
member of the church or religious
sect to which the solemnizing officer
belongs. (Art. 7, par. 2)
3. Ship captain or airplane chief in the
following cases;
a. Where one or both of the parties are
in articulo mortis,
b. While the ship is at sea or
c. While the plane is in flight, or
d. At stopovers or ports of call (Art 7,
par. 3; Art 31, FC).
4. Any military commander of a unit to which
a chaplain is assigned, in the absence of
the latter (Art 7, par. 4 FC);
a. Can only solemnize marriages in
articulo mortis between persons
within the zone of military operation,
whether members of the armed
forces or civilians (Art 32, FC).
5. Consul-general, consul, or vice consul (Art.
7, par. 5 FC)
a. Can solemnize marriages between
Filipino citizens abroad. The issuance
of the marriage license and the
duties of the local civil registrar shall
also be performed by said consular
official. (Art. 10, FC)
6. Mayors (LGC)
b. Marriage License
Marriages exempt from marriage license
requirement: (ARMC)
1. Marriage in articulo mortis (Art. 27, FC)
2. Marriage in remote and inaccessible places
(Art. 28, FC)
3. Marriages by Muslims and cultural
minorities. (Art. 33, FC)
4. Marriage by parties with who have
cohabited for at least 5 years. (Art. 34,
FC)
Ninal v Badayog
GR 133778 (2000)
There must be no legal impediment during the
entire five or more years that the parties are
living as husband and wife.
Things to do at the local civil registrar:
a) File an application of marriage license
at the proper local civil registrar. (Art.
11, FC)
b) Present birth or baptismal certificate.
(Art. 12, FC)
c) If aged 18-21 years, present parental
consent. (Art. 14, FC)
d) If aged 21-25, present parental
advice. (Art. 15, FC)
e) If aged 18-25, present certificate of
marriage counseling from your priest.
(PD 965)
f) Pay the required fees. (Art 19, FC)
g) If foreigner, present certificate of
legal capacity issued by diplomat or
consular officials. (Art. 21, FC)
c. Marriage Ceremony
There is no particular form or religious rite
required by law. (Art. 6, FC)
Minimum requirements by law:
1. The contracting parties appear personally
before the solemnizing officer
2. They declare in the presence of at least
two witnesses of legal age,
3. That they take each other as husband and
wife
4. The declaration shall be contained in the
marriage certificate,
5. Which shall be signed by the contracting
parties and their witnesses and attested
by the solemnizing officer. (Art. 6, FC)
Note: In a marriage in articulo mortis, when
one or both parties are unable to sign the
marriage certificate, it shall be sufficient for
one of the witnesses to write the name of said
party, which shall be attested by the
solemnizing officer. (Art 6, par. 2)
Places where marriage may be
celebrated (CCO): (Art. 8, FC)
General Rule:
1. Chambers of the judge or in open court;
2. Church, chapel, or temple
3. Office of the Consul-general, consul, or
vice-consul, as the case may be.
Exceptions:
1. Marriage in articulo mortis;
2. Marriage in a remote place in accordance
with Art. 29;
3. Where both of the parties request the
solemnizing officer in writing, in which
case the marriage may be solemnized at a
house or place designated by then in a
sworn statement.
D. MARRIAGES CELEBRATED ABROAD
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). (Art. 26, FC)
Exceptions: (AgeBI53PIPP)
1. Marriage between persons below 18
years old Art. 35(1)
2. Bigamous or polygamous marriage
Art. 35(4)
3. Mistake in identity Art. 35 (5)
4. Marriages void under Article 53 Art.
35 (6)
5. Psychological incapacity Art. 36
6. Incestuous marriages Art. 37
7. Marriage void for reasons of public
policy Art. 38
IV. VOID MARRIAGES
A. GROUNDS
a. Under Art. 35
1. Contracted by anyone below 18 years old,
even with consent of parents
2. Solemnized by anyone not authorized to
do so,
a. except when one or both parties
believe that the solemnizing officer
had authority to do so.
3. There is no marriage license,
a. except in marriage under
exceptional circumstances
4. It is bigamous or polygamous,
a. except when first spouse has been
absent for four years, or two years
under extraordinary circumstances,
and the remaining spouse has a
well-founded belief that the absent
spouse is dead, and is judicially
declared presumptively dead. (Art.
41)
5. There is a mistake in identity of the other
contracting party.
6. The subsequent marriage is void under
Art. 53:
a. Marriage is void when Art. 52 is
not complied with: the following
must be recorded in the
appropriate civil registry:
i. Judgment of annulment or
of absolute nullity of
marriage;
ii. Partition and distribution of
the properties of the
spouses
iii. Delivery of presumptive
legitimes of the children.
b. Under Art. 36
7. Psychological incapacity of any contracting
party, at the time of the celebration of the
marriage, to comply with the essential
marital obligations.
c. Under Art. 37
(Incestuous Relationships)
8. Between ascendants and descendants of
any degree, legitimate or illegitimate.
9. Between brothers and sisters, whether full
or half-blood, legitimate or illegitimate.
d. Under Art. 38
(For Reasons of Public Policy)
10. Between collateral blood relatives,
legitimate or illegitimate, up to the fourth
civil degree.
11. Between step-parents and step-children.
12. Between parents-in-law and children-in-
law.
13. Between adopting parent and adopted
child.
14. Between the surviving spouse of the
adopting parent and the adopted child.
15. Between the surviving spouse of the
adopted child and the adopter.
16. Between an adopted child and a legitimate
child of the adopter.
17. Between adopted children of the same
adopter.
18. Between parties where one, with the
intention to marry the other, killed that
other person's spouse, or his or her own
spouse.
The following CAN marry each other:
1. Brother-in-law and sister-in-law
2. Stepbrother and stepsister
3. Guardian and ward
4. Adopted child and illegitimate child of
the adopted
e. Under Art. 44
Subsequent marriage contracted under Art. 41
and both parties are in bad faith.
Declaration of nullity of marriage
- The action imprescriptible. (Art. 39,
FC)
- For purposes of remarriage, the nullity
of a previous marriage may be invoked
solely on the basis of a final judicial
declaration of nullity (JDN) of the
previous marriage. (Art. 40, FC)
Terre v. Terre
211 SCRA 6
Parties are not allowed to assume that their
marriage is void even if such is the fact. They
must file an action for declaration of nullity
under Art. 40 before they remarry.
Atienza v. Brillantes
243 SCRA 32
Art. 40 is applicable to remarriages entered
into after the effectivity of the Family Code,
regardless of the date of the first marriage.
The Family Code retroacts to the extent that it
does not impair rights.
Domingo v. CA
226 SCRA 572 (1993)
A marriage void for lack of marriage license
still needs a judicial declaration of such fact
even for a purpose OTHER than remarriage
(e.g. liquidation, partition, distribution and
separation of property between spouses,
custody and support of children, and delivery
of the latters presumptive legitime). Art. 40
not mean that JDN can only be invoked for
purposes of remarriage.
PSYCHOLOGICAL INCAPACITY
(Art. 36, FC)
Chi Ming Tsoi v. CA
266 SCRA 234 (1997)
Psychological incapacity involves the
senseless, constant, and prolonged refusal to
comply with the essential marital obligations.
Procreation is one of the essential marital
obligations under the Family Code. The
prolonged refusal of a spouse to have sex with
his spouse, even though capable, is equivalent
to psychological incapacity.
Santos v. CA
G.R. 112109 (1995)
Psychological incapacity under Art. 36, FC is
not meant to comprehend all possible cases of
psychoses. It should refer, rather, to no less
than a mental (not physical) incapacity that
causes a party to be truly incognitive of the
basic marital covenants that concomitantly
must be assumed and discharged by the
parties to the marriage. Psychological
incapacity must be characterized by (a)
gravity, (b) juridical antecedence, and (c)
incurability.
Carating-Siayngco v. Siayngco
G.R. No. 158896 (2004)
Sexual infidelity, per se, does not constitute
psychological incapacity. It must be shown
that respondents unfaithfulness is a
manifestation of a disordered personality
which makes him completely unable to
discharge the essential obligations of the
marital state and not merely due to his ardent
wish to have a child of his own flesh and
blood. Mere showing of irreconcilable
differences and conflicting personalities does
not constitute psychological incapacity.
Republic v. Quintero-Hamano
G.R. No. 149498 (2004)
In proving psychological incapacity, there
should be no distinction between an alien
spouse and a Filipino spouse. We cannot be
lenient in the application of the rules merely
because the spouse alleged to be
psychologically incapacitated happens to be a
foreign national. The medical and clinical rules
to determine psychological incapacity were
formulated on the basis of studies of human
behavior in general.
Republic v. Molina
268 SCRA 198 (1997),
Guidelines for the interpretation of Art. 36:
1. The burden of proof to show the nullity of
the marriage belongs to the plaintiff.
2. The root cause of the psychological
incapacity must be:
a. medically or clinically identified,
b. alleged in the complaint,
c. sufficiently proven by the experts,*
d. clearly explained in the decision.
3. The incapacity must be proven to be
existing at the time of the celebration of
the marriage.
4. Such incapacity must also be shown to be
medically or clinically permanent or
incurable.
5. Such illness must be grave enough to
bring about the disability of the party to
assume the essential obligations of
marriage.
6. The essential marital obligations must be
those embraced by Articles 68 up to 71 of
the Family Code as regards the husband
and wife as well as Articles 220, 221, and
225 of the same Code in regard to parents
and their children.
7. Interpretations given by the National
Appellate Matrimonial tribunal of the
Catholic Church in the Philippines, should
be given great respect by our courts.
8. The trial court must order the prosecuting
attorney or fiscal and the Solicitor General
to appear as counsel for the state.**
*NOTE HOWEVER, that in the later case of
Marcos v. Marcos (343 SCRA 755; 2000), it
was held that there is no need for the
respondent to be examined by an expert, as
the psychological incapacity may be
established by the totality of the evidence
presented.
** A.M. No. 02-11-10-SC (March 13, 2003)
made the ff. modifications to the Molina
doctrine:
1. The appearance of the Solicitor General
is no longer necessary.
2. Expert opinion need not be alleged, as
long as the physical manifestations of
psychological incapacity at the time of
celebration of marriage are alleged.
Tenebro v. CA
G.R. No. 150758 (2004)
The subsequent judicial declaration of nullity
of marriage on the ground of psychological
incapacity does not retroact to the date of the
celebration of the marriage insofar as the
Philippine penal laws are concerned.
As such, an individual who contracts a second
or subsequent marriage during the
subsistence of a valid marriage is criminally
liable for bigamy, notwithstanding the
subsequent declaration that the second
marriage is void ab initio on the ground of
psychological incapacity.
Buenaventura v. CA
G.R. No. 127358 (2005)
By declaring the petitioner as psychologically
incapacitated (hence beyond the control of the
party because of an innate inability), the
possibility of awarding moral damages on the
same set of facts was negated.
The award of moral damages should be
predicated, not on the mere act of entering
into the marriage, but on specific evidence
that it was done deliberately and with malice
by a party who had knowledge of his or her
disability and yet willfully concealed the same
Mallion v. Alcantara
G.R. No. 141528
Res judicata applies to a petition for nullity of
marriage due to lack of marriage license,
where a prior petition for nullity of marriage
based on psychological incapacity had been
denied. There is only one cause of action for
both petitionsthe nullity of the marriage.
Moreover, in the first case, petitioner
impliedly conceded that the marriage was
conduced in accordance with law, since he
never raised the issue of lack of marriage
license. Petitioner is now bound by this
admission.
BIGAMOUS MARRIAGE (Art. 41, FC)
2 Kinds of bigamous marriage:
VOID
bigamous
marriage
VOIDABLE
bigamous marriage
Contracted during
subsistence of
previous marriage
Contracted by spouse
present upon the
presumption of death
of first spouse
Good faith of
remarrying party
is immaterial; if in
bad faith, he
becomes liable for
bigamy
General Rule:
Marriage contracted by any person during the
subsistence of a previous marriage is VOID.
Good faith is immaterial here.
Exception:
If before the celebration of the subsequent
marriage
1. The first spouse has been absent for
four consecutive years, or two years
under extraordinary circumstances,
and
2. The surviving spouse has a well-
founded belief that the spouse is dead,
and
3. There is a judicial declaration of
presumptive death, without prejudice
to the effect of the reappearance of the
absent spouse. Note: This is a
VOIDABLE bigamous marriage.
Exception to the exception:
When both parties in the subsequent marriage
acted in bad faith, the marriage is still void
(Art. 44, FC).
People v. Mendoza
95 Phil. 845 (1954)
Mendoza contracted three marriages. He
contracted the second marriage during the
subsistence of the first marriage. He
contracted the third marriage after the death
of his first wife. He was prosecuted for bigamy
on his third marriage. The Supreme Court
held that he is not guilty for bigamy for his
third marriage, since his prior subsisting
marriage has already been extinguished by
the death of his first wife. It is the second
marriage that is bigamous.
Morigo v. People
G.R. No. 145226 (2004)
General Rule: Even if the first marriage is
judicially declared void only after contracting
the second marriage, the second marriage is
still bigamous.
Exception: Said second marriage is not
bigamous if the first marriage was void due to
the fact that no marriage ceremony was
solemnized at all. Here, the parties merely
signed a marriage contract on their own. No
semblance of marriage, no need for judicial
declaration of nullity.
B. EFFECTS OF NULLITY
(ChiPCuPCDRDIDS) (Arts. 50-54, 43-44)
1. Children considered illegitimate
2. Property Regime is dissolved liquidation,
partition and distribution of the properties
of the spouses. If either spouse acted in
bad faith, his/her share in the net profits
will be forfeited:
a. In favor of the common children
b. If none, in favor of the guilty
spouse by previous marriage
c. If none, in favor of the children of
the innocent spouse.
3. Custody and support of the common
children will be decided
4. Presumptive legitimes must be delivered
5. Creditors of the spouses and of the
absolute community or conjugal
partnership must be notified of the
proceedings of liquidation.
6. Conjugal dwelling given to the spouse
with whom majority of the children choose
to remain.
7. Parties can remarry after compliance
with Art. 52, FC.
8. Donation propter nuptias remains valid,
(but if the donee contracted marriage in
bad faith, donations will be revoked)
9. Insurance benefits innocent spouse may
revoke designation of guilty party as
beneficiary, even if such designation is
irrevocable
10. Donations - If both parties of subsequent
marriage acted in bad faith, any donations
and testamentary dispositions made by
one party to the other by reason of
marriage will be revoked
11. Succession Rights Party in bad faith
disqualified to inherit from innocent
spouse, whether testate or intestate
Note: Except for #1, the above also effects
apply to marriages which are annulled (and to
voidable bigamous marriages.)
V. VOIDABLE MARRIAGES
A. GROUNDS (CIF-mspd-FIS) (Art. 45, FC)
1. One of the parties is 18 or above but
below 21, and there is no parental
consent.
2. Either party was of unsound mind
(insanity).
3. The consent of either party was obtained
through fraud (different from mistake in
identity):
a. through non-disclosure of a
previous conviction of a crime
involving moral turpitude;
b. through concealment of the wife of
the fact that she was pregnant by
another man;
c. through concealment of a sexually-
transmitted disease, even if not
serious or incurable;*
d. through concealment of drug
addiction, habitual alcoholism or
homosexuality/lesbianism. (Art.46,
FC)
4. The consent of either party was obtained
through force, intimidation, or undue
influence.
5. Either party is physically unable to
consummate the marriage (impotence;
this is different from sterility).
6. Either party has a serious and incurable
sexually-transmissible disease, even if not
concealed.*
*STD: Art. 45 v. Art. 46
Art. 45 STD Art. 46 STD
Ground for
annulment
The STD is a type of
fraud which is a
ground for annulment
Does not have to
be concealed
Must be concealed
Must be serious
and incurable
Need not be serious
nor incurable
It is the
concealment that
gives rise to the
annulment
The STD itself is the
ground for annulment
Buccat v Buccat
72 Phil. 19
It held that it is unbelievable that the wife
could have concealed the fact that she was 6
months pregnant at the time of the marriage.
Annulment not granted.
Aquino v Delizo
109 Phil. 21
The Supreme Court granted annulment
because the wife concealed the fact that she
was 4 months pregnant during the time of the
marriage. It argued that since Delizo was
naturally plump, Aquino could hardly be
expected to know, by mere looking, whether
or not she was pregnant at the time of the
marriage.
Corpuz v. Ochoterena
AM No. RTJ-04-1861 (2004)
In a legal separation or annulment case, a
prior collusion investigation by the prosecuting
attorney is a condition sine qua non for
further proceedings if the defendant fails to
answer. A certification by the prosecutor that
he was present during the hearing and even
cross-examined the plaintiff does not suffice
to comply with the mandatory requirement.
Ground
(Art. 45)
Who can
file
(Art. 47)
Prescrip-
tion
(Art. 47)
Ratifica-
tion
(Art. 45)
Lack of
parental
consent
1.
Underage
party
1. 5
years
after
attaining
21.
Free
cohabita-
tion after
attaining
age of
21.
2. Parent
or
guardian
2. Before
child
reaches
21.
Insanity 1. Sane
spouse
with no
knowledge
of the
others
insanity
2. Legal
guardian
of insane
party
1. Any
time
before
the death
of insane
party
Free
cohabita-
tion of
insane
party
after
coming
to reason
3. Insane
party
2. During
lucid
interval
or after
regaining
sanity,
and
before
death
Fraud Injured
party
(defrau-
ded party)
Five
years
after
discovery
of fraud
Free
cohabita-
tion after
having
full
knowled-
ge of
fraud
Force,
intimida
tion,
undue
influen-
ce
Injured
party
Five
years
after
disappea
-rance of
force or
intimida-
tion
Free
cohabita-
tion after
the force
has
ceased
or
disappe-
red
Ground
(Art. 45)
Who can
file
(Art. 47)
Prescripti
on
(Art. 47)
Ratificati
on
(Art. 45)
Impoten
ce
Healthy
party
Five
years
after
marriage
Deemed
ratified
when
action
prescri-
bes
STD Healthy
party
Five
years
after
marriage
Deemed
ratified
when
action
prescri-
bes
B. MARRIAGE WHEN ONE SPOUSE
IS ABSENT
Requirements for subsequent marriage to
be valid when prior spouse is absent:
(Art. 41, FC)
1. The prior spouse had been absent for 4
consecutive years, or 2 years in cases
under Art. 391 CC.
2. The spouse present has a well-founded
belief that the absent spouse was already
dead.
3. The spouse present must institute a
summary proceeding for the declaration of
presumptive death of the absentee,
without prejudice to the effect of
reappearance of the absent spouse.
Effect of reappearance of absent spouse:
General rule:
The subsequent marriage remains valid.
Exception:
It is automatically terminated by the recording
of the affidavit of reappearance of the absent
spouse.
Exception to the exception:
If there is a judgment annulling the previous
marriage or declaring it void ab initio. (Art.
42, FC)
Republic v. Bermudez-Lorino
G.R. No. 160258 (2005)
The RTC rendered a decision declaring the
presumptive death of respondents absent
spouse based on Art. 41, FC. The Republic
appealed the decision to the CA. Applying
Art. 247 FC, the SC ruled that the CA did not
have jurisdiction over the appeal because
summary proceedings are immediately final
and executory, and therefore unappealable.
C. EFFECTS OF PENDING
ACTIONS/DECREE (Art. 49, FC)
1. The court shall provide for the support
of the spouses,
2. The custody of the common children,
giving paramount consideration to their
moral and material welfare, their
choice of parent with whom they wish
to remain.
3. The court shall also provide for
visitation rights of other parent.
No child under 7 years shall be separated
from the mother unless there is a compelling
reason to do so.
To prevent collusion between the parties,
fabrication or suppression of evidence, the
prosecuting attorney or fiscal shall appear on
behalf of the State. (Art. 48, FC)
D. VOID MARRIAGES vs.
VOIDABLE MARRIAGES
Void Marriage Voidable
Marriage
Nature INEXISTENT
from the
beginning
VALID until
annulled by
court
Co-
validatio
n
CANNOT be
covalidated
CAN be
covalidated by
prescription or
free
cohabitation
Effect on
property
No Community
Property, only
Co-ownership
ACP exists
unless another
system is
instituted
through
marriage
settlement
Legiti-
macy of
children
General rule:
Children are
ILLEGITIMATE
(Art. 165)
Exception:
In void
marriages
by reason of
psychologica
l incapacity
(Art. 36) or
non-partition
of properties
in a previous
marriage
(Art. 53),
children are
considered
LEGITIMATE
.
Children are
LEGITIMATE if
conceived
before decree
of annulment
Void Marriage Voidable
Marriage
How to
impugn
May be
attacked
DIRECTLY or
COLLATERALLY
, except for
purpose of
remarriage
(there must be
JDN)
Can only be
attacked
DIRECTLY
(there must be
annulment
decree)
Effect of
death of
parties
May still be
impugned after
death of
parties
Can no longer
be impugned
after death of
parties
E. JURISDICTION
Tamano v. Ortiz
291 SCRA 584 (1998)
PD No. 1083 (Code of Muslim Personal Laws
of the Philippines) does not provide for a
situation where the parties were married both
in civil and Muslim rites. Consequently, the
shari'a courts are not vested with original and
exclusive jurisdiction when it comes to
marriages celebrated under both civil and
Muslim laws. Hence, the Regional Trial Courts
have jurisdiction over such cases.
VI. LEGAL SEPARATION
A. GROUNDS (VAPIDHIBLA) (Art. 55, FC)
1. Repeated physical violence or grossly
abusive conduct directed against
petitioner, a common child, or a child of
the petitioner.
2. Physical violence or moral pressure to
compel petitioner to change religious or
political affiliation.
3. Attempt of respondent to corrupt or
induce petitioner, a common child, or
child of petitioner, to engage in
prostitution or connivance in such
corruption or inducement.
4. Final judgment sentencing respondent to
imprisonment of more than 6 years, even
if pardoned (executive pardon, not
pardon from offended party).
5. Drug addiction or habitual alcoholism of
respondent.
a. When it existed from the time of
celebration, and concealed from
petitioner, can be a ground for
annulment of marriage.
b. When it occurred only after the
marriage, it is only a ground for
legal separation, whether concealed
or not.
6. Lesbianism or homosexuality of
respondent.
a. Same as rules on drug addiction
7. Contracting by respondent of a
subsequent bigamous marriage, whether
in the Philippines of abroad.
8. Sexual infidelity or perversion.
9. Attempt on the life of petitioner by
respondent.
a. There is no need for criminal
conviction.
10. Abandonment of petitioner by respondent
without justifiable cause for more than
one year.
Gandioco v Pearanda
155 SCRA 725 (1989)
In sexual infidelity as a ground for legal
separation, there is no need for prior
conviction for concubinage, because legal
separation only requires a preponderance of
evidence, as opposed to proof beyond
reasonable doubt required in concubinage.
Lapuz v. Eufemio
43 SCRA 177
The action of the plaintiff in filing for legal
separation does not survive after her death.
Death of either spouse dissolves the marriage.
An action for legal separation is purely
personal between the spouses.
Dela Cruz. v. Dela Cruz
22 SCRA 333
Abandonment is not mere physical
abandonment but also financial and moral
desertion. There must be an intention never
to return.
B. DEFENSES
Grounds for denying legal separation
(4CMRPD) (Art. 56, FC)
1. Condonation by aggrieved party
2. Consent by aggrieved party to the
commission of the offense
3. Connivance between parties in the
commission of the offense
4. Mutual guilt in ground for legal
separation
5. Collusion between parties to obtain
decree of legal separation
6. Prescription of action for legal
separation (5 years from occurrence of
the cause of action)
7. Death of either party during pendency
of action (Lapuz-Sy v Eufemio, G.R.
No. L-30977, 1972)
8. Reconciliation of parties during
pendency of action (Art. 66 par.1)
C. WHEN TO FILE/TRY ACTIONS
Prescription:
Action prescribes in five years from
occurrence of cause (Art. 57, FC)
Reconciliation period:
Action cannot be tried before six months have
elapsed since the filing of the petition (Art. 58.
FC)
Attempts on reconciliation:
Action cannot be tried unless the court has
attempted to reconcile the spouses, and
determined that despite such efforts,
reconciliation is highly improbable (Art. 59,
FC)
Confession:
No decree of legal separation shall be based
upon a stipulation of facts or a confession of
judgment (Art. 60, par. 1. FC)
Collusion:
The court shall assign the prosecuting
attorney or fiscal to make sure that there is
no collusion between the parties, and that
evidence is not fabricated or suppressed (Art.
60, par. 2, FC)
D. EFFECTS OF FILING PETITION FOR
LEGAL SEPARATION (LAC)
1. The spouses are entitled to live separately
(Art. 61, par. 1. FC).
2. Administration of Community or Conjugal
Property If there is no written
agreement between the parties, the court
shall designate one of them or a third
person to administer the ACP or CPG. (Art.
61, par. 2, FC)
3. Custody of children The court shall give
custody of children to one of them, if there
is no written agreement between the
spouses. It shall also provide for visitation
rights of the other spouse. (Art. 62, cf.
Art. 49. FC)
E. EFFECTS OF DECREE FOR
LEGAL SEPARATION
1. The spouses can live separately (Art. 63.
FC)
2. The ACP of CPG shall be dissolved and
liquidated, and the share of the guilty
spouse shall be forfeited in favor the
common children, previous children, or
innocent spouse (Art. 63. cf. Art. 42, par.
2).
3. Custody of the minor children shall be
awarded to the innocent spouse (Art. 63.
FC)
4. Guilty spouse shall be disqualified from
inheriting from innocent spouse by
intestate succession. The provisions in
favor of the guilty party in the will of the
innocent spouse shall also be revoked by
operation of law. (Art. 63, FC)
5. Donation propter nuptias in favor of the
guilty spouse may be revoked (Art. 64.
FC)
6. Innocent spouse may also revoke
designation of guilty spouse as beneficiary
in an insurance policy, even if such
stipulations are irrevocable (Art. 64. FC).
7. Obligation for mutual support ceases, but
the court may order the guilty spouse to
support the innocent spouse. (Art. 198,
FC)
8. The wife shall continue to use the surname
of the husband even after the decree for
legal separation. (Art. 372, CC)
F. RECONCILIATION
How done:
Should the spouses reconcile, they should file
a corresponding joint manifestation under
oath of such reconciliation. (Art. 65, FC)
Effects of Reconciliation:
1. Proceedings for legal separation shall
be terminated at whatever stage. (Art.
66, FC)
2. If there is a final decree of legal
separation, it shall be set aside. (Art.
66, FC)
3. The separation of property and
forfeiture of share of guilty spouse
shall subsist, unless the spouses agree
to revive their former property regime
or to institute another property regime.
( Art. 66 cf. Art. 67, FC)
4. Joint custody of children is restored.
5. The right to intestate succession by
guilty spouse from innocent spouse is
restored.
6. The right to testamentary succession
depends on the will of the innocent
spouse.
G. DIVORCE
General Rule:
Decrees of absolute divorce obtained by
Filipinos abroad have no validity and are not
recognized in the Phil. dfd
Exception
(partial recognition of absolute divorce):
- When the divorce is validly obtained by
the alien spouses abroad which
capacitates him/her to remarry, the
Filipino spouse shall likewise have the
capacity to remarry. (Art. 26, par. 2
FC)
Twin elements for the application of par.
2, Art. 26, FC:
1. There is a valid marriage that has been
celebrated between a Filipino citizen
and a foreigner; and
2. A valid divorce is obtained abroad by
the alien spouse capacitating him or
her to remarry.
Republic v. Orbecido
G.R. No. 154380 (2005)
Given a valid marriage between 2 Filipino
citizens, where one party is later naturalized
as a foreign citizen and obtains a valid divorce
decree capacitating him or her to remarry, the
Filipino spouse remarry under Philippine law.
The RECKONING POINT is not the citizenship
of the parties at the time of the celebration of
the marriage, but their citizenship at the time
a valid divorce is obtained abroad by the alien
spouse capacitating the latter to remarry.
VII. RIGHTS AND OBLIGATIONS
BETWEEN HUSBAND & WIFE
A. OBLIGATION OF SPOUSES
(Arts. 68-71, FC)
1. Live together
2. Observe mutual love, respect, and fidelity
3. Render mutual help and support
4. Fix the family domicile.
a. In case of disagreement, the court
shall decide.
5. Jointly support the family.
6. Manage the household.
B. RIGHTS OF SPOUSES (Arts. 72-73, FC)
1. In case the other spouse neglects his or
her duties or commit acts which tend to
bring danger, dishonor or injury to the
family, the aggrieved party may apply the
court for relief.
2. Either spouse may exercise any legitimate
profession, without need for consent of the
other.
a. The other spouse may only object
on valid, serious, and moral
grounds.
b. In case of disagreement, the Court
shall decide whether (1) the
objection is proper, and (2) benefit
has accrued to the family before OR
after the objection.
i. If BEFORE, enforce
obligation against the
separate property of spouse
who has not obtained
consent.
ii. If AFTER, enforce obligation
against community property
C. USE OF SURNAME
1. Married Women: (Art. 370, CC)
A married woman may use:
1. Her maiden first name and surname
and add her husband's surname, or
2. Her maiden first name and her
husband's surname or
3. Her husband's full name, but prefixing
a word indicating that she is his wife,
such as Mrs.
Yasin v. Sharia District Court
G.R. No. 94986 (1995)
The woman only has an option and not a duty
to use the surname of her husband, as
provided for in Art. 370, CC. Moreover, when
her husband dies, the woman can revert to
her old name without need for judicial
declaration.
2. Widows:
A widow may use the deceased husbands
surname as though he were still living. (Art.
373, CC)
3. Mistresses:
Legamia v IAC
G.R. No. 63817 (1984)
The Supreme Court allowed the mistress to
use her live-in partners name, since everyone
already knew that she was a mistress, so as
to avoid confusion.
4. Divorcees
Tolentino v. CA
G.R. No. 41427 (1988)
A divorced woman may continue using the
surname of her former husband. Philippine
laws are silent in this issue. Moreover, there
is no usurpation as she never represented
herself as Mrs. Arturo Tolentino after the
divorce, but simply as Mrs. Consuela David-
Tolentino.
VIII. PROPERTY RELATIONS
BETWEEN SPOUSES
A. GENERAL PROVISIONS
Order to be followed: (ARTS. 74, 75, FC):
1. Marriage settlements before
marriage spouses can agree to
whatever regime they want, be it ACP,
CPG, or complete separation.
2. Family Code If there are no
marriage settlements, or if the regime
agreed upon is void, the Absolute
Community of Property will be followed
3. Local Customs
General Rule: (Art. 80, FC)
Property relations between Filipino spouses
are governed by Philippine laws, regardless of
the place of marriage and their residence.
Hence:
The rule that ACP is the default mode of
property relations absent any marriage
settlement applies to all Filipinos, regardless
of the place of the marriage and their
residence.
Exceptions: (Art. 80, FC)
1. Where both spouses are aliens
2. As to the extrinsic validity of contracts
3. Contrary stipulation
Requirements for Marriage Settlements:
(Art. 77, FC)
1. Must be in writing (public or private)
2. Signed by the parties
3. Executed before the celebration of the
marriage
4. If party needs parental consent,
parent/guardian must be a party to the
settlement
5. If party is under civil interdiction or
other disability (not including insanity),
court appointed guardian must be a
party
6. Must be registered in local civil registry
to affect third persons (If not
registered, will not prejudice third
persons, ACP will apply)
General Rule:
All modifications to the marriage settlement
must be made before the marriage is
celebrated.
Exceptions:
1. Legal Separation (Art. 63 (2), FC)
o The property regime is
dissolved.
2. Revival of the former property regime
upon reconciliation if the spouses
agree (Art. 66 (2))
3. A spouse may petition the court for:
a. Receivership
b. Judicial separation of property, or
c. The authority to be the sole
administrator of the conjugal
partnership
If the other spouse abandons the
other without just cause or fails to
comply with his or her obligations
to the family. (Art. 128)
4. Judicial Dissolution (Arts. 135 and 136)
B. DONATIONS BY REASON OF MARRIAGE
Requisites of donations propter nuptias:
(Art. 82, FC)
1. Made before the celebration of marriage
2. Made in consideration of the marriage
3. In favor of one or both spouses
Donations excluded:
1. Ordinary wedding gifts given after the
celebration of the marriage
2. Donations in favor of future spouses made
before marriage but not in consideration
thereof
3. Donations made in favor of persons other
than the spouses even if founded on the
intended marriage
Who may donate:
1. spouses to each other
2. parents of one or both spouses
3. 3
rd
persons to either or both spouses
Solis v. Barroso
53 Phil. 912 (1928)
Moreover, in donations propter nuptias, the
marriage is really a consideration but not in
the sense of giving birth to the obligation.
There can be a valid donation even if the
marriage never took place. However, the
absence of marriage is a ground for the
revocation of the donation.
Mateo v. Lagua
G.R. No. 26270 (1969)
Donations propter nuptias are without onerous
consideration, marriage being merely the
occasion or motive for the donation, not its
cause. Being liberalities, they remain subject
to reduction for inofficiousness upon the
donors death, if they should infringe the
legitime of a forced heir.
Distinguished from Ordinary Donations:
DONATIONS
PROPTER NUPTIAS
ORDINARY
DONATIONS
Does not require
express acceptance
Express
acceptance
necessary
May be made by
minors (Art. 78)
Cannot be made
by minors
May include future
property
Cannot include
future property
If present property is
donated and property
is not absolute
community, limited
to 1/5
No limit to
donation of
present property
provided
legitimes are not
impaired
Grounds for
revocation - In Art.
86
Grounds for
revocation - in
donation laws
RULES:
1. Before Marriage
General Rule:
Future spouses cannot donate to each other
more than 1/5 of their present property
(excess shall be considered void) (Art. 84, FC)
Exception:
If they are governed by ACP.
2. 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) (Art.
87, FC)
Exception:
Moderate gifts on the occasion of any family
rejoicing.
Grounds for Revocation of Donation
Propter Nuptias (Art. 86, FC)
1. If the marriage is not celebrated or
judicially declared void ab initio, except
donations made in settlements.
2. When the marriage takes place without
the consent of the parents or guardians,
as required by law.
3. When the marriage is annulled, and the
donee acted in bad faith.
4. Upon legal separation, if the donee is the
guilty spouse.
5. If there is a resolutory condition, and it is
not complied with.
6. When donee has committed an act of
ingratitude: (Art. 765, CC)
a. An offense against person or property
of donor, or his wife or children under
parental authority
b. An imputation to the donor of any
criminal offense, or any act involving
moral turpitude, even if proven, unless
the crime is committed against the
donee, his wife or children under his
authority.
c. Refusing to support the donor, if
he/she is legally required to do so.
*The action for filing for revocation of
donation prescribes.
Matabuena v Cervantes
38 SCRA 284 (1971)
The donation between common-law spouses
falls within the provision prohibiting donations
between spouses during marriage.
Harding v. Commercial Union
38 Phil. 464 (1918)
The prohibition on donations can only be
assailed by persons who bear such relation to
the parties or the property itself, that their
rights are being interfered with. Here, the
insurance company of the donated car cannot
assail the validity of the donation.
Sumbad v. CA
G.R. No. 106060 (1999)
The donation made by a man to a woman was
held valid because no proof was shown that
they were still living in a common-law
relationship at the time of the donation.
C. ABSOLUTE COMMUNITY OF PROPERTY
1. IN GENERAL
When it commences: At the precise
moment of the celebration of the marriage
(Art. 88, FC). However, if the marriage is
celebrated before the Family Code took effect
(1988), the default property regime is the
Conjugal Partnership of Gains (CPG).
Waiver of Rights: (Art. 89, FC)
General Rule:
NOT ALLOWED
Exceptions:
1. When there is judicial separation of
property
2. When there is legal separation
3. When the marriage is dissolved (by
death of one of the spouses)
4. When the marriage is annulled
2. WHAT CONSTITUTES COMMUNITY
PROPERTY
What it consists: All the property owned by
the spouses at the time of the celebration of
the marriage or acquired thereafter. (Art. 91,
FC)
Under the ACP, spouses cannot exclude
specific properties from the regime.
What is Excluded (BGM): (Art. 92, FC)
1. Properties acquired by a gratuitous title,
i.e. donation, inheritance by testate and
intestate succession, including the fruits of
such properties
EXCEPT: When it was expressly
provided by the donor or testator that the
property shall form part of the ACP
2. Properties for personal use
EXCEPT: Jewelry - they form part of
the ACP
3. Properties acquired before the marriage,
for those with legitimate descendants with
a former marriage (to protect rights of
children by a former marriage).
Presumption:
All properties acquired during the marriage
form part of the ACP, unless it be proven that
they are excluded. (Art. 93, FC)
3. CHARGES UPON THE ACP (Art. 94, FC):
(4 debts, 2 taxes, 2 expenses,
support, donation)
1. Support
- Spouses
o Even if not living together
except when a spouse leaves
conjugal home without just
cause
o Even during pendency of action
for legal separation or
annulment of marriage
- Common children
- Legitimate children of previous
marriage
2. Debts and Obligations Contracted During
Marriage
- Either by both spouses or one of them,
with the consent of the other.
- In (2) and (3), creditors need not
prove that the debts benefited the
family.
3. Debts Contracted by one Spouse Without
Consent of the other
- ACP liable only to the extent that the
debt benefited the family.
4. Tax, Liens, Repairs on Community
Property
- Includes both major and minor repairs
5. Taxes and Expenses for Mere preservation
of Separate properties
- Applies only to separate properties by
either spouse being used by the family,
not those that do not benefit the
family.
- Expenses limited to minor repairs.
6. Expenses for professional, Vocational, or
Self-Improvement Course of Spouses
7. Ante-nuptial Debts that Benefited the
Family
- If the ante-nuptial debt did not benefit
the family, applicable rule is (9).
8. Donations by Both Spouses to Common
Legitimate Children
9. Ante-Nuptial Debts not under (7), Support
of Illegitimate Children, Liabilities of Either
Spouse Arising from Crime or Quasi-Delict
- Only ff the debtor-spouse has no
exclusive property or his or her
property is insufficient.
- The payments by the ACP are deemed
advances to be deducted from the
share of the guilty spouse upon the
liquidation of the absolute community.
10. Expenses of Litigation between Spouses
4. ADMINISTRATION, OWNERSHIP AND
DISPOSITION OF ACP
Administration of property:
Belongs to both spouses jointly. If they
disagree the husbands decision prevails.
However, the wife has five years from the
date of the decision to go to court for
recourse. Otherwise, it is presumed that she
agreed with the husbands decision. (Art. 96,
FC)
Except:
When the other spouse is incapacitated, or
unable to participate in the administration
(e.g. when abroad).
Disposition of property:
Either spouse may, through a will, dispose
his/her interest in the community property.
(Art. 97, FC) However, the will should refer
only to his/her own share in the community
property.
Donation of property:
Donation of one spouse without the consent of
the other is not allowed (Art. 98, FC)
Except:
1. Moderate donations to charity due to
family rejoicing or distress;
2. Moderate gifts by each spouse to the
other due to family rejoicing. (note:
Whats moderate depends on the
socio-economic status of the family)
5. DISSOLUTION OF ACP
ACP terminates upon: (Art. 99, FC)
1. Death of either spouse follow rules in
Art. 103
2. Legal Separation follow rules in Arts. 63
and 64
3. Annulment or judicial declaration of nullity
follow rules in Arts. 50 to 52
4. Judicial separation of property during
marriage follow rules in Arts. 134 to 138
Rules on De Facto Separation:
(ART. 100, FC):
De facto separation does not affect the ACP.
EXCEPT that:
1. Spouse who leaves the conjugal home
without just cause shall not be entitled
to support. He/She, however, is still
required to support the other spouse
and the family.
2. If consent is necessary for transaction
but is withheld or otherwise
unobtainable, authorization may be
obtained from the court.
3. Support for family will be taken from
the ACP.
4. If ACP is insufficient, spouses shall be
solidarily liable.
5. If it is necessary to administer or
encumber separate property of spouse
who left, spouse present may ask for
judicial authority to do this.
6. If ACP is not enough and one spouse
has no separate property, spouse who
has property is liable for support,
according to provisions on support.
Abandonment: (Art. 101, FC)
Present spouse may petition the court for:
(a) receivership;
(b) judicial separation of property; or
(c) authority to be the sole administrator
of the absolute community, subject to
precautionary conditions that the court
may impose.
*Spouse is prima facie considered to have
abandoned the other spouse and the family if:
1. he/she has left for a period of three
months,
2. he/she has failed to inform his/her
whereabouts for a period of three
months.
6. LIQUIDATION OF ASSETS
AND LIABILITIES
Process of liquidation of ACP:
(Art. 102, FC)
1. Inventory of assets of ACP and of
spouses, with market values.
2. Obligations are paid with community
property, and separate obligations not
charged to ACP paid by respective
assets of spouses.
3. Balance, or net remainder is divided
equally between the spouses,
irrespective of how much each brought
into the community.
4. If obligations exceed the assets of the
ACP, nothing is divided. Creditors can
go after the separate properties of the
spouses, which are solidarily liable for
the deficiency.
5. If personal obligations of a spouse
exceed his/her separate property,
creditor can go after the share of the
spouse on the net remainder of the
ACP, without prejudice to the
provisions of law on forfeitures and
delivery of presumptive legitimes.
6. After covering all community
obligations and obligations of spouses,
balance of separate properties shall be
delivered to respective spouses or their
heirs, and they will also divide into two
equal shares whatever is left of the
community assets, without prejudice to
the provisions of law on forfeitures and
delivery of presumptive legitimes.
Rules in Case of Termination of Marriage
by Death of One of the Spouses:
(Art. 103, FC)
1. The community property shall be
liquidated in the same proceeding for
the settlement of the estate of the
deceased spouse.
2. If no such judicial settlement
proceeding is instituted, surviving
spouse shall liquidate the community
property either judicially or extra-
judicially within one year from the
death of the deceased spouse.
Procedure for Liquidation of Community
Properties of Two Marriages:
(Art. 104, FC)
1. Determine the capital, fruits, and
income of each community upon such
proof as may be considered according
to the rules of evidence.
2. In case of doubt as to which
community the existing properties
belong, they shall be divided between
two communities in proportion to the
capital and duration of each.
Onas v. Javillo
59 Phil. 733 (1934)
Javillo contracted 2 marriages. SC ruled that
each absolute community should be
considered owner of the parcels of land
acquired during its existence. Death
discontinues ACP.
Vda. De Delizo v. Delizo
G.R. No 32820 (1976)
In case of doubt as to which community the
existing properties belong, the same shall be
divided between the different communities in
proportion to the capital and duration of each.
D. CONJUGAL PARTNERSHIP OF GAINS
WHERE IT APPLIES:
1. For marriages before the implementation
of the Family Code.
2. For marriages after the Family Code, if
agreed to by the parties through a
marriage settlement.
HUSBAND AND WIFE PLACE IN COMMON
FUND:
1. The proceeds, products, fruits, and income
of their separate properties;
2. Everything acquired by them within
marriage through their own efforts;
3. Everything acquired by them by chance
EXCLUSIVE PROPERTIES OF THE
SPOUSES:
I. Property by direct acquisition, or property
that is originally exclusive:
1. Property brought into marriage by each
spouse as his/her own Art. 109(1)
2. Property acquired by either spouse
during the marriage by gratuitous
title Art 109 (2)
II. Property by substitution:
3. Property acquired by right of
redemption, by barter, or by
exchange with property belonging to
either spouse Art. 109 (3)
4. Property purchased with exclusive
money of either spouse- Art. 109 (4)
III. Other Separate Property:
5. Collection of credits belonging to one
spouse exclusively
6. Sale of separate property of a spouse
7. Indemnity paid in cash of expropriation
of separate property or under an
insurance policy covering separate
property.
8. Possession does not affect ownership
of separate property.
PROPERTIES THAT COMPOSE CPG:
1. Acquired by Onerous Title during the
Marriage at Expense of Common Fund
(Art. 117 (1));
2. Acquired through the Labor, Industry,
Work, Profession of Either or both
Spouses (Art. 117 (2));
3. Fruits from common property;
4. Net fruits of exclusive property of each
spouse (Art. 117 (3));
5. Share of either spouse in hidden treasure,
whether as finder or owner of property
where treasure is found (Art. 117(4));
6. Acquired through occupation such as
fishing or hunting (Art. 117 (5));
7. Livestock existing at dissolution of
partnership in excess of what is brought
by either spouse to the marriage (Art. 117
(6));
8. Acquired by chance, such as winnings from
gambling or betting (Art. 117 (7))
NOTE:
A. If winning ticket is bought by a spouse
with his or her own money or was
given gratuitously by a friend = the
prize will be separate property of the
spouse who owns the ticket
B. If winning ticket is bought by conjugal
funds = prize is conjugal
- presumption is ticket bought during
marriage is bought by conjugal
funds
Property bought on installments paid partly
from exclusive funds of the spouses and partly
from conjugal funds:
a.If full ownership is vested before the
marriage it shall belong to the buyer-
spouse
b.If full ownership was vested during
the marriage it shall belong to the
conjugal partnership
Property belonging to one spouse converted
into another kind totally different in nature
from its original form during marriage
becomes conjugal in the absence of proof
that the expenses of conversion were
exclusively for the account of the original
owner-spouse, subject to reimbursement of
the value of the original property from the
conjugal partnership
Upon dissolution of marriage or partnership,
the net gains or benefits from the partnership
shall be divided equally between the spouses,
unless they have agreed on another manner
of division in their marriage settlement.
Money received under the Social
Security Act is not conjugal, although the
employee-spouse contributes to the SSS with
his salaries, but belongs to the designated
beneficiary under the Social Security Law
Intellectual property, like copyright or
patent, should, according to Tolentino, citing
Planiol and Ripert, be considered separate
property of the spouse who produces or
invents or discovers it, this property being of
a special type, almost a part of one's person
or taken from his personality and the physical
or external manifestation of his intellect or
genius, that it is not simply a product of one's
work or industry but should be considered as
pertaining exclusively to its creator
Business property like trade-marks, trade
names, service marks, business goodwill, and
similar kinds of property are, however, merely
accessories to some commercial
establishment or product, so that if such
establishment or product is separate property
of one spouse, then the business property is
separate property, the same being an
accessory that follows the principal; but all
benefits or earnings derived from these
different kinds of property during the
marriage should belong to the conjugal
property (Tolentino, id., citing the same
authority).
CHARGES UPON CPG (ART. 121) [cf.
Charges to ACP]:
(3 debts, 2 taxes, 2 expenses, support,
donation)
1. Support of the spouse, their common
children, and the legitimate children of
either spouse
2. All debts and obligations contracted during
the marriage by the designated
administrator-spouse for the benefit of the
CPG, or by both spouses or by one of them
with the consent of the other
3. Debts and obligations contracted by either
spouse without the consent of the other to
the extent that the family may have
benefited
4. All taxes, liens, charges, and expenses
upon conjugal property
5. All taxes and expenses for mere
preservation made during the marriage
upon the separate property of either
spouse
6. Expenses to enable either spouse to
commence or complete a professional,
vocational, or other activity for self-
improvement
7. Ante-nuptial debts of either spouse insofar
as they have redounded to the benefit of
the family
8. The value of what is donated or promised
by both spouses in favor of their common
legitimate children for the exclusive
purpose of commencing or completing a
professional or vocational course or other
activity for self-improvement
9. Expenses of litigation between the spouses
unless the suit is found to groundless
If the conjugal partnership is insufficient to
cover the foregoing liabilities, the spouses
shall be solidarily liable for the unpaid balance
with their separate properties.
Disposition or encumbrance of conjugal
property requires:
A. The consent or approval by both
spouses; OR
B. Judicial authority secured in court
Mere awareness of a transaction is NOT
consent
Ayala Investment v. Ching
286 SCRA272
The Supreme Court ruled that indirect benefits
that might accrue to a husband in signing as a
surety or guarantee agreement not in favor of
the family but in favor of his employer
corporation are not benefits that can be
considered as giving a direct advantage
accruing to the family. Hence, the creditors
cannot go against the conjugal partnership
property of the husband in satisfying the
obligation subject of the surety agreement. A
contrary view would put in peril the conjugal
partnership by allowing it to be given
gratuitously as in cases of donation of
conjugal partnership property, which is
prohibited.
DISSOLUTION OF CPG (ART. 128):
1. Prepare an inventory of all properties
2. Amounts advanced by the conjugal
partnership in payment of personal debts
and obligations of either spouse shall be
credited to the conjugal partnership.
3. Each spouse shall be reimbursed for
the use of his or her exclusive funds in the
acquisition of property or for the value of
his or her exclusive property, the
ownership of which has been vested by
law in the conjugal partnership.
4. Debts and obligations of the conjugal
partnership shall be paid out of the
conjugal assets.
5. Whatever remains of the exclusive
properties of the spouses shall be
delivered
6. Indemnify loss or deterioration of
movables belonging to either spouse, even
due to fortuitous event, used for the
benefit of the family
7. The net remainder of the conjugal
partnership properties, or the profits,
which shall be divided equally between
husband and wife
EXCEPTIONS:
a. A different proportion or division was
agreed upon in the marriage
settlements
b. There has been a voluntary waiver or
forfeiture of such share as provided in
this Code.
[NOTE: Dissolution of the conjugal property
must be recorded in the registry of property in
order to affect third persons dealing with
registered property.]
De Ansaldo v. Sheriff of Manila
G.R. No. L-43257 (1937)
The Supreme Court ruled that the spouses are
not co-owners of the conjugal properties
during the marriage and cannot alienate the
supposed interest of each in the said
properties. The interest of the spouses in the
conjugal properties is only inchoate or a mere
expectancy and does not ripen into title until
it appears after the dissolution and liquidation
of the partnership that there are net assets
ACP/CPG TERMINATES UPON (ART. 99
AND 126):
5. Death of either spouse follow rules in
Art. 103
6. Legal Separation follow rules in Arts.
63 and 64
7. Annulment or judicial declaration of
nullity follow rules in Arts. 50 to 52
8. Judicial separation of property during
marriage follow rules in Arts. 134 to
138
CPG vs. ACP:
CPG ACP
1.
Property
acquired
before
marriage
.
Each
spouse
retains
his/her
property;
only fruits
part of
conjugal
property
Properties
become part of
community
property
2.
Property
acquired
during
marriage
Part of
conjugal
property
Becomes conjugal
property.
CPG ACP
3. Upon
dissolu-
tion of
marriage
Separate
properties
are
returned;
net profits
divided
equally
between
spouses or
heirs.
Net remainder of
ACP divided
equally between
spouses or heirs.
4. Basis Capital and
properties
of spouses
kept
separate
and
distinct
from
benefits;
insurmoun
table
obstacle to
presump-
tion of
solidarity
Mutual trust and
confidence
between spouses;
fosters oneness of
spouses
5.
Liquida-
tion
Exclusive
properties
will have
to be
identified
and
returned,
and
sometimes
, identify-
cation is
difficult.
Easier to liquidate
because net
remainder of
community
properties are
simply divided
between spouses
or heirs.
E. SEPARATION OF PROPERTIES
DURING MARRIAGE
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. (Art. 134)
Judicial separation of property may either be
voluntary or for sufficient cause.
SUFFICIENT CAUSES FOR JUDICIAL
SEPARATION OF PROPERTIES (CALASA)
(ART. 135):
1. Spouse of the petitioner has been
sentenced to a penalty which carries
with it civil interdiction.
2. Spouse of the petitioner has been
judicially declared an absentee.
3. Loss of parental authority of the
spouse of petitioner has been decreed
by the court.
4. Spouse of the petitioner has
abandoned the latter or failed to
comply with his or her obligations to
the family.
5. The spouse granted the power of
administration in the marriage
settlements has abused that power.
6. At the time of the petition, the spouses
have been separated in fact for at
least one year and reconciliation is
highly improbable.
Each spouse shall contribute to the family
expenses, in proportion to their income. In
case of insufficiency, the market value of their
separate properties. (Art. 146)
Liability of spouses to the creditors of the
family shall be SOLIDARY. (Art. 146, par. 2)
EFFECTS OF SEPARATION OF PROPERTY
BETWEEN SPOUSES:
1. ACP or CPG is dissolved and liquidated
2. The liability of the spouses to creditors
shall be solidary with their separate
properties
3. mutual obligation to support each
continues except when there is legal
separation
4. rights previously acquired by creditors
are not prejudiced
REVIVAL OF PROPERTY REGIME IN THE
FF. INSTANCES (ART. 141):
1.When the civil interdiction
terminates.
2.When the absentee spouse
reappears.
3.When the court, being satisfied that the
spouse granted the power of
administration in the marriage settlements
will not again abuse that power,
authorizes the resumption of said
administration.
4.When the spouse who has left the
conjugal home without a decree of legal
separation resumes common life with
the other;
5.When parental authority is judicially
restored to the spouse previously
deprived thereof;
6.When the spouses who have separated
in fact for at least one year, reconcile
and resume common life.
7.When after voluntary dissolution of the
absolute community of property or
conjugal partnership has been judicially
decreed upon the joint petition of the
spouses, they agree to the revival of
the former property regime. No voluntary
separation of property may thereafter be
granted.
TRANSFER OF ADMINISTRATION TO THE
OTHER SPOUSE WHEN (GACA) (ART.
142):
1. When one spouse becomes the
guardian of the other.
2. When one spouse is judicially declared
an absentee.
3. When one spouse is sentenced to a
penalty which carries with it civil
interdiction.
4. When one spouse becomes a fugitive
from justice or is in hiding as an
accused in a criminal case.
If the other spouse is not qualified by reason
of incompetence, conflict of interest, or any
other just cause, the court shall appoint a
suitable person to be the administrator.
F. PROPERTY REGIME OF
UNIONS WITHOUT MARRIAGE
Art.147 Art.148
Applica-
bility
1. man and
woman
2. living
together
as
husband
and wife
3. with
capacity to
marry
(Art.5
without
any legal
impedimen
t)
at least
18 years
old
1. man and
woman
2. living
together as
husband
and wife
3. NOT
capacitated
to marry
(Art.35(1)
under 18
years old)
4. adulterous
relationship
(e.g.
concubinage
)
5. bigamous/p
not Art.
37
(incestuo
us void
marriage)
not Art.
38 (void
marriage
by reason
of public
policy)
not
bigamous
4. other void
marriages
due to
absence of
formal
requisite
olygamous
marriage
(Art.35(4))
6. incestuous
marriages
under
Art.37
7. Void
marriages
by reason of
public policy
under
Art.38
Salaries
and
wages
Owned in
equal shares
Separately
owned by
parties
Art.147 Art.148
Proper-
ties
acquired
through
exclusive
funds
Remains
exclusive
provided
there is proof
Remains
exclusive
Proper-
ties
acquired
by both
through
work or
industry
Governed by
rules on co-
ownership
Owned in
common in
proportion to
respective
contribution
Proper-
ties
acquired
while
living
together
Owned in
equal
shares
since it is
presumed
to have
been
acquired
through
joint
efforts
if one
party did
not
participate
in
acquisitio
n,
presumed
to have
contribute
d through
care and
maintenan
ce of
family and
household
No
presumption of
joint
acquisition.
When there is
evidence of
joint
acquisition but
none as to the
extent of actual
contribution,
there is a
presumption of
equal sharing
Forfeitu-
re
When only
one of the
If one party is
validly married
parties is in
good faith,
the share of
the party in
bad faith shall
be forfeited:
1. In favor of
their
common
children
2. In case of
default of
or waiver
by any or
all of the
common
children
or their
descendan
ts, each
vacant
share
shall
belong to
the
respective
surviving
descendan
ts
3. In the
absence
of such
descendan
ts, such
share
belongs to
the
innocent
party
to another:
- his/her share
in the co-
owned
properties will
accrue to the
ACP/CPG of
his/her existing
valid marriage
If the party
who acted in
bad faith is not
validly married
to another,
his/her share
shall be
forfeited in the
same manner
as that
provided in Art
147
The same rules
on forfeiture
shall apply if
both parties
are in bad faith
IX. THE FAMILY
FAMILY basic social institution which public
policy cherishes and protects hence, no suit
between members of the family shall prosper
unless compromise between parties has
failed.
FAMILY RELATIONS INCLUDE:
1. Between husband and wife
2. Between parents and children
3. Among other ascendants and
descendants
4. Among brothers and sisters, full or half
blood.
General Rule:
For a suit between members of the same
family to prosper, the following are required:
1. Earnest efforts towards a compromise
have been made
2. Such efforts have failed
3. Such earnest efforts and the fact of
failure must be alleged
[NOTE: The case will be dismissed if it is
shown that no such efforts were made.]
Exceptions to the general rule (VJLAFF):
a. Civil status of persons,
b. Validity of marriage or a legal
separation,
c. Any ground for legal separation,
d. Future support,
e. Jurisdiction of courts,
f. Future legitime
Hontiveros v. RTC
309 SCRA 340 (1999)
Whenever a stranger is a party in a case
involving family members, the requisite
showing of earnest efforts to compromise is
no longer mandatory, as such inclusion of a
stranger takes the case out of the ambit of FC
151.
FAMILY HOME - dwelling place of a person
and his family
Guidelines:
1. It is deemed constituted from time of
actual occupation as a family residence
2. It must be owned by person
constituting it
3. It must be permanent
4. Rule applies to valid and voidable and
even to common-law marriages under
Arts.147 and 148
5. It continues despite death of one or
more spouses or unmarried head of
family for 10 years or as long as there
is a minor beneficiary (Art.159)
6. Can only constitute one family home
GENERAL RULE:
The family home is exempt from:
1. Execution
2. Forced sale
3. Attachment
Exceptions in the exemption of the family
home from execution (Art. 156):
1. Nonpayment of taxes.
2. Debts incurred prior to the constitution
of the family home.
3. Debts secured by mortgages on the
premises before or after such
constitution.
4. Debts due to laborers, mechanics,
architects, builders, materialmen and
others who have rendered service or
furnished material for the construction
of the building.
Beneficiaries of the family home
(Art. 154):
1. Husband and wife, or an unmarried
person who is the head of the family
2. Parents (may include parent-in-laws),
ascendants, descendants, brothers and
sisters (legitimate/illegitimate), who
are living in the family home and who
depend on the head of the family for
support
Requisites to be a beneficiary:
1. The relationship is within those
enumerated
2. They live in the family home
3. They are dependent for legal support
on the head of the family
Requirements for the sale, alienation,
donation, assignment, or encumbrance of
the family home:
1. the written consent of the person
constituting it,
2. his/her spouse, and
3. majority of the beneficiaries of legal
age
[NOTE: If there is a conflict, the Court will
decide.]
In case of death (ART. 159):
- The family home shall continue despite
the death of one or both spouses or of
the unmarried head of the family for a
period of ten years, or as long as there
is a minor beneficiary.
- The heirs cannot partition the home
unless the court finds compelling
reasons therefor.
Requisites for creditor to avail of the
right under article 160:
1. He must be a judgment creditor;
2. His claim is not among those excepted
under Article155, and
3. He has reasonable grounds to believe that
the family home is worth more than the
maximum amount fixed in Article 157
Procedure to avail of right under Article
160:
1. The creditor must file a motion in the
court proceeding where he obtained a
favorable for a writ of execution against
the family home.
2. There will be a hearing on the motion
where the creditor must prove that the
actual value of the family home exceeds
the maximum amount fixed by the FC
either at the time of its constitution or as
a result of improvements introduced
thereafter its constitution.
3. If the creditor proves that the actual
value exceeds the maximum amount the
court will order its sale in execution.
4. If the family home is sold for more than
the value allowed, the proceeds shall be
applied as follows:
a. First, the obligation 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
X. PATERNITY AND FILIATION
PATERNITY - the relationship or status of a
person with respect to his or her child
(paternity includes maternity).
FILIATION - the status of a person with
respect to his or her parents.
TYPES OF FILIATION:
1. Natural
a. Legitimate (Art. 164)
b. Illegitimate (Arts.165, 175, 176)
c. Legitimated (Arts. 167-172)
2. By Adoption (R.A. No. 8552 (Domestic
Adoption Act) and R.A. No. 8043 (Inter-
country Adoption Act)
3 TYPES OF LEGITIMATE CHILDREN:
1. Legitimate proper
2. Legitimated
3. Adopted
2 TYPES OF ILLEGITIMATE CHILDREN:
1. Children of parents disqualified to marry
each other at conception and marriage.
2. Children of parents qualified to marry each
other
A. LEGITIMATE CHILDREN
GENERAL RULE:
Those who are conceived OR born during a
valid marriage
EXCEPTIONS to the general rule are
those children who are:
1. Conceived as a result of artificial
insemination
2. Born of a voidable marriage before decree
of annulment
3. Conceived or born before judgment of
annulment or absolute nullity under Art.
36 (psychological incapacity) becomes
final & executory
4. Conceived or born of a subsequent
marriage under Art. 53 (failure to record
the judgment, partition and distribution of
properties, and delivery of childrens
presumptive legitime)
5. Of mothers who may have declared
against their legitimacy or was sentenced
as an adulteress
6. Legally adopted
7. Legitimated, conceived and born outside of
wedlock of parents without impediment at
the time of conception and who
subsequently married
For children by artificial insemination to
be considered legitimate:
1. The artificial insemination is made on the
wife, not on another woman AND
2. 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
AND
3. The artificial insemination has been
authorized or ratified by both spouses on a
written instrument executed and signed by
them before the birth of the child, AND
4. The written instrument is recorded in civil
registry together with the birth certificate
of the child
IMPUGNING LEGITIMACY:
Liyao v. Liyao
378 SCRA 563 (2002)
A child born within a valid marriage is
presumed legitimate even though the mother
may have declared against its legitimacy or
may have been sentenced as an adulteress.
The child himself cannot choose his own
filiation.
If the husband, presumed to be the father,
does not impugn the legitimacy of the child,
then the status of the child is fixed, and the
latter cannot choose to be the child of his
mothers alleged paramour.
Grounds to impugn the legitimacy of the
child:
1. Physically impossibility 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
2. Biological or other scientific grounds
that the child could not have been that
of the husband, except in the case of
children conceived through artificial
insemination
a. Blood grouping tests can
determine non-paternity but not
paternity (ex. A-B-O test).
b. Human Leukocyte Antigen Test
(HLA) can prove identity
between child and father with a
probability exceeding 98%.
c. DNA test
d. Vasectomy [NOTE: SEMPIO-DIY:
A double vasectomy, together
with other pieces of evidence, can
show the impossibility of the
alleged father siring his supposed
child; STA. MARIA: The fact that
the husband has undergone
vasectomy is not enough proof to
rebut the presumption of
legitimacy (Cocharan v.
Cocharan).]
3. Written authorization or ratification of
either parent of children conceived
through artificial insemination, when
the was obtained through mistake,
fraud, violence, intimidation, or undue
influence
Who can impugn the legitimacy of a child
General Rule:
Only the husband can impugn the legitimacy
of a child
Exceptions:
The heirs of the husband may impugn the
childs filiation in the following cases:
a. If the husband dies before the
expiration of period for filing the action
b. If the husband dies after filing without
desisting
If the child was born after the death of the
husband
When to impugn the legitimacy of a child:
1. Within 1 year from knowledge of the
birth or its recording in the civil register, if
the impugner resides in the city or
municipality where the birth took place or
was recorded;
2. Within 2 years from knowledge of the
the impugner resides in the Philippines
other than in the city or municipality
where the birth took place or was
recorded;
3. Within 3 years from knowledge of the
the impugner resides abroad
NOTE: Legitimacy cannot be collaterally
attacked. It can only be impugned in a direct
action.
Termination
of 1
st
marriage
Celebration
of 2
nd
marriage
180 days
after
celebration
of 2
nd
marriage
300 days
after
termination
of 1
st
marriage
Child of
the 1
st
marriage
Child of
the 2
nd
marriage
If the birth of the child has been
concealed or was unknown to the husband or
his heirs, the above periods shall be counted:
1. From the discovery or knowledge of
the birth of the child
2. From the discovery or knowledge of
the fact of registration of the birth,
whichever is earlier.
IN CASE OF TWO MARRIAGES OF THE
MOTHER:
For the child to be considered the child of
the 1
st
husband, the following requisites
must concur:
1. The mother must have married again
within 300 days from the termination
of her first marriage
2. The child was born within the same
300 days after the termination of the
former marriage of its mother
3. The child was born before 180 days
after the solemnization of its
mother's 2
nd
marriage
For the child to be considered the child of
the 2
nd
husband, the following requisites
must concur:
1. The mother must have married again
within 300 days from the termination
of the marriage
2. The child was born within the same
300 days after the termination of its
mother's first marriage
3. The child was born after 180 days
following the solemnization of its
mother's second marriage
NOTE: The first marriage must be terminated
either by death or annulment.
There is no presumptive rule on the status
of a child born after 300 days following the
termination of the marriage. (Art. 169)
[Reason: 300 days is the longest period of
gestation.]
B. PROOF OF FILIATION
1. The record of birth appearing in the civil
register or a final judgment.
2. An admission of legitimate filiation in a
public document or a private handwritten
instrument and signed by the parent
concerned.
Or, in their Absence:
1. The open and continuous possession of the
status of a legitimate or illegitimate child;
or
2. Any other means allowed by the Rules of
Court and special laws.
Jison v. CA
286 SCRA 495 (1998)
To prove open and continuous possession of
the status of an illegitimate child, there must
be evidence of the manifestation of the
permanent intention of the supposed father to
consider the child as his, by continuous and
clear manifestations of parental affection and
care, which cannot be attributed to pure
charity.
Continuous means uninterrupted and
consistent, but does not require any particular
length of time.
Cabatania v.CA
G.R. No. 124814 (2004)
A certificate of live birth purportedly
identifying the putative father is not
competent evidence of paternity when there is
no showing that the putative father had a
hand in the preparation of said certificate. The
local civil registrar has no authority to record
the paternity of an illegitimate child on the
information of a third person.
While a baptismal certificate may be
considered a public document, it can only
serve as evidence of the administration of the
sacrament on the date specified but not the
veracity of the entries with respect to the
childs paternity. Thus, certificates issued by
the local civil registrar and baptismal
certificates are per se inadmissible in evidence
as proof of filiation and they cannot be
admitted indirectly as circumstantial evidence
to prove the same.
Herrera v. Alba
G.R No. 148220 (2005)
To be effective, the claim of filiation must be
made by the putative father himself and the
writing must be the writing of the putative
father. A notarial agreement to support a child
whose filiation is admitted by the putative
father was considered acceptable evidence.
Letters to the mother vowing to be a good
father to the child and pictures of the putative
father cuddling the child on various occasions,
together with the certificate of live birth,
proved filiation. However, a student
permanent record, a written consent to a
fathers operation, or a marriage contract
where the putative father gave consent,
cannot be taken as authentic writing.
Standing alone, neither a certificate of
baptism nor family pictures are sufficient to
establish filiation.
ACTION TO CLAIM LEGITIMACY
1. The child can bring the action during his
lifetime
2. If the child dies after reaching majority
without filing an action, his heirs can
longer file the action after death
3. If the child dies during minority in the
state of insanity, his heirs can file the
action for him within 5 years form the
childs death
4. If the child dies after commencing the
action, the action will survive and his heirs
will substitute for him
5. If the child is a minor, incapacitated or
insane, his guardian can bring the action
in his behalf
C. ILLEGITIMATE FILIATION
GENERAL RULE:
Those who are conceived and born outside a
valid marriage are illegitimate. [NOTE: Proof
of filiation is the same as that for legitimate
children]
RIGHTS OF LEGITIMATE AND
ILLEGITIMATE CHILDREN:
LEGITIMATE ILLEGITIMATE
To bear the
surnames of the
father and the
mother
To bear the surname
of their mother [may
also use the surname
of the father if their
filiation has been
expressly recognized
by the father (R.A.
9255)]
To receive support
from their parents,
their ascendants,
and in proper
cases, their
brothers and
sisters, in
conformity with
the provisions of
this Code on
Support
To receive support in
conformity with the
Family Code
Entitled to the
legitime and other
successional rights
granted to them
by the New Civil
Code
The legitime of each
illegitimate child shall
consist of one-half of
the legitime of a
legitimate child.
D. LEGITIMATED CHILDREN
Legitimation takes place by the subsequent
marriage of the childs parents. It confers on
the child the rights of legitimate children, and
retroacts to the time of the childs birth.
REQUISITES FOR LEGITIMATION:
1. The child was conceived and born outside
of wedlock;
2. The parents, at the time of childs
conception, were not disqualified by any
impediment to marry each other
3. There is a valid marriage subsequent to
the childs birth.
WHO CAN BE LEGITIMATED:
1. Child who is conceived and born outside of
wedlock; and
2. At the time of conception, the parents
were not disqualified by any impediment
to marry each other.
[i.e. children of those who are not
disqualified by any impediment to marry
each other]
CHILDREN OF FOLLOWING CANNOT BE
LEGITIMATED (BECAUSE OF
IMPEDIMENT) (VIBA):
1. Adulterous relationships
2. Incestuous relationships
3. Bigamous relationships
4. Void marriages by reasons of public policy
under Art. 38
RIGHTS: Legitimated children shall
enjoy the same rights as legitimate
children (Art. 179)
RETROACTIVITY: The effects of
legitimation shall retroact from the time
of the childs birth. (Art. 180)
DEATH OF CHILD: When the child dies
before the celebration of the marriage,
their legitimation shall benefit their
descendants. (Art. 181)
IMPUGNING: Only those who are
prejudiced by their rights, within five
years from the time of the cause of
action accrues. (Art. 182)
XI. ADOPTION
LEGITIMATION ADOPTION
The law merely
makes legal
what exists by
nature
The law
merely
creates by
fiction a
relation
which did
not in fact
exist
Persons
affected
Only natural
children
Generally
applies to
strangers
Procedure Extrajudicial
acts of parents
Always by
judicial
decree
Who
applies
Only by both
parents
By one
parent
alone
Effect Same status
and rights as a
legitimated
child not only
in relation to
the legitimizing
parents but
also to other
relatives
Creates a
rel. only
between
the child
and the
adopting
parent
R.A 8552: Domestic Adoption Act of 1998
WHO MAY ADOPT:
A. Filipino Citizens
1. Of legal age
2. In possession of full civil capacity and legal
rights
3. Of good moral character
4. Has not been convicted of any crime
involving moral turpitude
5. Emotionally and psychologically capable of
caring for children
6. At least sixteen (16) years older than
adoptee, except when adopter is biological
parent of the adoptee or is the spouse of
the adoptees parent
7. In a position to support and care for
his/her children in keeping with the means
of the family
B. Aliens
1. Possession of the same as the
qualifications for Filipinos
2. His/her country has diplomatic relations
with the Philippines
3. Has been living continuously for 3 years
(provided that absences not exceeding 60
days per 1 year for professional, business,
or emergency reasons are allowed) in RP
prior to filing of decree is entered except
this may be waived under the following:
(i) A former Filipino Citizen who seeks to
adopt a relative within the 4
th
degree
of consanguinity or affinity
(ii) One who seeks to adopt the legitimate
or illegitimate child of his/her Filipino
spouse
(iii)One who is married to a Filipino Citizen
and seeks to adopt jointly with his/her
spouse a relative within the 4
th
degree
of consanguinity or affinity of the
Filipino spouse
4. Has been certified by his/her diplomatic or
consular office or any appropriate
government agency that he/she has the
legal capacity to adopt in his/her country
5. His/her government allows the adoptee to
enter his/her country as his/her adoptee
6. Has submitted all the necessary clearances
and such certifications as may be required
C. Guardians
With respect to theirs ward after the
termination of the guardianship and
clearance of his/her accountabilities
Husband and wife shall adopt jointly
except:
a. if one spouse seeks to adopt the
legitimate child of the other
b. if one of the spouse seeks to adopt
his/her illegitimate child provided that
other spouse has signified his/her
consent
c. if spouses are legally separated from
each other
PRE-ADOPTION SERVICES:
The DSWD shall provide for the following
services:
1. Counseling services for the biological
parents, prospective parents, and
prospective adoptee
2. Exhaust all efforts to locate the biological
parents, if unknown
WHO MAY BE ADOPTED:
1. Any person below 18 years old who has
been administratively or judicially declared
available for adoption
2. The legitimate child of one spouse by the
other spouse
3. An illegitimate child by a qualified adopter
to improve the childs status to that of
legitimacy
4. A person of legal age if, prior to the
adoption, said person has been
consistently considered and treated by the
adopter(s) as his/her child since minority
5. A child whose previous adoption has been
rescinded
6. A child whose biological or adoptive
parent(s) has died, provided that no
proceedings shall be initiated within 6
months from the time of death of said
parent(s)
CONSENT NECESSARY FOR ADOPTION:
1. The prospective adoptee if 10 years or
older
2. The prospective adoptees biological
parents or legal guardian
3. The prospective adopters legitimate and
adopted children who are ten years or
over and, if any, illegitimate children living
with them
4. The prospective adopters spouse in
appropriate cases
[NOTE: A decree of adoption shall be effective
as of the date the original petition was filed. It
also applies in case the petitioner dies before
the issuance of the decree of adoption to
protect the interest of the adoptee.]
Tamargo v. CA
G.R. No. 85044 (1992)
Where the petition for adoption was granted
after the child had shot and killed a girl, the
Supreme Court did not consider that
retroactive effect may be given to the decree
of adoption so as to impose a liability upon
the adopting parents accruing at a time when
adopting parents had no actual or physically
custody over the adopted child. Retroactive
affect may perhaps be given to the granting of
the petition for adoption where such is
essential to permit the accrual of some benefit
or advantage in favor of the adopted child. In
the instant case, however, to hold that
parental authority had been retroactively
lodged in the adopting parents so as to
burden them with liability for a tortious act
that they could not have foreseen and which
they could not have prevented would be unfair
and unconscionable.
EFFECTS OF ADOPTION:
1. Parental Authority:
All legal ties between biological parents
and adoptee are severed, and the same
shall be vested on the adopter, except if
the biological parent is the spouse of the
adopter.
2. Legitimacy:
The adoptee shall be considered legitimate
son/daughter of the adopter for all intents
and purposes.
3. Succession:
Adopter and adoptee shall have reciprocal
rights of succession without distinction
from legitimate filiation, in legal and
intestate succession. If adoptee and
his/her biological parents had left a will,
the law on testamentary succession shall
govern.
RESCISSION OF ADOPTION:
Adoption, being in the best interest of the
child, shall not be subject to rescission by the
adopter(s).
Adopted may request for rescission based on
the ff grounds:
1. repeated physical and verbal
maltreatment
2. attempt on life of adoptee
3. sexual assault or violence
4. abandonment and failure to comply
with parental obligations
However, the adopter(s) may disinherit the
adopted based on causes ias enumerated in
Art. 919 of the NCC.
EFFECTS OF RESCISSION:
1. The parental authority of the adoptee's
biological parents, if known, OR the legal
custody of the DSWD shall be restored if
the adoptee is still a minor or
incapacitated.
2. The reciprocal rights and obligations of the
adopters and the adoptee to each other
shall be extinguished.
3. The court shall order the Civil Registrar to
cancel the amended certificate of birth of
the adoptee and restore his/her original
birth certificate.
4. Succession rights shall revert to its status
prior to adoption, but only as of the date
of judgment of judicial rescission. Vested
rights acquired prior to judicial rescission
shall be respected.
R.A. 8043: Inter-Country Adoption
Act of 1995
INTER-COUNTRY ADOPTION refers to the
socio-legal process of adopting a Filipino child
by a foreigner or a Filipino citizen permanently
residing abroad where the petition is filed, the
supervised trial custody is undertaken, and
the decree of adoption is issued outside the
Philippines.
WHO MAY BE ADOPTED:
Only a legally-free child may be the subject
of inter-country adoption.
A legally-free child is one who has been
voluntarily or involuntarily committed to the
DSWD of the Philippines, in accordance with
the Child and Youth Welfare Code.
No child shall be matched to a foreign
adoptive family unless it is satisfactorily
shown that the child cannot be adopted
locally.
WHO MAY ADOPT:
Any foreign national or a Filipino citizen
permanently residing abroad who has the
qualifications and none of the disqualifications
under the Act may file an application if
he/she:
1. Is least 27 years of age and at least 16
years older than the child to be
adopted, at the time of application
unless the adopter is the parent by
nature of the child to be adopted or the
spouse of such parent
2. If married, his/her spouse must jointly
file for the adoption
3. Has the capacity to act and assume all
rights and responsibilities of parental
authority under his national laws, and
has undergone the appropriate
counseling from an accredited
counselor in his/her country
4. Has not been convicted of a crime
involving moral turpitude
5. Is eligible to adopt under his/her
national law
6. Is in a position to provide the proper
care and support and to give the
necessary moral values and example to
all his children, including the child to
be adopted
7. Agrees to uphold the basic rights of the
child as embodied under Philippine
laws, the U.N. Convention on the
Rights of the Child, and to abide by the
rules and regulations issued to
implement the provisions of this Act
8. Comes from a country with whom the
Philippines has diplomatic relations and
whose government maintains a
similarly authorized and accredited
agency and that adoption is allowed
under his/her national laws
INTER-COUNTRY ADOPTION BOARD:
Acts as the central authority in matters
relating to inter-country adoption
Ensures that all possibilities for adoption of
the child under the Family Code have been
exhausted and that inter-country adoption
is in the best interest of the child.
TRIAL CUSTODY:
The trial custody shall be for a period of 6
months from the time of placement.
It starts upon actual physical transfer of
the child to the applicant who, as actual
custodian, shall exercise substitute
parental authority over the person of the
child
The adopting parents shall submit to the
governmental agency or the authorized
and accredited agency, which shall in turn
transmit a copy to the Board, a progress
report of the child's adjustment. The
progress report shall be taken into
consideration in deciding whether or not to
issue the decree of adoption.
XII. SUPPORT
SUPPORT consists of everything
indispensable for sustenance, dwelling,
clothing, medical attendance, education and
transportation, in keeping with the financial
capacity of the family.
KINDS OF SUPPORT:
1. Legal that which is required to be given
by law
2. Judicial that which is required to be
given by court order whether pendent elite
or in a final judgment
3. Voluntary or Conventional by
agreement
CHARACTERISTICS OF SUPPORT
(PREVIW):
1. Personal
2. Intransmissible
3. Not subject to waiver or compensation
with regard to future support
4. Exempt from attachment or execution
5. Reciprocal on the part of those who are by
law bound to support each other
6. Variable
WHO ARE OBLIGED TO SUPPORT
EACH OTHER:
1. The spouses;
2. Legitimate ascendants and descendants;
3. Parents and their legitimate children and
the legitimate and illegitimate children of
the latter;
4. Parents and their illegitimate children and
the legitimate and illegitimate children of
the latter; and
5. Legitimate brothers and sisters, whether
of full or half-blood.
ORDER OF SUPPORT
(IF 2 OR MORE ARE TO GIVE SUPPORT):
1. Spouses
2. Descendants, nearest in degree
3. Ascendants, nearest in degree
4. Brothers and Sisters
[NOTE: When two or more are obliged to give
support, the payment shall be divided
between them in proportion to their
resources.]
XIII. PARENTAL AUTHORITY
PARENTAL AUTHORITY
(PATRIA POTESTAS):
The mass of rights and obligations which
parents have in relation to the person and
property of their children until their
emancipation, and even after this under
certain circumstances (Manresa).
PARENTAL AUTHORITY INCLUDES:
1. The caring for and rearing of children for
civic consciousness and efficiency;
2. The development of the moral, mental and
physical character and well-being of said
children
RULES AS TO THE EXERCISE OF
PARENTAL AUTHORITY:
1. The father and the mother shall jointly
exercise parental authority over the
persons of their common children. In
case of disagreement, the father's
decision shall prevail, unless there is a
judicial order to the contrary (Art.211)
2. If the child is illegitimate, parental
authority is with the mother.
CHARACTERISTICS OF PARENTAL
AUTHORITY:
1. It is a natural right and duty of the
parents (Art. 209)
2. It cannot be renounced, transferred or
waived, except in cases authorized by
law (Art 210)
3. It is jointly exercised by the father and
the mother (Art. 211)
4. It is purely personal and cannot be
exercised through agents
5. It is temporary
PARENTAL PREFERENCE RULE:
The natural parents, who are of good
character and who can reasonably provide for
the child, are ordinarily entitled to custody as
against all persons.
WHO EXERCISES AUTHORITY IN CASES
OF DEATH, ABSENCE, REMARRIAGE, OR
SEPARATION OF PARENTS:
In case one parent is absent or already
dead, the present or surviving parent
Remarriage shall not affect the
parental authority over the children
In case of separation of parents, the
parent designated by the court.
Innocent spouse gets custody of minor
children.
The court shall take into account all
relevant considerations, especially the
choice of the child over seven years of
age, unless the parent chosen is unfit.
TENDER YEARS PRESUMPTION:
NO child under 7 years of age shall be
separated from the mother, unless the court
finds compelling reasons to order otherwise.
Examples of compelling reasons are:
o When the mother is insane;
o with a communicable disease that
might endanger the life or health of the
child;
o or is maltreating the child.
[NOTE: Prostitution or infidelity to husband
does not make a mother unfit as parent.]
SUBSTITUTE PARENTAL AUTHORITY
EXERCISED BY (IN ORDER):
1. The surviving grandparent
2. Oldest brother or sister, over 21 years
old, unless unfit or unqualified.
3. Childs actual custodian, over 21 years
old, unless unfit or unqualified
SPECIAL PARENTAL AUTHORITY
EXERCISED BY:
1. School, its administrators and
teachers, or
2. The individual, entity or institution
engaged in child care.
LIABILITY OF THOSE EXERCISING
SPECIAL PARENTAL AUTHORITY OVER
THE CHILD:
1. 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.
2. 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.
Substitute
Parental
Authority
Special Parental Authority
It is
exercised in
case of
death,
absence, or
in case of
unsuitability
of parents.
It is exercised concurrently
with the parental authority
of the parents and rests 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.
St. Marys Academy v. Carpitanos
376 SCRA 473 (2002)
The special parental authority and
responsibility applies to all authorized
activities, whether inside or outside the
premises of the school, entity or institution.
EFFECTS OF PARENTAL AUTHORITY UPON
THE PROPERTY OF THE CHILD:
The Father and Mother shall jointly
exercise legal guardianship over the
property of the minor child without court
appointment
In case of disagreement, the fathers
decision shall prevail, unless there is
judicial order to the contrary
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 childs property or income
GROUNDS FOR SUSPENSION OF
PARENTAL AUTHORITY (CLEBC):
1. Conviction of parent for crime without civil
interdiction
2. Treats child with excessive harassment
and cruelty
3. Gives corrupting orders, counsel or
example
4. Compels child to beg
5. Subjects or allows acts of lasciviousness
PARENTAL AUTHORITY TERMINATES:
1. Upon death of parents
2. Upon death of child
3. Upon emancipation of child
4. If the parents exercising parental authority
has subjected the child or allowed him to
be subjected to sexual abuse
RIGHTS OF PARENTS UPON THEIR
CHILDREN:
To have them in their custody
To represent them in all matters
affecting their interests
Demand respect and obedience and
impose discipline on them
Administer their property and income
to support the child and the family
To give or withhold consent on
marriage, pre-nuptial, donation propter
nuptias, adoption, and employment
To disinherit them for just cause
DUTIES OF PARENTS UPON THEIR
CHILDREN:
Support and upbringing in accordance
to their means
Educate, instruct, and provide them
with moral and spiritual guidance, and
love and understanding
Defend them against unlawful
aggression
Answer for damages caused by their
fault or negligence, and for civil liability
for crimes committed by them
Give their lawful inheritance
RIGHTS OF CHILDREN:
[ART. 356, NCC]
parental care
receive at least elementary education
be given moral and civil training by
parents or guardian
live in an atmosphere conducive to his
physical, moral, and intellectual
development
[ART.3, PD603]
to be born well
right to a wholesome family life
right to a well-rounded development
right to a balanced diet, adequate
clothing, shelter, proper medical
attention, and all basic physical
requirements of a healthy life
raised in an atmosphere of morality
and rectitude
education commensurate to his
abilities
full opportunities for a safe and
wholesome recreation
protection against exploitation and
other bad influences
right to the care, assistance and
protection of the State
right to an efficient and honest
government
right to grow up as a free individual
DUTIES OF CHILDREN:
[ART.357, NCC]
obey and honor his parents or guardian
respect old relatives and persons
holding substitute parental authority
exert his utmost for his education and
training
cooperate with the family in matters
for his own good
[ART.4, PD603]
strive to live an upright and virtuous
life
love, obey, respect his parents and
cooperate with them in strengthening
the family
extend his love to his brothers and
sisters
exert his utmost to develop his
potentials
XIV. FUNERALS
GENERAL GUIDELINES:
1. Duty and right to make arrangement in
funerals in accordance with Art. 199 of FC:
a. Spouse
b. Descendants in nearest degree
c. Ascendants in nearest degree
d. Brothers and sisters
2. The funeral shall be in keeping with the
social position of the deceased
3. The funeral shall be in accordance with the
expressed wishes of the deceased
a. in the absence of expressed wishes,
his religious beliefs or affiliation
shall determine
b. in case of doubt, the persons in Art.
199 of FC shall decide
4. Any person who disrespects the dead or
allows the same shall be liable for
damages
* * *
PROPERTY CIVIL LAW
Property
TABLE OF CONTENTS
I. Classification 36
II. Ownership 41
III. Accession 42
IV. Quieting of Title 48
V. Ruinous Buildings and Tress in Danger of Falling 49
VI. Co-Ownership 49
VII. Condominium Law (Act. No. 4726) 55
VIII. Possession 57
IX. Usufruct 63
X. Easements 65
XI. Legal Easements 70
XII. Voluntary Easements 77
XIII. Nuisance 78
XIV. Registry of Property 80
XV. Different Modes of Acquiring Ownership 80
XVI. Prescription 81
XVII. Tradition 82
XVIII. Lease 83
XIX. Donation 89
PROPERTY CIVIL LAW
PROPERTY
I. CLASSIFICATION
CLASSIFICATION as to mobility
Art. 414 (1) Immovable or real property
(2) Movable or personal property
Art. 415. Immovables : MADAMS C
FLAT
1. Land, buildings, roads,
constructions adhered to soil;
2. Trees, plants, growing fruits--
attached to land/form integral
part of immovable
3. Everything attached to
immovable in fixed manner--
cannot be separated without
breaking / deterioration
4. Statues, reliefs, paintings,
objects for ornamentation in
buildings / on lands
a. by the owner of
immovable
b. manner reveals intention
to attach
permanently
5. Machinery, receptacles,
instruments, implements
intended by owner for an
industry; works which
may be carried on in
building or on a piece of land,
and tend directly to meet the
needs of industry or works
6. (6) Animal houses, pigeon-
houses, beehives, fish ponds,
breeding places in case
owner placed / preserves
them with intention to be
permanently attached to land,
AND form permanent part of it
--animals are included
7. Fertilizer actually used on a piece
of land
8. Mines, quarries, slag dumps,
while matter their matter forms
part of the bed, and waters
running or stagnant
9. Docks and structures which,
though floating, are intended by
their nature and object to remain
at a fixed place on a river, lake,
or coast;
10. Contracts for public works, and
servitudes and other real
rights over immovable
property.
Classification:
1. immovables by nature - (1) and (8)
2. immovables by incorporation- (2) (3)
(7)
3. immovables by destination- (4) (5)
(6) (9) and object to remain at a fixed
place on a river, lake, or coast
4. immovables by analogy or by law-
(10)
Art. 416. Personal Property
(Movables):
FLONTS
(1)Those movables susceptible of
appropriation Not included in the
preceding article;
(2)Real property which by law is
considered as personal property;
(3)Forces of nature which are brought
under control by science;
(4) all things which can be transported
from place to place without impairment
of the real property to which they
are fixed.
Machinery which is movable in
nature only becomes immobilized
when placed in a plant by the owner
of a property or plant, NOT when
placed by a tenant, usufructuary etc.
unless acting as an agent of the
owner.
(Davao Sawmill v. Castillo, 1935)
.a building is an immovable
property, irrespective of whether or
not said structure and the land on
which it is adhered belong to the
same owner. (Lopez v. Orosa)
Since only personal properties could
be the subject of a chattel mortgage,
the execution and registration of the
chattel mortgage and the foreclosure
of the house are null and void.
(Associated Insurance & Surety
Co. v. Iya 1958 )
It is undeniable that parties to a
contract may treat as personal
property that which by nature would
be real property; and for purposes of
taxation, what is naturally personal
property may be classed as real
property. If the properties subject to
the chattel mortgage are indeed not
personal properties, the mortgage
would be ineffective as against third
parties, but this is for the courts to
determine and not by the register of
deeds. (Standard Oil vs. Jaramillo
1923)
Re: building under chattel mortgage-
- separate treatment by the parties
of a building from the land on which
it stands does not change the
immovable character. An inscription
of a deed of sale of real property in
the chattel mortgage registry cannot
be given the legal effect of an
inscription in the registry of real
PROPERTY CIVIL LAW
property. (Leung Yee v. Strong
Machinery, 1981)
Where chattel mortgage is
constituted on machinery
permanently attached to the ground,
machinery is personal property and
mortgage is not null and void,
regardless of who owns the land. It
is undeniable that the parties to a
contract may by agreement treat as
personal property that which by its
nature would be real property, as
long as no interest of third parties
may be prejudiced thereby. (Makati
Leasing and Finance Corp v.
Wearever Textile Mills 1983)
Differences between Real Rights and
Personal Rights
Kinds of rights considered as property
(a) Real (jus in re)power belonging to
a person over a specific thing. It
gives direct and immediate juridical
power over a thing susceptible of
being exercised against a
determinate person and the whole
world.
(b) Right of obligation or Personal (jus
ad rem)rights belonging to one
person to demand of another as a
definite passive subject, the
fulfillment of a prestation to give, to
do, or not to do.
Real rights arises from
(OPLUMEPARP)
1. Ownership
2. Possession
3. Lease
4. Usufruct
5. Mortgage
6. Easement
7. Pledge
8. Antichresis
9. Redemption
10. Preemption
Real Rights Personal Rights
(1) One definite
active subject
and the rest of
the world as
passive
(2) Object is a
corporeal thing.
(3) Real right affects
the thing
directly.
(4) The creation of
the juridical
relation is by
(1) There is a
definite active
and passive
object.
(2) Object is an
intangible
thing.
(3) Personal
affects the
thing directly
through the
prestation of
the debtor.
(4) Creation of
the juridical
title is by title
mode and title.
(5) Extinguished by
the loss or
destruction of
the thing.
(6) Gives rise to real
actions against
3
rd
persons
alone.
(5) Not
extinguished
by the loss or
destruction of
the thing.
(6) Produces
only personal
actions against
definite
debtor.
Classification of Movables
(a) Consumables includes those
movables which cannot be used in a
manner appropriate to their nature
without their being consumed
(b) Non-consumable- includes all
others
Classification According to
Ownership
a) Public Dominion 420
i. intended for public use
ii. intended for public service of state,
provinces, cities & municipalities
Characteristics:
i. outside the commerce of men
ii. cannot be acquired through
prescription
iii. not subject to attachment &
execution
iv. cannot be burdened by voluntary
easement
* Art. 424. Property for public use, in
the provinces, cities, and municipalities,
consist of: (RSS FW P3)
Roads, Streets, Squares, Fountains,
Public Waters, Promenades, Public
Works for public service paid for by the
local government
All other property possessed by any of
them is patrimonial.
b) Private Ownership 421
i. patrimonial property of state,
provinces, cities, municipalities
-exist for attaining economic ends
of state
-property of public dominion when
no longer intended for public
use/service declared patrimonial
ii. property belonging to private
persons individually or
collectively
PROPERTY CIVIL LAW
Cases
Churches and other consecrated
objects are outside the commerce of
man (Barlin vs. Ramirez, 1907)
Reclaimed land is public property. In
case of gradual erosion by the ebb
and flow of the tide, private property
may become property of the public
domain, where it appears that the
owner abandoned it or permitted it
to be destroyed. When they stay in
that condition until reclaimed by
filling in done by the government,
they continue to be government
property after reclaiming. Immediate
possession by the former owner does
not confer on him ownership of the
lots, because, as they were
converted into property of the public
domain, no private person could
acquire title except in the form and
manner established by law.
(Government of the Philippine
Islands v. Cabangis)
The sale to private parties of a public
road which has been validly closed
by the city government is valid. Basis
: Art 422 CC (Cebu Oxygen and
Acetylene v. Bercilles, 1975)
The attachment of the municipal
trucks, police cars, police station and
market stalls is void because the
properties levied upon are exempt
from execution. Property for public
use of the municipality is not within
the commerce of man so long as it is
used by the public. (Vda. De
Tantoco vs. Municipal Council of
Iloilo)
Under the law on Municipal
Corporations, however, to be
considered public property, it is
enough that property be held and
devoted for governmental purposes.
(Province of Zamboanga del
Norte v. City of Zamboanga,
1967)
ACTIONS FOR THE RECOVERY OF IMMOVABLE
PROPERTY
FORCIBLE ENTRY OR
UNLAWFUL
DETAINER
PLENARY ACTION
TO RECOVER
POSSESSION
(ACCION
PUBLICIANA)
ACTION TO RECOVER
POSSESSION BASED ON
OWNERSHIP
(ACCION
REINVINDICATORIA)
FORCIBLE ENTRY
UNLAWFUL ENTRY
Possession unlawful
from time of entry.
Prior physical
possession is
INDISPENSABLE.
Decision here is res
judicata only as to
possession.
PRESCRIPTIVE PERIOD
1 year period starts
from last demand to
vacate.
Possession was lawful
at first but later
became illegal, i.e.
defendant withholds
possession after
expiration of his right.
Prior physical
possession is NOT
REQUIRED.
A civil proceeding to
recover the better
right of possession
except in cases of
forcible
entry/unlawful
detainer.
Also used to refer to
an ejectment suit
filed after the
expiration of 1 year
from the unlawful
withholding of
possession of the
realty.
An action to seek the
recovery of ownership,
necessarily including the
jus utendi and jus fruendi.
PROPERTY CIVIL LAW
WHEN
APPLICABLE
1. When
dispossession is
by any means
other than those
mentioned in
SEC 1 RULE 70
RoC
2. When, although
any of the
special
circumstances is
present, where
the 1 year
prescriptive
period for
bringing an
action for forcible
entry or unlawful
detainer has
expired
ISSUE Physical/material
possession (possession
de facto) (i.e. NOT civil
possession or
possession de jure,
which arises from the
ownership or is one of
the attributes of
ownership), of which a
person 1) has been
deprived or 2) against
whom it has been
withheld by any of the
means/circumstances
mentioned in RULE 70
Possession de jure
of realty
independent of the
title and restitution
of possession.
This action is distinct
and different from
an action for
recovery of title or
ownership.
A judgment
rendered here is
conclusive only as to
the question of
possession, but not
as to the question of
ownership.
Ownership, recovery of the
dominion over the property
as owner.
If the issue of possession
has already been decided,
this is the only action that
can be filed.
WHO MAY
INSTITUTE
1. A person deprived
of the possession of
any land or building
by force,
intimidation, threat,
strategy, or stealth
(forcible entry under
RULE 70) ;
2. A landlord, vendor,
vendee, or other
person against
whom the
possession of any
land or building is
unlawfully withheld
after the expiration/
termination of the
right to hold
possession by virtue
of any contract,
express or implied
(unlawful detainer);
or
3. The legal
representatives/
assigns of any such
landlord, vendor,
An owner who is
dispossessed by
means other than
those mentioned in
RULE 70 RoC, or
when the possession
of land is due to
tolerance of the
owner.
It is not necessary
to wait until the
expiration of 1 year
before
commencement of
action.
It can also be filed
after the expiration
of the 1 year period
if no action for
forcible entry or
unlawful detainer
has been filed during
that time, otherwise,
barred.
Legal owner or one with
the better right over the
property.
In an action for
reconveyance, what is
sought is the transfer of
the property which has
been wrongfully/
erroneously registered in
another persons name, to:
1) its rightful and legal
owner; or 2) to one with
the better right
PROPERTY CIVIL LAW
vendee or other
person
WHAT HAS
TO BE
ALLEGED
1. Prior possession de
facto
2. Undue deprivation
thereof
When the complaint
fails to aver acts
constitutive of forcible
entry/unlawful detainer
(how he was
dispossessed), the
remedy should be
either accion publiciana
or accion
reinvindicatoria.
In an ejectment suit,
issue of ownership can
be passed upon by the
court only by
determining the issue
of possession de facto.
An action for ejectment
is merely a quieting
process. If plaintiff has
in his favor priority in
time, he has the
security that entitles
him to remain in the
property (even against
the owner himself) until
he is lawfully ejected by
a person having a
better right by an
accion publiciana or
accion reinvindicatoria.
For an action to
reconveyance to prosper,
the property should not
have passed into the hands
of an innocent purchaser
for value.
WHERE
FILED
MTC
Summary In nature
these cases involve a
disturbance of social
order which must be
abated as promptly as
possible without any
undue reliance on
technical and
procedural rules
RTC
Prescriptive Periods:
1. 4 yearsif based on
fraud from date of
issuance of
certificate of title
over property
2. 10 yearsif based
on implied or
constructive trust
3. Imprescriptible
when plaintiff is in
possession of
property
4. 30 years (without
prejudice to what is
established for the
acquisition of
ownership and other
real rights by
prescription-
ART1141)if real
actions over
immovables
PROPERTY CIVIL LAW
II. OWNERSHIP
Art. 427. Ownership may be exercised
over things or rights.
Ownership is subject to restrictions
imposed by:
1. LAW and
2. RIGHTS of others
Attributes of Ownership (UFADVPA)
1. Jus possidendi- right to possess
2. Jus Utendi (right to use)right to
enjoy by receiving the thing that
it produces.
3. Jus abutendiright to enjoy by
consuming the thing by its use
4. Jus Disponendithe right to
dispose or encumber, transform,
and even destroy the thing
owned.
5. Jus Fruendi right to receive
fruits
6. Jus vindicandiright to exclude
from the possession of the thing
owned by any other person to
whom the ownership has not
transmitted such thing, by the
proper action for restitution, with
the fruits, accessions, and
indemnification for damages.
7. jus accessionis- right to the
accessories
Other specific rights: (HARJEES)
8. Right to Exclude: Doctrine of Self-
Help (429)
Elements:
a) Person exercising rights is owner
or lawful possessor
b) There is actual or threatened
unlawful physical invasion of his
property (not available to
squatters)
c) Use force as may be reasonably
necessary to repel or prevent it
-Available only when possession
has not yet been lost, if already
lost resort to judicial process
-May be exercised by 3
rd
person
negotiorum gestio
- Art. 431. cannot make use
thereof in such manner as to injure the
rights of a third person.
9. Right to Enclose or Fence without
detriment to servitudes constituted
thereon (430)
A person cannot enclose his tenement
and construct a fish pond that will
obstruct the natural flow of waters from
the upper tenements to the injury of the
owners of such tenements. (Lunod v.
Meneses)
10. Right to Receive Just Compensation
in case of Expropriation (435)
exception 436: when any property is
condemned or seized by competent
authority in the interest of health, safety
or security
11. Right to Space and Subsoil
The right of the owner extends to the
space and subsoil as far as necessary for
his practical interests or to the point
where it is possible to assert his
dominion and there is the possibility of
obtaining some enjoyment or benefit.
Beyond these limits, he would have no
legal interests.
12. Right to Hidden Treasure (if found
on his property)
a) hidden and unknown movables
consist of money or precious
objects
b) owner is unknown
c) If treasure is found by a stranger
by chance belongs to finder;
the finder must not be trespasser
be entitled to a share.
Discovery by chance
When there is no purpose or intent
to look for the treasure.
13. Right to accession
14. Right to recovery or possession/
ownership
Actions for possession:
1. movable replevin (return of a
movable)
2. immovable
a) forcible entry
b) unlawful detainer
c) accion publiciana
d) accion reinvindicatoria
e) Writ of Possession -- the original
registered owner is entitled to a
writ of possession against the
parties who appear and answer in
the land registration proceedings
and against all those who, having
been served with process, do not
appear or answer.
f) Writ of injunction
May be used to prevent or
restrain acts of trespass or illegal
interference by others of his
possession of the property.
Requisites in an action to recover
(a) Identity of the property
(b) Strength of plaintiffs title/ Better
Title
Limitation of Real Right of
Ownership
(1) For the benefit of the state and for
public interest (Police power,
eminent domain, taxation)
PROPERTY CIVIL LAW
(i) Expropriation for public use
(ii) Military requisitions
(iii) Zonification laws
(iv) Public or government monopolies
(v) Law on water and mines
(vi) Public health and safety
(vii) Public easements
(2) Legal servitudes and Voluntary
Servitudes
(3) Limitations imposed by party
transmitting property
(i) Either by contract or last will or
donations
(ii) Stipulation on inalienability
(4) True Owner Must Resort to Judicial
Process
(5) It is unlawful to exercise the right of
ownership in such a manner as to have
no other effect than to injure a third
person without benefit to the owner.
(a) Act in State of Necessity
The law permits the injury or
destruction of things belonging to
others provided this is necessary
to avert a greater danger or
dangers.
Different from concept of self-
help; the purpose is to protect
the actor himself or another
person at the expense of the
owner of the property who has no
part in the state of necessity.
(b) Liability of Proprietors under
Article 2191, for damagegs
caused by exposion of machinery,
excessive smoke, falling of trees,
emanations from canals
(c) Fortified places or Fortresses-
must comply with special laws
and regulations
(d) Easement of Aqueduct- must
observe proper distances and
prevent damage to neighboring
tenements
(e) Planting of Trees
(f) Easements
(g) Lateral and Sub-adjacent
Support
- Cannot commit crime in the
exercise of ownership (People
vs Segovia, 1958)
- Can file action for recovery of
possession even if one has never
possessed the land; action is
plenary action for recovery of
possession (De La Paz vs.
Panis, 1995)
III. ACCESSION
Art. 440. The ownership of property
gives the right by accession to
everything which is produced thereby, or
which is incorporated or attached
thereto, either naturally or artificially.
General Principles of Accession
(1) Accessory follows the principal
(2) No unjust enrichment (Art. 443)
(3) All works, sowing, and planting
are presumed made by owner & at
his expense, unless otherwise proved
(Art. 446)
(4) Accessory incorporated to
principal such that it cannot be
separated without injury to work
constructed or destruction to
plantings or construction of works.
(5) Bad faith involves liability for
damages
(6) Bad faith of one party neutralizes
bad faith of the other (Art. 453).
(7) Ownership of fruits belong to the
principal thing; Exceptions: (PULA)
(i) possession in good faith is
entitled to fruits
(ii) usufructuary is entitled to fruits
(iii) lessee is entitled to fruits
(iv) antichretic creditor is entitled to
fruits
Kinds of Accession
(1) Accession discreta the right
pertaining to the owner of a thing
over everything produced thereby:
(a) Natural fruits, or spontaneous
products of the soil, and the
young and other products of
animals (Art. 442)
(b) Industrial fruits, or those
produced by lands of any kinds
through cultivation or labor (Art.
442)
(c) Civil fruits, or rents of buildings,
the price of leases of and other
property and the amount of
perpetual or life annuities or
other similar income (Art. 442)
A dividend, whether in cash or
stock, is income or fruit and
consequently should go to the
usufructuary, rather than the
owner of the shares of stock.
Dividend is declared only out of
the profits of a corporation and
not out of its capital. (Bachrach
vs. Seifert).
PROPERTY CIVIL LAW
A bonus paid by the mortgage-
debtor to another who had
mortgaged his land to secure the
payment of the debtors
obligation to a bank is not a civil
fruit of the mortgaged property.
It is not income delivered from
the property but a compensation
granted for the risk assumed by
the owner of the property.
(Bachrach vs. Talisay-Silay)
(2) Accession Continua the right
pertaining to the owner of a thing
over everything that is incorporated
or attached thereto, either naturally
or artificially.
(a) With regard to immovable
property
(a.1) Accession industrial
(BPS)
(i) Building,
(ii) Planting, or
(iii) Sowing (Arts. 445-456)
(a.2) Accession natural (FACA)
(i) Alluvium
(ii) Avulsion
(iii)Change in the course of
river
(iv)Formation of islands
(b) With regard to movable property
(ACS)
(b.1) Adjunction or
conjunction
(i) inclusio or engraftment
(ii)soldadura or attachment
(a) ferruminatio objects
are of the same metal
(b) plumbatura objects
are diff. metals
(iii) tejido or weaving
(iv)pintura or painting
(v) escritura or writing
(b.2) Commixtion or confusion
(b.3) Specification
Accession Industrial
Art. 446 establishes 2 disputable
presumptions regarding BPS:
(a) The works etc. were made by the
owner
(b) They were made at the owners
expense
Exception: When contrary is proven
Right of owner of materials (OM)
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
BUILDING, PLANTING, SOWING
a) BPS / Land-owner +
Owner of Materials 447
- Land-owner GF: took
materials with no
knowledge that it
belonged to a 3
rd
person
- Land-owner BF: took
materials knowing fully
well that it belonged to
a 3
rd
person
- Owner of Materials GF:
demanded payment /
no idea of taking
- Owner of Materials BF:
regardless
PROPERTY CIVIL LAW
Land-owner / BPS (by himself or thru
another)
Owner of Materials
GF: pay value of materials and own the
thing built
GF: right to be paid value of materials
May remove materials if can be separated
without injury (no accession) but accession
prevails (hence, most likely only get paid)
BF: pay value of materials + damages
GF: right to be paid value of materials +
indemnity or remove materials even with
damage + indemnity
GF: pay value of materials regardless of
bf/gf of OM
Another view: 449 by analogy, no
reimbursement
BF: right to be paid value of materials
Another view: 449 by analogy, loses right
to materials, no reimbursement
BF: (both considered good faith) BF: (both considered good faith)
a) BPS / Owner of Materials + Land-owner
- Land-owner GF: no knowledge of illegal BPS
- Land-owner BF: has knowledge of illegal BPS and does not oppose it
453 (2)
- BPS/OM GF: s/he does not know that he built on anothers land
- BPS/OM BF: has knowledge that he had no right to build, plant or sow
Land-owner BPS / Owner of Materials
GF: options
1. Appropriate works, sowing or planting
+ pay indemnity
2. Oblige BP to pay price of land (or pay
rent if land value > building and trees)
or Sower to pay rent
Rent fixed by agreement of parties; if
not, by court 448
GF
GF: options
1. Appropriate without indemnity 449
2. Compel removal without indemnity at
BPSs expense 450
3. Compel BP to pay price of land (no
conditions) and Sower, the proper rent
450
Whichever option chosen, entitled to
receive damages 451
BF: loses what is built, planted or sown,
with no right to indemnity 449
Still entitled to reimbursement for
necessary expenses of preservation of the
land 452
Whichever option chosen, must pay LO
damages 451
BF: 447 by analogy 454
Pay value of materials + damages
GF: options (447 by analogy 454)
1. Remove works, sowing or planting even
with damage
2. Force payment of indemnity
BF: (both considered GF) BF: (both considered GF) 453 (1)
b) BPS + Land-owner + Owner of Materials 455
PROPERTY CIVIL LAW
Land-owner
BPS OM
GF
GF (GF) GF
LO appropriates and pays indemnity: OM can proceed against LO only after BPS
refuses/cannot pay, OM cannot remove
LO sells land to BPS: OM can only proceed against BPS
GF BF (GF) GF
LO compels demolition: OM cannot claim from LO, BPS solely liable
BF
GF (GF) GF
BPS removes even with damage: OM can only go after BPS
BPS forces LO to pay indemnity: OM cant demand removal/return but OM can proceed
against BPS and subsidiarily, the LO
BF BF (GF)
GF
Similar to GF-GF-(GF)-GF
GF GF (BF)
GF
LO sells land to BPS: OM can either ask BPS for indemnity + damages or remove
material even with damage
GF BF (BF)
GF
LO compels demolition: OM can compel return of material by removing even with
damage + damages or OM can ask for indemnity + damages
LO appropriates: OM cant remove because right of removal applies only to BPS in BF,
LO cant be prejudiced; OM only entitled to the value of materials (indemnity) +
damages from LO
LO sells land to BPS: OM can compel removal (straightforward 447) or ask BPS for
indemnity + damages
BF GF (BF)
GF
BPS removes even with damage: OM can either compel BPS to pay indemnity or to
return materials, in both cases + damages
BPS forces LO payment of indemnity: OM cant demand removal/return but OM can
proceed against BPS and subsidiarily, the LO
BF BF (BF)
GF
Similar to GF-GF-(BF)-GF
LO sells land to BPS: OM can either ask BPS for indemnity + damages or remove
material even with damage
PROPERTY CIVIL LAW
Cases:
A forced co-ownership occurs when the
BPS has acted in good faith. Owner of the
land ihas the right of retention (to pay)
because his right is older and because, by
the principle of accession, he is entitled to
the ownership of the accessory thing.
(Bernardo vs. Baticlan)
Since the option to remove or demolish
improvement is given to the LO and it is
limited to paying for the improvement or
selling his land to the BPS, he cannot
refuse to exercise his right of choice and
compel the builder to remove or demolish
the improvement. He is entitled to such
removal only when after choosing to sell
his land, the other party fails to pay for
the same. (Ignacio vs Hilario)
An order by a court compelling a builder in
good faith to remove is building from land
belonging to another who chooses neither
to pay for such building nor sell the land is
null and void for being offensive to Art.
448. (Sarmiento v. Agana)
While a possessor in good faith may retain
the property until he is reimbursed for
necessary and useful expenses, all the
fruits he receives from the moment his
good faith ceases must be deferred or
paid by him to the LO. He may, however,
secure the reimbursement of his expenses
by using the fruits to pay it off (deduct the
value of the fruits he receives from the
time his good faith ceases from the
reimbursement due him). (Ortiz vs
Kayanan)
A BPS in good faith does not lose his
rights under Art. 448 merely because of
the fact that some years after acquiring
the property in good faith, helearned
about and aptly recognized the right of
the LO to a portion of the land occupied
by the building. The supervening
awareness does not prejudice its right to
claim the status of a builder in good faith.
(Tecnogas Phil. Manufacturing Corp.
vs CA)
The BPS in good faith should not pay
rentals to the LO spouses. The spouses,
having opted to appropriate the
improvement on the lot, have to
reimburse the BPS of the cost of
construction of the building (in accordance
with Art 546). The BPS has the right to
retain the improvements until he is
reimbursed. An implied tenancy or
possession in fact is created pending the
payment of the corresponding indemnity.
(Pecson v CA)
Good faith consists in the belief of the
builder that the land he is building on is
his and he is ignorant of any defect or
flaw in his title. And as good faith is
presumed, the LO has the burden of
proving bad faith on the part of the BPS.
(Pleasantville Devt. Corp. v CA, 1996)
After the BPS had refused to restore the
land to the LO, to the extent that the
latter even had to resort to the present
action to recover his property, the LO
could no longer be regarded as having
impliedly assented or conformed to the
improvements thereafter made by
appellant on the premises. (Felices v.
Iriola)
(2) Accession in Natural
(i) Alluvium 457 the accretion
which lands adjoining the banks or
rivers, lakes, creeks or torrents
gradually receive from the
Requisites of alluvium: (CANG)
(a) The accretion must be gradual
(b) The cause must be the
current of the water
(c) The land where the
accretion takes place must be
adjacent to the banks
(d) must be natural
*riparian owner owner of the land
fronting such riverbanks
The alluvium, though automatically owned
by the riparian owner from the moment
the soil deposit can be seen, is not
automatically registered property, since it
is subject to acquisition through
prescription by 3
rd
persons. (Grande vs
CA)
(ii) Avulsion 459 takes place
whenever the current of a river,
lake, creek or torrent segregates
from an estate on its bank a known
portion of land and transfers it to
another estate
Distinguished from Alluvium
Alluvium Avulsion
1. Deposit of soil is
gradual
2. Deposit of the
soil belongs to the
owner of the
property where the
same was deposited
3. The soil cannot
be identified
1. Deposit of soil is
sudden or abrupt
2. The owner of the
property from which
a part was detached
retains the
ownership thereof
(2 yrs)
3. The detached
portion can be
identified
PROPERTY CIVIL LAW
Requisites of Avulsion (SIC)
(a) The segregation and transfer is
caused by current of water
(b) The segregation and transfer must
be sudden or abrupt
(c) The portion of land
transported must be known and
identifiable
Rights of the riparian owner
Removal within 2 years
The former owner preserves his
ownership of the segregated portion
provided he removes (not merely
claims) the same within the period of
2 yrs.
Art. 460 applies only to uprooted
trees. If a known portion of land with
trees standing thereon is carried away
by the current to another land, Art.
459 governs.
(iii) Change of river beds
that which takes place when a river
bed is abandoned through the
natural change in the course of the
waters (Art. 461)
Requisites for the application of Art.
461:
(a) There must be a change in
the natural course of the waters of
the river.
(b) The change must be abrupt
or sudden.
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)
(iv) Formation of islands
either on the seas within the
jurisdiction of the Philippines.
On lakes, and on navigable or
floatable rivers (Art. 464) or non-
navigable and non-floatable rivers
(Art. 465).
(1) Ownership of islands formed through
alluvion
(a) If formed:
(a.1) on the seas within Phil.
jurisdiction
(a.2) on lakes, and
(a.3) on navigable or floatable waters,
the island belongs to the State
(b) If formed in non-navigable and
non-floatable rivers:
(b.1) it belongs to the nearest riparian
owner or owner of the margin or
bank nearest to it as he is
considered in the best position to
cultivate and develop the island
(b.2) it is divided longitudinally in
halves, if it is in the middle of the
river
(c) Concept of navigable river
A navigable river is one which
forms in its ordinary condition by
itself or by uniting with other
waters a continuous highway over
with other waters a continuous
highway over which commerce is
or may be carried on.
Test: A river is navigable if it is used or
susceptible of being used, in its ordinary
condition, as a highway of commerce, that
is, for trade and travel in the usual and
ordinary modes.
Accession Continua-Movable property:
(1) Adjunction or Conjunction that
which takes place whenever movable
things belonging to different owners
are united in such a way that they
cannot be separated without injury,
thereby forming a single object (Art.
466)
Ownership of new object formed by
adjunction
Owner of Principal OP
Owner of Accessory OA
(a) union in Good Faith OP acquires
accessory, AND pays OA for its
value in uncontroverted state.
(b) union in Bad Faith
PROPERTY CIVIL LAW
-if OA incorporated in BF
1. lose the thing and
2. indemnify OP for
damages
-if OP acted in BF
1. OA has right to choose
-payment of value
-separation (even if
destroys principal)
2. OA indemnified
(c) If OP or OA made the
incorporation with the knowledge
and without the objection of the
other, their respective rights shall
be determined as though both
acted in good faith.
(d) if involves 3 things Art. 466
should be applied in an equitable
manner. The principal should be
determined and distinguished from
the others which would be
considered the accessories.
TEST to determine principal in
adjunction:
In order of application, the principal is
that:
(a) To which the other (accessory) has
seen united as an ornament or for
its use or perfection (Art. 467)-
INTENT
(a) Of greater value, if they are
unequal values-VALUE
(a) Of greater volume, if they are of an
equal value (Art. 468)-VOLUME
(a) That of greater merits taking into
consideration all the pertinent legal
provision applicable as well as the
comparative, merits, utility and
volume of their respective things.
(3) Specification that which takes place
whenever a person imparts a new
form to materials belonging to another
person (Art. 474).
Ownership of the new object in
specification
Person who made Transformation PT
Owner of Material OM
(a) If PT is in Good Faith, he shall
1. appropriate thing transformed
as his own
2. indemnify owner of material
BUT If material is more precious than
transformed thing OM may
1. appropriate new thing to himself
and indemnify labor OR
2. demand indemnity for
materials
(b) If PT is in Bad Faith,
1. OM shall appropriate work to
himself
Without paying maker OR
2. demand indemnity for value of
material & damages
BUT If transformed thing is more
valuable than material, owner of
material cannot appropriate
(3) Commixtion or confusion that which
takes place whenever there is a mixture of
things solid or liquid belonging to different
owners, the mixture of solids being called
commixtion, while that of liquids,
confusion (Art. 472).
Rights
1. 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)
2. 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
3. If both in bad faith no cause of
action against each other
IV. QUIETING OF TITLE
It is a remedy or form of proceeding
originating in equity jurisprudence, which
has for its purpose an adjudication that a
claim of title or an interest in property,
adverse to that of complainant, is invalid,
so that the complainant and those
claiming under him may be forever free
from any danger of the hostile claim.
Requisites
(1) There is a cloud on title to real
property or any interest to real
property (Art. 476)
(2) Plaintiff has legal or equitable title
to or interest in the subject/real
property.
(3) Instrument, record, claim,
encumbrance or proceeding must be valid
and binding on its face but in truth and
in fact invalid, ineffective, voidable or
unenforceable; contract upon which
defendant relies has been extinguished or
terminated, or has prescribed
(4) Plaintiff must return benefits
received from the defendant.
PROPERTY CIVIL LAW
Differences between action to quiet title, action to remove a cloud, and action to
prevent a Cloud
QUIET TITLE REMOVE CLOUD PREVENT CLOUD
Purpose is to put to an end
to vexatious troublesome
litigation over the property
involved
Intended to procure the
cancellation; delivery; release
of an instrument, encumbrance
or claim, which constitutes a
claim in plaintiffs title, and
which may be used to injure or
to vex him in his enjoyment of
his title.
Removal of a possible
foundation for a future
hostile claim.
Remedial action: involving a
present adverse claim
Preventive action: removes cloud
which may be used for future
actions
Preventive action: to prevent
a future cloud on the title
Plaintiff asserts his own
estate and declares
generally that the
defendant claims some
estate on the land, without
defining it and avers that
the claim is without
foundation and calls on the
defendant to set forth the
nature of his claim for
determination
Declares his own title and also
avers he source and nature of
the defendants claim, points
out its defects and prays it be
declared void
Filed against people who have
claims; claims are more
general in nature
Filed against defendant who
asserts claims based on an invalid
instrument (but not apparent)
Prescription of actionImprescriptible
if plaintiff is in possession; if not,
prescribes within period for filing accion
publiciana, accion reivindicatoria.
Notes:
An action for reconveyance:
a) Prescribes in 10 years if the
plaintiff is NOT in possession of
the property and if the action for
reconveyance is based on an
implied or constructive trust. The
point of reference is the date of
registration of the deed or the
date of the issuance of the
certificate of title over the
property.
b) Is IMPRESCRIPTIBLE if the
person claiming to be an owner is
in actual possession of the
property. Here, the right to seek
reconveyance in effect seeks to
quiet title. (Olviga v. CA)
It is not necessary that the
vendee has an absolute title. An
equitable title is sufficient to
clothe him with personality to
bring an action to quiet title.
(Pingol v. CA)
What plaintiff imagined as clouds
cast on his title were PRs alleged
acts of physical intrusion and not.
an instrument, record, claim,
encumbrance or proceeding
which constitutes or casts a
cloud, doubt, question or shadow
upon the owners title or interest
in real property. Clearly, the acts
alleged may be considered
grounds for an action for forcible
entry but definitely not one for
quieting of title. (Titong v. CA)
V. RUINOUS BUILDINGS AND
TREES IN DANGER OF FALLING
Liability for damages:
1. collapse engineer, architect or
contractor
2. 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
3. if no action done by
government at expense of owner
VI. CO-OWNERSHIP
Art. 484. There is co-ownership
whenever the ownership of an undivided
thing or right belongs to different
persons.
PROPERTY CIVIL LAW
Characteristics of Co-ownership
(PUSAM)
(1) plurality of owners, but only one
real right of ownership
(2) unity of material of the object of
ownership
(3) recognition of ideal shares or aliquot
(4) absolute control of each co-owner
over his ideal share, not over specific
portions of the property
(5) mutual respect among co-owners in
regard to the use, enjoyment, and
preservation of the property owned
in common.
Differences between co-ownership
and joint tenancy
Co-ownership Joint Ownership
Tenancy in
Common,
Ownership in
Common, Co-
dominium
Joint tenancy,
Tenancy in
common, Notion of
all-for one, one-
for-all
Civil law origin Common Law/
Anglo-American
origin
Each co-owner
owner of his ideal
share
Each joint owner,
the surviving joint
owners are
subrogated in his
rights by accretion
Each co-owner
may dispose of his
undivided share
without the others
consent.
Joint owner must
obtain the consent
of all the rest to
dispose of his
share.
In case there is a
co-owner who is a
minor, minority as
a defense against
prescription is
exclusive to him.
The defense of one
joint owner can be
used as a defense
by all joint owners.
Differences between partnership
and co-ownership
Ordinary
Partnership
Co-ownership
With legal/juridical
personality distinct
from its members
No legal
personality distinct
from its members
Created only by
agreement or
contract to that
effect
created by LAW
FOCUS [Law,
Fortuitous Event,
Occupancy,
Contract,
Succession]
Purpose is to
obtain profit
Purpose is
collective
enjoyment and to
maintain the unity
and preservation of
the things owned in
common.
No term set limit
set by law
As a rule, an
agreement to keep
the ownership for
more than 10 years
is void.
Creditors of
individual partners
cannot attach and
sell on execution
the shares of
partners in the
partnership
Creditors of a co-
owner can attach
his shares in the
co-owners and sold
on execution
Can be
extinguished by
the death or
incapacity of one
party
Death or incapacity
of a co-owner does
not affect existence
of a co-ownership
There is mutual
representation of
the parties
A special authority
is needed for such
representation.
A partner cannot
transfer his rights
to a 3
rd
person
without the
consent of the
others
A co-owner can
freely dispose of
his share without
need to ask the
consent of the
other co-owners.
Distribution of
profits can be
stipulated upon
(profit-sharing)
Profits of a co-
owner depend on
his proportionate
share; profit-
sharing is
invariable (Art.
485) not subject to
stipulation
Sources of co-ownership
(1) Law
(a) Cohabitation
(i) Between man and woman
capacitated to marry each
other. (Art 147, FC)
(ii) Between man and woman not
capacitated to marry each
other (Art. 148, FC)
(b) Absolute community property
(Art. 90, FC)
(c) two or more persons purchase
property and by common consent
legal title is taken in the name of
one of them for the benefit of all,
an implied trust is created in
favor of the others in proportion
to each to interest of each. (Art.
1452)
(d) Succession
(i) Intestate succession (1078)
(ii) Testateif property is given
to two or more heirs by the
testator
PROPERTY CIVIL LAW
Redemption done by one of
the co-owners/heirs will benefit
his other co-owner heirs despite
the fact that they did not
contribute to the redemption
money.
(e) Donation
donation to several persons
jointly, it is understood to be in
equal shares
no rights of accretion unless the
donor otherwise provides
but if donation is made to
husband and wife jointly, there
shall be a right of accretion,
unless contrary so provide.
(f) Chance commixtion in good
faith (Art. 472, NCC)
(g) Hidden treasure co-ownership
between finder and owner
(h) Easement of a party wall
(i) Occupation Harvesting and
fishing
(Punsalan et al. v. Boon Liat
et al.)
(j) Condominium law
Sec. 6(c) of RA 4726 unless
otherwise provided, common areas
are held in common by the holders of
the units in equal shares, one for
each unit.
(2)Contract
(a) Two or more persons agree to
create a co-ownershipmaximum
of ten years (494, 2
nd
par),
extendable by a new agreement.
(b) Universal Partnership
(i) Of all present properties (Art.
1778-1779, NCC)
(ii) Of profits (Art. 1780,
NCC)
(c) Associations and Societies,
whose articles are kept secret
wherein anyone of the members
may contact in his own name
with third persons (no juridical
personality)
Rights of each co-owner as to the
thing owned in common: FRom
CUERPO
(1) proportionate Fruits and benefits
(485)
(2) Repairs for preservation (489-490)
(3) Compel contribution (488)
(4) Use according to purpose intended
(486)
(5) bring an action for Ejectment (487)
(6) legal Redemption (1620)
(7) demand Partition and terminate co-
ownership (494-496; 498)
(8) full Ownership of proportion (493)
(1)Right to share in the fruits and
benefits in proportion to his
interest
PROVIDED the charges are borne by
each in the same proportion
A contrary stipulation is VOID.
Portions are presumed equal unless
contrary is proved.
Accretion added to any portion of
land co-owned becomes part of the
property in co-ownership and should
be divided according to each co-
owners proportionate share.
(2)Right to make repairs for
preservation
Necessary expenses
- taxes and expenses for the
preservation of the thing which if
not made would endanger the
existence of the thing or reduce
its value or productivity
- may be incurred upon the will of
1 co-owner, but if practicable, he
must give reasonable notice to
the other co-owners
Useful expenses
- increase the income of the thing
owned in common for the benefit
of all the co-owners
- a lone co-owner cannot incur
such expenses without the
consent of the others and then
ask reimbursement (resolution of
majority as per Art. 492)
- Effect of failure to notify co-
owners even if it was practicable
to do so: does not deprive co-
owner of right to reimbursement.
He is merely given the burden to
prove the necessity of such
repairs. He will not be fully
reimbursed if others can prove
that i.e., could have hired a
contractor who would charge less
(3)Right to compel the other co-
owner to contribute
For:
1. expenses for preservation
2. taxes
BUT co-owner has option not to
contribute by renouncing so much of
his undivided interest equal to the
amount of contribution EXCEPT if
waiver is prejudicial to co-ownership
PROPERTY CIVIL LAW
(4)Right to use the thing according
to its intended purpose
may be altered by agreement,
express or implied, provided:
- without injury or prejudice to
interest of co-ownership; and
- without preventing the use of
other co-owners
Any act against the collective
interest is an act against ownership
and the remedies available to owners
in general may by used by the co-
owner
(5)Right of to bring an action in
ejectment
no need to implead all the other co-
owners as co-plaintiffs because the
suit is deemed to be for the benefit
of all: a favorable decision will
benefit everyone but an adverse
decision will not affect them if they
are not parties in the case or they
did not give their consent to the
action
BUT action will not prosper if the
action is for the benefit of himself
only and not for the co-ownership
For title to prescribe in favor of the
co-owner, however, there must be a
clear showing that he has repudiated
the claims of the other co-owners
and that they have been
categorically advised of the exclusive
claim he is making to the property in
question. Only then will the period of
prescription being to run. (Cortes v.
Oliva)
(6)Right to exercise legal
redemption
Redemption of the property by a co-
owner does not vest in him sole
ownership over said property but will
inure to the benefit of all co-owners.
Redemption is not a mode of
termination of relationship.
(Mariano v CA)
By the very nature of the right of
"legal redemption", a co-owner's
right to redeem is invoked only after
the shares of the other co-owners
are sold to a third party or stranger
to the co-ownership. The law does
not prohibit a co-owner from selling,
alienating or mortgaging his ideal
share in the property held in
common. The law merely provides
that the alienation or mortgage shall
be limited only to the portion of the
property which may be allotted to
him upon termination of the co-
ownership and, as earlier discussed,
that the remaining co-owners have
the right to redeem, within a
specified period, the shares which
may have been sold to the third
party (Reyes vs. Judge
Concepcion)
Art 1621 presupposes that the land
sought to be redeemed is rural. Both
landsthat sought to be redeemed
and the adjacent lot belonging to the
person exercising the right of
redemptionmust be rural. If one or
both are urban, the right cannot be
invoked. (Halili v. CA, 1998)
Art. 1623 requires that the written
notification should come from the
vendor or prospective vendor, not
from any other person. It is the
notification from the seller, which
can remove all doubts as to the fact
of the sale, its perfection, and its
validity, for in a contract of sale, the
seller is in the best position to
confirm whether consent to the
essential obligation of selling the
property and transferring ownership
thereof to the vendee has been
given. (Francisco v. Boiser)
The written notice of sale is
mandatory for the tolling of the 30-
day redemption period,
notwithstanding actual knowledge of
a co-owner. (Verdad v CA, 1996)
A third person, within the meaning of
Art. 1620 of the Civil Code (on the
right of legal redemption of a co-
owner) is anyone who is not a co-
owner. (Pilapil v CA)
(7)Right to ask for partition
PARTITION: a division between two
or more persons of real or personal
property which they own as co-
partners, joins tenants or tenants in
common, effected by the setting
apart of such interests so that they
may enjoy and possess it in
severalty.
Gen rule: A co-owner can always ask
for a partition. There is no
prescriptive period.
Exceptions: (PUI SCAN)
1. when partition is generally
Prohibited by law
2. when partition would render the
thing Unserviceable, or the thing
PROPERTY CIVIL LAW
in common is essentially
Indivisible
- no physical partition but thing
maybe sold and co-owners
shall divide the proceeds
3. when there is a Stipulation
against it (not beyond 10 years)
4. when Condition of indivision is
imposed by transferor (donor or
testator) not exceed 20 years
5. Acquisitive prescription has set in
facor of a stranger to co-
ownership or in favor of co-
owner.
6. when legal Nature of community
prevents partition (e.g. party
wall)
Either co-owner may demand the
sale of the house and lot at any time
and the other cannot object to such
demand. Thereafter the proceeds of
the sale shall be divided equally
according to their respective
interests. (Aguilar v. CA)
Effects of partition:
1. It shall NOT prejudice third
persons who did not intervene in
the partition
2. There should be mutual
accounting of benefits,
reimbursements, payment of
damages due to negligence or
fraud, liability for defects of title
and quality of portion assigned to
each
3. The part allotted to a co-owner at
partition will be deemed to be
possessed by such co-owner from
the time the co-ownership
commenced.
4. Heir is exclusive owner of
property adjudicated to him.
5. Co-owners reciprocally bound to
each other for warranty of title
and quality of part given to each
(hidden defect) after partition.
6. Under Art. 1093, obligation of
warranty is proportionate to
respective hereditary shares;
insolvency of one makes the
others liable subject to
reimbursement (joint liability)
(8)Right to full ownership of
proportion
All that he can sell or freely dispose
is his undivided interest but he
cannot sell or alienate a concrete,
specific or definite part of the thing
owned in common because his right
over the thing is represented by a
quota or ideal portion without any
physical adjudication.
Co-owner can substitute another
person in the enjoyment of the thing
Effect of transaction by each co-
owner:
1. Limited to his share in the
partition
2. Transferee does not acquire any
specific portion of the whole
property until partition
3. Creditors of co-owners may
intervene in the partition to
attack the same if prejudicial
(Art. 499), except that creditors
cannot ask for rescission even if
not notified in the absence of
fraud (Art. 497)
Unless the partition is effected, each
heir cannot claim ownership over the
definite portion and cannot dispose
of the same. Co-heir can only sell his
successional rights. (Carvajal v CA)
Art 493 of the NCC allows the
alienation of the co-owner of his part
in the co-ownership. The effect of
such alienation or mortgage shall be
limited to the portion which may be
allotted to him in the division upon
the termination of the co-ownership
In short, a co-owner can enter into a
contract of lease insofar as to his
interest. Therefore, he can also
cancel such lease without the
consent from the other co-owner.
(Castro v. Atienza)
Duties and Limits to Rights of Co-
owners
1. pay for charges (485)
2. not to make alterations (491)
after partition
3. mutually account (500)
4. liability for defects in title and
quantity (501)
Duty not to make alterations
Alteration: act by virtue of which a co-
owner
changes the thing from the state
in which the others believe it
should remain or
withdraws it from the use to
which they are desired to be
intended in opposition to the
common or tacit agreement
Consent of ALL the co-owners is required
if it changes the essence or nature of the
thing (present article refers to this)
because it is an act of ownership.
Acts of alteration that do not change the
essence or nature of the thing requires
PROPERTY CIVIL LAW
only the agreement of the majority
because it is merely an act of
administration.
- but if withholding of consent by
any one of the co-owners is
clearly prejudicial to the common
interest, courts may afford
adequate relief (491)
Acts of
Alteration/Acts
of Ownership
Acts of
Administration
Relates to the use,
substance or form
of the thing
Also for the better
enjoyment of the
property
Have a more
permanent result
Effects are of
transitory
character
Consent of all is
necessary
Consent of the
financial majority
will be binding
Contrary to the co-
ownership
agreement
Does not give rise
to a real right over
the thing owned in
common.
Effects of acts of alteration and
remedies of non-consenting co-
owner :
(a) Co-owner who made alterations
may lose whatever he has spent
as he will not be reimbursed
(b) He may be ordered to demolish
or remove the alteration at his
expense
(c) He will be liable for damages and
other losses
(d) Co-ownership will benefit from
the alteration if other co-owners
decide to contribute to the
expenses by reimbursing him
(ratification)
(e) If a house is built in a common
lot, the co-owners are entitled to
the proportionate share of the
rent.
Lease becomes an act of ownership if:
(1) It is recorded in the Registry
of Property
(2) It is for more than 1 year
Management of Property
Who may manage:
a) The co-owners themselves
Court cannot appoint an
administrator to manage a property
co-owned when the co-owners want
to handle the management. In this
management, the majority control
and their decisions are binding upon
the minority. Majority may only
proceed to act without notice to the
minority if the circumstances warrant
urgency.
b) An administrator who may or may
not be a co-owner delegated by the
co-owners
An administrator cannot, without the
unanimous consent of all the co-
owners, compromise on, donate,
cede, alienate, mortgage, or
encumber in any manner the
common property.
The majority refers to the majority in
interest or the financial majority. (50%
+ 1)
When are acts seriously prejudicial?
So serious and affects the
interest of the co-owners in the
community
Such that will cause injuries
enough to justify the intervention
of the court
Examples:
(1) When the resolution calls for a
substantial change or alteration of
the common property or of the use
to which it has been dedicated by
agreement or by its nature
(2) When the resolution goes beyond
the limits of mere administration, or
invades the proprietary rights of the
co-owners, in violation of Art. 491
(prohibiting against acts of
alteration)
(3) When the majority leases, loans,
or other contracts without security,
exposing the thing to serious danger
to the prejudice of the other co-
owners.
(4) When the majority refuse to
dismiss an administrator who is
guilty of fraud or negligence in his
management, or does not have the
respectability, aptitude, and solvency
required of persons holding such
position.
(5) When resolution, if carried out,
would cause serious injury to the
thing itself, such as an agreement
not to borrow money under
reasonable terms when it is
necessary for urgent repairs for
preservation, or for the payment of
taxes.
Remedies of the minority
If the acts of the majority prejudice
the minority, the latter may ask for
injunction or at worse, a partition.
PROPERTY CIVIL LAW
Extinguishment of Co-Ownership
(1) Total destruction of the thing
(2) Merger of all the interest in one
person
(3) Acquisitive prescription
(a) By a third person
(b) By one co-owner against the
other co-owners
Requisites:
(i) Unequivocal acts of
repudiation of the rights of
the other co-owners (acts
amounting to ouster of other
co-owners)
(ii) Open and adverse possession,
not mere silent possession for
the required period of
extraordinary acquisitive
prescription.
(iii)Presumption is that
possession of a co-owner is
not adverse.
(4) Partition or division
(a) Right of Creditors of individual
Co-owners Art. 497
All creditors must be considered
to intervene in the partition of
the common property.
They must have become creditors
during the co-ownership
Co-owner debtors have the duty
to notify the creditors of the
partition
Otherwise partition not binding
on them
They can contest such partition if
they formulate a formal
opposition thereto.
(b) Partition may be made:
(ii.) Orally
Valid and enforceable
among the parties.
Statute of frauds does not
operate for partition is not
a conveyance of property
but merely a segregation
and designation of that
part of the property which
belongs to the co-owners.
(ii.) In writing
(a) Court will just
confirm such
written agreement.
(a) Rules of Court does not
preclude amicable settlement
between parties.
(b) Two principal issues in an
action for partition:
(b) plaintiff is indeed a
co-owner of the
property
(c) how the property is
to be divided
between plaintiff
and defendants.
If property cannot be divided
without great prejudice, the
court may order such
property be assigned to one
co-owner. Such co- owner
will pay the others the value
of their interests.
VII. CONDOMINIUM LAW (ACT NO.
4726)
Concept of condominium
Exclusive interest in units plus
undivided interest in common areas.
Partly co-ownership, partly under
individual separate ownership
Each unit belongs separately to one
or more persons
The land and the common areas are
of common use by the different
owners and are under co-ownership
either as contemplated by the Civil
Code or through a corporation.
Not governed by co-ownership as
provided for in the Civil Code.
External surfaces are common areas
Beams and posts are common areas
Easement, unless the master deed
says otherwise, is an exclusive
easement.
Interest in the common areas will
depend on interest in the condo
Important documents in buying a
condo unit
(i) deed of sale
(ii) enabling or master deed
(iii)declaration of restrictions
Sec. 9 The owner of a project shall,
prior to the conveyance of any
condominium therein, register a
declaration of restrictions relating to
such project, which restrictions shall
constitute a lien upon each condominium
in the project and shall insure to and
bind all condominium owners in the
project. Such liens, unless otherwise
provided, may be enforced by any
condominium owner in the project or by
the management body of such project.
The Register of Deeds shall enter and
annotate the declaration of restrictions
upon the certificate of title covering the
land included within the project, if the
land is patented or register under the
land included within the project, if the
PROPERTY CIVIL LAW
land is patented or registered under the
Land Registration or Cadastral Acts.
Method of taxation
Sec. 25. Whenever real property has
been divided into condominiums, each
condominium separately owned shall be
separately assessed, for purposes of real
property taxation and other tax
purposes to the owners thereof and the
tax on each such condominium shall
constitute a lien solely thereon.
Partition of Common Areas
Sec.7. Except as provided in the
following section, the common areas
shall remain undivided, and there shall
be no judicial partition thereof.
(b) Who manages the condominium?
(i) condominium corporation
(preferred by law) co-
terminous with the existence
of the condominium
(ii) co-ownership
(iii) association of owners
Rights and Obligations of
Condominium owner
What are the incidents of a
condominium grant?
(a) The boundary of the unit grant
(i) the interior surfaces of the
perimeter walls, floors,
ceilings, windows, and doors
(ii) those which are not part of
the unit bearing walls,
columns, floors, roofs,
foundations, and other
common structural elements
of the building; lobbies,
stairways, hallways, and other
areas of common use,
elevator equipment and
shafts, central heating,
central refrigeration, and
central air-conditioning
equipment, reservoirs, tanks,
pumps, and other central
services and faicilities, pipes,
ducts, flues, chutes, conduits,
wires and other utility
installations, wherever
located, except the outlets
thereof when located within
the unit.
(b) Exclusive easement for the use of
the air space encompassed by
the boundaries of th unit
(i) as it exists at any particular
time
(ii) as the unit may lawfully be
altered or reconstructed from
time to time
(iii)such easement shall be
automatically terminated in
any air space upon
destruction of the units to
render it untenable
(c) Unless otherwise provided, the
common areas are held in
common by the holders of units,
in equal shares, one for each unit
(d) a non-exclusive ease ment for
ingress, egress, and support
through the common areas are
subject to such easements
(e) Each condominium unit owner
shall have the exclusive right to
paint, repaint, tile, wax, paper, or
otherwise refinish and decorate
the inner surfaces of the walls,
ceilings, floors, windows, and
doors, bounding his own unit
(f) Each condominium owner shall
have the exclusive right to
mortgage, pledge, encumber his
condominium and to have the
same appraised independently of
the other condominiums but any
obligation incurred by such
condominium owner is personal
to him.
(g) Each condominium owner has
also the absolute right to sell or
dispose of his condominium
unless the master deed contains
a requirement that the property
be first offered to the
condominium owners within a
reasonable period of time before
the same is offered to outside
parties.
Case
Ownership of a unit, therefore, is a
condition sine qua non to being a
shareholder in the condominium
corporation By necessary implication,
the "separate interest" in a
condominium, which entitles the holder
to become automatically a share holder
in the condominium corporation, as
provided in Section 2 of the
Condominium Act, can be no other than
ownership of a unit. (Sunset View
Condominium v Judge Campos)
PROPERTY CIVIL LAW
VIII. POSSESSION
Definition and Concept
(1) Possession is the holding of a thing
of the enjoyment (exercise) of a
right (523), whether by material
occupation (de facto possession) or
by the fact that the thing or the right
is subjected to the action of our will.
(2) It is a real right independent of and
apart from ownership.
Essential requisites of possession
(1) Holding or control of a thing or right
(corpus) consists of either:
(a) the material or physical
possession
(b) subject action of our will-
exercise of a right
(c) constructive possession
doctrine of constructive possession
applies when the possession is under
title calling for the whole, i.e.,
possession of a part is possession of
the whole.
Constructive possession
a) 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)
(2) Intention to possess (animus
possidendi)
it is a state of mind whereby the
possessor intends to exercise and
does exercise a right of possession,
whether or not such right is legal
intention may be inferred from the
fact that the thing in question is
under the power and control of the
possessor
may be rebutted by contrary
evidence
Cases:
The general rule is that the possession
and cultivation of a portion of a tract of
land under a claim of ownership of all is
a constructive possession of all, IF the
remainder is not in the adverse
possession of another. Possession in the
eyes of the law does not mean that a
man has to have his feet on every
square meter of ground before it can be
said that he is in possession. (Ramos
v. Director of Lands)
The rule on constructive possession does
not apply when the major portion of the
disputed property has been in the
adverse possession of homesteaders and
their heirs. It is still part of the public
domain until the patents are issued.
(Director v. CA)
Degrees of holding of possession
(1) Mere holding or possession without
title whatsoever and in violation of
the right of the owner.
applies to both movables and
immovables
both the possessor and the public
know that the possession is wrongful
there can be no acquisitive
prescription of movables under the
NCC (Art. 1133)
(2) Possession with juridical title but
not that of ownership.
peaceably acquired
this will never ripen into full
ownership as long as there is no
repudiation of concept under which
the property is held (if such
repudiation is made known to the
owner, then extraordinary
prescription of 30 yrs will apply)
e.g., possession by tenant,
depositary, agent, bailee, trustee,
lessee, antichretic creditor
even actual owner may be prevented
by law from taking possession
a depositary bank is not a possessor
in this degree, since a deposit is
actually a loan to the bank
(3) Possession with just title or title
sufficient to transfer ownership, but
not from the true owner
title deed of sale or contract of sale
possession of a vendee from vendor
who pretends to be the owner, i.e.,
innocent buyer of stolen goods
good faith of buyer = just title
if in good faith, extraordinary
prescription of 30 years will apply
this degree of possession ripens
interesting full ownership by lapse of
time
(4) Possession with just title from the
true owner
Transfer of possession transfers
ownership! (possession as an
incident of ownership)
Cases of possession
(1) Possession for oneself, or
possession exercised in ones own
name and possession in the name of
another.
rights of possession may be
exercised through agents
PROPERTY CIVIL LAW
(a) necessary exercised on behalf
of the conceived child, of juridical
persons, of persons not sui juris,
and of the conjugal partnership
(b) voluntary in cases of agents or
administrators appointed by the
owner or possessor
(2) Possession in the concept of an
owner and possession in the concept
of a holder with the ownership
belonging to another
In the Concept of a Holder
such possessor acknowledges in
another a superior right which
he believes to be ownership,
whether his belief be right or
wrong
e.g. tenant, usufructuary, and
borrower
In the Concept of Owner
such possessor may be the owner
himself or one who claims to be
so
only this class of possession can
serve as title for acquiring
dominion
good faith or bad faith is
immaterial except for purposes of
prescription (GF: 10 yrs; BF: 30
yrs)
Effects of possession in the concept
of an owner:
(1) possession may by lapse of
time ripen into full ownership,
subject to certain exceptions
(2) presumption of just title and
cannot be obliged to show or
prove it Exception: for
purpose of prescription in Art
1131.
(3) possessor can bring all
actions an owner can bring to
protect his possession, except
accion reivindicatoria
(4) may employ self-help (Art
429)
(5) can ask for the inscription of
his possession in the registry
of property
(6) has right to the fruits and
reimbursement for expenses
(assuming he is a possessor
in GF)
(7) upon recovering possession
from unlawful deprivers, can
demand fruits and damages
(8) generally, he can do
everything an owner is
authorized to do until he is
ousted by one who has a
better right (e.g.,
preemption)
(9) possession in GF and
possession in BF
(3) Possession in good faith and
possession in bad faith
possession in good faith ceases from
the moment defects in the title are
made known to the possessor
when an action is filed to recover
possession, good faith ceases from
the date of the summons to appear
at the trial
GF consists in the possessors belief
that the person from whom he
receive a thing was the owner of the
same and could convey his title
GF is always presumed
belief that one is the legal owner
must be based on some title or mode
of acquisition, i.e., sale, donation,
inheritance
error in the application of the law, in
the legal solutions that arise form
such application, in the appreciation
of the legal consequences of certain
acts, and in the interpretation of
doubtful provisions or doctrines, may
properly serve as the basis of GF-
mistake upon a doubtful or difficult
question of law as a basis of good
faith [Art 526 (3)]
Subjects of possession
All rights and things susceptible of
appropriation
Things which cannot be possessed:
(1) property of public dominion
(2) res communes
(3) easements (discontinuous or
non-apparent)
(4) things specifically prohibited by
law
res nullius (abandoned or ownerless
property) may be possessed but
cannot be acquired by prescription
Acquisition of Possession
(1) Ways of acquiring possession
(a) Material occupation of the thing
occupation is used in the general
sense, i.e., a means of acquiring
possession of things, not of rights
kind of possession acquired is
only the fact of possession, not
the legal right of possession
(i) Doctrine of constructive
possession
(ii) Includes constructive
delivery (equal to material
occupation in cases where
PROPERTY CIVIL LAW
occupation is essential to the
acquisition of prescription)
traditio brevi manu
one who possesses a thing
by title other than
ownership continues to
possess the same but
under a new title, that of
ownership
traditio constitutum
possessorium
owner alienates the thing,
but continues to possess
the same but as that of
depositary, pledge, or
tenant
(b) subjection to the action of our
will
different from and
independent of juridical acts
and legal formalities as it
refers more to the right of
possession that to possession
as a fact
(i) traditio simbolica --
effected by delivering some
object or symbol, placing
under the thing under the
control of the transferee, such
as the keys to the warehouse
containing the goods
delivered [Art 1498 (2)]
(ii) traditio longa manu
effected by the transferor
pointing out to the transferee
the things which are being
transacted
(c) proper acts and legal formalities
refers to the acquisition of
possession by sufficient title,
whether inter vivos or mortis
causa, or lucrative or onerous
e.g., donations, succession,
contracts, judicial writs of
possession, writs of execution
of judgments, and registration
of public instruments
There was a perfect contract of pledge
and the depositary was placed in the
possession of the goods after the
symbolic transfer by means of delivery
to him of the keys to the warehouse
where the goods were kept. (Banco
Espanol Filipino v. Peterson)
(2) By whom possession may be
acquired
(a) by same person
Elements of personal acquisition
must have the capacity to
acquire possession
must have the intent to
possess
possibility to acquire
possession must be present
(b) by his legal representative
Requisites:
representative or agent has
the intention to acquire the
thing or exercise the right for
another, and not for himself
person for whom the thing
has been acquired or right
exercised, has the intention of
possessing such thing or
exercising such right
(c) by his agent
(d) by any person without any
power whatsoever but subject to
ratification, without prejudice to
proper case of negotiorum gestio
(e) Qualifiedly, minors and
incapacitated persons
refers only to possession of
things, not of rights, and to
acquisition of possession by
material occupation
(3) What do not affect possession
(a) acts merely tolerated
(b) acts executed clandestinely AND
without knowledge of owner
(c) acts by violence as long as the
possessor objects thereto (i.e.,
he files a case)
If owner of a tract of land, to
accommodate the public, permits them
to cross his property, it is not his
intention to divest himself of ownership
or to establish an easement. Such
possession is not affected by acts of
possessory character which are merely
tolerated. (Cuaycong v Benedicto)
As a squatter, she has no possessory
rights over the disputed lot. The States
solicitude from the destitutes and the
have-nots does not mean that it should
tolerate usurpations pf property, public
or private. (Astudillo v PHHC)
A possessor by mere tolerance is
necessarily bound by an implied promise
to vacate upon demand. (Peran v CFI)
PROPERTY CIVIL LAW
(4) Rules to solve conflict of
possession
In case of conflict of possession, the
following order of preference must be
followed:
(1) present possessor or actual
possessor
(2) if 2 or more possessors, the one
longer in possession
(3) if dates of possession are the
same, the one who presents a
title
(4) if all the condition are equal, the
thing shall be placed in judicial
deposit pending determination of
possession or ownership through
proper proceedings
Preference in case of conflict of
ownership (double sales)
(1) for immovable property
(a) first who registered his right
in GF in the Registry of
Property
(b) if no registration, first who
possessed in GF
(c) if no possession, one who
presents the oldest title
(2) for movable property: first who
possessed in GF
Effects of Possession
(1) In general, every possessor has a
right to
be respected in his possession; if
disturbed therein, possessor has
right to be protected in or restored to
said possession (539)
(a) action to recover possession
(i) summary proceedings
forcible entry and unlawful
detainer. Plaintiff may ask for
writ of preliminary mandatory
injunction may be asked.
Within 10 days from filing of
complaint in forcible entry
- the same writ is available in
unlawful detainer actions
upon appeal (Art 1674)
The acquirer and possessor in
good faith of a chattel or movable
property is entitled to be
respected and protected in his
possession as if he were the true
owner, until a competent court
rules otherwise. Such possession
in good faith is equivalent to title
and every possessor has a right
to be respected in his possession
(Arts 539 and 559). (Yu v
Honrado)
(ii) accion publiciana (based on
superior right of possession, not
of ownership)
(iii)accion reivindicatoria
(recovery
of
ownership)
(iv) action for replevin for
recovery of movable property
(b) Possessor can employ self-help
(2) Entitlement to fruits possessor in
GF/ BF
Possessor in GF is entitled to the
fruits received before the possession
is legally interrupted.
Possessor in BF has no right to
receive any fruits. Those already
gathered and existing will have to be
returned; with respect to those lost,
consumed, or which could have been
received, he must pay the value.
But the possessor in BF does not
have to pay interest on the value of
fruits he has to pay, because such
amount is unliquidated.
(3) Reimbursement for expenses (See
Table below
(4) Possession of movable acquired in
GF (in concept of an owner) is
equivalent to title
one who has lost a movable or has
been unlawfully deprived thereof
may recover it without
reimbursement, except if possessor
acquired it at a public sale (559)
3 requisites to make possession of
movable equivalent to a title:
(1) that the possession is in GF
(2) that the owner has voluntarily
parted with the possession of the
thing
(3) that the possession is in the
concept of an owner
Presumptions in favor of the
possessor
(1) Of good faith until the contrary is
proved (Sideco vs. Pascua)
(2) Of continutity of initial GF in
which possession was commenced or
possession in GF does not lose its
character
Exception: in the case and from the
moment the possessor became aware or
is not unaware of improper or wrongful
possession.
(3) Of enjoyment of possession in
the same character in which was
acquired until the contrary is proved.
PROPERTY CIVIL LAW
(4) Of non-interruption of
possession in favor of present
possessor who proves possession at a
previous time until the contrary is
proved. (554, 1120-1124)
2 Kinds of Interruption
(1) Natural (Art 1122)if
interruption is for more than 1
year.
(2) Civil (Art 1123) will start from
the service of summons but the
proper action must be filed
in case of natural interruption, the
old possession loses all its juridical
effects and therefore cannot be
tacked to the new possession for
purposes of prescription
in case of civil interruption, if
possession is recovered, it can be
connected to the time that has
elapsed as if it were continuous and
can be counted in favor of
prescription
(5) Of exclusive possession of
property allotted to a participant in a
thing possessed in common for the
entire period during which co-
possession lasted;
(6) Of continuous possession or non-
interruption of possession of which
he was wrongfully deprived for all
purposes favorable to him (561)
(7) Other presumptions with respect to
specific property rights
(i) Of extension of possession of real
property to all movables
contained therein so long as it is
not shown that they should be
excluded (Art. 426)
(ii) Non-interruption of possession of
hereditary property (Art. 533,
Art. 1078)
(iii)Of just title in favor of possessor
in concept of owner, subject to
Art. 1141
Loss of Possession
(1) Abandonment
(2) AssignmentWON gratuitously or
onerously
(3) Destructionmust be total/goes
out of commerce
(4) Possession of anotherthe
possession that is lost here refers
only to possession as a fact (de
facto), not the legal right of
possession (de jure)
NOTE: all the other 3 cases of loss of
possession (abandonment, assignment,
destruction) refer to loss of possession
de jure (real right of possession) and
therefore cannot be recovered anymore
by any action.
Rules for Loss of Movables
General Rule: possession of personal
property acquired in GF = title therefore
the true owner cannot recover it
Exception: if the true owner
(1) lost the movable or
(2) has been unlawfully
deprived
In either of these, he may recover the
personal property not only from the
finder but also from those who may
have acquired it in GF from such finder
or thief, without paying for any
indemnity except if possessor acquired it
in public sale but the possessor in GF is
entitled to reimbursement.
Wild animals are possessed only while
they are under one's control;
domesticated or tamed animals are
considered domestic or tame if they
retain the habit of returning to the
premises of the possessor. (Art. 560)
(5) Reivindicationthe most natural
mode of losing possession, i.e.,
recovery or reivindication of the
thing by the lawful owner
PROPERTY CIVIL LAW
Effects of Possession in Good Faith or Bad Faith
Good Faith Bad Faith
Fruits
received
Entitled to the fruits while possession
is in GF and before legal interruption
(Art 544)
Must reimburse fruits received or
fruits which legitimate possessor
could have received (549);
Entitled to expenses for production,
gathering, and preservation
Pending
Fruits
Entitled to a part of the expenses of
cultivation and a part of the network
harvest, both proportion to the time of
possession (545)
Owner may indemnify or allow
possessor in GF to finish cultivation
and the fruits will be indemnified for
his cultivation (545)
If possessor refuses concession, no
indemnity (545)
Charges Must share with the legitimate
possessor, in proportion to the time of
possession
Same as with GF
Necessary
Expenses
Right of reimbursement and retention
in the meantime (545)
Reimbursement only
Useful
Expenses
Owners option to reimburse him
either for expenses or for increase in
value (546)
Retention prior to reimbursement
(546)
Limited right of removal (but should
not damage principal and owner does
not exercise option of payment of
expenses or increase in value) (547)
No right to reimbursement. He also
cannot remove improvements even
he can do so without injury to the
principal thing
Ornamental
Expenses
Limited right of removal as above
(548)
Limited right of removal (no injury to
thing and lawful possessor does not
retain by paying for them) (548)
Deterioration
or Loss
No liability unless due to fraud or
negligence after becoming in BF
Liable WoN due to his fault,
negligence, fortuitous event
Costs of
Litigation
Bears cost Bears cost
Effects of Recovery of Possession
Improvements caused by nature or
time shall always insure to the
benefit of the person who has
succeeded in recovering
possession. (Art. 551).
One who recovers possession shall
not be obliged to pay for
improvements which have ceased
to exist at the time he takes
possession of the thing. (Art. 553)
necessary expenses: lawful
possessor or owner has to pay for
them even if the object for which
they were incurred no longer exist
PROPERTY CIVIL LAW
IX. USUFRUCT
Definition
USUFRUCT is a real right which gives the
usufructuary
- a right to enjoy the property of
another
- with the obligation of preserving
its form and substance, unless
the title constituting it or the law
otherwise provides. (Art.562)
Characteristics
1. real right of use and enjoyment
of property owned by another
2. of a temporary duration
3. transmissible
4. may be constituted on real or
personal property, on tangibles
or intangibles
Rights of Usufructuary:
A. As to the thing and its fruits
1. right to possess and enjoy the
thing itself, its fruits and
accessions (566-567)
2. right to lease the thing (572)
3. right to improve the thing
Right to possess and enjoy the thing
itself, its fruits and accessions
Fruits belong to the usufructuary
except when they diminish the
substance of the thing (e.g.,
minerals in quarries), in which case
they will belong to the usufruct only
when the owner has dedicated the
property to the exploitation of such
products.
Dividends from shares are fruits.
Rights may be transferred, assigned,
or otherwise disposed of by the
usufructuary;
As to hidden treasure, usufructuary
is a stranger, so no right to it
Fruits pending at the beginning of
the usufruct belong to the
usufructuary, with no obligation to
refund the expenses of the owner.
But, if expenses for production were
incurred by third persons, they must
be reimbursed.
Fruits growing at the time of the
termination of the usufruct belong to
the owner, but the usufructuary
must be reimbursed from the
proceeds of such fruits for his
production expenses.
Right to lease the thing
even without consent of owner
BUT no alienation, mortgage, pledge
Lease by the owner before the start
of the usufruct is not extinguished by
such usufruct.
Usufructuary will be liable to the
owner for damages caused by the
fault or negligence of the transferee
or lessee.
General rule: Lease by the usufruct
should terminated at the end of the
usufruct or earlier.
Exception: leases of rural lands,
in which case the lease continues
for the remainder of the
agricultural year
Right to improve the thing
Useful improvements or expenses
only
No alteration of form and substance
Usufructuary may remove
improvements only if it is possible
without damaging the property.
The owner cannot compel the
usufructuary to remove the
improvements. BUT If the
usufructuary does not remove, he
has no right to be indemnified.
Registry of improvements is
necessary to protect the
usufructuary against third persons
regarding the improvements.
If improvements cannot be removed,
such may be used to offset any
damage caused by the usufructuary
to the property.
B. As to the usufructuary right itself
1. Right to alienate
EXCEPT in purely personal
ones or when the title
constituting the usufruct
prohibits the same.
Examples:
- Legal usufruct of
parents (Art. 226 FC)
- Usufruct granted the
usufructuary in
consideration of his
person
- Usufruct acquired
through caucion
juratoria
Sale by the usufructuary
Future crop may be sold; but such
sale will be void if not ratified by the
owner. Its a sale of property not
belonging to the usufructuary and
those gathered at the termination of
the usufruct belonging to the owner.
If things are consumable or were
appraised when delivered, the
usufructuary can dispose of them.
PROPERTY CIVIL LAW
Rights of the naked owner
1. At the beginning of the usufruct
all obligations of the usufructuary
at the beginning of the usufruct
2. During the usufruct
retains title to the thing and
improve it
may alienate the property
3. At the termination or end of the
usufruct
recover property from the
usufructuary in the same
preserved form and substance
with room for ordinary wear and
tear subject to ordinary repairs
Obligations of the Usufructuary
These requirements are conditions
merely to the entry upon the
possession and enjoyment of the
property.
A. At the beginning of the usufruct or
before the exercise of the right of
the usufruct
1. To make an inventory EXCEPT
when
No one will be injured
thereby
Title constituting usufruct
excused the making of
inventory
already makes an inventory
2. To give a bond for the faithful
performance of duties as
usufructuary EXCEPT when
No prejudice would result
Usufruct is reserved by donor
excused usufructuary
Caucion juratoria: a sworn
undertaking wherein the
usufructuary claims that he is
in dire need of the house and
the implements/furniture and
asks that he be allowed to
enjoy the same even without
giving the required security
B. During the usufruct
1. To take care of the things like a
good father of the family
bad use of the thing will not
extinguish the usufruct
Owner becomes entitled to
delivery and administration of
the thing should the
abuse cause substantial
injury to the owner
2. To undertake Ordinary Repairs
for the preservation
if not repairs made by
usufructuary, even after the
demand by the owner, the
latter may pay for the repairs,
with right of reimbursement
from the usufructuary
3. To Notify the Owner of Need to
Undertake Extra-Ordinary Repairs
Those caused by exceptional
circumstances, WON they are
necessary for the preservation
of the thing
Those caused by the natural
use of the thing, but are not
necessary for its preservation
Naked owner obliged to
undertake them but when
made by the owner,
usufructuary pays legal
interest on the amount while
usufruct lasts
Naked owner cannot be
compelled to undertake extra-
ordinary repairs
If indispensable and owner
fails to undertake
extraordinary repairs- may be
made by the usufructuary
4. To notify owner of any act
detrimental to ownership
OR ELSE, usufructuary will be
liable for damage and he
cannot make extraordinary
repairs
5. To shoulder costs of litigation
regarding the usufruct
6. To answer for the fault of alienee,
lessee, or agent of the
usufructuary
Causes of extinguishment of
Usufruct (Art.603) DERM PLT
1. Death of the usufructuary, unless
a contrary intention clearly
appears;
2. Expiration of the period for which
it was constituted, or by the
fulfillment of any resolutory
condition provided in the title
creating the usufruct;
3. Renunciation of the usufructuary;
4. Merger of the usufruct and
ownership in the same person;
5. Prescription;
6. Total Loss of the thing in
usufruct;
7. Termination of the right of the
person constituting the usufruct
Special Cases of Usufruct
1. over a pension or periodical income
(570)
2. of property owned in common (582)
3. of head of cattle (591)
4. over deteriorable property (578)
PROPERTY CIVIL LAW
5. over vineyards and woodlands (575-
576)
6. on mortgaged property (600)
7. over entire patrimony (598)
8. over consumable property (574)
quasi-usufruct
may be on consumables, e.g.,
food, but must be replaced with
equal quantity if not appraised,
must be considered as on their
value
may also be on non-consumables
that gradually deteriorate by use,
e,g,, furniture or car in reality,
the usufruct is converted into a
simple loan not upon consumable
things themselves which are
delivered to the
usufructuary, but upon the
sum representing their value or
upon a quantity of things of the
same kind and quality the
usufructuary, in effect, becomes
the owner of the things in
usufruct, while the grantor
becomes a mere creditor entitled
to the return of the value or of
the things of the same quantity
and quality
X. EASEMENTS
Art. 613. Easement or Servitude:
encumbrance imposed upon an
immovable for the benefit of another
immovable belonging to a different
owner...
Dominant estate: the immovable in
favor of which the easement is
established
Servient estate: the immovable
which is the subject of the easement.
Art. 614. Personal Easements:
established for the benefit of a
community, or of one or more persons
to whom the encumbered estate does
not belong.
- real right or encumbrance imposed on
an immovable for the benefit of another
immovable belonging to a different
owner or for the benefit of a community
or one or more persons to whom the
encumbered estate does not belong by
which the owner is obliged to abstain
from doing or to permit a certain thing
to be done on his estate.
Easements cannot be established on
personal property
Burden should not be so great as to
amount to a taking of his property
It is not essential that the benefit be
great. It is sufficient that there is a
determinate use or utility in favor of
a dominant estate.
Not necessary that the right acquired
under the servitude be exercised.
Servitudes cant be established on
things which are outside the
commerce of man. Such things are
inalienable. Imposition of an
encumbrance would constitute an
alienation.
Servitudes cannot be created on
property of public dominion.
Easement v. Lease
EASEMENT LEASE
Real right WON
registered, WON
real or personal
Real right only
when it is
registered, or
when its subject
matter is real
property and the
duration exceeds 1
year.
Imposed only on
real property
May involve either
real or personal
property
Limited right to the
use of real
property of
another, without
right of possession.
Limited right to
both the
possession and use
of anothers
property.
Easement v. Usufruct
EASEMENT USUFRUCT
Imposed only on
real property.
May involve either
real or personal
property.
Limited to a
particular or
specific use of the
servient estate.
Includes all the
uses and fruits of
the property.
Non-possessory
right over an
immovable
Involves right of
possession in an
immovable or
movable.
Not extinguished
by death of the
dominant owner.
As a rule,
extinguished by
the death of the
usufructuary.
Essential Features of Easements or
Real Servitudes (RAIL-IRI-NA-
RIP)
(1) It is a real right. It gives rise to an
action in rem or real action against
any possessor of the servient estate.
(2) It is a right enjoyed over another
property (jus in re aliena). It cannot
exist in ones own property (nulli res
sua servit). Servient and dominant
PROPERTY CIVIL LAW
estates have to belong to different
persons.
(3) It is a right constituted over an
immovable by nature not over
movables.
(4) It limits the servient owners
right of ownership or the benefit of
the dominant estate. But servient
tenement remains unimpaired. Being
an abnormal limitation of ownership,
it cannot be presumed.
(5) It creates a relation between
tenements.
(6) It can exist only between
neighboring tenements. It cant be
created on another servitude.
(7) It cannot consist in requiring the
owner of the servient estate to do an
act unless the act is accessory to a
praedial servitude (obligation propter
rem).
(8) It may consist in requiring the
owner of the dominant estate
demanding that the owner of the
servient estate refrain from doing
something (servitus in non faciendo),
or that the latter permit that
something be done over the servient
property (servitus in patendo) but
not in the right to demand that the
owner of the servient estate do
something (servitus in faciendo)
except if such act is an accessory
obligation to a praedial servitude.
(9) It is inherent or inseparable from
estate to which they actively or
passively belong. (Art. 617)
Servitudes cannot exist without
tenements. They are merely
accessory. This doesnt mean they
dont have juridical existence of their
own. (Solid Manila vs. Bio Hong)
Inherence refers only to that portion
of the tenement affected by it.
Portion not affected can be alienated
without the servitude.
Contract of transmission of easement
by owner of the dominant estate
may constitute a renunciation or
extinguishments of easement
(10) It is intransmissible, cannot be
alienated separately from the
tenement. It cant be the object of
mortgage and exists even if not
annotated.
(11) It is indivisible. (618)
(12) It has permanence.
Classification
A
s
t
o
r
e
c
e
p
i
e
n
t
o
f
b
e
n
e
f
i
t
Real/Predial
In favor of
another
immovable
(Art.613)
Personal
In favor of a
community or
of 1 or more
persons, may
be public or
private
(Art.614)
i. Public:
vested in the
public at
large or in
some class of
indeterminate
individuals
ii. Private:
vested in a
determinate
individual or
certain
persons
A
s
t
o
i
t
s
s
o
u
r
c
e
Voluntar
y
Establish
ed by will
or
agreeme
nt of the
parties or
by a
testator
(Art.619)
Legal
Impose
d by law
either
for
public
use or
in the
interest
of
private
persons
(Art.619
)
Mixed
Created
partly
by will
or
agree-
ment
and
partly
by law
A
s
t
o
i
t
s
e
x
e
r
c
i
s
e
Continuous
Use of which
is or may be
incessant,
without the
intervention
of any act of
man.
(Art.615)
Discontinou
s
Used at
intervals and
depend upon
acts of men
(Art.615)
A
s
t
o
W
O
N
i
t
s
e
x
i
s
t
e
n
c
e
i
s
i
n
d
i
c
a
t
e
d
Apparent
Made known
and are
continually
kept in view
by external
signs that
reveal the
use and
enjoyment of
the same
(Art.615)
Non-
apparent
Show no
external
indication of
their
existence
(Art.615)
* In general,
negative
easements
are non-
apparent.
PROPERTY CIVIL LAW
A
s
t
o
d
u
t
y
o
f
s
e
r
v
i
e
n
t
o
w
n
e
r
Positive
Imposes upon
the owner of
the servient
estate the
obligation of
allowing
something to
be done or of
doing it
himself
(Art.616)
Negative
Prohibits the
owner of the
servient
estate from
doing
something
which he
could lawfully
do if the
easement did
not exist
(Art.616)
General Rules Relating to Servitudes
(1) No one can have a servitude over
his own property
(2) A servitude cannot consist in
doing
(3) There cannot be a servitude over
another servitude
(4) A servitude must be exercised
civiliter, in a way least
burdensome to the owner of the
land.
(5) A servitude must have a
perpetual cause.
Modes of Acquiring Easements
(1) By Title
a juridical act
which gives rise to
the servitude such
as the law (e.g.
donation, contracts
and wills)
All easements
- continious and
apparent (Art.620)
- continous and
non-apparent
easements
(Art.622)
- discontinous
easements,
whether apparent
or non-apparent
* Discontinuous
easement can only
be acquired by title
and not by
prescription.
(2) By
Prescription of
10 years
Continuous and
apparent
easements
(Art.620)
The time for
reckoning
prescription:
(a) Positive
easements- from
the day on which
the owner of the
dominant estate,
or the person who
may have made
use of the
easement,
commenced to
exercise it upon
the servient estate
(b) Negative
easements- from
the day on which
the owner of the
dominant estate
forbade, by an
instrument
acknowledged
before e notary
public, the owner
of the servient
estate, from
executing an act
which would be
lawful without the
easement.
(Art.621)
* Prescription does
not require good
faith or just title.
General rules for
acquisitive
prescription of
ownership and
other real rights do
not apply to it.
* There must
however be
adverse possession
or exercise of the
easement.
(3) By deed of
recognition
(Art.623)
If easement has
been acquired but
no proof of
existence is
available, and
easement is one
that cannot be
acquired by
prescription
(4) By final
judgment
(Art.623)
(5) By apparent
sign established
by the owner of
2 adjoining
estates.
The existence of an
apparent sign of
easement between
two estates,
PROPERTY CIVIL LAW
established or
maintained by the
owner of both,
shall be
considered, should
either of them be
alienated, as a title
in order that the
easement may
continue actively
and passively,
unless, as the time
the ownership of
the two estates is
divided, the
contrary should be
provided in the
title of conveyance
of either of them,
or the sign
aforesaid should be
removed before
the execution of
the deed. This
provision shall also
apply in case of
the division of a
thing owned in
common by two or
more persons.
(Art. 624.)
Cases
The road is clearly a servitude
voluntarily constituted in favor of the
community under Art. 531. Having been
devoted by NNSC to the use of the
public in general, the road is charged
with public interest. And while so
devoted. NNSC may not establish
discriminatory exceptions against any
private persons. (North Negros Sugar
Co. vs Hidalgo)
Since the construction of the church,
there had been a side door in the wall
through which the worshippers attending
mass enter and leave, passing and
entering the land in question. As this use
of the land has been continuous, it is
evident that the church has acquired a
right to such use by prescription, in view
of the time that has elapsed since the
church was built and dedicated to
religious worship, during which period
the Municipality has not prohibited the
passage over the land by persons who
attend services held by the church.
(Municipality of Dumangas vs Bishop
of Jaro)
Easement of light and view go together.
Acquisition of easements is by title or by
prescription. The visible and permanent
sign of an easement is the title that
characterizes its existence. Existence of
the apparent sign had the same effect as
a title of acquisition of the easement of
the light and view upon death of original
owner. (Amor vs. Florentino)
An easement of a right of way cannot be
acquired through prescription because
possession of right of way is intermittent
and discontinuous. Acquisitive
prescription requires that the possession
be continuous or uninterrupted (Art.
1118). (Ronquillo v Roco)
Rights and Obligations of Owners of
Dominant and Servient Estates
Art. 625. Upon establishment of an
easement, all the rights necessary for
its use are considered granted.
(1) Rights of the dominant estate
(EWW)
(a) To use the easement (Art.626)
and exercise all rights necessary
for the use (Art. 627)
(b) To use at his expense all
necessary works for the use and
preservation of the easement.
(Art. 627)
(c) In a right of way, to ask for
change in width of easement
sufficient for needs of dominant
estate.
Such right of way may be
demanded when there is
absolutely no access or even
when there is one, it is difficult or
grossly insufficient. Art. 651
also provides that the width of
the easement of right of way
shall be that which is sufficient
for the needs of the dominant
estate, and may accordingly be
changed from time to time.
(Encarnacion v CA)
(2)Obligations of dominant estate
(UNAC)
(a) To use easement for the benefit
of immovable and in the manner
originally established. (Art. 626)
(b) To notify owner of the servient
estate before making repairs in
manner inconvenient to servient
estate. (Art. 627)
(c) Not to alter easement or render it
burdensome.
PROPERTY CIVIL LAW
(d) If there are several dominant
estates unless he renounces his
interest: to contribute the
expenses of works necessary for
use and preservation servitude.
(Art. 628)
Owner of dominant estate has the
right to use accessory servitudes or
those necessary for the use of other
servitudes regarded as principals
ones.
Works must be executed in the
manner of least inconvenience to the
servient who cannot recover
indemnity for the inevitable damages
that may be suffered by the servient
owner.
If dominant owner violates
restrictions, he can be compelled to
restore the things their original
condition and to pay indemnity for
the damages.
If dominant tenement is alienated,
transferee can be required to restore
things their original condition but he
cannot be required to pay indemnity
because this is a personal liability of
the former owner.
(3) Rights of the servient estate
(RC)
(a) To retain ownership and use of
his property (Art 630)
(b) To change the place and manner
of the use of the easement
(4)Obligations of the servient estate
(IC)
(a) Not to impair the use of the
easement. (Art. 629)
(b) To contribute proportionately to
expenses to use the easement
[Art 628(2)]
Owner of servient tenement must
abstain from rendering the use of the
easement more inconvenient to the
owner of the dominant estate.
If owner of the servient estate
performs act or constructs works
impairing the use of the servitude,
the owner of the dominant tenement
may ask for the destruction of such
works and restoration with damages.
Injunction is another remedy.
Modes of Extinguishment of
Easements (Art.631) (MINERRO)
(1)Merger must be absolute, perfect
and definite, not merely temporary.
If cause for cessation of merger is
inherent like nullity or rescission,
easement is reestablished. If
extrinsic, there is no revival.
If the owner of the merged estate
sells one of the estates later,
easement is not reestablished.
(2)Non- user for 10 years
(a) Computation of period
(1) Discontinuous easements:
counted from the day they
ceased to be used
(2) Continuous easements:
counted from the day an act
adverse to the exercise took
place
(b) Use by a co-owner of the
dominant estate bars prescription
with respect to others (Art.633)
(c) Servitudes not yet exercised
cannot be extinguished by non-user
Non user must be due to
abstention by dominant owner and
not to fortuitous event. If dominant
estate is used in common, exercise
of the easement of one of the co
owner inures to the benefit of all
others and preserves the easement
which is indivisible.
Erection of works incompatible with
the exercise of the easement or
totally obstructing the servitude,
agreed to by the owner of the
dominant estate, amounts to tacit
renunciation and extinguishes the
servitude.
Right or power to claim exercise of
the legal servitude do not prescribe.
(3) Impossibility of use
When either or both of the estates
fall into such condition that the
easement cannot be used; but it
shall revive if the subsequent
condition of the estates or either of
them should again permit its use,
unless when the use becomes
possible, sufficient time for
prescription has elapsed, in
accordance with the provisions of the
preceding number;
This mode arises from the condition
of the tenements and only suspends
the servitude unlit such time when it
can be used again.
10 years cap for suspension,
otherwise, extinguished by
prescription as previously provided.
Eg. Flooding of servient tenement
over which a right of way exists.
PROPERTY CIVIL LAW
(4) Expiration of term or fulfillment
of resolutory condition
By the expiration of the term or the
fulfillment of the condition, if the
easement is temporary or
conditional;
(5) Renunciation of owner of the
dominant estate
It must be specific, clear, express.
Fact that owners of the dominant
estate refrained from claiming the
servitude without any positive act to
imply a real waiver or renunciation
does not bring the case within the
provisions of this article.
Occurs only in voluntary easements.
(6) Redemption agreed upon
between the owners.
By the redemption agreed upon
between the owners of the dominant
and servient estates.
-Voluntary
-Stipulated conditions, which
extinguish easements.
(7) Other causes not mentioned
(a) Annulment or rescission or
cancellation of the title constituting
the easement.
(b) Termination of the right of grantor
to create the easement ( e.g.
redemption of the property sold a
retro because of the exercise of the
right of conventional redemption (
Art. 1618)
(c) Abandonment of the servient
estate
(d) Eminent domain
(e) Special cause of extinction of legal
right of way, the opening of an
adequate outlet to the highway
extinguishes the easement, if
servient owner makes a demand
for such extinguishment.(Art. 655)
(f) Registration of the servient estate
as FREE
(g) Permanent impossibility to make
use of the easement.
XI. LEGAL EASEMENTS
DEFINITION
Art. 634. Imposed or mandated by law
and which have for their object either
public use or the interest of private
persons, and thereby become a
continuing property right.
2. KINDS (as to their use or object)
(1) Public legal easements for public or
communal use
(2) Private legal easements for the
interest of private persons or for private
use including:
Waters
Right of way
Party Wall
Light & View
Drainage
Intermediate Distances
Against Nuisance
Lateral & Subjacent Support
(1)Laws Governing Legal Easements
Generally, special laws and the CC
govern easements but note that
private legal easements may be
governed by agreement of the
interested parties whenever the law
does not prohibit it and no injury is
suffered by a third person.
(a) Those established for the use of
water or easements relating
waters (Arts. 637 648)
(1) Natural drainage of waters
with stones or earth carried
with them
waters which form in upper
tenements and flow to the lower
ones by force of nature and not by
those caused by acts of man.
Owner of tenements cannot
construct works to increase the
burden of this servitude.
Owner of the lower tenements
cannot make works which impede
the servitude. But he can construct
work necessary to prevent damage
to himself provided it does not
impede the servitude and he does
not cause damage to other
tenements
Rain water from roofs of buildings
and water from houses must be
received on ones own land.
It is the duty of the owner of the
building to direct the rainwater to a
public place or to establish an
easement of passage of water
through a neighboring tenement.
PROPERTY CIVIL LAW
Case
The dikes are continuous easements
since it does depend upon the act of
man, but is due to gravity. Being such, it
is subject to the extinction to the non-
user (20 years in the Old Code and 10
years in the New Code). (Ongsiaco v.
Ongsiaco)
(2) Easements on lands along
riverbanks
For public use: 3m zone along
margins for navigation, floatage,
fishing and salvage.
If navigable Towpath easement for
navigation and floatage
If private land expropriate, since it
is for private use.
(3) Abutment of Land
Non owner builder of the dam pay
owner of land for the abutment of
the land.
abutment part of dam that extends
to the riverbank or dam
if no easement previously
established, and the dam floods the
land injured owner or his
representative can remove it as
private nuisance.
(4) Aqueduct
Any person who may wish to use upon
his own estate any water of which he
can dispose shall have the right to make
it flow through the intervening estates,
with the obligation to indemnify their
owners, as well as the owners of the
lower estates upon which the waters
may filter or descend. (Art. 642.)
Obligation of the dominant estate:
(1) To prove that he can dispose of the
water and that it is sufficient for the use
for which it is intended;
(2) To show that the proposed right of
way is the most convenient and least
onerous to third persons;
(3) To indemnify the owner of the
servient estate
The easement of aqueduct for
private interest cannot be imposed
on buildings, courtyards, annexes, or
outhouses, or on orchards or gardens
already existing.
For legal purposes, the easement of
aqueduct shall be considered as
continuous and apparent.
(5) Drawing waters and
watering materials
Compulsory easements for drawing
water or for watering animals can be
imposed only for reasons of public use in
favor of a town or village, after payment
of the proper indemnity. (Art. 640)
Easements for drawing water and for
watering animals carry with them the
obligation of the owners of the servient
estates to allow passage to persons and
animals to the place where such
easements are to be used, and the
indemnity shall include this service.
(Art. 641)
Easements of the right of way for the
passage of livestock known as animal
path, animal trail or any other, and
those for watering places, resting places
and animal folds, shall be governed by
the ordinances and regulations relating
thereto, and, in the absence thereof, by
the usages and customs of the place.
(Art. 657)
Without prejudice to rights legally
acquired, the animal path shall not
exceed the width of 75 meters, and
the animal trail that of 37 meters
and 50 centimeters.
Whenever it is necessary to establish
a compulsory easement of the right
of way or for a watering place for
animals, the provisions of this
Section and those of Articles 640 and
641 shall be observed. In this case
the width shall not exceed 10
meters.
(6) Stop lock and sluice gate
Art. 647. One who for the purpose of
irrigating or improving his estate, has to
construct a stop lock or sluice gate in
the bed of the stream from which the
water is to be taken, may demand that
the owners of the banks permit its
construction, after payment of damages,
including those caused by the new
easement to such owners and to the
other irrigators.
(a)Easement of right of way
Requisites before demanding a right
of way (Articles 649-650)
(a) owner, or anyone with a real
right to cultivate, or use
immovable
(b) not due to acts of the proprietor
of the dominant estate
(c) surrounded by immovables
belonging to others, without
adequate outlet to public highway
i. absolutely no access
PROPERTY CIVIL LAW
ii. difficult or dangerous to use
(d) right of way claimed is the least
prejudicial to the servient estate
(e) payment of the proper indemnity
(i) permanent passage value of
the land
(ii) without permanent passage
payment of damages
To justify the imposition of this
servitude, there must be a real
necessity for it. Mere convenience is
not enough. Even when there is a
necessity, if it can be satisfied
without imposing the servitude,
servitude should not be imposed.
Owner can not by his own act isolate
his property from the public highway
and then claim an easement of way
through an adjacent estate.
Access to highway may be
demanded:
(a) when there is absolutely no
access to a public highway
(b) when even if there is one, it is
difficult or dangerous to use
or is grossly insufficient
Payment of the value of the land for
permanent use of easement does not
mean an alienation of the land
occupied.
Criterion of the least prejudice to the
servient estate must prevail over the
criterion of the shortest distance.
(Quimen v. Quimen)
Before judicial decision,
establishment of any road would
constitute an invasion of the land
with all consequences resulting from
such transgression.
It is the needs of the dominant
estate which determines the width of
the passage. Servitude may thus be
modified after it has already been
established.
Whenever a piece of land acquired by
sale, exchange or partition, is
surrounded by other estates of the
vendor, exchanger, or co-owner, he
shall be obliged to grant a right of way
without indemnity.
In case of a simple donation, the donor
shall be indemnified by the donee for the
establishment of the right of way. (Art.
652)
Servitude without indemnity is
considered as a tacit condition of the
sale, exchange or partition, but not
implied in a simple donation.
When the right of way originally
established without indemnity should
disappear or become useless, a legal
servitude may be demanded with the
payment of the indemnity.
On the other hand, if grantor/
exchanger/ vendors property
becomes isolated, he must pay
indemnity.
Art. 654. If the right of way is
permanent, the necessary repairs shall
be made by the owner of the dominant
estate. A proportionate share of the
taxes shall be reimbursed by said owner
to the proprietor of the servient estate.
Obligations of praedium dominans;
necessary repairs, proportionate
share of taxes.
Art. 655. If the right of way granted to
a surrounded estate ceases to be
necessary because its owner has joined
it to another abutting on a public road,
the owner of the servient estate may
demand that the easement be
extinguished, returning what he may
have received by way of indemnity. The
interest on the indemnity shall be
deemed to be in payment of rent for the
use of the easement.
The same rule shall be applied in
case a new road is opened giving access
to the isolated estate.
In both cases, the public highway must
substantially meet the needs of the
dominant estate in order that the
easement may be extinguished.
Extinguishment Not Ipso Jure
(only) owners of the servient estate
has to ask for it and return
indemnity.
Owner of the dominant estate may
not ask for the return of the
indemnity unless servient owner asks
for the extinguishment.
Offset interest of the indemnity with
rentals of the land.
Art. 656. If it be indispensable for the
construction, repair, improvement,
alteration or beautification of a building,
to carry materials through the estate of
another, or to raise therein scaffolding
or other objects necessary for the work,
the owner of such estate shall be obliged
to permit the act, after receiving
payment of the proper indemnity for the
damage caused him.
This may be demanded by owner and
usufructuary.
Word indispensable should not be
understood as indicating that it
would be impossible to construct or
repair the building. It is enough that
PROPERTY CIVIL LAW
it would be extremely difficult to do
so without the easement.
Animal Path
exceed the width of 75 meters, and
the animal trail that of 37 meters
and 50 centimeters.
Whenever it is necessary to establish
a compulsory easement of the right
of way or for a watering place for
animals, the provisions of this
Section and those of articles 640 and
641 shall be observed. In this case
the width shall not exceed 10
meters.(570a)
Cases
A voluntary easement of right of way
could be extinguished only by mutual
agreement or by renunciation of the
owner of the dominant estate. The
opening of an adequate outlet to a
highway can extinguish only legal or
compulsory easements, not voluntary
easements. (La Vista v. CA)
An easement of right of way can be
established through continued use.
(Vda. de Baltazar v CA)
(c) Easement of party wall
Art. 658. The easement of party wall
shall be governed by the provisions of
this Title, by the local ordinances and
customs insofar as they do not conflict
with the same, and by the rules of co-
ownership
Party wall is a co-ownership in a
special class by itself:
(1) It is indivisible.
(2) The part pertaining to each co-
owner can be materially
designated.
(3) Rights of a co-owner of a party
wall are greater than those of an
ordinary co-owner and with
respect to increasing the height
of the wall.
Wall may be owned in common by
the adjoining owners either form its
construction or by a subsequent act.
Each owner can insert the beams of
his building in the wall to the extent
of its entire thickness.
A party wall is one which is built by
common agreement by getting land
from the adjoining tenements in
equal parts. Each owner may use the
wall but only to the extent of one-
half of its thickness.
Art. 659. The existence of an easement
of party wall is presumed, unless there
is a title, or exterior sign, or proof to the
contrary:
(1) In dividing walls of adjoining
buildings up to the point of common
elevation;
(2) In dividing walls of gardens or yards
situated in cities, towns, or in rural
communities;
(3) In fences, walls and live hedges
dividing rural lands.
Co-ownership must be accepted
unless the contrary appears from the
title showing that the entire wall
belongs exclusively to one of the
property owners or unless there is an
exterior sign to destroy such
presumption.
Art. 660. It is understood that there is
an exterior sign, contrary to the
easement of party wall:
(1) Whenever in the dividing wall of
buildings there is a window or opening;
(2) Whenever the dividing wall is, on
one side, straight and plumb on all its
facement, and on the other, it has
similar conditions on the upper part Art.
657. Easements of the right of way for
the passage of livestock known as
animal path, animal trail or any other,
and those for watering places, resting
places and animal folds, shall be
governed by the ordinances and
regulations relating thereto, and, in the
absence thereof, by the usages and
customs of the place.
exceed in any case the width of 75
meters, and the animal trail that of 37
meters and 50 centimeters.
Whenever it is necessary to establish a
compulsory easement of the right of way
or for a watering place for animals, the
provisions of this Section and those of
Articles 640 and 641 shall be observed.
In this case the width shall not exceed
10 meters. (570a), but the lower part
slants or projects outward;
(3) Whenever the entire wall is built
within the boundaries of one of the
estates;
(4) Whenever the dividing wall bears the
burden of the binding beams, floors and
roof frame of one of the buildings, but
not those of the others;
(5) Whenever the dividing wall between
courtyards, gardens and tenements is
constructed in such a way that the
coping sheds the water upon only one of
the estates;
PROPERTY CIVIL LAW
(6) Whenever the dividing wall, being
built of masonry, has stepping stones,
which at certain intervals project from
the surface on one side only, but not on
the other;
(7) Whenever lands inclosed by fences
or live hedges adjoin others which are
not inclosed.
In all these cases, the ownership of the
walls, fences or hedges shall be deemed
to belong exclusively to the owner of the
property or tenement which has in its
favor the presumption on any one of
these signs. (573)
Art. 661. Ditches or drains opened
between two estates are also presumed
as common to both, if there is no title or
sign showing the contrary.
There is a sign contrary to the part-
ownership whenever the earth or dirt
removed to open the ditch or to clean it
is only on one side thereof, in which
case the ownership of the ditch shall
belong exclusively to the owner of the
land having this exterior sign in its
favor.
Art. 662. The cost of repairs and
construction of party walls and the
maintenance of fences, live hedges,
ditches, and drains owned in common,
shall be borne by all the owners of the
lands or tenements having the party wall
in their favor, in proportion to the right
of each.
Nevertheless, any owner may exempt
himself from contributing to this charge
by renouncing his part-ownership,
except when the party wall supports a
building belonging to him.
Art. 663. If the owner of a building,
supported by a party wall desires to
demolish the building, he may also
renounce his part-ownership of the wall,
but the cost of all repairs and work
necessary to prevent any damage which
the demolition may cause to the party
wall, on this occasion only, shall be
borne by him.
Art. 664. Every owner may increase the
height of the party wall, doing at his own
expense and paying for any damage
which may be caused by the work, even
though such damage be temporary.
The expenses of maintaining the wall in
the part newly raised or deepened at its
foundation shall also be paid for by him;
and, in addition, the indemnity for the
increased expenses which may be
necessary for the preservation of the
party wall by reason of the greater
height or depth which has been given it.
If the party wall cannot bear the
increased height, the owner desiring to
raise it shall be obliged to reconstruct it
at his own expense and, if for this
purpose it be necessary to make it
thicker, he shall give the space required
from his own land.
Art. 665. The other owners who have
not contributed in giving increased
height, depth or thickness to the wall
may, nevertheless, acquire the right of
part-ownership therein, by paying
proportionally the value of the work at
the time of the acquisition and of the
land used for its increased thickness.
Art. 666. Every part-owner of a party
wall may use it in proportion to the right
he may have in the co-ownership,
without interfering with the common and
respective uses by the other co-owners.
Each part-owner can use the party
wall only in proportion to his interest
(d) Easement of Light and View
Art. 667. No part-owner may, without
the consent of the others, open through
the party wall any window or aperture of
any kind.
Such act would imply the exercise of
the right of ownership by the use of
the entire thickness of the wall. It
would be an invasion of the right of
the other part owners.
Art. 668. The period of prescription for
the acquisition of an easement of light
and view shall be counted:
(1) From the time of the opening of the
window, if it is through a party wall; or
(2) From the time of the formal
prohibition upon the proprietor of the
adjoining land or tenement, if the
window is through a wall on the
dominant estate.
Art. 669. When the distances in Article
670 are not observed, the owner of a
wall which is not party wall, adjoining a
tenement or piece of land belonging to
another, can make in it openings to
admit light at the height of the ceiling
joints or immediately under the ceiling,
and of the size of thirty centimeters
square, and, in every case, with an iron
grating imbedded in the wall and with a
wire screen.
PROPERTY CIVIL LAW
Nevertheless, the owner of the tenement
or property adjoining the wall in which
the openings are made can close them
should he acquire part-ownership
thereof, if there be no stipulation to the
contrary.
He can also obstruct them by
constructing a building on his land or by
raising a wall thereon contiguous to that
having such openings, unless an
easement of light has been acquired.
Openings allowed are for the purpose
of admitting light. They can be
made only in the walls of buildings
and not in the walls separating
gardens or yards because they have
no need for such openings
The period to require the closing of
the illegal opening begins to run from
the moment such opening is made.
But it is only the action to compel the
closure which prescribes
Although action to compel the closing
has prescribed, this does not mean
servitude has been acquired by
person who opened them. Servitude
is negative and period for acquisitive
prescription will begin to run only
from the time that the owner
asserting the servitude has forbidden
the owner of adjoining tenement
from doing something he latter could
lawfully do without the servitude.
Art. 670. No windows, apertures,
balconies, or other similar projections
which afford a direct view upon or
towards an adjoining land or tenement
can be made, without leaving a distance
of two meters between the wall in which
they are made and such contiguous
property.
Neither can side or oblique views upon
or towards such conterminous property
be had, unless there be a distance of
sixty centimeters.
The nonobservance of these distances
does not give rise to prescription.
Direct View that which is obtained
from a wall parallel to the boundary
line, such that from the opening in
such wall, it is possible to see the
adjoining tenement without the
necessity of putting out or turning
ones head
Side or oblique viewthat which is
obtained from a wall a an angle with
the boundary line such that in order
to see the adjoining tenement, it is
necessary to put out or turn ones
head to the left or to the right
Mere opening of windows in violation
of the present article does not give
rise to the easement of light and
view by prescription.
Art. 672. The provisions of Article 670
are not applicable to buildings separated
by a public way or alley, which is not
less than three meters wide, subject to
special regulations and local ordinances.
Art. 673. Whenever by any title a right
has been acquired to have direct views,
balconies or belvederes overlooking an
adjoining property, the owner of the
servient estate cannot build thereon at
less than a distance of three meters to
be measured in the manner provided in
Article 671. Any stipulation permitting
distances less than those prescribed in
Article 670 is void. Art. 673. Whenever
by any title a right has been acquired to
have direct views, balconies or
belvederes overlooking an adjoining
property, the owner of the servient
estate cannot build thereon at less than
a distance of three meters to be
measured in the manner provided in
Article 671. Any stipulation permitting
distances less than those prescribed in
Article 670 is void.
This article refers to a true servitude.
Acquisition may be through contact,
testament, or prescription. Distance
may be increased by stipulation of
the parties. It may also be extended
by prescription.
(e)Drainage of Buildings
Art. 674. The owner of a building shall
be obliged to construct its roof or
covering in such manner that the rain
water shall fall on his own land or on a
street or public place, and not on the
land of his neighbor, even though the
adjacent land may belong to two or
more persons, one of whom is the owner
of the roof. Even if it should fall on his
own land, the owner shall be obliged to
collect the water in such a way as not to
cause damage to the adjacent land or
tenement.
Falling water is res nullius and has
no owner. Every owner of a house
or building would have aright to
dispose of it in any manner even to
the prejudice of neighbors had it not
been for the provisions in this Code
Last sentence is an exception to Art
637 which requires lower tenements
to receive water flowing naturally
from higher tenements.
PROPERTY CIVIL LAW
Art. 675. The owner of a tenement or a
piece of land, subject to the easement of
receiving water falling from roofs, may
build in such manner as to receive the
water upon his own roof or give it
another outlet in accordance with local
ordinances or customs, and in such a
way as not to cause any nuisance or
damage whatever to the dominant
estate.
Receive water through
(1) another roof
(2) another outlet
In accordance with local ordinances
or customs
Not a nuisance to the dominant
estate
Art. 676. Whenever the yard or court of
a house is surrounded by other houses,
and it is not possible to give an outlet
through the house itself to the rain
water collected thereon, the
establishment of an easement of
drainage can be demanded, giving an
outlet to the water at the point of the
contiguous lands or tenements where its
egress may be easiest, and establishing
a conduit for the drainage in such
manner as to cause the least damage to
the servient estate, after payment of the
property indemnity.
(f) Intermediate Distances
and Works for Certain
Constructions and Plantings
Art. 677. No constructions can be built
or plantings made near fortified places
or fortresses without compliance with
the conditions required in special laws,
ordinances, and regulations relating
thereto.
Art. 678. No person shall build any
aqueduct, well, sewer, furnace, forge,
chimney, stable, depository of corrosive
substances, machinery, or factory which
by reason of its nature or products is
dangerous or noxious, without observing
the distances prescribed by the
regulations and customs of the place,
and without making the necessary
protective works, subject, in regard to
the manner thereof, to the conditions
prescribed by such regulations. These
prohibitions cannot be altered or
renounced by stipulation on the part of
the adjoining proprietors.
In the absence of regulations, such
precautions shall be taken as may be
considered necessary, in order to avoid
any damage to the neighboring lands or
tenements.
Art. 679. No trees shall be planted near
a tenement or piece of land belonging to
another except at the distance
authorized by the ordinances or customs
of the place, and, in the absence
thereof, at a distance of at least two
meters from the dividing line of the
estates if tall trees are planted and at a
distance of at least fifty centimeters if
shrubs or small trees are planted.
Every landowner shall have the right to
demand that trees hereafter planted at a
shorter distance from his land or
tenement be uprooted.
The provisions of this article also apply
to trees which have grown
spontaneously. (591a)
Art. 680. If the branches of any tree
should extend over a neighboring estate,
tenement, garden or yard, the owner of
the latter shall have the right to demand
that they be cut off insofar as they may
spread over his property, and, if it be
the roots of a neighboring tree which
should penetrate into the land of
another, the latter may cut them off
himself within his property.
Owner of the neighboring tenement
can cut the roots without necessity of
notice to the owner of the trees. But
as to the branches, it is necessary to
as that they be cut.
Art. 681. Fruits naturally falling upon
adjacent land belong to the owner of
said land.
(g) Easement against Nuisance
Art. 682. Every building or piece of land
is subject to the easement which
prohibits the proprietor or possessor
from committing nuisance through
noise, jarring, offensive odor, smoke,
heat, dust, water, glare and other
causes.
Art. 683. Subject to zoning, health,
police and other laws and regulations,
factories and shops may be maintained
provided the least possible annoyance is
caused to the neighborhood.
Nuisancethat class of wrongs which
arise from unreasonable, unwarranted,
or unlawful use by a person of his own
property and which produces material
annoyance, inconvenience, discomfort,
PROPERTY CIVIL LAW
or harm that the law will presume a
consequent damage.
Whether the effects of the use of
ones property constitutes a nuisance
depends upon the circumstances.
Their penetration into another
tenement in a limited measure is
permissible. Even if these effects
cause material injury, they would
constitute a nuisance if they result
from the utilization of a tenement in
a manner which is usual or current in
the locality.
(h) Easement of Lateral and
Subjacent Support
Art. 684. No proprietor shall make such
excavations upon his land as to deprive
any adjacent land or building of
sufficient lateral or subjacent support.
Owner has a right to excavate on his
own land up to the boundary line of
the building land. This easement
prevents him from excavating so
close as to deprive the adjoining
estate of its natural support and
cause it to crumble.
There are cases where surface
belongs to one person and substrata
may belong to or be lawfully used by
others. This is where easement of
subjacent support exists. Owners of
rights below the surface may
excavate but this imposes upon them
the duty to refrain from removing
such sufficient support which will
protect the surface from subsiding
Remedies for violation:
(1) Action for damages
(2) Injunction
Action may be maintained against
anyone who causes the injury
whether he is the owner or not.
Contractor is liable jointly with the
owner of the land. It is the person
who made the excavation which
causes the injury and not the person
in possession when the injury occurs,
who is liable for damages.
Art. 685. Any stipulation or
testamentary provision allowing
excavations that cause danger to an
adjacent land or building shall be void.
Art. 686. The legal easement of lateral
and subjacent support is not only for
buildings standing at the time the
excavations are made but also for
constructions that may be erected.
Art. 687. Any proprietor intending to
make any excavation contemplated in
the three preceding articles shall notify
all owners of adjacent lands.
Notice enables the adjoining owner
to take the necessary precautions to
protect their lands and buildings. It
must be sufficient to inform the
nature and the extent of the
proposed excavation.
Although person making the excavation
has given notice, he is bound to exercise
reasonable care and skill so as not to
cause damage.
XII. VOLUNTARY EASEMENTS
Art. 688. Every owner of a tenement or
piece of land may establish thereon the
easements
which he may deem suitable, and
in the manner and form which he
may deem best
provided he does not contravene
the laws, public policy or public
order
Art. 690. Whenever the naked
ownership of a tenement or piece of land
belongs to one person and the beneficial
ownership to another, no perpetual
voluntary easement may be established
thereon without the consent of both
owners.
Art. 691. In order to impose an
easement on an undivided tenement, or
piece of land, the consent of all the co-
owners shall be required.
The consent given by some only, must
be held in abeyance until the last one of
all the co-owners shall have expressed
his conformity.
But the consent given by one of the co-
owners separately from the others shall
bind the grantor and his successors not
to prevent the exercise of the right
granted.
Art. 693. If the owner of the servient
estate should have bound himself, upon
the establishment of the easement, to
bear the cost of the work required for
the use and preservation thereof, he
may free himself from this obligation by
renouncing his property to the owner of
the dominant estate.
PROPERTY CIVIL LAW
Who may establish voluntary
easements:
The OWNER possessing capacity to
ENCUMBER property may constitute
voluntary servitudes. (Art. 688)
The usufructuary, and even the
possessor in good faith, does not
have the right to do so because the
creation of a servitude is a
disposition of part of the right of
ownership, and no one but an
owner may do this.
A general capacity to contract is not
sufficient.
If there are various owners, ALL
must CONSENT, but consent once
given is irrevocable. (Art. 690 and
691)
Hence, their consent need not be
simultaneous.
In whose favor they are established:
(a)Praedial Servitudes
For the owner of the dominant
estate
For any other person having any
juridical relation with the
dominant estate, if the owner
ratifies it.
(b)Personal Servitudes
For anyone capacitated to accept
In case of property under usufruct
The usufructuary must not be
prejudiced (Art 689)
Rights and Obligations
These are determined by the
(1) Title, and
(2) Possession (in case of
prescription enlarging or
diminishing the initial voluntary
easement) (Art. 692)
Where the owner bound himself
to pay for the maintenance or do
some service he may abandon his
tenement and relieve himself of his
obligation (Art. 693)
To produce the transmission of
ownership over the tenement
abandoned, the abandonment must
be made in the proper juridical form
required for the transmission of the
ownership of immovable property.
XIII. NUISANCE
Art. 694. A nuisance is any act,
omission, establishment, business,
condition of property, or anything else
which: (HOSDU)
(1) Injures or endangers the health or
safety of others; or
(2) Annoys or offends the senses; or
(3) Shocks, defies or disregards decency
or morality; or
(4) Obstructs or interferes with the free
passage of any public highway or street,
or any body of water; or
(5) Hinders or impairs the use of
property.
Classification of Nuisance
Nature
1. Nuisance Per Se or at Law
2. Nuisance Per Accidens or in Fact
Scope Of Their Injurious Effects
1. Public
2. Private
3. Mixed
Nuisance Per Se (Nuisance at Law)
nuisance at all times and under any
circumstances, REGARDLESS OF
LOCATION OR SURROUNDINGS.
Nuisance Per Accidens (Nuisance in
Fact)
One that becomes a nuisance by
reason of circumstances and
surroundings
Public Nuisance
It causes hurt, inconvenience, or injury
to the public, generally, or to such part
of the public as necessarily comes in
contact it
public nuisance=common nuisance
It is a direct encroachment upon public
rights or property which results
injuriously to the public
Private Nuisance
One which violates only private rights
and produces damages to but one or a
few persons
Liability of Creator of Nuisance
General Rule: he who creates a
nuisance is liable for the resulting
damages and, ordinarily, his liability
continues as long as the nuisance
continues.
He whose duty is to abate a nuisance
should answer for the consequences
resulting from its continuance
No one is to be held liable for a
nuisance which he cannot himself
physically abate
All parties to the creation or
maintenance of a nuisance per se are
responsible for its effect without
limitation of conditions or of time.
Liability of Transferees
To render him liable, he must
knowingly continue the nuisance, and
generally, he is not liable for
PROPERTY CIVIL LAW
continuing it in its original form, unless
he has been notified of its existence
and requested to remove it, or has
actual knowledge that it is a nuisance
and injurious to the rights of others.
Nature of liability is solidary
Art. 697. The abatement of a nuisance
does not preclude the right of any
person injured to recover damages for
its past existence.
Art. 698. Lapse of time cannot legalize
any nuisance, whether public or private.
No Prescription
The creation and maintenance of a
public nuisance is punishable criminally
hence, it should prevent the
acquisition of a right to maintain it.
Art. 699. The remedies against a public
nuisance are:
(1) A prosecution under the Penal Code
or any local ordinance (only for public
nuisance): or
(2) A civil action; or
(3) Abatement, without judicial
proceedings.
Judgment With Abatement
Art. 700. The district health officer shall
take care that one or all of the remedies
against a public nuisance are availed of.
Art. 701. If a civil action is brought by
reason of the maintenance of a public
nuisance, such action shall be
commenced by the city or municipal
mayor.
Art. 702. The district health officer shall
determine whether or not abatement,
without judicial proceedings, is the best
remedy against a public nuisance.
Art. 703. A private person may file an
action on account of a public nuisance, if
it is specially injurious to himself.
Special Injury to Individual
GENERAL RULE: a public nuisance
gives no right of action to any
individual but must be abated by a
proceeding instituted in the name of
the State
EXCEPTION: an individual who
suffered some special damage by
reason of a public nuisance, different
from that sustained by the general
public, may maintain a suit in equity
for an injunction to abate it, or an
action for damages
In other words, a public nuisance is
not actionable by an individual unless
and until it becomes as to him, a
private nuisance; i.e., until he suffers
some special and definite harm.
Art. 704. Any private person may abate
a public nuisance which is specially
injurious to him by removing, or if
necessary, by destroying the thing which
constitutes the same, without
committing a breach of the peace, or
doing unnecessary injury. But it is
necessary:
(1) That demand be first made upon the
owner or possessor of the property to
abate the nuisance;
(2) That such demand has been
rejected;
(3) That the abatement be approved by
the district health officer and executed
with the assistance of the local police;
and
(4) That the value of the destruction
does not exceed three thousand pesos.
Right of Individual to Abate a Public
Nuisance
Requisites
1. Must be exercised only in cases
of urgent or extreme necessity
2. Nuisance must be actually
existing at the time when
abatement is undertaken
3. The summary abatement should
be resorted to within a reasonable
time after knowledge of the
nuisance is acquired or should have
been acquired by the person
entitled to abate
4. Must give a reasonable notice of
his intention; a demand must be
made
5. The means employed must be
reasonable
6. The abatement must be approved
by the district health officer
7. The property must not be
destroyed unless it is absolutely
necessary to do so; the civil code,
however, provides a limitation, that
the value of destruction shall not
exceed three thousand pesos
8. The right must always be
exercised with the assistance of the
local police
Art. 705. The remedies against a
private nuisance are:
(1) A civil action; or
(2) Abatement, without judicial
proceedings.
PROPERTY CIVIL LAW
Right to Damages
A person may maintain an action at
law for damages caused by a nuisance
The payment of damages is generally
a mere reparation for past injuries,
and not an authority to continue the
wrong.
each repetition of it gives rise to a new
cause of action
Defenses to Action
Public Necessity
Estoppel
Art. 706. Any person injured by a
private nuisance may abate it by:
removing, or
if necessary, by destroying the
thing which constitutes the
nuisance
o without committing a
breach of the peace or
doing unnecessary injury
o procedure for extrajudicial
abatement of a public
nuisance by a private
person be followed
Who may sue on Private Nuisances
Ownership of the legal title is not
necessary. Even a possessor may sue
Art. 707. A private person or a public
official extrajudicially abating a nuisance
shall be liable for damages:
(1) If he causes unnecessary injury; or
(2) If an alleged nuisance is later
declared by the courts to be not a real
nuisance.
Remedies of Property Owner
He may bring an action for replevin, or
enjoin its sale and damages if it is has
been sold; or action to enjoin private
parties from proceeding to abate a
supposed nuisance
Ask court to determine WON it is
indeed a nuisance
XIV. REGISTRY OF PROPERTY
Art. 708. The Registry of Property has
for its object the inscription or
annotation of acts and contracts relating
to the ownership and other rights over
immovable property.
Concept
The Registry of Real Property may be
defined as a public center where the
true condition of real estate is made
clear by registering all transferable
title of ownership and of real rights
which affect it and even where the
capacity of free disposition on the part
of an individual is modified
Purposes of the Principle of Publicity
To give notice of the true status of the
property
To record transmissions and
modifications of real rights
To prevent fraud
To guarantee the effectivity of rights
Art. 709. The titles of ownership, or of
other rights over immovable property,
which are not duly inscribed or
annotated in the Registry of Property
shall not prejudice third persons.
Art. 710. The books in the Registry of
Property shall be public for those who
have a known interest in ascertaining
the status of the immovables or real
rights annotated or inscribed therein.
Art. 711. For determining what titles
are subject to inscription or annotation,
as well as the form, effects, and
cancellation of inscriptions and
annotations, the manner of keeping the
books in the Registry, and the value of
the entries contained in said books, the
provisions of the Mortgage Law, the
Land Registration Act, and other special
laws shall govern.
XV. DIFFERENT MODES OF
ACQUIRING OWNERSHIP
TITLE - the remote cause of
acquisition
Every juridical right which gives a means
to the acquisition or real rights but
which in itself is insufficient
MODE- the proximate cause of
acquisition
The specific cause which produces
dominion and other real rights as a
result of the co-existence of special
status of things, capacity, and intention
of persons and fulfillment of the
requisites of law
Modes of acquiring ownership
(POSTDI)
1) Occupation
2) Intellectual Creation
3) Donation
4) Prescription
5) Succession
6) Tradition
PROPERTY CIVIL LAW
XVI. PRESCRIPTION
It is the 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
Kinds:
1. Acquisitive
1. Extinctive
Comparison between Acquisitive
Prescription and Extinctive Prescription
Acquisitive
Prescription
Extinctive
Prescription
Usurpacion Prescription
It is the possessor
who does the act
One looks at the
neglect of the
owner/ his
omission
Expressly vests the
property and
raised a new title
in the occupant
Statute of
limitation that
merely bars the
right of action
Important feature
is the claimant in
possession
Important feature
is the owner out of
possession
Who may acquire by prescription:
a. person who are capable of
acquiring property by other legal
modes
b. STATE
c. minors through guardians of
personally
Against whom prescription run:
1. minors & incapacitated person
who have guardians
2. absentees who have
administrators
3. persons living abroad who
have administrators
4. juridical persons except the
state with regards to property
not patrimonial in character
5. between husbands & wife
6. between parents & children
(during minority/insanity)
7. between guardian & ward
(during guardianship)
8. between co-heirs/co-owners
9. between owner of property &
person in possession of
property in concept of holder
Things subject to prescription: all things
within the commerce of men
a. private property
b. patrimonial property of the state
Things not subject to prescription:
1. public domain
2. in transmissible rights
3. movables possessed through a
crime
4. registered land
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 & Other
Real Rights
Kinds of Acquisitive prescription
1. ordinary
2. extra-ordinary
Requisites for ordinary prescription:
1. possession in good faith
2. just title
3. within time fixed by law
4 years for movables
8 years for immovables
4. in concept of an owner
5. public, peaceful, uninterrupted
Requisites for extra-ordinary
prescription:
1. just title is proved
2. within time fixed by law
10 years for movables
30 years for immovables
3. in concept of an owner
4. public, peaceful, uninterrupted
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
JUST TITLE (TRUE & VALID)
must be proved & never
presumed
a) Titulo Colorado -
b) Titulo putativo -
title must be one which would
have been sufficient to
PROPERTY CIVIL LAW
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
IN CONCEPT OF OWNER
possession not by mere
tolerance of owner but
adverse to that of the owner
claim that he owns the
property
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
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
void for lack of legal solemnities
plaintiff desist from
complaint/allow proceedings to
lapse
possessor is absolved from
complaint
i. express or tacit
renunciation
ii. possession in wartime
RULES IN COMPUTATION OF
PERIOD:
a. Present possessor may tack his
possession to that of his grantor
or predecessor in interest
b. Present possessor presumed to
be in continuous possession I
intervening time unless contrary
is proved
c. First day excluded, last day
included
Tacking Period
there must be privity between
previous & present possessor
possible when there is succession of
rights
if character of possession different:
predecessor in bad faith possessor
in good faith use extraordinary
prescription
Prescription of Actions
By lapse of time fixed by law
30 years
-action over immovables from
time possession is lost
10 years
-mortgage action
-upon written contract
-upon obligation created by law
-upon a judgement
8 years
-action to recover movables from
time possession is lost
6 years
-upon an oral contract
-upon a quasi-contract
5 years
-actions if periods are not fixed
by law
4 years
-upon injury to rights of plaintiff
-upon a quasi-delict
1 year
-for forcible entry & detainer
-for defamation
Rights not extinguished by
prescription:
1. demand right of way
2. abate public /private nuisance
3. declare contract void
4. recover property subject to
expressed trust
5. probate of a will
6. quiet title
XVII. TRADITION
Requisites:
1. Pre-existence of right in estate of
grantor
2. Just cause or title for the
transmission
3. Intention- of both grantor and
grantee
4. Capacity- to transmit and to
acquire
5. An act giving it in outward form,
physically, symbolically, or legally
Legal Maxim:
Non nudis pactis, sed tranditione,
dominia rerum transferentur
(Not by mere agreement but by delivery,
is ownership transferred)
Kinds of Tradition:
a. Real Tradition
b. Constructive Tradition
i. Symbolic Delivery
ii. Delivery by Public Instrument
iii. Traditio Longa Manu- long
hand; placed in the sight of
PROPERTY CIVIL LAW
vendee so that he can take
possession of the property
anytime
iv. Traditio Brevi Manu- short
hand; transferee already in
possession of the property but
not as owner
v. Traditio Constitum
Possessorium- owner remains
in possession but not as owner
e.g. lease
vi. Quasi-Tradition- subject
matter: property right; e.g. right
to collect credit
vii. Tradition by operation of law
XVIII. LEASE
General Characteristics of Every
Lease
(1) Temporary duration
(2) Onerous
(3) Price is fixed according to
contract duration
Kinds of Lease
(1) Lease of thingsmovables and
immovables
no lease for more than 99 years
shall be valid
(2) Lease of work or contract of
labor
no relation of principal and agent
does not exist between them.
(3) Lease of Services
no principle of representation
unlike in agency
The will of both parties is
necessary for the extinguishment
of the obligation
(i)
Lease of
Service
Contract for
a piece of
work
Manner of
paying the
price
The price is
paid in
relation to
the
duration of
the labor or
service
In proportion
to the work
accomplished
Existence
of a
relation of
dependenc
e between
lessor and
lessee
If the lessor
workstation
under the
direction of
the lessee,
receiving
instructions
from him
on the
manner of
rendering
If the lessor
works by
himself,
independently
of the lessee,
in the manner
he deems
most
adequate for
the execution
of the work
service or
labor
Lease of things
(1) Concept
Art. 1643. In the lease of things, one of
the parties binds himself to give to
another the enjoyment or use of a thing
for a price certain, and for a period
which may be definite or indefinite.
However, no lease for more than ninety-
nine years shall be valid.
(2) Consumable things cannot be the
subject matter of lease, Except
(a) consumables only for display
or advertising. eg. Wedding
cakes for display in
Goldilocks, wine in a
showcase of a store
(b) goods are accessory to an
industrial establishment e.g.,
coal in a factory
(3) Special characteristics of lease of
things;
(a) essential purpose is to
transmit the use and
enjoyment of a thing
(b) consensual
(c) onerous
(d) price fixed in relation to
period of use or enjoyment
(e) temporary
(4) Lease distinguished from sale,
usufrunct, commodatum
In case of doubt-INTENTION of the
parties should be the guide in determining
the contract entered into.
Lease Sale
Only the use or
enjoyment of the
things is
transferred, and
only for a
determinate period
Plain redundancy to
fix or mention the
price of the thing
which is the subject-
matter thereof
Price of the thing
was fixed in the
contract
May be in money, or
in fruits, or in some
other useful thing or
some other
prestation
Price must be in
money or its
equivalent
Lease Usufruct
PROPERTY CIVIL LAW
Real right only by
exception: when
registered and for
more than 1 year
Always a real right
Constitutor/Lessor
need not be an
owner e.g.
sublessor,
usufruct
To constitute
usufruct, constitutor
must be the owner
Lessor places and
maintains lessee
in the enjoyment
of the thing
Owner merely allows
usufructuary to use
and enjoy the
property
Use is limited to
that written in the
contract
Includes all possible
uses and manner of
enjoyment of
property EXCEPT in
distinction of normal
or abnormal usufruct
Must be definite,
otherwise court
may fix the same
through the
proper action
Maybe for an
indefinite period of
time
BOTH the lessee and the usufructuary
USE and ENJOY the thing.
Lease Commodatum
Consists in the
cessation of the use
of a thing to
another but this is
essentially onerous
Consists in the
cessation of a thing
to another but this
is essentially
gratuitous
BOTH consist in the cession of the use of
a thing to another
(5) Price In Lease
Price may be in money, or in
fruits, or in some other useful
things; some other prestation
TENANCY CONTRACT- when the
price consists of a certain
percentage of the fruits obtained
from the thing. But is regarded as
having the character more of a
partnership rather than a lease.
Amount of Rent
If the parties are not able to fix
the price, or the basis for its
determination, the contract is
ABSOLUTELY VOID. If the lessee
has entered upon the possession
and enjoyment of the thing, he
will be liable for the damages for
the occupation of the thing.
(6) Period of lease
When the lease is for such time
as the lessor or lessee may
please, it is considered as on for
life, ending upon the death of the
party who would have terminated
the contract.
CANNOT be perpetual- there
must always be a period, which
may be definite or indefinite
If the period is indefinite, and the
thing leased is rural land,
art.1682 shall apply; if it is urban
land art. 1687 governs.
If the thing is neither rural nor
urban land, the provisions of the
two articles should be applied by
analogy.
(i) rural land
Art. 1682. The lease of a piece of rural
land, when its duration has not been
fixed, is understood to have been for all
the time necessary for the gathering of
the fruits which the whole estate leased
may yield in one year, or which it may
yield once, although two or more years
have to elapse for the purpose.
(ii) urban land
Art. 1687. If the period for the lease
has not been fixed, it is understood to
be from year to year, if the rent agreed
upon is annual; from month to month, if
it is monthly; from week to week, if the
rent is weekly; and from day to day, if
the rent is to be paid daily.
Rent Courts can fix a longer term
monthly lessee occupied premises for
more than a year
weekly lessee has been in possession
for over six months
Daily lessee has stayed in the place
for over one month
Capacity of Lessee
Those who are disqualified to buy certain
things cannot lease such things. (ART.
1646, 1490,1491)
Lease of Real Estate
Every lease of real estate may be
recorded in the Registry of Property to
be binding upon 3
rd
persons.
Purchase of Leased Land
Where a purchaser of land at the
time of the purchase has FULL
KNOWLEDGE of the fact that the land
has been leased to a third person, he
is BOUND to respect said lease,
although it is not recorded upon the
certificate of title.
(7) Assignment of lease
Art. 1649. The lessee cannot assign the
lease without the consent of the lessor,
PROPERTY CIVIL LAW
unless there is a stipulation to the
contrary.
However, a mere transfer of
rights of the lessee, and not of
the contract itself, would not
require the lessors consent,
unless there is an express
stipulation to the contrary.
(8) Sublease
Art. 1650. When in the contract of lease
of things there is no express prohibition,
the lessee may sublet the thing leased,
in whole or in part, without prejudice to
his responsibility for the performance of
the contract toward the lessor.
Assignment of
lease
Sublease
There is a transfer
to a third person of
the rights and
obligations arising
from the lease
contract
Merely another
contract of lease,
where the original
lessee becomes in
turn a lessor
A sale of the
lessees rights, and
when the lessor
gives his consent,
the original lessee
is released
Even when the
lessor consents to
the sub-lease, the
original lease
contract subsists
and is binding on
the lessee
Succession by
particular title to
one contract of
lease
Juxtaposition of 2
leases
Effects
(1) Remedy when property is
subleased despite prohibition:
recission and damages, or
damages only.
(2) When in the contract of lease,
there is no express
prohibition, the lessee may
sublet the thing leased, in
whole or in part, without
prejudice to his responsibility
for the performance of the
contract toward the lessor.
(a) House Rental Law (RA 877)
there is a presumption that there
would be no sublease unless the
lessor allows it
(b) obligation of sublessee to lessor
Art. 1651. Without prejudice to his
obligation toward the sublessor, the
sublessee is bound to the lessor for all
acts which refer to the use and
preservation of the thing leased in the
manner stipulated between the lessor
and the lessee.
(i) for rents
Art. 1652. The sublessee is subsidiarily
liable to the lessor for lessees rent but
not responsible beyond the amount of
rent due from him at the time of the
extrajudicial demand by the lessor.
Payments of rent in advance by the
sublessee shall be deemed not to have
been made, so far as the lessor's claim
is concerned, unless said payments were
effected in virtue of the custom of the
place.
(ii) for the use and preservation
of the thing leased
Without prejudice to his obligation
toward the sublessor, the
sublessee is bound to the lessor for
all the acts which refer to the use
and preservation of the thing
leased in the manner stipulated
between the lessor and the lessee.
(9) Rights and obligations of lessor
and lessee
(a) obligation of lessor
Art. 1654. The lessor is obliged:
(1) To deliver the thing which is the
object of the contract in such a condition
as to render it fit for the use intended;
(2) To make on the same during the
lease all the necessary repairs in order
to keep it suitable for the use to which it
has been devoted, unless there is a
stipulation to the contrary;
(3) To maintain the lessee in the
peaceful and adequate enjoyment of the
lease for the entire duration of the
contract.
(i) Warranty of Lessor
IN the cases where the return of
the price is required, REDUCTION
shall be made in proportion to the
time during which the lessee
enjoyed the thing.
Art. 1547, 1555, 1561, 1566,
1567, 1568, 1569
Liability for the warranty is not
equivalent to liability in damages.
The lessor is liable for the warranty
of the thing leased against any
hidden defects it may have, even
when UNKNOWN to said lessor.
But this liability for warranty of the
thing leased does not amount to an
obligation to indemnify the tenant
for damages, which is only to be
PROPERTY CIVIL LAW
allowed, when lessor acted with
fraud and in bad faith by
concealing the defect and not
revealing it to the lessee.
(ii) Making of Repairs
It implies the putting of something
back into the condition in which it
was originally and NOT an
improvement
It is the duty of the lessee to give
NOTICE of the need of repairs to the
lessor, and he shall be liable for the
damages which by his neglect may
be suffered by the owner.
Lessor is NOT bound to make repairs
caused by the lessee himself.
Effect of Urgent Repairs
During the lease it should
become necessary to make some
urgent repairs upon the thing
leased, which cannot be deferred
until the termination of the lease,
the lessee is obliged to tolerate
the work.
If the repair lasts for more than
40 days, the rent shall be
reduced in proportion to the
time-including the 40 days- and
the part of the property of which
the lessee has been deprived.
When the work is of such a
nature that the portion which the
lessee and his family need for
their dwelling becomes
uninhabitable, he may rescind
the contract if the main purpose
of the lease is to provide a
dwelling for the lessee.
If after having been notified, the
lessor fails to make urgent
repairs, the lessee, to avoid
imminent danger, may order the
repairs at the lessors expense.
Dangerous Conditions
The lessee may terminate the
lease at once by notifying the
lessor, even if at the time the
contract was perfected the
former knew of the dangerous
condition or waived the right to
rescind the lease on account of
the condition.
Alteration
Art. 1661. The lessor cannot alter the
form of the thing leased in such a way
as to impair the use to which the thing is
devoted under the terms of the lease.
(iii) Peaceful Possession
To maintain the lessee on the
peaceful and adequate enjoyment
of the lessee for the entire
duration of the contract.
Failure to do so releases the
lessee from the obligation to pay
what is stipulated in the contract
from the date he ceased to
occupy the premises.
(b) obligations of lessee (Art.
1657)
(i) Pay Rent
arises only when the contract has
been actually carried into effect
by the delivery of the thing
leased to the lessee for the
purpose stipulated in the
contract.
Increase and Decrease of Rent
Increase and decrease in the
price of lease shall be 10% per
year, net of the assessed
violation of the property
Failure to Pay for Rent
Eviction, recover the unpaid rent,
plus accrued legal interest
thereon at the rate of 6% per
year.
Place and Time
Payment of rent shall be made at
the domicile of the lessee; and
with respect to the time, the
custom of the place shall be
followed.
ii. Use the Thing Leased as a
Diligent Father
Standard: diligent father of a
family, in the absence of
stipulation, to that which may be
inferred from the nature of the
thing leased, according to the
custom of the place.
The lessee is responsible for the
deterioration of the thing leased,
unless he proves that it took
place without his fault.
The lessee is liable for any
deterioration caused by members
of his household and by his guest
and visitors.
iii. Pay Expenses for the Deed of
Lease (Art. 1662-1667)
c. Right of lessee to suspend
payment of rentals
Art. 1658. The lessee may suspend the
payment of the rent in case the lessor
fails to make the necessary repairs or to
PROPERTY CIVIL LAW
maintain the lessee in peaceful and
adequate enjoyment of the property
leased.
d. Right to ask for rescission
Liability for Breach of Duties
If the lessor or lessee should not
comply with the obligation set
forth in ART 1654 and 1657, the
aggrieved party may ask for:
(1) rescission of the contract;
(2) indemnification for
damages;
(3) only damages,
allowing the contract to
remain in force
The lessor cannot be held
responsible for damages from
defects unknown to both parties.
Alternative Remedies
Performance of the contract and
rescission
In either case, the aggrieved
party is entitled to such damages
but may not upon rescission of
the contract recover the damages
that are appropriate only where
the performance is demanded.
Rescission of the Contract
Where the plaintiff alleges and
submits proof that the defendant
is in possession of a parcel of
land as lessee, and the latter has
not paid the proper rents, he may
be compelled, by reason of his
inability to pay to:
(1) return the leased
property;
(2) the lessor has a
right to rescind the
contract;
(3) recover the unpaid
rents
(4) eject the tenant
from the land
The execution of the deed shall
be equivalent to delivery but this
is a rebuttable presumption.
If the thing leased has never
been placed in possession of the
lessee, he has the remedy of
rescission.
Enforcement of Lease
Where the lessor resumes
possession of his leased property
for its protection after the lessee
has abandoned the same, the
lessor has still the right to hold
the lessee responsible until the
termination of the lease.
(e) Lessor not obliged to answer
for mere act of trespass by a
third person
(10) Grounds for ejectment of
lessee by lessor
Termination of Lease
(1) by the expiration of the
period;
(2) by the total loss of the
thing;
(3) by the resolution of the right
of the
lessor, such as when the
lessor is usufruct is
terminated;
(4) by the will of the purchaser or
transferee of the things;
(5) by rescission due to
nonperformance of the
obligation of one of the
parties.
Period
If at the end of the contract the
lessee should continue enjoying
the thing leased for fifteen days
with the acquiescence of the
lessor, and unless a notice to the
contrary by either party has
previously given, it is understood
that there is an implied new
lease, not for the period of the
original contract but for the time
established in art. 1682(rural)
and 1687(urban)
When the parties have made no
agreement and the tenant
remains in possession with the
acquiescence of the lessor for 15
days after the expiration of the
term, the duration of the tenancy
is governed by article 1682 and
1687.
Tacit Renewal
The fifteen-day period which
brings about a tacit renewal of
the lease, is not applicable to
successive renewals.
Judicial Ejectment
The lessor may judicially eject
the lessee for any of the following
causes:
(1) When the period agreed
upon, or that which is fixed
for the duration of leases
under Art 1682 (rural) and
1687(urban), has expired;
PROPERTY CIVIL LAW
(2) Lack of payment of the price
stipulated;
(3) Violation of any of the
conditions agreed upon in the
contract;
(4) When the lessee devotes the
thing leased to any use or
service not stipulated which
causes the deterioration
thereof, or if he does not
observe due diligence in its
use.
When the lease contract does not
have a definite period, but is
terminable upon 30 days notice,
the lease will terminate upon the
expiration of 30 days from the
receipt of notice, whether the
termination coincides with the
rent day or not.
The landlord has the right to
increase the rent after the
expiration of the stipulated
period. And if no period is
stipulated, in a lease of urban
property, notice by the lessor of
an increase in rent is equivalent
to notice of termination of the
original agreement.
(12) Right of purchaser of
leased land
Art. 1676. The purchaser of a piece of
land which is under a lease that is not
recorded in the Registry of Property may
terminate the lease, save when there is
a stipulation to the contrary in the
contract of sale, or when the purchaser
knows of the existence of the lease.
If the buyer makes use of this right,
the lessee may demand that he be
allowed to gather the fruits of the
harvest which corresponds to the current
agricultural year and that the vendor
indemnifies him for damages suffered.
If the sale is fictitious, for the
purpose of extinguishing the lease, the
supposed vendee cannot make use of
the right granted in the first paragraph
of this article. The sale is presumed to
be fictitious if at the time the supposed
vendee demands the termination of the
lease, the sale is not recorded in the
Registry of Property.
Art. 1677. The purchaser in a sale with
the right of redemption cannot make use
of the power to eject the lessee until the
end of the period for the redemption.
Sale Of Leased Property
The purchaser which is under a
lease that is not recorded in the
Registry of Property may
terminate the lease except when
the contract provided otherwise
or purchaser is aware of lease.
If the buyer makes use of this
right, the lessee may demand
that he be allowed to gather the
fruits of the harvest which
corresponds to the current
agricultural year and that the
vendor indemnify him for
damages suffered. This right does
not extend to the gathering of
fishes, which require 2 years
before they are of any
commercial value.
The act of the new owner of
giving notice of an increase of
rent, when the existing lease is of
an indefinite time, or when the
original period has expired,
constitutes a notice of
termination of the original lease.
Right to Repurchase
The purchaser in a sale with the
right to redemption cannot make
use of the power to eject the
lessee until the end of the period
of redemption.
But when the vendor remains in
possession as a tenant, and he
fails to pay the agreed rent, he
may be evicted by the vendee
even before the period of
redemption has expired.
(13) Useful improvements in
good faith made by lessee.
Indemnity For Improvements
If the lessee makes, in good
faith, useful improvements the
lessor upon the termination of
the lease shall pay the lessee
one-half of the value of the
improvements at that time.
(14) Special provisions for
leases of rural lands
It is urban when the principal
purpose is dwelling.
It is rural when the principal
purpose is exploitation of the soil.
PROPERTY CIVIL LAW
XIX. DONATION
Characteristics:
a) Unilateral obligation imposed on
the donor
b) Consensual perfected at time donor
knows of acceptance
Requisites of Donation:
(1) Consent and capacity of parties
(2) Animus donandi (causa)
(3) Delivery of thing donated
(4) Form as prescribed by law
There must be impoverishment in fact
of donors patrimony and enrichment on
part of donee.
Requirements of a donation:
1. subject matter anything of
value; present property & not
future, must not impair legitime
2. causa anything to support a
consideration: generosity,
charity, goodwill, past service,
debt
3. capacity to donate & dispose &
accept donation
4. form depends on value of
donation
Kinds of Donation
A. As to its taking effect
1. Inter Vivos (729, 730, 731)
2. Donation mortis causa (728)
3. Propter nuptias (Art. 82, 87
Family Code)
o Nature of a donation is not made to
depend by the title given by the
donor but by what is expressed.
o To determine whether mortis causa
or inter vivos, nature of act, whether
it is disposition or execution, is
controlling.
Inter vivos
In doubt, conveyance should be
deemed a donation inter vivos to
avoid uncertainty as to the
ownership of the property.
Where the ownership and
possession as well as
administration were turned over
to the donee but right to reap
and dispose of the fruits was
deferred until after donors
death, donation is inter vivos
General rule: Donation inter vivos
is irrevocable EXCEPT:
1. During the subsequent birth
of the donors children
2. Failure of donee to comply
which conditions imposed
3. Ingratitude of donee; and
4. Reduction of the donation by
reason of inofficiousness
Donation mortis causa
A donation mortis causa not in
the form of a will is not valid and
does not transmit any right.
If the donor reserves the right to
dispose of all the properties
purportedly donated, there is no
donation inter vivos but mortis
causa.
What rules
govern
Intention of the parties prevail
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Inter
vivos
take effect
during the
lifetime of
the donor
Governed by the
rules on
contracts and
obligations with
regard to
portions not
provided in the
title on
donations ART
732
if the intention is to make the donation effective
during the donors lifetime:
ART 729: even if the thing donated is delivered
only at the time of the donors death, it is inter
vivos and the fruits of the thing belongs to the
donee unless the donor provides otherwise
ART 730: even if there is a fixing of an event or
the imposition of a suspensive condition which
may take place beyond the natural expectation
of the life of the donor
ART 731: If the resolutory condition is the
donors survival (i.e. if donor does not die, the
donation already effective shall terminate)
Mortis
causa
take effect
upon the
death of
the donor
They partake of
the nature if
testamentary
provisions and
are governed by
the rules on
Succession ART
728
PROPERTY CIVIL LAW
B. As to Cause or Consideration
1. Simple (Art.725)
2. Remuneratory (Art.726)
3. Onerous (Art.733)
(See Table in the appendix)
C. As to its Effectivity or
Extinguishment
1. Pure
2. Conditional (730, 731)donation
is not carried out until the day comes
but it produces effects
With a term He who donates with a
term has already disposed of the
thing donated and cannot revoke it
nor can he dispose the thing in favor
of another unless the donor
postpones execution and reserves
the right to revoke
Perfection of Donation
presumes a demandable juridical
relation. The donor can no longer
withdraw and he can be compelled to
comply.
Acceptance is necessary because
nobody is obliged to receive a benefit
against his will.
When the donation and the acceptance
are in the same instrument, signed
by both donor and donee, donation
is perfected.
After perfection, donation can only be
revoked by the consent of the donee
or by judicial decree especially when
the donation is onerous.
Mere declaration of an intention without
intent to transfer is not a donation
even if accepted.
DONATION OF MOVABLES; ART 748
Oral In writing
Value of the thing
donated < or =
P5,000
Value of the
thing donated
> P5,000;
otherwise, void
Requires
simultaneous
delivery of the
thing or the
document which
represents the
thing
WHEN PERFECTED: ACCEPTANCE BY
THE DONEE: GENERALLY
ART 734: Donation is perfected at the
moment the donor knows of the
donees acceptance
WHO MAY
ACCEPT:
ART 745: Only these
persons may accept;
otherwise, void
1) donee personally
2) authorized person
with a special
power for the
purpose or with a
general sufficient
power
WHEN TO
ACCEPT
ART 746: During lifetime
of donor and donee
DONATION OF IMMOVABLES:
DONATION AND ACCEPTANCE
FORM OF
DONATION
Public document
CONTENTS
OF
DONATION
Property donated is
specified and the value of
the charges which the
donee must satisfy
FORM OF
ACCEPTANCE
Same deed of donation
or in a separate public
document; if separate,
the donor shall be
notified in an authentic
form and this shall be
noted in both
instruments
WHEN TO
ACCEPT
During lifetime of donor
PROPERTY CIVIL LAW
DONOR DONEE
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ART 735: All persons who may contract
and dispose of their property
ART 736: Donors capacity determined
at the time of the making of the
donation
ART 738; All those not specially
disqualified by law
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ART 736: Guardians and trustees with
respect to the property entrusted to
them
ART 739: Void donations:
1) those made between persons guilty of adultery or concubinage at the time
of the donation (the declaration of nullity may be brought by the spouse of
the donor or donee and only preponderance of evidence is needed)
2) those found guilty of the same criminal offense inconsideration thereof
ART 739 (3): public officer or his wife,
descendants and ascendants by reason
of his office
ART 740: Those who cannot succeed by
will cannot be donees
ART 743: Donations made to
incapacitated persons are void although
made under the quise of another
contract
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ART 741: Minors may become donees
but acceptance must be made through
their parents or legal representative
ART 742: Donations made to unborn
children may be accepted by persons
who would legally represent them if
they were already born
Who may receive?
e. All those who are not specially
disqualified by law e.g.
husband and wife during
marriage, not propter nuptias
f. Even if incapacitated e.g.
minors, insane, etc. (acceptance
made through parents or legal
guardian); conceived and unborn
(acceptance made through legal
representatives if they were
born)
Capacity required is for disposition
inter vivos and not mortis causa. Both
capacity to contract and the capacity to
dispose of property must exist in order
to have capacity to donate.
Capacity to accept is also governed by
rules on succession
Other persons disqualified to receive
donations:
1. priest who heard confession of donor
during his last illness
2. relatives of priest within 4
th
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
5. Art. 2012 Any person who is
forbidden from receiving a donation
under Art. 739 cannot be named
beneficiary of a life insurance policy
by the person who cannot make a
donation to him.
Double Donations
Apply double sales to double donations
Who may accept (Art. 745, 747)
- donee personally or through
authorized
person
- representatives of incapacitated
must make notification and
notation
If the donor dies before he learns of the
acceptance, the donation does not take
effect, even if the acceptance is made
during the lifetime of the donor.
Form of Donations
(a) Personal property (Art. 748)
Document of donation need not be public
instrument. When donation does not
exceed P5,000, it may be made orally or
in writing. If made orally, there must be
simultaneous delivery. If no
PROPERTY CIVIL LAW
simultaneous delivery, donation is void
unless it is made in writing.
The law does not require that when the
donation is made in writing the
acceptance should also be in writing (if
value does not exceed P5,000).
(b) Real property (Art. 749)
Art. 1357 is not applicable. Donee
cannot bring an action to compel the
donor to execute a public instrument of
donation. That article is applicable only
to contracts which validly exist and
cannot be held applicable to a case
where the form is required in order to
make it valid.
Where the donor executed private
instruments of donation and after his
death his only heir executed a public
instrument ratifying the donation, such
public instrument cannot be considered
as having retroactively perfected the
gift. It might serve as a quitclaim on the
part of the heir who is estopped from
asserting any right to the properties.
If the instrument of donation has been
recorded in the registry of property, the
instrument that shows the acceptance
should also be recorded.
If acceptance has been made but before
the donor has been notified, the donor
dies, the donation is not perfected. If
the donors heirs ratify the donation and
the donee or his heirs accept, the
donation subsists but in reality it is a
new and valid one.
While a donation of immovable property
not made in a public instrument is not
effective as a transfer of title, it is a
circumstance which may explain the
adverse and exclusive character of the
possession of the intended donee and
such possession may ripen into
ownership by prescription.
Rules in Art. 748 and 749 not
applicable to:
i. onerous donations
ii. modal donations
iii. mortis causa donations
iv. donations propter nuptias
What may be given:
All or part of donors present
property provided he reserves
sufficient means for the support
of the ff:
himself
relatives who by law are entitled
to his support
legitimes shall not be impaired
when w/o reservation or if
inofficious, may be reduced on
petition of persons affected
except: conditional donation &
donation mortis causa
except: future property (Osorio
vs. Osorio)
PROPERTY CIVIL LAW
WHAT MAY BE DONATED
ART 750
All present property of the
donor or part thereof
LIMITATION: he reserves in
full ownership or in usufruct,
sufficient means for his
support and of all relatives
who at the time of
acceptance of the donation
are by law entitled to be
supported
EFFECT OF NON
RESERVATION: reduction of
the donation
WHAT MAY NOT BE
DONATED:
ART 751; Donations cannot
comprehend future property;
those which the donor cannot
dispose of at the time of the
donation
ART 752: No person may give
or receive by way of donation
more than what he may give
or receive by will
EFFECT OF EXCESS:
inofficious
DONATIONS MADETO
SEVERAL PERSONS
JOINTLY
ART 753: No accretion (i.e.
one donee does not get the
share of the other donees
who did not accept)
EXCEPTION: those given to
husband and wife except
when the donor otherwise
provides
WHAT THE DONEE
ACQUIRES WITH THE
THING
ART 754: to be subrogated to
all the rights and actions that
would pertain to the donor in
case of eviction
OBLIGATIONS OF THE
DONOR
ART 754: No obligation to
warrant
EXCEPT: when donation is
onerous
EFFECT: if the donor shall be
liable
This also applies in case of
bad faith on his part with
regard to hidden defects
WHAT MAY BE RESERVED
BY THE DONOR
ART 755: Right to dispose
may be reserved
If donor dies without
exercising this right, the
portion reserved shall belong
to the donee
USUFRUCT vs. OWNERSHIP ART 757: The ownership of
the property may be donated
to one person and the
usufruct to another
REVERSION ART 758: The donor may
provide that the property will
go back to him or to another
person for any case or
circumstances
LIMITATION: The third
person should be living at the
time of the donation
OTHERWISE: reversion is
void but obligations subsists
OBLIGATION OF DONEE TO
PAY DONORS DEBTS
ART 758: If the donation
imposes this obligation on the
donee, only those debts
previously contracted shall be
paid by said donee and in no
case shall he be responsible
for debts exceeding the value
of the thing donated
EXCEPT: When contrary
intention appears
IN FRAUD OF CREDITORS ART 759: If there is no
stipulation for the donee to
pay debts, he shall only be
responsible when the
donation was made in fraud
of creditors
PRESUMPTION that donation
in fraud of creditors: when at
the time of donation, the
donor did not reserve
sufficient property to pay his
debts prior to the donation
PROPERTY CIVIL LAW
In General
(1) Donee may demand actual
delivery of the thing donated.
(2) Donee is subrogated to rights of
donor in the property
donated.
(3) Donor not obligated to warrant
things donated, except in
onerous donations in which case,
donor is liable for eviction
up to the extent of the burden.
(4) Donor is liable for eviction or
hidden defects in case of bad
faith on his part.
Donations propter nuptias of property
subject to encumbrances are valid.
Art. 85 FC-Effect of foreclosure-
Donations by reason of marriage of
property subject to encumbrances shall
be valid. In case of foreclosure of the
encumbrance and the property is sold
for less than the amount of the
obligation secured, the donee shall not
be liable for the deficiency. If the
property is sold than the total amount of
said obligation, the donee shall be
entitled to the excess.
Donation to several donees jointlyno
right of accretion Except
1. donation provides otherwise
2. donation to husband and wife
jointly with right of accretion (jus
accrescendi), unless the donor
provides otherwise.
Special Provisions
(1) Reservation by donor of power to
dispose (in whole or in part) or to
encumber property donated.
(755)
(2) Donation of naked ownership to
one donee and usufruct to
another. (756)
(3) Conventional reversion in favor of
donor or other person. (757)
(4) Payment of donors debt (758)
(a) If expressly stipulated-donee
to pay debts contracted
before the donation, unless
specified otherwise, but in no
case shall the donee be
responsible for debts
exceeding value of property
donated, unless clearly
intended
(b) If there is no stipulation-
donee answerable only for
donors debt only in case of
donation in fraud of creditors.
Liability of the donee for the
debts of the donor should be
considered as limited to the value
of the thing donated.
Creditors may demand the
rescission of the donation. If the
credits exceed the value of the
property, the donee cannot be
held liable for such excess.
If the donee has alienated the
property to one who acquired it in
good and he is unable to return
it, he will be held liable in
damages but the damages cannot
exceed the value of the property
itself.
Donations of Future Property (751)
Future property includes all property
that belongs to others at the time the
donation is made, although it may or
may not later belong to the donor.
BUT these can be donated:
1. properties to which the donor
has a RIGHT, although the
delivery of such properties to him
may be fixed for a future date
2. those properties which pertain
to him CONDITIONALLY, and will
become his upon the happening of
a suspensive condition.
Properties of an existing INHERITANCE
cannot be considered future property of
the heirs after the death of the
predecessor, because the rights of the
heirs are acquired on the moment of
death, even if the delivery to them of
the property may be delayed.
Revocation of Donations
- applies only to donation inter vivos
- not applicable to onerous donations
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
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
ingratitude
1. Donee commits offense against
person, honor, property of donor,
spouse, children under his
parental authority
PROPERTY CIVIL LAW
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
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
Inofficious donations:
1. shall be reduced with regards to
the excess
2. action to reduce to be filed by
heirs who have right to legitimate
at time of donation
3. donees/creditors of deceased
donor cannot ask for reduction of
donation
4. if there are 2 or more donation:
recent ones shall be suppressed
5. if 2 or more donation at same
time treated equally &
reduction is pro rata but donor
may impose preference which
must be expressly stated in
donation
KINDS OF DONATION
Pure/Simple Remuneratory Conditional Onerous
a) Consideration
Merits of donee
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
b) law to apply/
forms
Law on donations
Law on donations Extent of burden Law on obligations
imposed>oblicon
excess>donation
c) form of
acceptance
Required
Required Required Required
d) reservation
w/regards to
personal support
& legitime
Applicable
Applicable Applicable Not Applicable
e) warranty
against eviction
& hidden defects
In bad faith only In bad faith only In bad faith only Applies
f) revocation
Applicable Applicable Applicable Applicable
g) effect of
impossible/
illegal conditions
considered not
written
considered not written considered not
written
Obligation nullified
PROPERTY CIVIL LAW
MODES OF EXTINGUISHMENT
BIRTH OF CHILD NON-FULFILLMENT OF
CONDITION
INGRATITUDE
Ipso jure revocation, no
need for action., court
decision is merely
declaratory
needs court action needs court action
Extent: portion which may
impair legitime of heirs
Extent: whole portion but
court may rule partial
revocation only
Extent: Whole portion returned
Property must be returned Property in excess Property to be returned
Alienation/mortgages done
prior to recording in
Register of Deeds:
If already sold or cannot
be returned the value
must be returned
If mortgaged donor may
redeem the mortgage with
right to recover from
donee
Alienations/mortgages
imposed are void unless
registered with Register of
Deeds
Prior ones are void; demand value
of property when alienated and
cant be recovered or redeemed
from 3rd persons
Fruits to be returned at filing
of action for revocation
Fruits to be returned at filing
of complainant
Prescription of action is 4
years from birth, etc.
Prescription is 4 years from
non-fulfilment
Prescription is 1 year from knowledge
of fact and it was possible for him to
bring action
Action cannot be renounced Action cannot be renounced
in advance
Right of action transmitted to
heirs
Right of action at instance of
donor but may be transmitted
to heirs
Heirs cant file action
Action extends to donees
heirs
Action does not extend to
donees heirs
PROPERTY CIVIL LAW
REVOCATION/ REDUCTION OF DONATION
BASIS TIME OF
ACTION
TRANSMISSIBILITY EFFECT LIABILITY
(FRUITS)
Birth,
appearance,
adoption
Within 4 years
from birth,
legitimation
and adoption
Transmitted to
children and
descendants upon
death of donor
Property
returned/
value (if
sold)/
redeem
mortgage
with right to
recover
Fruits returned
from the filing of
the complaint
Non compliance
with condition
Within 4 years
from non
compliance
May be transmitted to
donors heirs and
may be exercised
against donees heirs
Property
returned,
alienations
and
mortgages
void subject
to rights of
third person
in good faith
Fruits received
after having
failed to fulfill
condition
returned
Ingratitude Within 1 year
after
knowledge of
the fact
Generally not
transmitted to heirs
of donor/donee
Property
returned but
alienations
and
mortgages
effected
before the
notation of
the
compliant for
revocation in
the registry
of property
subsist
Fruits returned
from the filing of
the complaint
Failure to
reserve sufficient
means for
support
At any time by
the donor or
relatives
entitled to
support
Not transmissible Reduced to
the extent
necessary to
provide
support
Donee entitled
Inofficiousness
for being in
excess of what
the donor can
give by will
Within 5 years
from death of
donor
Transmitted to
donors heirs
Donation
takes effect
on the
lifetime of
donor.
Reduction
only upon his
death with
regard to the
excess
Donee entitled
Fraud against
creditors
Rescission
within 4 years
from the
perfection of
donation/
knowledge of
the donation
Transmitted to
creditors heirs or
successors in interest
Returned for
the benefit of
creditor who
brought
action
Fruits returned/
if impossible
indemnify
creditor for
damages
SUCCESSION CIVIL LAW
Succession
TABLE OF CONTENTS
I. Succession in General 99
II. Testamentary Succession 99
III. Legal or Intestate Succession 109
IV. Provisions Common to Testamentary and Intestate Succession 114
DEFINITION OF SUCCESSION (Art. 774,
CC)
- 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
KINDS OF SUCCESSION
1. Testamentary that which results
from the designation of an heir, made
in a will executed in the form
prescribed by law. (Art. 779, CC)
2. Legal or Intestate that which takes
place by operation of law in the
absence of a valid will.
3. Mixed that which is effected partly
by will and partly by operation of law.
(Art. 780, CC)
KINDS OF HEIRS
1. 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. They
succeed regardless of a will.
2. 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. They succeed by
reason of a will.
3. 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. They succeed in the absence of
a valid will.
I. TESTAMENTARY SUCCESSION
A. CONCEPT
DEFINITION OF WILL (Art. 783, CC)
- 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
B. TESTAMENTARY CAPACITY
TESTAMENTARY CAPACITY
1. All persons who are not expressly
prohibited by law (Art. 796, CC)
2. Eighteen (18) years old and above
(Art. 797, CC)
3. Of sound mind at the time of the
execution of the will (Art. 798, CC)
*Supervening capacity or incapacity does
not affect the will.
C. FORMALITIES OF WILLS
KINDS OF WILLS
1. Notarial an ordinary or attested will
(Articles 804-808, CC)
2. Holographic a handwritten will (Art.
810, CC)
COMMON REQUIREMENTS TO BOTH
WILLS (Art. 804, CC)
1. In writing
2. In a language or dialect known to the
testator
REQUISITES FOR A VALID NOTARIAL
WILL
1. In writing (Art. 804, CC)
testator (Art. 804, CC)
3. Subscribed at the end by the testator
himself or by the testators name
written by some other person in his
presence, and by his express direction
(Art. 805, CC)
*Requisite of a signature: satisfied by
a thumbprint Matias vs. Salud. However, a
cross does not. Garcia vs. Lacuesta
4. Attested and subscribed by three or
more credible witnesses in the
presence of the testator and of one
another (Art. 805, CC)
*Test of Presence: Not whether they
actually saw each other sign, but
whether they might have seen each
other sign had they chosen to do so
considering their mental and physical
condition and position with relation to
each other at the moment of
inscription of each signature. Jaboneta
vs. Gustilo, 5 Phil. 541
5. Each and every page, except the last,
must be signed by the testator or by
the person requested by him to write
his name, and by the instrumental
witnesses of the will, on the left
margin. (Art. 805, CC)
*Exceptions:
a. when the will consists of only one
page
b. when the will consists of only two
pages, the first of which contains
all dispositions and is signed at
the bottom by the testator and
the witnesses, and the second
page contains only the attestation
clause duly signed at the bottom
by the witnesses. Abangan vs.
Abangan
*Note: The inadvertent failure of one
witness to affix his signature to one
page of a testament, due to the
simultaneous lifting of two pages in the
course of signing, is not per se
sufficient to justify denial of probate.
Icasiano vs. Icasiano, 11 SCRA 422
6. Each and every page of the will must
be numbered correlatively in letters
placed on the upper part of each page.
(Art. 805, CC) example, page one of
five pages
7. It must contain an attestation clause,
stating the following (Art. 805, CC)
a. The number of pages used upon
which the will is written.
b. The fact that the testator signed
the will and every page, or caused
some other person to write his
name, under his express direction,
in the presence of the instrumental
witnesses.
c. All the instrumental witnesses
witnessed and signed the will and
all the pages in the presence of the
testator and of one another.
8. It must be acknowledged before a
notary public by the testator and the
witnesses. (Art. 806, CC)
* Note: The notary public before whom
the will was acknowledged cannot be
considered as the third instrumental
witness since he cannot acknowledge
before himself his having signed the
will. To allow such would have the
effect of having only two attesting
witnesses to the will which would be in
contravention of Articles 805 and 806.
Cruz vs. Villasor, 54 SCRA 31
ADDITIONAL REQUISITES FOR A
NOTARIAL WILL IF THE TESTATOR BE
DEAF OR A DEAF-MUTE (Art. 807, CC)
1. Testator must personally read the will,
if able to do so.
2. Otherwise, testator shall designate two
persons to read the will and
communicate its contents to him in
some practicable manner.
ADDITIONAL REQUISITES FOR A
NOTARIAL WILL IF THE TESTATOR BE
BLIND (Art. 808, CC)
The will shall be read to the testator twice
1. Once by one of the subscribing
witnesses
2. Once by the notary public before whom
the will is acknowledged
REQUISITES FOR A HOLOGRAPHIC WILL
1. In writing (Art. 804, CC)
testator (Art. 804, CC)
3. Entirely written, dated, and signed by
the hand of the testator himself (Art.
810, CC)
AMENDING A WILL
1. Notarial only through a codicil
2. Holographic
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 such 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
EFFECT OF INSERTION WRITTEN BY
ANOTHER PERSON ON THE VALIDITY OF
A HOLOGRAPHIC WILL WRITTEN BY THE
TESTATOR
When Made Effect
After the execution of
the will, without the
consent of the testator
Insertion is
considered not
written. The validity
of the will cannot
be defeated by the
malice or caprice of
a third person.
the will, with the
consent of the testator
Will is valid.
Insertion is void.
the will, validated by
the testator by his
signature
Insertion becomes
part of the will.
Entire will becomes
void because it did
not comply with the
requirement that it
must be wholly
written by the
testator.
Contemporaneous to
the execution of the will
Will is void because
it is not written
entirely by the
testator.
RULES IN CASE OF SUBSEQUENT
DISPOSITIONS
Subsequent
Disposition
Effect
Signed
Not dated
Last disposition is
signed and dated
Valid
Not signed
Dated
Void
Signed
Not dated
Void but it does not
affect the validity of
the other dispositions
or the will itself
QUALIFICATIONS OF WITNESSES TO A
NOTARIAL WILL (Arts. 820 821, CC
(SABRDC))
1. Of sound mind
2. Of the age of 18 years or more
3. Not blind, deaf or dumb
4. Able to read and write
5. Domiciled in the Philippines
6. Have not been convicted of falsification
of a document, perjury or false
testimony
INTERESTED WITNESS (Art. 823, CC)
- A witness who attests to the
execution of a will which gives a
legacy or devise to that witness, or
his spouse, or his parent or his
child.
*Effect: The devise or legacy, insofar as it
concerns that witness or his spouse or his
parent or his child, shall be void unless
there are three other witnesses to such
will. His competence as a witness shall
subsist.
GOVERNING LAW
As to time Governing Law
Formal Validity Law in force at the time
the will is made
Intrinsic Validity Law of decedents
nationality at the time
of his death (Art. 16,
CC)
As to Place
Testator Place of
Execution of
the Will
Governing Law
Filipino Philippines
(Art. 16, CC)
Philippine Law
Outside of
the
Philippines
(Art. 815,
CC)
1. Law of the
country in
which it is
executed; or
2. Philippine Law
Alien Philippines
(Art. 817,
CC)
1. Philippine Law;
or
2. Law of the
Country of
which testator
is a citizen or
subject.
Outside the
Philippines
(Art. 816,
CC)
1. Law of the
place where
the will is
executed; or
2. Law of the
place where
the testator
resides; or
3. Law of the
testators
country; or
4. Philippine Law
ASPECTS OF THE WILL GOVERNED BY
THE NATIONAL LAW OF THE
DECEDENT (Arts. 16 and 1039, CC)
1. Order of succession
2. Capacity to succeed
3. Amount of successional rights
4. Intrinsic validity of testamentary
provisions
JOINT WILL
- A single testamentary instrument
- which contains the wills of two or
more persons
- jointly executed by them
- either for their reciprocal benefit or
for the benefit of a third person
MUTUAL WILLS
- Executed pursuant to an agreement
between two or more persons
- to dispose of their property in a
particular manner
- each in consideration of the other
separate wills of two persons which
are reciprocal in their provisions
RECIPROCAL WILLS
- Testators name each other as
beneficiaries
- under similar testamentary plans
Note: A will that is both joint and mutual is
one executed jointly by two or more persons,
the provisions of which are reciprocal and
which shows on its face that the devises are
made in consideration of the other. Such is
prohibited under Art. 819, CC. Prohibition is
applicable only to joint wills executed by
Filipinos.
D. CODICIL AND INCORPORATION
BY REFERENCE
DEFINITION OF A CODICIL (Arts. 825
826, CC)
- It is a supplement or addition to a
will
- made after the execution of a will
- and annexed to be taken as a part
of the will
- by which any disposition made in
the original will is explained, added
to, or altered
- It is executed as in the case of a
will.
REQUISITES FOR INCORPORATION BY
REFERENCE (Art. 827, CC)
1. The document or paper referred to in
the will must be in existence at the
time of the execution of the will.
2. The will must clearly describe and
identify the same, stating among other
things the number of pages thereof.
3. It must be identified by clear and
satisfactory proof as the document or
paper referred to therein. And
4. It must be signed by the testator and
the witnesses on each and every page,
except in case of voluminous books of
account or inventories.
E. REVOCATION OF WILLS AND
TESTAMENTARY DISPOSITIONS
MODES OF REVOKING A WILL (Art. 830,
CC)
1. By implication of law
2. By the execution of a will, codicil or
other writing executed as provided in
the 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
*Note: It must be done any time before
the death of the testator. The right of
revocation cannot be waived or restricted.
(Art. 828, CC)
LAWS WHICH GOVERN REVOCATION
(Art. 829, CC)
PLACE OF
REVOCATION
TESTATORS
DOMICILE
GOVERNING
LAW
In the
Philippines
Philippines or
in some
other country
Philippine
Law
Outside the
Philippines
Philippines Philippine
Law
Foreign
country
1. Law of
the place
where the
will was
made; or
2. Law of
the place
in which
the
testator
had his
domicile
at the
time of
revocatio
n.
DOCTRINE OF DEPENDENT RELATIVE
REVOCATION
- A revocation subject to a condition
does not revoke a will unless and
until the condition occurs. Thus,
where a testator revokes a will
with the proven intention that he
would execute another will, his
failure to validly make a latter will
would permit the allowance of the
earlier will.
- Where the act of destruction is
connected with the making of
another will so as to fairly raise the
inference that the testator meant
the revocation of the old to depend
upon the efficacy of the new
disposition intended to be
substituted, the revocation will be
conditional and dependent upon the
efficacy of the new disposition; and
if for any reason, the new will
intended to be made as a
substitute is inoperative, the
revocation fails and the original will
remain in full force. Molo vs. Molo,
90 Phil. 37
F. ALLOWANCE AND
DISALLOWANCE OF WILLS
PROBATE
- It is a special proceeding by which
the validity of a will may be
established.
- Probate court may pass upon the
title thereto, but such
determination is provisional, not
conclusive, and is subject to the
final decision in a separate action
to resolve title. Pastor vs. CA 1983
- Probate of a will bars criminal
prosecution of the alleged forger of
the probated will. Mercado vs.
Santos 1938
MATTERS TO BE PROVED IN A PROBATE
1. Whether the instrument which is
offered for probate is the last will and
testament of the decedent
2. Whether the will has been executed in
accordance with the formalities
prescribed by law
3. Whether the testator had testamentary
capacity at the time of the execution of
the will
GROUNDS FOR DISALLOWANCE OF A
WILL (Art. 839, CC) FIFU SM
1. If the Formalities required by law have
not been complied with.
2. If the testator was Insane, or
otherwise mentally incapable of
making a will, at the time of its
execution.
3. If it was executed through Force or
under duress, or the influence of fear,
or threats.
4. If it was procured by Undue and
improper pressure and influence, on
the part of the beneficiary or of some
other person.
5. If the Signature of the testator was
procured by fraud.
6. If the testator acted by Mistake or did
not intend that the instrument he
signed should be his will at the time of
affixing his signature thereto.
*This list is exclusive.
REVOCATION VS. DISALLOWANCE
REVOCATION DISALLOWANCE
Voluntary act of the
testator
Given by judicial
decree
With or without
cause
Must always be for a
legal cause
May be partial or
total
Always total except
when the ground of
fraud or influence for
example affects only
certain portions of the
will
G. INSTITUTION OF HEIRS
DEFINITION OF INSTITUTION OF HEIRS
(Art. 840, CC)
- It is an act by virtue of which a
testator designates in his will
- the person/s who are to succeed
him in his property and
transmissible rights and
obligations.
REQUISITES FOR A VALID INSTITUTION
OF HEIR (DACCVP)
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
THREE PRINCIPLES IN THE INSTITUTION
OF HEIRS
1. Equality heirs who are instituted
without designation of shares shall
inherit in equal parts. (Art. 846, CC)
2. Individuality heirs collectively
instituted are deemed individually
named unless a contrary intent is
proven. (Art. 847, CC)
3. Simultaneity when the testator calls
to the succession a person and his
children, they are all deemed to have
been instituted simultaneously and not
successively. (Art. 849, CC)i
INSTITUTION BASED ON A FALSE CAUSE
(Art. 850, CC)
- General Rule: The statement of a
false cause for the institution of an
heir shall be considered as not
written.
- Exception: If it appears from the
will that the testator would not
have made such institution if he
had known the falsity of such
cause. In this case, the institution
shall be annulled.
- Requisites of Annulment under
850:
1. cause for institution of heirs
must be stated in the will
2. cause must be shown as false
3. it must appear form the face of
the will that the testator would
not have made such institution
if he had known the falsity of
the cause. Austria vs. Reyes
1970
RULES REGARDING A PERSONS RIGHT
TO DISPOSE OF HIS ESTATE (Art. 842,
CC)
1. If testator has no compulsory heirs
a. He can give his estate to any
person having capacity to succeed.
b. He must respect restriction
imposed by special laws.
2. If testator has compulsory heirs
a. He can give the disposable portion
to strangers.
b. Legitimes of compulsory heirs must
be respected.
CONCEPT OF PRETERITION (Art. 854, CC)
1. There must be a total omission of one,
some or all of the heir/s in the will.
2. The omission must be that of a
compulsory heir.
3. The compulsory heir omitted must be
of the direct line.
4. The omitted compulsory heir must be
living at the time of the testators
death or must at least have been
conceived before the testators death.
EFFECTS OF PRETERITION (Art. 854, CC)
1. The institution of the heir is annulled.
2. Devises and legacies shall remain valid
as long as they are not inofficious.
3. If the omitted compulsory heir should
die before the testator, the institution
shall be effectual, without prejudice to
the right of representation.
PRETERITION VS. DISINHERITANCE
PRETERITION DISINHERITANCE
Tacit deprivation of legitime Express deprivation of legitime
Presumed to be involuntary as it is an
omission to mention an heir or though
mentioned, is not instituted as an heir. But it
may also be voluntary.
Always voluntary
Presumed by law to be a mere oversight or
mistake
Legal cause is present
The omitted compulsory heir gets his
legitime plus his share in the free portion not
disposed of by way of legacies and devises.
Even a compulsory heir may be totally
excluded. If disinheritance is not lawfully
made, the compulsory heir is restored to his
legitime.
EFFECTS OF PREDECEASE, INCAPACITY, REPUDIATION
HEIR PRE
DECEASE
IN
CAPACITY
REPUDIA
TION
Voluntary No right transmitted to the
heirs of the voluntary heir.
No right transmitted to
the heirs of the
voluntary heir.
Voluntary heir
who repudiated
cannot transmit
any right to his
own heirs.
Compulsory Right to the legitime and not
to the free portion
transmitted to the
representatives of the
compulsory heir.
Compulsory heir may be
represented but only
with respect to his
legitime.
Compulsory heir
who repudiated
cannot transmit
any right to his
own heirs.
KINDS OF INSTITUTIONS
1. Simple or Pure the rights to the
succession are transmitted from the
moment of the death of the decedent.
(Art. 777, CC)
2. Conditional may be potestative,
causal or mixed. (See Arts. 871 884)
*Disposicion Captatoria disposition
made upon the condition that the heir
shall make some provision in his will in
favor of the testator or of any other
person. This is void. (Art. 875, CC)
3. With a Term designation of the day
or time when the effects of the
institution of an heir shall commence
or cease. (Art. 885, CC)
4. Modal institution where the testator
states the following: (Art. 882, CC)
a. the object of the institution; or
b. the purpose of the application of
the property left by the testator; or
c. the charge imposed by the creator
upon the heir.
*Doctrine of Constructive
Compliance When without the fault
of the heir, the modal institution
cannot take effect in the exact manner
stated by the testator, it shall be
complied with in a manner most
analogous to and in conformity with his
wishes. (Art. 883, CC)
H. SUBSTITUTION OF HEIRS
DEFINITION OF SUBSITUTION (Art. 857,
CC)
- It is the appointment of another
heir
- so that he may enter into the
inheritance in default of the heir
originally instituted.
CLASSES OF SUBSITITUTION
1. Vulgar or Simple the testator may
designate one or more person/s to
substitute the heir/s instituted in case
such heir/s should: (Art. 859, CC)
a. die before him (predecease)
b. should not wish to accept the
inheritance (renounce)
c. should be incapacitated to accept
the inheritance (incapacitated)
2. Brief or Compendious (Art. 860, CC)
a. Brief - two or more persons
designated by the testator to
substitute for only one heir.
b. Compendious One person is
designated to take the place of two
or more heirs.
3. Reciprocal If the heirs instituted in
unequal shares should be reciprocally
substituted, the substitute shall acquire
the share of the heir who dies,
renounces, or is incapacitated, unless
it clearly appears that the intention of
the testator was otherwise. If there are
more than one substitute, they shall
have the same share in the
substitution as in the institution. (Art.
861, CC)
4. Fideicommissary if the testator
institutes an heir with an obligation to
preserve and to deliver to another the
property so inherited. The heir
instituted to such condition is called
the first heir or the fiduciary heir, the
one to receive the property is the
fideicommissary or the second heir.
(Art. 863, CC)
REQUISITES FOR A FIDEICOMMISSARY
SUBSTITUTION (Arts. 863 865, CC)
1. A fiduciary or first heir instituted
entrusted with the obligation to
preserve and to transmit to a
fideicommissary substitute or second
heir the whole or part of the
inheritance.
2. The substitution must not go beyond
one degree from the heir originally
instituted.
3. The fiduciary heir and the
fideicommissary are living at the time
of the death of the testator.
4. The fideicommissary substitution must
be expressly made.
5. The fideicommissary substitution is
imposed on the free portion of the
estate and never on the legitime.
I. LEGITIMES
DEFINITION OF LEGITIME (Art. 886, CC)
- It is that part of the testators
property which he cannot dispose
of
- because the law has reserved it for
his compulsory heirs
CLASSES OF COMPULSORY HEIRS (Art.
887, CC)
1. Primary those who have precedence
over and exclude other compulsory
heirs
a. Legitimate children and legitimate
descendants with respect to their
legitimate parents and ascendants
2. Secondary those who succeed only
in the absence of the primary
compulsory heirs
a. Legitimate parents and legitimate
ascendants with respect to their
legitimate children and descendants
b. Illegitimate parents with respect to
their illegitimate children
3. Concurring those who succeed
together with the primary or the
secondary compulsory heirs
a. Widow or widower (legitimate)
b. Illegitimate children and illegitimate
descendants
Legitmate children- LC
Illegitimate children- ILC
Surviving spouse- SS
Legimate Parents- LP
Illegitimate Parents- ILP
COMPULSORY HEIRS
If the testator is a
LEGITIMATE
CHILD
If the testator is an
ILLEGITIMATE
CHILD
1. LC and
descendants
1. LC and descendants
2. In default of no.
1, LP and ascendants
2. ILC and
descendants
3. SS 3. In default of nos. 1-
2, ILP only
4. IC and
descendants
4. SS
SPECIFIC RULES ON LEGITIMES
1. Direct Descending Line
a. Rule of preference between
lines - Those in the direct
descending line shall exclude those
in the direct ascending and
collateral lines, and those in the
direct ascending line shall, in turn,
exclude those in the collateral line.
b. Rule of proximity the relative
nearest in degree excludes the
farther one
c. Right of representation ad infinitum
in case of predecease, incapacity or
disinheritance. For decedents who
are legitimate children, only the
legitimate descendants can
represent. For decedents who are
illegitimate children, both the
legitimate and illegitimate
descendants can represent.
d. If all the legitimate children
repudiate their legitime, the next
generation of legitimate
descendants succeed in their own
right.
2. Direct Ascending Line
a. Rule of division by lines
b. Rule of equal division the
relatives who are in the same
degree shall inherit in equal shares
3. Non-impairment of legitime
SUMMARY OF LEGITIMES OF COMPULSORY HEIRS
SURVIVING
REL.
LC &
DESCENDANTS
SS ILC LP &
ASCENDANT
S
ILP
LC alone (divided by
# of children)
1 LC,
SS

LC, SS (divided by
# of children)
Same as the share
of 1 LC
LC, ILC of the share of 1
LC
1 LC, SS,
ILC

(preferred)
of the share of 1
LC
2 or more
LC,
SS,
ILC
(divided by
# of children)
Same as the share
of 1 LC
of the share of 1
LC
LP alone
LP,
ILC

LP, SS
LP, SS,
ILC
1/8
ILC alone (divided by # of
children)
ILC,
SS
1/3 1/3 (divided by #
of children)
SS alone or 1/3 if
marriage in
articulo mortis
ILP alone
ILP, SS
Adopter
ILC, SS
1/3 1/3 1/3
(adopter)
STEPS IN DETERMINING THE LEGITIME
OF COMPULSORY HEIRS
1. Determine the gross value of the
estate at the time of the death of the
testator.
2. Determine all debts and charges which
are chargeable against the estate.
3. Determine the net value of the estate
by deducting all debts and charges
from the gross value of the estate.
4. Collate or add the value of all
donations inter vivos to the net value
of the estate.
5. Determine the amount of the legitime
from the total thus found.
6. Impute the value of all donations inter
vivos made to compulsory heirs
against their legitime and of the value
of all donations inter vivos made to
strangers against the disposable free
portion and restore it to the estate if
the donation is inofficious.
7. Distribute the residue of the estate in
accordance with the will of the
testator.
REMEDY OF COMPULSORY HEIR IN CASE
OF IMPAIRMENT OF LEGITIME
1. If the impairment is total, then there
may be preterition if the compulsory
heir omitted is either an ascendant or
descendant. Art. 854, CC would come
in to play, i.e., there will be an
annulment of the institution of heirs
and a reduction of devises and
legacies.
2. If the impairment is partial, then the
compulsory heir is entitled to
completion of legitime under Art. 906,
CC.
3. If the impairment is through donation,
the remedy is collation.
CONCEPT OF RESERVA TRONCAL (Art.
891, CC)
- The ascendant who inherits from
his descendant
- any property which the latter may
have acquired by gratuitous tile
- from another ascendant, or a
brother or sister,
- is obliged to reserve such property
- as he may have acquired by
operation of law
- for the benefit of relatives within
the third degree
- and who belong to the line from
which said property came.
REQUISITES FOR RESERVA TRONCAL
Chua vs. CFI, 78 SCRA 406 and Gonzales vs.
CFI, 104 SCRA 161
1. that the property was acquired by a
descendant (prepositus) from an
ascendant or from a brother or sister
(source) by gratuitous title
2. that the prepositus died without an
issue
3. that the property is inherited by
another ascendant (reservista) by
operation of law
4. that there are relatives within the 3
rd
degree (reservatarios) belonging to the
line from which said property came
J. DISINHERITANCE
DEFINITION OF DISINHERITANCE (Art.
915, CC)
- It is the act by which the testator
- for just cause
- deprives a compulsory heir of his
right to the legitime.
REQUISITES FOR A VALID
DISINHERITANCE
1. Heir disinherited must be designated
by name or in such a manner as to
leave no room for doubt as to who is
intended to be disinherited.
2. It must be for a cause designated by
law.
3. It must be made in a valid will.
4. It must be made expressly, stating the
cause in the will itself.
5. The cause must be certain and true,
and must be proved by the interested
heir if the person disinherited should
deny it.
6. It must be unconditional.
7. It must be total.
SUMMARY OF CAUSES OF
DISINHERITANCE
Art. 919- children/ descendants
Art. 920- parents/ ascendants
Art. 921- spouse
Art. 1032- unworthiness
GROUNDS FOR
DISINHERITANCE 919 920
921
10
32
Guilty/convicted of
attempt against life of
testator/spouse/
ascendant/descendant
* * *
*
Accused
testator/decedent of
crime punishable by
imprisonment of 6
years or more, found
groundless, false
* * *
*
Causes
testator/decedent to
make will or change
one by fraud,
violence, intimidation,
or undue influence
* * *
*
Unjustified refusal to
support testator
* * *
Convicted of adultery
or concubinage with
spouse of
testator/decedent
* *
*
Maltreatment of
testator by word and
deed
*
Leading a
dishonorable or
disgraceful life
*
Conviction of crime
which carries penalty
of civil interdiction
*
Abandonment of
children or inducing
children to live
corrupt and immoral
life or attempted
against virtue
*
*
Loss of parental
authority
* *
Attempt by one
parent against life of
the other UNLESS
there is reconciliation
between parents
*
Spouses given cause *
(Source)
A
C
(Reservatario)
B
E
F
D G (Reservista)
H
(Prepositus)
for legal separation
Failure to report
violent death of
decedent within one
month, unless
authorities have
already taken action
*
Force, violence,
intimidation or undue
influence to prevent
another from making
a will or revoking one
already made or who
supplants or alters
the latters will
*
Falsifies or forges a
supposed will of the
decedent
*
REVOCATION OF DISINHERITANCE
1. Reconciliation
2. Subsequent institution of the
disinherited heir
3. Nullity of the will which contains the
disinheritance
*Note: The moment the testator uses one of
the acts of unworthiness as a cause for
disinheritance, he thereby submits it to the
rules on disinheritance. Thus, reconciliation
renders the disinheritance ineffective.
K. LEGACIES AND DEVISES
PERSONS CHARGED WITH LEGACIES AND
DEVISES
1. Compulsory heir
2. Voluntary heir
3. Legatee or devisee
4. Estate
VALIDITY AND EFFECT OF LEGACY OR
DEVISE
STATUS OF
PROPERTY GIVEN
BY LEGACY/DEVISE
EFFECT ON THE
LEGACY/DEVISE
1. Belonging to the
testator at the time of
the execution of the
will until his death
Effective
2. Belonging to the
will but alienated in
favor of a 3
rd
person
Revoked
3. Belonging to the
favor of the legatee
or devisee
gratuitously
No revocation. There
is a clear intention to
comply with the
legacy/devise.
4. Belonging to the
Legatee/devisee can
demand
reimbursement from
the heirs or the
favor of the
legatee/devisee
onerously
estate.
5. Not belonging to
the testator at the
time the will is
executed but he has
ordered that the thing
be acquired in order
that it be given to the
legatee/devisee.
Effective
6. Not belonging to
the testator at the
time the will is
executed and the
testator erroneously
believed that the
thing pertained to
him.
Void
7. Not belonging to
the testator at the
time the will is
executed but
afterwards it becomes
his by whatever title.
Effective
8. Already belonged
to the
legatee/devisee at
the time of the
execution of the will
even though another
person may have
interest therein
Ineffective
9. Already belonged
to the
legatee/devisee at
the time of the
execution of the will
even though it may
have been
subsequently
alienated by him.
Ineffective
10. Testator had
knowledge that the
thing bequeathed
belonged to a third
person and the
legatee/devisee
acquired the property
gratuitously after the
execution of the will.
Legatee/devisee can
claim nothing by
virtue of the
legacy/devise
11. Testator had
knowledge that the
thing bequeathed
belonged to a third
person and the
legatee/devisee
acquired the property
by onerous title.
Legatee/devisee can
demand
reimbursement from
the heir or estate.
ORDER OF PAYMENT IN CASE THE
ESTATE IS INSUFFICIENT TO COVER ALL
LEGACIES AND DEVISES ART. 911, CC
VS. ART. 950, CC
ART. 911 ART. 950
Order of Preference Order of Preference
(LIPO) (RPSESO)
1. Legitime of
compulsory
heirs
2. Donations Inter
vivos
3. Preferential
legacies or
devises
4. All Other
legacies or
devises pro rata
1. Remuneratory
legacy/devise
2. Preferential
legacy/devise
3. Legacy for Support
4. Legacy for
Education
5. Legacy/devise of
Specific,
determinate thing
which forms a part
of the estate
6. All Others pro rata
Application: Application:
1. When the
reduction is
necessary to
preserve the
legitime of
compulsory
heirs from
impairment
whether there
are donations
inter vivos or
not; or
2. When, although,
the legitime has
been preserved
by the testator
himself there
are donations
inter vivos.
*Art. 911
governs when
there is a
conflict between
compulsory
heirs and the
devisees and
legatees.
1. When there are no
compulsory heirs
and the entire
estate is
distributed by the
testator as legacies
or devises; or
2. When there are
compulsory heirs
but their legitime
has already been
provided for by the
testator and there
are no donations
inter vivos.
*Art. 950 governs
when the question
of reduction is
exclusively among
legatees and
devisees
themselves.
*Note: In case of reduction, the inverse order
of payment should be followed.
GROUNDS FOR REVOCATION OF
LEGACIES AND DEVISES (Art. 957, CC)
1. Testator transforms the thing
bequeathed in such a manner that it
does not retain either the form or the
denomination it had.
2. Testator by any title or for any cause
alienates the thing bequeathed, or any
part thereof, it being understood that
in the latter case the legacy or devise
shall be without effect only with
respect to the part alienated. Except:
When the thing should again belong to
the testator after alienation by virtue
of the exercise of the right of
repurchase.
3. Thing bequeathed is totally lost during
the lifetime of the testator, or after his
death without the heirs fault.
4. Other causes: nullity of the will; non-
compliance with suspensive conditions
affecting the bequests; sale of the
thing to pay the debts of the deceased
during the settlement of his estate.
*Note: List is not exclusive.
II. LEGAL OR INTESTATE
SUCCESSION
CAUSES OF VACANCY IN SUCCESSION
1. Disinheritance the testator creates
it himself
2. Repudiation the heir does
something
3. Incapacity or Predecease
something happens to the heir
HOW VACANCIES ARE FILLED
1. Substitution (Art. 857, CC)
2. Representation (Art. 970, CC)
3. Accretion (Art. 1015, CC)
4. Intestate Succession
CAUSES FOR LEGAL OR INTESTATE
SUCCESSION (Art. 960, CC)
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
5. When the will does not dispose of all
the property belonging to the testator.
Legal succession shall take place only
with respect to the property which the
testator has not disposed.
6. If the suspensive condition attached to
the institution of the heir does not
happen or is not fulfilled
7. If the heir dies before the testator
8. If the heir repudiates the inheritance,
there being no substitution, and no
right of accretion takes place
9. When the heir instituted is incapable of
succeeding, except in cases provided in
the Civil Code
FUNDAMENTAL UNDERLYING
PRINCIPLES IN LEGAL OR INTESTATE
SUCCESSION
1. Rule of Preference Between Lines
Those in the direct descending line
shall exclude those in the direct
ascending and collateral lines, and
those in the direct ascending line shall,
in turn, exclude those in the collateral
line.
2. Rule of Proximity the relative nearest
in degree excludes the farther one.
(Art. 962, CC)
3. Rule of Equal Division the relatives
who are in the same degree shall
inherit in equal shares. (Articles 987
and 1006, CC)
Exceptions:
a. Division in the ascending line
(between paternal and maternal
grandparents)
b. Division among brothers and
sisters, some of whom are of the
full and others of half-blood
c. Division in cases where the right of
representation takes place
4. Rule of Barrier between the legitimate
family and the illegitimate family the
illegitimate family cannot inherit by
intestate succession from the
legitimate family and vice-versa. (Art.
992, CC)
5. Rule of Double Share for full blood
collaterals when full and half-blood
brothers or sisters, nephews or nieces,
survive, the full blood shall take a
portion in the inheritance double that
of the half-blood. (Articles 895 and
983, CC)
RELATIONSHIP (Articles 963 969, CC)
1. Number of generations determines
proximity.
2. Each generation forms a degree.
3. A series of degrees forms a line.
4. A line may either be direct or
collateral.
5. A direct line is that constituted by the
series of degrees among ascendants
and descendants (ascending and
descending).
6. A collateral line is that constituted by
the series of degrees among persons
who are not ascendants or
descendants, but who come from a
common ancestor.
7. Full blood same father and mother.
8. Half-blood only one of either parent
is the same.
9. In adoption, the legal filiation is
personal and exists only between the
adopter and the adopted. The adopted
is deemed a legitimate child of the
adopter, but still remains as an
intestate heir of his natural parents
and other blood relatives.
DEFINITION OF THE RIGHT OF
REPRESENTATION (Art. 970, CC)
- 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 if he were living
or if he would have inherited.
*Notes:
- In the direct line, representation
takes place ad infinitum in the
direct descending line, never in the
ascending.
- In the collateral line, representation
takes place only in favor of the
children of the brothers or sisters
(i.e., nephews and nieces) whether
of the full or half-blood and only if
they concur with at least one uncle
or aunt.
RIGHT OF REPRESENTATION IN
TESTAMENTARY SUCCESSION
1. When a compulsory heir in the direct
descending line had predeceased the
testator and was survived by his
children or descendants.
descending line is excluded from the
inheritance due to incapacity or
unworthiness and he has children or
descendants.
descending line is disinherited and he
has children or descendants;
representation covers only the
legitime.
4. A legatee or devisee who died afther
the death of the testator may be
represented by his heirs.
RIGHT OF REPRESENTATION IN
INTESTATE SUCCESSION
1. When a legal heir in the direct
descending line had predeceased the
decedent and was survived by his
children or descendants.
2. When a legal heir in the direct
descending line is excluded from the
inheritance due to incapacity or
unworthiness and he has children or
descendants.
3. When brothers or sisters had
predeceased the decedent and they
had children or descendants.
4. When illegitimate children represent
their deceased illegitimate parents in
the estate of their grandparents.
5. When nephews and nieces inherit
together with their uncles and aunts in
representation of their deceased
parents who are brothers or sisters of
said uncles and aunts.
ORDER OF LEGAL OR INTESTATE SUCCESSION
DECEDENT IS A
LEGITIMATE CHILD
DECEDENT IS AN
ILLEGITIMATE CHILD
DECEDENT IS AN ADOPTED CHILD
1 LC and
Legitimate descendants
LC and
LC and
2 LP and
Legitimate ascendants
ILC and
Illegitimate descendants
ILC and Illegitimate
descendants
3 ILC and
Illegitimate descendants
ILP LP or ILP and
Legitimate ascendants,
Adoptive parents
4 SS SS SS
5 Legitimate siblings,
Nephews,
Nieces
Illegitimate siblings,
Nephews,
Nieces
Siblings,
Nephews,
Nieces
6 Legitimate collateral relatives
within the 5
th
degree
State State
7 State
CONCURRENCE IN LEGAL OR INTESTATE SUCCESSION
Intestate Heir
EXCLUDES EXCLUDED BY CONCURS WITH
LC and
Ascendants,
Collaterals and
State
No one SS and
ILC
ILC
and Descendants
ILP,
Collaterals and
State
No one SS
LC and
LP
LP and
Legitimate ascendants
Collaterals and
State
LC ILC and
SS
ILP Collaterals and
State
LC and ILC SS
SS Collaterals other than
siblings, nephews and
nieces
No one LC, ILC, LP, ILP
Siblings
Nephews
Nieces
Siblings,
Nephews
Nieces
All other collaterals
and
State
LC, ILC, LP, ILP SS
Other collaterals within
5
th
degree
Collateral more remote
in degree and
State
LC, ILC, LP, ILP and
SS
Collaterals in the same
degree
State No one Everyone No one
A MORE DETAILED SUMMARY OF INTESTATE SHARES
1
LEGITIMATE CHILDREN AND LEGITIMATE DESCENDANTS ALONE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LC 1
TOTAL 1
2
ONE LEGITIMATE CHILD AND SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LC
SS
TOTAL 1
3
LEGITIMATE CHILDREN AND SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LC
Remaining portion of
estate after paying
legitimes
Whole estate divided
equally between total
# of children plus the
SS
SS
Same as share of 1 LC
Legitimes to be
divided equally
between total # of
children plus the SS
# of children plus the
SS (see above)
TOTAL Varies on no. of
children
Varies on no. of
children
1
4
LEGITIMATE CHILDREN AND ILLEGITIMATE CHILDREN
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LC Remaining portion of
estate after paying
legitimes
by the ratio of 2:1 for
each LC as compared
to the ILC
ILC share of 1 LC Legitimes to be
divided by the ratio of
2 for each LC, 1 for
each ILC
1 for each ILC
provided that legitimes
wouldnt be impaired
TOTAL Varies on # of children Varies on # of children 1
5
ONE LEGITIMATE CHILD, ILLEGITIMATE CHILD, AND SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
estate after paying
legitimes to be divided
each LC and each
ILC, respectively
by the ratio of 2 for
each LC
ILC share of 1 LC or 1 for each ILC (see
above)
1 for each ILC
SS Same share as a LC Legitimes wouldnt be
impaired
TOTAL Varies depending on #
of ILC
Varies depending on #
of ILC
1
6
LEGITIMATE CHILDREN, ILLEGITIMATE CHILDREN AND SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
estate, if any after
paying legitimes to be
divided by the ratio of
2 for each LC
each LC and ILC
respectively
ILC share of each LC 1 for each ILC (see
above)
1 for each ILC (see
above)
SS Same share as one
LC
Same share as a LC,
provided legitimes
are not impaired
Same share as a LC,
provided legitimes
are not impaired
TOTAL Varies depending on
no. of ILC
Varies depending on
no. of ILC
1
7
LEGITIMATE PARENTS ALONE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LP 1
TOTAL 1
8
LEGITIMATE PARENTS AND ILLEGITIMATE CHILDREN
In
testate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LP
ILC
TOTAL 1
9
LEGITIMATE PARENTS AND SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LP
SS
TOTAL 1
10
LEGITIMATE PARENTS, SURVIVING SPOUSE AND ILLEGITIMATE CHILDREN
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
LP
SS 1/8 1/8
ILC
TOTAL 7/8 1/8 1
11
ILLEGITIMATE CHILDREN ALONE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
ILC alone 1
TOTAL 1
12
ILLEGITIMATE CHILDREN AND SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
ILC 1/3 1/6
SS 1/3 1/6
TOTAL 2/3 1/3 1
13
SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
SS or 1/3 or 1/3 1
TOTAL or 1/3 or 1/3 1
14
ILLEGITIMATE PARENTS ALONE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
ILP 1
TOTAL 1
15
ILLEGITIMATE PARENTS AND SURVIVING SPOUSE
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
ILP
SS
TOTAL 1
16
SIBLINGS, NEPHEWS AND NIECES ALONE
(SPECIAL KIND OF COLLATERAL RELATIVES)
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
Siblings, nephews,
nieces
1
TOTAL 1
17
SURVIVING SPOUSE, SIBLINGS, NEPHEWS AND NIECES
Intestate Heir
SHARE AS LEGITIME
SHARE AS FREE
DISPOSAL
TOTAL INTESTATE
SHARE
SS
Siblings, nephews,
nieces

TOTAL 1
ORDER OF CONCURRENCE IN THE CASE OF AN ADOPTED CHILD (Art. 190, FC)
SURVIVORS SHARE
LC, ILC, SS As in the case of ordinary intestate succession
LP or ascendants or ILP Adopter
LP or ascendants or ILP or Adopter

SS

LP or ascendants
Adopter
ILC or descendants
LP or ascendants
Adopter
SS
ILC or descendants
1/3
1/3
1/3
Adopter alone Entire estate
Collateral blood relatives As in the case of ordinary intestate succession
III. PROVISIONS COMMON TO TESTAMENTARY AND INTESTATE
SUCCESSIONS
A. ACCRETION
DEFINITION OF ACCRETION (Art. 1015, CC)
- It is a right by virtue of which
- when two or more persons are called to the same inheritance, devise or legacy
- the part assigned to one who renounces or cannot receive his share or who died
before the testator
- is added or incorporated to that of his co-heirs, co-devisees, or co-legatees.
EFFECT OF PREDECEASE, INCAPACITY, DISINHERITANCE OR REPUDIATION IN
TESTAMENTARY AND INTESTATE SUCCESSION
CAUSE OF VACANCY TESTAMENTARY SUCCESSION INTESTATE
SUCCESSION LEGITIME FREE PORTION
Predecease Representat'n
Intestate Succession
Accretion
Representat'n
Incapacity Representat'n
Accretion
Representat'n
Disinheritance Representat'n
- -
Repudiation Intestate Succession Accretion Accretion
B. CAPACITY TO SUCCEED
REQUISITES FOR CAPACITY TO
SUCCEED BY WILL OR BY INTESTACY
(Art. 1024 1025, CC)
1. The heir, legatee or devisee must
be living or in existence at the
moment the succession opens; and
2. He must not be incapacitated or
disqualified by law to succeed.
WHO ARE INCAPABLE OF
SUCCEEDING
1. BASED ON UNDUE INFLUENCE
OR INTEREST (Art. 1027, CC) -
PIGRAP
a. Priest who heard the last
confession of the testator
during his last illness, or the
minister of the gospel who
extended spiritual aid to him
during the same period;
b. Individuals, associations and
corporations not permitted by
law to inherit;
c. 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;
d. Relatives of the priest or
minister of the gospel within
the fourth degree, the church,
order, chapter, community,
organization, or institution to
which such priest or minister
may belong;
e. Attesting witness to the
execution of a will, the spouse,
parents, or children, or any one
claiming under such witness,
spouse, parents, or children;
f. Physician, surgeon, nurse,
health officer or druggist who
took care of the testator during
his last illness.
2. BASED ON MORALITY OR
PUBLIC POLICY (Art. 739, CC)
a. Those made in favor of a
person with whom the testator
was guilty of adultery or
concubinage at the time of the
making of the will.
b. Those made in consideration of
a crime of which both the
testator and the beneficiary
have been found guilty.
c. Those made in favor of a public
officer or his spouse,
descendants and ascendants,
by reason of his public office.
3. BASED ON ACTS OF
UNWORTHINESS (Art. 1032,
CC) See table under
disinheritance
PARDON OF ACTS OF UNWORTHINESS
EXPRESS IMPLIED
Made by the
execution of a
document or any
writing in which the
decedent condones
the cause of
incapacity
Effected when the
testator makes a
will instituting the
unworthy heir with
knowledge of the
cause of incapacity
Cannot be revoked Revoked when the
testator revokes the
will or the
institution
C. ACCEPTANCE AND
REPUDIATION OF INHERITANCE
CHARACTERISTICS VIR (Articles
1041 1042, 1056, CC)
1. Voluntary and free
2. Irrevocable except if there is
vitiation of consent or an unknown
will appears
3. Retroactive
REQUISITES (Art. 1043, CC)
1. certainty of death of the decedent
2. certainty of the right to the
inheritance
ACCEPTANCE VS. REPUDIATION
1. Acceptance involves the
confirmation of transmission of
successional rights, while
repudiation renders such
transmission ineffective.
2. Repudiation is equivalent to an act
of disposition and alienation.
3. The publicity required for
repudiation is necessary for the
protection of other heirs and also
of creditors.
FORMS OF ACCEPTANCE (Articles
1049 1050, CC)
1. Express Acceptance one made
in a public or private document.
2. Tacit Acceptance one resulting
from acts by which the intention to
accept is necessarily implied or
from acts which one would have no
right to do except in the capacity of
an heir. Examples would be when
the heir sells, donates or assigns
his right, when the heir demands
partition of the inheritance, when
the heir alienates some objects of
the inheritance, etc.
FORMS OF REPUDIATION (Art. 1051,
CC)
1. in a public instrument
acknowledged before a notary
public; or
2. in an authentic document
equivalent of an indubitable writing
or a writing whose authenticity is
admitted or proved; or
3. by petition presented to the court
having jurisdiction over the
testamentary or intestate
proceeding
HEIRS IN TWO CAPACITIES (Art.
1055, CC)
- If a person is called to the
same inheritance as an heir by
will and by law and he
repudiates the inheritance in
his capacity as a testamentary
heir, he will be considered to
have also repudiated the
inheritance as a legal heir.
- If he repudiates it as a legal
heir, without his being a
testamentary heir, he may still
accept it in the latter capacity.
D. COLLATION (Articles 1061
1077, CC)
CONCEPT OF COLLATION
- To collate is to bring back or to
return to the hereditary mass
- in fact or by fiction
- property which came from the
estate of the decedent, during
his lifetime by donation or other
gratuitous title
- but which the law considers as
an advance from the
inheritance.
- It is the act by virtue of which,
the compulsory heir who
concurs with other compulsory
heirs in the inheritance bring
back to the common hereditary
mass
- the property which they may
have received from the testator
- so that a division may be
effected according to law and
the will of the testator.
OPERATIONS RELATED TO
COLLATION
1. Collation adding to the mass of
the hereditary estate the value of
the donation or gratuitous
disposition.
2. Imputing or Charging crediting
the donation as an advance on the
legitime (if the donee is a
compulsory heir) or on the free
portion (if the donee is a stranger).
3. Reduction determining to what
extent the donation will remain
and to what extent it is excessive
or inofficious.
4. Restitution return or payment
of the excess to the mass of
hereditary estate.
PERSONS OBLIGED TO COLLATE
1. General Rule: compulsory heirs
Exceptions:
a. when the testator should
have so expressly provided
b. when the compulsory heir
should have repudiated his
inheritance
2. Grandchildren who survive with
their uncles, aunts, or first cousins
and inherit by right of
representation
*Note: Grandchildren may inherit
from their grandparent in their own
right, i.e., as heirs next in degree,
and not by right of representation
if their parent repudiates the
inheritance of the grandparent, as
no living person can be
represented except in cases of
disinheritance and incapacity in
which case grandchildren are not
obliged to bring to collation what
their parent has received
gratuitously from their
grandparent.
WHAT TO COLLATE
1. Any property or right received by
gratuitous title during the
testators lifetime.
2. All that they may have received
from the decedent during his
lifetime.
3. All that their parents would have
brought to collation if alive.
PROPERTIES NOT SUBJECT TO
COLLATION
1. Absolutely no collation
a. Expenses for support,
education (only elementary
and secondary), medical
attendance, even in
extraordinary illness,
apprenticeship, ordinary
equipment, or customary
gifts. (Art. 1067, CC)
2. Generally not imputable to
legitime
a. Expenses incurred by
parents in giving their
children professional,
vocational or other career
unless the parents so
provide, or unless they
impair the legitime.
b. Wedding gifts by parents
and ascendants consisting
of jewelry, clothing, and
outfit except when they
exceed 1/10 of the sum
disposable by will.
E. PARTITION AND
DISTRIBUITON OF ESTATE
(Articles 1078 1105, CC)
CONCEPT OF PARTITION (Art. 1079,
CC)
- It is the separation, division
and assignment
- of a thing held in common
among those to whom it may
belong.
- The thing itself or its value may
be divided.
WHO MAY EFFECT PARTITION
1. decedent, during his lifetime by an
act inter vivos or by will
2. heirs
3. competent court
4. third person designated by the
decedent
WHO CAN DEMAND PARTITION
1. compulsory heir
2. voluntary heir
3. legatee or devisee
4. any person who has acquired
interest in the estate
WHEN PARTITION CANNOT BE
DEMANDED PAPU
1. when expressly Prohibited by the
testator for a period not exceeding
20 years
2. when the co-heirs Agreed that the
estate shall not be divided for a
period not exceeding 10 years,
renewable for another 10 years
3. when Prohibited by law
4. when to partition the estate would
render it Unserviceable for the use
for which it is intended
PROHIBITION TO PARTITION
1. The prohibition to partition for a
period not exceeding 20 years can
be imposed on the legitime.
2. If the prohibition to the partition is
for more than 20 years, the excess
is void.
3. Even if a prohibition is imposed,
the heirs by mutual agreement can
still make the partition.
PARTITION INTER VIVOS (Art. 1080,
CC)
- It is one that merely allocates
specific items or pieces of
property on the basis of the
pro-indiviso shares fixed by law
or given under the will to heirs
or successors.
EFFECTS OF INCLUSION OF
INTRUDER IN PARTITION
1. Between a true heir and several
mistaken heirs partition is void.
2. Between several true heirs and a
mistaken heir transmission to
mistaken heir is void
3. Through error or mistake, share of
true heir is allotted to mistaken
heir partition shall not be
rescinded unless there is bad faith
or fraud on the part of the other
persons interested, but the latter
shall be proportionately obliged to
pay the true heir of his share. The
partition with respect to the
mistaken heir is void.
A VOID WILL MAY BE A VALID
PARTITION
1. If the will was in fact a partition
2. If the beneficiaries of the void will
were legal heirs
IMPORTANT PERIODS TO REMEMBER
1 month or
less before
making a will
Testator, if publicly known
to be insane, burden of
proof is on the one
claiming validity of the
will
20 years Maximum period testator
can prohibit alienation of
dispositions
5 years from
delivery to
the State
To claim property
escheated to the State
1 month To report knowledge of
violent death of decedent
lest he be considered
unworthy
5 years from
the time
disqualified
person took
possession
Action for declaration of
incapacity & for recovery
of the inheritance, devise
or legacy
30 days from
issuance of
order of
distribution
Must signify
acceptance/repudiation
otherwise, deemed
accepted
1 month form
written notice
of sale
Right to repurchase
hereditary rights sold to a
stranger by a co-heir
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
4 years form
partition
Action for rescission of
partition on account of
lesion
SAMPLE BAR QUESTIONS
1. Alfonso, a bachelor without any
descendant or
ascendant, wrote a last will and testament
in which he devised, all the properties of
which I may be possessed at the time of
my death to his favorite brother Manuel.
At the time he wrote the will, he owned
only one parcel of land. But by the time
he died, he owned 20 parcels of land. His
other brothers and sisters insist that his
will should pass only the parcel of land he
owned at the time it was written, and did
not cover his properties acquired, which
should be by intestate succession. Manuel
claims otherwise. Who is correct?
Explain.
Answer:
Manuel is correct because under Art. 793,
NCC, property acquired after the making
of a will shall only pass thereby, as if the
testator had possessed it at the time of
making the will, should it expressly appear
by the will that such was his intention.
Since Alfonsos intention to devise all
properties he owned at the time of his
death expressly appears on the will, then
all the 20 parcels of land are included in
the devise.
2. Cristina, the illegitimate daughter of
Jose and Maria, died intestate, without
any descendant or ascendant. Her
valuable estate is being claimed by Ana,
the legitimate daughter of Jose, and
Eduardo, the legitimate son of Maria. Is
either, both, or neither of them entitled to
inherit? Explain.
Answer:
Neither Ana nor Eduardo is entitled to
inherit ab intestate from Cristina. Both
are legitimate relatives of Cristinas
illegitimate parents and therefore they fall
under the prohibition prescribed un Art.
992, NCC (Manuel vs. Ferrer, 242 SCA
477; Diaz vs. CA, 182 SCRA 427).
3. (a) Luis was survived by 2 legitimate
children, 2 illegitimate children, his
parents, and 2 brothers. He left an estate
of P1 million. Who are the compulsory
heirs of Luis, how much is the legitime of
each, and how much is the free portion of
his estate, if any?
(b) Suppose Luis, in the preceding
question, died intestate. Who are his
intestate heirs, and how much is the share
of each in his estate?
Suggested Answer:
(a) The compulsory heirs are the 2
legitimate children and the 2 illegitimate
children. The parents are excluded by the
legitimate children, while the brothers are
not compulsory heirs at all.
Their respective legitimes are:
1. The legitime of the 2 legitimate
children is of the estate (P500,000) to
be divided between them equally, or
P250,000 each.
2. The legitime of each illegitimate
child is the legitime of each legitimate
child or P125,000.
Since the total legitimes of the compulsory
heirs is P750,000, the balance of
P250,000 is the free portion.
(b) The intestate heirs are the 2
legitimate children and the 2 illegitimate
children. In intestacy, the estate of the
decedent is divided among the legitimate
and illegitimate children such that the
share of each illegitimate child is the
share of each legitimate child.
Their shares are:
1. For each legitimate child:
P333,333.33
2. For each illegitimate child:
P166,666.66
OBLIGATIONS & CONTRACTS CIVIL LAW
Obligations and Contracts
TABLE OF CONTENTS
Title 1. Obligations 121
I. General Provisions 121
II. Effect of Obligations 122
III. Different Kinds of Obligations 128
IV. Extinguishment of Obligations 141
Title 2. Contracts 148
I. General Provisions 148
II. Essential Requisites of a Contract 149
III. Form of Contracts 155
IV. Reformation of Instruments 157
V. Interpretation of Contracts 158
VI. Rescissible Contracts 159
VII. Voidable Contracts 161
VIII. Unenforceable Contracts 162
IX. Void or Inexistent Contracts 163
Title 3. Natural Obligations 166
Title 4. Estoppel 166
TITLE I: OBLIGATIONS
Chapter I: General Provisions
I. Concept
Definition
Art. 1156, NCC
An obligation is a juridical necessity to give, to
do or not to do.
The legal relation established between one
party and another, whereby the latter is
bound to the fulfillment of a prestation which
the former may demand of him. (Manresa)
Elements
Active subject (obligee/ creditor)
- the one in whose favor the obligation is
constituted
- the person who is entitled to demand
Passive subject (obligor / debtor)
- the one bound to the fulfillment
- the person who has the duty of giving,
doing or not doing
Prestation (object)
- the conduct which has to be observed by
the debtor/obligor
- duties of the obligor
Requisites:
1. it must be Licit
2. it must be Possible, physically and
judicially
3. it must be Determinate or
determinable; and
4. it must have a Possible equivalent in
money
Vinculum juris
(efficient cause; juridical or legal tie)
that which binds or connects the parties to
the obligation. This can be easily known
by knowing the sources of obligations. (de
Leon
Distinction between natural and civil
obligations
Civil
Obligations
(Art. 1156)
Natural Obligations
(Art. 1423)
Based on
positive law
Based on equity and
natural law
Give a right of
action to
compel their
performance
Do not grant a right
of action to enforce
their performance;
but after voluntary
fulfillment by the
obligor, they
authorize the
retention of what
has been delivered
or rendered by
reason thereof
II. Sources (Art. 1157)
Law
Contracts
Quasi-contracts
Delicts
Quasi-delicts
LAW
General Rule
Obligations derived from law are not
presumed; only those expressly determined in
this Code or in special laws are demandable,
and shall be regulated by the precepts of the
law which establishes them; and as to what
has not been foreseen, by the provisions of
this Book. (Article 1158)
*Those imposed by the law itself.
CONTRACTS
Definition
A contract is a meeting of minds between two
persons whereby one binds himself, with
respect to the other, to give something or to
render some service (1305)
General Rule
The contracting parties may establish
such stipulations, clauses, terms and
conditions as they may deem convenient,
provided they are not contrary to Law,
Morals, Good customs, Public order and
Public policy (1306)
Contracts as force of law between
parties
obligations arising from contracts have the
force of law between the contracting
parties and should be complied with in
good faith (1159)
QUASI-CONTRACTS (LoVe yoU)
Definition
It is the juridical relation resulting from lawful,
voluntary, and unilateral acts by virtue of
which the parties become bound to each other
to the end that no one shall be unjustly
enriched or benefited at the expense of
another (2142)
Lawful Distinguishing it from
crimes
Voluntary Differentiating it from
quasi-delict, which are
based on fault and
negligence
Unilateral Distinguishing it from
contract which is based
on agreement
Obligations derived from quasi-contracts shall
be subject to the provisions of Chapter 1, Title
XVII of this Book (1160)
Kinds of quasi-contracts
1. Negotiorum gestio (unauthorized
management)
2. Solutio Indebiti (undue payment)
1. Negotiorum Gestio
This takes place when a person voluntarily
takes charge of anothers abandoned
business or property without the owners
authority (Article 2144)
This juridical relation does not arise in
either of these instances:
a. When the property or business
is not neglected or abandoned
b. If in fact the manager has been
tacitly authorized by the owner
2. Solutio Indebiti
This takes place when something is
received when there is no right to demand
it, and it was unduly delivered thru
mistake (2154)
DELICTS (Obligations Ex Delicto)
Governing Rules
Pertinent provisions of the RPC and other
penal laws subject to Art 2177 Civil Code
Art. 100, RPC
Every person criminally liable for a felony is
also civilly liable
Chapter 2, Preliminary title, on Human
Relations (Civil Code)
Title 18 of Book IV of the Civil Code - on
damages
What civil liability arising from a crime
includes
Restitution
Reparation of damage caused
Indemnity for consequential damages
QUASI-DELICTS
Definition
An act or omission with fault or negligence
causing damage to another; not a crime nor
contract
Article 2176, New 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
provisions of this Chapter.
Governing Rules
Obligations derived from quasi-delicts shall
be governed by the provisions of Chapter
2, Title XVII of this Book, and by special
laws (1162)
Title XVIII on damages
Articles 19-36 on human relations
Chapter II: Effect of Obligations
I. KINDS OF PRESTATION
1. Obligation to Give
2. Obligation to Do
3. Obligation Not to do
OBLIGATION TO GIVE:
Specific/
determinate
thing
Generic thing (1246)
It is identified by
its individuality;
hence, it cannot
be substituted
with another
although the
intended
substitute is of
the same kind
and quality.
It is identified only
by its specie. The
debtor can give
anything of the same
class as long as it is
of the same kind.
Creditor cannot
demand a thing of
superior quality;
neither can the
debtor deliver a
thing of inferior
quality.
*Limited Generic thing when the generic
objects are confined to a particular class, e.g.,
an obligation to deliver one of my horses
(Tolentino)
Specific/ Determinate Thing
Duties of the obligor:
1. To preserve or take care of the thing due
(1163)
*Standard of care:
that of a good father of a family
unless the law or stipulation requires
another standard of care
2. To deliver the thing itself (1244)
3. To deliver the fruits of the thing (Art.
1164, par. 1)
*When does the right to the fruits begin to
exist?
From the time the duty to deliver arises:
when there is no term/condition
from the perfection of the
contract
when there is a term/condition
from the moment the term or
condition arises
4. To deliver the accessions and accessories
of the thing (Art. 1166)
*Accessories - those joined to or included with
the principal for the latters better use,
perfection or enjoyment
*Accessions additions to or improvements
upon a thing
5. To pay for damages in case of breach
(1170)
Generic Thing
Duties of the obligor:
1. To deliver a thing which is of the quality
intended by the parties taking into
consideration the purpose of the obligation
and other circumstances (1246)
2. To be liable for damages in casa of fraud,
negligence, or delay, in the performance
of his obligation, or contravention of the
tenor itself (1170)
Personal Right Real Right
Before delivery After delivery
Jus ad rem/ jus in
personam a
right enforceable
only against a
definite passive
subject, the
debtor
jus in re a right
enforceable
against the world.
Right pertaining to
the person to
demand from
another, as a
definite passive
subject, the
fulfillment of a
prestation to give,
to do or not to do
Right pertaining to
a person over a
specific thing,
without a passive
subject individually
determined against
whom such right
may be personally
enforced
Rights of a Creditor
Specific Generic
To compel
specific
performance
To ask for
performance of the
obligation
To recover
damages in case
of breach of the
obligation,
exclusive or in
addition to
specific
performance
To ask that the
obligation be
complied with at
the expense of the
debtor
Entitlement to To recover
fruits, interests
from the time the
obligation to
deliver arises.
damages in case of
breach of
obligation
OBLIGATION TO DO:
To do it (1167)
To shoulder the cost if someone else does
it (1167)
To undo what has been poorly done
(1167)
To pay damages (1170-1172, 2201-2202)
If a person obliged to do something fails to do
it, the same shall be executed at his cost.
This same rule shall be observed if he does it
is in contravention of the obligation.
Furthermore, it may be decreed that what has
been poorly done be undone. (1167)
*The creditor may demand that the obligation
be performed by the debtor himself or by a
third person at the expense of the debtor.
However, in cases where the personal
qualifications of the debtor are taken into
account, the only remedy of the creditor is an
action for damages. In the Balane notes,
there is no action for compliance for an
obligation to do because such would be
involuntary servitude which is prohibited by
the constitution.
OBLIGATION NOT TO DO:
Not to do what should not be done
To shoulder the cost to undo what should
not have been done (1168)
To pay damages (1170, 2201-2202)
*If undoing is not possible, either physically
or legally, or because of rights acquired by
third persons who acted in good faith, or for
some other reason, his remedy is an action
for damages caused by the debtors violation
of his obligation. (Manresa)
II. BREACH OF OBLIGATION
Voluntary - the debtor, in the performance of
the obligation is guilty of fraud, negligence,
delay or contravention of the tenor of the
obligation
Involuntary debtor is unable to comply
with his obligation because of a fortuitous
event
A. MODES OF BREACH (1170)
1. Fraud
2. Negligence
3. Delay
4. Contravention the tenor thereof
FRAUD
It is the deliberate or intentional evasion of
the normal fulfillment of an obligation.
(Manresa)
It implies some kind of malice or dishonesty
and it cannot cover cases of mistake and
errors in judgment made in good faith. It is
synonymous to bad faith. (Oleary v.
Macondray & Co., Inc., G.R. No. 21383,
March 25, 1924)
*Responsibility arising from fraud is
demandable in all obligations (fraud in the
performance)
*Waiver of action for future fraud is void for
being contrary to law and public policy (Art.
1171) because the advance renunciation of
the creditor would practically leave the
obligation without effect.
*Past fraud can be renounced. The fraud
referred to is fraud in Article 1170, which is
the malice or bad faith in the performance of
the obligation.
Kinds of Fraud
Fraud in the
Performance
(Art. 1170)
Fraud in the Execution
Causal
Fraud
(dolo
causante)
(Art. 1338)
Incidental
Fraud (dolo
incidente)
(Art. 1344)
Present
during the
performance
of a pre-
existing
obligation
Present
during the
perfection
of a
contract
Present
during the
perfection
of a
contract
Purpose is
to evade the
normal
fulfillment
of the
obligation
Purpose is
to secure
the
consent of
another to
enter into
the
contract
Purpose is
to secure
the consent
of the other
party but
the fraud
was not the
principal
inducement
in making
the contract
Results in
the breach
of an
obligation
Results in
vitiation of
consent;
voidable
contract
Does not
result in the
vitiation of
consent
Gives rise to
a right in
favor of the
creditor to
recover
damages
Gives rise
to a right
of an
innocent
party to
annul the
contract
Gives rise
to a right of
an innocent
party to
claim for
damages
NEGLIGENCE (fault or culpa)
It is the absence of due diligence.
It is any voluntary act or omission, there
being no malice, which prevents the normal
fulfillment of an obligation. (1173, 1174)
Distinction between fraud and negligence
Fraud Negligence
There is
deliberate
intention to
cause
damage.
There is no deliberate
intention to cause
damage.
Liability
cannot be
mitigated.
Liability may be
mitigated.
Waiver for
future fraud is
void.
Waiver for future
negligence may be
allowed in certain
cases:
a) gross can never
be excused in
advance; against
public policy
b) simple may be
excused in certain
cases
Diligence Required
1. That agreed upon by the parties
2. In the absence of stipulation, that required
by law in the particular case
3. If both the contract and law are silent,
diligence of a good father of a family
*Deligence of a Good Father of a Family:
That reasonable diligence which an
ordinary prudent person would have had
under the same circumstances.
Test of Negligence
Did the defendant in doing the alleged
negligent act use the reasonable care and
caution which an ordinary and prudent person
would have used in the same situation? If
not, then he is guilty of negligence.
(Mandarin Villa, Inc. v. CA, 257 SCRA
538, 1996)
The rule for measuring degree of care and
vigilance is dependent upon the circumstances
in which a person finds himself situated.
(Cusi v. Phil. National Railways, 90 SCRA
357, 1979)
Kinds of Culpa
1. Culpa Aquiliana (quasi-delict) wrong or
negligence committed independent of
contract and without criminal intent
2. Culpa Contractual wrong or negligence
in the performance of an obligation
3. Culpa Criminal wrong or negligence in
the commission of a crime
DELAY (mora)
It is the non-fulfillment of an obligation with
respect to time.
1
st
GENERAL RULE: Delay occurs from the
time of creditors judicial or extrajudicial
demand
Exception: Demand is not necessary to
incur in delay when:
obligation or law expressly declares
time is a controlling motive
demand would be useless
2
nd
GENERAL RULE: In reciprocal obligations,
delay happens from the moment one party
fulfills his undertaking. (1169) If neither party
performs his undertaking, neither incurs delay
Kinds of delay
1. Mora solvendi
2. Mora accipiendi
3. Compensatio morae the delay of the
obligors in reciprocal obligations
1. Mora Solvendi
There is a delay on the part of the debtor to
fulfill his obligation (to give or to do)
a) Mora Solvendi Ex re default in real
obligations
b) Mora Solvendi Ex persona default in
personal obligations
Requisites:
The obligation must be liquidated, due and
demandable.
The debtor is guilty of non-performance.
There was demand made judicially or
extra-judicially.
Effects when these elements are present:
The creditor may ask for damages/ the debtor
is liable for damages
The debtor is liable even if the loss is due to
fortuitous events.
The debtor shall bear the risk of loss.
Instance when there is no default or mora
solvendi:
a) In negative obligations, because one can
never be late in not doing or not giving
something
b) In natural obligations, because the
performance is optional or voluntary on
the part of the debtor.
2. Mora Accipiendi
There is a delay on the part of the creditor to
accept the performance of the obligation
Requisites:
1. Offer of performance by the debtor who
has the required capacity.
2. Offer must be to comply with the
prestation as it should be performed.
3. Creditor refuses the performance without
just cause.
Effects when these elements are present:
1. The responsibility of debtor is reduced to
fraud and gross negligence.
2. The debtor is exempted from risk of loss
of thing or the creditor bears risk of loss.
3. The expenses incurred by the debtor for
the preservation of the thing after the
mora shall be chargeable to the creditor.
4. If the obligation bears interest, the debtor
does not have to pay from time of delay.
5. The creditor is liable for damages.
6. The debtor may relieve himself of
obligation by consigning the thing.
3. Compensatio Morae
It is the delay of the parties or the obligors in
reciprocal obligations. The effect is that it is as
if there is no default.
Rules on Mora, Delay or Default
Unilateral
Obligations
Reciprocal
Obligations
General Rule:
No demand no
delay. The mere
expiration of the
period fixed by the
parties is not
enough in order
that the debtor
may incur in delay.
One party incurs in
delay from the
moment the other
party fulfills his
obligation, while
he himself does
not comply or is
not ready to
comply in a proper
manner with what
is incumbent upon
him. The general
rule is that
fulfillment by both
parties should be
simultaneous.
Exception:
when the
obligation or law
expressly
declares
when time is of the
essence in the
contract
when the demand
would be useless
when the debtor
acknowledged
When different
dates for the
performance of
obligation is fixed
by the parties.
that he is in
default
It is not enough
that there is a
specific date of
performance, the
words without
the need of
demand should
appear in the face
of the instrument.
The demand is still
necessary only
when the
respective
obligations are to
be performed on
separate dates.
If neither party
complies with the
prestation, the
default on one
compensates the
default of another.
*Delay in payment of money is indemnified
through interest unless a gratuitous mutuum
or simple loan. If no stipulated interest,
default interest is (6%) six percent. (2209)
*If obligation consists in payment of a sum of
money, and debtor incurs in delay, the
indemnity for damages, there being no
stipulation to the contrary, shall be the
payment of the interest agreed upon, and in
the absence of stipulation, the legal interest,
which is six percent per annum. (2209)
*When there is delay, the injured party may
ask for damages. But this benefit arising from
Mora, default or delay may cease upon:
- Renunciation of the creditor
- Prescription of action
- Extension of time for the fulfillment of
the obligation
Bragaza v. CA
A contract was entered into for delivery of
materials on Dec. 22, 1990 in time for the
aggrieved partys wife who expressly wished
that she be buried before Christmas day, and
where, despite knowing this timetable and
having been paid for the materials, the
supplier failed to make the delivery despite
pleas and earnest follow-ups by the widower.
Supreme Court ruled that time was of the
essence of such contract and the supplier
should be liable for the delay and breach.
N.B. Example of incurring delay without
judicial or extrajudicial demand. (#2)Time is
of the essence. Contract was entered into in
view of burial before Christmas.
Agcaoili v. GSIS
The parties entered into a contract of sale of a
government housing unit on the condition that
Agcaoili should occupy the same within three
days from the receipt of notice. Failure to
immediately occupy contractually allowed
GSIS to terminate the contract. Agcaoli upon
receipt of notice, immediately went to the
place and found a house in a state of
incompleteness that civilized occupation was
not possible. He made the first monthly
installment but refused to make further
payments until and unless GSIS completed
the housing unit. GSIS cancelled the award
and required Agcaoili to vacate the premises.
Held: GSIS had no right to rescind sale. In
reciprocal obligations, neither party incurs in
delay if the other does not comply or is not
ready to comply in a proper manner with what
is incumbent upon him. (1169, par. 6)
CONTRAVENTION TO THE TENOR OF THE
OBLIGATION
This is the violation of the terms and
conditions stipulated in the obligation. And
such contravention must not be due to a
fortuitous event or force majeure.
In general, every debtor who fails in the
performance of his obligation is bound to
indemnify for the losses and damages caused
thereby.
The phrase in any manner contravenes the
tenor means any illicit act, which impairs the
strict and faithful fulfillment of the obligation,
or every kind of defective performance.
It is therefore immaterial whether or not the
actor is in bad faith or negligent, what is
required is that it is his fault or the act done
contravenes their agreement.
B. FORTUITOUS EVENTS
DEFINITION
Events which could not be foreseen, or which
though foreseen are inevitable. (Article 1174)
Act of God
An act of God is defined as an accident, due
directly and exclusively to natural causes
without human intervention, which by no
amount of foresight, pains or care, reasonably
to have been expected, could have been
prevented. (Nakpil v. CA)
Act of Man
In contrast, force majeure is a superior or
irresistible force, which is essentially an act of
man, such as wars, strikes, riots, acts of
robbers, pirates, and brigands.
*In our law, acts of man and acts of God are
identical in so far as they exempt an obligor
from liability because the events happened
independent of the will of the obligor.
(Republic v. Stevedoring Corp., 21 SCRA
279, 1967 and UST v. Descals, 38 Phil.
287, 1918)
Kinds of Fortuitous Events
1. Ordinary those which are common and
which the contracting parties could easily
foresee.
2. Extraordinary those which are
uncommon and which the contracting
parties could not have reasonably
foreseen. (see 1680)
General Rule
Except in cases expressly specified by law, or
when it is otherwise declared by stipulation, or
when the nature of the obligations requires
assumption of risk, no person shall be
responsible for those events which, could not
be foreseen, or which though foreseeable, are
inevitable.
*When a debtor is unable to fulfill his
obligation because of fortuitous events or
force majeure, his obligation to comply is
extinguished subject to the following
exceptions:
cases expressly specified by law (i.e.,
552(2), 1165, 1268, 1942, 2147,
2148, 2159)
declared by stipulation
nature of the obligation requires the
assumption of risk (1174)
when the obligor is in default or has
promised to deliver the same thing to
two or more persons who do not have
the same interests. (1165(3))
Requisites for exemption
1. cause of event or debtors failure
independent of human will
2. impossible to foresee or avoid
3. impossible for debtor to fulfill his
obligation in a normal manner
4. debtor free from participation in the
aggravation of the injury to the creditor
(Nakpil v. CA and Lasam v. Smith)
*It must be the ONLY and SOLE cause, not
merely a proximate cause.
Effect of Concurrent Fault
One who negligently creates a dangerous
situation cannot escape liability for the natural
and probable consequences thereof although
an act of God intervened to precipitate the
loss. There must be no fraud, negligence,
delay or violation or contravention in any
manner of the tenor of the obligation. (Nakpil
v. CA)
When the effect is found to be in part the
result of the participation of man, whether
due to his active intervention or neglect or
failure to act, the whole occurrence is then
humanized and removed from the rules
applicable to the acts of God. (NAPOCOR v.
CA, 211 SCRA 162, 1992)
Herbosa v. CA
374 SCRA 578 (2002)
PVE, a subsidiary of SD, Inc., was not able to
cover the wedding celebration of EH and RH
allegedly due to the gross negligence of the
crew and the lack of supervision from PVEs
general manager. Held: PVE or SD, Inc.
cannot take refuge under Article 1280 of the
New Civil Code. The defense that they
exercised due care in the selection and
supervision of their employees can only be
availed of when the liability arises from culpa
aquiliana and not from culpa contractual.
C. REMEDIES OF CREDITORS
GENERAL RULE
Rights acquired by virtue of an obligation are
transmissible in character.
Exception
a) when they are not transmissible by their
very nature (Personal obligation)
b) when there is Stipulation of the parties
that they are not transmissible
c) when they are not transmissible by
operation of Law
Rights of Creditor against Debtor (E-PAA,
electronic paa/foot or e-foot)
1. Exact fulfillment to demand fulfillment of
the obligation or specific performance
either specific, substitute or equivalent
performance
2. Pursue the leviable to attach the
properties of the debtor, except those
exempt by law, from execution.
3. Accion subrogatoria
4. Accion Pauliana
Accion Subrogatoria
Definition
Novation via change of creditor (1291, par.
3);
This involves the right of the creditor to
exercise all of the rights and bring all of the
actions which the debtor may have against
third persons.
Requisites
1. Creditor must have the right of return
against debtor
2. The debt is due and demandable
3. There is a failure of the debtor to collect
his own debt from 3
rd
persons either
through malice or negligence
4. The debtor's assets are insufficient
5. The right of account is not purely personal
Accion Pauliana
Definition
Rescission, which involves the right of the
creditor to attack or impugn by means of a
rescissory action any act of the debtor which
is in fraud and to the prejudice of his rights as
creditor.
Requisites
1. There is a credit in favor of plaintiff
2. The debtor has performed an act
subsequent to the contract, giving
advantage to other persons
3. The creditor has no other legal remedy
4. The debtor's acts are fraudulent
5. The creditor is prejudiced by the debtor's
act which are in favor of 3
rd
parties and
rescission will benefit the creditor
Chapter III: Different Kinds
of Obligations
PRIMARY CLASSIFICATION
(PaPA, Just Dont Preach)
1. Pure and conditional obligations (1179-
1192)
2. Obligations with a Period (1193-1198)
3. Alternative obligations (1199-1206)
4. Joint and solidary obligations (1207-1222)
5. Divisible and indivisible obligations (1223-
1225)
6. Obligations with a Penal clause (1226-
1230)
SECONDARY CLASSIFICATION
(U R D PoLiCe)
1. Unilateral and bilateral
2. Real and personal
3. Determinate and indeterminate
4. Positive and negative
5. Legal and conventional
6. Civil and natural
Classification according to Sanchez
Roman:
1. Juridical quality and efficaciousness
2. By parties or subject
3. By the object of the obligation or
prestation
4. By their juridical perfection and
extinguishment
Juridical quality and efficaciousness
a. Civil obligations
b. Natural obligations
c. Mixed according to natural and civil
law
By the parties or subject
a. Unilateral or Bilateral
b. Individual or Collective
c. Joint or Solidary
By the object of the obligation or prestation
a. Specific or Generic
b. Positive or Negative
c. Real or Personal
d. Possible or Impossible
e. Divisible or Indivisible
f. Principal or Accessory
g. Simple or Compound
If compound:
Conjunctive (demandable at the same
time)
Distributive (alternative or facultative)
By their juridical perfection or fulfillment
a. Pure or Conditional
b. With a Period
I. PURE AND CONDITIONAL OBLIGATIONS
PURE OBLIGATION
The effectivity or extinguishment is not
subject to any condition and no specific date
is mentioned for its fulfillment and is,
therefore, immediately demandable. (1179,
par. 1)
CONDITIONAL OBLIGATION
The consequences are subject in one way or
another to the fulfillment of a condition.
Condition
It is a future and uncertain event, upon the
happening of which, the effectivity or
extinguishment of an obligation (or rights)
subject to it depends.
Term
A day certain is understood to be that which
must necessarily come, although it may not
be known when.
*Difference between conditional and those
with a term: There is uncertainty or certainty
of day or time.
If the uncertainty consists in whether the day
will come or not, the obligation is conditional,
and it shall be regulated by the rules of the
preceding section. (1193)
Pay v. Viuda de Palanca
The debtor issued a promissory note to the
creditor to pay a sum of money payable upon
receipt of a particular sum of money from the
estate of a certain deceased person upon
demand. The case for collection on the note
was filed 15 years after its execution. The
Supreme Court ruled that, since the
prescriptive period for filing the action was 10
years and considering that the promissory
notes payment constituted a pure obligation
and therefore demandable at once, the action
to collect could no longer prosper. It was
deemed pure since satisfaction of credit could
be realized either through the debtor sued
receiving the cash payment from the estate of
the deceased or upon demand.
Classification of Conditions
1. As to effect
a. Suspensive
b. Resolutory
2. As to form
a. Express the condition is clearly
stated
b. Implied the condition is merely
inferred
3. As to possibility
a. Possible
b. Impossible
4. As to cause or origin
a. Potestative
b. Casual
c. Mixed
5. As to mode
a. Positive the condition consists in the
performance of an act (1184)
b. Negative the condition consists in the
omission of an act
6. As to numbers
a. Conjunctive there are several
conditions and all must be fulfilled
b. Disjunctive there are several
conditions and only one or some of
them must be fulfilled
7. As to divisibility
a. Divisible the condition is susceptible
of partial performance
b. Indivisible the condition is not
susceptible of partial performance
Suspensive and Resolutory (1179)
SUSPENSIVE CONDITION
(Condition precedent or condition antecedent)
It suspends the acquisition of rights until the
conditions are fulfilled; that is, until the
happening of the uncertain event which
constitutes the condition.
RESOLUTORY CONDITION
(Condition subsequent)
It causes the extinguishment or loss of rights
already acquired upon the fulfillment of the
condition, that is, the happening of the event
which constitutes the condition. In other
words, the fulfillment of which will extinguish
an obligation (or right) already existing.
Suspensive Resolutory
When it is fulfilled,
the obligation
arises.
The obligation is
extinguished.
When it takes
place,
the tie of law
(juridical or legal
tie) does not
appear
The tie of law is
consolidated
Until it takes place,
the existence of
the obligation is a
mere hope
Its effects flow,
but over it, hovers
the possibility of
termination
Effect:
The acquisition of
rights
The loss
(termination) of
rights already
acquired
(Manresa)
Potestative, Casual and Mixed (1182)
POTESTATIVE CONDITION
(facultative condition)
It is a condition which is suspensive in nature
and which depends upon the sole will of one
of the contracting parties.
Suspensive
condition
Resolutory
condition
Depends upon the
will of the debtor
The condition and
obligation are void
because the
validity and
compliance are
left to the will of
the debtor and it
cannot, therefore,
be legally
demanded as it
will cause the
debtor not to
fulfill the
condition to
escape liability.
Except when the
obligation is a pre-
existing one;
hence, only the
The condition and
obligation are still
valid because the
debtor is interested
in the fulfillment of
a condition which
causes the
extinguishment or
loss of rights
already acquired
by the creditor.
condition is void.
Depends upon the
will of the creditor
The condition and
obligation are
valid because the
creditor is
interested in the
fulfillment of the
obligation as it
will benefit him.
CASUAL CONDITION
The condition depends upon chance or the will
of a third person.
MIXED CONDITION
The condition depends partly on the will of a
party and partly on chance or the will of a 3
rd
person.
The obligation is valid if the suspensive
condition depends partly upon chance and
partly upon the will of a third person. (Naga
Telephone, Co., Inc. v. CA, 230 SCRA 351,
1994)
Possible and Impossible Conditions
(1183)
*Applies to suspensive conditions.
POSSIBLE CONDITIONS
The condition is capable of fulfillment, legally
and physically.
IMPOSSIBLE CONDITIONS
The condition is not capable of fulfillment,
legally or physically.
Two Kinds
1. Physically impossible conditions those, in
the nature of things, cannot exist or
cannot be undone.
2. Legally impossible conditions those
which are contrary to law, morals, good
customs, public order and public policy.
General Rule
They shall annul the obligation which depends
upon them
Exceptions
1. pre-existing obligation
2. divisible obligations
3. simple or remuneratory donations
4. testamentary dispositions
5. in case of conditions not to do an
impossible thing
Effect
It renders the conditional obligation void since
the obligor knows that his obligation cannot
be fulfilled; thus, showing that he has no
intention to comply with his obligation.
Effects of Impossible and Illegal Conditions
If the condition is:
1. To do an impossible or illegal thing, the
condition and the obligation are void.
2. Negative (not to do an illegal thing), the
condition and the obligation are valid.
3. Negative (not to do the impossible thing),
disregard the condition, however, the
obligation remains.
Positive and Negative Conditions
POSITIVE CONDITION
(suspensive)
The obligation is extinguished:
a) as soon as the time expires without the
event taking place
b) as soon as it has become indubitable that
the event will not take place although the
time specified has not yet expired (1184)
NEGATIVE CONDITION
(suspensive)
The obligation becomes effective:
a) from the moment the time indicated has
elapsed without the event taking place; or
b) from the moment it has become evident
that the event cannot occur, although the
time indicated has not yet elapsed (1185)
Constructive Fulfillment (1186)
For Suspensive Conditions
Requisites
1. The condition is suspensive;
2. The obligor actually prevents the
fulfillment of the condition; and
3. He acts voluntarily.
For Resolutory Condition
This also applies to a resolutory condition
when the debtor is bound to return what he
has received upon fulfillment of the condition.
Effects of Suspensive Conditions
1. Before the condition is fulfilled, the
demandability and acquisition or effectivity
of the rights arising from the obligation is
suspended.
2. After the condition has been fulfilled, the
obligation arises or becomes effective.
3. The effects of a conditional obligation to
give, once the condition has been fulfilled
shall retroact to the day the obligation was
constituted.
*The law allows retroactivity because the
condition is not an essential requisite of an
obligation.
1. When the obligation imposes reciprocal
prestations upon the parties, the fruits and
interests shall be deemed to have been
mutually compensated (this assumes a
simultaneous performance of prestations).
*The fruits are mutually compensated for
convenience.
2. In a unilateral obligation, the debtor shall
appropriate the fruits and interests
received unless the intention constituting
such was different.
3. In obligations to do or not to do, the court
shall determine the retroactive effect of
the condition that has been complied with.
Rights Pending Fulfillment of a Suspensive
Condition
Of the creditor Of the debtor
He may take or
bring appropriate
actions for the
preservation of his
right, as the debtor
may render
nugatory the
obligation upon the
happening of the
condition.
He is entitled to
recover what he
has paid by
mistake prior to
the happening og
the suspensive
condition.
Loss, Deterioration or Improvement
Pending the Happening of the Condition
(1189)
Requisites for 1189 to apply
6. The obligation is a real obligation;
7. The object is a specific or determinate
thing;
8. The condition is subject to a suspensive
condition;
9. The condition is fulfilled; and
10. There is loss, deterioration, or
improvement of the thing during the
pendency of the the condition.
LOSS
Kinds of loss
1. Physical loss (the thing perishes)
2. Legal loss (the thing goes out of
commerce)
3. Civil loss (the thing disappears and the
existence is unknown or unrecoverable as
a matter of fact or of law)
Rules
1. When the thing is lost without the debtors
fault, the obligation is extinguished.
2. When the thing is lost with the debtors
fault, the debtor pays for damages.
DETERIORATION
Rules
1. When the thing deteriorates without the
debtors fault, the creditor will suffer the
deterioration of impairment.
2. When the thing deteriorates with the
debtors fault, the creditor may choose
between:
a. Rescission (cancellation) of the
obligation with indemnity for damages,
or
b. Fulfillment of the obligation also with
damages
IMPROVEMENT
Rules
1. When the thing is improved by nature or
by time, the improvement shall inure to
the benefit of the creditor.
2. When the thing is improved at the expense
of the debtor, the debtor shall have no
other right than that granted to a
usufructuary.
Effect of the Fulfillment of Resolutory
Conditions (1190)
1. Extinguishment of the obligation
2. Mutual restitution (the parties restore to
each other what they have received
including the fruits and interest)
3. Art. 1189 applies to whoever has the duty
to return in case of loss, deterioration or
improvement of the thing
4. If the obligation is to do or not to do, the
courts determine the retroactivity of the
fulfillment of the condition as stated in
1187
Kinds of Obligation according to the
Person Obliged
UNILATERAL OBLIGATION
It is when only one party is obliged to comply
with a prestation.
BILATERAL OBLIGATION
It is when both parties are mutually bound to
each other making them both the debtors and
creditors of each other.
It may be:
reciprocal, or
non-reciprocal
Reciprocal Obligations
Those which arise from the same cause and in
which each party is debtor and creditor of the
other.
Implied Condition
There must be compliance by the other with
the duties incumbent upon him as party to the
debt.
In reciprocal obligations, a party cannot
demand unless he complies or is ready to
comply with obligations (inferred from 1169).
*This is subject to same rules on interim
obligations and interim remedies.
Non-Reciprocal Obligations
Those which do not impose simultaneous and
correlative performance on both parties. The
performance of one party does not depend
upon the simultaneous performance of
another.
Remedies in Reciprocal Obligations
RESCISSION IN ARTICLE 1191
The power to rescind means the right to
cancel or to resolve the contract in case of
non-fulfillment of the obligation on the part of
one of the parties.
It is the breach of faith committed by the
person who is supposed to comply with
obligation. It is not the rescission in 1380
which involves damage or lesion, or injury to
the economic interest of a person.
Characteristics
1. It only exists in reciprocal obligations.
2. It can be demanded only if the plaintiff is
ready, willing and able to comply with his
own obligation and the other is not.
(Seva v. Berwia, 48 Phil. 581)
General Rule
Judicial approval is necessary for rescission,
except:
a. When the object is not yet delivered
b. When, even if there has been delivery, the
contract states that either party can
rescind the same or take possession of the
property upon non-fulfillment of the
obligation by the other party.
By one party: (1191)
1. Implied in reciprocal obligations, when the
other does not comply
2. Power to rescind plus damages
3. Compel fulfillment and then rescind if such
becomes impossible
4. The Court decrees rescission unless just
cause for authorizing a period
5. Must be without prejudice to third persons
who have acquired the thing, in
accordance with articles 1385 and 1388
and the Mortgage Law.
By both parties: (1192)
In case both parties have committed a breach
of the obligation, the liability of the first
infractor shall be equitably tempered by the
courts. If it cannot be determined which of
the parties first violated the contract, the
same shall be deemed extinguished, and each
shall bear his own damages.
1. Rule against the first infractor, as
tempered by courts
2. If first infractor cannot be determined,
obligation extinguished
*Rescission should be done judicially unless
stipulated in the contract. Rescission will only
be granted if breach of the obligation is
substantial and not mere occasional
malfunction of the machine without even an
allegation of loss of income. (Philippine
Amusement Enterprises, Inc. v.
Natividad)
*Injured party has the power to rescind
but only through the courts in proper
proceedings. (Ocejo v. International Banking
Corp.)
UP v. de los Angeles
The parties stipulated rescission of logging
agreements without the need for any judicial
pronouncement.
N.B. Judicial pronouncement of rescission was
unnecessary as it was clearly expressed in
their contract. No law prohibits parties from
entering agreements wherein violation of the
terms of contract would cause cancellation
even without court intervention. Rescission on
account of infractions by the other party by
one of the parties must be made known to
that other party who in turn can seek for
judicial remedy should he feel that rescission
is unjustified.
Obligations Rendered Void By Certain
Conditions
Annulling conditions:
a. Potestative only if suspensive condition
is solely upon the will of the debtor (1182)
b. Impossible Conditions (1183)
c. those contrary to law, good customs,
morals, public order or public policy
(1183)
d. Not to do an impossible thing not agreed
upon (1183, par. 2)
Lao Lim v. CA
The stipulation that the lessee has the right to
renew contract of lease as long as he needs
the premises and he can pay for the same is
invalid. It would leave the lessee, Dy, the sole
power to determine whether the lease should
continue or not. The lease contract is deemed
extinguished at the end of a year, subject to
renewal by means of a new agreement but
since the lessor did not want to renew, there
is no more lease.
Romero v. CA
This case shows that one cannot rescind a
contract on account of ones own failure to
fulfill an obligation.
Ducusin v. CA
Only that which is dependent on the sole will
of the debtor is invalid. No one is supposed to
have sole power. In this case, since the
condition is dependent on the will of third
persons, the condition was held to be valid.
II. OBLIGATIONS WITH A TERM
Those whose consequences are subjected in
one way or another to the expiration of a
period or term. (Manresa, Lirag Textiles,
Inc. v. CA, 63 SCRA 374, 1975)
PERIOD or TERM
It is a future and certain event upon the
arrival of which the obligation (or right)
subject to it either arises or is terminated.
*The demandability is suspended by the term,
not the acquisition of the right or the
effectivity of the obligation.
*Fortuitous events do interrupt the running of
the period.
Distinguishing a period from a condition
Period/ Term Condition
As to fulfillment
Certain event Uncertain event
As to time
Refers only to the
May also refer to a
past event
future unknown to parties
As to influence on
the obligation
Merely fixes
the time for the
efficaciousness
of the
obligation.
If suspensive,
it cannot
prevent the
birth of the
obligation in
due time.
If resolutory, it
does not annul,
even in fiction,
the fact of its
existence.
It causes an
obligation to arise
or be terminated.
As to effect, when
left to the debtors
will
Depends upon
the will of the
debtor
empowers the
court to fix its
duration
Depends upon the
sole will of the
debtor, thus,
invalidates the
obligation
As to retroactivity
of effects
Unless
stipulated, the
arrival of a
period has no
retroactive
effect.
The happening of
the condition has
retroactive effect.
Classifications of Term/ Period
1. According to effect
a. suspensive period (ex die) obligation
becomes demandable only upon the
arrival of a certain day
b. resolutory period (in diem) obligation
is valid up to a day certain and
terminated upon the arrival of period.
2. According to source
a. legal period provided for by law
b. conventional/ voluntary period
agreed to by the parties
c. judicial period fixed by the court
3. According to definiteness
a. definite period fixed or the coming of
which is known
b. indefinite period not fixed or the
coming of which is not known (usually,
the law empowers the courts to fix the
period)
Requisites of Period/ Term
It must refer to the future.
It must be certain.
It must be possible.
Effect of payment before the arrival of
the period
The debtor may recover what he has paid
including the fruits and interest if he is
unaware of the period or believed that the
obligation has become due and demandable
(1195). If he paid voluntarily knowing that the
obligation is not yet due, he cannot recover
what he has paid.
General Rule
The period attached to the obligation is for the
benefit of both parties.
Exception
When it appears from the tenor of the
obligation or other circumstances that the
period has been established in favor of one or
the other subject to an express stipulation of
the parties, the period may be benefit the
debtor or the creditor alone.
Period for the benefit of the debtor alone:
The debtor cannot be compelled to pay
prematurely, however, he may renounce the
benefit of the period by performing his
obligation in advance. (Manresa)
Period for the benefit of the creditor alone:
The creditor may demand fulfillment even
before the arrival of the term but the debtor
cannot compel him to accept before the
expiration of the period (i.e., on demand).
Interim obligations
In case of loss, deterioration or improvement
of the thing before the arrival of the day
certain, the rules in article 1189 shall be
observed.
i. Exercise due diligence; otherwise,
responsibility for loss, deterioration
(1189)
ii. Improvement inures to creditor, if at
expense of debtor only usufructuary
right (1189)
iii. Recover payment or delivery before
due and demandable
ABESAMIS V. WOODCRAFT WORKS, INC.
THE CONTRACT PROVIDED THAT THE APPELLANT
SHALL MAKE SHIPMENT BEFORE THE END OF JULY,
BUT WILL NOT COMMENCE EARLIER THAN APRIL
WITH THE OPTION TO MAKE PARTIAL SHIPMENT
DEPENDING ON THE AVAILABILITY OF LOGS AND
VESSELS. THE SUPREME COURT, IN DECIDING
WHO WAS TO BEAR THE LOSS AS A RESULT OF THE
TYPHOON IN A CONTRACT FOR DELIVERY OF LOGS,
RULED THAT THE QUOTED PROVISION PROVIDES
FOR A PERIOD. THE DESIGNATED TIME WAS
CALCULATED TO AVOID TYPHOONS. ON MAY 5,
1951 THE APPELLANT FAILED TO SEND A VESSEL
TO PICK UP THE LOGS, WHICH WERE
CONSEQUENTLY SWEPT AWAY BY A TYPHOON.
SINCE THE SAID DATE WAS WITHIN THE PERIOD
PRESCRIBED, NONE OF THE PARTIES COULD INCUR
DELAY NOR DEMAND PERFORMANCE. THE LOSS
SHOULD BE SHOULDERED BY THE APPELLEE OR THE
LOGGER.
FIXING OF A PERIOD
The Court May Fix a Period When:
1. There is no express stipulation, but a
period is intended by the parties as can be
inferred from the nature and
circumstances of the obligation.
2. If the duration of the period depends upon
the will of the debtor.
3. If the debtor promises to pay when his
means permit him to do so. (1197)
The Court May NOT Fix a Period When:
1. When no term has been specified by the
parties because no term was ever
intended, in which case it is considered a
pure obligation.
2. When the obligation is payable on
demand.
3. When specified period is provided by law.
Araneta, Inc. v. Philippine Sugar Estates
Development Co., Ltd.
The parties in the case intended to defer
performance of obligations until after the
squatters were duly evicted. Although it was
indefinite, such was the intention of the
parties and courts could not just assign a
period out of thin air. The requisite and
guideline for setting a period is when there is
no period specified but such was intended,
courts should just fix a period, which the
parties could have intended.
Reasons for Fixing a Period
1. There can be no possibility of any breach
of contract or failure to perform the
obligation unless the period is fixed by the
courts.
2. When the court has not yet fixed the
period, it is premature to collect.
A Debtor Loses the Right to Make Use of
a Period (when the creditor can demand even
when the obligation is not yet due) (1198)
1. When after contracting the obligation, the
debtor suffers from insolvency, unless he
gives guaranties or securities for the debt
2. When the debtor does not furnish
promised guaranties or securities he
promised
3. When by his own act, the debtor has
impaired established guaranties or
securities and when through a fortuitous
event they disappear, unless he gives new
ones equally satisfactory when the debtor
violates any undertaking in consideration
of which the creditor agreed to the period
4. When the debtor attempts to abscond.
*IN ALL THE CASES ABOVE, DESPITE THE FACT
THAT THE PERIOD HAS NOT YET LAPSED, THE
OBLIGATION SHALL BECOME IMMEDIATELY
PAYABLE OR DEMANDABLE.
*THE WORD INSOLVENT DOES NOT REQUIRE A
JUDICIAL DECREE OF INSOLVENCY. IT SHOULD BE
UNDERSTOOD IN ITS ORDINARY MEANING WHICH
MAY EMBRACE DIFFERENT DEGREES OF FINANCIAL
EMBARRASSMENT. THE INSOLVENCY MUST HAVE
OCCURRED AFTER THE OBLIGATION WAS
CONSTITUTED.
Gaite v. Fonacier
Payment of obligation was secured by two
surety bonds: one from a mining company
and its stockholders and the other from a
bonding company. The obligor was obliged to
pay the indebtedness from the time it
received the proceeds of the sale of iron ore,
the Supreme Court ruled that the obligor in
this case lost its right to the period. Failure to
renew an expired surety with the bonding
company constituted an impairment of the
securities or guaranties. Thus, Fonacier lost
his right to the period, i.e. time to sell the iron
ore, unless he immediately gives new ones
equally satisfactory.
III. ALTERNATIVE OBLIGATIONS
Kinds of Obligation according to Object
1. Simple obligation one where there is
only one prestation
2. Compound obligation one where there
are two or more prestations
a. Conjunctive obligation one where
there are several prestations and all of
them are due
b. Distributive obligation one where one
of two or more of the prestations is
due
*A distributive obligation may be
alternative (1199), or
facultative (1206)
ALTERNATIVE OBLIGATION
It is one wherein various prestations are due
but the performance of one of them is
sufficiently determined by the choice which,
as a general rule, belongs to the debtor.
(Manresa)
FACULTATIVE OBLIGATION
It one where only one prestation has been
agreed upon but the obligor may render
another in substitution.
Distinguising Alternative and Facultative
Obligations
Alternative Facultative
Number of
prestations
Several
prestations are
due but
compliance with
one is sufficient
Only one
prestation is due
although the
debtor is allowed
to substitute
another
Right of choice
May be given to
the creditor or to
a third person
The right to make
the substitution is
given only to the
debtor
Loss through a
fortuitous event
The loss of one or
more of the
alternatives does
not extinguish
the obligation
The loss of the
thing due
extinguishes the
obligation.
Loss through
fault of debtor
a) Does not
render the debtor
liable
b) Where the
choice belongs to
the creditor, the
loss of one
alternative gives
rise to liability
a) The debtor is
liable
b) The loss of the
substitute before
the substitution
does not render
the debtor liable
Nullity of
prestation
a) The nullity of
one prestation
does not
invalidate the
others
b) the debtor or
creditor should
choose from
among the
remainder
a) The nullity of
the prestation
agreed upon
invalidates the
obligation
b) the debtor is not
bound to choose
the substitute
Right of Choice
General Rule
The right of choice belongs to the debtor.
Except:
When expressly granted to the creditor, or
When expressly granted to a third person
*A right of choice becomes a simple obligation
when a person who has a right of choice has
communicated his choice and that one choice
is the only practicable one (i.e., the others
may have become illegal or impossible).
(1202)
Limitations on the Debtors Right of Choice
1. The debtor cannot choose those
prestations which are impossible, unlawful
or which could not have been the object of
the obligation. (1200)
2. The debtor has no more right of choice
when among the prestations whereby he is
alternatively bound, only one is
practicable.
3. The debtor cannot choose the part of one
prestation and part of another.
The Right of Choice belongs to the Debtor
As a general rule, in alternative obligations,
the right of choice belongs to the debtor.
However, the debtor may expressly give the
right of choice to the creditor.
Rules in Alternative Obligations
Debtors
choice
Creditors
choice
Due to a Fortuitous Event
All Extinguish Extinguish
Some Deliver any of
the remaining
Deliver any of
the remaining
One Deliver Deliver
Debtors Fault
All Value of the
last thing lost
and damages
Value of any of
the things and
damages
Some Deliver any of
the remaining,
no damages
Value of the
thing lost,
damages or
any of the
remaining
One Deliver, no
damages
Loss of Last Thing
Extinguish Value of any of
the things lost
due to the
creditors fault
and damages
Rules in Facultative Obligations
Before
Substitution
After Substitution
Loss of the Principal
Fortuitous Event
The obligation is
extinguished
The debtor is not
liable whatever may
be the cause
Fault of Debtor
The debtor is
liable for
damages
Loss of the Substitute
The debtor is not
liable whether
the loss is due to
the fault of the
debtor or to a
fortuitous event.
Fortuitous Event
The obligation is
extinguished
Fault of Debtor
The debtor is liable
for damages
IV. JOINT AND SOLIDARY OBLIGATIONS
JOINT OBLIGATIONS
Obligacion Mancomunada
It is an obligation where the whole liability is
to be paid or fulfilled proportionately by the
different debtors; and/or is to be demanded
proportionately by the different creditors.
SOLIDARY OBLIGATION
Obligacion Solidaria
It is an obligation where each one of the
debtors is bound to render, and/ or each one
of the creditors has a right to demand
compliance with the prestation. (1207)
*In a joint obligation, each debtor shall
be liable only for his part of the debt
presumed to be equal with the other debtors.
The above provision is consistent with the rule
that a joint obligation is presumed in case of
plurality of debtors or creditors for solidary
obligation exists only when the law so
provides, when expressly stipulated by the
parties or when called for by the nature of the
obligation. (Jurado) (see 1208)
General Rule
By default, collective obligations are presumed
to be joint if there is concurrence of two or
more debtors and/ or creditors.
Solidarity exists only
1. When Stipulated by the parties using such
words like jointly and severally, in
solidum, I promise to pay in a note
signed by two or more debtors, or similar
words. (conventional solidarity)
2. When solidary liability is provided by Law,
hence, civil liability arising from crimes,
negotiorum gestio, commodatum or quasi-
delict shall be solidary. (legal solidarity)
3. When the Nature of the obligation requires
solidarity.
4. When a charge or condition is imposed
upon heirs or legatees, and the Testament
expressly makes the charge or condition
in solidum.
5. When a solidary responsibility is imputed
by a Final judgment upon several
defendants.
Some Features of Joint Liability
1. Insolvency of one debtor does not make
the others liable.
2. Vitiated consent on the part of one debtor
does not affect the others.
3. Demand made to one of the debtors is not
a demand to all because the debt of one is
distinct from the others.
*In a given contract, wherein a party
signs as a surety but the agreement states
joint and several liabilities, there is a solidary
obligation. (Jaucian v. Querol)
Kinds of Solidarity (PAMela Anderson)
1. Passive Solidarity
2. Active Solidarity
3. Mixed Solidarity solidarity among
creditors and debtors
Passive
Solidarity
Active
Solidarity
Solidarity
of debtors
Solidarity of
creditors
Any one of
the debtors can
be made liable for
the fulfillment of
the entire
obligation, with
the consequent
right to demand
from the others
their
corresponding
shares in the
liability.
Any one of
the creditors may
demand fulfillment
of the entire
obligation.
It is in the
nature of a
mutual guaranty.
Its essential
feature is that of
mutual
representation.
Joint Indivisibility
A joint indivisible obligation is one in
which the object or prestation is indivisible,
not susceptible of division; while the tie
between the parties is joint, that is, liable only
to a proportionate share. (1209)
*In a joint indivisible obligation, the
liabilities of the debtors or the rights of the
creditors are joint, but they are indivisible as
to compliance. (1224) The concurrence of all
the creditors is necessary for demanding
compliance due to the indivisibility of the
obligation. The same is inversely true as
regards the debtors. The concurrence of all
the creditors is also necessary for acts which
are prejudicial. But an act beneficial to all like
interruption of prescription may be performed
by one of the creditors.
Indivisible obligations are not necessarily
solidary (1210)
Indivisibility Solidarity
Refers to the
prestation
Refers to the legal
or juridical tie
binding the parties
Only the debtor
who is guilty of
breach of
obligation is
liable for
damages, thereby
terminating the
agency.
All of the debtors
are liable for the
breach of
obligation
committed by any
one of the debtrs.
Can exist even if
there is only one
debtor or one
creditor
Can only exist
when there is at
least two debtors
or creditors
The others are
not liable in case
of insolvency of
one debtor
The others are
proportionately
liable in case of
insolvency of one
debtor
Characteristics
1. Demand must be made to all the joint
debtors.
2. The creditor must proceed against all the
joint debtors, because the compliance of
the obligation is possible only if all of the
joint debtors would act together.
3. If one of the debtors is insolvent, the
other(s) shall not be liable for his share.
4. If one of the debtors cannot comply, the
obligation is converted into monetary
consideration. One who is ready and
willing to comply will pay his proportionate
share, and the other not willing shall pay
his share plus damages when his financial
condition improves.
5. If there is more than one creditor, delivery
must be made to all, unless one is
authorized to receive for the others.
RULES
1. GIVES RISE TO INDEMNITY FOR DAMAGES:
NON-COMPLIANCE WITH UNDERTAKING
(1224)
2. DEBTORS READY TO FULFILL SHALL NOT BE
LIABLE (1224)
*AS ALREADY STATED, IN A JOINT INDIVISIBLE
OBLIGATION, A SUIT FOR SPECIFIC PERFORMANCE
MUST BE DIRECTED AGAINST ALL THE DEBTORS
AND IF ANY ONE OF THEM IS NOT WILLING TO
FULFILL, THE ACTION SHALL BE CONVERTED INTO
ONE FOR DAMAGES WHERE THE DEBTORS SHALL BE
LIABLE FOR THEIR RESPECTIVE SHARES WHILE THE
UNWILLING DEBTOR SHALL PAY HIS SHARE PLUS
DAMAGES FOR HE ALONE SHALL BE LIABLE FOR
DAMAGES, THE OTHER DEBTORS BEING WILLING
TO DELIVER.
3. Prejudiced only by collective acts of ALL
creditors / enforced against ALL debtors
(1209)
*Article 1209 contemplates an
obligation which is joint as to the parties but
indivisible as to compliance. The concurrence
of all the creditors is necessary for demanding
compliance due to the indivisibility of the
obligation. The same is inversely true as
regards the debtors. The concurrence of all
the creditors is also necessary for acts which
are prejudicial. But an act beneficial to all like
interruption of prescription may be performed
by one of the creditor.
Inchausti & Co. v. Yulo
Six brothers and sisters admitted solidary
liability. Gregorio Yulo was sued for
payment of entire indebtedness.
However, solidary debtors Francisco,
Manuel and Carmen entered into a
compromise agreement with plaintiff.
Gregorio was ordered to pay the part of
the reduced indebtedness, only insofar as
such is demandable. Greg Yulo was
solidarily liable, he benefited from the
remission, but not the extension of the
period for payment, thus there was
partial demandability.
Debtor/ Passive Solidarity Distinguished
From Suretyship
By guaranty a person, called the guarantor,
binds himself to the creditor to fulfill the
obligation of the principal debtor in case the
latter should fail to do so. A solidary guaranty
is suretyship.
Suretyship
If a person binds himself solidarily with the
principal debtor, the provisions of Section 4,
Chapter 3, Title I of this Book shall be
observed. In such case the contract is called
a suretyship. (2047)
Distinguishing Suretyship from
Solidarity
1. A surety does not have an actual loan of
his own, solidary debtor is also liable for
his own debt in addition to that of others.
2. After paying the debt, a surety has right to
collect from principal debtor, while a
solidary debtor has right to collect from
solidary co-debtor.
3. Most importantly, an extension of time
would benefit the surety and such would
not benefit solidary co-debtors who did not
know or consent to an extension of time.
(Villa v. Garcia Bosque) (Jurado)
Rights of solidary creditor/s
1. Do only what is useful to others, nothing
prejudicial to co-creditors. (1212)
2. There is no assignment without the
consent of others (1213)
*The consent of the other co-solidary
creditors is necessary because they may not
trust the new creditor who would thereby be
entitled to collect the entire debt. (Jurado)
3. Anyone has right to receive the payment;
but the first one to demand receives the
payment. (1214)
*Payment made by the debtor to any
one of the solidary creditors extinguishes the
obligation. If one of the solidary creditors
demands payment of the debt, he has the
right to do so and payment must be made to
him. (Jurado)
Quiombing v. CA
Only one of the solidary creditors filed
a suit for collection against the solidary
debtors. The debtors moved for the dismissal
of the suit on the ground that the other
solidary creditors should have been included
in the case. The Supreme Court rejected the
dismissal of the suit invoking Art. 1212 and
stated that recovery of the contract price was
surely a useful act and can be done even by
one solidary creditor. Furthermore, the
question as to who should sue was a personal
issue among the solidary creditors.
N.B. As to who sues for recovery of
the obligation should not matter to the
debtors as they are wholly obligated to either
one of the solidary creditors.
4. Action against and payment by solidary
debtor.
a. Proceed against anyone, some, or all of
them simultaneously (1216)
b. Demand against one: not obstacle for
demand against another, unless paid
(1216)
Effect of Loss or Impossibility
1. Without any fault of any of the debtors:
Extinguishment (1221)
2. With fault of any of the debtors: all are
responsible but co-debtors have a right
against negligent debtor
3. Due to a fortuitous event, but with delay:
all are responsible with right of action
against the negligent debtor
Rules of Payment in Solidary Obligations
1. The creditor may proceed against any one
of the solidary debtors or some or all of
them as long as the debt has not been
fully collected. (1316)
2. Payment made by one of the solidary
debtors extinguishes the obligation.
(1217)
3. If two or more debtors offer to pay, the
creditor may choose which offer to accept.
(1217)
4. The paying debtor may ask for
reimbursement with interest from his co-
debtors. (1217)
5. The share of the insolvent debtor shall be
borne by all his co-debtors, pro-rata.
(1217)
6. There shall be no reimbursement if the
solidary debtor paid AFTER the obligation
has prescribed or has become illegal.
(1218)
Rights of Solidary Debtor
1. Set-up all defenses
2. Right of action against solidary co-debtors
Set-up Defenses (1222)
a. Defenses derived from the nature of
the obligation available to all debtors
as a defense to compliance with the
entire obligation;
b. Defenses personal to the debtor like
minority, insanity, civil interdiction,
etc. not available to the other debtors
so as to free the latter from their
liability for their own shares in the
obligation;
c. Defenses that pertain to his co-
debtor(s), like the existence of a period
or condition available only as regards
the share of such co-debtor(s) for
solidarity may exist even if the debtors
are bound under different periods or
conditions.
Imperial Insurance, Inc. v. David
Husband and wife bound themselves
solidarily in favor of obligee for a sum of
money and when the husband died, the
obligee demanded payment from the wife who
resisted payment, claiming that the obligees
claim is barred by its failure to file a claim in
the intestate proceeding of the deceased
husband. The Supreme Court ruled that the
obligee can properly claim from the wife as
the nature of the obligation is solidary.
N.B. If obligation were solidary, the
entire obligation is demandable from anyone
of the solidary obligors.
Right of action against solidary co-debtors
The payor of the obligation may claim
from each co-debtor his share of the debt with
interest, unless paid before debt is due or
demandable (with no interest). (1217)
V. DIVISIBLE & INDIVISIBLE
OBLIGATIONS
The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor does
solidarity of itself imply indivisibility. (1210)
DIVISIBLE OBLIGATIONS
Those obligations whose objects are capable
of partial performance in their delivery or
performance.
INDIVISIBLE OBLIGATIONS
Those obligations whose objects are not
capable of partial fulfillment in delivery or
performance.
Test for Distinction
The determining factor is the purpose of the
obligation or the intention of the parties and
NOT the possibility or impossibility of partial
prestation. (1225)
Presumptions
1. INDIVISIBLE: DEFINITE THINGS, NOT PARTIAL
PERFORMANCE
2. DIVISIBLE: PARTIAL PERFORMANCE; BY DAYS
OF WORK, METRICAL UNITS, OR ANALOGOUS
THINGS
3. PHYSICALLY DIVISIBLE: SUBJECT TO LAW OR
WHAT IS INTENDED BY THE PARTIES
4. NOT TO DO: DETERMINED BY CHARACTER OF
PRESTATION
KINDS OF INDIVISIBILITY OF AN OBLIGATION
a. LEGAL INDIVISIBILITY - BY LAW, AS WHEN
TAXES ARE TO BE PAID IN FULL BECAUSE THE
LAW DOES NOT PERMIT PAYING THE SAME BY
INSTALLMENTS
b. CONVENTIONAL INDIVISIBILITY - BY
STIPULATION OF THE PARTIES OR INTENTION
BY THEM TO TREAT THE THINGS AS
INDIVISIBLE EVEN IF THEY ARE ACTUALLY
DIVISIBLE
c. NATURAL INDIVISIBILITY - BY THE NATURE
OF THE OBLIGATION
Quantum Meruit Principle
Divisible Obligation
If only partially performed, the obligor
can enforce his right in proportion to the
services performed.
Indivisible Obligation
If obligor fails to perform the work
completely, he cannot recover on this
principle because in indivisible obligations,
partial performance is equivalent to non-
performance.
This principle allows recovery of the
reasonable value of the work done regardless
of any agreement as to the value. It entitles
the party to as much as he reasonably
deserves as distinguished from quantum
valebant or to as much as what is reasonably
worth. The sellement of claim under this
principle requires application of judgment and
discretion and cannot be adjusted by simple
arithmetical process. (F.F. Manocop v. CA,
GR 122196, Jan. 15, 1997)
VI. OBLIGATIONS WITH A PENAL CLAUSE
In an obligation with a penal clause, the
penalty shall substitute the indemnity for
damages and the payment of interest in case
of non-compliance, if there is no stipulation to
the contrary. A penal clause is an accessory
undertaking to assume greater liability in case
of breach.
Principal and Accessory Obligations
PRINCIPAL OBLIGATION
That which can stand by itself and does not
depend upon other obligations for its validity
and existence.
ACCESSORY OBLIGATION
That which contains an accessory undertaking
to pay a previously stipulated indemnity in
case of breach of the principal prestation
intended primarily to induce its fulfillment.
Purposes of Penalty
1. Funcion coercitiva or de garantia - to
ensure performance of the obligation
2. Funcion liquidatoria - to substitute a
penalty for the indemnity of damages and
the payment of interest in case of non-
compliance.
3. Funcion estrictamente penal - to punish
the debtor for the non-fulfillment of his
obligation.
Penalty as a Substitute for Damages
General Rule
The penalty fixed by the parties is a
compensation or substitute for damages in
case of breach.
Exceptions
1. When there is a stipulation to the contrary
2. When the debtor is sued for refusal to pay
the agreed penalty
3. When the debtor is guilty of fraud
Distinguishing a Penal Clause from a
Condition
Penal Clause Condition
There is
obligation through
an accessory
No obligation
through an
accessory
May become
demandable in
default of an
unperformed
obligation and
sometimes jointly
with it
Is never
demandable
(Manresa)
Kinds of Penal Clause
As to origin
Legal penal clause provided by law
Conventional penal clause provided for
by stipulation of the parties
As to its purpose
Compensatory penal clause the penalty
takes the place of damages
Punitive penal clause the penalty is
imposed merely as a punishment for
breach
As to its dependability or effect
Subsidiary or alternative penal clause
only the penalty can be enforced
Joint or cumulative penal clause both the
principal obligation and the penal
clause can be enforced (Manresa)
Effect of Nullity of the Penal Clause
If only the penal clause is void, the principal
obligation remains valid and demandable.
(1230)
Nullity of the Principal Obligation
If the principal is void, the penal clause is also
void because the penal clause cannot stand
along without the principal obligation to which
it is subordinated.
However, if the nullity of the principal
obligation is due to the debtors fault who
acted in bad faith, and by reason of which the
creditor suffered damages on equitable
grounds, the penalty may be enforced.
Chapter IV: Extinguishment of
Obligations
Classification of the Modes of
Extinguishment of Obligations
1. Novation
2. Compensation
3. Merger or confusion
4. Remission or condonation
5. Payment or performance
6. Loss of the thing due
7. Prescription
8. Rescission
9. Fulfillment of the Resolutory condition
10. Annulment
I. PAYMENT OR PERFORMANCE
The delivery of money, the delivery of the
thing (other than money), the doing of an act,
or not doing of an act.
Elements
The elements of payment are analyzed into:
1. persons- who may pay to whom payment
may be made
2. thing or object in which the payment must
consist
3. the cause thereof
4. the mode or form thereof
5. the place and time in which it must be
made
6. the imputation of expenses occasioned by
it
7. the special parts which may modify the
same and the effects they generally
produce
Requisites for Valid Payment
With respect to prestation itself:
(1) identity
(2) integrity or completeness
(3) indivisibility
With respect to parties
This must be made by the proper party to the
proper party
(1) Payor
(a) Payor - the one performing, he can be
the debtor himself or his heirs or
assigns or his agent, or anyone
interested in the fulfillment of the
obligation; can be anyone as long as it
is with the creditor's consent
(b) 3
RD
person pays/performs - only the
creditor's consent;
If performance is done also with
debtor's consent - he takes the place
of the debtor. There is subrogation
except if the 3
rd
person intended it to
be a donation
(c) 3
rd
person pays/performs with consent
of creditor but not with debtor's
consent, the repayment is only to the
extent that the payment has been
beneficial to debtor
(2) Payee
(a) payee - creditor or obligee or successor
in interest of transferee, or agent
(b) 3
rd
person - if any of the ff. concur:
i. it must have redounded to the
obligee's benefit and only to the
extent of such benefit
ii. it falls under art 1241, par 1,2,3 -
the benefit is total so, performance
is total
(c) anyone in possession of the credit - but
will apply only if debt has not been
previously garnished
Payment made to an Incapacitated Person
It is valid when:
1. The incapacitated person kept the thing
delivered, or
2. Insofar as the payment has been beneficial
to him
Payment to a 3
rd
party not authorized, valid if
proved & only to the extent of benefit
Presumed if:
1. After payment, 3
rd
person acquires the
creditors rights
2. Creditor ratifies payment to 3
rd
person
3. By creditors conduct, debtor has been led
to make the payment (estoppel)
Payment made in good faith to a person in
possession of credit shall release debtor
Requisites:
1. Payment by debtor must be made in good
faith
2. Creditor must be in possession of the
credit & not merely the evidence of
indebtedness
With respect to time and place of
payment
Where payment should be made
1. In the place designated in the obligation
2. If there is no express stipulation and the
undertaking is to deliver a specific thing
at the place where the thing might be at
the moment the obligation was constituted
3. In other cases in the place of the
domicile of the debtor
Time of payment
This is the time stipulated by the parties.
Effect of payment
The obligation is extinguished.
Except in an order to retain the debt.
Substantial Performance
1. Attempt in Good Faith to perform without
willful or intentional departure
2. Deviation is slight
3. Omission/Defect is technical or
unimportant
4. Must not be so material that intention of
parties is not attained
Effect of Substantial performance in good faith
1. Obligor may recover as though there has
been strict and complete fulfillment, less
damages suffered by the obligee
2. Right to rescind cannot be used for slight
breach
Currency
Stipulated (1249)
Philippine legal tender
The payment of debts in money shall be made
in the currency stipulated, and if it is not
possible to deliver such currency, then in the
currency which is legal tender in the
Philippines. (1249)
Mercantile documents, payable to order:
only when cashed or impaired by
creditor.
The delivery of promissory notes payable to
order, or bills of exchange or other mercantile
documents shall produce the effect of
payment only when they have been cashed,
or when through the fault of the creditor they
have been impaired. (1249)
*Impairment contemplates an issuance by a
third party, otherwise, creditor can just ask
from creditor again but without interest as
there was no delay. (Jurado, Balane)
During encashment: action in abeyance.
In the meantime, the action derived from the
original obligation shall be held in the
abeyance. (1170)
Extraordinary inflation/ deflation
Stipulation (1250)
Currency value at time of agreement.
In case an extraordinary inflation or deflation
of the currency stipulated should supervene,
the value of the currency at the time of the
establishment of the obligation shall be the
basis of payment, unless there is an
agreement to the contrary. (1250)
Expenses:
Unless it is otherwise stipulated, the
extrajudicial expenses required by the
payment shall be for the account of the
debtor. With regard to judicial costs, the
Rules of Court shall govern. (1247)
Special Rules/Forms Of Payment
Application of Payments the designation
of the debt which payment shall be made, out
of 2 or more debts owing the same creditor:
1. May be made according to the stipulation
of the parties or application of party given
benefit of period;
2. For the application to be valid, it must be
debtors choice or w/ consent of debtor
Requisites for the Application of payment
1. Various debts of the same kind
2. Same debtor
3. Same creditor
4. All debts must be due
Exception: there may be application of
payment even if all debts are not yet due
if:
a) parties so stipulate
b) when application of payment is made
by the party for whose benefit the term
has been constituted
5. Payment is not enough to extinguish all
debts
How the application is made:
1. Debtor makes the designation
2. If not, creditor makes it by so stating
in the receipt that he issues, unless
there is cause for invalidating the
contract
3. If neither the debtor nor creditor has
made the application or if the
application is not valid, then
application, is made by operation of
law
Who makes the application:
General Rule: Debtor
Exception: Creditor
a) Debtor without protest accepts receipt
in which creditor specified expressly
and unmistakably the obligation to
which such payment was to be applied
*The debtor in this case renounced the
right of choice
b) When monthly statements were made
by the bank specifying the application
and the debtor signed said statements
approving the status of her account as
thus sent to her monthly by the bank
In case no application has been made
1. Apply payment to the most onerous
2. If debts are of the same nature and
burden, application shall be made to all
proportionately
Dacion en Pago
The mode of extinguishing an obligation
whereby the debtor alienates in favor of the
creditor property for the satisfaction of
monetary debt; extinguish up to amount of
property unless w/ contrary stipulation;
A special form of payment because 1 element
of payment is missing: IDENTITY.
*Governed by the law on sales
Conditions for a valid dacion:
1) If creditor consents, for a sale
presupposes the consent of both
parties
2) If dacion will not prejudice the other
creditors
3) If debtor is not judicially declared
insolvent
Cession/Assignment in Favor of creditors
The process by which debtor transfer all the
properties not subject to execution in favor of
creditors is that the latter may sell them and
thus, apply the proceeds to their credits;
extinguish up to amount of net proceeds (
unless w/ contrary stipulation )
Kinds
1. Legal governed by the insolvency law
2. Voluntary agreement of creditors
Requisites for voluntary assignment
a) More than 1 debt
b) More than 1 creditor
c) Complete or partial insolvency of debtor
d) Abandonment of all debtors property not
exempt from execution
e) Acceptance or consent on the part of the
creditors
Effects
a) Creditors do not become the owner; they
are merely assignees with authority to sell
b) Debtor is released up to the amount of the
net proceeds of the sale, unless there is a
stipulation to the contrary
c) Creditors will collect credits in the order of
preference agreed upon, or in default of
agreement, in the order ordinarily
established by law
Consignation
Tender -the act of offering the creditor what
is due him together with a demand that the
creditor accept the same (When creditor
refuses w/o just cause to accept payment, he
becomes in mora accepiendi & debtor is
released from responsibility if he consigns the
thing or sum due)
Consignation the act of depositing the
thing due with the court or judicial authorities
whenever the creditor cannot accept or
refuses to accept payment; generally requires
prior tender of payment
Requisites of valid consignation:
1. Existence of valid debt
2. Consignation was made because of some
legal cause - previous valid tender was
unjustly refused or under circumstances
making previous tender exempt.
3. Prior Notice of Consignation had been
given to the person interested in
performance of obligation (1
st
notice)
4. Actual deposit/Consignation with proper
judicial authorities
5. Subsequent notice of Consignation (2
nd
notice)
Effects: Extinguishment of obligation
(1) Debtor may ask judge to order
cancellation of obligation
(2) Running of interest is suspended
(3) Before creditor accepts or before judge
declares consignation has been properly
made, obligation remains (debtor bears
risk of loss at the meantime, after
acceptance by creditor or after judge
declares that consignation has been
properly made risk of loss is shifted to
creditor)
Consignation w/o prior tender
This is allowed when:
a. creditor absent or unknown/ does not
appear at the place of payment
b. incapacitated to receive payment at the
time it is due
c. refuses to issue receipt w/o just cause
d. 2 or more creditor claiming the same right
to collect
e. title of obligation has been lost
II. LOSS OF THE THING DUE
This is partial or total which includes the
impossibility of performance.
CONCEPT
Meaning of loss of the thing
1) When the object perishes (physically)
2) When it goes out of commerce
3) When it disappears in such a way that its
existence is unknown or it cannot be
recovered
When is there impossibility of
performance
1) Physical impossibility
2) Legal impossibility :
EFFECT OF TOTAL LOSS
In obligations to deliver a specific thing
General Rule: Extinguished
Exceptions:
a) Debtor is at fault
b) Debtor is made liable for fortuitous event
because of a provision of law, contractual
stipulation or the nature of the obligation
requires assumption of risk on part of
debtor
In obligations to deliver a generic thing
General Rule: Not extinguished
Exceptions:
a) if the generic thing is delimited
b) if the generic thing has already been
segregated
c) monetary obligation
In obligations to do
General Rule: Debtor is released when
prestation becomes legally or physically
impossible without fault on part of debtor
EFFECT OF PARTIAL LOSS
Judicial determination of extent is necessary.
a) when loss is significant may be enough
to extinguish obligation
b) when loss insignificant not enough to
extinguish obligation
WHEN THING IS LOST IN THE
POSSESSION OF THE DEBTOR
Presumption: Loss due to debtors fault
(disputable)
Exception: natural calamity, earthquake,
flood, storm
REBUS SIC STANTIBUS
A doctrine which holds that an agreement is
valid only if the same conditions prevailing at
time of contracting continue to exist at the
time of performance.
Effect of Difficulty Beyond Parties
Contemplation
Rule: The obligor may be released in whole or
in part.
Requisites:
(a) The event or change could not have been
foreseen at the time of the execution of
the contract
(b) The performance is extremely difficult, but
not impossible (because if it is impossible,
it is extinguished by impossibility)
(c) The event was not due to the act of any of
the parties
(d) The contract is for a future prestation
III. CONDONATION/REMISSION
OF THE DEBT
An act of pure liability by virtue of which the
obligee, without receiving any price or
equivalent, renounces the enforcement of the
obligation, as a result of which it is
extinguished in its entirety or in part or aspect
of the same to which the remission refers.
*It is the gratuitous abandonment of the
creditor of his rights.
Requisites
a. There must be an agreement
b. There must be a subject matter (object of
the remission, otherwise there would be
nothing to condone)
c. Cause of consideration must be liberality
Essentially gratuitous, an act of liberality
d. Parties must be capacitated and must
consent; requires acceptance by obligor-
implied in mortis causa & express inter
vivos
e. Formalities of a donation are required in
the case of an express remission
f. Revocable subject to rule on inofficious
donation (excessive, legitime is impaired)
& ingratitude & condition not followed
g. Obligation remitted must have been
demandable at the time of remission
h. Waivers or remission are not to be
presumed generally
Forms Extent Kinds
Express
formalities
of donation
total Principal accessory
also condoned
Implied
conduct is
sufficient
partial accessory principal
still outstanding
accessory obligation
of pledge
condoned;
presumption only,
rebuttable
Implied Condonation
1. voluntary delivery presumption; when
evidence of indebtedness is w/ debtor
presumed that it is a voluntary delivery by
creditor; rebuttable
2. effect of delivery of evidence of
indebtedness: conclusion that debt is
condoned
Voluntary Delivery of Private Document
1. if in the hands of joint debtor only his
share is condoned
2. if in the hands of solidary debtor - whole
debt is condoned
Tacit: Voluntary destruction of instrument by
creditor; made to prescribe w/o demanding
IV. CONFUSION OR MERGER OF RIGHTS
It is the merger of the characteristics of the
creditor and the debtor in one and the same
person by virtue of which the obligation is
extinguished.
Requisites
a. It must take place between the principal
debtor & the principal creditor only
b. The merger must be clear & definite
c. The obligation involved must be the same
& identical one obligation only
d. Revocable, if for any reason the confusion
ceases, the obligation is revived
V. COMPENSATION
Extinguishment in the concurrent amount of
the obligation of those persons who are
reciprocally debtors and creditors of each
other.
Requisites
1. Both parties must be mutually creditors
and debtors - in their own right and as
principals
2. Both debts must consist in sum of money
or if consumable, of the same kind or
quality
3. Both debts are due
4. Both debts are liquidated & demandable
5. Neither debt must be retained in a
controversy commenced by 3
rd
person &
communicated w/ debtor (neither debt is
garnished)
Kinds
1. Legal by operation of law; as long as 5
requisites concur- even if unknown to
parties & if payable in diff places;
indemnity for expense of exchanges; even
if not equal debts only up to concurring
amount
2. Conventional agreement of parties is
enough, forget other requirement as long
as both consented
3. Facultative one party has choice of
claiming/opposing one who has benefit
of period may choose to compensate
- not all requisites are present
- depositum; commodatum; criminal
offense; claim for future support; taxes
4. Judicial set off; upon order of the court;
needs pleading & proof; all requirements
must concur except liquidation
5. Total when 2 debts are of the same
amount
6. Partial when 2 debts are not of the same
amount
Effect of assignment of credit to 3
rd
person; can there still be compensation
1. if made after compensation took place
no effect; compensation already perfected
2. if made before compensation took place
depends
a) with consent of debtor debtor is
estopped unless he reserves his right &
gave notice to assignee
b) with knowledge but w/o consent of
debtor compensation may be set up
as to debts maturing prior to
assignment
c) w/o knowledge compensation may
be set-up on all debts prior to his
knowledge
VI. NOVATION
The substitution or change of an obligation by
another, resulting in its extinguishment or
modification, either by changing its object or
principal conditions, or by substituting another
in place of the debtor, or by subrogating a 3
rd
person in the rights of the creditor.
It is the total or partial extinction of an
obligation through the creation of a new one
which substitutes it.
Requisites
1. The existence of a previous valid
obligation
2. The intention or agreement and capacity
of the parties to extinguish or modify the
obligation
3. The extinguishment or modification of the
obligation
4. The creation of a valid new obligation (Tiu
Siuco v. Habana, 45 Phil. 707, 1924)
Purpose of Novation
1. The original obligation is extinguished
2. A new obligation is created
Kinds of Novation
1. As to essence
a. Objective/ Real This refers to the
change in either the cause, object or
principal
b. Subjective/ Personal This refers to
the substitution of the person of the
debtor or to the subrogation of the 3
rd
person in the rights of the creditor
c. Mixed
2. As to its form/ constitution
a. Express When it is declared in
unequivocal terms that the old
obligation is extinguished by a new one
which substitutes the same
b. Implied When the old and new
obligation are incompatible with each
other on every point
Forms of Substitution by Debtors
1. Expromision
2. Delegacion
EXPROMISION
It is effected with the consent of the creditor
at the instance of the new debtor even
without the consent or even against the will of
the old debtor.
Requisites
1. Initiative for substitution must emanate
from the new debtor
2. Consent of the creditor to the substitution
Kinds
1. Substitution with the knowledge and
consent of the old debtor
2. Substitution without the knowledge or
against the will of the old debtor (Jurado)
Effect of Payment by the New Debtor
1. Substitution with the knowledge and
consent of the old debtor
The new debtor is entitled to
reimbursement of the entire amount paid
and subrogation.
2. Substitution without the knowledge or
against the will of the old debtor
The new debtor is entitled to
reimbursement in so far as beneficial to
the old debtor with no right if subrogation
Effect of Insolvency of the New Debtor
There are two prevailing views:
1. The new debtors insolvency or non-
fulfillment of the obligation shall not revive
the original debtors liability to the creditor
whether the substitution is effected with or
without the knowledge or against the will
of the original debtor. (Tolentino)
2. If the substitution was effected with the
knowledge and consent of the original
debtor, the new debtors insolvency or
non-fulfillment of the obligation shall
revive the original debtors liability to the
creditor.
DELEGACION
It is effected with the consent of the creditor
at the instance of the old debtor, with the
concurrence of the new debtor.
Requisites
1. Initiative for substitution must emanate
from the old debtor
2. Consent of the new debtor
3. Acceptance by the creditor
Effect of Payment by the New Debtor
The new debtor is entitled to reimbursement
of the entire amount paid and subrogation.
Effect of Insolvency of the New Debtor
The creditor can sue the old debtor when the
insolvency was prior to the delegation and
publicly known or when the old debtor knew
of such insolvency at the time he delegated
the obligation.
Effects of Novation to Accessory
When the principal obligation is extinguished
in consequence of a novation, accessory
obligation must subsist only insofar as they
may benefit 3
rd
persons who did not give
consent.
Effects of Condition in Novation
1. If the original obligation was subject to
condition, the new obligation shall be
under the same condition, unless it is
otherwise stipulated.
2. If the new obligation and the old obligation
are subject to different conditions:
a. If the conditions are compatible, both
must be fulfilled otherwise there is
nothing to novate.
b. If the conditions are incompatible, the
latter should be fulfilled.
Kinds of Subrogation
1. Conventional
2. Legal
CONVENTIONAL
That which takes place by agreement of the
parties. This kind of subrogation requires the
intervention and consent of 3 persons: the
original creditor, the new creditor and the
debtor.
LEGAL
That which takes place without the agreement
but by operation of law because of certain
acts.
General Rule
Legal subrogation cannot be presumed.
Exception
1. The creditor pays another creditor who is
preferred, without the debtors knowledge
2. A third person is not interested in the
obligation pays with the express or tacit
approval of the debtor
3. Even without the debtors knowledge, a
person interested in the fulfillment of the
obligation pays without prejudice to the
effects of confusion as to the latters share
Magdalena Estates, Inc. v.
Spouses Rodriguez
The mere fact that the creditor accepts
payments from a third person who agreed to
assume the obligation, when there is no
agreement that the first debtor shall be
released from the responsibility does not
constitute obligation.
Kabankalan Sugar Co., Inc v.
Josefa Pacheco
When an easement of right of way is one of
the principal conditions of a contract, and the
duration of said easement is specified, the
reduction of said period in a subsequent
contract, wherein the same obligation is one
of the principal conditions, constitutes a
novation and to that extent extinguishes the
former contract.
Aquintey v. Spouses Tibong
(511 SCRA 414, G.R. No. 166704, 2006)
The transfer of rights takes place upon
perfection of the contract, and ownership of
the right, including all appurtenant accessory
rights, is acquired by the assignee who steps
into the shoes of the original creditor as
subrogee of the latter from that amount, the
ownership of the right is acquired by the
assignee. The law does not require any
formal notice to bind the debtor to the
assignee, all that the law requires is
knowledge of the assignment. Even if the
debtor had not been notified, but came to
know of the assignment by whatever means,
the debtor is bound by it. If the document of
assignment is public, it is evidence even
against a third person of the facts which gave
rise to its execution and of the date of the
latter. The transfer of the credit must
therefore be held valid and effective from the
moment it is made to appear in such
instrument, and third persons must recognize
it as such, in view of the authenticity of the
document, which precludes all suspicion of
fraud with respect to the date of the transfer
or assignment of the credit.
TITLE II: CONTRACTS
Chapter I: General Provisions
Definition
A contract is a meeting of the minds between
two persons whereby one binds himself, with
respect to the other, to give something or to
render some service. (1305)
A contract is a juridical convention manifested
in legal form, by virtue of which, one or more
persons bind themselves in favor of another
or others, or reciprocally, to the fulfillment of
a prestation to give, to do, or not to do.
Principal Characteristics (AMOR = love)
1. Autonomy
2. Mutuality
3. Obligatory Force and Consensuality
4. Relativity
AUTONOMY
This is the freedom or liberty to stipulate.
General Rule
The parties are free to stipulate anything they
may deem convenient.
Except
As long as the stipulation are not contrary to:
1. Law
2. Morals
3. Good Customs
4. Public Order
5. Public Policy (1306)
MUTUALITY
Performance or validity of the contract binds
both parts and it cannot be left to the will of
one of them. (1308)
OBLIGATORY FORCE & CONSENSUALITY
Contracts are perfected by mere consent and
from that moment, the parties are bound, not
only to the fulfillment of what has been
expressly stipulated but also to all the
consequences which, according to their
nature, may be in keeping with good faith,
usage and law.
RELATIVITY
General Rule
Contracts take effect only between parties,
their assigns and their heirs.
Exceptions
1. Obligations arising from contract which are
not transmissible by their nature,
stipulation, or provision of law.
2. Stipulation Pour Autrui a stipulation in
favor of a third person
Requisites
a. The stipulation must only be a part of
the contract; it must not be the whole
of the contract.
b. The contracting parties clearly and
deliberately conferred the favor to the
third person.
c. The 3
rd
person must have
communicated his acceptance to the
obligor before its revocation by the
original parties.
d. Neither of the contracting parties bears
the legal representation or
authorization of a 3
rd
party.
e. The favorable stipulation should not be
conditioned or compensated by any
kind of obligation.
3. When a third person induces another to
violate his contract. (1314)
Requisites
Existence of a valid contract
Knowledge of the contract by a 3
rd
person
Interference by the 3
rd
person without
legal justification or excuse
4. Accion Directa - the right of a creditor to
sue on a contract entered into by his
debtor. (1313)
5. Third persons who come into possession of
the object of the contact creating real
rights (1312)
6. Accion Pauliana (see Obligations > Breach
of Obligation > Remedies of Creditors)
Kinds of Contracts
1. According to perfection
Consensual a contract that is perfected
by agreement of the parties
Real a contract that is perfected by
delivery
Formal/ Solemn a contract perfected by
conformity to essential formalities,
e.g., donation
2. According to degree of importance
a. Principal a contract that can stand
alone
b. Accessory a contract that is
dependent upon another contract for
its existence and validity
c. Preparatory means through which
other (future) contracts may be made;
not an end in itself, e.g. Agency
3. According to subject matter
a. Involving things, such as sale or barter
b. Involving rights or credits, such as
usufruct or assignment of credits
c. Involving services such as agency,
carriage, etc.
4. According to name
a. Nominate a contract that has its own
individuality and id regulated by a
special provision of law, i.e., pledge,
mortgage, etc.
b. Innominate a contract that lacks
individuality and is not regulated by a
special provision of law
- Do ut des I give that you may give
- Do ut facias I give that you may do
- Facio ut des I do that you may give
- Facio ut facias I do that you may
do
*facio/ facias do
*do - give
5. According to cause
a. Onerous a contract with an exchange
of valuable considerations
b. Gratuitous a contract with no
consideration received in exchange for
what has been given
c. Remuneratory a contract in which
something (a prestation) is given for a
benefit or service performed without
any legal obligation to do so
6. According to nature of obligation
produced or number of parties
obligated
a. Unilateral a contract with only one
party with an obligation, e.g.
Commodatum and Mutuum
b. Bilateral a contract in which both
parties are required to render
reciprocal prestations
7. According to risk
a. Commutative a contract where
equivalent values are given by both
parties, i.e., sale, barter and lease
b. Aleatory a contract where fulfillment
is dependent upon chance, such as
insurance
Stages of a Contract (PPC)
1. Preparation or conception bargaining
point, negotiation
2. Perfection or birth the meeting of
minds regarding the subject matter and
the cause of the contract.
3. Consummation or death parties have
performed their respective obligations and
the contract is put to an end
Chapter II: Essential Requisites
Essential Requisites of a Contract
(Always COCa-Cola)
1. Consent of the contracting parties;
2. Object certain which is the subject matter
of the contract;
3. Cause of the obligation which is
established. (1318)
I. CONSENT
Consent is manifested by the meeting of the
offer and the acceptance upon the thing and
the cause which are to constitute the contract.
The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a
counter-offer. (1319)
Requisites
1. Plurality of subject
2. Capacity
3. Intelligence and free will
4. Manifestation of intent of parties
5. Cognition by the other party
6. Conformity of manifestation and cognition
*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
Auto Contract
A contract made by a person acting in
anothers name in one capacity and his own
name or that of another in another capacity.
Collective Contract
A contract where the law authorizes that the
will of the majority binds a minority to an
agreement, notwithstanding the opposition of
the latter.
Contract of Adhesion
A contract in which one party has already
prepared a form of a contract, containing
stipulations desired by him and he simply asks
the other party to agree to them if he wants
to enter into the contract.
Offer and Acceptance
OFFER
A proposal made by one party to another to
enter into a contract.
Elements of Valid Offer
1. Definite
2. Complete
3. Intentional
Mode of acceptance as stipulation
The person making the offer may fix the time,
place, and manner of acceptance, all of which
must be complied with. (1321)
Agent as offerer
An offer made through an agent is accepted
from the time acceptance is communicated to
him. (1322)
Withdrawal of Offer (1324)
General Rule: An offer or proposal may be
withdrawn as long as the offeror has no
knowledge that the offeree has already
accepted the offer.
Exception: When the option is founded upon
a consideration, as something paid or
promised, the offer cannot be withdrawn.
When does the offer become ineffective?
1. Death, civil interdiction, insanity or
insolvency of either party before
acceptance is conveyed
2. Express or implied revocation of the offer
by the offeree
3. Qualified or conditional acceptance of the
offer
4. Subject matter becomes illegal or
impossible before acceptance is
communicated
Rule on Complex Offers
1. When offers are interrelated - the
contracted can only be perfected if all the
offers are accepted.
2. When offers are not interrelated the
single acceptance of each offer results in a
perfected contract unless the offeror has
made it clear that one is dependent upon
the other and acceptance of both is
necessary
*An Offer inter praesentes must be accepted
immediately. If the parties intended that
there should be an express acceptance, the
contract will be perfected only upon
knowledge by the offeror of the express
acceptance by the offeree of the offer. An
acceptance which is not made in the manner
prescribed by the offeror is not effective, but
it takes the form of a counter-offer which the
offeror may accept or reject. (Malbarosa vs.
CA, G.R. No. 12576, 2003)
Advertisements as Offers
Business advertisements of things for sale are
not definite offers, but mere invitations to
make an offer, unless it appears otherwise.
(1325)
Advertisements for bidders are simply
invitations to make proposals, and the
advertiser is not bound to accept the highest
or lowest bidder, unless the contrary appears.
(1326)
ACCEPTANCE
The manifestation by the offeree of his assent
to the terms of the offer.
Elements of Valid Acceptance
1. Unequivocal
2. Unconditional
*If qualified, constitutes a counter-offer.
Forms of Acceptance (1320)
1. Express Acceptance - may be oral or
written.
2. Implied Acceptance - may be inferred
from the act or conduct of the offeree.
Period for Acceptance
1. stated fixed period in the offer
2. no stated fixed period
a) offer is made to a person present
acceptance must be made immediately
b) offer is made to a person absent
acceptance may be made within such
time that, under normal circumstances,
an answer can be received from him
*Acceptance may be revoked before the
offeror finds out about it.
*Amplified Acceptance - under certain
circumstances, a mere amplification on the
offer must be understood as an acceptance of
the original offer, plus a new offer which is
contained in the amplification.
Withdrawal of Acceptance
1. First View (Manresa): It is to be observed
that although the offeror is not bound until
he learns of the acceptance, the same
thing can not be said of the offeree who,
from the moment he accepts, loses the
power to retract such acceptance since the
right to withdraw between the time of the
acceptance and its communication is a
right which is expressly limited by law to
the offeror.
*To justify the inequality between the
contracting parties, Manresa said that
since the offeree is the first to know about
the concurrence of will if the parties, as a
consequence, the obligation, as far as he
is concerned, must also commence earlier.
2. Second View (Tolentino): Acceptance may
be revoked before it comes to the
knowledge of the offeror because in such a
case, there is still no meeting of minds,
since the revocation has cancelled or
nullified the acceptance which thereby
ceased to have any legal effect.
Acceptance by Letter or Telegram (1319)
When is it binding?
Acceptance is binding only from the time the
offerer had knowledge of it.
Where is it binding?
he contract is presumed to have been entered
into in the place where the offer was made.
Theories on Acceptance of an Offer by
Telegram
1. Manifestation Theory a contract is
perfected from the moment the
acceptance is declared or made
2. Expedition Theory contract is perfected
from the moment the acceptance is
declared or made even if not made known
to the offeror
3. Cognition Theory perfected from the
moment the acceptance comes to the
knowledge of the offeror; adopted in
Philippines
4. Reception Theory the contract is
perfected from the moment the offeror
receives the letter
*Revocation of Acceptance: The acceptance
by the offeree may be revoked before
reaching the knowledge of the offeror. If it is
revoked, the contract is not perfected if the
notice of revocation reaches the offeror before
the letter of acceptance is received.
*In unilateral promises, when offer is made to
the public, specific acceptance is not required
to bind the obligor.
OPTION
It is a preparatory contract in which one party
grants to the other, for a fixed period to
decide whether or not to enter into a principal
contract.
*An option may be withdrawn anytime before
acceptance is communicated but not when
supported by a consideration other than
purchase price: option money
*A unilateral promise to buy or sell, if not
supported by a distinct consideration, may be
withdrawn but may not be done whimsically
or arbitrarily; the right of the grantee here is
damages and not specific performance. (Ang
Yu v. CA, 1994)
*An option clause in order to be valid and
enforceable must indicate the definite price at
which the person granting the option is willing
to sell, contract can be enforced and not only
damages. (Equatorial v. Mayfair, 24 SCRA
483)
*The right of first refusal may be enforced by
specific performance. (Paranaque Kings v.
CA, 1997)
Persons Who Cannot Give Valid Consent
to a Contract
1. Unemancipated Minors
2. Insane or demented persons
3. Deaf-mutes or illiterates who do not know
how to write
4. Intoxicated persons and hypnotized
persons
5. A person under Mistake since a mistake
may deprive one of intelligence. (1331)
6. A person induced by Fraud (dolo
causante) (1338)
*Dolus bonus (usual exaggerations in
trade) are not in themselves fraudulent
Article 1330
A contract where consent is given through
mistake, violence, intimidation, undue
influence, or fraud is voidable.
Rule on Contracts Entered into By Minors
General Rule
These contracts are considered voidable.
Exceptions
1. Minor is Estopped for having
misrepresented his age and misled the
other party (when age is close to age of
majority as in the Mercado v. Espiritu &
Sia Suan v. Alcantara cases)
2. They were contracts for Necessities such
as food, but here the persons who are
bound to give them support should pay
therefor Upon reaching age of majority
they ratify the same
3. They were entered unto by a Guardian
and the court having jurisdiction had
approved the same right of first refusal
may be enforced by specific performance
4. Voluntary fulfillment of a natural
obligation provided that the minor is
between 18-21 years of age.
5. Contracts of Life, health or accident
insurance taken on the life of the minor.
Rule on Contracts Entered into by Insane or
Demented Persons or Those Who Were
Intoxicated or Hypnotized
Contracts entered into during a lucid interval
are valid. Contracts agreed to in a state of
drunkenness or during a hypnotic spell are
voidable. (1328)
The incapacity declared in article 1327 is
subject to the modifications determined by
law, and is understood to be without prejudice
to special disqualifications established in the
laws. (1329)
Rule on Contracts Entered into under Mistake
In order that mistake may invalidate consent,
it should refer to the substance of the thing
which is the object of the contract, or to those
conditions which have principally moved one
or both parties to enter into the contract.
(1331)
As to identity or qualifications: Mistake as
to the identity or qualifications of one of
the parties will vitiate consent only when
such identity or qualifications have been
the principal cause of the contract.
Correction only if: A simple mistake of
account shall give rise to its correction.
(1331)
- Error must be excusable, not caused
by negligence
- Error must be a mistake of fact, not of
law
Exceptions on Mistake:
1. Illiterate party (1332)
2. Knowledge of doubt, contingency, risk
affecting the object of the contract (1333)
3. Mutual error (1334)
Disqualified to Enter into Contracts
Contracts consented into by the following are
void:
1. those under civil interdiction
2. hospitalized lepers
3. prodigals
4. deaf and dumb who are unable to read
and write
5. 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
Distinguishing Incapacity from Disqualification
Incapacity Disqualification
Restrains the
exercise of the
right to contract
Restrains the very
right itself
May still enter
into contract
through parent,
guardian or legal
representative
Absolutely
disqualified
Based upon
subjective
circumstance of
certain person
Based upon public
policy and morality
Contracts
entered into are
merely voidable
Contracts entered
into are void
Causes which Vitiate Freedom to Consent
1. Violence
2. Intimidation
3. Mistake
4. Fraud
5. Undue Influence
VIOLENCE
There is violence when in order to wrest
consent, serious or irresistible force is
employed.
Requisites
a. Irresistible physical force
b. Such force is the determining cause for
giving consent
INTIMIDATION
There is intimidation when one of the
contracting parties is compelled by a
reasonable and well-grounded fear of an
imminent and grave evil upon his person or
property, or upon the person or property of
his spouse, descendants or ascendants, to
give his consent. (1335)
Requisites
a. One of the parties is compelled to give his
consent by a reasonable and well-
grounded fear of an evil
b. The evil must be imminent and grave.
c. The evil must be unjust.
d. The evil must be the determining cause for
the party upon whom it is employed in
entering into the contract.
Reluctant Consent
A contract is valid even though one of the
parties entered into it against his wishes and
desires or even against his better judgment.
Contracts are also valid even though they are
entered into by one of the parties without
hope of advantage or profit. (Martinez v.
Hongkong and Shanhai Bank, 15 Phil
252)
MISTAKE
It is not only a wrong conception of the thing
but also the lack of knowledge with respect to
it. (Manresa)
General Rule
Mistake does not vitiate consent.
Exception:
Mutual error as to the effect of an agreement
when the real purpose of the parties is
frustrated.
Requisites:
a. Mistake must be with respect to the
legal effect of an agreement
b. It must be mutual
c. The real purpose of the parties must
have been frustrated
FRAUD
There is fraud when, through insidious words
or machinations of one of the contracting
parties, the other is induced to enter into a
contract which, without them, he would not
have agreed to. (1338) (Dolo Causante)
Failure to disclose facts
When there is a duty to reveal them, as when
the parties are bound by confidential
relations, constitutes fraud. (1339)
Kinds of Fraud
Fraud in the perfection of the contract
1. Dolo Causante (1338) renders the
contract voidable
2. Dolo Incidente (1344) holds the guilty
party liable for damages
(see Obligations > Effect of Obligations >
Breach of Obligation > Fraud)
Fraud in the performance of an obligation
(1170)
Requisites of Fraud
a. Insidious words or machinations are
employed
b. It must be serious
c. It induced another party to enter into a
contract
d. It is not employed by both parties nor by
3
rd
parties
Exceptional Cases
These are not fraud unless Dolo Causante
or substantial/ principal condition:
i. Usual exaggerations in trade, when the
other party had an opportunity to know
the facts, are not in themselves
fraudulent. (1340)
*Caveat Emptor dealers talk, buyer
beware
ii. Opinions: A mere expression of an
opinion does not signify fraud, unless
made by an expert and the other party
has relied on the former's special
knowledge. (1341)
iii. Misrepresentation by a third person
does not vitiate consent, unless such
misrepresentation has created
substantial mistake and the same is
mutual. (1342)
iv. Misrepresentation made in good faith is
not fraudulent but may constitute
error. (1343)
General Rule on Fraud
In order that fraud may make a contract
voidable, it should be serious and should not
have been employed by both contracting
parties. (1344)
1. There must be a deliberate intent to
deceive or to induce
2. The other party relied on this untrue
statement.
3. Incidental fraud only obliges the person
employing it to pay damages. (1344)
Fraud by Third Persons
General Rule: Fraud by a 3
rd
person does not
vitiate consent and merely gives tise to action
for damages.
Except when:
1. There is collusion by one of the parties
o fthe contract with the 3
rd
person.
2. There is misrepresentation that has
created a substantial mistake and the
same is mutual.
UNDUE INFLUENCE
There is undue influence when a person takes
improper advantage of his power over the will
of another, depriving the latter of a
reasonable freedom of choice. (Coso v.
Fernandez Deza, 42 Phil. 595)
Simulated Contracts
SIMULATION
Simulation is the declaration of a fictitious
intent manifested deliberately and by
agreement by the parties in order to produce,
for the purpose of deceiving others, the
appearance of a transaction which does not
exist or which is different from the true
agreement.
Kinds of Simulated Contracts
a. Absolute There is no intention on the
part of the contracting parties to be bound
by the contract at all. The contract is
merely fictitious making it void from
beginning
b. Relative There is an intention by the
parties to be bound but they conceal their
true agreement
*Relative simulated contracts are binding
when:
i. It does not prejudice 3
rd
persons
ii. It is not contrary to law, morals, good
customs, public order or public policy.
II. OBJECT
The thing, right or service which is the subject
matter of the obligation arising from the
contract.
Requisites (PLDT-Ctc)
a) The prestation must be within the
Commerce of man, either existing or in
potency
b) It must be Licit or not contrary to law,
morals, good customs, public order, or
public policy.
c) It must be Possible or real.
d) It must be Determinate as to its kind or
determinable without the need to enter
into a new contract. (1349)
e) It must be Transmissible.
Those which Cannot be the Object of a
Contract (Fruits In Cream IOI)
1. Future inheritance (1347)
2. Impossible things or services cannot be
the object of contracts. (1348)
3. Contrary to law morals, good customs,
public order, and public policy.
4. Indeterminable as to their kind.
5. Outside the commerce of men
6. Intransmissible rights
Future Things
May be interpreted in two ways (Manresa):
1. Conditional Contract the thing must
come into existence otherwise the contract
is void.
2. Aleatory Contract One of the parties
bears the risk of loss that the thing might
not come into existence.
III. CAUSA
It is the why of the contract, the essential
reason which impels the parties to enter into
the contract.
Requisites
1. It must Exist at the time of the celebration
of the contract.
2. It must be Real (true).
3. It must be Licit or lawful.
Distiguishing Cause from Motive
Cause Motive
Direct and most
proximate
reason of a
contract
Indirect and remote
reason
Objective and
juridical reason
Psychological or
purely personal
reason
Cause is always
same for each
contracting party
Motive differs for
each contracting
party
The legality or
illegality of
cause affects the
existence or
validity of the
contract
The legality or
illegality of motive
does not affect the
existence or validity
of the contract.
Causes according to type of contract
a. In onerous contracts: the cause is
understood to be, for both parties, the
prestation or promise of a thing or service
by the other.
b. In remuneratory contracts: the cause is
the service or benefit remunerated
c. Of Pure beneficence: liberality of donor or
benefactor (1350)
d. In accessory contracts: the cause is
identical with the cause of the principal
contract, that is the loan from which it
derives lide and existence.
Effects of Cause
When Cause Renders Contract Void:
1. Absence of cause/ unlawful cause (1352)
2. False unless to prove another cause
(1353)
Want of Cause There is a total lack or
absence of consideration.
Illegal Cause The cause is contrary to
law, morals, good custom, public
order, or public policy.
False Cause The cause is stated but
that cause is not true.
When Cause Renders Contract Voidable:
Unless specified by law, lesion or inadequacy
will not invalidate a contract as long as there
has been no fraud, mistake or undue
influence. (1355)
Cause Effect
Absence of
causa
VOID - produce no legal
effect
Illegality of
causa
VOID - produce no legal
effect
Falsity of causa VOIDABLE party must
prove that cause is
untruthful; presumption
of validity but rebuttable
Causa not
stated in
contract
PRESUMED TO EXIST -
burden of proof is on the
person assailing its
existence
Inadequacy of
causa
DOES NOT INVALIDATE
CONTRACT PER SE
Exceptions:
1. when there is fraud,
mistake or undue
influence, or
2. when the parties
intended a donation or
some other contract
Chapter III: Form of Contracts
Form is a manner in which a contract is
executed or manifested
Forms of Contracts
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 property must be written
General Rule
SPIRITUALITY PRINCIPLE
Contracts are valid and enforceable in
whatever form, even if orally entered into, as
long as all essential requisites are present.
(1356)
EXCEPTION
1. Law requires contract to be in some form
for validity - donation and acceptance of
real property
to be enforceable - Statute of Frauds;
contract is valid but right to enforce
cannot be exercised; need ratification to
be enforceable
for convenience - contract is valid and
enforceable, needed only to bind 3rd
parties
Ex: public documents needed for the ff:
a. Contracts w/c object is creation,
transmission or reformation of real
rights over immovables
b. Cession, repudiation, renunciation
of hereditary rights/CPG
c. Power to administer property for
another
d. Cession of action of rights
proceeding from an act appearing
in a public inst.
e. All other docs where amount
involved is in excess of 500 ( must
be written even private docs )
When is Form Important
1. When form is required for Validity
2. When form is required for Enforceability
3. When form is required for Convenience
FOR VALIDITY (formal/solemn contracts)
1. Donation of real property must be in a
public instrument, otherwise, void.
2. Donation of personal property exceeding
P5,000 must be in writing, otherwise void.
3. Contribution of a partner of immovable
property in a partnership, must be in
writing, otherwise void.
4. Authority of agent to sell land must be in
writing, otherwise sale is void.
Dievas v. Acuna
Articles 1357 and 1358 do not require a
particular form to validate or enforce a
contract, only to ensure its efficacy, so that
after its existence have been admitted, the
party bound may be compelled to execute
necessary document.
Solis v. Barroso
Even where the contract has not been reduced
to the required form, it is still valid and
binding as far as contracting parties are
concerned. Consequently both presuppose the
existence of a valid and enforceable contract.
FOR ENFORCEABILITY
(Statute of Frauds)
(1403, par. 2, in relation to 1405)
Those that do not comply with the Statute of
Frauds as set forth in this number.
In the following cases an agreement hereafter
made shall be unenforceable by action,
unless the same, or some note or
memorandum, thereof, be in writing, and
subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement
cannot be received without the writing, or a
secondary evidence of its contents:
1. An agreement that by its terms is not to
be performed within a year from the
making thereof;
2. A special promise to answer for the debt,
default, or miscarriage of another;
3. An agreement made in consideration of
marriage, other than a mutual promise to
marry;
4. An agreement for the sale of goods,
chattels or things in action, at a price not
less than five hundred pesos, unless the
buyer accept and receive part of such
goods and chattels, or the evidences, or
some of them, of such things in action or
pay at the time some part of the purchase
money; but when a sale is made by
auction and entry is made by the
auctioneer in his sales book, at the time of
the sale, of the amount and kind of
property sold, terms of sale, price, names
of the purchasers and person on whose
account the sale is made, it is a sufficient
memorandum;
5. An agreement of the leasing for a longer
period than one year, or for the sale of
real property or of an interest therein;
6. A representation as to the credit of a third
person.
FOR CONVENIENCE
Public Document
The following must appear in a public
document: (1358)
1. Real rights over immovable property, sales
of real property - Acts and contracts which
have for their object the creation,
transmission, modification or
extinguishment of real rights over
immovable property; sales of real property
or of an interest therein a governed by
articles 1403, No. 2, and 1405;
2. Hereditary rights and conjugal property of
gains -The cession, repudiation or
renunciation of hereditary rights or of
those of the conjugal partnership of gains
3. Power to administer property, other
powers to act, prejudice 3
rd
persons - The
power to administer property, or any
other power which has for its object an act
appearing or which should appear in a
public document, or should prejudice a
third person;
4. Cession of actions from public documents
- The cession of actions or rights
proceeding from an act appearing in a
public document.
Private Document
1. All other contracts where the amount
involved exceeds five hundred pesos must
appear in writing, even a private one. But
sales of goods, chattels or things in action
are governed by articles, 1403, No. 2 and
1405. (1358)
2. Donations exceeding five thousand pesos
(Art. 748)
3. Giving authority to an agent for the Sale
of land. (Art. 1874)
4. Agreements on payment of interests on
contracts of loan (art. 1956)
5. Antichresis (Art. 2134)
Electronic Commerce Act (RA 8792)
1. Amends Art. 1403 by including computers
and their networks as means against
frauds and proof of contracts
2. Expressly provides for the application of
the same principles as normal contracts
but adds more presumptions wherein such
should be known by both parties.
Presumptions from rules of court and
doctrines as applied to e-mail, internet,
and networks
Receipt of letter presumed to come to
knowledge regardless of actual reading
Regular functions have been carried out
regularly
*However, special presumptions for
computers were made into law by the e-
commerce act.
In IBM v. Sec. of Labor, the Supreme Court
ruled that Local Area Network or LAN is not
sufficient notice for firing an employee since
there was still no law providing for such
presumptions. Remember that presumptions
facilitate transactions and rules of evidence by
being pragmatic about it. Otherwise, proving
the propositions as found in the presumptions
would be impossible and uncertain. E.g. no
one can really prove that person A read his e-
mail, thus it is more practical to presume that
he had done so given proof of his receiving
such e-mail.
Provisions of the E-commerce Act
1. Present laws apply; electronic documents
are valid like ordinary ones.
2. In using ATM of network banks,
transaction is final at actual debiting;
presumption of authority upon the holder
of the ATM card.
3. Electronic devices are valid
4. Message from originator presumed to be
made by the owner thereof regardless of
who actually typed it. There must be
express statement that he (owner) would
be held liable for that ID. Receiver has
right to assume his actual authorship.
5. On agreements of acknowledgement of
receipt, such as actual reply of the
receiver, or notice by the server. If no
reply or acknowledgement, presumption
that it was not sent.
6. As to time, presumption is at the time
such was received by the designated
information system or server, or that of
the receiver. This also requires a system
of acknowledgement of receipt.
7. Web sites require proof or
acknowledgement of visiting the site. This
is usually done by pre-program procedure
like requirement of registration before
being given access.
8. On security of signature electronic
imprints, identification systems, and codes
Tip: Always have a hard copy back-up
Acts Required for the Perfection of
Certain Contracts
REGISTRATION
Chattel Mortgages (art. 2140)
b. Sales or Transfers of Large Cattle
(Cattle Registration act)
DELIVERY OF THE THING
(for Real contracts)
Pledge - In addition to the requisites
prescribed in article 2085, it is necessary,
in order to constitute the contract of
pledge, that the thing pledged be placed in
the possession of the creditor, or of a third
person by common agreement. (2093)
Deposit- A deposit is constituted from the
moment a person receives a thing
belonging to another, with the obligation
of safely keeping it and of returning the
same. If the safekeeping of the thing
delivered is not the principal purpose of
the contract, there is no deposit but some
other contract. (1962)
Chapter IV: Reformation of
Contracts
(Arts.1359-1369)
Reformation is that remedy in equity by
means of which a written instrument is made
or construed so as to express or conform to
the real intention of the parties when some
error or mistake has been committed.
Requisites for Reformation
1. Meeting of minds.
2. True intention not expressed within the
instrument by reason of mistake, fraud,
inequitable conduct, or accident.
3. There is clear and convincing proof of
mistake, accident, fraud, simulation or
inequitable conduct.
Causes for Reformation (MUMO ghost)
1. Mutual: instrument includes something
w/c should not be there or omit what
should be there
a. Mutual
b. Mistake of fact
c. clear and convincing proof
d. causes failure of instrument to express
true intention
2. Unilateral
a. one party was mistaken
b. other either acted fraudulently or
inequitably or knew but concealed
c. party in good faith may ask for
reformation
3. Mistake by 3rd persons due to
ignorance, lack of skill, negligence , bad
faith of drafter, clerk, typist
4. Others specified by law to avoid
frustration of true intent
Special Cases
1. Mutual mistake - When a mutual mistake
of the parties causes the failure of the
instrument to disclose their real
agreement, said instrument may be
reformed.
2. Mistaken party, not fraudulent - If one
party was mistaken and the other acted
fraudulently or inequitably in such a way
that the instrument does not show their
true intention, the former may ask for the
reformation of the instrument.
3. Mistaken party, other knew of mistake and
non-conformity of instrument When one
party was mistaken and the other knew or
believed that the instrument did not state
their real agreement, but concealed that
fact from the former, the instrument may
be reformed.
4. Ignorance, lack of skill, negligence, or bad
faith of drafter, clerk, typist of instrument
- When through the ignorance, lack of
skill, negligence or bad faith on the part of
the person drafting the instrument or of
the clerk or typist, the instrument does
not express the true intention of the
parties, the courts may order that the
instrument be reformed.
5. Agreement on pledge or mortgage but
with instrument on sale If two parties
agree upon the mortgage or pledge of real
or personal property, but the instrument
states that the property is sold absolutely
or with a right of repurchase, reformation
of the instrument is proper.
Prescriptive period: 10 years from the date
of the execution of the instrument.
When No Reformation Is Allowed (SWV-
E, Sisters With Voices-E)
(Arts. 1366-1367)
1. Simple donations inter vivos wherein no
condition is imposed;
2. Wills;
3. When the real agreement is Void.
4. Estoppel When one of the parties has
brought an action to enforce the
instrument, he cannot subsequently ask
for its reformation.
Standing:
Reformation may be ordered at the instance
of:
either party or his successors in interest, if
the mistake was mutual; otherwise,
upon petition of the injured party, or his
heirs and assigns. (1368)
Chapter V: Interpretation of
Contracts
(Arts. 1370-1379)
LITERAL MEANING OF CLEAR TERMS
If the terms of a contract are clear and leave
no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations
shall control.
EVIDENT INTENTION PREVAILS OVER
LETTER
If the words appear to be contrary to the
evident intention of the parties, the latter
shall prevail over the former.
CONTEMPORANEOUS AND SUBSEQUENT
ACTS CONSIDERED
In order to judge the intention of the
contracting parties, their contemporaneous
and subsequent acts shall be principally
considered.
GENERAL TERMS IN ACCORDANCE TO
INTENTION
However general the terms of a contract may
be, they shall not be understood to
comprehend things that are distinct and cases
that are different from those upon which the
parties intended to agree.
INTERPRET TO EFFECTUATE
If some stipulation of any contract should
admit of several meanings, it shall be
understood as bearing that import which is
most adequate to render it effectual.
READ AS A WHOLE
The various stipulations of a contract shall be
interpreted together, attributing to the
doubtful ones that sense which may result
from all of them taken jointly. (1374)
IN KEEPING WITH NATURE AND OBJECT
OF CONTRACT
Words which may have different significations
shall be understood in that which is most in
keeping with the nature and object of the
contract.
CUSTOMS FACILITATE INTERPRETATION
The usage or custom of the place shall be
borne in mind in the interpretation of the
ambiguities of a contract, and shall fill the
omission of stipulations which are ordinarily
established.
OBSCURE WORDS FOR NON-OBSCURERS
The interpretation of obscure words or
stipulations in a contract shall not favor the
party who caused the obscurity.
DOUBTS
1. Doubts with regard to incidental
circumstances:
When it is absolutely impossible to settle
doubts by the rules established in the
preceding articles, and the doubts refer to
incidental circumstances of a gratuitous
contract, the least transmission of rights
and interests shall prevail. If the contract
is onerous, the doubt shall be settled in
favor of the greatest reciprocity of
interests.
2. Doubts with regard to principal object:
If the doubts are cast upon the principal
object of the contract in such a way that it
cannot be known what may have been the
intention or will of the parties, the contract
shall be null and void.
*Principles of interpretation under ROC also
observed (Rule 140 B (4))
*DEFECTIVE CONTRACTS
Kinds of Defective Contracts (VURV, The
VURV Pipe or, a VURV an action word)
1. Rescissible Contracts
2. Voidable Contracts
3. Unenforceable Contracts
4. Void or Inexistent Contracts
Chapter VI: Rescissible Contracts
Rescission is a process to render inefficacious
a contract validly entered into, and normally
binding, by reason of external conditions,
causing an economic prejudice to a party or
his creditor.
*According to the SC, it is a relief to protect
one of the parties or a third person from all
injury and damages which the contract may
cause, to protect some preferential right.
Rescission in
1191
Rescission Proper in
1381
It is a principal
action
retaliatory in
character
It is a subsidiary
remedy
Only ground is
non-
performance of
ones obligation
or what is
incumbent upon
him
There are 5 grounds
to rescind. Non-
performance by the
other is not
important
Applies only to
reciprocal
obligation
It applies to both
unilateral and
reciprocal
obligations
Only a party to Even a third person
the contract may
demand
fulfillment or
seek the
rescission of the
contract
who is prejudiced by
the contract may
demand the
rescission of the
contract.
Court may fix a
period or grant
extension of
time for the
fulfillment of the
obligation
Court cannot grant
extension of time for
fulfillment of the
obligation
Its purpose is to
cancel the
contract
Its purpose is to
seek reparation for
the damage or injury
caused, thus
allowing partial
rescission of the
contract
Requisites of Rescission
1. Contract is essentially valid.
2. There is lesion or pecuniary prejudice.
3. Plaintiff has no other means to obtain
reparation.
4. Plaintiff must be able to return whatever
he may be obliged to return due to
rescission.
The things must not have been passed
to 3
rd
parties who did not act in bad
faith.
It must be made within the prescribed
period.
Grounds for Rescission (1381)
The following contracts are rescissible:
(FLAG)
1. Those entered into by Guardians where
the ward suffers lesion of more than of
the value of the things which are the
objects thereof
2. Those agreed upon in representation of
Absentees, of the latter suffers lesion by
more than of the value of things which
are the subject thereof
3. Those undertaken in Fraud of creditors
when the latter cannot in any manner
claim what are due them
4. Those which refer to things under
Litigation if they have been entered into
by the defendant without the knowledge
and approval of the litigants of the court
5. All other contracts especially declared by
law to be subject to rescission and
payments made in the state of insolvency.
a. Payment made by insolvent
b. Partition with lesion to heirs by at least
(1098)
c. Deterioration because suspensive
condition debtors fault
d. When the conditions have been
imposed with the intention of
suspending the efficacy of an obligation
to give, the following rules shall be
observed in case of the improvement,
loss or deterioration of the thing during
the pendency of the condition (1198)
e. If it deteriorates through the fault of
the debtor, the creditor may choose
between the rescission of the
obligation and its fulfillment, with
indemnity for damages in either case
f. Unpaid seller may rescind (1534)
g. Sale of object which is inferior by more
than 10% (1539)
h. Sale of land for lack of measurement
(1542)
i. Sale because of loss of important part
through eviction (1556)
j. Sale of animals w/ redhibitory defects
warranty vs. Hidden faults & defects
(1567)
k. Lease (1659)
Obligation to Return in Rescission
Rescission creates the obligation to return the
things which were the object of the contract,
together with their fruits, and the price with
its interest; consequently, it can be carried
out only when he who demands rescission can
return whatever he may be obliged to restore.
(1385)
Extent Necessary
Rescission shall be only to the extent
necessary to cover the damages caused.
(1384)
When is Rescission NOT Allowed
1. When there are other means (1383)
2. When he who demands rescission has no
ability to restore. (1385)
3. In possession of a 3
rd
person in good faith
(1385)
4. Rescission referred to in Nos. 1 and 2 of
article 1381 shall not take place with
respect to contracts approved by the
courts. (1386)
Who Can Bring Action for Rescission
the injured party;
his heirs;
the creditor, if the transaction is fraudulent.
Effect of Rescission
1. As to the parties Mutual restitution
together with the fruits and interest.
2. As to 3
rd
persons
a. If he acted in bad faith or he was not
legally in possession, he is obliged to
return.
b. If he legally possess the object in good
faith, he is not obliged to return.
Mutual Restitution
Things w/c are the objects of the contract and
their fruits
Price with interest
When Mutual Restitution is not Applicable
a. When the creditor did not receive anything
from the contract.
b. When the thing is already in possession of
the party in good faith; subject to
indemnity only; if there are 2 or more
alienations, it is the liability of the 1
st
infractor
When Contracts can be Rescinded on the
Ground of Lesion
1. The contract must have been entered into
by a guardian in behalf of his ward or by a
legal representative in behalf of an
absentee.
2. The ward or absentee must have suffered
lesion of more than of the value of the
property which is the object of the
contract.
3. The contract must have been entered into
without judicial approval. (court approval)
4. There must be no other legal means of
obtaining separation for the lesion.
(subsidiary character of rescission)
5. The person bringing the action must be
able to return whatever he may be obliged
to restore. (mutual restitution)
6. The object of the contract must not be
legally in the possession of a third person
who did not act in bad faith.
When Contracts can be Rescinded on the
Ground of Fraud (Accion Pauliana)
1. There must be credit existing prior to the
celebration of the contract.
2. There must be fraud or, at least, the
intent to commit fraud to the prejudice of
the creditor seeking rescission.
3. The creditor cannot, in any legal manner,
collect his credit.
4. The object of the contract must bot be
legally in possession of a 3
rd
person who
did not act in bad faith.
Presumptions of Fraud
By Gratuituous Title
All contracts by virtue of which the debtor
alienates property by gratuitous title are
presumed to have been entered into in fraud
of creditors, when the donor did not reserve
sufficient property to pay all debts contracted
before the donation.
By Onerous Title
Alienations by onerous title are also presumed
fraudulent when made by persons against
whom some judgment has been issued.
The decision or attachment need not refer to
the property alienated, and need not have
been obtained by the party seeking the
rescission.
*In addition to these presumptions, the
design to defraud creditors may be proved in
any other manner recognized by the law
of evidence. (1387)
Badges of Fraud
1. Consideration of the conveyance is
inadequate or fictitious
2. Transfer was made by a debtor after a suit
has been begun and while it is pending
against him
3. Sale upon credit by an insolvent debtor
4. Evidence of indebtedness or complete
insolvency
5. Transfer of all his property by a debtor
when he is financially embarrassed or
insolvent
6. Transfer made between father and son
where there is present any of the above
circumstances
7. Failure of the vendee to take exclusive
possession of the property
Reliefs
1. Grant rescission only to extent
necessary; no other means; ability to
restore; no acquirer in good faith; nos. 1
and 2 are not court approved
2. Order return ability to restore; object of
contract or its price, together with fruits,
plus interests
3. Damages: Who are liable?
a. Art. 1189 rules on
improvement, loss, or deterioration
b. Acquirer in bad faith (1388)
*If there are two or more alienations,
the first acquirer shall be liable first,
and so on successively. (1388)
c. One who alienates to acquirer in
good faith (1385, par. 3)
Prescriptive Period
General Rule
Within four (4) years from the date it was
entered into:
a. If the person is under guardianship, within
4 years from the time the guardianship
ceases
b. In case of absentees, within 4 years from
the time domicile is known
c. In case of alienation in fraud of creditor,
things under litigation and payment of the
state of insolvency, within 4 yeas from the
time of discovery of fraud.
Exception
In certain contracts of sale which are specially
declared by law to be rescissible, the period is
6 months or even 40 days, counted from the
day of deliver. (1542, 1571, 1577)
Chapter VII: Voidable Contracts
Voidable Contracts are those which possess all
the essential requisites of a valid contract but
either on of the grounds under 1390 is
present.
These contracts are binding, unless they are
annulled by a proper action in court. They are
susceptible of ratification.
Characteristics
1. Effective until set aside
2. May be assailed or attacked only in an
action for that purpose
3. Can be confirmed ( NOTE: confirmation is
the proper term for curing the defect of a
voidable contract)
4. Can be assailed only by the party whose
consent was defective or his heirs or
assigns
Grounds
1. One of the parties is incapable of giving
consent to a contract
2. The consent is vitiated by mistake,
violence, intimidation, undue influence or
fraud (Art 1390)
Contracts are voidable when entered into by:
a. Minors ( below 18 )
b. Insane persons unless they acted in lucid
interval
c. Deaf mutes who cannot read or write
d. Persons who are specially disqualified, i.e.,
due to civil interdiction
e. Intoxicated persons
f. Hypnotized persons
The Person who has the Right to Annul a
Voidable Contract
General Rule
The party prejudiced has the right to annul a
voidable contract.
Exception
If a 3
rd
person is prejudiced in his rights with
respect to one of the contracting parties, and
can show detriment which would positively
result to him from the contract in which he
has no intervention. (Teves v. Peoples
Homesite and Housing Corp., 23 SCRA
1141)
Causes of Extinction of an Action to Annul
1. Prescription
2. Ratification
3. Loss of the thing due to default of the
plaintiff and loss of the thing during the
plaintiffs incapacity or after he had
acquired incapacity
PRESCRIPTION
The action must be commenced within 4 years
from:
a. the time the incapacity ends
b. the time the violence, intimidation or
undue influence ends
c. the time the mistake or fraud is
discovered
*The discovery of fraud must be reckoned to
have taken place from the time the document
was registered in the office of the registrar of
deeds. Registration constitutes constructive
notice to the whole world. (Carantes v. CA,
76 SCRA 514)
RATIFICATION
Requisites
a. The contract should be tainted with a vice
which is susceptible of being cured
b. The confirmation should be effected by the
person who is entitled to do so under the
law
c. The cause of the nullity or defect should
have already disappeared
d. It should be effected with the knowledge
of the vice or defect of the contract.
Restitution between Parties
Obligation of Mutual Restitution
1. Obligation to do or not to do there will
be apportionment of damages based onteh
value of such prestation with
corresponding interests. (Jurado)
2. Obligation to give Restoe to each other
the things which have been the subject
matter of the contract with fruits and the
price with interest, except in cases
provided by law.
*Articles 1398-1402 are not applicable to
consummated contracts
*The incapacitated person is not obliged to
make restitution except insofar as he has
been benefited by the thing or price received
by him. (1399)
*It is presumed in the absence of proof that
no such benefit has accrued to the
incapacitated person. (Manresa)
Effect of a Failure to make a Restitution
When the thing is lost:
1. Due to the fault of the defendant, he shall
be obliged to pay the value of the thing at
the same time of the loss including the
interest from the same date.
2. Due to the fault of the plaintiff, there is no
restitution, annulment cannot be made
3. Due to a fortuitous event, the person
obliged to return shall pay the value of the
thing at the time of loss, but without
interest thereon
4. Due to the fault of an incapacitated
person, no restitution can be made.
Chapter VIII: Unenforceable
Contracts
They are contracts which cannot be enforced
in court or sued upon by reason of defects
provided by law until and unless they are
ratified according to law.
It is considered valid but one cannot compel
its execution unless ratified due to the
extrinsic defect of the contract. It produces
legal effects only after ratified.
Kinds
1. Unauthorized or No sufficient authority
entered into in the name of another when:
a. No authority conferred
b. In excess of authority conferred (ultra
vires)
2. Curable by Ratification - Both parties
incapable of giving consent -2 minor or 2
insane persons
3. Curable by Acknowledgment - Failure to
comply with Statute of Frauds
a. Agreement to be performed within a
year after making contract
b. Special promise to answer for debt,
default or miscarriage of another
c. Agreement made in consideration of
promise to marry
d. Agreement for sale of goods, chattels
or things in action at price not less
than 500; exception: auction when
recorded sale in sales book
e. Agreement for lease of property for
more than one year and sale of real
property regardless of price
f. Representation as to credit of another
Grounds for Unenforceable Contracts
(1403)
1. Those contracts which are entered into in
the name of another by one without or
acting in excess of authority.
2. Those which do not comply with the
Statute of Frauds
3. Those contracts in which both parties are
incapable of giving consent.
WITHOUT OR IN EXCESS OF AUTHORITY
Those entered into in the name of another
person by one who has been given no
authority or legal representation, or who has
acted beyond his powers.
STATUTE OF FRAUDS
Those that do not comply with the Statute of
Frauds as set forth in this number. In the
following cases an agreement hereafter made
shall be unenforceable by action, unless the
same, or some note or memorandum, thereof,
be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore,
of the agreement cannot be received without
the writing, or a secondary evidence of its
contents:
- An agreement that by its terms is not to
be performed within a year from the
making thereof (executory contracts)
- A special promise to answer for the debt,
default, or miscarriage of another;
- Propter nuptias - An agreement made in
consideration of marriage, other than a
mutual promise to marry;
- Sale of at least Php 500, unless partial
compliance / Auction entry in sales book
sufficient - An agreement for the sale of
goods, chattels or things in action, at a
price not less than five hundred pesos,
unless the buyer accept and receive part
of such goods and chattels, or the
evidences, or some of them, of such
things in action or pay at the time some
part of the purchase money; but when a
sale is made by auction and entry is made
by the auctioneer in his sales book, at the
time of the sale, of the amount and kind of
property sold, terms of sale, price, names
of the purchasers and person on whose
account the sale is made, it is a sufficient
memorandum;
- An agreement of the leasing for a longer
period than one year, or for the sale of
real property or of an interest therein;
- A representation as to the credit of a third
person.
*The contact or agreement under the Statute
of Frauds require that the same be evidenced
by some note, memorandum or writing,
subscribed by the party charged or by his
agent, otherwise, the said contract shall be
unenforceable.
Curing Unenforceable Contracts
1. Failure of defendant to object in time, to
the presentation of parole evidence in
court, the defect of unenforceability is
cured
2. Acceptance of benefits under the contract.
If there is performance in either part and
there is acceptance of performance, it
takes it out of unenforceable contracts;
also estoppel sets in by accepting
performance, the defect is waived
Chapter IX: Void & Inexistent
Contracts
These are contracts which have absolutely no
force and effect and are inexistent from the
beginning. The maxim is no contract at all.
VOID CONTRACTS
Those where all the requisites of a contract
are present but the cause, object or purpose
is contrary to law, morals, good customs,
public order or public policy; or the contract
itself is prohibited or declared void by law.
INEXISTENT CONTRACTS
Those where one or some or all of the
requisites essential for the validity of a
contract are absolutely lacking.
Grounds (Art.1409)
Void Contracts
1. The cause, object or purpose is contrary to
law, morals, good customs, public order or
public policy; (1347 par. 3, 1352)
2. The object is outside the commerce of
men; (1347, par. 1)
3. It contemplates an impossible service;
(1348)
4. The intention of the parties relative to the
principal object of the contract cannot be
ascertained; (1378)
5. Those expressly prohibited or declared
void by law. (1347, par. 3)
Inexistent Contracts
6. It is absolutely simulated or fictitious;
(1346)
7. The cause or object did not exist at the
time of the transaction; (1318)
Characteristics
1. It produces no effect whatsoever either
against or in favor of anyone
2. There is no action for annulment
necessary as such is ipso jure. A judicial
declaration to that effect is merely a
declaration
3. It cannot be confirmed, ratified or cured.
4. If performed, restoration is in order,
except if pari delicto will apply
5. The right to set up the defense of nullity
cannot be waived
6. Imprescriptible
7. Anyone may invoke the nullity of the
contract whenever its juridical effects are
asserted against him
Illegal Contracts
Kinds of Illegal Contracts
In Pari Delicto Doctrine
*Only applicable to void contracts and not to
inexistent contracts.
General Rule
When the defect of a void contract consists in
the illegality of the cause or object of the
contract and both of the parties are at fault or
in pari delicto, the law refuses them every
remedy and leaves tehm where they are.
Contract constitute
criminal offense
Contract does not
constitute criminal
offense but is
illegal or unlawful
per se
The parties are in
pari delicto
No action for
specific
performance
No action for
restitution on either
side.
Both shall be
prosecuted
Thing/price to be
confiscated in favor
of government
No action for
specific
performance
No action for
restitution on
either side.
No confiscation
Only One Party is
guilty
No action for
specific
performance
Innocent party is
entitled to
restitution
Guilty party is not
entitled to
restitution
Guilty party will be
prosecuted
Instrument of crime
No action for
specific
performance
Innocent party is
entitled to
restitution
Guilty party is not
entitled to
restitution
will be confiscated
in favor of the
governement
Exception
1. If the purpose has not yet been
accomplished and if the damage has not
been cause to any 3
rd
person
2. Payment of usurious interest (1413)
3. Payment of money or delivery of property
for an illegal purpose, where the party
who paid or delivered repudiates the
contract before the purpose has been
accomplished, or before any damage has
been caused to a 3
rd
person (1415)
4. Payment of money or delivery of property
made by an incapacitated person (1416)
5. Agreement or contract which is not illegal
in itself and the prohibition is designed for
the protection of the plaintiff (1416)
6. Payment of any amount in excess of the
maximum price of any article or
commodity fixed by law or regulation by
competent authority (1417)
7. Contract whereby a laborer undertakes to
work longer than the maximum number of
hours fixed by law. (1418)
8. Contract whereby a laborer accepts a
wage lower than the minimum wage fixed
by law. (1419)
9. One who lost in gambling because of
fraudulent schemes practiced on him is
allowed to recover losses even if the
gambling is prohibited. (315, RPC)
Requisites of illegal contracts
1. Contract is for an illegal purpose
2. Contract must be repudiated by any of the
parties before purpose is accomplished or
damage is caused to 3
rd
parties
3. The court believes that public interest will
be served by allowing recovery
(discretionary upon the court ) based on
remorse; illegality is accomplished when
parties entered into contract; before it
takes effect party w/c is remorseful
prevents it
Where Laws Are Issued To Protect Certain
Sectors
1. Consumer protection
2. Labor
3. Usury law
Consumer protection if price of
commodity is determined by statute, any
person paying an amount in excess of the
maximum price allowed may recover such
excess
Labor if the law sets the minimum wage for
laborers, any laborer who agreed to receive
less may still be entitled to recover the
deficiency; if law set max working hours and
laborer who undertakes to work longer may
demand additional compensation
Interest paid in excess of the interest allowed
by the usury law may be recovered by
debtor with interest from date of payment
Effects of Illegal Contracts
If one party is incapacitated, courts may
allow recovery of money, property
delivered by incapacitated person in the
interest of justice; pari delicto cannot
apply because an incapacitated person
does not know what he is entering into;
unable to understand the consequences of
his own action
If agreement is not illegal per se but
merely prohibited and prohibition is
designated for the protection of the
plaintiff may recover what he has paid
or delivered by virtue of public policy
Mutual Restitution in Void Contracts
General Rule
The 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
return object of contract and fruits
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; except:
a. incapacitated not obliged to return
what he gave but may recover what he
has given
b. other party is less guilty or not guilty
Angeles v. CA
A sale of homestead within five year
prohibitive period is void but in pari delicto
does not apply because of public policy.
However, recovery does not extend to
products or fruits of the land, and the
improvements made by the other party. The
unjust enrichment principle must apply as to
the recovery of the price paid.
Philippine Banking Corp. v. Lui She
A virtual sale through a very long-term lease
of 50 years was deemed void for its
contravention to the prohibition on foreign
ownership. However, since the prohibition was
only for protection and security of Filipino
ownership of land, applying article 1416, pari-
delicto does not apply.
TITLE III: NATURAL OBLIGATIONS
Article 1423. Obligations are civil or natural.
Civil obligations give a right of action to
compel their performance. Natural obligations,
not being based on positive law but on equity
and natural law, do not grant a right of action
to enforce their performance, but after
voluntary
They are real obligations to which the law
denies an action, but which the debtor may
perform voluntarily.
They are patrimonial, and presupposes a
prestation.
The binding tie of these obligations is in the
conscience of man, for under the law, they do
not have the necessary efficacy to give rise to
an action.
Features
1. no positive law giving right of action
2. no right of action to enforce performance
3. voluntary fulfillment of obligation by
obligor
4. authorize retention of what has been
fulfilled;
5. no right to recover, or demand return of
what has been fulfilled
fulfillment by the obligor, they authorize
the retention of what has been delivered
or rendered by reason thereof. Some
natural obligations are set forth in the
following articles.
The following are natural obligations
1. Prescribed action of obligee. (1424)
2. Prescribed action of 3
rd
person payor who
pays without knowledge and consent of
debtor against the latter. (1425)
3. Annulled contract of minor without
consent of parents. (1426, 1427)
a. returns whole thing or price he has
received (Relate to Art. 1241, only
insofar benefited)
b. fulfills obligation, and good faith
consummation and spending of what
has been delivered (Relate to Art.
1327, unemancipated minors cannot
give consent to contracts)
4. Voluntary performance after failed action
to enforce contract (Art. 1428)
5. Succession
a. Heirs paying decedents debt beyond
what he has received (1429)
b. The will is voided by lack of formalities,
intestate heir pays a legacy (1430)
TITLE IV: ESTOPPEL
It is the admission or representation
conclusive upon person making such; cannot
be denied or disproved.
General Rule
Effective only between parties thereto or
successors in interest. (1439)
Types of Estoppel
1. By Conduct (in pais) intentional and
culpable negligence
Elements
a. acts inducing another to believe certain
facts to exist
b. with intent or culpable negligence
c. the other party rightfully relies and
acts on such belief
d. other party would be prejudiced if the
guilty party is allowed to deny facts
first represented by him
Types:
a. by silence
b. by acceptance of benefits
c. by acts representations or
admissions
2. By Deed - cannot question admission in
document or deeds
3. By Record cannot question executive
and legislative records
4. By Judgment no denial of adjudicated
facts by competent court
5. By Laches
Failure or neglect, for an unreasonable
and unexplainable length of time, to do
that which, by exercising due diligence,
could or should have been done earlier; it
is negligence or omission to assert a right
within a reasonable time, warranting a
presumption that the party entitled to
assert it either has abandoned it or
declined to assert it.
Distinguishing Laches from Prescription
Laches Prescription
Concerned with
the effect of delay
Concerned with
the fact of delay
Question of
inequity of
permitting the
claim to be
enforced
Question or
matter of time
Not statutory Statutory
Applies in equity Applies at law
Not based on a
fixed time
Based on a fixed
time
Elements
1. Conduct on the part of the defendant,
or of one under whom he claims,
giving rise to the situation of which
complaint is made and for which the
complaint seeks a remedy.
2. Delay in asserting the complainants
rights, the complainant having
knowledge or notice, of the defendants
conduct and having been afforded the
opportunity to institute a suit
3. Lack of knowledge or notice on the
part of the defendant that the
complainant would assert the right on
which he bases his suit
4. Injury to the defendant in the event
relief is accorded to the complainant
The following are estopped
Ownership transfers to the buyer (in Sales)
1. Seller or grantor who is not owner at time
of sale but he later acquires ownership of
such (1434)
2. Seller represents owner in a sale; cannot
contest title of ownership of buyer (1435)
Lessee or bailee cannot claim ownership of
thing leased or received against lessor or
bailor (1436)
Misleader in 3
rd
party contracts on immovable
property
Requisites
1. fraudulent representation or wrongful
concealment of facts known to the party
estopped;
2. intent by party precluded that the other
should act upon the facts as
misrepresented;
3. party misled must have been unaware of
the true facts; and
4. party defrauded must have acted in
accordance with the misrepresentation.
Owner allowing another to feign ownership,
cannot claim ownership as defense against
pledge. (In pledge) (1438)
* * *
SALES CIVIL LAW
Sales
TABLE OF CONTENTS
I. Contract of Sale 169
II. Elements of a Valid Sale 172
III. Transfer of Ownership 175
IV. Risk of Loss 176
V. Document of Title 176
VI. Obligations of Seller and Buyer 178
VII. Remedies of Seller and Buyer 182
VIII. Double Sale 189
IX. Extinguishment of Sale 190
X. Assignment 192
XI. Special Laws 193
SALES CIVIL LAW
SALES (Title VI, Book 4, Arts 1458-
1637, Civil Code)
I. CONTRACT OF SALE
1
A contract of sale only constitutes a TITLE or
right to the transfer of ownership, but is NOT
the MODE of transferring ownership. (Aznar v.
Yapdiangco, 1965)
A. ESSENTIAL REQUISITES: (Art. 1318)
1. Consent- meeting of offer and
acceptance on the thing and the price
2. Object- determinate thing
3. Cause
- for the seller: payment of price
- for the buyer: transfer of
ownership and delivery of thing
B. STAGES:
1. Negotiation - from the time the
prospective contracting parties indicate
interest in the contract to the time the
contract is perfected
2. Perfection upon the concurrence of
the essential elements of the sale,
which is the meeting of the minds of
the parties as to the object of the
contract and upon the price
3. Consummation - begins when the
parties perform their respective
undertakings under the contract of
sale, culminating in the extinguishment
thereof (Ang Yu Asuncion v. CA, 1994)
C. CHARACTERISTICS:
1. Nominate
2. Consensual- perfected by mere
consent
3. Real obligation (to give) a
determinate thing is created
4. Bilateral- with reciprocal obligations
5. Onerous- with exchange of equivalent
values
6. Principal
7. Commutative- fulfillment
predetermined in advance
D. KINDS: (Art. 1458(2))
1. ABSOLUTE sale
2. CONDITIONAL sale (Contract to sell)
o Ownership of the thing sold is
retained until the fulfillment of a
positive suspensive condition,
1
Art. 1458. By the contract of sale, one of the
parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other
to pay therefore a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional.
normally the full payment of the
purchase price.
o Breach of the condition prevents
the obligation to convey title from
acquiring obligatory force. (Ang Yu
Asuncion v. CA, 1994)
In some cases, the SC makes finer
distinctions between a conditional sale and
a contract to sell in that:
o In a contract to sell- the fulfillment
of the suspensive condition, which
is the full payment of the purchase
price, will not automatically
transfer ownership to the buyer
although the property may have
been previously delivered to him;
o In a conditional sale- the fulfillment
of the suspensive condition renders
the sale absolute and affects the
sellers title thereto such that if
there was previous delivery of the
property, the sellers ownership or
title to the property is
automatically transferred to the
buyer (see Ursal v. CA, 2005)
E. FORM (Art. 1483)
GEN. RULE: NO form required may be
o Written
o Oral
o Partly written, partly oral
o Inferred from the conduct of the
parties
Why: because sale is consensual (Art. 1475)
EXCEPTIONS:
1. Under Statute of Frauds (contract or
some memorandum thereof must be
written and subscribed; otherwise,
contract unenforceable UNLESS ratified
by failure to object to oral evidence OR
acceptance of benefits under the
contract) (Art1403(2)):
a. Sale not to be performed within
1 year
b. Sale of personal property at a
price of P500 up.
c. Sale of real property or an
interest therein
The Statute of Frauds applies only to
executory contracts, NOT to contracts either
partially or totally performed. (Iigo v. Estate
of Maloto, 1967)
2. Transmission of real rights over
immovable property (must appear in
public document to bind third parties)
(Art.1358(1))
3. When certain form required by other
law
a. Transfer of large cattle must
be registered with the municipal
treasurer to be valid (Sec. 529,
SALES CIVIL LAW
Revised Administrative Code of
1917)
b. In sale of land through agent,
the authority of the agent must
be written; otherwise, sale is
void (Art.1874)
F. REMEDIES:
1. Specific Performance + damages (Arts.
1191 and 1165(1))
2. Rescission + damages (Art. 1191)
3. Damages (Art. 1170)
G. VIS-A-VIS:
1. Bilateral promise
to buy and sell (Art. 1479(1)
2
)
o LIKE sale: there must be a
- determinate thing to be sold
- price certain to be paid
o UNLIKE sale: the promise to buy is the
consideration for the promise to sell and
vice versa (de la Cavada v. Diaz, 1918)
o Manresa: has the same effect as a
contract of sale since parties can
reciprocally demand fulfillment
2. Option to buy or to sell
(accepted unilateral promise
to buy or to sell) (1479(2)
3
)
o Example: if the financial condition of the
mortgagees will permit, they may
purchase said land absolutely on any date
within the 2 year term of this mortgage at
the agreed price of P3,900. (Soriano v.
Bautista, 1962)
o LIKE sale: there must be a
- determinate thing to be sold
- price certain to be paid
o UNLIKE sale: it is unilateral- it gives a
right to buy or to sell, but imposes no
obligation on the part of the option-holder,
aside from the consideration for the offer
o It must be supported by a consideration
distinct from the price.
o RULES re SEPARATE CONSIDERATION:
(Bible Baptist Church v. CA, 2004)
1. An option contract must be supported
by a separate consideration.
2
A promise to buy and sell a determinate thing for
a price certain is reciprocally demandable.
3
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding
upon the promissor if the promise is supported by a
consideration distinct from the price.
Money advanced but eventually
utilized as rental payments is NOT
a separate consideration for an
option to buy in a lease contract;
hence, the option is not binding.
2. The consideration may be in money OR
in kind (things or undertakings)
3. If the consideration is not monetary,
a. these must be things or
undertakings of value, in view
of the onerous nature of the
contract of option;
b. said consideration must be
clearly specified as such in the
option contract or clause.
- example: an undertaking on the part
of the optionee (lessee) to sell the
improvements made on the
property if the option to buy is not
exercised
o Arts. 1324
4
and 1479(2), as
interpreted by the Supreme Court
5
:
- IF the option is supported by
consideration distinct from the
price: it is both a binding contract
of option and an offer of a contract
of sale.
- IF the option is NOT supported by
consideration distinct from the
price: it is NOT binding as a
contract of option, but is a mere
offer of a contract of sale.
- IF the offer is accepted (i.e., option
is exercised) BEFORE withdrawal, a
contract of sale is perfected, hence
the remedy of specific performance
lies. (Soriano v. Bautista, 1962;
Sanchez v. Rigos, 1972)
- IF the offer is withdrawn BEFORE
acceptance, specific performance
does not lie because no contract of
sale was perfected.(Ang Yu
Asuncion v. CA, 1994)
Remedies in Case of Breach
Option with
distinct
consideration
Withdrawal
of offer
BEFORE
acceptance
Damages for
breach of
option
contract
AFTER
acceptance
of offer
Specific
performance
of sales
contract
Option w/o Withdrawal Damages
4
When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at
any time before acceptance by communicating such
withdrawal, except when the option is founded
upon a consideration, as something paid or
promised.
5
Sanchez v. Rigos (1972); Ang Yu Asuncion v. CA
(1994) ; Limson v. CA (2001).
SALES CIVIL LAW
Distinct
consideration
of offer
BEFORE
acceptance
ONLY IF
there is an
abuse of
right under
Art. 19, CC
(no
damages for
breach of
option
contract)
AFTER
acceptance
of offer
Specific
Performance
of sales
contract
3. Right of first refusal
o Example: That should the LESSOR
decide to sell the leased premises, the
LESSEE shall have the priority right to
purchase the same. (Tanay Recreation
Center and Development Corp. v.
Fausto, 2005)
o LIKE sale: there must be a determinate
thing to be sold
o UNLIKE sale:
- price and other terms yet to be
agreed upon (Ang Yu Asuncion v.
CA, 1994)
- it is unilateral
o UNLIKE option:
- The grantee has no right to buy or
sell, only a right to the first offer
should the grantor decide to sell
(Polytechnic University of the
Philippines v. CA, 2001)
6
- Separate consideration NOT
required
7
- rescission and specific performance
available in case of breach
Prevailing doctrine: A sale made in violation
of a right of first refusal is valid but rescissible
under Art 1381(3),CC, and may be the
6
The basis of the right of first refusal must be the
current offer to sell of the seller or offer to buy of
any prospective buyer. Only after the optionee fails
to exercise its right of first priority under the same
terms and within the period contemplated, could
the owner validly offer to sell the property to a
third person, again under the same terms as
offered to the optionee. (Paraaque Kings
Enterprises, Inc. v. CA, 1997)
7
When contained in a lease contract, the right of
first refusal is an integral and indivisible part of the
contract of lease and is inseparable from the whole
contract. The consideration for the lease includes
the consideration for the right of first refusal and is
built into the reciprocal obligations of the parties.
(Equatorial Realty Development, Inc. v. Mayfair
Theater Inc., 1996)
subject of an action for specific performance
(Tanay Recreation Center and Development
Corp. v. Fausto, 2005)
8
H. DISTINGUISHED FROM OTHER
ACTS/CONTRACTS
1. Contract for a piece of work (Art.1467)
SALE
CONTRACT FOR A
PIECE OF WORK
Goods manufactured
or procured in the
ordinary course of
business (WON on
hand)
Goods
manufactured
specially for the
customer upon his
special order
For the general
market
Not for the
general market
Essence is the object Essence is skill
Tests under jurisprudence:
1. Habituality test: WON the job
requires the use of extraordinary
or additional equipment, or
involves services not generally
performed (Celestino v. CIR, 1956)
2. WON the thing is one which would
have never existed but for the
order of the party desiring to
acquire it, or one which would
have existed and have been the
subject of sale to some other
person even f the order had not
been given (CIR v. Eng.&Supply,
1975)
2. Agency to Sell (Art.1467)
O Look at essential clauses- cause and
subject matter
SALE AGENCY TO SELL
Buyer pays price
(WON he sells the
thing to a 3
rd
person)
Agent does not
pay price, but
only delivers to
the principal the
price he obtains
from the sale to a
third person
Buyer becomes the
owner
Agent does not
become the
owner
Buyer can make profit
if he resells
Agent cannot
make secret
profit in selling
3. Barter
SALE BARTER
Price in money or
its equivalent
Consideration is
another thing
If the consideration is partly in money
and partly in another thing:
1. look at manifest intention of the
8
Equatorial, reverting to the doctrine in Guzman,
reversed Ang Yu Asuncion where it was held that
the remedy in case of a sale violative of a right of
first refusal is limited to damages.
SALES CIVIL LAW
parties to characterize the
transaction;
2. if no manifest intention:
o barter: if value of thing > amt of
money or its equivalent
o sale: if value of thing < amt of
money or its equivalent
4. Dation (Art. 1245)
SALE DATION
No pre-existing debt w/ pre-existing
debt
Creates obligation Extinguishes
obligation (mode
of payment)
5. Lease of things
SALE LEASE OF THING
Ownership
transferred
Ownership not
transferred
6. Donation
SALE DONATION
onerous gratuitous
Other contracts governed by the law of
sales:
1. Dation (Art.1245)
- a mode of payment where property
is alienated to the creditor in
satisfaction of a debt in money
2. Barter (Art. 1641)
- a contract where one of the parties
binds himself to give one thing in
consideration of the others promise
to give another thing (Art.1638)
- governed by title on sales in
matters not specifically provided for
in title on barter
3. Innominate contracts most analogous
to sale (Art. 1307)
II. ELEMENTS OF A VALID SALE
A. THING sold must be:
1. Determinate (Art.1458)
2. Licit (1459)
3. Actual or Possible (Arts. 1461 & 1462)
A thing is DETERMINATE when it is:
1. Particularly designated;
2. Physically segregated; or
3. Capable of being made determinate
without the necessity of a new or
further agreement between the
parties. (Art. 1460)
Example: specific mention of some lots plus
the phrase lots needed for the city hall site,
avenues and parks, according to the Arellano
development plan of the Municipality (Melliza
v. City of Iloilo, 1968)
A thing is LICIT if it is NOT: (Art. 1409)
1. Contrary to law, morals, good customs,
public order, or public policy;
- e.g. dangerous drugs; land acquired
by homestead or free patent- within 5
years from issuance of patent or grant,
except if sale in favor of the Gov.t or any
of its units, braches or institutions (CA
141)
2. Outside the commerce of men;
e.g. property of public dominion such
as a river (Martinez v. CA, 1974)
A thing is
o ACTUAL when it is existing,
o POSSIBLE when it is has a potential
existence.
- sale of future goods (goods to be
manufactured, raised, or acquired
by the seller after the perfection of
sale): VALID
- sale of a mere hope or expectancy:
subject to the CONDITION that the
thing will come into existence
- sale of a vain hope or expectancy:
VOID
Future inheritance cannot be the object
of sale (Art.1347(2)) but heir may sell
his hereditary rights (Art.1088)
Rules in case of loss at perfection
(Baviera: loss occurred before the
contract was entered into without the
knowledge of both parties) (Arts.
1493-1495):
Total loss contract without any
effect (no object)
Partial loss OR
material
deterioration in
whole or in part
Buyer may:
1. Withdraw from
contract OR
2. Demand remaining
part and pay
proportional price
The following may be objects of sale:
1. Undivided interest in a thing (Art.1463)
2. Things under litigation; BUT if without
the knowledge and approval of the
litigants or of the court, sale rescissible
(Art.1381(4))
3. Things subject to a resolutory condition
(Art. 1465)
- e.g. things acquired under a legal or
conventional right of redemption
B. PRICE must be:
1. Certain (Art. 1458)
2. In money or its equivalent (Art. 1458)
3. Real (Art 1471)
4. True (Art. 1353)
SALES CIVIL LAW
Price is CERTAIN when it is:
1. Fixed by agreement of the parties (Art.
1473)
2. Certain with reference to another thing
certain (Art. 1469)
- e.g. 10% below invoice price
3. The price which the thing sold would
have on a definite day, or a particular
exchange or market, or a certain
amount above or below such price
(Art. 1472)
4. To be fixed by a third person (Art.
1469)
- If 3
rd
person unable or unwilling to
fix price: sale inefficacious UNLESS
the parties subsequently agree
upon the price
- If 3
rd
person acts in BF or by
mistake: courts may fix price
- If 3
rd
person prevented from fixing
price by fault of the buyer or seller:
party not in fault may avail of
remedies against the other
o If price CANNOT be determined:
- sale INEFFICACIOUS
- BUT if the thing or part thereof has
been delivered to and appropriated
by the buyer, he must pay a
reasonable price therefor
(Art.1474)
Price must be in
o MONEY or
o its EQUIVALENT
- e.g. letter of credit (Baviera)
Price must be REAL, not simulated.
o Price is real when there is an intention
(on the part of the buyer) to pay and
an expectation on the part of the
seller) to receive it.
o If price is simulated:
- sale is vOID
- BUT the act may be shown to have
been really a donation or some
other act or contract (Art.1471)
Price must be TRUE, not false.
o The price is false when the real
consideration is not the same as that
stated in the contract (Mapalo v.
Mapalo, 1966)
o If false price stated
- sale void unless proved to be
founded on another true and lawful
price (Art. 1353)
- SC says the contract is not void but
is a relatively simulated contract;
hence, the parties are bound by
their real agreement. (Balite v. Lim,
2004)
GROSS INADEQUACY of price does not affect
a contract of sale, except that:
1. It may indicate a defect in the consent
such as fraud, mistake, or undue
influence (Arts.1470 & 1355)
2. It may indicate that the parties
intended a donation or some other act
or contract (Art1470)
e.g. when the price of a sale with right
to repurchase is unusually inadequate,
it is presumed to be an equitable
mortgage (Art1602(1))
3. Sale is rescissible if:
a. the sale is entered into by a
guardian or by a representative
of an absentee;
b. the ward or absentee
represented suffers lesion by
more than of the value of the
thing sold; AND
c. the sale is not approved by the
court (Arts.1381(1)(2) & 1386)
4. In an ordinary sale, for reason of
equity, a transaction may be
invalidated on the ground of
inadequacy of price, or when such
inadequacy shocks ones conscience as
to justify the courts to interfere; BUT
such does not follow when the law
gives the owner the right to redeem as
when a sale is made at public auction,
upon the theory that the lesser the
price, the easier it is for the owner to
effect redemption. (Hulst v. PR
Builders, Inc. , 2007)
C. CONSENT perfects a contract of sale.
o Consent: meeting of offer and
acceptance on the
1. thing sold
2. price
- Manner of payment goes into the
price such that a disagreement on the
manner of payment is tantamount to a
failure to agree on the price (Toyota Shaw
v. CA, 1995)
The buyer and the seller must have CAPACITY
to enter into a contract of sale.
Absolute Incapacity: (MIDDD-HI-C)
1. Minors
2. Insane
Except: during lucid interval (Art.1328)
3. Demented persons
4. Deaf-mutes who do not know how to write
(Art. 1327)
5. Persons suffering civil interdiction (Art.34,
RPC)
6. Drunk person
7. Hypnotized person (Art.1328)
8. Those judicially declared Incompetent
a) prodigals
b) hospitalized lepers
SALES CIVIL LAW
c) persons not being of unsound mind, but
by reason of age, disease, weak mind, and
other similar causes, cannot, without
outside aid, take care of themselves and
manage their property, becoming thereby
an easy prey for deceit and exploitation
(Sec.2, Rule 92,ROC)
o Status of sale:
- Where 1 party incapacitated:
VOIDABLE (Art.1390(1))
- Where both parties incapacitates:
UNENFORCEABLE (Art.1403(3))
o BUT when necessaries (those
indispensable for sustenance, clothing,
dwelling, medical attendance, education,
transportation) are sold and delivered to
incapacitated person, he must pay a
reasonable price therefor. (Art.1489)
Relative Incapacity to buy (HW-PAGE-JLO)
1. Husband/Wife
- What: property of spouse
- Except: when property regime is
separation of property (marriage
settlement or judicial order)
- Prohibition applies to common-law
spouses (Matabuena v. Cervantes,
1971)
2. Guardian
- What: property of ward
3. Agent
- What: property of principal
- Except: principal consents
4. Executor/Administrator
- What: property of estate
administered
- Does NOT apply to sale of
hereditary right bec. it is not
administered by the
executor/administrator (Naval v
Enriquez, 1904)
5. Public officers and employees
- What: property of State, GOCC,
institution administered
- Applies to judges and govt. experts
who, in any manner, take part in
the sale
6. Judicial officers and employees (justices,
judges, prosecuting attorneys, court
clerks, other officers and employees
connected with the administration of
justice)
- What: property or rights in
litigation or levied upon an
execution before the court within
their territorial jurisdiction
7. Lawyers
- What: property and rights object
of any litigation handled by them
(Art. 1491)
8. Others specially disqualified by law
- e.g. aliens, wrt private land in the
Philippines (Art.12, sec.7,
Constitution)
o Status of sale: VOID (Art. 1409(7))
o BUT sale to guardians, agents,
executors/administrators can be ratified
by the execution of a new contract,
making the sale valid from the time the
new contract is executed, unlike sale to
public or judicial officers and employees
and lawyers which cannot be so ratified
because it is contrary to public policy
(Rubias v. Batiller, 1973)
The OFFER must be CERTAIN (Art. 1319) as
to the object and the price (Villanueva v. PNB,
2006).
o Offer a.k.a. imperfect promise or
policitacion (Litonjua v. L&R Corp.,
2000)
o The ff. are not definite offers but mere
invitations to make an offer, unless the
contrary appears:
1. Business advertisements of things
for sale (Art.1325)
2. Advertisements for bidders
(Art.1326)
The ACCEPTANCE must be ABSOLUTE. (Art.
1319)
o Qualified acceptance= counter-offer
Consent must not be VITIATED, otherwise
sale is VOIDABLE. (Arts. 1330 &1390(2))
o Vices of consent:
1. Fraud
2. Mistake
3. Violence
4. Intimidation
5. Undue influence
Payment of EARNEST MONEY is considered as
proof of the perfection of sale. (Art. 1482)
o BUT mere payment of earnest money
is not sufficient proof of a perfected
sale when some essential element
(e.g. agreement on terms of payment)
is admittedly lacking (Velasco v. CA,
1973)
EARNEST MONEY v. OPTION MONEY
(Limson v. CA, 2001)
part of purchase
price
given as a distinct
consideration for an option
contract
given only when
there is already
a sale
applies to a sale not yet
perfected
when given, the
buyer is bound
to pay the
balance
when given, the would-be-
buyer is not required to
buy, but may even forfeit it
depending on the terms of
the option
SALES CIVIL LAW
III. TRANSFER OF OWNERSHIP
A perfected contract of sale per se does NOT
transfer ownership over the thing sold.
For ownership to transfer, there must be:
1. Right to transfer ownership at the
time of delivery (Art.1459)
a. owner (Art. 428)
b. authorized by owner
2. Delivery (Art. 1496)
3. Intention to transfer ownership
(Norkis Distributors Inc. v. CA,
1991)
4. If delivery is symbolic, control of
the seller over the thing sold that
its material delivery could have
been made. (Vda. de Sarmiento v.
Lesaca, 1960)
A. RIGHT TO TRANSFER OWNERSHIP
1. When the seller has NO TITLE
Gen. Rule: One cannot give what one does
not have (Nemo dat quod non habet)
o Art. 559: When the owner has lost or
has been unlawfully deprived of a
movable, he may recover it even from
a buyer in good faith (Aznar v.
Yapdiangco, 1965)
- limitation: if buyer in good faith
acquired it in a public sale, the
owner must reimburse the price
paid therefor
Exceptions:
a. Estoppel: when the owner is by his
conduct precluded from denying the
sellers authority to sell (Art. 1505)
b. Sale under court order (Art. 1505)
o But in execution sale, the buyer merely
steps into the shoes of the judgment
debtor (Rule 39, sec. 33, ROC)
c. When goods are purchased in a
- merchant store,
- fair, or
- market (Art. 1505)
d. Registered land bought in good faith
- Gen rule: buyer need not go
beyond the Torrens title
- Exception: when he has actual
knowledge of facts and
circumstances that would impel a
reasonably cautious man to make
further inquiry
No factors acts or recording laws (referred
to in Art1505(1)) in the Philippines
(Baviera)
2. When the seller has a voidable title
which has not been avoided at the time of the
sale, a buyer in good faith acquires a good
title to the goods. (Art.1506)
o BUYER in GOOD FAITH is one who buys
property from another
- without notice that some other
person has a right to or interest in
it, AND
- who pays a full and fair price
therefor at the time of the purchase
or before receiving such notice.
o When the seller voluntarily delivers the
thing sold to the buyer but is swindled,
- the seller is not unlawfully
deprived of the thing under Art.
559; the buyer who practiced fraud
acquires a voidable title which, if
not avoided at the time of sale,
confers a good title on a
subsequent buyer in good faith and
for value
- a good title means an indefeasible
title even as against the original
owner. (Tagatac v. Jimenez, 1957;
Edca v. Santos, 1990)
B. DELIVERY
o Ownership over the thing sold is
transferred by DELIVERY or tradition
(Aznar v. Yapdiangco, 1965)
o Sale without delivery gives the buyer
no rights over the property except
those of a creditor (Kuenzle & Streiff v.
Macke & Chandler, 1909)
o Delivery may be actual or constructive
1. Actual delivery
o placing the thing sold in the control
and possession of the buyer (Art.1497)
2. Constructive Delivery
(Arts. 1498-1501)
Kind How Made Applies to
1. Symbolic o By
execution
of public
instrumen
t
evidencin
g sale
except: if
contrary
appears or
can be
clearly
inferred
real or
personal
property;
incorporeal
property
o delivery
of keys
where
stored/ke
pt
personal
property
2. Traditio
longa manu
By mere
agreement
of the buyer
personal
property
SALES CIVIL LAW
Kind How Made Applies to
and seller if
possession
cannot be
transferred
at the time
of the sale
3. Traditio
brevi manu
By mere
agreement
of the buyer
and seller if
the buyer
already had
possession
for any
other reason
personal
property
4. Traditio
constitutum
possessorium
Seller
remains in
possession
of the
property in
a different
capacity e.g.
as lessee
real or
personal
property
5. Quasi-
tradition
Placing of
the titles of
ownership
in the
possession
of the buyer
or allowing
the buyer to
use his
rights
incorporeal
property
6. Tradition
by operation
of law
(Art.1434)
When a non-
owner who
sells a thing
later
acquires
title thereto
real or
personal
property
7. Delivery to
a carrier
9
delivery to a
carrier for
transmission
to the buyer
goods
C. INTENTION TO TRANSFER OWNERSHIP
Ownership is not transferred despite delivery
in the following cases:
1. Ownership is reserved, as
o In conditional sale
o When under the bill of lading, the
goods are deliverable to the seller or
his agent, or to the order of the seller
or his agent (Art.1503(2))
2. Sale on approval (trial or satisfaction),
where ownership transfers only when the
buyer
o signifies his approval or acceptance to
the buyer or does any other act
adopting the transaction; OR
o retains the goods without giving notice
of rejection within the time fixed or a
9
Discussed in detail under obligation of the seller
to deliver.
reasonable time, if no time has been
fixed. (Art.1502 (2))
- cf. Sale on return where
o ownership passes to the buyer upon
delivery
o BUT he may revest ownership in the
seller by returning the goods within
the time fixed or a reasonable time,
if no time has been fixed. (Art. 1502
(1))
D. CONTROL
o The efficacy of symbolic delivery can
be prevented if the seller does not
possess control over the thing sold, in
which case this legal fiction must yield
to reality.
o The key word is control, NOT
possession. The presence of lessees or
illegal occupants who do not have
claims of ownership does not prevent
symbolic delivery (Power Commercial
and Industrial Corp. v. CA, 1997; Sabio
v. The International Corporate Bank,
Inc., 2001)
IV. RISK OF LOSS
Transfer of ownership is relevant in
determining who bears the risk of loss.
A. GEN RULE: owner bears the risk of loss
(res perit domino:the thing is lost to the
owner)
B. EXCEPTIONS: (Art.1504)
1. Stipulation to the contrary
2. Security title: goods delivered and
ownership retained by the seller merely
to secure payment- buyer bears the
risk from the time of delivery
3. Delay in actual delivery through the
fault of the seller or buyer- party in
fault bears the risk
V. DOCUMENT OF TITLE
Document of title is a document
o used as proof of possession or control
of the goods sold, or
o authorizing or purporting to authorize
the possessor of the document to
transfer or receive goods represented
by such document (Art.1636(1))
Examples:
- bill of lading
- quedan
- warehouse receipt
It may be negotiable (bearer or order) or non-
negotiable.
SALES CIVIL LAW
o Words like not negotiable or non-
negotiable do not affect negotiability
When document of title is negotiable:
o It may be negotiated
- if bearer, by delivery
- if order, by indorsement
indorsement of a non-negotiable
document gives the transferee no
additional right (Art.1511)
o Goods in the possession of the bailee
cannot be attached or levied under an
execution unless the document
- be first surrendered or
- its negotiation enjoined
o Bailee cannot be compelled to deliver
up the actual possession of the goods
until the document is
- surrendered to him or
- impounded by the court (Art.1519)
-
IMPLIED WARRANTIES of indorser or
transferor (unless a contrary intention
appears):
1. Genuineness of document
2. Legal right to negotiate or transfer
3. No knowledge of fact which would
impair the validity or worth of the
document
4. Right to transfer the title to the goods
and merchantability or fitness for a
particular purpose, whenever such
warranties would have been implied
had the contract been transfer the
goods without a document (Art.1516)
o The indorser does NOT warrant the
fulfillment by the bailee issuing the
document or previous indorsers of their
respective obligations (Art.1517)
Rights under
negotiation
Rights under transfer
1. title to the
goods of the
one who
negotiated and
of the original
consignee
(Art.1513(1))
2. direct obligation
of the bailee
issuing the
document to
hold possession
of the goods for
him according
to the terms of
the document as
fully as if such
bailee had
contracted
directly with
him
(Art.1513(2))
3. freedom from
the defenses of:
- breach of
duty
- loss
- theft
- accident
- mistake
- conversion,
if the buyer of
the document
paid value
therefor in good
faith and
without notice
(Art.1518)
1. title to the
goods as
against the
transferor,
subject to any
agreement with
the latter
2. right to notify
the bailee
issuing the
document of the
transfer thereof,
and thereby to
acquire the
direct obligation
of such bailee to
hold possession
of the goods for
him accdg to
the terms of the
document
o prior to the
notification of
the bailee, the
title and right of
the transferee
may be
defeated by
- levy of
attachment of
execution
upon the
goods by the
transferors
creditor, or
- a notification
to such bailee
by the
transferor or a
subsequent
buyer of a
subsequent
sale of the
goods by the
transferor
(Art. 1519)
3. If the document
is negotiable,
right to compel
the transferee
to indorse it,
unless a
contrary
intention
appears
o negotiation
takes effect
from actual
indorsement
(Art. 1515)
SALES CIVIL LAW
VI. RECIPROCAL OBLIGATIONS
OF THE SELLER AND THE BUYER
A. OBLIGATIONS OF THE SELLER: (WPD)
1. Preserve (take care of) the thing sold until
delivery (Art. 1480 in rel. to Art.1163)
2. Deliver
o Thing sold (Art. 1495)
o Fruits (Arts. 1164 &1537)
o Accessions and accessories (Arts.1166
&1537)
If the thing is improved by nature:
improvement inures to the benefit of the
buyer
If the thing is improved at the sellers
expense: seller only entitled to the right of
a usufructuary- not entitled to indemnity
but may remove the improvement if it can
be done without damage tot the thing
sold. (Art. 1538 in rel. to Arts. 1198 &
579)
3. Warrant the thing sold (Art.1495)
1. Preservation
o Standard of care: diligence of a good
father of a family
- UNLESS another standard of care
required is required by law or
stipulation
o Liability for fortuitous event:
1. By Law
a. Guilty of delay
b. Promised to deliver the same
thing to 2 or more persons who
do not have the same interest
2. By Stipulation
3. Nature of obligation requires
assumption of risk
2. Delivery
o Recall: kinds of delivery
o Unless otherwise agreed, when symbolic
delivery has been made, the seller is not
obliged to remove tenants to place the
buyer in actual possession of the property
as he has already complied with his
obligation to transfer ownership of and
deliver the thing sold. (Power Commercial
and Industrial Corp. v. CA, 1997; Sabio v.
The International Corporate Bank, Inc.,
2001)
o The seller is NOT bound to deliver if:
1. the buyer has not paid him the price or
no period for payment has been fixed
in the contract (Art.1524);
2. the buyer loses the right to make use
of the term, as when:
a. he becomes insolvent UNLESS
he gives a guaranty or security
for the debt;
b. he does not does not furnish
the seller the guaranties or
securities he promised;
c. he impairs the guaranties or
securities or they disappear
fortuitously UNLESS he
immediately gives new ones
equally satisfactory;
d. he violates any undertaking, in
consideration of which the seller
agreed to the period;
e. he attempts to abscond.
(Art.1536 in rel. to Art.1198)
o Rules wrt delivery of goods (tangibles)
1. Whether it is for the buyer to take
possession of the goods or for the
seller to send them depends on the
contract between the parties.
2. place of delivery: sellers place of
business or residence if no place of
business
exceptions:
a. contract (express or implied) or
usage of trade to the contrary
b. sale of specific goods which
parties knew to be in some
other place at the time of sale-
that place is the place of
delivery
3. Where the seller is bound to send the
goods but no time for sending is fixed,
he must send them w/in a reasonable
time.
What constitutes a reasonable time
is determined by the circumstances
of the particular transaction, such
as:
- the character of the goods,
- the purpose for which they are
intended,
- the ability of the seller to produce
the goods if they are manufactured,
- the facilities available for
transportation and the distance the
goods must be carried, and
- the usual course of business in the
particular trade (Smith Bell & Co.,
Ltd. V. Matti, 1922)
4. Where the goods at the time of sale
are possessed by a 3
rd
person, no
delivery unless and until such 3
rd
person acknowledges to the buyer that
he holds the goods on the buyers
behalf.
5. Demand or tender of delivery must be
made at a reasonable hour, otherwise
it may be treated as ineffectual.
6. Expenses of and incidental to putting
the goods in a deliverable state (state
that the buyer would be bound to take
delivery) must be borne by the seller,
UNLESS otherwise agreed. (Art.1521)
SALES CIVIL LAW
7. Where the seller is authorized or
required to send the goods, delivery to
a carrier for transmission to the buyer
is deemed delivery to the buyer
Exceptions:
a. contrary stipulation
b. contrary intent
- A specification in the contract
relative to the payment of
freight may indicate the
intention of the parties as to the
place of delivery (i.e., the
owner pays for the freight);
however the terms F.O.B.,
c.i.f., and F.a.S. merely
make rules of presumption
which yield to proof of contrary
intention.
- the best indication of the
intention of the parties as to the
place of delivery is the manner
and place of payment of the
price.
F.O.B.
(free on
board)
c.i.f
(cost,
insurance,
freight)
F.a.s
(free
alongside)
Seller bears
the expenses
of
transportation
up to the
f.o.b. point
Price
quoted
includes
the costs of
the goods,
insurance,
and freight
charges on
the goods
up to the
place of
destination
Seller bears
the expenses
of
transportation
until he
delivers the
goods
alongside a
vessel at a
named port
c. under bill of lading, goods
deliverable to the seller or his
agent or to the order of the seller
of his agent (seller reserves
ownership in the goods)
- cf. under bill of lading, goods
deliverable to the order of the
buyer or his agent, but the seller or
his agent retains possession of the
BoL- only right of possession
reserved (Art.1523 in rel. to Art.
1503)
o The expenses for the execution and
registration of the sale shall be borne by
the seller, unless there is a contrary
stipulation. (Art.1487)
3. Warranty
o may be express or implied
o cf. condition on performance of obligation:
- if condition not performed, party
whose obligation is subject to the
condition may refuse to proceed
with the contract OR may waive
performance of the condition.
- Example of condition on
performance of obligation:
obligation of the buyer to pay the
balance of the purchase price made
subject to the condition that the
seller first deliver the reconstituted
title of the house and lot (Laforteza
v. Machuca, 2000)
o If seller has promised that the condition
should happen or be performed, the buyer
may treat the nonperformance of the
condition as a breach of warranty.
(Art.1545)
Express Warranty (APIR)
There is an EXPRESS warranty when:
1. The seller makes an affirmation of fact
or any promise relating to the thing
sold;
2. The natural tendency of such
affirmation or promise is to induce the
buyer to buy; AND
3. The buyer buys the thing relying
thereon.
Affirmation of the value of the thing or
statement of the sellers opinion only is
NOT a warranty unless:
o The seller made it as an expert; AND
o It was relied upon by the buyer.
(Art.1546)
Cf. Dealers talk (usual exaggerations of
trade)
o Ordinarily, what does not appear on
the face of the written instrument
should be regarded as dealer's or
trader's talk; conversely, what is
specifically represented as true in said
document cannot be considered as
mere dealer's talk. (Moles v. IAC,
1989)
o The refusal of the seller to warrant his
estimate should have admonished the
purchaser that that estimate was put
forth as a mere opinion; and we will
not now hold the seller to a liability
equal to that which would have been
created by a warranty, if one had been
given. A man who relies upon an
affirmation made by a person whose
interest might so readily prompt him
to exaggerate the value of his property
does so at his peril, and must take the
consequences of his own imprudence.
(Songco v. Sellner, 1917)
Examples of express warranty:
o certification that the machine sold
was in A-1 condition (Moles v. IAC,
1989)
o express intimation that all taxes and
duties had already been paid
(Harrison Motors Corporation v.
Navarro, 2000)
An express warranty can be made by and
also be binding on the seller even in the
SALES CIVIL LAW
sale of a secondhand article. (Moles v.
IAC, 1989)
Cf. fraud: in fraud, there must be an
intention to deceive or mislead the other
party to his prejudice (Philippine
Manufacturing Co. v. Go Jucco, 1926)
Implied Warranty
IMPLIED warranties (unless a contrary
intention appears)
10
: (Art.1547)
1. Implied Warranty of Title
2. Implied Warranty against Encumbrance
3. Implied warranty against Hidden Defects
Implied Warranty of Title
o Sellers right to sell at the time the
ownership is to pass and the buyers
peaceful and legal possession of the
thing from that time
o Does NOT apply to a sheriff,
auctioneer, mortgagee, pledge, or
other person professing to sell by
virtue of authority in fact or law.
o Requisites for breach of warranty
against eviction:
a. Buyer is deprived of the whole or a
part of the thing sold;
b. Eviction is by final judgment
c. Final judgment based on
A right prior to the sale OR
An act imputable to the vendor
d. Seller is summoned and made co-
defendant in the suit for eviction at
the instance of the buyer. (Arts.
1548, 1558, Power Commercial
and Industrial Corp. v. CA, 1997)
Implied Warranty against Encumbrance
o Requisites for breach:
a. thing sold is an immovable
b. burden or servitude encumbering
the thing sold is
non-apparent
not mentioned in the agreement
of such nature that it must be
presumed that the buyer would
not have bought it had he been
aware thereof
not recorded in the Registry of
Property UNLESS there is an
express warranty that the thing
is free from all burdens and
encumbrances (Art.1560)
Implied warranty against Hidden Defects
o Requisites for breach:
a. The defect renders the thing sold
unfit for the use for which it was
intended OR diminishes its fitness
for such use to such an extent that
had the buyer been aware thereof,
10
These also apply in a contract of lease and a
contract for a piece of work if the contractor agrees
to produce the work from material furnished by
him. (Arts. 1653 & 1714)
he would not have bought it or
would have paid a lower price;
b. The defect is not patent or visible;
c. The buyer is not an expert who, by
reason of his trade or profession,
should have known the defect
d. The seller is aware of the hidden
fault or defect, OR even he is not
aware thereof if there is no
stipulation to the contrary
(Arts.1561 &1566)
o Implied warranty as to Merchantable
Quality and Fitness of Goods
a. Merchantable Quality:
1) Where the goods are brought by
description from a seller who
deals in goods of that
description (Art.1562(2))
2) In a sale by sample, if the seller
is a dealer in goods of that kind
and the defect is not apparent
on reasonable examination of
the sample (Art.1566)
b. Fitness for a particular purpose:
Where the buyer expressly or
impliedly makes known to the
seller the particular purpose for
which the goods are acquired AND
it appears that the buyer relies on
the sellers skill or judgment
(Art.1562(1))
o Implied warranty against Redhibitory
Defect in the Sale of Animals
Redhibitory defect- a hidden defect
of animals of such nature that
expert knowledge is not sufficient
to discover it, even in case a
professional inspection has been
made
No warranty in case of:
a. animals sold at fairs or
public auctions
b. livestock sold as
condemned
The following sales are void:
a. sale of animals suffering
from contagious diseases
b. sale of animals unfit for the
purpose for which they are
acquired as stated in the
contract
Veterinarian liable if he fails to
discover or disclose the hidden
defect through ignorance or bad
faith
Seller liable if animal dies within 3
days after its purchase due to a
disease that existed at the time of
sale.
OTHER warranties
1. Warranty in sale of CONSUMER GOODS
o Consumer goods- goods primarily for
personal, family, household or agricultural
purposes, which shall include but not
SALES CIVIL LAW
limited to food, drugs, cosmetics, and
devices (Sec.4(q), RA 7493
11
)
o Kinds of express warranty:
1. Full warranty- if the written warranty
meets the minimum standards
2. Limited warranty- if the written
warranty does not meet the minimum
standards (Sec.6(c), RA7394)
o Minimum standard for warranties that the
warrantor shall:
1. remedy such consumer product within
a reasonable time and without charge
in case of a defect, malfunction or
failure to conform to such written
warranty;
2. permit the consumer to elect whether
to ask for a refund or replacement
without charge of such product or part,
as the case may be, where after
reasonable number of attempts to
remedy the defect or malfunction, the
product continues to have the defect or
to malfunction
BUT the warrantor will not be required
to perform the above duties if he can
show that the defect, malfunction or
failure to conform to a written
warranty was caused by damage due
to unreasonable use thereof.
(Sec.68(d), RA 7394)
2. Warranty in sale of SUBDIVISION LOT or
CONDOMINIUM UNIT
o The owner or developer shall be
answerable and liable for the facilities,
improvements, infrastructures or other
forms of development represented or
promised in brochures, advertisements
and other sales propaganda disseminated
by the owner or developer or his agents
and the same shall form part of the sales
warranties enforceable against said owner
or developer, jointly and severally.
(Sec.19, PD 957
12
)
B. OBLIGATIONS OF THE BUYER
1. Accept delivery of the thing sold
2. Pay the price of the thing sold (Art.1582)
1. Acceptance
o Modes of accepting goods: (AIR)
1. Buyer intimates to the seller that he has
accepted the goods.
2. Goods delivered to the buyer and he does
any act in relation to them which is
inconsistent with the ownership of the
seller.
3. After the lapse of a reasonable time, the
buyer retains the goods without intimating
11
Consumer Act of the Philippines
12
The Subdivision and Condominium Buyers
Protective Decree.
to the seller that he has rejected them.
(Art.1585)
o Rights of the buyer (UNLESS otherwise
agreed):
1. Not bound to accept delivery of goods
by installments (Art. 1583)
2. Reasonable opportunity to examine the
goods upon delivery to ascertain WON
they are in conformity with the
contract before accepting the same
BUT when the seller delivers the goods
to a carrier upon the terms that the
same shall not be delivered to the
buyer until he has paid the price, the
buyer has no right to examine the
goods before payment unless there is
an agreement or usage of trade
permitting such examination.
(Art.1584)
3. Acceptance of the goods shall not
discharge the seller from liability for
breach of any promise or warranty
BUT the buyer must give the seller
notice of the breach of promise or
warranty within a reasonable time after
the buyer knows or ought to know of
such breach, otherwise the seller shall
not be liable therefor. (Art.1586)
o The buyer must notify the seller
of the breach of warranty at any
time BEFORE the latter has filed
the suit for the collection of the
unpaid price since the purpose
of the rule requiring notice is to
prevent the buyer from
interposing belated claims for
damages as an offset to a suit
begun by the seller for the
purchase price (de Guzman v.
Triangle Ace Corp., 2001)
4. Reject delivery of a wrong quantity of
goods or of goods of a different
description not included in the contract
which are mixed with the goods sold.
(Art.1522)
5. If he refuses to accept the goods,
having the right to do so, he is not
bound to return them to the seller; it
being sufficient that he notifies the
seller of his refusal to accept.
If he voluntarily constitutes himself a
depositary of the goods, he shall be
liable as such. (Art.1587)
o Effect of refusal to accept goods without
just cause: title to the goods passes to the
buyer from the moment they are placed at
his disposal, except if ownership has been
reserved by the seller (Art.1588)
2. Payment
o 3 cases where the buyer is liable for
interest for the period between delivery
and payment: (STD)
1. It is stipulated;
2. Thing sold produces fruits or income;
SALES CIVIL LAW
3. Buyer is in default (interest accrues
from the time of judicial or
extrajudicial demand for the payment
of the price)
o Rights of the buyer:
1. Suspend payment
When:
a) he is disturbed in the possession or
ownership of the thing acquired or
has reasonable grounds to fear
such disturbance,
b) by a vindicatory action or a
foreclosure of mortgage
Until when: until the seller has caused
the disturbance or danger to cease
Exceptions:
b) When the seller gives security for
the return of the price in a proper
case
c) When it has been stipulated that,
notwithstanding any such
contingency, the buyer shall be
bound to pay
A mere act of trespass shall not
authorize the suspension of the
payment. (Art.1590)
2. In the sale of immovable property, to
pay even after the expiration of the
period agreed upon,
as long as no demand for rescission of
the contract has been made upon him
either judicially or by a notarial act,
even though it may have been
stipulated that rescission shall of right
take place upon failure to pay the price
at the time agreed upon. (Art.1592)
VII. REMEDIES IN CASE OF
BREACH
13
A. GENERAL REMEDIES (Art.1191)
1. Specific performance
2. Rescission
3. Damages
o The general rule is that rescission of a
contract will not be permitted for a slight
or casual breach, but only for such
substantial and fundamental breach as
would defeat the very object of the parties
in making the agreement (Song Fo & Co.
v. Hawaiian-Philippine Co., 1925)
o In reciprocal obligations, neither party
incurs in delay if the other does not
comply or is not ready to comply in a
proper manner with what is incumbent
upon him. (Art.1169 last par.)
o Prescriptive periods:
- 10 years if based on written contract
- 6 years if based on oral contract
13
Includes both extrajudicial and judicial remedies.
B. PARTICULAR REMEDIES OF THE BUYER
1. Breach of Obligation to Preserve
Loss (Arts.1538 & 1189)
Without fault of
seller
No breach
(obligation
extinguished)
Through fault of
seller OR through
fortuitous event if
seller liable even for
fortuitous events
Damages
o A thing is lost when it:
1. perishes;
2. goes out of commerce; or
3. disappears in such a way that its
existence is unknown or it cannot
be recovered
Deterioration (Arts.1538 & 1189)
Without fault of
seller
No breach
(impairment
borne by buyer)
Through the fault of
seller
1. Rescission +
damages OR
2. SP + damages
2. Breach of Obligation to Deliver
Delivery of wrong quantity
Goods (Art.1522)
Less 1. Reject OR
2. Accept and pay
- at contract rate: if he
accepts knowing that the
seller is not going to perform
in full; or
- fair value: if he used the
goods delivered before
knowing that the seller is not
going to perform in full
More 1. Reject the excess or the
whole
if indivisible OR
2. Accept the whole and pay at
contract rate
o In the sale of an undivided share of a
specific mass of fungible goods, if the
mass contains less than the number,
weight, or measure bought, the buyer
becomes the owner of the whole mass and
the seller is bound to make good the
deficiency from goods of the same kind
and quality, UNLESS a contrary intent
appears. (Art.1464)
SALES CIVIL LAW
Real estate (Arts.1539-1543)
per unit of
measure
less (in
area or
quality)
1.
proportional
reduction of
price OR
2. rescission,
if
- lack in area
or inferior
quality at
least 1/10 of
area stated or
price; OR
- the buyer
would not
have bought
had he known
of smaller
area or
inferior
quality
prescriptive
pd: 6 mos.
from delivery
more 1. Reject the
excess OR
2. Accept the
whole and
pay at
contract rate.
Lump sum/
sale of 2 or
more
immovables
for a single
price
Everything
w/in
boundaries,
even if less
or more
than stated
area
No remedy
o Where
both the
area and
the
boundaries
of the
immovable
are
declared,
the area
covered
within the
boundaries
of the
immovable
prevails
over the
stated
area.
(Rudolf
Lietz, Inc.
v. CA,
2005)
NOT
everything
w/in
boundaries
1.
proportional
reduction in
price OR
2. rescission
Real estate (Arts.1539-1543)
prescriptive
pd: 6 mos.
from delivery
3. Breach of Warranty
Express Warranty
o Prescriptive period:
1. Period specified in the express
warranty; OR
2. If no period specified, 4 years,
following the general rule on rescission
of contract (Engineering & Machinery
Corp. v. CA, 1996)
o Remedies in case of sale of goods:
1. Accept goods + demand diminution or
extinction of price
2. Accept goods + action for damages
3. Refuse to accept goods + action for
damages
4. Rescind (refuse to accept OR return or
offer to return) + recover price paid
Rescission NOT available IF buyer:
- knew of the breach of warranty
when he accepted the goods
without protest;
- fails to notify seller of the election
to rescind w/in a reasonable time;
- fails to return or to offer to return
the goods to the seller in
substantially as good condition as
they were in when delivered, unless
the deterioration is due to the
breach of warranty
Measure of damages in case of breach
of warranty of quality (in the absence
of special circumstances showing
proximate damage of a greater amt):
difference between the value of goods
at the time of delivery and the value
they would have had if they had
answered to the warranty.
Effects of rescission:
1. Buyer no longer liable for price and
entitled to return of any part
thereof paid, concurrently with or
immediately after an offer to
return the goods.
2. If seller refuses to accept offer to
return goods, buyer deemed bailee
for the seller and has right of lien
to secure payment of any part of
price paid.
Implied Warranty Against Eviction
(Arts.1555&1556)
Total
eviction
Enforce liability for eviction
(demand VICED from seller)
o Value of thing sold at the
time of eviction
o Income or fruits, IF he has
been ordered to deliver
them to the party who
won the eviction suit
SALES CIVIL LAW
o Costs of
- eviction suit and
- in a proper case, suit
against seller for the
warranty
o Expenses of the contract,
IF the buyer has paid
them
o Damages and interests,
and ornamental expenses,
IF the sale was made in
BF
Partial
eviction
1. Enforce liability for
eviction (VICED) OR
2. Rescind, IF he would not
have bought the thing sold
without the part lost (but
he must return the thing
without other
encumbrances than those
which it had when he
acquired it)
o RULES: (Arts.1549-1554)
1. Buyer need not appeal from the decision to
hold seller liable for eviction.
2. When adverse possession commenced
before sale but prescriptive pd. completed
after transfer- seller not liable
3. If property sold for nonpayment of taxes
due and not made known to the buyer
before sale- seller liable
4. Judgment debtor also responsible for
eviction in judicial sales, unless it is
otherwise decreed in the judgment
5. If there is waiver of warranty:
a. if seller acted in BF- seller liable
for eviction (waiver void)
b. if buyer made waiver without
knowledge of the risks of
eviction- seller liable only for the
value of the thing sold at the
time of eviction
c. if buyer made waiver with
knowledge of the risks of
eviction and assumed its
consequences- seller not liabl
Implied Warranty Against Encumbrances
(Art.1560)
1. Rescission- w/in 1 yr. from execution
of deed of sale; OR
2. Damages- w/in 1 yr from execution of
deed of sale or from discovery of
burden or servitude
Implied Warranty Against Hidden Defects
(Arts.1567-1571)
Thing not lost 1. Withdraw from
contract (accion
redhibitoria) +
damages; OR
2. Demand a
proportionate
reduction of the price
(accion quanti
minoris)+damages
Thing
lost
Due to
hidden
fault
o If seller aware of
defect- may demand:
- return of price
- refund of
expenses of
contract
- damages
o If seller not aware of
defect- may demand
price and expenses
but not damages
Due to
fortuitous
event or
to fault of
buyer
Demand:
o Price paid minus
value of thing when
it was lost
o Damages IF the
seller acted in BF
o Prescriptive period: 6 mos. from delivery
Implied Warranty Against Redhibitory Defect
of Animals
1. Withdraw from contract (accion
redhibitoria) + damages; OR
2. Demand a proportionate reduction of the
price (accion quanti minoris)+damages
o If sale rescinded, buyer must return
animal in the condition in which it was sold
and delivered (liable for injury due to his
negligence and not arising from the
redhibitory fault or defect)
o Prescriptive period: 40 days from delivery
Warranty in Sale of Consumer Goods (Sec. 68
(e)(f), RA 7394)
Express
warranty
1. Demand repair w/in 30
days (extendible for
causes beyond the control
of the warrantor; OR
2. Demand refund of price
minus amount directly
attributable to the use of
the consumer prior to the
discovery of the non-
conformity
Implied
warranty
1. Retain the goods and
recover damages; OR
2. Reject the goods, cancel
contract and recover from
the seller so much of the
purchase price as has
been paid, including
damages.
o Duration of warranty if implied warranty
accompanies express warranty:
- If the implied warranty on
merchantability accompanies an
express warranty, both will be of
equal duration.
- Any other implied warranty shall
endure not less than sixty (60)
SALES CIVIL LAW
days nor more than one (1) year
following the sale of new consumer
products.
C. PARTICULAR REMEDIES OF THE
SELLER
NON-ACCEPTANCE OF GOODS
1. Action for damages for nonacceptance,
where the buyer wrongfully neglects or
refuses to accept and pay for the goods
(Art.1596)
Measure of damages:
- estimated loss directly and
naturally resulting in the ordinary
course of events from the buyers
breach
- where there is an available market
for the goods (in the absence of
special circumstances): difference
between the contract price and the
market price at the time the goods
ought to have been accepted or if
no time fixed, at the time of refusal
to accept
- labor performed and expenses
made by the seller before receiving
notice of the buyers repudiation or
countermand
- profit the seller would have made if
sale had been fully performed
2. Rescission by giving notice of election to
rescind to the buyer (Arts.1597&1593)
NONPAYMENT
In sale of movables:
1. Self-help remedies of unpaid seller
of goods
2. Action for the price of goods
3. Alternative remedies under the
Recto Law (Arts. 1484 & 1485)
Self-help remedies of an unpaid seller of
goods (Arts.1525-1535)
o unpaid seller when:
1. the whole of the price has not
been paid or tendered
2. a bill of exchange or other
negotiable instrument received as
conditional payment has been
dishonored
seller includes:
- sellers agent to whom the BOE has
been endorsed
- a consignor or agent who has
himself paid, or is directly
responsible for the price
- any other person who is in the
position of a seller
o Self-help remedies:
1. Lien- right to retain the goods
while he is in possession of them
2. Stoppage in transitu- right to
resume possession of the goods at
any time while they are in transit
as if he never parted with the
possession
3. Resale
4. Rescission rescind transfer of title
and resume ownership in the goods
Right of LIEN
o Available when:
1. Goods sold w/o any stipulation as to
credit;
2. Goods sold on credit, but the term of
credit has expired; or
3. Buyer becomes insolvent
14
o Lost when:
1. Seller delivers goods to carrier or other
bailee for transmission to the buyer
w/o reserving ownership or right to
possession;
2. Buyer or his agent lawfully obtains
possession of the goods
3. Seller waives it
o NOT lost by reason only that the buyer
has obtained judgment for the price of the
goods
o In case of part delivery: may exercise
right of lien as to remainder UNLESS part
delivery made with intent to waive the lien
o NOT affected by any sale or other
disposition of goods which the buyer may
have made UNLESS the seller has
consented thereto
BUT if negotiable doc of title has
been issued, right of a holder in
due course NOT defeated, whether
the negotiation be prior or
subsequent to the notification of
the carrier or other bailee of the
sellers claim to a lien.
Right of STOPPAGE IN TRANSITU
o Available when the buyer of the goods is
or becomes insolvent
o Goods are in transit:
1. From the time they are delivered to a
carrier or other bailee for transmission
to the buyer until buyer or his agent
takes delivery;
2. If buyer rejects the goods and the
carrier or bailee continues in
possession, even if the seller has
refused to receive them back
o Goods no longer in transit if:
1. Buyer or his agent obtains delivery of
the goods before their arrival at the
appointed destination;
2. After the arrival of the goods at the
appointed destination, carrier or bailee
acknowledges to the buyer or his
14
Insolvency under Title on Sales refers to
insolvency in fact- when a person has ceased to
pay his debts in the ordinary course of business or
cannot pay his debts as they become due, WON
insolvency proceedings have been commenced
(Art.1636(2))
SALES CIVIL LAW
agent that he holds the goods on his
behalf and continues in possession of
them as bailee for the buyer or his
agent (immaterial if buyer indicates
further destination for the goods;
3. The carrier or baileewrongfully refuses
to deliver the goods to the buyer or his
agent
o Exercised by:
1. Obtaining actual possession of the
goods; OR
2. Notifying carrier or bailee of his claim
If carrier or bailee has issued a
negotiable document of title, it
must first be surrendered for
cancellation before the goods are
redelivered to the seller
o In case of part delivery: may exercise
right of stoppage in transitu as to
remainder UNLESS circumstances of part
delivery show an agreement with the
buyer to give up possession of the whole
of the goods.
o NOT affected by any sale or other
disposition of goods which the buyer may
have made UNLESS the seller has
consented thereto
BUT if negotiable doc of title has been
issued, right of a holder in due course
NOT defeated, whether the negotiation
be prior or subsequent to the
notification of the carrier or other
bailee of the sellers claim to a right of
stoppage in transitu
Right of RESALE
o Available to unpaid seller who:
1. has a right of lien; OR
2. has stopped the goods in transitu
o Available when:
1. Goods are of a perishable nature;
2. Seller expressly reserves the right of
resale in case the buyer defaults; or
3. Buyer defaults in payment for an
unreasonable time
o For the resale to be valid, the seller need
NOT notify the original buyer of:
1. the intention to resell
2. the time and place of the resale
o BUT giving or failure to give notice of
intention to resell is relevant in
determining WON the buyer had been in
default for an unreasonable time before
the resale was made.
o The seller must exercise reasonable care
and judgment in making a resale
o The resale may be by public or private
sale.
o The seller CANNOT buy the goods, directly
or indirectly.
o Effects of resale:
1. The seller is NOT liable anymore to the
original buyer:
- upon the contract of sale; OR
- for any profit made by the resale
2. The seller may recover damages from
the original buyer for any loss
occasioned by the breach of the
contract of sale.
3. The buyer in the resale acquires a good
title as against the original buyer.
Right to RESCIND
o Available to unpaid seller who:
1. has a right of lien; OR
2. has stopped the goods in transitu
o Available when:
1. Seller expressly reserved the right to
rescind in case the buyer defaults; or
2. Buyer defaults in payment for an
unreasonable time.
o Rescission made by manifesting an
intention to rescind by:
1. notice to the buyer; OR
2. some other overt act which
need not be communicated to
the buyer
o BUT giving or failure to give notice of
intention to rescind is relevant in
determining WON the buyer had been in
default for an unreasonable time before
the rescission.
Action for the price of goods
o Available when:
1. Ownership has passed to buyer and
buyer wrongfully neglects or refuses to
pay;
2. Price payable on a certain day
irrespective of delivery and buyer
wrongfully neglects or refuses to pay;
or
3. Buyer notifies seller of his repudiation
of the contract after the seller has
completed the manufacture of the
goods or had procured the goods to be
delivered, and the goods cannot
readily be resold for a reasonable
price. (Art.1595)
Under the Recto Law (Arts.1484 & 1485)
o Applies in cases of:
1. sale of movables in installment
2. lease of personal property
- with option to buy
- when the lessor has deprived the
lessee of the possession or
enjoyment of the thing
When the seller assigns his credit to
another person, the assignee is
likewise bound by the same law.
(Borbon II v. Servicewide Specialists,
Inc., 1996)
Stipulation that the installments or
rents paid shall not be returned to the
buyer or lessee VALID insofar as the
same may not be unconscionable (Art.
1486)
SALES CIVIL LAW
Sale of movables in installment
The Recto law does NOT apply to a
straight term sale in which the balance,
after payment of the initial sum, should be
paid in full at the time specified, because
the law attempts to protect improvident
buyers from the great temptation of
buying beyond their means. In a straight
term sale, the partial payments are not so
small as to place buyers off their guard
and delude them to a miscalculation of
their ability to pay. (Levy Hermanos, Inc.
v. Gervacio, 1939)
Lease of personal property with option to buy
The condition that the lessor has deprived
the lessee of possession or enjoyment of
the thing for the purpose of applying Art.
1485 is fulfilled when the lessor files a
complaint for replevin to recover
possession of the movable property. By
virtue of the writ of seizure, the lessee is
deprived of the use of the property. (Elisco
Tool Manufacturing Corp., v. CA, 1999)
The Recto law does not apply to a financial
leasing agreement which, by definition
under RA 8556
15
, does not give the lessee
an option to buy. (Sing, Jr. v. FEB Leasing
and Finance Corp., 2007)
BUT when a contract purporting to be a
financial leasing agreement is in reality a
contract of lease with option to buy, the
Recto law applies. When the lessor, in its
demand letter, gives the defaulting lessee
the option of either returning the movable
property or keeping it by paying the
outstanding balance, the lessee is in effect
given an option to buy, even if the lease
agreement does not contain a purchase
option clause.(PCI Leasing and Finance,
Inc. v. Giraffe-X Creative Imaging, Inc.,
2007)
The Recto law does not apply to a
creditor-mortgagee in a loan secured by a
chattel mortgage on the property
purchased with the proceeds of the loan,
absent proof that:
- the agreement was in fact a
consumer loan agreement (i.e., the
mortgagee in fact bought the
property from the original seller
and in turn, sold it to the
mortgagor) (Superlines
Transportation Company, Inc. v.
Lavides, 2003); or
- the seller assigned to the creditor
the right to collect the balance of
the purchase price from the buyer.
(Rosario v. PCI Leasing and
Finance, Inc., 2005)
o Alternative remedies under the Recto law:
1. Specific performance
15
Financing Company Act of 1998
2. Cancellation of sale, IF the
buyer fails to pay 2 or more
installments
3. Foreclosure of chattel
mortgage on the thing sold, if
one has been constituted, IF
the buyer fails to pay 2 or
more installments.
o Nature of the remedies: ALTERNATIVE,
NOT CUMULATIVE- the exercise of one
bars the exercise of the others (Cruz v.
Filipinas Investment & Finance Corp.,
1968)
16
SPECIFIC PERFORMANCE
o When the seller-mortgagee first seeks to
enforce additional mortgages, guarantees
or other security arrangements, he loses
his lien on the chattel mortgage of the
personal property he sold, although he
may still levy on it. (Borbon II v.
Servicewide Specialists, Inc., 1996)
o When there is a chattel mortgage on the
thing sold but the seller elects to sue on a
promissory note to exact fulfillment of the
obligation to pay, the seller is not limited
to the proceeds, on execution, of the
mortgaged property, as there is no
foreclosure of chattel mortgage nor a
foreclosure sale of the thing sold in such a
case. Hence, other properties of the buyer
may be levied upon in case of deficiency.
(Tajanlangit v. Southern Motors, Inc.,
1957)
CANCELLATION OF SALE
o Available when the buyer fails to pay 2 or
more installments
o When the seller cancels the sale by
repossessing the property sold, it is barred
from exacting payment of the balance of
the price thereof. (Nonato v. IAC, 1985)
FORECLOSURE OF CHATTEL MORTGAGE
o Available when the buyer fails to pay 2 or
more installments
o Foreclosure may be judicial or
extrajudicial- that is, by ordinary action or
by foreclosure under power of sale
contained in the mortgage. (Magna
Financial Services Group, Inc. v. Colarina,
2005)
o Effect of foreclosure: seller shall have no
further action to recover any unpaid
balance of the price; any contrary
agreement VOID.
Purpose of the law is to remedy the
abuses committed in foreclosure of
16
QUOTABLE QUOTE: SC always says, It cannot
have its cake and eat it too.
SALES CIVIL LAW
chattel mortgages. It prevents
mortgagees from seizing the
mortgaged property, buying it at
foreclosure sale for a low price and
then bringing the suit against the
mortgagor for a deficiency judgment.
The almost invariable result of this
procedure was that the mortgagor
found himself minus the property and
still owing practically the full amount
of his original indebtedness. (Bachrach
Motor Co., Inc. v. Millan, 1935)
It is the fact of foreclosure and actual
sale of the mortgaged chattel that
would bar the seller from recovering
any unpaid balance; hence, after filing
an action for replevin but before the
foreclosure sale, the seller may accept
payments voluntarily tendered by the
buyer who admits a subsisting
indebtedness. (Northern Motors, Inc.
v. Sapinoso, 1970)
The further action referred to may be
judicial or extrajudicial; hence, it
includes extrajudicial foreclosure of a
real estate mortgage given as
additional security. (Cruz v. Filipinas
Investment & Finance Corp., 1968)
After foreclosure of the chattel
mortgage, the seller cannot proceed
against additional security put up by
the buyer himself (Ridad v. Filipinas
Investment and Finance Corp., 1983)
or even by a third person, because the
buyer would still be the one ultimately
burdened- the guarantor can recover
from him what it had paid. (Cruz v.
Filipinas Investment & Finance Corp.,
1968)
Where the buyer-mortgagor
unjustifiably refused to surrender the
chattel subject of the mortgage upon
failure of 2 or more installments, or if
he concealed the chattel to place it
beyond the reach of the seller-
mortgagee, that thereby constrained
the latter to seek court relief, the
expenses incurred for the prosecution
of the case, such as attorneys fees,
could rightly be awarded (Borbon II v.
Servicewide Specialists, Inc., 1996)
In sale of immovables
1. Rescission for anticipatory breach
(Art.1591)
2. Specific Performance + damages under
Art.1191
3. Rescission + damages under Art.1191
Subject to the provisions of:
- Art.1592 in case of an absolute sale
(Odyssey Park, Inc. v. CA, 1997);
OR
- RA 6552
17
in case of a sale in
installment
17
Realty Installment Buyer Act
Rescission for anticipatory breach
o Available when the seller has reasonable
grounds to fear the loss of immovable
property sold and its price
Rescission
o Available even after the seller has chosen
specific performance IF the latter becomes
impossible
o Instead of decreeing rescission, the court
may authorize the fixing of a period for a
just cause.
o In case of an absolute sale, the seller
must make a demand for rescission either
- judicially OR
- by a notarial act (Art. 1592)
A judicial or notarial act is necessary
before a valid rescission can take
place, whether or not automatic
rescission has been stipulated. (Iringan
v. CA, 2001)
Effect of lack of demand: buyer can
still pay
Effect of demand: the court may not
grant the buyer a new term
The ff. have been considered by the SC
as constituting a judicial demand for
rescission:
1. Cross-claim (Luzon Brokerage Co.,
Inc. v. Maritime Building Co., Inc.,
1972);
2. Action for Judicial Confirmation of
Rescission and Damages (Iringan
v. CA, 2001)
3. Defense in the sellers Answer to
the buyers Action for Specific
Performance (Ramel v. Aquino,
2006)
o In installment sale of realty, RA 6552
imposes additional requirements for a
valid rescission
RA 6552 does not apply to:
1. industrial lots
2. commercial buildings
3. sale to tenants under RA 3844
18
Requirements for a valid rescission if
buyer has paid at least 2 years of
installments: (Sec.3)
1. Grace period- 1 mo/1 yr of
installment payments made; BUT
buyer may avail of it only once in
every 5 yrs.
2. Refund of cash surrender value
(CSV): 50% of total amt paid +
5% for every yr after the first 5
years of installments, BUT not >
90% of total amt paid
3. Notice of cancellation or demand
for rescission by notarial act,
effective 30 days from the buyers
receipt thereof and upon full
payment of the CSV
18
Agricultural Land Reform Code
SALES CIVIL LAW
Requirements for a valid rescission if
buyer has paid less than 2 yrs of
installments: (Sec.4)
1. Grace period of at least 60 days
2. Notice of cancellation or demand
for rescission by notarial act,
effective 30 days from the buyers
receipt thereof
Down payments, deposits or options on
the contract shall be included in the
computation of the total number of
installment payments made. (Sec.3)
The seller can go to court to demand
judicial rescission in lieu of a notarial
act of rescission. (Olympia Housing,
Inc. v. Panasiatic Travel Corp, 2003)
The requirement of a notarial act of
rescission is dispensed with when the
seller files an action for annulment of
contract, which is a kindred concept of
rescission (Layug v. IAC, 1988); but
NOT when he files
- an action for reconveyance (Ramos
v. Heruela, 2005; Olympia Housing,
Inc. v. Panasiatic Travel Corp.,
2003); OR
- an action for unlawful detainer
(Pagtalunan v. Vda. De Manzano,
2007)
Automatic cancellation clause is void
under Section 7 of R.A. 6552 (Fabrigas
v. San Francisco Del Monte, Inc.,
2005)
VIII. DOUBLE SALE
(Art.1544)
A. REQUISITES: (Cheng v. Genato, 1998)
1. 2 or more valid sales;
2. same subject matter;
3. 2 or more buyers with conflicting
interests at odds over the rightful
ownership of the thing sold;
4. same seller
O No double sale when one of the two
contracts is a mere contract to sell. (San
Lorenzo Development Corp. v. CA, 2005;
Coronel v. CA, 1996)
O No double sale where there is only one
valid sale, the other sale being forged.
(Fudot v. Cattleya Land, Inc., 2007)
O No double sale when the two different
contracts of sale are made by two
different persons, one of them not being
the owner of the property sold.(Salera v.
Rodaje, 2007)
O When not all requisites for the application
of Art. 1544 are present, the principle of
prior tempore, potior jure (he who is first
in time is preferred in right) should apply.
The only essential requisite of this rule is
priority in time; in other words, the only
one who can invoke this is the first
vendee. Undisputedly, he is a purchaser
in good faith because at the time he
bought the real property, there was still no
sale to a second vendee.(Consolidated
Rural Bank (Cagayan Valley), Inc. v. CA,
2005)
o Art. 1544 does NOT apply to the sale of
unregistered land at an execution sale
because a buyer of unregistered land at a
execution sale only steps into the shoes of
the judgment debtor, and merely acquires
the latter's interest in the property sold as
of the time the property was levied upon.
(Carumba v. CA, 1970)
B. RULES OF PRIORITY UNDER ART.1544
IN CASE OF MOVABLES:
- Possession in good faith
IN CASE OF IMMOVABLES:
1. Registration in good faith
2. If no prescription, possession in good
faith
3. If no registration or possession, oldest
title acquired in good faith.
o Good faith- lack of knowledge of any
defect in the title over the property sold
(Vda de Melencion v. CA, 2007)
o Knowledge gained by the first buyer of the
second sale cannot defeat the first buyers
rights except where the second buyer
registers in good faith the second sale
ahead of the first, as provided by the Civil
Code. Such knowledge of the first buyer
does not bar her from availing of her
rights under the law, among them, to
register first her purchase as against the
second buyer. But in converso, knowledge
gained by the second buyer of the first
sale defeats his rights even if he is first to
register the second sale, since such
knowledge taints his prior registration with
bad faith. (Uraca v. CA, 1997)
o Registration- any entry made in the books
of the registry, including both registration
in its ordinary and strict sense and
cancellation, annotation, and even
marginal notes. (Cheng v. Genato, 1998)
o If the land is registered under the Land
Registration Act (and therefore has a
Torrens Title), and it is sold and the sale
is registered not under the Land
Registration Act but under Act 3344, as
amended, such sale is not considered
registered under Art. 1544 of the Civil
Code; neither does such registration
operate as constructive notice to the
second buyer.(Vda de Melencion v. CA,
2007)
o Possession includes not only
material(actual) possession, but also
symbolic possession, which is acquired by
SALES CIVIL LAW
the execution of a public instrument
(Sanchez v. Ramos, 1919)
o Older title- any document showing
acquisition of the land in good faith, like a
receipt for the price. (Baviera)
IX. EXTINGUISHMENT OF SALE
A. CAUSES: (Arts.1600 &1231)
(P-PLAN-CCC-RRR)
1. Payment/performance
2. Presription
3. Loss of thing due
4. Annulment
5. Novation
6. Condonation/remission
7. Confusion/merger
8. Compensation
9. Rescission
10. Resolutory condition fulfilled
11. Redemption
a. Legal
b. Conventional
B. CONVENTIONAL REDEMPTION
(Arts.1601-1618)
o Available when the seller reserves the
right to repurchase the thing sold in the
same instrument of sale as one of the
stipulations of the contract (Villarica v CA,
1968)
An agreement to repurchase becomes
a promise to sell when made after the
sale, because when the sale is made
without such an agreement, the
purchaser acquires the thing sold
absolutely, and if he afterwards grants
the vendor the right to repurchase, it
is a new contract entered into by the
purchaser, as absolute owner already
of the object. (Ramos v. Icasiano,
1927)
o Period for redemption:
- pd. stipulated, but NOT > 10 yrs; OR
- 4 yrs from date of contract, if no pd.
stipulated
o Available to:
1. Seller (or his agent/heirs/assigns)
2. Creditors of seller, AFTER they have
exhausted the sellers property
If co-owners, jointly and in the same
contract, sell an undivided immovable,
each may redeem only his respective
share
If a sole owner sells an immovable and
leaves several heirs, each heir may
redeem only his share.
In these 2 cases, the buyer a retro
may demand all the sellers a retro or
heirs to buy redeem the whole thing
and he cannot be compelled to agree
to a partial redemption.
o Enforceable against:
1. Buyer (or his agent/heirs/assigns)
If the land is registered, the right to
redeem must be annotated in the title
in order to prejudice a subsequent
buyer from the buyer a retro.
A buyer of a part of an undivided
immovable who acquires the whole
thereof may compel the seller to
redeem the whole property.
If the buyer leaves several heirs,
action to redeem may be brought
against each heir only for his own
share, WON the thing has been
partitioned, UNLESS in the partition,
one heir was awarded with the thing
sold, in which case he may be sued for
redemption of the whole thing
o Redemption exercised by:
1. Returning the ff. to the buyer: (PEN)
a. Price of the sale;
b. Expenses of the contract and other
legitimate payments made by reason
of the sale;
c. Necessary and useful expenses
made on the thing sold
2. Complying with any other stipulation
agreed upon, if any.
The general rule in redemption is that
it is not sufficient that a person
offering to redeem manifests his desire
to do so. The statement of intention
must be accompanied by an actual and
simultaneous tender of payment for
the full amount of the repurchase
price. (BPI Family Savings Bank, Inc.
v. Veloso, 2004)
Tender of payment is enough (i.e.,
consignation is not necessary), if made
on time, as a basis for action against
the buyer to compel him to resell. But
that tender does not in itself relieve
the buyer from his obligation to pay
the price when redemption is allowed
by the court. (Paez v. Magno, 1949)
o Effects of redemption:
1. The seller shall receive the thing free
from all charges or mortgages
constituted by the buyer BUT he shall
respect leases executed by the buyer
in good faith and in accordance with
local custom.
2. If there are growing fruits at the time
of sale and at the time of redemption:
no reimbursement or prorating if the
buyer did not pay indemnity at the
time of sale
3. If there were no growing fruits at the
time of sale, but some exist at the
time of redemption: fruits prorated
(buyer entitled to part corresponding
to time he possessed the land in the
last year, counted from the
anniversary of the date of sale)
o Effect of non-redemption: Ownership
consolidated in the buyer BUT the
SALES CIVIL LAW
consolidation shall not be recorded in the
Registry of property w/o a judicial order,
after the vendor has been duly heard.
If the court declares the contract as an
equitable mortgage, the right of action
to foreclose the mortgage or to collect
the indebtedness arises from the
judgment, even if it is not alternatively
prayed for. (Heirs of Arches v. Diaz,
1973)
CONTRACT OF SALE (with right to repurchase
or absolute) vis--vis EQUITABLE MORTGAGE
o An equitable mortgage is defined as one
which, although lacking in some formality,
or form or words, or other requisites
demanded by a statute, nevertheless
reveals the intention of the parties to
charge real property as security for a
debt, and contains nothing impossible or
contrary to law. (Molina v. CA, 2003)
o Contract of sale (whether with right of
purchase or purported as absolute) is
presumed to be an equitable mortgage in
ANY of the ff. cases: (5P-R)
1. Price unusually inadequate;
2. Possession retained by the seller as
lessee or otherwise;
3. Period of redemption extended (or
granted anew) upon or after the
expiration of the right to repurchase;
4. Part of the purchase price retained by
the seller;
5. Payment of taxes on the thing sold
borne by the seller;
6. Any other case where it may be fairly
inferred that the real intention of the
parties is for the transaction to secure
a debt or other obligation.
o For the presumption of an equitable
mortgage to arise under Art. 1602, two
(2) requisites must concur: (a) that the
parties entered into a contract
denominated as a contract of sale, and (b)
that their intention was to secure an
existing debt by way of a mortgage.
(Molina v. CA, 2003)
o In case of doubt, a contract purporting to
be a sale with right to repurchase shall be
construed as an equitable mortgage.
o Remedy of apparent vendor if equitable
mortgage is the real intention:
REFORMATION
If decreed to be an equitable
mortgage- any money, fruits or other
benefit to be received by the buyer as
rent or otherwise considered as
interest.
If decreed as a true sale with right to
purchase- seller may redeem w/in 30
days from finality of judgment, even if
the period for redemption has expired.
C. LEGAL REDEMPTION (Arts. 1619-1623)
o Legal redemption
- the right to be subrogated,
- upon the same terms and
conditions,
- in the place of one who acquires a
thing by onerous title (such as sale
or dation)
o Instances of legal redemption and periods
for their exercise
To whom granted Period
Co-owner
(Art.1620, CC)
30 days from notice
- in writing
- by the seller
- of the actual
execution and
delivery of the deed
of sale
*Actual knowledge
of the sale
immaterial
(Doromal v CA,
1975)
Adjoining owner of
rural land
(Art.1621,CC)
Adjoining owner of
urban land
(Art.1622,CC)
Debtor in case a
credit or
incorporeal right in
litigation is sold
(Art.1634)
30 days from the
date the assignee
demands payment
from debtor
Applicant or his
widow or legal
heirs in case of
sale of homestead
(Sec.119, Public
Land Act)
5 yrs. from date of
conveyance
Taxpayer in case of
tax sale (Sec. 215,
NIRC)
1 year from date of
forfeiture
Judgment debtor,
successorin-
interest, or creditor
with subsequent
lien, in case of
execution sale
(Rule 39, Sec.27,
ROC)
1 year from the
date of registration
of the certificate of
sale
Debtor-mortgagor,
successors-in-
interest,
judicial/judgment
creditor, any
person having a
lien on the
property, in case of
extrajudicial
foreclosure of
mortgage (Act No.
3135. Sec. 6. )
1 year from the
date of the sale
debtor-mortgagor
in case of judicial
foreclosure of real
estate mortgage IF
the mortgagee is a
90 days from
finality of judgment
SALES CIVIL LAW
To whom granted Period
bank or a banking
institution. (The
General Banking
Law of 2000)
Agricultural lessee
w/o knowledge of
sale of landholding
(Agrarian Land
Reform Code,
Sec.12)
2 years from the
registration of the
sale
o How exercised: by either a formal offer to
redeem or the filing of an action in court
together with the consignation of the
redemption price within the reglementary
period. (Lee Chuy Realty Corp., v. CA,
1995)
Redemption by co-owner
o Available when the shares of any or all of
the other co-owners are sold to a 3
rd
person (anyone not a co-owner)
o If price grossly excessive, the
redemptioner shall pay only a reasonable
one.
o If 2 or more co-owners want to redeem:
they may do so in proportion to their
respective shares
o The right of redemption of co-owners
excludes that of adjoining owners.
Redemption by adjoining owner of rural land
o Available when the area of rural land is 1
hectare or less, unless the grantee does
not own any rural land.
o NOT available when the adjoining lands
are separated by brooks, drains, ravines,
roads, and other permanent servitudes for
the benefit of other estates
o Priority if 2 or more adjoining owners want
to redeem:
1. owner of smaller adjoining land;or
2. if with same area, owner who first
requested redemption
Redemption by adjoining owner of urban land
o Granted in addition to right of pre-emption
o Available when the urban land:
1. is so small and so situated that a major
portion of it cannot be used for any
practical purpose w/in a reasonable
time;
2. was bought merely for speculation;
and
3. was resold.
o Priority if 2 or more adjoining owners want
to redeem: owner whose intended use of
the land appears to be best justified
Redemption of credit or incorporeal right
o Available when it is sold while in litigation
(from the time the complaint is answered)
o NOT available when the assignment in
favor of:
1. co-heir/co-owner of right assigned
2. creditor in payment of his credit
3. possessor of a tenement or piece of
land which is subject to the right
assigned
o How exercised: reimburse the assignee for
the:
- Price paid
- Judicial expenses incurred
- Interest on the price from date of
payment
X. ASSIGNMENT
o Assignment: a sale of credits and other
incorporeal rights
o Requirement to bind third persons:
- if involving credit, right, or action:
must appear in public instrument;
- if involving right over real property:
must be recorded in Registry of
property
o Debtor who pays his creditor before
having knowledge of the assignment is
released from the obligation.
o Assignment of credit includes all accessory
rights, such as:
- Guaranty;
- Mortgages;
- Pledge
- Preference
o Warranties in assignment of credit:
1. Seller warrants existence and legality
of the credit at the time of the sale,
UNLESS it should have been sold as
doubtful;
2. Seller does NOT warrant solvency of
the debtor, UNLESS:
- expressly stipulated or
- the insolvency was prior to the sale
AND of common knowledge
If seller warrants debtors solvency but
duration of liability not stipulated:
duration is 1 year from
- time of assignment, if the period
for payment had already expired,
or
- maturity, if period has not yet
expired
o Liability of assignor of credit in case of
breach of warranty:
- if in GF: price received + expenses of
contract
- if in BF: price received + all expenses
+ damages
o Other warranties:
SALES CIVIL LAW
1. If inheritance sold w/o enumerating
the things composing it, seller only
warrants his character as an heir
2. If certain rights, rents, or products sold
for lump sum, seller warrants only the
legitimacy of the whole in general and
not each part composing it, EXCEPT in
case of eviction from the whole or the
part of greater value
XI. SOME SPECIAL LAWS
A. RA 6552
TITLE: Realty Installment Buyer Act
PURPOSE OF THE LAW: to protect buyers of
real estate on installment payments against
onerous and oppressive conditions (Sec.2)
SCOPE OF APPLICATION: (Sec.3)
o Applies to: sale or financing of real estate
on installment payments, including
residential condominium apartments
o Does NOT apply to:
1. industrial lots;
2. commercial buildings; and
3. sales to tenants under the Agrarian
Land Reform Code
RIGHTS/BENEFITS GRANTED TO BUYERS
1. Additional requirements for rescission in
case of default in payment:
19
a. grace period
b. notice of cancellation or
demand for rescission by
notarial act
c. payment of CSV, if at least 2
yrs of installments paid
(Secs.3&4)
2. During the grace period and before actual
cancellation of the contract:
a. right to assign by a notarial act
his rights to another person, or
b. right to reinstate the contract
by updating the account.
(Sec.5)
3. Right to pay in advance
- any installment or the full unpaid
balance of the purchase price
- any time
- without interest
and to have such full payment of the
purchase price annotated in the certificate
of title covering the property. (Sec.6)
o Any contrary stipulation NULL & VOID.
(Sec.7)
B. PD 957
TITLE: The Subdivision and Condominium
Buyers Protective Decree
19
Discussed in detail under rescission.
PURPOSE OF THE LAW: to regulate the sale of
subdivision lots and condominiums and
impose penalties on fraudulent practices and
manipulations committed in connection
therewith (Whereas clause)
SCOPE OF APPLICATION: Sale of subdivision
lot (inc. the building or other improvements)
or condominium unit, which includes:
- a contract to sell,
- a contract of purchase and sale,
- an exchange,
- an attempt to sell,
- an option of sale or purchase,
- a solicitation of a sale, or
- an offer to sell, directly or by an agent, or by
a circular, letter, advertisement or otherwise.
REGULATION BY THE NATIONAL HOUSING
AUTHORITY
1. Approval of plan for subdivision or
condominium project and registration of
approved plan. (Sec.4)
2. License to sell (subdivision lots or
condominium units) and performance
bond, except in the ff. cases:
a. Sale of a subdivision lot resulting from
the partition of land among co-owners
and co-heirs.
b. Sale or transfer of a subdivision lot by
the original buyer thereof and any
subsequent sale of the same lot.
c. Sale of a subdivision lot or a
condominium unit by or for the
account of a mortgagee
- in the ordinary course of business
- when necessary to liquidate a bona
fide debt. (Secs.4-7)
4. Power to suspend license to sell (Sec.8)
5. Power to revoke registration certificate
and license to sell after notice and hearing
(Sec.9)
6. Registers of subdivision lots and
condominium units where all NHA orders
affecting the condition or status thereof
shall be entered (Sec.10)
7. Registration of dealers, brokers, and
salesmen (Sec.11)
8. Revocation of registration of dealers,
brokers, and salesmen after notice and
hearing (sec12)
9. Prior written approval for any mortgage on
the unit or lot to be made by the owner or
developer (sec.18)
10. Permission for alteration of approved
subdivision plan (Sec.22)
11. Visitorial powers (Sec34)
12. Take-over development at the expenses of
the owner or developer, jointly and
severally, in cases where the owner or
developer has refused or failed to develop
or complete the development of the
project as provided for in this Decree.
o NHA may, after such take-over,
demand, collect and receive from the
buyers the installment payments due
SALES CIVIL LAW
on the lots, which shall be utilized for
the development of the subdivision.
(Sec.35)
RIGHTS/BENEFITS GRANTED TO BUYERS
1. If the owner or developer mortgaged the
lot or unit to secure a loan:
- buyer must be notified before the
release of the loan
- buyer may, at his option, pay his
installment for the lot or unit directly
to the mortgagee who shall apply the
payments to the corresponding
mortgage indebtedness secured by the
particular lot or unit being paid for,
with a view to enabling said buyer to
obtain title over the lot or unit
promptly after full payment thereto
(Sec.18)
2. Warranties enforceable
- against the owner or developer, jointly
and severally,
- for the facilities, improvements,
infrastructures or other forms of
development represented or promised
in brochures, advertisements and
other sales propaganda disseminated
by the owner or developer or his
agents (Sec.19)
o The owner or developer must complete
the construction within 1 year from the
date of the issuance of the license for
the subdivision or condominium
project or such other period of time as
may be fixed by the NHA (Sec.20)
3. Consent by the homeowners association or
majority of the lot buyers required for any
alteration of the approved subdivision plan
(Sec.22)
4. Non-forfeiture of installment payments
when the buyer,
- after due notice to the owner or
developer,
- desists from further payment
- due to the failure of the owner or
developer to develop the subdivision or
condominium project according to the
approved plans and within the time
limit for complying with the same.
o Such buyer may, at his option, be
reimbursed the total amount paid
including amortization interests but
excluding delinquency interests, with
interest thereon at the legal rate.
(Sec.23)
5. Rights under RA 6552 if the buyer defaults
in payment for reasons other than the
failure of the owner or developer to
develop the project (Sec.24)
6. Issuance of title upon full payment of the
lot or unit
o No fee, except those required for the
registration of the deed of sale in the
Registry of Deeds, shall be collected
for the issuance of such title.
o In the event a mortgage over the lot or
unit is outstanding at the time of the
issuance of the title to the buyer, the
owner or developer shall redeem the
mortgage or the corresponding portion
thereof within six months from such
issuance. (Sec.25)
7. Payment of real estate tax and
assessment on a lot or unit by the owner
or developer without recourse to the buyer
for as long as the title has not passed the
buyer
o BUT if the buyer has actually taken
possession of and occupied the lot or
unit, he shall be liable to the owner or
developer for such tax and assessment
effective the year following such taking
of possession and occupancy. (Sec.26)
8. Freedom from any collection of charges by
the owner or developer for an alleged
community benefit.
o Fees to finance services for common
comfort, security and sanitation may
be collected only by a properly
organized homeowners association and
only with the consent of a majority of
the lot or unit buyers actually residing
in the subdivision or condominium
project. (Sec.27)
9. Right of way to public road must be
secured by the owner or developer of a
subdivision without access to any existing
public road or street (Sec.29)
10. Organization of Homeowners Association
to be initiated by the owner or developer
for the purpose of promoting and
protecting the mutual interest of the
buyers and assisting in their community
development. (Sec.30)
o Any waiver of compliance with any
provision of PD957 VOID (Sec.33)
o Sanctions in case of violation:
1. Administrative fine: up to P10K
2. Criminal liability: fine up to P20K
and/or imprisonment up to 10 yrs.
C. ACT NO. 3952
TITLE: The Bulk Sales Law
PURPOSE OF THE LAW: To protect persons
who extended credit to merchants, relying on
the fact that their stock of merchandise was
not to be sold in bulk, but kept up and
replenished from time to time. Credit was
extended, presupposing continuance in the
business of merchandising (Baviera, citing US
case)
SCOPE OF APPLICATION
o Applies to: a sale and transfer in bulk,
which includes any sale, transfer,
mortgage or assignment of:
SALES CIVIL LAW
1. a stock of goods, wares, merchandise,
provisions or materials NOT in the
ordinary course of trade and the
regular prosecution of the business of
the seller, transferor, mortgagor, or
assignor
2. all, or substantially all, of the business
or trade theretofore conducted by the
seller, transferor, mortgagor, or
assignor
3. all, or substantially all, of the fixtures
and equipment used in and about the
business of the seller, transferor,
mortgagor, or assignor
o Does not apply :
1. If the vendor, transferor, mortgagor or
assignor, produces and delivers a
written waiver of the provisions of the
Act from his creditors as shown by
verified statements (Sec.2)
2. To executors, administrators,
receivers, assignees in insolvency, or
public officers, acting under judicial
process. (Sec.8)
REQUIREMENTS: (SPIN-C)
1. Sworn statement of list of creditors
2. Pro-rata application of the purchase or
mortgage money to the payment of listed
creditors
3. Inventory of the goods, wares,
merchandise, provisions or materials
4. Notice to listed creditors
5. Consideration for the sale, transfer,
mortgage or assignment
Sworn statement of list of creditors
o Contents:
1. names and addresses of all creditors of
seller or mortgagor
2. amount of indebtedness due or owing,
or to become due or owing to each
o When delivered: before receiving any part
of the purchase price, or any promissory
note, memorandum, or other evidence of
indebtedness therefor
o To who delivered:
- to such buyer, mortgagee, or agent; or
- if the buyer, mortgagee, or agent be a
corporation: to the president, vice-
president, treasurer, secretary or
manager of said corporation; or
- if such vendee or mortgagee be a
partnership firm: to a member thereof
Inventory
o Contents:
1. quantity
2. cost price of each article, so far as
possible
o When made: at least 10 days before sale
or mortgage
Notice to creditors
o Contents: price, terms, and conditions of
the sale, transfer, mortgage or assignment
o When made: at least 10 days before
transferring possession
o How made: personally or by registered
mail
Consideration
- must not be nominal
EFFECT OF NON-COMPLIANCE:
o Criminal liability: 6 mos.-5yrs
imprisonment, or fine of P5K or less, or
both.
o In addition, if the purchase or mortgage
money is not applied pro-rata to the bona
fide claims of listed creditors, the sale,
transfer or mortgage shall be
FRAUDULENT and VOID.
Q 2007 BAR
Seeking to streamline its operations and to
bail out its losing ventures, the stockholders
of X Corporation unanimously adopted a
proposal to sell substantially all of the
machineries and equipment used in and about
its manufacturing business and to sink the
proceeds of the sale for the expansion of its
cargo transport services.
(a) Would the transaction be covered by the
provisions of the Bulk Sales Law?
(b) How would X Corporation effect a valid
sale?
CIVIL LAW
AGENCY
Agency
TABLE OF CONTENTS
Section 1. Nature, Form, and Kinds of Agency 197
Section 2. Obligations of the Agent 202
Section 3. Liabilities of the Agent 204
Section 4. Obligations of the Principal 205
Section 5. Extinguishment of Agency 206
CIVIL LAW
AGENCY
NATURE, FORM, AND KINDS OF
AGENCY
Definition and concept
Contract of agency: where a person binds
himself,
1. to render some service, or
2. to do something in representation
or on behalf of another, with the
latters consent or authority. (Art.
1868, CC)
AGENCY is a relationship which implies a
power in an agent to contract with a 3rd
person on behalf of a principal. [Humble
Oil & Refining v Beu Tex. Cir. App.]
AGENCY is personal, representative, and
derivative in nature. The authority to act
emanates from the powers granted to him
by his principal. His act is the act of the
principal if done within the scope of the
authority. [Rallos v Felix Go Chan & Sons
Realty, 1978]
Nature, basis and purposes
Since agency is a contract, there must
consent, object, and cause.
The purpose of agency is to extend the
principals personality.
General rule: What a man may do in person,
he may do thru another.
Exceptions: There are acts which the agent
may not do for the principal:
1. Personal acts, and
2. Criminal acts.
Knowledge of the agent is imputed to the
principal.
Exceptions: 1. Agents interests are adverse
to those of the principal;
2. Agents duty is not to disclose
information; and
3. 3rd person claiming the benefit
of the rule colludes with agent to
defraud principal.
The theory of imputed knowledge ascribes the
knowledge of the agent, to the principal, not
the other way around. The knowledge of the
principal cant be imputed to its agent
(Sunace Internatl Mgt. Services v. NLRC,
2006).
Characteristics
1. Consensual: Perfected by mere consent.
General Rule: On the part of the principal,
there must be an actual intention to appoint
or an intention naturally inferable from his
words or actions; and on the part of the
agent, there must be an intention to accept
the appointment and act on it, and in the
absence of such intent, there is generally no
agency. [Victorias Milling v CA, 2000]
Exception: One who clothes another with
apparent authority as his agent, and holds
him out to the public as such, cant be
permitted to deny the authority of such
person to act as his agent, to the prejudice of
innocent third parties dealing with such
person in good faith. [Macke v Camps, 1907]
2. Nominate: Has its own name.
3. Preparatory: Entered into as a means to an
end.
4. Principal: Can stand by itself without need
of another contract:
5. If gratuitous, unilateral: Creates obligations
for only one of the parties. If for
compensation, bilateral: Gives rise to
reciprocal rights and obligations. (CNPPU/B)
Essential elements
1. Consent, express or implied
2. Object of the contract, which is the
execution of a juridical act in relation to
third persons;
3. Agent acts as a representative; and
4. Agent acts within the scope of his
authority. (Rallos v Felix Go Chan & Sons
Realty, 1978)
The agent may also be called an attorney,
proxy, delegate or representative. (Angeles
v. PNR, 2006)
Relationship between the parties is fiduciary:
With respect to the property that is subject
matter of the agency, the agent is estopped
from asserting an interest adverse to the
interest of the principal. The agent cannot
bind the principal where the agent has an
adverse interest.
Exception:
1. If agent acts with the knowledge
and consent of both, in which case
either party may repudiate the
transaction.
2. If agent is mere intermediary
with no independent initiative.
The agent must not use or divulge confidential
information. After agency terminates, the
agent is no longer under a duty to abstain
from competition and may use general
information (not acquired in violation of his
duty as agent).
While acting as an agent of his employer, an
employee owes the duty of fidelity and
loyalty. Being a fiduciary, he cant solicit his
employers customers or co-employees for
himself or for a business competitor of his
employer. (Molina v. Pacific Plans, 2006)
CIVIL LAW
AGENCY
The rules on service of process make service
on "agent", whether general or special,
sufficient even if agent has limited authority.
An employee of a corporation may not be
deemed an agent under the above rule unless
his/her duties are so integrated to the
business that his/her absence or presence
wont toll the business operations (Aboitiz
Internatl Forwarders, Inc. v. CA, 2006).
Determination of existence of agency
1. Designation by parties is not
controlling.
2. Fact of existence: if relations that
constitute agency exist, there is
agency regardless of WON parties
understood the exact nature of the
relation.
3. No presumption of existence: agency
must exist as a fact.
Exceptions:
a) When agency arises ipso jure
b) To prevent unjust enrichment
4. Intention of the parties to create
relationship. As between principal and
3rd person, agency may exist without
the direct assent of the agent.
Against the principal, the agent has
the obligation to determine
existence and scope of agency
Against the agent, the third person
has the obligation to determine
existence and scope of agencyThe
person dealing with the agent must
also act with ordinary prudence and
reasonable diligence. If he knows
or has good reason to believe that
the agent is exceeding his
authority, he cannot claim
protection. [Harry Keeler Electric v
Rodriguez, 1922]
Agency vs. similar contracts
1. Partnership
a. An agent acts only for his principal; a
partner acts for his partners, the
partnership, and for himself.
b. Parity of standing test: A partnership
generally presupposes a parity of standing
between the partners-- equal proprietary
interest in the capital or property and
exercises equal rights in the conduct of the
business.
2. Independent contractor
Agent independent
contractor
Represents his
principal.
Employed by the
employer.
Acts under the
principals control
and instruction.
Acts according to his
own method.
Principal is liable for
torts committed by
the agent within the
scope of his
authority.
Employer not liable
for torts committed
by the independent
contractor.
3. Lease
agency lease of service
Based on
representation.
Based on
employment.
Agent exercises
discretionary
powers.
Lessor ordinarily
performs only
ministerial
functions.
3 parties: Principal,
agent and the 3rd
person with whom
the agent contracts.
2 parties: Lessor
and lessee.
Relates to
commercial or
business
transactions.
Relates more to
matters of mere
manual or
mechanical
execution.
agency lease of property
Agent is controlled
by the principal.
Lessee is not
controlled by the
lessor.
Agency may involve
things other than
property.
Lease of property
involves property..
Agent can bind the
principal.
Lessee cannot bind
the lessor.
4. Contract of sale
agency to sell sale
Agent receives the
goods as the
principals goods.
Buyer receives the
goods as owner.
Agent delivers the
proceeds of the sale.
Buyer pays the price.
Agent can return the
object in case he is
unable to sell the
same to a 3rd
person.
Buyer, as a general
rule, cannot return
the object sold.
CIVIL LAW
AGENCY
Agent in dealing with
the thing received is
bound to act
according to the
instructions of his
principal.
Buyer can deal with
the thing as he
pleases, being the
owner.
5. Guardianship
agency guardianship
Agent represents a
capacitated person.
A guardian
represents an
incapacitated
person.
Agent is appointed
by the principal and
can be removed by
the latter.
Guardian is
appointed by the
court and stands in
loco parentis.
Agent is subject to
the directions of the
principal.
Guardian is not
subject to the
directions of the
ward but must act
for the benefit of the
latter
Agent can make the
principal personally
liable.
Guardian has no
power to impose
personal liability on
the ward.
In agency, the agent acts not on his own
behalf but on behalf of his principal. In
assignment, there is total transfer or
relinquishment of right by the assignor to the
assignee. (Apex Mining Co. v. Southeast Asia
Mindanao Gold Mining, Corp., 2006)
Kinds
1. As to manner of creation
a. Express: where the agent has been
actually authorized by the
principal,
i. Orally, or
ii. In writing. (Art. 1869, CC)
b. Implied: where the agency created is
deduced from the
i. Acts or conduct of the
principal;
ii. Silence or lack of action of the
principal;
iii. Principals failure to repudiate
the agency; (Art.
1869, CC)
iv. Agents acts which carry out
the agency; or
v. Agents silence or inaction.
(Art. 1870, CC) 2 situations
of implied acceptance from
silence
a. The persons are present:
if the principal delivers his
power of attorney to the
agent, who receives it
without any objection
(Art. 1871, CC); and
b. The persons are absent:
acceptance isnt implied
from the agents silence,
except
1. When the principal
transmits his power of
atty. to the agent, who
receives it without any
objection;
2. When the principal
entrusts to him by
letter/telegram a power
of atty. with respect to
the business in which
hes habitually engaged
as an agent, and he
didnt reply (Art. 1872,
CC).
By special notification: The person appointed
as agent is considered such with respect to
the person to whom it was given. (Art. 1873,
CC)
By public advertisement: The agent is
considered such with regard to any person.
(Art. 1873, CC)
2. As to formalities
Gen. Rule: No formal requirements
governing the appointment of an agent.
Except: When the law requires a specific
form, i.e. if the sale of a piece of land or any
interest therein is through an agent, the
agents authority shall be in writing, or the
sale is void. (Art. 1874, CC)
Note: If the owner himself sells
realty/interest therein, if not made in
writing, the contract of sale is unenforceable
but subject to ratification (Art. 1403, par.
2(e), CC).
3. As to cause or consideration
a. Gratuitous
b. Onerous: there is
compensation. Agency is
presumed to be for
compensation (Art. 1875, CC)
4. As to extent of business covered
a. General: comprises all the
business of the principal; or
b. Special: comprises one or more
specific transactions. (Art.
1876, CC)
Universal agent: authorized to do all acts that
the principal may personally do, and which he
can lawfully delegate to another the power of
CIVIL LAW
AGENCY
doing. (Mechem, Sec. 58)
general
agent
special
agent
Scope of
authority
All acts
connected
with the
business or
employment
in which he is
engaged.
Specific acts
in pursuance
of particular
instructions
or with
restrictions
necessarily
implied from
the act to be
done.
Nature of
service
authorized
Involves
continuity of
service.
No continuity
of service.
Extent to
which agent
may bind the
principal
May bind his
principal by
an act within
the scope of
his authority
although it
may be
contrary to
the latters
special
instructions.
Cannot bind
his principal
in a manner
beyond or
outside the
specific acts
which he is
authorized to
perform.
Termination
of authority
Apparent
authority
does not
terminate by
the mere
revocation of
his authority
without
notice to the
3rd party.
Duty imposed
upon the 3rd
party to
inquire
makes
termination
of the
relationship
as between
the principal
and agent
effective as
to such 3rd
party, unless
the agency
has been
entrusted for
the purpose
of contracting
with such 3rd
party.
Construction
of principals
instructions
Merely
advisory in
nature.
Strictly
construed as
they limit the
agents
authority.
5. As to authority conferred
a. Couched in general terms:
comprise only acts of
administration, even if
i. the principal states that he
withholds no power,
ii. that the agent may execute
such acts as he may
consider appropriate, or
iii. the agency authorizes a
general and unlimited
management. (Art. 1877,
CC)
b. Couched in specific terms:
authorizing only the
performance of a specific act/s.
(Art. 1878, CC)
Power of attorney: a written authorization to
an agent to perform specified acts in behalf of
his principal which acts, when performed,
shall have binding effect on the principal (2
Am. Jur. 30).
Purpose: Not to define the agents
authority, but to evidence such
authority to 3rd parties
Interpretation: Strictly construed
Exception: When strict construction will
destroy the very purpose of the power.
Special power of attorney: an authority
granted by the principal to the agent where
the act for which it is drawn is expressly
mentioned. (Strong v. Repide) A special
power can be included in a gen. power of
attorney, either by giving authority for all acts
of a particular character or by specifying
therein the act/transaction for which a special
power is needed. (Tolentino)
When special powers are necessary: for acts
of strict dominion/ownership
a. To make payments;
b. To effect novations;
c. To compromise, submit questions for
arbitration, renounce the right to
appeal from judgment, waive
objections to venue of actions, or
abandon a prescription already
acquired;
d. To effect remission/condonation;
e. To enter into any contract by which the
ownership of an immovable is
transmitted/acquired;
f. To make gifts;
g. To loan or borrow money;
h. To lese any realty to another for more
than a year;
i. To bind the principal to render some
service without compensation;
j. To bind the principal in a contract of
partnership;
k. To obligate the principal as a
guarantor or surety;
l. To create or convey real rights over
immovables;
m. To accept or repudiate an inheritance;
n. To ratify or recognize obligations
contracted before the agency; and
o. Any other act of strict dominion. (Art.
1878, CC)
6. As to nature and effects
a. Ostensible or Representative
CIVIL LAW
AGENCY
b. Simple or commission: agent acts in
his own name but for the principals
account. (Art. 1883, CC)
c. Agency by estoppel: there is no
agency, and the alleged agent seemed
to have apparent or ostensible, but not
real, authority to represent another.
apparent
authority
authority by
estoppel
Though not actually
granted, principal
knowingly permits
or holds out the
agent as possessing
the necessary
powers to act in a
certain way.
Where the principal,
by his negligence,
permits his agent to
exercise powers not
granted to him,
even though the
principal may have
no notice or
knowledge of the
conduct of the
agent.
Implied Agency Agency by
Estoppel
1. There is actual
agency; thus
with rights &
duties as an
agent.
1. There is no actual
agency; thus
without rights &
duties as an agent.
2. Principal alone
is liable.
2. If caused by the
principal, he is
responsible. If
caused by the agent,
he is responsible.
Provided, 3
rd
person
in good faith.
One professing to act as agent for another is
estopped to deny his agency both as against
his asserted principal and third persons
interested in the transaction which he
engaged in. (Angeles v. PNR, 2006)
In general, a hospital isnt liable for the
negligence of an independent contractor-
physician. The exception is if the physician is
the hospitals ostensible agent.
Under the doctrine of apparent authority a
hospital can be held vicariously liable for the
negligent acts of a physician, WON the
physician is an independent contractor, unless
the patient knows, or shouldve known that
the physician is an independent contractor.
This doctrine involves 2 factors to determine
liability. The first factor focuses on the
hospitals manifestations, whether the hospital
acted in a manner which would lead a
reasonable person to conclude that the
individual who was alleged to be negligent
was an employee or agent of the hospital. The
hospital need not make express
representations to the patient that the
treating physician is an employee of the
hospital; a representation may be general and
implied. The second factor focuses on the
patients reliance-whether the plaintiff relied
upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence.
(Nogales v. Capitol Medical Center, 2006)
Apparent authority/doctrine of ostensible
agency/agency by estoppel, imposes liability
because of the actions of a principal/
employer in misleading the public into
believing that the relationship or the authority
exists. The question is whether the principal
has by his voluntary act placed the agent in
such a situation that a person of ordinary
prudence, conversant with business usages
and the nature of the particular business, is
justified in presuming that such agent has
authority to perform the particular act in
question. In cases where it can be shown that
a hospital, by its actions, has held out a
particular physician as its agent and/or
employee and that a patient has accepted
treatment from that physician in the
reasonable belief that it is being rendered in
behalf of the hospital, then the hospital will be
liable for the physicians negligence.
(Professional Services Inc v. Agana, 2007)
d. Agency by Ratification
Conditions for ratification:
1. The principal must have
capacity and power to ratify.
2. He must have had knowledge of
material facts.
3. He must ratify the acts in its
entirety.
4. The act must be capable of
ratification.
5. The act must be done in behalf
of the principal.
Ratification need not be expressed to the
agent or 3rd party. Before ratification, the 3rd
party may revoke the unauthorized contract.
Effects of ratification:
1. With respect to the agent: It
relieves the agent from liability. He
may also recover compensation.
2. With respect to the principal: He
assumes responsibility for the
unauthorized act, as fully as if the
agent had acted under original
authority; but he is not liable for acts
outside the authority approved by his
ratification.
3. With respect to 3rd persons: They
are bound by ratification. They cannot
question agents authority.
Ratification Estoppel
Rests on intention. Rests on prejudice.
CIVIL LAW
AGENCY
Affects the entire
transaction from the
beginning.
Affects only
relevant parts of
the transaction.
The substance of
ratification is
confirmation of
unauthorized acts or
conduct after it has
been done.
The substance of
estoppel is the
principals
inducement to
another to act to
his prejudice.
7. Kinds of principal
a. Disclosed
b. Partially disclosed third is unaware of
the principals identity.
c. Undisclosed
General rule: If the principal is
undisclosed, the agent is directly liable to
the person with whom he had contracted
as if the transaction were his own. (Art.
1883, CC)
Rationale: There is no representation.
Exception: When the contract involves
things belonging to the principal, in
order to protect 3rd persons against
possible collusion between the agent
and the principal. (Art. 1883, CC)
The agents who made a contract in their
own names may sue the third person.
(Behn Mayer & Co. v. Banco Espaol-Fil.)
The undisclosed principal cant sue the
third person on a contract concluded by
the agent in his own name (Smith Bell &
Co. v. Sotto Matti). His recourse is against
the agent.
OBLIGATIONS OF THE AGENT
a) To carry out the agency he
accepted
Acceptance of agency: person is free to
refuse the agency, but once he accepts hes
bound to carry it out (Art. 1884, CC) in
accordance with its terms in good faith and
following the principals instructions.
Obligation to answer for damages: the agent
is liable for damages suffered by the principal
due to his non-performance (Art. 1884, CC).
Obligation to finish business upon principals
death: if delay will entail any danger to the
subject of the agency/principal, the agent
must finish the transaction/business already
begun on the principals death (Art. 1884,
CC). This is an exception to the gen. rule that
death extinguishes agency.
Obligation of person who declines an agency:
under equity he is still bound to observe bono
paterfamilias in the custody and preservation
of the property forwarded to him by the
owner. However, the owner must act as soon
as practicable either by appointing an agent or
by taking charge of the property. (Art. 1885,
CC)
When agency shouldnt be carried out: if its
execution would manifestly result in
loss/damage to the principal (Art. 1888, CC).
b) To act within the scope of
authority
The agent must act within the scope of his
authority (Art. 1881, CC): authority is the
power to act within the scope of his
assignment on his principals behalf with
binding effect on the latter. But the agent isnt
deemed to have exceeded the limits of his
authority should he perform the agency in a
manner more advantageous to the principal
(Art. 1882, CC) since hes authorized to do
such acts as may be conducive to the
accomplishment of the agencys purpose (Art.
1881, CC).
c) To advance the necessary funds
Obligation to advance funds: when the
contract stipulates that the agent shall
advance the necessary funds. (Art. 1886,
CC)
Basis: principals obligation to
reimburse the agent
Exception: insolvent principal (Art.
1886, CC)
d) To act in accordance with
instructions
When departure from instructions is justified:
a. In sudden emergencies
b. If there are ambiguous instructions
c. Insubstantial departures
Absence of instructions: agent shall exercise
the diligence of a good father of a family as
required by the nature of the
business/transaction (Art. 1888, CC)
Authority Instructions
The sum total of the
powers committed or
permitted to the
agent
Only a private rule
of guidance to the
agent
Relates to the
subject
(biz/transaction)
with which the agent
is empowered to
deal or act.
Refers to the
manner or mode of
agents action with
respect to matters
within the permitted
scope of action.
CIVIL LAW
AGENCY
Limits of authority
operate vs those
who have/are
charged with
knowledge of them.
Binding only on the
principal and agent
e) To be loyal
Obligation not to prefer own interest: agent is
liable for damages if, there being a conflict of
interests, he prefers his own (Art. 1889,
CC).
Exception:
a. The principal waives the benefit of the rule,
provided he does so with full knowledge of the
facts.
b. The interests of the agent are superior.
f) To borrow money
a. Agent empowered to borrow money:
agent may himself be the lender at
current rate of interest (Art. 1890, CC),
for there is no danger of damage to
principal.
b. Agent authorized to lend money: needs
the principals consent (Art. 1890, CC)
for he may be a bad debtor.
g) To render accounts and
deliver things received by virtue
of the agency
Obligation to render accounts: agents duty to
account for and deliver to the principal all
money and property received by virtue of the
agency (Art. 1891, CC). If he fails to do so
or uses the money/property for his own use,
the agent is liable for estafa (Art. 315, RPC).
Stipulation exempting the agent from this
duty is void (Art. 1891, CC).
Inapplicability:
a. The agent or broker acted only as a
middleman (Domingo v. Domingo)
b. The agent or broker informed the principal
of the gift or bonus or profit he received from
the vendee, and the principal did not object.
c. A right of lien exists in favor of the agent.
d. Solutio indebiti
h) To be responsible for
substitutes
Sub-agent: Person to whom the agent
delegates, as his agent, the performance of an
act for the principal which the agent has been
empowered to perform through his
representative. (Restatement of the Law
on Agency, Sec. 5)
Power to appoint sub-agent/substitute: unless
prohibited by the principal, the agent may
appoint one (Art. 1892, CC). The principal
has a right of action against both the agent
and substitute (Art. 1893, CC).
Effects of Substitution:
a. Substitution prohibited all the
substitutes acts are void (Art. 1892,
CC)
b. Substitution authorized agent is
released from responsibility unless
substitute is notoriously incompetent
or insolvent (Art. 1892, CC).
- if the substitute is the one designated
by the principal, agent is absolutely
exempted
c. Substitution not authorized, not
prohibited valid if beneficial to the
principal
- if caused damage to principal, agent
is responsible for substitutes acts
(Art. 1892, CC) and principal with
right of action against substitute (Art.
1893).
Relation among the principal, agent and sub-
agent:
a. If sub-agent is appointed by the agent on
the agents sole account, the sub-agent is a
stranger to the original principal.
b. If sub-agent is appointed by the agent with
the principals authority, the relation of
principal-agent generally exists between the
original principal and the sub-agent.
Effect of death of the original agent:
a. If the authority of the sub-agent proceeds
from the principal- not terminated.
b. If the sub-agent is a substitute for, acts
under the authority of, and is accountable to,
the agent, the sub-agents authority is
terminated even if the power of substitution is
given in the original power.
Applying the law to the SPA executed by
Rubio in favor of his daughter Llamas, it is
clear that she isnt prohibited from appointing
a substitute. By authorizing Lim to sell the
subject properties, Llamas merely acted
within the limits of the authority given by her
father, but she will have to be "responsible for
the acts of the sub-agent," among which is
precisely the sale of the subject properties in
favor of respondent. (Escueta v. Lim, 2007)
i) To pay interest
2 cases under Art. 1896, CC:
a. Sums belonging to the principal applied to
agents own use: agent liable for interest as
compensation/indemnity from the day on
which he did so, without prejudice to criminal
liability (Art. 315, RPC)
b. Agent owes sums even after the end of the
agency: agent liable for interest from the date
the agency is extinguished.
Agent is bound to deliver the money hence,
demand unnecessary. (Art. 1891, CC)
CIVIL LAW
AGENCY
j) To answer for his
fraud/negligence
Liability: that the agency is or isnt gratuitous
will be considered by the court in fixing the
liability of the agent (Art. 1909, CC)
k) Factor/Commission agents
Factor/commission agent: one whose business
is to receive & sell goods for a commission,
and is entrusted by the principal with its
possession (Mechem on Agency)
Obligations of a commission agent:
a. Responsibility for goods received as
described in the consignment to avoid
liability, make a written statement of the
damage and deterioration of the goods
upon receiving them (Art. 1903, CC)
b. If handling goods of same kind and
mark with different owners distinguish
them by countermarks and designate the
goods owned by each principal (Art.
1904, CC)
c. Sale on credit only if with principals
express or implied consent (Art. 1905,
CC). If without authority, principal with
2 alternatives:
1. require payment in cash any
interest/benefit from the sale shall
go to the agent
2. ratify the sale
- if authorized, shall be deemed to have
been made on a cash basis if agent fails
to inform the principal of such sale and
of the names of the buyers (Art. 1906,
CC)
d. If agent receives a guarantee
commission agent bears the risk of
collection (Art. 1907, CC). The
guarantee commission is paid to the
agent in addition to the ordinary
commission agreed upon.
e. To collect the principals credits when
they are due & demandable agent is
liable for damages if he fails to do so,
unless he can show that the credit is
uncollectible despite the exercise of due
diligence (Art. 1908, CC). This
exception doesnt apply if theres a
guarantee commission.
ordinary agent commission agent
Acts for and in
behalf of the
principal.
Acts in his own
name or in that his
principal.
Need not have
possession of the
goods of the
principal.
Must be in
possession of the
goods of the
principal.
commission agent Broker
Engaged in the
purchase and sale,
for a principal, of
personal property
which has to be
placed in his
possession and
disposal.
Has no custody or
possession of the
thing he disposes;
merely acts as an
intermediary
between the sellers
and the buyer.
Has a relation with
the principal (buyers
or sellers) and the
property which is
the object of the
transaction.
Maintains no
relation with the
thing which he
purchases or sells.
[Pacific Commercial v Yatco, 1939]
LIABILITIES OF THE AGENT
When liable, not liable
Gen. rule: an agent who acts as such isnt
personally liable to the party with whom he
contracts (Art. 1897, CC)
Exceptions:
1. The agent acts in his own name (Art.
1883, CC): he is directly bound in favor of
the person with whom he contracted.
Exception: if the contract involves
things owned by the principal. (Art.
1883, CC)
2. The agent expressly binds himself
(Art. 1897, CC): he obligates himself
personally and by his own act.
3. The agent exceeds his authority
without giving the other party sufficient
notice of his powers (Art. 1897, CC): the
contract is unenforceable against the
principal; for depriving the third party of
any remedy against the principal, the
agent is liable. (NPC v. Natl Merchandising
Corp.)
4. The agent exceeded the scope of his
authority and undertook to secure
principals ratification (Art. 1898, CC).
That the agent has also bound himself to pay
the debt doesnt relieve the principal, for
whose benefit the debt was incurred, from
liability. The agents individual liability
constitutes a further security in the creditors
favor and doesnt affect/preclude the
principals liability. [Tuason v Orozco, 1906]
Art. 1897 presents 2 instances when an agent
becomes personally liable to a third person:
when he expressly binds himself to the
obligation, and when he exceeds his authority.
In the last instance, the agent can be held
liable if he does not give the third party
sufficient notice of his powers. In case of
CIVIL LAW
AGENCY
excess of authority, the law doesnt say that a
third person can recover from both the
principal and the agent. (Eurotech Industrial
Technologies Inc. v. Cuizon, 2007)
Though the entrustee is a corporation, the law
specifically makes the officers/employees
responsible for the offense, without prejudice
to the civil liabilities of such corporation
and/or board of directors. Such
officers/employees are vested with the
authority and responsibility to devise means
necessary to ensure compliance with the law
and, if they fail to do so, are held criminally
accountable. The principle applies to those
corporate agents who themselves commit the
crime and to those, who, by virtue of their
managerial positions or other similar relation
to the corporation, could be deemed
responsible for its commission, if by virtue of
their relationship to the corporation, they had
the power to prevent the act. (Ching v. Sec.
of Justice, 2006)
Where agency exists, the third party's liability
on a contract is to the principal and not to the
agent. However, where an agent is
constituted as an assignee, the agent may, in
his own behalf, sue on a contract made for his
principal. (Angeles v. PNR, 2006)
Effect where 3
rd
person aware of limits of
power: if agent exceeded the scope of his
authority and the principal didnt ratify the
contract, the contract is unenforceable against
the principal, and void between the agent and
the third person. (Art. 1898, CC)
1. Agent promised to secure the
principals ratification and failed
agent is liable. (Art. 1898, CC)
2. Contract ratified principal is liable.
Effect of agents ignorance: if the agent acted
in accordance with the principals orders, the
latter cant use the agents ignorance as to
circumstances where he himself was/ought to
have been aware. (Art. 1899, CC) The
principal is liable.
When 3
rd
person cant use as a defense the
agents lack of authority:
1. The principal has ratified the contract;
or
2. Principal signified his willingness to
ratify. (Art. 1901, CC)
Ratification: if the agent exceeds his
authority, the principal isnt bound unless he
ratifies it. (Art. 1910, CC) Without
ratification, the agent is liable.
When agent acts within scope of authority
Within the scope of authority: for third
persons, an act is within the scope of
authority if its within the terms of the power
of attorney as written, even if the agent in
fact exceeded the limits of authority based on
an understanding between him and the
principal (Art. 1900, CC).
Presentation of power of attorney or
instructions: may be required by 3
rd
persons
(Art. 1902, CC). As a rule, a 3
rd
person deals
with an agent at his peril. But he cant be
bound by private/secret orders and
instructions of the principal (Art. 1902, CC).
Liability of 2 or more agents
Gen. rule: joint liability
Except: if solidarity is expressly stipulated,
solidary liability (Art. 1894, CC) for:
1. non-fulfillment of the agency; or
2. fault/negligence of fellow agents.
Exception to exception: when some agents
acted beyond the scope of their authority,
innocent agents arent liable. (Art. 1895,
CC)
OBLIGATIONS OF THE PRINCIPAL
1. To comply with the obligations
contracted by the agent
Principal is bound: he must comply with all
the obligations arising from the agents
authorized acts. If the agent acted beyond his
authority, the principal is bound if he ratifies
the contract (Art. 1910, CC).
Principal is estopped: though the agent
exceeded his authority, the principal is liable if
he allowed the former to act as if he had full
powers (Art. 1911, CC).
If 2 persons contract simultaneously with
agent & principal for the same thing:
a. Contract of prior date prevails.
b. If applicable, follow the rule on double
sales in Art. 1544, CC. (Art. 1916,
CC)
Liability to 3
rd
persons, if agent & principal
contracted separately:
a. Agent in good faith principal is liable
for damages.
b. Agent in bad faith agent is liable.
(Art. 1917, CC)
2. To advance the necessary
sums and reimburse the agent
Obligation to advance funds: the principal
must advance to the agent, upon his request,
the sums necessary for the execution of the
agency. (Art. 1912, CC)
Obligation to reimburse: if the agent
advanced the sums necessary, these must be
reimbursed by the principal with interest from
CIVIL LAW
AGENCY
the day the advance was made, even if the
business wasnt successful (Art. 1912, CC).
Exceptions to the obligation of advancement/
reimbursement:
a. If the agent acted in contravention
of the principal's instructions, unless
principal derives benefits.
b. When the expenses were due to the
fault of the agent.
c. When the agent incurred them
knowing that an unfavorable result
would ensure, if the principal was
unaware thereof.
d. When it was stipulated that the
expenses would be borne by the agent,
or that the latter would be allowed only
a certain sum. (Art. 1918, CC)
Agents right to retain object of agency in
pledge: if the principal fails to reimburse the
agent (Art. 1914, CC). But agent isnt
entitled to the excess in case the thing was
sold to satisfy his claim, and the proceeds are
more than his claim (Arts. 2115, 2121, CC).
Also he must possess the thing lawfully in his
capacity as agent (2 C.J. 457).
When principals solidarily liable for the
agencys consequences:
a. There are 2/more principals;
b. They all concurred in the
appointment of the same agent;
and
c. The agent is appointed for a
common
transaction/undertaking. (Art.
1915, CC)
3. To indemnify the agent for
damages
Obligation to indemnify agent: for damages
which the execution of the agency has caused
the agent, so long as the agent isnt at fault
(Art. 1913, CC). This is based on fairness.
Note: Arts. 1914-1915 are applicable here.
4. To pay the agents
compensation
Presumed for compensation: the principal
must pay the compensation
a. agreed upon, or
b. the reasonable value of the services.
When agent is entitled to compensation: only
after he has completed/substantially
completed his obligation.
Agent cant be deprived of agreed commission
by the principal by dealing directly with the
buyer. The principals act is unfair as would
amount to bad faith. (Infante v. Cunanan)
It would be in the height of injustice to permit
the principal to terminate the contract to the
brokers prejudice when he had already
reaped the benefits of the brokers efforts.
(Lim v. Saban)
In case of double agency:
a. If both principals have knowledge of
the double employment, the agent can
recover from both of the principals.
b. If both principals have no knowledge of
the double employment, the agent
cant recover from either.
c. If the 2nd employer has knowledge of
the 1st employment, both he and the
agent are guilty, and an executory
contract entered into in fraud of the
1st employer is unenforceable.
Brokers: One who negotiates contracts
relative to property in behalf of others and for
a fee.
Since a brokerage relationship is essentially a
contract of agency, principles of contract law
apply. Since the principals of the broker are
generally undisclosed, the broker is personally
liable. Hence, petitioner had to advance the
payments for respondents trades. Brokers
have a right to be reimbursed for sums
advanced by them. (Abacus Securities Corp.
v. Ampil, 2006)
If a broker isnt efficient in procuring cause in
bringing about the sale, he isnt entitled to
compensation. (Prats v. CA)
EXTINGUISHMENT OF AGENCY
Quick glance: Ways to extinguish agency
Mode Way of
extinguishing
1. By the parties
subsequent acts
a. Principals
revocation
b. Agents withdrawal
2. By operation of law a. By the
principals/agents
- death
- civil interdiction
- insanity, or
- insolvency
b. By the
firms/corporations
dissolution
3. By agreement a. Accomplishment of
object/purpose
CIVIL LAW
AGENCY
b. Expiration of
period
4. Other modes a. Other modes of
extinguishment of
obligations
b. Changes in law
c. Changes in
conditions
d. War
Modes of extinguishment (Art. 1919, CC)
1. By the subsequent acts of the parties
either by mutual consent or unilaterally.
a. By the principals revocation.
Revocation: termination by the
subsequent acts of the principal. May be
express or implied. If the agents
authority is in writing, the principal may
compel him to return this document
(Art. 1920, CC).
Gen. rule: principal may revoke the
agency at will (Art. 1920,CC).
Except (BIW): 1. the revocation is done
in bad faith (Danon v. Brimo);
2. the agency is coupled with an
interest, such as when
a. a bilateral contract depends
on it;
b. its the means of fulfilling an
obligation already contracted;
c. a partner is appointed
manager of a partnership and
is removed unjustifiably. (Art.
1927, CC)
3. the principal waived his right
to revoke (New Manila Lumber
Co. v. Rep.)
Agency coupled with an interest cant be
terminated by the sole will of the
principal since third persons are
involved, though its revocable after the
interest ceases. The interest of the agent
must be in the subject matter of the
power conferred, and not merely in the
exercise of the power as it entitles him
to compensation. (Del Rosario v. Abad)
An agency coupled with interest may be
revoked when the agent acts to defraud
the principal. The irrevocability of the
power of attorney may not be used to
shield the perpetration of acts in bad
faith, breach of confidence, or betrayal
of trust. [Coleongco v Claparols, 1964]
Irrevocability of the contract cannot
affect 3rd persons and is obligatory only
on the principal who executed the
agency. [New Manila Lumber v Republic,
1960]
Principals liability for damages despite
revocation of agency:
1. Agency with a fixed period: principal
liable due to wrongful discharge of
agent before end of the period.
2. No period fixed: principal liable if
the agent can prove the former acted
in bad faith.
Effect of revocation wrt 3
rd
persons:
(Arts. 1921-1922, CC)
Agency to contract
with specific
persons
Agency to contract
with general
public
Wont prejudice
3
rd
persons until
notice is given
them.
Wont prejudice
those in good faith
& w/o knowledge.
Notice must be
personal.
Notice may be
personal.
The principal has a duty to give actual
notice of the revocation of the agency to
third parties. [La Compania General de
Tobacos v Diaba, 1911]
As to the agent: Express notice is always
necessary. Revocation without notice to
the agent will not render invalid an act
done in pursuance of the authority.
As to 3rd persons: Express notice is
necessary. Insofar as 3rd parties acting
in good faith and without knowledge of
revocation, acts of the agent are deemed
valid.
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.
Revocation by appointment of a new
agent: effective when notice is given to
the former agent (Art. 1923, CC). The
2 agencies must be incompatible. This is
an implied revocation.
Revocation by direct management by
principal: when the principal deals
directly with 3
rd
persons (Art. 1924,
CC). This is an implied revocation.
CIVIL LAW
AGENCY
Revocation if with 2/more principals: one
of the principals may revoke the power
of attorney without the others consent
(Art. 1925, CC).
Partial revocation of gen. power: a gen.
power is revoked by a special one wrt
the special matter involved in the latter
(Art. 1926, CC).
b. By the agents withdrawal.
The agent may withdraw at will, subject
to the contractual obligations to the
principal (fixed period of agency,
purposes not accomplished).
Right to withdraw: based on the
prohibition against involuntary servitude
(Art. III, Sec. 18, 1987
Constitution).
1. without just cause: agent with duty
to give due notice to the principal
and to indemnify the latter, should
he suffer damages due to the
withdrawal (Art. 1928, CC)
2. with just cause: if due to
impossibility of continuing with the
agency without grave detriment to
himself (Art. 1928, CC), or due to
a fortuitous event (Art. 1174,
CC), the agent cant be held liable.
Obligation to continue to act: agent must
continue to act until the principal has
had reasonable opportunity to take the
necessary steps to remedy the situation
caused by the withdrawal (1929, CC).
Implied renunciation:
1. agent conducts himself in a way
incompatible with his duties.
2. agent abandons the object of agency
and acts for himself in committing a
fraud upon the principal.
3. files a complaint against the principal
and adopts an antagonistic attitude
towards him (Valera v. Velasco).
2. By operation of law.
a. By the principals/agents death,
civil interdiction, insanity or
insolvency.
As theres an integration of the
principals personality into the agents,
its impossible for agency to continue
once the death of either is established.
(Rallos v. Felix Go Chan & Sons)
Except: 1. the agency is constituted in
the common interest of the principal and
agent, or in the interest of a 3
rd
person
who accepted the stipulation in his favor
(Art. 1930, CC).
2. wrt acts done by the agent who didnt
know of the principals death (Art.
1931, CC)
3. wrt business already begun when the
principal died, if delay would cause
danger (Art. 1884, CC).
An act done by the agent after the
principals death is valid and effective
only if the agent and the 3
rd
person knew
of the death. The knowledge of the 2
must concur; otherwise the agents act
void and unenforceable. (Rallos v. Go
Chan & Sons)
Agents death: his heirs are obligated to
notify the principal and to adopt such
measures as the circumstances may
demand for the principals interest (Art.
1932, CC). But they cannot continue
the agency.
Exceptions:
a. agency by operation of law
b. agency coupled with an interest in the
subject matter of the agency
b. By the dissolution of the
firm/corporation.
3. By agreement.
a. By the accomplishment of the
agencys object/purpose.
b. By the expiration of the period of
the agency.
Other Modes
The modes enumerated in Art. 1919 are
those peculiar to agency. The list isnt
exclusive.
Other modes:
1. Modes of extinguishment of obligations
(Art. 1291, CC)
2. Changes in law affecting the subject
matter/transaction involved in the
agency (2 Am. Jur. 75)
3. Changes in conditions not anticipated
by the parties (2 Am. Jur. 61)
Except: a. the original circumstances
are restored within a reasonable period
of time
b. agent has reasonable doubts
as to whether the principal
would want him to act, his
authority wont be terminated if
he acts reasonably
c. the principal and agent are in
close daily contact, and the
agent knows that the principal
is aware of the change and
CIVIL LAW
AGENCY
doesnt give him new
instructions
4. Outbreak of war
Presumption of continuance of agency: once
shown to have existed, agency is presumed to
continue, without anything showing
termination.
PARTNERSHIP CIVIL LAW
Partnership
TABLE OF CONTENTS
Section 1. Nature; Creation of a Partnership 211
Section 2. Classification of Partnerships and Partners 212
Section 3. Obligations of Partners 214
Section 4. Obligations of Partnerships 217
Section 5. Rights of Partners 218
Section 6. Rights of Partnerships 220
Section 7. Dissolution and Winding Up 220
Section 8. Settlement of Accounts Between Partners 223
Section 9. Limited Partnership 223
Section 10. Limited Partner 225
CIVIL LAW PARTNERSHIP
NATURE; CREATION OF A
PARTNERSHIP
Essential Features
Contract of Partnership:
a. 2/more persons bind themselves
b. to contribute money, property, or
industry to a common fund,
c. with the intent of dividing the profits
among themselves. (Art. 1767, CC)
Essential features:
1. There must be a valid contract
2. The parties must have legal capacity
3. A mutual contribution of money, property,
or industry to a common fund
4. Has a lawful object (Art. 1770, CC)
5. The primary purpose is to obtain profits
and divide the same among the parties
Characteristics:
1.Fiduciary
2.Nominate
3.Consensual
4.Bilateral/multilateral
5.Principal
6.Onerous
7.Preparatory
8.With legal personality (Art. 1768, CC)
9.Profit oriented
The partners cant be held liable for the
partnerships obligations unless it is shown
that the legal fiction of a different juridical
personality is being used for fraudulent,
unfair, or illegal purposes (Aguila v CA).
Principle of delectus personae: no one can be
a partner without the consent of all the
partners.
Form of Contract
General Rule: No special form is required
(Art. 1771, CC)
Exceptions:
1. Where immovable property or real rights
are contributed (Art. 1771, CC) written in
a public instrument with a signed inventory of
the contributions. (Art. 1773, CC)
2. Where the capital is at least P3,000, in
money or property need a public
instrument, which must be recorded in the
SEC. (Art. 1772, CC) But a partnership has a
juridical personality even if requirement is not
complied with.
Rules to determine the existence of a
partnership (Art. 1769, CC)
1. General Rule: Persons who are not partners
to each other are not partners as to third
persons.
exception: partnership by estoppel.
2. Co-ownership and sharing of gross returns
dont establish a partnership, by itself
3. Prima facie evidence of partnership: receipt
of a share of the business profits
Except if received in payment as:
a. A debt by installment
b. Wages or rent
c. An annuity
d. Interest on a loan
e. Consideration in a sale
For tax purposes, a co-ownership of inherited
properties is automatically converted to an
unregistered partnership when these are used
as a common fund with intent to produce
profits for the heirs in proportion to their
shares in the inheritance as determined in a
project of partition. (Oa v. CIR)
Whether a partnership exists is a factual
matter. Where circumstances taken singly
may be inadequate to prove the intent to form
a partnership, the collective effect of these
circumstances may be such as to support a
finding of the existence of the parties intent.
(Heirs of Tan Eng Kee v CA)
Distinctions
Partnership Corporation
Created by mere
agreement of the
parties;
Created by
operation of law
May be organized
by only two
persons
Requires at least 5
incorporators;
Juridical
personality
commences from
the moment of
execution of the
contract of
partnership
Personality
commences from
SECs issuance of
the certificate of
incorporation
May exercise any
power authorized
by the partners as
long as it is not
contrary to law,
etc.
Can exercise such
powers expressly
granted by law or
incident to its
existence
If no agreement as
to mgt. - every
partner is an agent
of the partnership
Power to do
business is vested
in the board of
directors/ trustees
A partner as such
may sue a co-
partner who
mismanages
Suit against the
board/director who
mismanages must
be brought in the
corp.s name
Has no right of
succession
Has right of
succession
The partners are
liable personally
and subsidiarily for
partnership debts
The stockholders
are liable to the
extent of the
shares subscribed
by them
Based on delectus
personam
Not based on
delectus personam
May be established
for any period of
time stipulated
May not be formed
for a period
exceeding 50
years
May be dissolved
at anytime by the
will of any or all
partners
May be dissolved
only with the
consent of the
state
Governed by the
Civil Code
Governed by the
Corporation Code
Partnershi
p
Co-
ownership
Creation Always
created by a
contract
Gen., created
by law, may
exist even
without a
contract
Juridical
Personality
Has a
separate,
distinct
juridical
personality
Has no
juridical
personality
Purpose Realization
of profits
Common
enjoyment of
a thing or
right
Duration No limitation
upon the
duration is
set by law
Property cant
be undivided
for more than
10 years
Transfer of
Interests
Need
unanimous
consent of
partners to
make
assignee of
interest a
partner
A co-owner
can dispose
of his share
without the
consent of
the others
Power to
act with
Third
Persons
A partner
may bind
the
partnership
A co-owner
cant
represent the
co-ownership
Dissolution Death or
incapacity of
a partner
dissolves the
partnership
Death or
incapacity of
a co-owner
doesnt
dissolve the
co-ownership
Representa
-tion
There is
mutual
agency
There is no
mutual
agency
Profits Must be
stipulated
upon
Must always
depend upon
proportionate
shares and
any
stipulation to
the contrary
is void.
A corp. cant enter into a partnership contract.
This is based on public policy, since in a
partnership the corporation would be bound
by the acts of persons who arent duly
appointed and authorized agents and officers,
which would be inconsistent with the policy
that the corporation shall manage its own
affairs, separately and exclusively. (SEC
OPINION to Antonio Librea dated Feb.
29, 1980)
The main distinction is that the partnership
contemplates a general business with some
degree of continuity, while the joint adventure
is formed for the execution of a single
transaction, and is of a temporary nature.
Under Phil. law, a joint adventure is a form of
partnership. Although a corporation cannot
enter into a partnership contract, it may
engage in a joint venture (Heirs of Tan Eng
Kee v CA).
CLASSIFICATION OF
PARTNERSHIPS AND PARTNERS
Kinds of Partnerships
1. As to nature
a. Commercial/trading
b. Professional
2. As to duration
a. With a fixed term - (Art. 1830[1a],
CC) unless continued by some/all the
partners (Art. 1785, CC)
b. At will (Art. 1785, CC)
3. As to legality of existence
a. De jure has complied with all the
necessary requisites for lawful
establishment (Arts. 1772, 1773,
CC)
b. De facto failed to comply with the
requisites
4. As to representation to others
a. Ordinary/real really exists between &
among the partners themselves and as
to third persons
b. Ostensible/by estoppel deemed one
only in relation to transacting third
persons (Art. 1825, CC)
5. As to publicity
a. Open known to the public
b. Secret
6. As to its object
a. Universal (Art. 1777, CC)
i. As to all present property (Art. 1778,
CC)
ii. As to profits (Art. 1780, CC)
b. Particular (Art. 1783, CC)
7. As to partners liability
a. General liable pro rata (Art. 1816,
CC) or solidarily (Arts. 1822-1824,
CC)
b. Limited (Art. 1843, CC)
Types, Universal Partnership:
All present
property
All profits
All present property
actually owned by
partners are
contributed
become common
property of the
partnership & the
partners.
Property owned by
the partners when
the partnership was
formed continue to
pertain to them
only the usufruct
becomes common
property
Only profits from the
property contributed
become common
property; other
profits may, by
stipulation, be
considered as
common property.
All profits acquired
through partners
industry/work
become common
property.
Who are prohibited from entering into
universal partnerships: those prohibited from
giving donations (Art. 1782, CC), such as:
a. legally married, common law spouses (Art.
87, FC)
b. parties guilty of adultery/concubinage
c. criminals convicted for the same offense in
consideration of the same
d. a person & a public officer (or his wife,
descendants, ascendants) by reason of his
office (Art. 739, CC)
Kinds of Partners
1. As to membership
a. Real a contributing member
b. By estoppel/Quasi-partner not really a
partner but represents himself as one
2. As to continuation of business affairs after
dissolution
a. Continuing
b. Discontinuing
3. As to value of contribution
a. Majority
b. Nominal
4. As to nature of membership
a. Original
b. Incoming
5. As to state of survivorship
a. Surviving continues to be a partner
after dissolution due to death of a
partner
b. Deceased
6. As to effect of expulsion
a. Expelled (Art. 1840[6], CC)
b. Expelling
7. As to nature of contribution
a. Capitalist contribute money or
property
b. Industrial contribute industry/labor.
He cant engage in business for himself
unless expressly permitted (Art.
1789, CC)
8. As to liability
a. General/Real liability extend to
separate property (Art. 1776, CC)
b. Limited/Special only to extent of
contribution (Art. 1843, CC)
c. Capitalist-Industrial
9. As to management
a. Managing manages the firms affairs
b. Silent doesnt participate in
management
c. Liquidating winds up the affairs after
dissolution
10. Other special classifications
a. Subpartner related only to the
regular partner (Art. 1804, CC)
b. Retiring withdraws/retires from the
partnership
Industrialist
Partner
Capitalist
Partner
Contribution Contributes
his industry
Contributes
money or
property
Prohibition
to engage in
other
business
Cannot
engage in any
business for
himself
Cant engage
in the same or
similar
enterprise
Profits Receives a
just and
equitable
share
Shares in
profits
according to
agreement
thereon; if
none, pro rata
to his
contribution
Losses Exempted as
to losses as
between
partners but
it is liable to
3rd persons
without
prejudice to
reimburseme
nt from the
capitalist
partners
1. stipulation
as to losses
2. if none, the
agreement as
to profits
3. if none, pro
rata to
contribution
Partnership and Partner by Estoppel
Partner by estoppel: the representation of
being a partner is done by 1 person only
Partnership by estoppel: the representation
involves several persons pretending to be a
firm
Requisites of Partner By Estoppel:
1. The person
a. represents himself as a partner of an
existing partnership when he isnt, or
b. consents to another representing him to
anyone as a partner in an existing
partnership, or
c. consents to another representing him to
anyone as a partner with 1/more persons not
actual partners.
2. Third person relied on the
misrepresentation, unaware of the deception.
3. On the faith of the misrepresentation, the
3
rd
person gave credit to the actual/apparent
partnership.
4. The alleged partner cant disallow liability
by claiming he isnt actually a partner. He is
bound as a partner though he actually isnt.
(Art. 1825, CC)
Partnership by estoppel: composed of the
alleged partner and the partnership itself. It
arises when all the members of the existing
partnership consented to the representation
(Art. 1825, CC). The person becomes an
agent of the existing firm and his
act/obligation binds the firm.
No real partnership is created by estoppel. Its
only insofar as 3
rd
persons are involved and
for the purpose of protecting them that the
principal of estoppel is recognized.
When
liability
is:
Situation Who are
liable
Pro rata no
existing
partner
ship
existing
partner
ship
all those
represented
as partners
consented to
the
representatio
n or
not all of the
partners
consented
person
who
represente
d/was
represente
d as a
partner
and all
those who
consented
Separat
e
no
existing
partner
ship
Existin
g
partner
ship
only some of
those
represented
as partners
consented to
the
representatio
n
or
none of the
partners
consented
person
who
represente
d/was
represente
d as a
partner
and all
those who
consented
He who contracts with a partnership as such is
estopped in a suit by the partnership against
him growing out of such contract to claim that
the partnership was not properly organized
(Behn, Meyer & Co. v. Rozamin).
Applicability of general provisions of
partnership:
1. If the law recognizes a defectively
organized partnership as de facto as far as
3rd persons are concerned, it should have
such attribute of partnership as domicile.
(MacDonald v. National City Bank)
2. Although it has no legal standing or
juridical personality, it is a partnership de
facto and the general provisions of the Civil
Code applicable to all partnerships apply to it.
Corporation by estoppel: all persons are liable
as general partners (Sec. 21, Corp. Code). A
de facto partnership is created.
OBLIGATIONS OF PARTNERS
A. Contribute
1. Obligation with respect to contribution
of property
Partner is a debtor: for whatever he had
promised to contribute thereto (Art. 1786,
CC)
Partner is a warrantor wrt contributions of
specific & determinate things: hes bound to
warrant vs. eviction (Art. 1786, CC)
Liability for undelivered fruits: if the property
is fruit-producing, and the fruits werent
delivered at the execution of the contract or
any specified time, the partner will be liable
for the value of these fruits (Art. 1786, CC).
No demand is necessary.
Remedy for breach of warranty: partnership
may recover indemnity from contributing
partner. If the partnership wouldnt have been
constituted had it not been for the
contribution, the other partners may dissolve
the firm (11 Planiol & Ripert, 276)
Other duties of contributing partners:
a. to preserve the property with the diligence
of a good father of a family (Art. 1163, CC)
b. to indemnify the partnership for damages
caused to it by delay in contribution of
property (Art. 1170, CC)
2. Appraisal of goods or property
contributed
Rule when contribution is in goods: the
amount must be determined by proper
appraisal at the time of contribution.
a.Comply if mode of appraisal is agreed
upon
b. no agreement by experts chosen by
Subsequent changes in value: will be for the
firms account (Art. 1787, CC)
3. Obligation with respect to contribution
of money, and money converted to
personal use
Sanctions:
a.partner becomes the firms debtor for
interest and damages from the time of
his failure to contribute or from time of
conversion (Art. 1788, CC)
b. payment of 12% interest as interest on
forbearance of money (Martinez v.
Ong Pang Co)
When money or property have been received
by a partner for a specific purpose and he
later misappropriated it, such partner is guilty
of estafa. (Liwanag v CA)
4. Bring to partnership capital credit
received
Equal contribution by general partners:
capitalist partners shall contribute equal
shares to the capital of the partnership (Art.
1790, CC).
5. Obligation of capitalist partner to
contribute additional capital
To contribute additional capital in case of
imminent loss, requisites:
a. There is an imminent loss of the business
b. The majority of the capitalist partners are
of the opinion that an additional contribution
to the common fund would save the business
c. Capitalist partner refuses deliberately to
contribute an additional share
d. There is no agreement to the contrary
If refused to contribute: the partner must sell
his interest in the partnership to the other
Industrial partner is exempt from sanction.
6. Obligation of collecting managing
partner
Requisites:
a. 2 separate credits, both demandable,
b. one credit is owed to the partnership,
c. the other to the collecting partner whos a
managing partner.
Managing partner should:
a. If issued receipt for own account only
apply the sum to the 2 credits in proportion to
their amounts
b. Issued receipt for partnerships account
apply whole sum to partnerships credit (Art.
1792, CC)
7. Obligation of partner who receives
share of partnership credit
Receipt of share in partnership credit: if a
debtor made a partial payment of his debt to
the partnership, where a partner received his
share of the credit and the others havent,
and the debtor later becomes insolvent, the
partner who received his share shall bring to
the partnership capital what he received
though the receipt he issued covered only his
share (Art. 1793, CC).
Cf. 1792: in 1793 theres only 1 debt where
the partnership is the creditor.
B. Pay damages
Liability for damages due to partners fault:
the damages cant be compensated with the
profits & benefits he may have earned for the
partnership by his industry (Art. 1794, CC).
Compensation is inapplicable as its requisites
are absent.
Mitigation of liability: if through his
extraordinary efforts in other activities
unusual profits have been realized (Art.
1794, CC)
C. Bear risk of loss
Risk of loss of things contributed (Art. 1795,
CC): owner bears the loss
Specific & determinate
things, not fungible
where only usufruct is
contributed
Risk is borne by
partner
Specific & determinate
things, with ownership
transferred to
partnership
Risk is borne by
partnership
Fungible things
(consumable)
Risk is borne by
partnership
Things contributed to
be sold
Risk is borne by
partnership
Things brought and
appraised in the
inventory
Risk is borne by
partnership
D. Mutual Agency
Appointed managing partners (MP) power:
execute all acts of administration despite his
partners opposition unless he acts in bad faith
(Art. 1800, CC). He has the powers of a
general agent and all incidental powers
essential for the carrying on of the firms
purposes.
If MP appointed in the articles of partnership:
power is irrevocable
Except: 1. with just, lawful cause
2. upon the vote of the partners
representing the controlling interest
(Art. 1800, CC)
If power granted after constitution of
partnership: revocable any time, for any
cause (Art. 1800, CC)
In case of conflict: if
1. 2/more partners are appointed MPs,
2. theres no specification of their
respective duties,
3. theres no stipulation that 1 of them
shall not act without the others
unanimous consent,
Then each MP may separately execute all
acts of administration.
If any MPs oppose the others acts the issue
shall be decided by the majority of the MPs.
In case of tie the issue shall be decided by
the partners owning the controlling interest
(Art. 1801, CC).
Joint management: if theres a stipulation that
none of the MPs shall act without the others
consent. Unanimity is required, even if an MP
is absent/incapacitated unless theres
imminent danger of grave or irreparable injury
(Art. 1802, CC)
If without agreement on manner of mgt:
1. all partners are considered agents
2. Important changes in the firms realty
require unanimity (Art. 1803, CC)
Judicial intervention to get total consent: if
the important alteration is necessary &
unanimous consent cant be obtained (Art.
1803, CC)
Kinds of acts of a partner (Art.1818, CC)
Those apparently for
the carrying of the
partnerships
business in the
usual way
These acts bind the
partnership, unless the
partner had in fact no
authority and the 3
rd
person dealing with
him knew of such fact
Those not
apparently for
carrying on the
partnerships
business in the
usual way
These acts only bind
the partnership if the
partner was in fact
authorized by the co-
partners
Those in
contravention of a
restriction on
authority
Not binding on the
partnership if the 3
rd
person knew of the
restriction
Presumption: that each individual partner is
the firms agent & that he has authority to
bind the firm in carrying on the partnership
transactions. This presumption permits 3
rd
persons to hold the firm liable on transactions
entered into by any of its members acting
apparently on its behalf & within the scope of
his authority (Litton v. Hill). A 3
rd
person has
the right to presume that a gen. partner
dealing with partnership property has the
requisite authority from his co-partner
(Goquiolay v. Sycip).
Re: 7 acts of dominion in Art.1818, CC: can
be done on the partnerships behalf if all the
partners jointly act.
Except: 1. all the co-partners have
authorized a partner to execute the act
2. all the co-partners have abandoned the
business
Liability of a partner acting without authority:
personal liability
E. Render full information
Duty to give info: on demand, to give true &
full info relating to partnership affairs (Art.
1806, CC). Hes also under the duty of
voluntary disclosure of material facts within
his knowledge relating to/affecting partnership
affairs (Art. 1821, CC).
F. Account for benefits
A partner cant, to the others detriment,
apply exclusively to his own benefit the
results of the knowledge and info gained in
the character of partner (Pang Lim v. Lo
Seng).
Partner shall hold as trustee for partnership
any profits:
1. derived without the others consent from
any transaction connected to the
a. formation,
b. conduct, or
c. liquidation of the partnership.
2. derived from the use of the partnerships
funds or property (Art. 1807, CC).
G. Liable for Partnership contracts
Liability of partnership & partners for
partnership contracts: pro rata, with all their
property (Art. 1816, CC). The private
property of the partners cant be seized for
satisfaction of partnership debts until all the
partnership assets have been exhausted.
The exemption of an industrial partner from
paying losses relates exclusively to the
settlement of the partnership affairs among
the partners themselves, and not with the
partners liabilities to 3
rd
persons (La
Compania Maritima v Munoz).
While the liability of the partners are joint in
transactions entered into by the partnership, a
3
rd
person who transacted with the
partnership can hold partners solidarily liable
for the whole obligation if the 3
rd
persons
case falls under Arts. 1822-1823 (Muasque
v. CA).
Partner acting in his own name: he is solely
liable
Gen. rule: stipulation against pro rata liability
is void
Except: such stipulation is valid by & among
the partners (Art. 1817, CC)
Art. 1817 vs. 1799: it is permissible to
stipulate among partners that a capitalist
partner will be exempted from liability in
excess of the original capital contributed; but
wont be exempted insofar as his capital is
concerned (Paras).
The dismissal of the complaint to favor 1 of
the general partners doesnt increase the
remaining partners liability. (Island Sales v.
United Pioneers).
Liability of a newly-admitted partner:
1.obligations contracted before his admission:
liable only up to his share in the partnership
property unless theres a contrary
stipulation (Art. 1826, CC).
2.obligations contracted after admission:
liable as an ordinary original partner.
Liability of outgoing partner:
1. when he gives notice of his retirement or
withdrawal, hes freed from liability on
contracts entered into thereafter but still
liable on existing incomplete contracts
2. hes liable for goods sold & delivered
after his retirement/withdrawal if the sale
was pursuant to a contract made before such
retirement/withdrawal
H. Solidarily liable with partnership
Solidary liability of partnership & partners: for
everything chargeable to the partnership
under Arts. 1822-1823 (Art. 1824, CC).
This is an exception to Art. 1816 as it
involves torts.
Vicarious liability, requisites:
1.the partner committed a wrongful
act/omission;
2.he acted in the ordinary course of the
partnership business or with the authority of
the co-partners even if the act wasnt
connected with the partnership business;
3.loss/injury is caused to a 3
rd
person by the
wrongful act/omission;
4.3
rd
person isnt a partner (Art. 1822, CC);
5.theres no pre-existing contract between the
partnership & 3
rd
person; if there is, but was
grossly & deliberately violated, this itself
constitutes quasi-delict (Air France v.
Carrascoso).
Extent of liability: firm is liable to the same
extent as the partner (Art. 1822, CC) & all
partners are solidarily liable with the firm
(Art. 1824, CC).
Misapplication of money/property resulting in
losses: if loss is suffered by the 3
rd
person
who delivered the money/property, the
partnership is solidarily liable with the
misappropriating partner (Art. 1823, CC) &
all partners are solidarily liable with the firm
(Art. 1824, CC).
The liability of partners under the Workmens
Compensation Act also solidary. If their
responsibility was merely joint and one
became insolvent, the amount awarded would
only be partially satisfied, which is contrary to
the laws purpose (Liwanag v. Workmens
Compensation Comm.)
OBLIGATIONS OF PARTNERSHIPS
A. Bear risk of loss
Partnership bears the risk: when what is
contributed is a fungible thing, thing which
cant be kept without deteriorating, if the
thing was contributed to be sold, and
contributions are appraised in the inventory
(Art. 1795, CC)
B. Reimburse
3 obligations of the partnership:
1. refund disbursements with legal interest
2. answer for obligations contracted in good
faith in the partnerships interest
3. answer for risks (Art. 1796, CC)
Partner = agent. Being a mere agent, he isnt
personally liable as long as hes not at fault
(Art. 1912, CC) and acted within the scope
of his authority. But unlike an ordinary agent,
the paying partner doesnt have the right of
retention if he isnt paid.
C. Operate under firm name
Required: every partnership shall operate
under a firm name (Art. 1815, CC) to
distinguish the partnership from other entities
& from the individual partners.
Non-members whose names were used: dont
have the rights of a partner but are liable to
3
rd
persons without notice as partners (Art.
1815, CC). They become partners by
estoppel (PNB v. Lo).
Use of deceased partners name in law firm:
permissible as long as its indicated in the
firms communications that the partner is
deceased (Rule 3.02, CPR)
Other rules:
1. a person continuing the partnership after
a dissolution uses the firm name/name of
deceased partner as part of the name:
deceased partners individual property isnt
liable for debts contracted (Art. 1840, CC)
2. the limited partners surname shall not
appear in the firm name unless
a. its also the surname of a general
partner
b. before the limited partner became such,
the business had been carried on under a
name in which his surname appeared (Art.
1846, CC)
D. Bound by partners admission
Requisites to be admissible against the
partnership:
1. it must be connected with partnership
affairs
2. its within the scope of the partners
authority (Art. 1820, CC)
3. its made during the firms existence
Exception: when a partner makes admissions
for himself only without purporting to act for
the partnership
Admission by a former partner not admissible
in evidence against the partnership. (Congco
vs. Trillana)
E. Bound by notice to partner
Notice to the firm:
1. Notice to a partner while already a partner
2. Knowledge is acquired by a partner whos
acting in a particular matter, WON a partner
at the time as long as he still remembers the
partnership matter
3. The partner who acquired it has reason to
believe that it be the subject of the business,
and couldve communicated it to the acting
partner (Art. 1821, CC)
F. Liable for wrongful act of partner
Extent of liability for wrongful acts, omissions
of a partner: firm is liable to the same extent
as the partner (Art. 1822, CC).
Misapplication of money/property resulting in
losses: if loss is suffered by the 3
rd
person
who delivered the money/property, the
partnership is solidarily liable with the
misappropriating partner (Art. 1823, CC).
RIGHTS OF PARTNERS
A. Share in losses and profits
Rules for distribution of profits and losses,
(Art. 1797, CC)
OF
PROFITS
OF LOSSES
With
agreement
According to
agreement
According to
agreement
Without
agreement
1. Share of
capitalist
partner is in
proportion
to his capital
contribution
2. Share of
purely
industrial
partner is
not fixed -
1. If sharing
of profits is
stipulated -
apply to
sharing of
losses
2.If no profit
sharing
stipulated -
losses shall
be borne
as may be
just and
equitable
under the
circumstanc
es
according to
capital
contribution
3.Purely
industrial
partner not
liable for
losses
For capitalist-industrial partner: wrt his capital
contribution, he shall, in addition, receive a
share in the profits in proportion to the
amount of his capital contribution.
Industrial partner not liable for losses
Designation of shares: by agreement, may be
entrusted to a 3rd person. Designation made
by the 3
rd
person is binding on partners,
unless it is manifestly inequitable or
unreasonable (Art. 1798, CC).
When the designation of a 3
rd
person can no
longer be impugned:
1. the partner has begun to execute the
decision
2. he hasnt questioned it within 3 months
from knowledge of it (Art.1798, CC)
Prohibited stipulation: the exclusion of a
partner from the profits or from sharing in the
losses (Art. 1799, CC).
B. Associate another person
Subpartnership: partnership of a partner with
another person wrt the formers share. The
subpartner isnt a part of the partnership.
Requisite so subpartner is part of the main
partnership: consent of all (Art. 1804, CC).
C. Access partnership books
Partnership books: open to inspection of all
the partners at a reasonable hour (Art. 1805,
CC).
Where kept:
1. place agreed upon
2. if without agreement, at principal place of
business (Art. 1805, CC)
Reasonable hours on business days
throughout the year, not merely during some
arbitrary period of a few days chosen by the
managing partners (Pardo v. Lumber Co.)
D. Obtain formal account
Gen. rule: a partner isnt entitled to a formal
account, save in dissolution
Basis: his right of access to the books
Except:
1. if hes wrongfully excluded from the
business/possession of the property by his co-
partners
2. if the right exists by agreement
3. as provided in Art. 1807
4. whenever other circumstances render it
just & reasonable (Art. 1809, CC)
The right of a partner to demand an
accounting exists as long as the partnership
exists. The prescription period begins to run
only upon the dissolution when the final
accounting is done (Fue Leung v. IAC).
E. Property rights
Property rights (Art. 1810, CC):
1.in the specific partnership property
2.in the partnership, and
3.to participate in the management
Partnership capital vs. partnership property
Capital Property
With a constant value Value varies, in
accordance with
market value
Includes only the
actual capital
contributed &
promised to the
partnership
Includes the
contribution & all
property later acquired
on the partnerships
account
Partners are co-owners of specific partnership
property: the incidents are
1. a partner has an equal right with his co-
partners to possess specific property for
partnership purposes if excluded from this,
can seek a formal accounting (Art. 1809,
CC) or judicial dissolution (Art. 1831, CC)
2. a partners right in specific property cant
be assigned except when all partners assign
their rights in that property
3. a partners right in specific property isnt
subject to attachment/execution except on a
claim against the partnership
4. a partners right in specific property isnt
subject to support payment (Art.1811, CC)
Property used by the partnership: a partner
may
1. contribute only the use of property
2. allow partnership to use his separate
property
3. hold the title to partnership property in his
own name without having it belong to him
Property acquired by a partner with
partnership funds: partnership property
Except:
1. contrary intention appears
2. property was acquired after dissolution but
before winding up
Partners interest in the partnership: his share
in the profits & surplus (Art. 1812, CC). This
may be assigned, attached, & subject to
payment of support as there was already a
liquidation of the partnership affairs. The
assignee is only entitled to the profits
assigned.
The partner isnt a creditor of the partnership
for the amount of the shares (Leyte-Samar
Sales v. Cea).
Conveyance of partners entire interest:
doesnt, of itself, dissolve the partnership
(Art. 1813, CC)
Rights of the
transferee or
assignee
What assignees
cannot do
To receive in
accordance with his
contract the profits
accruing to the
assigning partner
Interfere in the
management;
To avail of the usual
remedies provided
by law in the event
of fraud in the
management
Require any
information or
account
To receive the
assignors interest in
case of dissolution
Inspect any of the
partnership books.
Enforcement of a judgment vs. a debtor-
partners interest (Art. 1814, CC): the
judgment creditor may
1. apply for an order charging the partners
interest with payment of the unsatisfied
amount of the final judgment with interest
2. have a receiver appointed
Redemption: a partner or more may redeem
the interest with
1. their separate property
2. with partnership property, with the consent
of all partners whose interests arent
charged/sold (Art. 1814, CC)
F. Convey real property
Effects of Conveyance (Art. 1819, CC):
Title in
partnership name
- Any partner may
convey under
partnership name
Conveyance passes title
but partnership can
recover unless: 1)The
partner who sold it was
carrying on in the usual
way the business of the
partnership hence
binding the
partnership; or 2)
Buyer had no
knowledge of the lack
of authority of the
seller
Title in
partnership name
- Conveyance in
partner's name
Conveyance does not
pass title but only
equitable interest.
Provided that: The
partnership hence
binding the partnership
Title in name of
1/ more partners,
Conveyance in
name if
partner/partners
in whose name
title stands
Conveyance passes title
but partnership can
recover unless: 1)The
partnership hence
binding the
partnership; or 2)
Buyer had no
knowledge of the lack
of authority of the
seller
Title in name of
1/more/all
partners or 3
rd
person in trust for
partnership,
Conveyance
executed in
partnership name
of in name of
partners
Conveyance will only
pass equitable interest.
Provided that: The
partnership hence
binding the partnership
Cf agency: this is different from the provisions on
agency, which provide that a special power to sell
excludes the power to mortgage (Art. 1879, CC).
RIGHTS OF PARTNERSHIPS
A. Acquire immovables
Immovables/an interest therein may be
acquired in the partnership name, and title so
acquired can only be conveyed in the
partnership name (Art. 1774, CC).
Cf Art. 1819: if the immovable is in the firms
name, it must be alienated in the name of the
firm; if its in the partner/s name, it must be
alienated in the name of said partner/s. If the
immovable is in the firms name but conveyed
by a partner or some of them in his/their
names, only the equitable interest is passed
to the buyer in good faith.
B. Preference of creditors
Preference: partnership creditors preferred to
creditors of individual partners (Art. 1827,
CC).
Remedy of private creditors of partners: seek
the attachment/public sale of the shares
DISSOLUTION AND WINDING UP
Definitions:
1. Dissolution: the change in the partners
relation caused by any partner ceasing to be
associated in the carrying on of the business
(Art. 1828, CC).
2. Winding up: process of settling business
affairs after its dissolution.
3. Termination: point in time after all
partnership affairs have been wound up.
(Idos v. CA)
Effect of dissolution: partnership continues
until winding up is completed (Art. 1829,
CC).
Effect of dissolution on the partners:
1. they cant evade prior obligations
2. generally theyre spared from new
obligations to which they didnt consent,
unless these are essential for the winding up
(Testate Estate of Mota v. Serra)
Causes of Dissolution
1.Extrajudicial causes (Art. 1830, CC)
a. Causes w/o violation of partnership
agreement
i. End of the definite term or agreed
undertaking
ii. By a partners express will, in good faith.
If in bad faith, hell be liable for damages
but he cant be compelled to remain in the
firm (Rojas v. Maglana)
iii. Express will of all partners who havent
assigned their interests or suffered them to
be charged for their separate debts
iv. Expulsion of a partner in good faith
b. Causes in violation of partnership
agreement
c. Business becoming unlawful
d. Loss of specific thing
i. Promised specified thing lost before
delivery dissolved
ii. Promised specific thing lost after delivery
& transfer of ownership not dissolved
iii. Transfer of usufruct dissolved
e. Death of any partner
f. Insolvency
g. Civil interdiction
h. Court decree in relation to Art. 1831
The articles didnt provide that the heirs would
be limited partners; they expressly stipulated
that in case of death, the co-partnership
would be continued with the heirs. It couldnt
be continued if it were to be converted from a
general partnership to a limited one since the
difference between the 2 is fundamental and
as this would leave the heirs without a share
in the management (Goquiolay v. Sycip).
The death of a partner causes dissolution. A
new partnership (with the same name) was
formed with the remaining living partners. It
may be that the succeeding partnerships
merely continued the business started by the
original one. This element of continuity
doesnt detract from the fact that the
partnerships of the same name formed after
the partners demise are entities altogether
different and with personalities distinct from
the original partnership. (Estate of Grimm v.
Estate of Parsons, 2006)
The death of 2 partners didnt disqualify the
partnership from being an awardee of a
foreshore lease, as it was survived by 7
partners who continued the operations of the
partnership. The death of a partner wont
disqualify the partnership from awards and
rights it had gained before the partners
death. (Lu Do and Lu Ym Corp. v. Aznar
Brothers Realty Co., 2006)
No profits gained after dissolution by death
will be due to the heirs, who are entitled only
to the profits already obtained at the time of
death. After death, the partnership was
merely a partnership in liquidation
(Bearneza v. Dequilla).
The partners cant enter into an agreement
where the automatic dissolution caused by law
will be limited/restricted (Lichauco v.
Lichauco).
2.Judicial causes (Art. 1831, CC)
a. On application by/for a partner when:
i. A partner is insane/of unsound mind
ii. A partner is incapable of performing his
part in the contract
iii. A partner is guilty of prejudicial acts
iv. A partner breaches the partnership
agreement
v. The business can only be carried on at a
loss
vi. Other equitable circumstances
b. On application by the buyer of partners
interest under Art. 1813 or 1814:
i. After the end of the specified term/agreed
undertaking
ii. Any time if its a partnership at will when
the partners interest had already been
assigned/charged
3.Membership changes (Art. 1840, CC)
(ARADE)
a. Admission of new member
b. Partners retirement
c. Assignment of rights in partnership
property
d. Death of a partner
e. Expulsion of a partner
Consequences of dissolution
1. As to partner's authority to act for the
partnership
Gen. rule: terminates the partners authority
to bind the partnership (Art. 1832, CC)
Exceptions:
a. to wind up partnership affairs and complete
unfinished transactions (Art. 1832, CC)
b. With respect to the partners (Art. 1833,
CC): if dissolved by act, death, or insolvency
of a partner, a partner remains liable to his
co-partners for his share of any liability
incurred by any partner acting for the
partnership as if there is no dissolution
Except: i. The dissolution being by act, the
representing partner knew of such.
ii. The dissolution being by
death/insolvency, the representing
partner knew/had notice of such.
c. With respect to third persons (Art. 1834,
CC) if:
i. The business/transaction is necessary for
the winding up
ii. Theres a need to complete unfinished
business already begun
iii. New transactions entered into by a
partner with a 3
rd
person in good faith.
Stipulation expressly declared not binding
after dissolution (Art. 1834, CC):
a. When dissolved because its unlawful to
carry on the business, unless the acts
appropriate for winding up
b. Insolvency of a partner
c. The partner is w/o authority to wind up
partnership affairs, except in transactions with
one who
i. Had extended credit before dissolution and
had no knowledge/notice of the want of
authority
ii. Hadnt extended credit before dissolution,
and had no knowledge/notice of want of
authority due to lack of advertisement of
such
If after dissolution a person pretends to be a
partner though he isnt, hell be liable as a
partner by estoppel under Art. 1825
(Art.1834, CC)
2. As to partner's existing liability
Gen. rule: dissolution doesnt by itself
discharge the partners existing liability
Except: if theres an agreement to that effect
between the partner, the creditor & the
person/partnership continuing the business
(Art. 1835, CC)
Death of a partner: his individual property
shall be liable for all partnership obligations
incurred while he was still a partner, subject
to prior payment of his separate debts.
3. Liability of person/partnership
continuing the business (Art. 1840,CC)
When applicable: a partnership is dissolved
due to change in membership but the
remaining partners continue the business
without liquidation.
Effect: unpaid old creditors of the dissolved
partnership automatically become creditors of
the new partnership.
New partners liability: satisfied out of
partnership property only, unless with a
contrary stipulation
Not only the retiring partners but also the new
partnership itself which continued the
business of the dissolved one, are liable for
the debts of the prior partnership. A
withdrawing partner remains liable to a 3
rd
party creditor of the old partnership
(Singsong vs. Isabela Sawmill).
Rights of partners upon dissolution
1. Right to wind up (Art. 1836, CC)
Kinds of winding up: judicial & extrajudicial
Who can initiate: (PALA)
a. the partner expressly authorized
b. if theres no agreement, all the partners
c. the legal representative of the last surviving
partner whos not insolvent for cause
d. assignee
Powers of a liquidating partner: limited to
whats necessary to wind up the affairs -
a. may enter into new contracts necessary for
winding up.
b. may borrow money or sell property to pay
its debts (40 Am. Jur. 325).
c. may incur obligations necessary to
complete existing contracts or to preserve
partnership assets (40 Am. Jur. [1960]
Supp. 36).
d. may engage the services of counsel to
prosecute/defend the firms cases.
The action for accounting & liquidation of
partnership against the deceased industrial &
managing partner cant be continued against
the heirs. When a partner dies, the duty of
liquidating its affairs devolves on the surviving
partners, not on the deceaseds legal
representatives (Lota v. Tolentino).
2. Right to damages for wrongful
dissolution
When arises: if hes an innocent partner
(havent caused a wrongful dissolution), he
has the right to claim damages against the
partner who caused the wrongful dissolution,
based on breach of the agreement (Art.
1837, CC).
3. Right to continue business on wrongful
dissolution (Art. 1837, CC)
To continue: all innocent partners may
continue the partnership business in the same
name either by themselves or jointly with
others during the agreed term of the
partnership subject to certain conditions
a. secure by bond or pay the value of the
guilty partners partnership interest (less the
value of damages he caused), and
b. to indemnify him against all partnerships
liabilities, present & future.
4. Rights where dissolution not in
contravention of agreement
Rights of each partner against his co-
partners:
a. to have the partnership property applied to
discharge partnership liabilities
b. the surplus assets, if any, distributed in
cash to the respective partners, after
deducting what may be due to the firm from
them as partners (Art. 1837, CC)
5. Rights of innocent party
If dissolution in contravention of agreement:
a. Apply partnership property to discharge its
liabilities
b. Have the surplus, if any, for payment in
cash of the net amount owed to partners
c. Claim for damages against guilty partner
d. To continue the business in the same name
e. To possess partnership property if the
business is continued (Art. 1837, CC)
6. Rights of guilty party (Art. 1837, CC)
Business isnt
continued
Business is
continued
Guilty partner with all
the ff. rights of innocent
partners -
i. apply partnership
property to discharge the
partnership liabilities
ii. receive in cash his
share of surplus less
damages he caused
Guilty partner shall -
i. have the value (in
cash or secured by a
bond) of his interest
in the partnership
less damages
ii. be released from
all the firms existing
liabilities
7. Rights of expelled partner
Expelled with just
cause
Expelled without
just case
Receive in cash only
the net amount due
him from the
partnership, if hes
discharged from all
liabilities
Have all the rights of
an innocent partner
plus damages for his
unlawful exclusion
(Art. 1837, CC)
8. Rights of parties entitled to annul
When entitled to rescind: if with fraud or
misrepresentation
Rights:
a. Of lien/retention of the surplus of the
partnership property after satisfaction of the
partnership liabilities to 3
rd
persons for any
sum paid or for any capital/advances
contributed
b. To subrogate partnership creditors after his
payment of liabilities to them.
c. To be indemnified by the supposed guilty
partner against all debts & liabilities of the
partnership (Art. 1838, CC).
9. Right of retiring/ deceased partner
When applicable: a partner retires/dies & the
business is continued without any settlement
of accounts
Except: no liquidation is necessary when
theres an agreement as to what the retiree
shall receive & he in fact received that amount
(Bonnevie v. Hernandez).
If no agreement, liquidation:
a. The retiree/legal rep. of the deceased may
have the value of the interest at the date of
dissolution.
b. He shall receive as an ordinary creditor an
amount equal to the value of his interest in
the partnership with interest or, in lieu of
interest, the profits attributable to the use of
his right in the property of the dissolved
partnership (Art. 1841, CC).
10. Right to account (Art. 1842, CC)
Right to demand accounting of partners
interest: reckoned from the date of
dissolution, unless with a contrary agreement.
Duty to make an account: the winding
up/surviving partners or those continuing the
business.
Right to demand an accounting exists as long
as the partnership exists. Prescription begins
to run only upon the dissolution of the
partnership, after final accounting (Fue
Leung v IAC).
Art. 1842 Art. 1809
Accounting upon
dissolution
Accounting before
dissolution
SETTLEMENT OF ACCOUNTS
BETWEEN PARTNERS (Art. 1839,
CC)
The rules for distribution wont apply if theres
a contrary agreement between the partners.
Rule of preference in the payment of
partnership liabilities:
1.those owed to creditors other than
partners
2.those owed to partners other than
capital and profits
3.those owed to partners in respect of
capital
4.those owed to partners in respect of
profits
When assets are insufficient to satisfy
liabilities: the partners are required to
contribute, based on contributed capital.
If refuses to contribute a petition in court
may be filed for its enforcement.
If partner is dead contribution may be
enforced against his private property through
the administrator
Doctrine of Marshalling of Assets: If there are
claims over both partnership assets &
partners individual properties, both in custody
of the court for distribution:
1. Partnership creditors are preferred with
regard to partnership property
2. Individual creditors are preferred wrt
individual properties of partners.
3. Anything left from either goes to the
other.
Order in case of insolvency of a partner or his
estate (in case of death):
1.Separate creditors
2.Partnership creditors
3.Partners who gave contributions
Liquidation needed. The business profits cant
be determined by taking into account the
result of 1 transaction instead of all the
transactions had, thus the need for a general
liquidation before a partner may claim a
specific sum as his share of the profits (Sison
v. McQuaid).
No return of shares without dissolution &
liquidation, for the firms outside creditors
have preference over the firms assets and the
firms property cant be diminished to their
prejudice (Magdusa v. Albaran).
LIMITED PARTNERSHIP
Limited partnership:
a. formed by 2/more persons,
b. in accordance with the requirements of
law,
c. composed of 1/more general partners
& 1/more limited partners (Art. 1843, CC).
Limited partners: not bound by the
partnerships obligations (Art. 1843, CC).
A limited partnership that hasnt complied
with the law of its creation is but a general
partnership in which all members are liable
(Jo Chung Cang v. Pacific Commercial).
Characteristics:
1. Complied with the statutory requirement
of form (Art. 1844 CC)
2. The business is controlled by 1/more gen.
partners who are personally liable to
creditors (Arts. 1848, 1850 CC)
3. 1/more limited partners contribute to the
capital & share in the profits but dont
manage the business
4. The limited partners arent personally
liable for obligations beyond their
contribution (Arts. 1845, 1848, 1856
CC)
5. Obligations/debts are paid out of
partnership assets and the gen. partners
separate assets
6. Limited partners may get back their capital
contributions subject to conditions
prescribed by law (Arts. 1844, 1857 CC)
Advantages of limited partnerships:
1. For gen. partners: secure capital from
others while retaining control &
supervision of the business
2. For limited partners: share in the profits
without the risk of personal liability
General
Partner
Limited
Partner
extent of
liability
Personally
liable for
partnership
obligations
Only to the
extent of his
capital
contributions
right to
participate
in
managemen
t
If manner
of mgt. not
agreed
upon, all
gen
partners
have an
equal right
in business
mgt
No
participation in
management
contribution Cash,
property or
industry
Cash or
property only,
not industry
proper party
to
proceedings
by or
against the
partnership
Proper
party to
proceeding
s
by/against
partnership
Not proper
party to
proceedings
by/against
partnership
unless:
1. he is also a
gen. partner
2. where the
object of the
proceedings is
to enforce a
limited
partner's right
against or
liability to the
partnership
Name in
firm name
Name may
appear in
firm name
Name must
appear in firm
name
prohibition
to engage in
other
business
Prohibited No prohibition
effect of
retirement
death
insanity or
Dissolves
the
partnership
Different
effect; rights
transferred to
legal rep.
insolvency
Assignability
of interest
in
partnership
Not
assignable
Assignable
Gen.
Partnership
Limited
Partnership
Creation In any form
unless
immovables
are contributed
Executed in a
cert. of limited
partnership
containing the
required data,
duly signed &
sworn to by all
partners & filed
in the SEC
Composition Only gen.
partners
1/more gen.
partners and
1/more limited
partners
Firm name Must contain
the word
Company
(SEC Memo
Circ. #14-00)
unless its a
professional
partnership
Name must
include the
word Limited
(SEC Memo
Circ. #14-00)
Who may be limited partners:
1. A partnership no
2. A gen. partnership may be changed
into a limited one, & a partner in the former
gen. partnership may be a limited partner in
the limited partnership formed.
When the cert. of partnership may be
amended:
1. Change in partnership name or in the
amount/character of contribution of any
limited partner
2. Substitution of a limited partner
3. Additional limited partner is admitted
4. A gen. partner is admitted
5. Gen. partner retires, dies, becomes
insolvent or insane, or under civil
interdiction & the business is continued
6. A change in the character of business
7. A false/erroneous statement in the cert.
8. A change in the time as stated in the cert.
for the dissolution of the partnership or
return of a contribution
9. To fix the time for dissolution or return of
a contribution
10. The members want to change a
statement in the cert. to make it more
accurate (Art. 1864, CC)
Requirements to amend:
1. Must be in writing, under oath, & set forth
clearly the change desired
2. Signed & sworn to by all the members,
including the new members & assigning
members
3. The cert., as amended, must be filed in
the SEC (Art. 1865, CC)
When the certificate shall be cancelled:
1. When the partnership is dissolved
2. When all limited partners cease to be such
(Art. 1864, CC)
Requirements to cancel:
1. Must be in writing
2. Signed by all the members
3. Filed with the SEC; if cancellation is court-
ordered, a certified copy of the order shall
also be filed (Art.1865, CC)
LIMITED PARTNER
Contribution
Restriction: only cash or property, not
services (Art. 1845, CC).
Liabilities of a limited partner
Gen. rule: not liable as a gen. partner. His
liability is limited to the extent of his
contribution to the partnership.
1. To the partnership (Art. 1858, CC)
Limited partner is responsible for:
a. Difference between his actual contribution &
that stated in the certificate as having been
made
b. Unpaid contributions which he agreed to
make at specified future time & on the
conditions stated in the certificate
Liability as trustee for the partnership:
a. Specific property which he committed but
didnt contribute, or which he contributed
but was wrongfully returned to him
b. Money/property wrongfully paid or conveyed
to him
Waiver of liability: if all the partners consent
but waiver cant include the right of a creditor
who extended credit or whose claim arose
after the filing & before a
cancellation/amendment of the certificate is
made.
Return of contribution: if a limited partner
rightfully received back his contribution to
capital, he remains liable to the partnership
for any sum necessary to discharge the
liabilities of the partnership to creditors who
extended credit/whose claims arose before
such return.
2. Liabilities to partnership creditors &
other partners
a. Contributes services (Art. 1845, CC)
Effect: he will be considered an industrial &
general partner. If the certificate states that
hes a limited partner, he will be a general
partner & limited partner at the same time.
Here he divests himself of the privilege of
limited liability & will be exposed to all the
liabilities of a gen. partner.
b. Surname in firm name (Art.1846, CC)
Gen. rule: the surname of a limited partner
shall not appear in the partnership name
If used in firm name: he is liable as a gen.
partner to creditors who didnt know that he
isnt a gen. partner.
c. False statement (Art. 1847, CC)
Whos liable: any party to the certificate who
knew the falsity of a statement therein, which
is relied upon by an innocent person and who
suffered loss because of the falsity
d. Control of business (Art. 1848, CC)
Effect: he becomes liable as a gen. partner
without acquiring the rights of one. Control
here contemplates active participation in the
business.
e. Fraud on creditors (Art. 1854, CC)
Prohibited transactions of limited partners:
1. Receiving/holding as collateral security any
partnership property
2. Receiving any payment, conveyance, or
release from liability if it will prejudice the
rights of 3
rd
persons
If performed prohibited acts: presumption of
fraud on the creditors. But the law doesnt
absolutely prohibit the taking as collateral
security of the property, as the prohibitions are
modify by the requirement of sufficient assets
to discharge the partnership obligations.
f. Non-compliance with requisites for
formation (Art. 1844 par.2, CC)
Effect of lack of substantial compliance:
partnership becomes a general partnership wrt
3
rd
persons, and the members are liable as
general partners.
3. Liabilities to separate creditors
Right of creditors: to petition the court to
charge the interest of the indebted limited
partner with the payment of the unsatisfied
amount of the claim. A receiver may be
appointed to preserve the interest.
Redemption: with the separate property of
any gen. partner. (Art. 1862, CC)
Rights of Limited Partners
Common rights of limited & gen. partners:
1.Demand that partnership books be kept at
the principal place of business
2.Inspect & copy any of the books, content
3.Demand true & full info of all things
affecting the partnership
4.Demand a formal account
5.Resort to the court for the dissolution and
winding up of the business
6.Receive a share of the profits & surplus
7.Demand the return of his contribution
provided assets are more than the liabilities
(Art. 1851, CC)
Restrictions on gen. partners: gen. partners
cant, without the written consent or written
ratification of all limited partners, do the ff:
1. Any act in contravention of the certificate
2. Any act which would make it impossible to
carry on the partnership business
3. Confess judgment
4. Possess partnership property, or assign
their rights in specific partnership property for
other than a partnership purpose
5. Admit a person as a gen. partner
6. Admit a person as a limited partner, unless
the right is granted in the certificate
7. Continue the business with partnership
property on the death, retirement, insanity,
civil interdiction or insolvency of a gen.
partner, unless the power is granted in the
certificate (Art. 1850, CC)
Loan & other business transactions
Allowed to loan money, transact business: the
relationship between the limited partner &
partnership isnt based on trust & confidence.
There is no conflict of interests.
Sharing pro rata: hes entitled to a pro rata
share of the partnership assets together with
the creditors. (Art. 1854, CC)
Return of contribution (Art.1857,CC)
Conditions for return:
1. All liabilities to non-partner creditors had
been paid, or there are sufficient assets to
satisfy them
2. All members consent, unless the limited
partner desiring the return has lawfully
demanded the return of his contribution.
3. The certificate had been cancelled or
amended as to reflect the
withdrawal/reduction of contribution.
When return may be demanded:
1. On the dissolution of the partnership
2. On the arrival of the date specified in the
certificate
3. On the lapse of 6 months from notice in
writing to all other members if no time is
specified
Gen. rule: return of contribution is in cash
Except: if theres a statement to that effect in
the certificate or all partners consent
Dissolution, upon petition of limited partner:
1.When his demand for return of contribution
wasnt acted upon/denied
2.His contribution wasnt returned/paid
In case of several limited partners: members
may agree to give priority to 1/more limited
partners, and this must be stated in the
certificate of partnership. The preference
covers
1. return of contributions,
2. compensation, and
3. other matters where some benefit is
granted (Art. 1855, CC).
Share of profits (Art. 1856, CC)
Partners share: when the assets exceed
liabilities (except those to limited & general
partners), a limited partner may recover a
share in the profits/compensation by way of
income stipulated in the certificate.
Assign interests (Art. 1859, CC)
Substituted limited partner: a person admitted
to all the rights of a limited partner who has
died or assigned his interest in a partnership
Rule: limited partners interest is assignable.
The assignee may become a substituted
limited partner if
1. all the members consent, or
2. the assignor is empowered in the
articles of partnership, and he gave the
assignee the right to be a substituted limited
partner.
It is still required that the certificate be
amended (Art. 1865, CC) and registered
with the SEC.
Rights of substituted limited partner:
1. To require any info/account of the
transactions
2. To inspect partnership books
Liability of substituted limited partner:
1. all restrictions & liabilities of the assignor
2. responsible for the liabilities of the
assignor except those he was ignorant of
when he became a limited partner and
couldnt be ascertained in the certificate
Effect on assignor: that the assignee has
become a substituted limited partner doesnt
relieve the assignor of all liabilities to the
partnership (Arts. 1847, 1858 CC).
If assignee didnt become a substituted
limited partner:
1.remains a mere assignee
2.with right to receive the share of the
profits/compensation by way of income, or
the return of his contribution to which the
assignor wouldve been entitled to
Effect of death (Art. 1861, CC)
Rights of executors/administrators:
1.All the rights of a limited partner for the
purpose of settling the estate
2. If the deceased had assigned his interest in
the partnership, the executor or
administrator may constitute the assignee a
substituted limited partner if the deceased was
empowered to do so
Estates liability: for all the deceaseds
obligations & liabilities to the partnership as a
limited partner
Person erroneously believing hes a limited
partner (Art. 1852, CC)
Effect: he doesnt, by reason of his exercise of
the rights of a limited partner, become a gen.
partner. Neither is he bound by the
obligations of the person/partnership. Hes
exempt from general liability.
Conditions for exemption:
1. on ascertaining the mistake, he promptly
renounces his interest in the profits of the
business
2. his surname doesnt appear in the
partnership name
3. he doesnt participate in the management
of the business
Dissolution
When a limited partnership may be dissolved:
1. The misconduct of a general partner
2. Fraud on the limited partner by the
general partner
3. The retirement, death, insolvency,
insanity, or civil interdiction of a general
partner
Except: if the business is continued by the
remaining general partners
i. under a right stated in the cert.
ii. when all members consented to the
continuation (Art. 1860, CC)
4. When all the limited partners ceased to be
such (Art. 1864, CC)
5. End of the term for which it was to exist
(Art. 1844, CC)
6. By mutual consent of the partners before
the end of the firms original term
7. When the limited partner demanded the
return of his contribution but was
unjustifiably denied (Art. 1857, CC)
8. The causes in Arts. 1830 & 1831.
If dissolved by expiration of the fixed term:
the notice of dissolution need not be given
since the papers filed in the SEC are notice to
the world.
If dissolved by express will of the partners:
the certificate should be cancelled, and a
dissolution isnt effected until there has been
compliance with this requirement.
Settling accounts after dissolution
Order of priority in the payment of liabilities
(Art. 1863, CC):
1. Those owed to creditors, in the order of
priority provided by law (Arts. 2236-
2251, CC), except those to limited
partners on account of their contribution &
to general partners
2. Those to limited partners in respect to their
share of the profits and other compensation
by way of income in their contributions
3. Those to limited partners in respect of their
capital contributions
4. Those to general partners other than for
capital and profits
5. Those to general partners in respect to
profits
6. Those to general partners in respect to
capital
Winding up: general partners have the duty &
power to wind up the partnerships affairs
If theres no agreement, the limited partners
shall share in the partnership assets and
profits in proportion to the respective amounts
of their claims (Art. 1863, CC).
CREDIT TRANSACTIONS CIVIL LAW
Credit Transactions
TABLE OF CONTENTS
Section 1. Credit Transactions 229
Section 2. Loan 229
Section 3. Deposit 233
Section 4. Guaranty 240
Section 5. Legal and Judicial Bonds 246
Section 6. Pledge, Mortgage, Antichresis 248
Section 7. Concurrence and Preference of Credit 255
Section 7. Special Laws 256
Section 9. Warehouse Receipts Law 256
Section 10. Insolvency Law 261
Section 11. Sample Questions 268
CREDIT TRANSACTIONS
include all transactions involving the purchase or
loan of goods, services or money in the present with
a promise to pay or deliver in the future (contract of
security)
2 TYPES OF CREDIT TRANSACTIONS:
1. SECURED TRANSACTIONS THOSE
SUPPORTED BY A COLLATERAL OR AN
ENCUMBRANCE OF PROPERTY
2. UNSECURED TRANSACTIONS THOSE
SUPPORTED ONLY BY A PROMISE TO PAY
OR THE PERSONAL COMMITMENT OF
ANOTHER SUCH AS A GUARANTOR OR
SURETY
SECURITY is something given, deposited or
serving as a means to ensure the fulfillment
or enforcement of an obligation or of
protecting some interest in the property
2 TYPES OF SECURITY:
1. personal when an individual
becomes a surety or a guarantor
2. real or property when an
emcumbrance is made on property
BAILMENT is the delivery of property of one
person to another in trust for a specific
purpose, with a contract, express or implied,
that the trust shall be faithfully executed and
the property returned or duly accounted for
when a special purpose is accomplished or
kept until the bailor reclaims it.
PARTIES IN BAILMENT
1. bailor the giver, the party who
delivers possession/custody of the
thing bailed
2. bailee the recipient, the party who
receives the possession/custody of the
thing delivered
KINDS OF CONTRACTUAL BAILMENT W/
REFERENCE TO COMPENSATION
1. for the sole benefit of the bailor
(gratuitous) e.g. gratuitous deposit,
mandatum (do some act w/ respect to
a thing)
2. for the sole benefit of the bailee
(gratuitous) e.g. commodatum,
gratuitous simple loan or mutuum
3. for the benefit of both parties e.g.
deposit for compensation, involuntary
deposit, pledge and bailments for hire:
a. hire of things temporary use
b. hire of service for work or labor
c. hire of carriage of goods for
carriage
d. hire of custody for storage
LOAN
LOAN is a contract by which one of the parties
delivers to another, either something not consumable
so that the latter may use the same for a certain time
and return it, in which case the contract is called
commodaturm; or money or other consumable thing,
upon the condition that the same amount of the
same kind and quality shall be paid, in which case
the contract is simply called a loan or mutuum.(Art
1933)
CHARACTERISTICS OF A LOAN:
1. real contract delivery is essential
for perfection of the loan (BUT a
promise to lend, being consensual, is
binding upon the parties)
2. unilateral contract - only the
borrower has the obligation
Cause or consideration in a contract of
loan:
1. as to the borrower the acquisition of
the thing
2. as to the lender the right to demand
its return or its equivalent
2 KINDS OF LOAN:
Commodatum Mutuum or
simple
loan
nature bailor delivers
to the bailee a
non-
consumable
thing so that
the latter may
use it for a
certain time
and return the
identical thing
bailor
(creditor)
delivers to
the bailee
(debtor)
money or
other
consumable
thing upon
the
condition
that the
latter will
pay the
same
amount of
the same
kind and
quality
Subject
matter
Non-
consumable
thing (Art
1936)
Except: when
purpose of
contract is not
consumption,
but merely for
exhibition the
subject matter
may be a
consumable
Money or
other
consumable
thing
thing. In this
case, the use
is exhibition of
the thing, so
the
consumable
thing is not
being used in a
manner
appropriate to
its purpose,
but for another
purpose.
Transfer of
ownership
None,
ownership is
retained by
bailor (Art
1933)
Ownership
is
transferred
to the
debtor
consideration None,
essentially
gratuitous (Art
1933)
Note that if
there is any
compensation,
the contract
that arises is a
lease contract
(Art. 1643)
May be
gratuitous
or onerous,
i.e. w/
stipulation
to pay
interest
need to
return and
what
Bailee must
return the
same thing
loaned (Art
1933)
debtor
needs only
to pay the
same
amount of
the same
kind and
quality
Nature of
property
involved
May involve
real or
personal
property (Art
1937)
Only
personal
property
Purpose of
loan
Loan for use
(Art 1935)
If the bailee is
not entitled to
the use of the
thing, the
contract may
be a deposit.
(Art 1962)
Loan for
consumption
WON return
may be
demanded
before end of
term
YES, in case of
urgent need
(Art 1946)
NO, creditor
may not
demand its
return
before the
lapse of the
term agreed
upon
who suffers
the loss
Bailor, since he
is the owner
(Art 1942, Art
1174)
Debtor
suffers the
loss
A thing is consumable when it is used in a
manner appropriate to its purpose or nature.
(Art 418)
COMMODATUM
2 KINDS OF COMMODATUM:
1. ordinary commodatum - use by the
bailee of the thing is for a certain
period of time
2. precarium one whereby the bailor
may demand the thing loaned at will;
exists in cases where:
i. neither the duration of the
contract nor the use to
which the thing loaned
should be devoted has
been stipulated
ii. if the use of the thing is
merely tolerated by the
owner. (Art 1947)
General rule: In a commodatum, the right to
use is limited to the thing loaned, and not
to its fruits.
Except: There is stipulation to the
contrary. (Art 1940) In cases where
there is such a stipulation, enjoyment
of the fruits must be incidental to the
use of the thing itself. Otherwise, if the
use of the fruits is the main cause, the
contract ma be one of usufruct. (Art
562)
What is the effect of an accepted promise
to deliver by way of commodatum or
mutuum?
It is binding upon the parties, but the
contract of loan shall not be perfected
until delivery of the contract. (Art
1934)
Who may be bailor in commodatum?
Anyone. The bailor in commodatum
need not be the owner of the thing
loaned. (Art 1938)
But the bailee himself may not lend
nor lease the thing loaned to him to a
third person (Art 1939(2))
General rule: Commodatum is purely
personal in character. (Art 1939)
1. death of either party extinguishes the
contract
2. bailee can neither lend nor lease the
thing lent to him to a third person
Except: Members of the bailees household
may make use of the thing loaned
Except: Bailees household may NOT
use it when:
1. there is stipulation to the
contrary, or
2. the nature of the thing forbids
such use.
What are the OBLIGATIONS OF THE
BAILEE in commodatum?
1. obligation to pay for the ordinary
expenses for the use and preservation
of the thing loaned (Art 1941)
2. obligation to take good care of the
thing with the diligence of a good
father of a family (Art 1163)
3. liability for loss, even if loss through
fortuitous event, in certain
circumstances (Art 1942)
4. liability for deterioration of thing
loaned, except under certain
circumstances (Art 1943)
5. obligation to return the thing upon
expiration of term or upon demand in
case of urgent need
6. solidary obligation where there are 2 or
more bailees to whom a thing was
loaned in the same contract (Art 1945)
General rule: Bailee is not liable for loss or
damage due to a fortuitous event (Art 1174),
since the bailor retains ownership of the thing
Except: Bailee is liable even for loss
due to a fortuitous event when: (Art
1942)
1. he devotes the thing to any
purpose different from that for
which it was loaned
2. he keeps it longer than the period
stipulated, or after the
accomplishment of the use for
which the commodatum has been
constituted
3. the thing loaned has been delivered
with appraisal of its value, unless
there is stipulation exempting the
bailee from responsibility in case of
a fortuitous event
4. he lends or leases the thing to a
third person who is a not a member
of his household
5. being able to save either the thing
borrowed or his own thing, he
chose to save the latter.
General rule: Bailee is liable for deterioration
of thing loaned.
Except: The deterioration of the thing
is due only to the use thereof and
without his fault, then bailee is not
liable. (Art 1943)
General rule: Bailee has no right of retention
of the thing loaned, on the ground that the
bailor owes him something.
Except: Bailee has a right of retention
for damages for known hidden flaws
mentioned in Art 1951. (Art 1944)
What are the requisites for the application
of Art 1951?
1. There is a flaw or defect in the thing
loaned
2. The flaw or defect is hidden
3. The bailor is aware thereof
4. He does not advise the bailee of the
same, and
5. The bailee suffers damages by reason
of said flaw or defect
What are the OBLIGATIONS OF THE
BAILOR in a commodatum?
1. obligation to respect the duration of
the loan: The bailor cannot demand
the return of the thing loaned till after
the expiration of the period stipulated,
or after the accomplishment of the use
for which the commodatum has been
constituted.
Except: Bailor may demand return
or temporary use before end of
term when:
1. he should have urgent need of
the thing (Art 1946)
2. bailee commits an act of
ingratitude specified in Art 765
(Art 1948)
The law uses its return or temporary
use because the return demanded
may be temporary or permanent.
In case of temporary use by the
bailor, the rights and duties of the
parties are temporarily suspended
while the thing is in the possession of
the bailor. (Art 1946, par 2)
Any of the following constitutes acts of
ingratitude:
1. bailee commits offenses against
the person, the honor, or the
property of the bailor, or of his wife
or children under his parental
authority
2. bailee imputes to the bailor any
criminal offense, or any act
involving moral turpitude, even
though he should prove it, unless
the crime or the act has been
committed against the bailee
himself, his wife, or children under
his authority, and
3. if the bailee unduly refuses the
bailor support when the bailee is
legally or morally bound to give
support to the bailor
Article 765 is applicable, because like a
donation, a commodatum is essentially
gratuitous. (Art 1933, par 2)
2. obligation to refund extraordinary
expenses (Art 1949):
a. extraordinary expenses for the
preservation of the thing are
borne by the bailor.
Requisites for liability of bailor to
arise:
1. extraordinary expense for
preservation
2. bailee gives bailor notice before
incurring the expenses, except
when the expense is so urgent that
a reply to notice cannot be awaited
without danger to the thing
b. extraordinary expenses on the
occasion of actual use by bailee,
even if without fault are borne
equally by the bailor and the
bailee, unless there is contrary
stipulation
c. ordinary expenses for use and
preservation are also borne by
bailor (Art 1950, in rel Art
1941)
Bailor has no right of abandonment: He
cannot exempt himself from payment of
expenses to bailee by abandoning the thing to
the latter. (Art 1952)
MUTUUM OR SIMPLE LOAN
A mutuum or simple loan is a contract by
which a person (creditor) delivers to another
(debtor) money or other consumable thing
with the understanding that the same amount
of the same kind and quality shall be paid.
(Art 1953)
Elements of a mutuum:
1. delivery of a money or other
consumable thing
2. obligation on the part of debtor to pay
(not exactly to return)
When is a contract deemed a barter? (Art
1954)
1. transfer of ownership of non-fungible
thing to another
2. obligation on the part of the latter to
give things of the same kind, quantity,
and quality
What is a fungible thing?
Fungibles are those which are dealt
with by number, weight, or measure,
such as grain, oil, sugar, etc.
Whether a thing is consumable or not
depends on the nature and whether it
is fungible or not depends on the
intention of the parties.
e.g. Wine is consumable by nature, but
it may be non-fungible if the intention
is merely for display or exhibition.
Loan (both
kinds)
barter
Subject
matter
Money or any
other fungible
things
Non-fungible
things
obligation Obligation to
return or to
pay
Obligation to
give an
equivalent of
that received
consideration Loan may be
gratuitous
(commodatum)
Barter is
always
onerous
The object of simple loan may be either
money or consumable or fungible things.
1. loan of money
2. loan of fungible thing
Kinds of interest:
1. Simple interest which is paid for the
principal at a certain rate fixed or
stipulated by the parties
2. Compound Interest that which is
imposed interest due and unpaid. The
accrued interest is added to the principal
sum and the whole is treated as a new
principal upon which the interest for the
next period is calculated
3. Legal Interest that which the law
directs to be charged in the absence of
any agreement as to the rate between
the parties.
4. Lawful Interest that which the laws
allow or do not prohibit
5. Unlawful or Usurious Interest paid or
stipulated to be paid beyond the
maximum fixed by law
General Rule: If the exact rate of interest is
not mentioned, the legal rate shall be imposed
Except:
a. the debtor is liable to pay legal
interest (12%) as indemnity even in
the absence of stipulation for the
payment of interest
b. interest due shall earn legal interest
from the time it is judicially
demanded although the obligation
may be silent upon this point
General Rule: Accrued interest shall not earn
interest
Except:
a. when judicially demanded as
provided in art 2122.
b. when there is an express stipulation
made by the parties that the interest
due and unpaid shall be added to the
principal obligation and the resulting
total amount shall earn interest
Payment of unstipulated interest
1. where unstipulated interest is paid by
mistake the debtor may recover as this
would be a case of solution indebiti or
undue payment
2. where the unstipulated interest is paid
voluntarily because the debtor feels
morally obliged to do so there can be no
recovery as in the case of natural
obligations
USURY
1. Usury is contracting for or receiving
something in excess of the amount
allowed by law for the loan or
forbearance of money, goods or
chattels
2. Forbearance signifies the contractual
obligation of the creditor to forbear or
refrain during a period to require the
debtor payment of an existing debt
then due and payable.
3. Where there is no loan or forbearance
there is no usury
4. The usury law has not been repealed,
it is just suspended; there may still be
unconscionable interest if the court
finds it so
5. Interest is the compensation allowed
by law or fixed by the parties for the
loan or forbearance of money, goods or
chattels
6. a floating interest rate is not invalid
per se but there must be a reference
point
7. Requirements for a valid escalation
clause
a. increase is provided by law/
resolution by the monetary
board
b. there is a corresponding de-
escalation clause
c. the effectivity of the clause is
on or after the effect of increase
ordered on the maximum
interest
DEPOSIT
DEPOSIT is constituted from the moment a
person receives a thing belonging to another,
with the obligation of safely keeping it and of
returning the same. If the safekeeping of the
thing delivered is not the principal purpose of
the contract, there is no deposit but some
other contract. (Art. 1962)
CHARACTERISTICS OF A DEPOSIT
1. Real like commodatum & mutuum;
bec its perfected by the delivery of the
subj matter. Where there is no
delivery, there is merely an agreement
to deposit w/c, however, is binding &
enforceable upon the parties. Hence, a
contract of future deposit is consensual
(see 1934 CC).
2. Unilateral if its gratuitous; bec only
the depositary has an oblig.
3. Bilateral if its for a compensation;
bec it gives rise to obligs on both the
depositary & the depositor.
4. Voluntary as a general rule. It
becomes necessary in the 3 cases in
1996 & 1998 CC and in cases of
deposit of goods made by
travelers/passengers w/ common
carriers, which may also be regarded
as necessary.
5. Gratuitous as a general rule
Exceptions:
1. where there is contrary
stipulation
2. where depositary engaged in
the business of storing goods
3. where property saved from
destruction w/o knowledge of
the owner
PRINCIPAL PURPOSE
Safekeeping of the thing delivered. (This is
why if its only an accessory or secondary
oblig of the recipient, deposit is not
constituted but some other contract).
1. Deposit v. Mutuum
Purpose
Safekeeping
or mere
custody
Consumption
of the Subj
Matter
Demandability
Depositor can
demand the
return of the
subject
matter at will
Lender must
wait until the
expiration of
the period
granted to
the debtor
Object
May be both
movable &
immovable
property
Only money
& other
fungible thing
2. Deposit v. Commodatum
Purpose
Safekeepin
g
Transfer of
the Use
Remuneratio
n
May be
gratuitous
Essentially
& always
gratuitous
Object
In
extrajudicia
l deposit,
only
Both
movable &
immovable
property
movable
things may
be the
object
may be
the object
CREATION OF A DEPOSIT
1. By virtue of a court order; or
2. By law
3. Not by the will of the parties
4. It is essential that the depositary is not
the owner of the property deposited
(Art. 1962)
EXTINGUISHMENT OF DEPOSIT
1. A deposit is extinguished:
a. upon the loss or deterioration of
the thing deposited;
b. upon the death of the
depositary, ONLY in gratuitous
deposits;
c. other provisions in the Civil
Code (novation, merger, etc.)
KINDS OF DEPOSIT
1. judicial - when an attachment or
seizure of property in litigation is
ordered
2. extrajudicial (Art. 1967)
a. voluntary- delivery is made by
the will of the depositor or by
two or more persons each of
whom believes himself entitled
to the thing deposited;
b. necessary- made in compliance
with a legal obligation, or on
the occasion of any calamity, or
by travelers in hotels and inns
or by travelers with common
carriers
Judicial Extrajudici
al
creation
Will of the
court
Will of the
contracting
parties
purpose
Security or
ensure the
right of a
party to
property or
to recover in
case of
favorable
judgment
Custody and
safekeeping
Subject
matter
Generally
immovables
cause
Always
onerous
Maybe
compensate
d but
generally
gratuitious
Return
of thing
Upon order
of the court/
end of
Upon
demand of
depositor
litigation
In whose
behalf
held
Person who
has a right
Depositor or
3rd person
designated
SUBJECT MATTER OF DEPOSIT
1. Only movable/personal property may
be the object of extrajudicial deposit,
whether voluntary or necessary. The
provisions do not embrace
incorporeal or intangible property,
like rights & actions.
2. Judicial deposit may cover movable
as well as immovable property, its
purpose being to protect the rights of
the parties to a suit.
PARTIES TO A DEPOSIT
1. Ordinarily, there are only 2 persons
involved. Sometimes, however, the
depositary may be a 3
rd
person.
2. The main difference btw a voluntary
deposit & a necessary deposit is that in
voluntary deposit, the depositor has
complete freedom in choosing the
depositary, whereas in the latter, there
is lack of free choice in the depositor.
3. As a general rule, the depositor must be
the owner of the thing deposited.
However, it may belong to another
person than the depositor. For example,
when two or more persons claiming to
be entitled to a thing may deposit the
same with a third person. In such case,
the third person assumes the obligation
to deliver to the one to whom it belongs.
The depositary may bring an action of
interpleader to compel the depositors to
settle their conflicting claims. Here one
of the depositors is not the owner.
EFFECTS OF INCAPACITY
Depositary is
capacitated;
Depositor is
incapacitated
Depositary is
incapacitated;
Depositor is
capacitated
Depositary is
subject to ALL the
obligations of a
depositary
Depositary does not
incur the obligations
of a depositary
Depositary must
return the
property either to:
a) the legal
representative of
the incapacitated,
OR
b) the depositor
himself if he
Depositary, however
is liable to:
a) return the thing
deposited while still
in his possession;
AND
b) pay the depositor
the amount by which
should acquire
capacity
he may have
benefited himself
with the thing or its
price subject to the
right of any 3
rd
person who acquires
the thing in good
faith
OBLIGATIONS OF THE DEPOSITARY
1. Two primary obligations (Art.
1972)
a) safekeeping of the object, using as
a degree of care the same diligence
that the depositary would exercise
over his property
20
Exception:
The depositary cannot excuse
himself from liability in the event of
loss by claiming that he exercised
the same amount of care toward
the thing deposited as he would
towards his own if such care is less
than that required by the
circumstances.
Rationale:
i. Essential requisite of judicial
relation which involves the
depositors confidence in his
good faith and trust worthiness;
ii. The presumption that the
depositor took into account the
diligence which the depositary is
accustomed with respect to his
own property.
b) Return of the thing when required
even though a specified term or
time for such may have been
stipulated in the contract.
2. Obligation not to transfer deposit
(Art. 1973)
a) General rule
the depositary is not allowed to deposit
the thing with a third person.
20
THE ROMAN CATHOLIC BISHOP OF JARO v. DE LA PEA:
Although the CC states that "a person obliged to give something
is also bound to preserve it with the diligence pertaining to a good
father of a family" (art. 1094), it also provides, following the
principle of the Roman law, major casus est, cui humana infirmitas
resistere non potest, that "no one shall be liable for events which
could not be foreseen, or which having been foreseen were
inevitable, with the exception of the cases expressly mentioned in
the law or those in which the obligation so declares." (Thus, in
this case, the defendant cannot be held liable for the loss of the
money he deposited in his personal trust fund because such was
not illegal and the Court cannot say that in choosing between two
means equally legal, he is culpably negligent in selecting one
whereas he would not have been if he had selected the other).
Rationale
A deposit is founded on trust and
confidence and it can be supposed that
the depositor, in choosing the
depositary, has taken into
consideration the latters qualification.
Exception
The depositary is authorized by
express stipulation.
b) General rule:
Depositary is liable for loss of the thing
deposited when:
i. He transfers the deposit with a
third person without authority
although there is no negligence
on his part and the third
person;
ii. He deposits the thing with a
third person who is manifestly
careless or unfit although
authorized, even in the absence
of negligence; or
iii. The thing is lost through the
negligence of his employees
whether the latter are
manifestly careless or not.
Exception:
There is an exemption from liability
when The thing is lost without the
negligence of the third person with
whom he was allowed to deposit the
thing if such third person is not
manifestly careless or unfit.
3. Obligation not to change the way
of deposit (Art. 1974)
General rule:
Depositary may not change the way of
the deposit
Exception:
If there are circumstances indicating
that the depositor would consent to the
change. This is a situation wherein the
depositary would reasonably presume
that the depositor would agree to the
change if he knows of the facts of the
situation.
Requisites:
a) The depositary must notify the
depositor of such change and
b) Must wait for the reply of the
depositor to such change.
Exception: If the delay of the
reply would cause danger.
4. Obligation to collect on the choses
in action deposited (Art. 1975)
a) If the thing deposited should earn
interest, the depositary is under the
obligation to:
i. Collect the capital and interest
as they become due;
ii. Take such steps as may be
necessary to preserve its value
and the right corresponding to
it.
b) A contract for the rent of safety
deposit boxes is not an ordinary
contract of lease of things, but a
special kind of deposit; hence, it is not
to be strictly governed by the
provisions on deposit. The prevailing
rule in the US is that the relation
between a bank renting out safety
deposit boxes and its customer with
respect to the contents of the box is
that of bailor and bailee.
21
5. Obligation not to commingle things
if stipulated (Art. 1976)
General rule:
The depositary is permitted to
commingle grain or other articles of
the same kind and quality.
Effects:
a) The various depositors of the
mingled goods shall own the
entire mass in common.
b) Each depositor shall be entitled
to such portion of the entire as
the amount deposited by him
bears the whole.
Exception:
When there is a stipulation to the
contrary.
6. Obligation not to make use of the
thing deposited (Art. 1977)
a) General rule:
Deposit is for safekeeping of the
subject matter and not for its use
22
.
Exceptions:
a) Expressly authorized by the
depositor;
21
CA AGRO-INDUSTRIAL DEV. CORP. v CA: the contractual
relation between a commercial bank and another party in a
contract of rent of a safety deposit box is one of deposit
22
JAVELLANA v. LIM ET AL.: a depositary CANNOT make use
of the thing deposited w/o the express permission of the depositor.
Article 1768 CC also states that when the depositary has
permission to make use of the thing deposited, the contract
LOSES the character of a deposit & becomes a LOAN or
BAILMENT.
b) Such use is necessary for its
preservation but limited for the
purpose only.
b) Unauthorized use will result in
liability for damages. In addition,
unauthorized use will have the
following effects:
i. If the thing deposited is
nonconsumable:
General rule: The contract loses
the character of a deposit and
acquires that of a commodatum
despite the fact that the parties
may have denominated it as a
deposit.
Exception: Safekeeping is still
the principal purpose of the
contract.
ii. Thing deposited is money or
other consumable thing:
General rule: Converts the
contract into a simple loan or
mutuum.
Exception: Safekeeping is still
the principal purpose of the
contract, but it becomes an
irregular deposit. Bank deposits
are in the nature of irregular
deposits but they are really
loans governed by the law on
loans.
7. Liability for loss through fortuitous
events (Art. 1979)
General rule:
If the thing deposited is lost without a
fortuitous event, the depositary is
presumed at fault. If it was lost
through a fortuitous event, the
depositary is not liable without his
fault.
Exceptions:
a) If it is so stipulated;
b) If he uses the thing without the
depositors permission
c) If he delays in its return;
d) If he allows others to use it, even
though he himself may have been
authorized to use the same.
8. Relation between bank and
depositor (Art. 1980)
Fixed, savings, and current deposits of
money in banks and similar institutions
shall be governed by the provisions
concerning simple loan.
a) Contract of loan deposits
in banks are really loans
because the bank can use the
same for its ordinary
transactions
b) Relation of creditor and
debtor the relation between a
depositor and a bank is that of
a creditor and a debtor.
9. Obligation when the thing
deposited is closed and sealed
(Art. 1981)
General rule:
The depositary has the obligation to:
a) return the thing deposited when
delivered closed and sealed in the
same condition;
b) pay for damages should the seal or
lock be broken through his fault,
which is presumed unless proven
otherwise;
c) Keep the secret of the deposit
when the seal or lock is broken,
with or without his fault.
Exception:
The depositary is justified in opening a
closed and sealed subject matter
a) When the depositary is presumed
authorized to do so (the
presumption applies if the key has
been delivered to him)
b) When the instructions of the
depositor as regards the deposit
cannot be executed without
opening the box or receptacle.
(Necessity)
10.Obligation to return products,
accessories and accessions (Art.
1983)
11.Obligation to pay interest on sums
converted for personal use (Art.
1983)
12.The depositary who receives the
thing in deposit cannot require
that the depositor prove his
ownership over the thing (Art.
1984)
13.Where a third person appears to be
the owner. (Art. 1984)
The depositary may be relieved from
liability when:
a) He advised the true owner of the
thing of the deposit.
b) If the owner, is spite of such
information, does not claim it
within the period of one month (30
days)
14.Obligation of the depositary when
there are two or more depositors.
(Art. 1985)
a) In cases of a divisible thing and
joint depositors each one of the
depositors can demand only his
share proportionate thereto.
b) In cases of an Indivisible thing and
solidary depositors rules on active
solidarity
i) General Rule: Each one of the
depositors may do whatever
may be useful to the others.
(Art. 1212)
Exception: Anything which may
be prejudicial to the other
depositors.
ii) General Rule: The depositary
may return the thing to any one
of the solidary depositors
Exception: When a demand,
judicial or extrajudicial, for its
return has been made by one of
them in which case delivery
should be made to him.
c) In cases where there is a
stipulation of return to one of the
depositors if by stipulation, the
thing should be returned to one of
the depositors, the depositary is
bound to return it only to the
person designated although he has
not made any demand for its
return.
15.Obligation to return to the person
to whom return must be made.
(Art. 1986)
a) The depositary is obliged to return
the thing deposited, when required,
to:
The depositor;
To his heirs or successors;
or
To the person who may
have been designated in the
contract.
b) If the depositor was incapacitated
at the time of making the deposit,
the property must be returned to:
His guardian or
administrator;
To the person who made the
deposit;
To the depositor himself
should he acquire capacity.
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.
16.Obligation to return at the place of
return (Art. 1987)
General rule:
At the place agreed upon by the
parties, transportation expenses shall
be borne by the depositor.
Exception:
(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.
17.Obligation to return upon the time
of return. (Art. 1988)
General rule:
The thing deposited must be returned
to the depositor upon demand, even
though a specified period or time for
such return may have been fixed.
Exceptions:
a) When the thing is judicially
attached while in the depositarys
possession
b) When notified of the opposition of a
third person to the return or the
removal of the thing deposited
18.Right of the depositary to return
the thing deposited. (Art. 1989)
(NOTE: in this case, it is the depositary
who is returning the deposit WITH OR
WITHOUT THE DEMAND of the
depositor)
General rule:
The depositary may return the thing
deposited notwithstanding that a
period has been fixed for the deposit if:
a) The deposit is gratuitous;
b) The reason is justifiable.
If the depositor refuses to receive
the thing, the depositary may
deposit the thing at the disposal of
the judicial authority.
Exception:
When the deposit is for a valuable
consideration, the depositary has no
right to return the thing before the
expiration of the time designated even
if he should suffer inconvenience as a
consequence.
19.Depositarys liability in case of loss
by force majeure or government
order. (Art. 1990)
The depositary is not liable in cases of
loss by force majeur or by government
order. However, he has the duty to
deliver to the depositor money or
another thing he receives in place of
the thing.
20.Liability in case of alienation of the
depositarys heir. (Art. 1991)
When alienation is done in GOOD
FAITH:
a) Return the value of the thing
deposited
b) Assign the right to collect from the
buyer.
The heir does not need to pay
the actual price of the thing
deposited.
When alienation is done in BAD FAITH:
a) Liable for damages;
b) Pay the actual price of the thing
deposited.
21.Depositary may retain the thing in
pledge until the full payment of
what may be due him by reason of
the deposit. (Art. 1994)
The thing retained serves as security
for the payment of what may be due to
the depositary by reason of the
deposit. (see Art. 1965, 1992, 1993).
Note: The debt must be prior to the
deposit.
OBLIGATIONS OF THE DEPOSITOR
1. Obligation to pay expenses of
preservation. (Art. 1992)
2. Obligation to pay losses incurred
due to character of thing
deposited. (Art. 1993)
General rule:
The depositary must be reimbursed for
loss suffered by him because of the
character of the thing deposited.
Exceptions:
a) Depositor was not aware of the
danger;
b) Depositor was not expected to
know the dangerous character of
the thing;
c) Depositor notified the depositary of
such dangerous character;
d) Depositary was aware of the
danger without advice from the
depositor.
3. Effect of death of depositor or
depositary. (Art. 1995)
a) Deposit gratuitous death of
either of the depositor or
depositary extinguishes the
deposit (personal in nature). By
the word extinguished, the law
really means that the depositary
is not obliged to continue with
the contract of deposit.
b) Deposit for compensation not
extinguished by the death of
either party.
NECESSARY DEPOSITS
A deposit is necessary when:
1. It is made in compliance with a legal
obligation, in which case it is governed
by the law establishing it, and in case
of deficiency, the rules on voluntary
deposit e.g. Arts. 538, 586 and 2104
2. It takes place on the occasion of any
calamity, such as fire, storm, flood,
pillage, shipwreck, or other similar
events. There must be a causal relation
between the calamity and the
constitution of the deposit. In this case
the deposit is governed by the rules on
voluntary deposit and Art. 2168
3. Made by passengers with common
carriers., as to those baggage the
passengers or their agents carry
4. Made by travelers in hotels or inns.
(Art. 1998)
The hotel-keeper cannot free himself
from responsibility by posting notices
to the effect that he is not liable for the
articles brought by the guest. (Art.
2003) Any stipulation between the
hotel-keeper and the guest whereby
the responsibility of the former (as set
forth in Art. 1998-2001) is suppressed
or diminished shall be VOID.
Before keepers of hotels or inns may
be held responsible as depositaries
with regard to the effects of their
guests, the following must concur:
Elements:
a) They have been previously
informed about the effects brought
by the guests; and
b) The latter have taken the
precautions prescribed regarding
their safekeeping.
Extent of liability:
a) Liability in hotel rooms which come
under the term baggage or
articles such as clothing as are
ordinarily used by travelers
b) Include those lost or damages in
hotel annexes such as vehicles in
the hotels garage.
In the following cases, the hotel-
keeper is liable REGARDLESS of the
amount of care exercised:
a) The loss or injury to personal
property is caused by his servants
or employees as well as by
strangers (Art. 2000).
b) The loss is caused by the act of a
thief or robber done without the
use of arms and irresistible force.
(Art. 2001)
In the following cases, the hotel-
keeper is not liable:
a) The loss or injury is cause by
force majeure, like flood, fire,
theft or robbery by a stranger
(not the hotel-keepers servant
or employee) with the use of
firearms or irresistible force.
Exception: Unless the hotel-
keeper is guilty of fault or
negligence in failing to provide
against the loss or injury from
his cause.
b) The loss is due to the acts of
the guests, his family,
servants, visitors.
c) The loss arises from the
character of the things brought
into the hotel.
Hotel-keepers right to retain
The hotel-keeper has a right to retain
the things brought into the hotel by the
guest, as a security for credits on
account of:
a) lodging;
b) supplies usually furnished to
hotel guests.
Rationale
It is given to hotel-keepers to
compensate them for the
liabilities imposed upon them by
law. The right of retention
recognized in this article is in
the nature of a pledge created
by operation of law.
JUDICIAL DEPOSIT
When judicial deposit takes place: Judicial
deposit takes place when an attachment or
seizure of property in litigation is ordered by a
court. (Art. 2005)
Nature: Auxiliary to a case pending in court.
Purpose: To maintain the status quo during
the pendency of the litigation or to insure the
right of the parties to the property in case of a
favorable judgment.
Depositary of sequestered property: person
appointed by the court. (Art. 2007)
Obligations:
a) To take care of the property with the
diligence of a good father of the family.
(Art. 2008)
b) He may not be relieved of his
responsibility until the litigation is
ended or the court so orders. (Art.
2007)
Applicable law: The law on judicial deposit is
remedial or procedural in nature. Hence, the
Rules of Court are applicable. (Art. 2009)
Basis of
Compariso
n
Judicial
Deposit
Extra-
judicial
Deposit
Cause or
origin
By will of
the courts
By will of the
parties.
Hence, there
is a contract
Purpose Security;
Secure the
right of a
party to
recover in
case of
favorable
judgment.
Custody;
Safekeeping
of the thing
Subject
Matter
Either
movable or
immovable
property
but
generally,
immovable
Only
movable
property
Remunerati
on
Always
remunerate
d (onerous)
Generally
gratuitous,
but may be
compensate
d
In whose
behalf it is
held
In behalf of
the person
who, by the
judgment,
has a right
In behalf of
the
depositor or
third person
designated
GUARANTY
GUARANTY is a contract whereby a person,
called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal
debtor in case the latter should fail to do so.
(Art. 2047)
CHARACTERISTICS
1. Accessory dependent for its
existence upon the principal obligation
guaranteed by it;
2. Subsidiary and conditional takes
effect only when the principal debtor
fails in his obligation subject to
limitation
3. Unilateral
a. It gives rise only to a duty on
the part of the guarantor in
relation to the creditor and not
vice versa
b. It may be entered into even
without the intervention of the
principal debtor.
4. Guarantor must be a person distinct
from the debtor a person cannot be
the personal guarantor of himself
CLASSIFICATION OF GUARANTY
1. Guaranty in the broad sense:
a. Personal guaranty is the
credit given by the person who
guarantees the fulfillment of the
principal obligation; or
b. Real guaranty is property,
movable, or immovable
i. Real mortgage (2124) or
antichresis (2132)
guaranty is immovable
ii. Chattel mortgage (2140)
or pledge (2093)
guaranty is movable
2. As to its origin:
a. Conventional constituted by
agreement of the parties
(2051[1])
b. Legal imposed by virtue of a
provision of law
c. Judicial required by a court to
guarantee the eventual right of
one of the parties in a case.
3. As to consideration:
a. Gratuitous guarantor does not
receive any price or
remuneration for acting as such
(2048)
b. Onerous one where the
guarantor receives valuable
consideration for his guaranty
4. As to person guaranteed:
a. Single constituted solely to
guarantee or secure
performance by the debtor of
the principal obligation;
b. Double or sub-guaranty
constituted to secure the
fulfillment by the guarantor of a
prior guaranty
5. As to its scope and extent:
a. Definite where the guaranty is
limited to the principal
obligation only, or to a specific
portion thereof;
b. Indefinite or simple where the
guaranty included all the
accessory obligations of the
principal, e.g. costs, including
judicial costs.
RULES GOVERNING GUARANTY
1. A guaranty is generally gratuitous
(2048)
General Rule: Guaranty is gratuitous
Exception: When there is a stipulation
to the contrary
2. On the cause of a guaranty contract
a. Presence of cause which supports
principal obligation: Cause of the
contract is the same cause which
supports the obligation as to the
principal debtor
23
. The
consideration which supports the
obligation as to the principal
debtor is a sufficient consideration
to support the obligation of a
guarantor or surety.
b. Absence of direct consideration or
benefit to guarantor: Guaranty or
surety agreement is regarded valid
despite the absence of any direct
consideration received by the
guarantor or surety, such
consideration need not pass
directly to the guarantor or surety;
a consideration moving to the
principal will suffice.
3. A married woman who is a guarantor
binds only her separate property,
generally
Exceptions:
1. With her husbands consent, bind the
community or conjugal partnership
property
2. Without husbands consent, in cases
provided by law, such as when the
guaranty has redounded to the benefit
of the family.
4. A guaranty need not be undertaken
with the knowledge of the debtor (2050)
23
SEVERINO v SEVERINO: A guarantor or surety is bound by
the same consideration that makes the contract effective between
the principal parties thereto.
1. Guaranty is unilateral exists for the
benefit of the creditor and not for the
benefit of the principal debtor
2. Creditor has every right to take all
possible measures to secure payment
of his credit guaranty can be
constituted even against the will of the
principal debtor
However, as regards payment made by a
third person:
1. Payment without the knowledge or
against the will of the debtor:
a. Guarantor can recover only
insofar as the payment has
been beneficial to the debtor
b. Guarantor cannot compel the
creditor to subrogate him in his
rights
2. Payment with knowledge or consent of
the debtor: Subrogated to all the rights
which the creditor had against the
debtor
5. The guaranty must be founded on a
valid principal obligation (2052[1])
Guaranty is an accessory contract: It is an
indispensable condition for its existence that
there must be a principal obligation. Hence, if
the principal obligation is void, it is also void.
6. A guaranty may secure the
performance of a voidable,
unenforceable, and natural obligation
(2052[2])
A guaranty may secure the performance of a:
1. Voidable contract such contract is
binding, unless it is annulled by a
proper court action
2. Unenforceable contract because such
contract is not void
3. Natural obligation the creditor may
proceed against the guarantor
although he has not right of action
against the principal debtor for the
reason that the latters obligation is not
civilly enforceable. When the debtor
himself offers a guaranty for his
natural obligation, he impliedly
recognizes his liability, thereby
transforming the obligation from a
natural into a civil one.
7. A guaranty may secure a future debt
(2053)
Continuing Guaranty or Suretyship
24
:
24
DIO v. CA: Under the Civil Code, a guaranty may be given to
secure even future debts, the amount of which may not known at
the time the guaranty is executed. This is the basis for contracts
denominated as continuing guaranty or suretyship.
1. Future debts, even if the amount is not
yet known, may be guaranteed but
there can be no claim against the
guarantor until the amount of the debt
is ascertained or fixed and
demandable.
Rationale: A contract of guaranty is
subsidiary.
a. To secure the payment of a loan
at maturity surety binds
himself to guarantee the
punctual payment of a loan at
maturity and all other
obligations of indebtedness
which may become due or
owing to the principal by the
borrower.
b. To secure payment if any debt
to be subsequently incurred a
guaranty shall be construed as
continuing when by the terms
therof it is evident that the
object is to give a standing
credit to the principal debtor to
be used from time to time
either indefinitely or until a
certain period, especially if the
right to recall the guaranty is
expressly reserved.
c. To secure existing unliquidated
debts refer to debts existing
at the time of the constitution
of the guaranty but the amount
thereof is unknown and not to
dents not yet incurred and
existing at that time. The surety
agreement itself is valid and
binding even before the
principal obligation intended to
be secured thereby is born, any
more than there would be in
saying that obligations which
are subject to a condition
precedent are valid and binding
before the occurrence of the
condition precedent
A continuing guaranty is one which is not limited to a
single transaction, but which contemplates a future course of
dealing, covering a series of transactions, generally for an
indefinite time or until revoked. It is prospective in its operation
and is generally intended to provide security with respect to future
transactions within certain limits, and contemplates a succession
of liabilities, for which, as they accrue, the guarantor becomes
liable.
A continuing guaranty is one which covers all
transactions, including those arising in the future, which are within
the description or contemplation of the contract, of guaranty, until
the expiration or termination thereof. A guaranty shall be
construed as continuing when by the terms thereof it is evident
that the object is to give a standing credit to the principal debtor to
be used from time to time either indefinitely or until a certain
period, especially if the right to recall the guaranty is expressly
reserved.
Where the contract of guaranty states that the same is
to secure advances to be made "from time to time" the guaranty
will be construed to be a continuing one.
8. A guaranty may secure the
performance of a conditional obligation
1. Principal obligation subject to a
suspensive condition the guarantor is
liable only after the fulfillment of the
condition.
2. Principal obligation subject to a
resolutory condition the happening of
the condition extinguishes both the
principal obligation and the guaranty
9. A guarantors liability cannot exceed
the principal obligation (2054)
General Rule:
Guaranty is a subsidiary and accessory
contract guarantor cannot bind himself for
more than the principal debtor and even if he
does, his liability shall be reduced to the limits
of that of the debtor. But the guarantor may
bind himself for less than that of the principal.
Exceptions:
1. Interest, judicial costs, and attorneys
fees as part of damages may be
recovered creditors suing on a
suretyship bond may recover from the
surety as part of their damages,
interest at the legal rate, judicial costs,
and attorneys fees when appropriate,
even without stipulation and even if
the surety would thereby become liable
to pay more than the total amount
stipulated in the bond.
Interest runs from:
a. Filing of the complaint (upon
judicial demand); or
b. The time demand was made
upon the surety until the
principal obligation is fully paid
(upon extra-judicial demand)
Rationale
Surety is made to pay, not by reason
of the contract, but by reason of his
failure to pay when demanded and for
having compelled the creditor to resort
to the courts to obtain payment.
2. Penalty may be provided a surety
may be held liable for the penalty
provided for in a bond for violation of
the condition therein.
Principals liability may exceed
guarantors obligations
The amount specified in a surety bond
as the suretys obligation does not limit
the extent of the damages that may be
recovered from the principal, the
latters liability being governed by the
obligations he assumed under his
contract.
10. The existence of a guaranty is not
presumed (2055)
Guaranty requires the expression of consent
on the part of the guarantor to be bound. It
cannot be presumed because of the existence
of a contract or principal obligation.
Rationale:
1. There be assurance that the guarantor
had the true intention to bind himself;
2. To make certain that on making it, the
guarantor proceeded with
consciousness of what he was doing.
11. A contract of guaranty is covered by
the Statute of Frauds
Guaranty must not only be expressed but
must so be reduced into writing. Hence, it
shall be unenforceable by action, unless the
same or some note or memorandum thereof
be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore,
of the agreement cannot be received without
the writing, or a secondary evidence of its
contents. However, It need not appear in a
public document.
GUARANTY DISTINGUISHED FROM
WARRANTY
GUARANTY WARRANTY
Contract by which a
person is bound to
another for the
fulfillment of a
promise or
engagement of a
third party
An undertaking
that the title,
quality, or
quantity of the
subject matter of
a contract is
what it has been
represented to
be, and relates
to some
agreement made
ordinarily by the
party who makes
the warranty
GUARANTY DISTINGUISHED FROM
SURETYSHIP
GUARANTY SURETYSHIP
Liability depends
upon an
independent
agreement to pay
the obligation if
the primary debtor
fails to do so
Assumes liability as
a regular party to
the undertaking
Engagement is a
collateral
Charged as an
original promisor
undertaking
Secondarily liable
he contracts to
pay if, by the use
of due diligence,
the dent cannot be
paid
Primarily liable
undertakes directly
for the payment
without reference to
the solvency of the
principal, and is so
responsible at once
the latter makes
default, without any
demand by the
creditor upon the
principal
whatsoever or any
notice of default
Only binds himself
to pay if the
principal cannot or
unable to pay
Undertakes to pay if
the principal does
not pay, without
regard to his ability
to do so
Insurer of the
solvency of the
debtor
Insurer of the debt
Does not contract
that the principal
will pay, but
simply that he is
able to do so
Pay the creditor
without qualification
if the principal
debtor does not
pay. Hence, the
responsibility or
obligation assumed
by the surety is
greater or more
onerous than that
of a guarantor
13. On the guarantor (2056-2057)
1. He possesses integrity;
2. He has capacity to bind himself;
3. He has sufficient property to answer
for the obligation which he guarantees.
Exception: The creditor waives the
requirements
The qualifications above need only be present
at the time of the perfection of the contract.
The subsequent loss of integrity or property or
supervening incapacity of the guarantor would
not operate to exonerate the guarantor of the
eventual liability he has contracted, and the
contract of guaranty continues. The creditor
can merely demand another guarantor with
the proper qualifications except that the
creditor may waive such remedy if he chooses
and hold the guarantor to his bargain.
Selection of Guarantor:
1. Specified person stipulated as
guarantor: Substitution of guarantor
may not be demanded
Reason: The selection of the guarantor
is:
a. Term of the agreement;
b. As a party, the creditor is,
therefore, bound thereby.
2. Guarantor selected by the principal
debtor: Debtor answers for the
integrity, capacity, and solvency of the
guarantor.
3. Guarantor personally designated by the
creditor: Responsibility of the selection
should fall upon the creditor because
he considered the guarantor to have
the qualifications for the purpose.
EFFECTS OF GUARANTY BETWEEN THE
GUARANTOR AND THE CREDITOR
1. The guarantor has the right to benefit
from excussion/ exhaustion
25
Exceptions to the benefit of excussion (2059)
1. As provided in Art. 2059:
a. If the guarantor has expressly
renounced it ;waiver is valid but
it must be made in express
terms.
b. If he has bound himself
solidarily with the debtor, the
liability assumed is that of a
surety. The guarantor becomes
primarily liable as a solidary co-
debtor. In effect, he renounces
in the contract itself the benefit
of exhaustion
26
.
c. In case of insolvency of the
debtor guarantor guarantees
the solvency of the debtor. If
the debtor becomes insolvent,
the liability of the guarantor as
the debtor cannot fulfill his
obligation
d. When he (debtor) has
absconded, or cannot be sued
within the Philippines the
creditor is not required to go
after a debtor who is hiding or
cannot be sued in our courts,
and to incur the delays and
expenses incident thereto. The
exception is when the debtor
has left a manager or
representative;
e. If it may be presumed that an
execution on the property of the
25
SOUTHERN MOTORS, INC. v BARBOSA: The right of
guarantorsto demand exhaustion of the property of the principal
debtor, exists only when a pledge or a mortgage has not been
given as special security for the payment of the principal
obligation.
26
LUZON STEEL CORP. v SIA: The surety in the present case
bound itself "jointly and severally" (in solidum) with the defendant;
and excussion (previous exhaustion of the property of the debtor)
shall not take place "if he (the guarantor) has bound himself
solidarily with the debtor".
principal debtor would not result
in the satisfaction of the
obligation if such judicial
action including execution would
not satisfy the obligation, the
guarantor can no longer require
the creditor to resort to all such
remedies against the debtor as
the same would be but a
useless formality. It is not
necessary that the debtor be
judicially declared insolvent.
2. If he does not comply with Art. 2060:
In order that the guarantor may make
use of the benefit of excussion, he
must:
a. Set it up against the creditor
upon the latters demand for
payment from him;
b. Point out to the creditor:
i. Available property of the
debtor the guarantor
should facilitate the
realization of the
excussion since he is the
most interested in its
benefit.
ii. Within the Philippine
territory excussion of
property located abroad
would be a lengthy and
extremely difficult
proceeding and would
not conform with the
purpose of the guaranty
to provide the creditor
with the means of
obtaining the fulfillment
of the obligation.
iii. Sufficient to cover the
amount of the debt.
3. If he is a judicial bondsman and sub-
surety (2084)
4. Where a pledge or mortgage has been
given by him as a special security.
5. If he fails to interpose it as a defense
before judgment is rendered against
him.
2. The creditor has the right to secure a
judgment against the guarantor prior to
the excussion
General rule:
An ordinary personal guarantor (NOT a
pledgor or mortgagor), may demand
exhaustion of all the property of the debtor
before he can be compelled to pay.
Exception:
The creditor may, prior thereto, secure a
judgment against the guarantor, who shall be
entitled, however, to a deferment of the
execution of said judgment against him, until
after the properties of the principal debtor
shall have been exhausted, to satisfy the
latters obligation.
3. The creditor has the duty to make prior
demand for payment from the guarantor
(2060)
1. The demand is to be made only after
judgment on the debt
2. Joining the guarantor in the suit
against the principal debtor is not the
demand intended by law. Actual
demand has to be made.
4. The guarantor has the duty to set up
the benefit of excussion (2060)
As soon as he is required to pay, guarantor
must also point out to the creditor available
property (not in litigation or encumbered) of
the debtor within the Philippines.
5. The creditor has the duty to resort to
all legal remedies (2061)
a) After the guarantor has fulfilled the
conditions required for making use of
the benefit of exhaustion, it becomes
the duty of the creditor to:
b) Exhaust all the property of the debtor
pointed out by the guarantor;
c) If he fails to do so, he shall suffer the
loss but only to the extent of the value
of the said property, for the insolvency
of the debtor.
6. The creditor has the duty to notify the
guarantor in the action against the
debtor
Under this article, notice to the guarantor is
mandatory in the action against the principal
debtor. The guarantor, however, is not duty
bound to appear in the case, and his non-
appearance shall not constitute default, w/ its
consequential effect.
Rationale:
The purpose of notification is to give the
guarantor the opportunity to allege and
substantiate whatever defenses he may have
against the principal obligation, and chances
to set up such defenses as are afforded him
by law if he so desires
7. A compromise shall not prejudice the
person not party to it.
1. A compromise between creditor and
principal debtor benefits the guarantor
but does not prejudice him.
2. A compromise between guarantor and
the creditor benefits but does not
prejudice the principal debtor.
8. Co-guarantors are entitled to the
benefit of division (2065)
The benefit of division applies only when there
are several guarantors and one debtor for a
single debt. Except when solidarity has been
stipulated among the co-guarantors, a co-
guarantor is liable only to the extent of his
share in the obligation as divided among all
the co-guarantors.
EFFECTS OF GUARANTY BETWEEN THE
DEBTOR AND THE GUARANTOR
1. The guarantor has the right to be
subrogated to the rights of the creditor
A guarantor who pays the debt is entitled to
every remedy which the creditor has against
the principal debtor, to enforce every security
and all means of payments; to stand in the
place of the creditor not only through the
medium of the contract, but even by means of
the securities entered into w/out the
knowledge of the surety; having the right to
have those securities transferred to him
though there was no stipulation for it, and to
avail himself of all securities against the
debtor
The need to enforce the provisions on
indemnity in Article 2066 forms the basis for
the subrogation clause of Article 2067. The
assumption, however, is that the guarantor
who is subrogated to the rights of the
creditor, has the right to be reimbursed for his
answering for the obligation of the debtor.
Absent this right of reimbursement,
subrogation will not be proper.
2. The guarantor has the duty to notify
the debtor before paying the creditor.
Should payment be made without notifying
the debtor, and supposing the debtor has
already made a prior payment, the debtor
would be justified in putting up the defense
that the obligation has already been
extinguished by the time the guarantor made
the payment. In this case, the guarantor will
lose the right of reimbursement and
consequently the right of subrogation as well.
3. The guarantor cannot make payment
before the obligation has become due.
General rule:
Since a contract of guaranty is only
subsidiary, the guarantor cannot be liable for
the obligation before the period on which the
debtors liability will accrue. Any payment
made by the guarantor before the obligation is
due cannot be indemnified by the debtor.
Exception:
Prior consent or subsequent ratification by the
debtor
4. The guarantor may proceed against
the debtor even before payment has been
made
General rule:
Guarantor has no cause of action against the
debtor until after the former has paid the
obligation.
Exceptions:
1. When he is sued for the payment;
2. In case of insolvency of the principal
debtor;
3. When the debtor has bound himself to
relieve him from the guaranty within a
specified period, and this period has
expired;
4. When the debt has become
demandable, by reason of the
expiration of the period for payment;
5. After the lapse of 10 years, when the
principal obligation has no fixed period
for its maturity, unless it be of such
nature that it cannot be extinguished
except within a period longer than 10
years;
6. If there are reasonable grounds to fear
that the principal debtor intends to
abscond;
7. If the principal debtor is in imminent
danger of becoming insolvent.
Rationale
To enable the guarantor to take measures for
the protection of his interest in view of the
probability that he would be called upon to
pay the debt. As such, he may, in the
alternative, obtain release from the guaranty;
or demand security that shall protect him
from any proceedings by the creditor; and
against the insolvency of the debtor.
EEFECTS OF GUARANTY AS BETWEEN CO-
GUARANTORS
Requisites for the applicability of Art. 2073:
1. Payment has already been made by
one guarantor;
2. The payment was made because
a. Of the insolvency of the debtor,
or
b. By judicial demand
3. The paying guarantor seeks to be
indemnified only to the extent of his
proportionate share in the total
obligation. For purposes of
proportionate reimbursement, the
other guarantors may interpose such
defenses against the paying guarantor
as are available to the debtor against
the creditor, except those that are
personal to the debtor.
EXTINGUISHMENT OF GUARANTY
1. Once the obligation of the debtor is
extinguished in any manner provided in the
Civil Code, the obligation of the guarantor is
also extinguished. However, there may be
instances when, after the extinguishment of
the guarantors obligation (as in the case of a
release from the guaranty), the obligation of
the debtor still subsists.
2. Although the guarantor generally has to
make payment in money, any other thing of
value, if accepted by the creditor, is valid
payment and therefore releases the
guarantor.
3. If one guarantor is released, the release
would benefit the co-guarantors to the extent
of the proportionate share of the guarantor
released.
4. A guarantor is also released if the creditor,
without the guarantors consent, extends the
time within which the debtor may perform his
obligation. This is to protect the interest of the
guarantor should the debtor be insolvent
during the period of extension and deprive the
guarantor of his right to reimbursement.
5. If through the fault of the creditor the
guarantors are precluded from being
subrogated to the formers rights, the latter
are released from the obligation.
LEGAL AND JUDICIAL BONDS
Bond an undertaking that is sufficiently
secured, and not cash or currency.
Bondsman a surety offered in virtue of a
provision of law or a judicial order.
Qualifications of personal bondsman:
1. He possesses integrity;
2. He has capacity to bind himself;
3. He has sufficient property to
answer for the obligation which he
guarantees.
PLEDGE OR MORTGAGE IN LIEU OF BOND
Guaranty or suretyship is a personal security.
Pledge or mortgage is a property or real
security.
If the person required to give a legal or
judicial bond should not be able to do so, a
pledge or mortgage sufficient to cover the
obligation shall be admitted in lieu thereof.
BONDSMAN NOT ENTITLED TO
EXCUSSION
A judicial bondsman and the sub-surety are
not entitled to the benefit of excussion.
Reason: They are not mere guarantors, but
sureties whose liability is primary and
solidary.
Effect of negligence of creditor: Mere
negligence on the part of the creditor in
collecting from the debtor will not relieve the
surety from liability.
SURETYSHIP is a relation which exists where
one person (principal) has undertaken an
obligation and another person (surety) is also
under a direct and primary obligation or other
duty to the obligee, who is entitled to but one
performance, and as between the two who are
bound, the second, rather than the first
should perform.
If a person binds himself solidarily with the
principal debtor, the contract is called
suretyship and the guarantor is called a
surety.
NATURE OF SURETYS UNDERTAKING
1. Liability is contractual and
accessory but direct:
2. Liability is limited by terms of
contract
3. Liability arises only if principal
debtor is held liable
a. In the absence of collusion, the
surety is bound by a judgment
against the principal event
though he was not a party to
the proceedings;
b. The creditor may sue,
separately or together, the
principal debtor and the surety;
c. A demand or notice of default is
not required to fix the suretys
liability
Exception: Where required by
the provisions of the contract of
suretyship
d. A surety bond is void where
there is not principal debtor
because such an undertaking
presupposes that the obligation
is to be enforceable against
someone else besides the
surety, and the latter can
always claim that it was never
his intention to be the sole
person obligated thereby.
NOTE: Surety is not entitled to
exhaustion
4. Undertaking is to creditor, not to
debtor: The surety makes no covenant
or agreement with the principal that it
will fulfill the obligation guaranteed for
the benefit of the principal. The
suretys undertaking is that the
principal shall fulfill his obligation and
that the surety shall be relieved of
liability when the obligation secured is
performed.
Exception: Unless otherwise expressly
provided.
NOTE: Surety is not entitled to notice
of principals default
5. Prior demand by the creditor upon
principal not required
Surety is not exonerated by
neglect of creditor to sue principal
STRICTISSIMI JURIS RULE APPLICABLE
ONLY TO ACCOMMODATION SURETY
Reason: An accommodation surety acts
without motive of pecuniary gain and hence,
should be protected against unjust pecuniary
impoverishment by imposing on the principal,
duties akin to those of a fiduciary.
This rule will apply only after it has been
definitely ascertained that the contract is one
of suretyship or guaranty.
STRICTISSIMI JURIS RULE NOT
APPLICABLE TO COMPENSATED
SURETIES
Reasons:
1. Compensated corporate sureties are
business association organized for the
purpose of assuming classified risks in
large numbers, for profit and on an
impersonal basis.
2. They are secured from all possible loss
by adequate counter-bonds or
indemnity agreements.
3. Such corporations are in fact insurers
and in determining their rights and
liabilities, the rules peculiar to
suretyship do not apply.
PLEDGE, MORTGAGE,
ANTICHRESIS
ESSENTIAL REQUISITES COMMON TO
PLEDGE AND MORTGAGE
1) Constituted to secure the fulfillment of a
principal obligation
27
.
2) Pledgor or mortgagor must be the
absolute owner of the thing pledged or
mortgaged.
3) The persons constituting the pledge or
mortgage have the free disposal of their
property, and in the absence thereof, that
they be legally authorized for the purpose.
4) Cannot exist without a valid obligation.
5) Debtor retains the ownership of the thing
given as a security.
6) When the principal obligation becomes
due, the thing pledged or mortgaged may
be alienated for the payment to the
creditor.
IMPORTANT POINTS
1) Future property cannot be pledged or
mortgaged.
2) Pledge or mortgage executed by one who
is not the owner of the property pledged
or mortgaged is without legal existence
and registration cannot validate it.
3) Mortgage of a conjugal property by one of
the spouses is valid only as to of the
entire property.
4) In case of property covered by Torrens
title, a mortgagee has the right to rely
upon what appears in the certificate of title
and does not have to inquire further.
5) Pledgor or mortgagor has free disposal of
property.
6) Thing pledged or mortgaged may be
alienated.
7) Creditor not required to sue to enforce his
credit.
8) Pledgor or mortgagor may be a third
person.
RIGHT OF CREDITOR WHERE DEBTOR FAILS
TO COMPLY WITH HIS OBLIGATION
1) Creditor is merely entitled to move for the
sale of the thing pledged or mortgaged
with the formalities required by law in
order to collect.
27
MANILA SURETY V VELAYO: The accessory character is of
the essence of pledge and mortgage. As stated in Art 2085 CC, an
essential requisite of these contracts is that they be constituted to
secure the fulfillment of a principal obligation
2) Creditor cannot appropriate to himself the
thing nor can he dispose of the same as
owner.
pledge mortgage
Constituted on
movables.
Constituted on
immovables.
Property is
delivered to the
pledgee, or by
common consent to
a 3
rd
person.
Delivery not
necessary.
Not valid against 3
rd
persons unless a
description of the
thing pledged and
the date of the
pledge appear in a
public instrument.
Not valid against 3
rd
persons if not
registered.
PROHIBITION AGAINST PACTUM
COMMISSORIUM
1. Stipulation is null and void: Stipulation
where thing or mortgaged shall
automatically become the property of
the creditor in the event of
nonpayment of the debt within the
term fixed.
2. Requisites of pactum commissorium
28
:
a) Pledge or mortgage.
b) A stipulation for an automatic
appropriation by the creditor of the
property in the event of
nonpayment.
3. Effect on security contract: Nullity of
the stipulation does not affect validity
and efficacy of the principal contract.
IMPORTANT POINTS
1) Debtor-owner bears the risk of loss of the
property.
2) Pledge or mortgage is indivisible.
Exceptions:
a) Where each of several things
guarantees a determinate portion of
the credit.
b) Where only a portion of loan was
released.
c) Where there was failure of
consideration.
3) Rule that real property, consisting of
several lots should be sold separately,
applies to sales in execution, and not to
foreclosure of mortgages.
4) The mere embodiment of a real estate
mortgage and a chattel mortgage in one
28
UY TONG v CA: The 2 elements for pactum commissorium to
exist: (1) that there should be a pledge or mortgage wherein a
property is pledged or mortgaged by way of security for the
payment of the principal obligation; and (2) that there should be a
stipulation for an automatic appropriation by the creditor of the
thing pledged or mortgaged in the event of non-payment of the
principal obligation within the stipulated period.
document does not have the effect of
fusing both securities into an indivisible
whole
29
.
5) Pledge or mortgage may secure all kinds
of obligation, be they pure or subject to
suspensive or resolutory conditions.
6) A promise to constitute pledge or
mortgage creates no real right, only a
personal right binding upon the parties,
only right of action to compel the
fulfillment of the promise but there is no
pledge or mortgage yet.
7) Under the RPC, estafa is committed by a
person who, pretending to be the owner
of any real property, shall convey, sell,
encumber or mortgage the same knowing
that the real property is encumbered and
shall dispose of the same as
unencumbered. It is essential that fraud or
deceit be practiced upon the vendee at the
time of the sale.
PLEDGE is a contract by virtue of which the
debtor delivers to the creditor or to a third
person a movable or document evidencing
incorporeal rights 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. (Art.2085 in
rel to 2093)
KINDS
1) Voluntary or conventional Created by
agreement of parties.
2) Legal Created by operation of law.
29
CENTRAL BANK vs. CA: The consideration of the accessory
contract of real estate mortgage is the same as that of the
principal contract. For the debtor, the consideration of his
obligation to pay is the existence of a debt. Thus, in the accessory
contract of real estate mortgage, the consideration of the debtor in
furnishing the mortgage is the existence of a valid, voidable, or
unenforceable debt (Art. 2086, in relation to Art. 2052, of the Civil
Code).
It is not necessary that any consideration should pass at
the time of the execution of the contract of real mortgage. It may
either be a prior or subsequent matter. But when the consideration
is subsequent to the mortgage, the mortgage can take effect only
when the debt secured by it is created as a binding contract to
pay. And, when there is partial failure of consideration, the
mortgage becomes unenforceable to the extent of such failure.
Where the indebtedness actually owing to the holder of
the mortgage is less than the sum named in the mortgage, the
mortgage cannot be enforced for more than the actual sum due.
The rule of indivisibility of the mortgage as outlined by
Article 2089 above-quoted presupposes several heirs of the
debtor or creditor which does not obtain in this case. Hence, the
rule of indivisibility of a mortgage cannot apply;
BELO vs. PNB: From Art. 2089 is excepted the case in w/c, there
being several things given in mortgage or pledge, each one of
them guarantees only a determinate portion of the credit. The
debtor, in this case, shall have a right to the extinguishment of the
pledge or mortgage as the portion of the debt for w/c each thing is
specially answerable is satisfied. From the wordings of the law,
indivisibility arises only when there is a debt, that is, there is a
debtor-creditor relationship.
CHARACTERISTICS
1) Real Perfected by delivery.
2) Accessory Has no independent existence
of its own.
3) Unilateral Creates obligation solely on
the part of the creditor to return the thing
subject upon the fulfillment of the principal
obligation.
4) Subsidiary Obligation incurred does not
arise until the fulfillment of the principal
obligation.
CAUSE OR CONSIDERATION
1) Principal obligation In so far as the
pledgor is concerned.
2) Compensation stipulated for the pledge or
mere liberality of the pledgor If pledgor
is not the debtor.
PROVISIONS APPLICABLE ONLY TO
PLEDGE
1) Transfer of possession to the creditor or to
third person by common agreement is
essential in pledge.
- Actual delivery is important.
- Constructive or symbolic
delivery of the key to the
warehouse is sufficient to show
that the depositary appointed
by common consent of the
parties was legally placed in
possession.
2) All movables within the commerce of man
may be pledged as long as they are
susceptible of possession.
3) Incorporeal rights may be pledged. The
instruments representing the pledged
rights shall be delivered to the creditor; if
they be negotiable instruments, they must
be indorsed.
4) Pledge shall take effect against 3
rd
persons
only if the following appear in a public
instrument:
a) Description of the thing pledged.
b) Date of the pledge.
5) The thing pledged may be alienated by the
pledgor or owner only with the consent of
the pledgee. Ownership of the thing
pledged is transmitted to the vendee or
transferee as soon as the pledgee
consents to the alienation, but the latter
shall continue to have possession.
6) Pledge gives the creditor the right to retain
the thing in his possession or in that of a
third person to whom it has been
delivered, until the debt is paid.
7) Special Laws apply to pawnshops and
establishments engaged in making loans
secured by pledges. Provisions of the Civil
Code shall apply subsidiarily to them.
RIGHTS AND DUTIES OF CREDITOR IN A
PLEDGE
1) Shall take care of the thing pledged with
the diligence of a good father of a family.
2) Has right to reimbursement of the
expenses made for preserving the thing.
Shall be liable for loss or deterioration of
the thing by reason of fraud, negligence,
delay or violation of the terms of the
contract, but not for fortuitous events.
3) May bring actions pertaining to the owner
of the thing in order to recover it from, or
defend it against, a 3rd person.
4) Cannot use the thing without the authority
of the owner. If he uses the thing without
authority, or if he misuses the thing when
he was authorized to use it, the owner
may ask that it be judicially or
extrajudicially deposited.
5) May use the thing if necessary for its
preservation.
6) May either claim another thing in pledge
or demand immediate payment of the
principal obligation if he is deceived on the
substance or quality of the thing.
RIGHTS AND DUTIES OF THE PLEDGEE
1) Cannot deposit the thing pledged with a
3rd person, unless there is a contrary
stipulation
30
.
2) Is responsible for the acts of his agents or
employees with respect to the thing
pledged.
3) Has no right to use the thing or to
appropriate its fruits without authority
from the owner
31
.
4) May cause the public sale of the thing
pledged if, without fault on his part, there
is danger of destruction, impairment or
dimunition in value of the thing. The
proceeds of the auction shall be a security
for the principal obligation.
PLEDGOR
1) Takes responsibility for the flaws of the
thing pledged.
2) Cannot ask for the return of the thing
against the will of the creditor, unless and
until he has paid the debt and its interest,
with expenses in proper cases.
30
YULIONGSIU vs. PNB: There is authority supporting the
proposition that the pledgee can temporarily entrust me physical
possession of the chattels pledged to the pledgor without
invalidating the pledge. In such a case, the pledgor is regarded as
holding the pledged property merely as trustee for the pledgee.
The type of delivery will depend upon the nature and the peculiar
circumstances of each case.
31
PNB vs. ATENDIDO: according to law, a pledgee cannot
become the owner of, nor appropriate to himself, the thing given in
pledge. If by the contract of pledge the pledgor continues to be the
owner of the thing pledged during the pendency of the obligation,
it stands to reason that in case of loss of the property, the loss
should be borne by the pledgor.
3) Is allowed to substitute the thing which is
in danger of destruction or impairment
without any fault on the part of the
pledgee, with another thing of the same
kind and quality.
4) May require that the thing be deposited
with a 3rd person, if through the
negligence or willful act of the pledgee the
thing is in danger of being lost or
impaired.
EXTINGUISHMENT OF A PLEDGE
1) Ways to extinguish a pledge:
a) Payment of the debt.
b) Sale of the thing pledged at public
auction.
c) Thing pledged is returned by the
pledgee to the pledgor or owner.
d) Written statement by the pledgee that
he renounces or abandons the pledge.
For this purpose, neither the
acceptance by the pledgor or owner
nor the return of the thing pledged is
necessary, and the pledgee becomes a
depositary.
2) Presumptions
32
:
a) If, subsequent to the perfection of the
pledge, the thing is found in the
possession of the pledgor or owner,
there is prima facie presumption that
the thing has been returned by the
pledgee.
b) If the thing is in the possession of a
3rd person who received it from the
pledgor or owner after the constitution
of the pledge, there is prima facie
presumption that the thing has been
returned by the pledgee.
REQUIREMENTS IN SALE OF THE THING
PLEDGED BY A CREDITOR, IF CREDIT IS
NOT PAID ON TIME
1) Debt is due and unpaid.
2) Sale must be at a public auction.
3) Notice to the pledgor and owner, stating
the amount due.
4) Sale must be made with the intervention
of a notary public.
EFFECT OF THE SALE OF THE THING
PLEDGED
1) Extinguishes the principal obligation,
whether the price of the sale is more or
less than the amount due.
32
MANILA BANKING v TEODORO: In case of doubt as to whether a
transaction is a pledge or a dation in payment, the presumption is in
favor of pledge, the latter being the lesser transmission of rights and
interests (as earlier established in Lopez v. Court of Appeals)
2) if the price is more than amount due, the
debtor is not entitled to the excess unless
the contrary is provided.
3) If the price of the sale is less, neither is
the creditor entitled to recover the
deficiency. A contrary stipulation is void.
LEGAL PLEDGES
1) Necessary expenses shall be refunded to
every possessor, but only a possessor in
good faith may retain the thing until he
has been reimbursed.
- Useful expenses shall be refunded only
to the possessor in good faith with the
same right of retention, the person
who has defeated him in the
possession having the option of
refunding the amount of the expenses
or of paying the increase in value
which the thing may have acquired
and by reason thereof (Art. 546)
2) He who has executed work upon a
movable has a right to retain it by way of
pledge until he is paid. (Art. 1731)
3) The agent may retain the things which are
the objects of agency until the principal
effects the reimbursement and pays the
indemnity. (Art. 1914)
4) The laborers wages shall be a lien on the
goods manufactured or the work done.
(Art. 1707)
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
33
.
OBJECTS OF REAL MORTGAGE
1) Immovables.
2) Alienable real rights in accordance with the
laws, imposed upon immovables.
- Future property cannot be object of
mortgage.
KINDS
1) Voluntary
2) Legal
3) Equitable One which, although lacking
the proper formalities of a mortgage,
33
DAYRIT v CA: Well-entrenched in law is the rule that a
mortgage directly and immediately subjects the property upon
which it is imposed, the same being indivisible even though the
debt may be divided, and such indivisibility likewise being
unaffected by the fact that 'the debtors are not solidarity liable.
"When several things are pledged or mortgaged, each thing for a
determinate portion of the debt, the pledges or mortgage, are
considered separate from each other. But when the several things
are given to secure the same debt in its entirety, all of them are
liable for the debt, and the creditor does not have to divide his
action by distributing the debt among the various things pledged or
mortgaged. Even when only a part of the debt remains unpaid, all
the things are still liable for such balance." (Tolentino)
shows the intention of the parties to make
the property as a security for a debt.
- Provisions governing equitable
mortgage: Arts. 1365, 1450, 1454,
1602, 1603, 1604 and 1607.
ESSENTIAL REQUISITES
1) Constituted to secure the fulfillment of a
principal obligation
34
.
2) Mortgagor must be the absolute owner of
the thing mortgaged.
3) The persons constituting the mortgage
have free disposal of the property; in the
absence thereof, they should be legally
authorized for the purpose.
4) Cannot exist without a valid obligation.
5) When the principal obligation becomes
due, the thing in which the mortgage
consists may be alienated for payment to
the creditor.
6) Must appear in a public document duly
recorded in the Registry of Property, to be
validly constituted.
- In a legal mortgage, the persons in
whose favor the law establishes a
mortgage have the right to demand
the execution and recording of a
document formalizing the mortgage.
EFFECTS
1) Creates real rights, a lien inseparable from
the property mortgaged, enforceable
against the whole world.
2) Creates merely an encumbrance.
LAWS GOVERNING MORTGAGE
1) New Civil Code.
2) PD 1952.
3) Revised Administrative Code.
4) RA 4882, regarding aliens becoming
mortgagees.
IMPORTANT POINTS
1) As a general rule, the mortgagor retains
possession of the property. He may deliver
said property to the mortgagee without
altering the nature of the contract of
mortgage.
2) It is not an essential requisite that the
principal of the credit bears interest, or
34
MOJICA v CA: Mortgages given to secure future
advancements are valid and legal contracts; that the amounts
named as consideration in said contract do not limit the amount for
which the mortgage may stand as security if from the 4 corners of
the instrument the intent to secure future and other indebtedness
can be gathered. A mortgage given to secure advancements is a
continuing security and is not discharged by repayment of the
amount named in the mortgage, until the full amount of the
advancements are paid (as established earlier in Lim Julian v.
Lutero).
that the interest as compensation for the
use of the principal and the enjoyment of
its fruits be in the form of a certain
percentage thereof.
INCIDENTS OF REGISTRATION OF
MORTGAGE
1) Mortgagee is entitled to registration of
mortgage as a matter of right.
2) Proceedings for registration do not
determine validity of the mortgage or its
effect
35
.
3) Registration is without prejudice to better
rights of third parties.
4) Mortgage deed, once duly registered,
forms part of the records for the
registration of the mortgaged property.
5) Mortgage by a surviving spouse of his/her
undivided share in the conjugal property
can be registered.
EFFECT OF INVALIDITY OF MORTGAGE
ON THE PRINCIPAL OBLIGATION
1) Principal obligation remains valid.
2) Mortgage deed remains evidence of a
personal obligation.
FORECLOSURE OF MORTGAGE
It is the remedy available to the mortgagee by
which he subjects the mortgaged property to
the satisfaction of the obligation secured by
the mortgage.
KINDS OF FORECLOSURE
1) Judicial.
- Rule 68, ROC:
May be availed of by bringing an action
in the proper court which has
jurisdiction over the area wherein
the real property involved or a
portion thereof is situated.
If the court finds the complaint to be
well-founded, it shall order the
mortgagor to pay the amount due
with interest and other charges
within a period of not less than 90
days nor more than 120 days from
the entry of judgment
If the mortgagor fails to pay at the
time directed, the court, upon
35
SAMANILLA v CAJUCOM: A mortgage, whether registered or
not, is binding between the parties, registration being necessary
only to make the same valid against third persons (Art. 2125, CC).
Registration only operates as a notice of the mortgage to others,
but neither adds to its validity nor convert an invalid mortgage into
a valid one between the parties. In Gurbax Singh Pabla vs. Reyes,
SC ruled that "if the purpose of registration is merely to give
notice, the questions regarding the effect or invalidity of
instruments are expected to be decided after, not before,
registration. It must follow as a necessary consequence that
registration must first be allowed and validity or effect litigated
afterwards".
motion, shall order the property to
be sold to the highest bidder at a
public auction.
Upon confirmation of the sale by the
court, also upon motion, it shall
operate to divest the rights of all
parties to the action and to vest
their rights to the purchaser
subject to such rights of
redemption as may be allowed by
law.
Before the confirmation, the court
retains control of the proceedings
The proceeds of the sale shall be
applied to the payment of the:
- Costs of the sale;
- Amount due the mortgagee;
- Claims of junior encumbrancers
or persons holding subsequent
mortgages in the order of their
priority; and
- Balance, if any shall be paid to
the mortgagor.
Sheriffs certificate is executed,
acknowledged and recorded to
complete the foreclosure.
- NATURE OF JUDICIAL
FORECLOSURE PROCEEDINGS:
a) Quasi in rem action.
b) Foreclosure is only the result or
incident of the failure to pay debt.
c) Survives death of mortgagor.
2) Extrajudicial.
- Act No. 3135, as amended:
a) Express authority to sell is given to
the mortgagee.
b) Authority is not extinguished by
death of mortgagor or mortgagee.
c) Public sale should be made after
proper notice.
d) Surplus proceeds of foreclosure
sale belong to the mortgagor.
e) Debtor has the right to redeem the
property sold within 1 year from
and after the date of sale.
f) Remedy of party aggrieved by
foreclosure is a petition to set aside
sale and cancellation of writ of
possession.
- Nature of power of foreclosure by
extrajudicial sale:
a) Conferred for mortgagees
protection.
b) An ancillary stipulation.
c) A prerogative of the mortgagee.
- Both should be distinguished from
execution sale governed by Rule 39, ROC.
- Foreclosure retroacts to the date of
registration of mortgage.
- A stipulation of upset price, or the
minimum price at which the property shall
be sold to become operative in the event
of a foreclosure sale at public auction, is
null and void.
RIGHT OF MORTGAGEE TO RECOVER
DEFICIENCY
1) Mortgagee is entitled to recover deficiency.
2) If the deficiency is embodied in a
judgment, it is referred to as deficiency
judgment.
3) Action for recovery of deficiency may be
filed even during redemption period.
4) Action to recover prescribes after 10 years
from the time the right of action accrues.
EFFECT OF INADEQUACY OF PRICE IN
FORECLOSURE SALE
1) Where there is right to redeem,
inadequacy of price is immaterial because
the judgment debtor may redeem the
property.
- Exception: Where the price is so
inadequate as to shock the conscience
of the court, taking into consideration
the peculiar circumstances.
2) Property may be sold for less than its fair
market value, upon the theory that the
lesser the price the easier it is for the
owner to redeem.
3) The value of the mortgaged property has
no bearing on the bid price at the public
auction, provided that the public auction
was regularly and honestly conducted.
WAIVER OF SECURITY BY CREDITOR
1) Mortgagee may waive right to foreclose his
mortgage and maintain a personal action
for recovery of the indebtedness.
2) Mortgagee cannot have both remedies.
REDEMPTION
1) It is a transaction by which the mortgagor
reacquires the property which may have
passed under the mortgage or divests the
property of the lien which the mortgage
may have created
36
.
2) Kinds:
a) Equity of redemption: Right of the
mortgagor to redeem the mortgaged
property after his default in the
performance of the conditions of the
mortgage but before the sale of the
mortgaged property or confirmation of
sale
b) Right of redemption: Right of the
mortgagor to redeem the property
36
MEDIDA v CA: The rule up to now is that the right of a
purchaser at a foreclosure sale is merely inchoate until after the
period of redemption has expired without the right being
exercised. The title to land sold under mortgage foreclosure
remains, in the mortgagor or his grantee until the expiration of the
redemption period and conveyance by the master's deed.
within a certain period after it was sold
for the satisfaction of the debt.
ANTICHRESIS is a contract whereby the
creditor acquires the right to receive the fruits
of an immovable of the debtor, with the
obligation to apply then to the payment of the
interest, if owing, and thereafter to the
principal of the credit (Art 2132)
CHARACTERISTICS
1. Accessory contract it secures the
performance of a principal obligation
2. formal contract it must be in a
specified form to be valid (Art. 2134)
SPECIAL REQUISITES:
1. it can cover only the fruits of an
immovable property
2. delivery of the immovable is necessary
for the creditor to receive the fruits
and not that the contract shall be
binding
3. amount of principal and interest must
be specified in writing
4. express agreement that debtor will
give possession of the property to
creditor and that the latter will apply
the fruits to the interest, if any, then to
the principal of his credit
5. NOTE: The obligation to pay interest is
not of the essence of the contract of
antichresis; there being nothing in the
Code to show that antichresis is only
applicable to securing the payment of
interest-bearing loans. On the
contrary, antichresis is susceptible of
guaranteeing all kinds of obligations,
pure or conditional
Antichresis Pledge
Refers to real
property
Refers to personal
property
Perfected by mere
consent
Perfected by
delivery of the thing
pledged
Consensual contract Real contract
Antichresis Real Mortgage
Property is
delivered to creditor
Debtor usually
retains possession
of the property
Creditor acquires
only the right to
receive the fruits of
the property, hence,
it does not produce
a real right
Creditor does not
have any right to
receive the fruits,
but the mortgage
creates a real right
over the property
The creditor, unless
there is stipulation
to the contrary, is
obliged to pay the
taxes and charges
upon the estate
The creditor has no
such obligation
It is expressly There is no such
stipulated that the
creditor given
possession of the
property shall apply
all the fruits thereof
to the payment of
interest, if owing,
and thereafter to
the principal
obligation on part of
mortgagee
Subject matter of
both is real property
OBLIGATIONS OF ANTICHRETIC
CREDITOR
1. to pay taxes and charges on the
estate, including necessary
expenses
Creditor may avoid said obligation
by:
a. compelling debtor to reacquire
enjoyment of the property
b. by stipulation to the contrary
2. to apply all the fruits, after
receiving them, to the payment of
interest, if owing, and thereafter to
the principal
3. to render an account of the fruits
to the debtor
4. to bear the expenses necessary for
its preservation and repair
REMEDIES OF CREDITOR IN CASE OF
NON-PAYMENT OF DEBT
1. action for specific performance
2. petition for the sale of the real
property as in a foreclosure of
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 (Tavera v. El Hogar Filipino,
Inc. 68 Phil 712)
a stipulation authorizing the
antichretic creditor to appropriate
the property upon the non-payment
of the debt within the agreed
period is void (Art. 2088)
CHATTEL MORTGAGE is a contract by virtue
of which a personal property is recorded in the
Chattel Mortgage Register as security for the
performance of an obligation.
- IF THE MOVABLE, INSTEAD OF BEING
RECORDED, IS DELIVERED TO THE CREDITOR,
IT IS PLEDGE AND NOT CHATTEL MORTGAGE.
chattel mortgage pledge
Involves movable
property.
Involves movable
property.
Delivery of the
personal property
is NOT necessary.
Delivery of the
personal property is
necessary.
Registration is
necessary for
validity.
Registration is NOT
necessary for
validity.
Procedure: Sec. 14
of Act 1508, as
amended.
Procedure: Art.
2112, CC.
If the property is
foreclosed, the
excess over the
amount due goes
to the debtor.
If the property is
sold, the debtor is
not entitled to the
to the excess
UNLESS it is
otherwise agreed
or in case of legal
pledge.
Creditor is entitled
to deficiency from
the debtor EXCEPT
if it is a security for
the purchase of
personal property
in installments.
Creditor is not
entitled to recover
deficiency
notwithstanding
any stipulation to
the contrary.
LAWS GOVERNING CHATTEL MORTGAGE
1) Chattel Mortgage Law
37
(Act.1508, as
amended).
2) Civil Code.
3) Revised Administrative Code.
4) Revised Penal Code.
5) Ship Mortgage Decree of 1978 (PD 1521)
governs mortgage of vessels of domestic
ownership.
AFFIDAVIT OF GOOD FAITH
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 purposes and that
the same is a just and valid obligation and
one not entered into for the purpose of fraud.
EFFECT OF REGISTRATION
1) Creates real rights.
2) Adds nothing to mortgage.
37
ACME SHOE vs. CA: A chattel mortgage must comply
substantially with the form prescribed by the Chattel Mortgage
Law itself. One of the requisites, under Sec 5 thereof, is an
affidavit of Good Faith. While it is not doubted that if such an
affidavit is not appended to the agreement, the chattel mortgage
would still be valid between the parties (not against third persons
acting in GF), the fact, however, that the statute has provided that
the parties to the contract must execute an oath that "x x x
mortgage is made for the purpose of securing the obligation
specified in the conditions thereof, and for no other purpose, and
that the same is a just and valid obligation, and one not entered
into for the purpose of fraud." makes it obvious that the debt
referred to in the law is a current, not an obligation that is yet
merely contemplated.
- Registration of assignment of mortgage is
not required.
RIGHT OF REDEMPTION
1. When the condition of a chattel mortgage
is broken, the following may exercise
redemption:
a. Mortgagor.
b. Person holding a subsequent
mortgage.
c. Subsequent attaching creditor.
2. An attaching creditor who so redeems
shall be subrogated to the rights of the
mortgagee and entitled to foreclose the
mortgage in the same manner as a
mortgagee.
3. Redemption is made by paying or
delivering o the mortgagee the amount
due on such mortgage and the costs and
expenses incurred by such breach of
condition before the sale.
FORECLOSURE OF CHATTEL MORTGAGE
1. Public sale.
2. Private sale There is nothing illegal,
immoral or against public order in an
agreement for the private sale of the
personal properties covered by chattel
mortgage.
PERIOD TO FORECLOSE
1. After 30 days from the time of the
condition is broken.
2. The 30-day period is the minimum period
after violation of the mortgage condition
for the creditor to cause the sale at public
auction with at least 10 days notice to the
mortgagor and posting of public notice of
time, place, and purpose of such sale, and
is a period of grace for the mortgagor, to
discharge the obligation.
3. After the sale at public auction, the right of
redemption is no longer available to the
mortgagor.
CIVIL ACTION TO RECOVER CREDIT
1. Independent action not required.
2. Mortgage lien is deemed abandoned by
obtaining a personal judgment.
RIGHT OF MORTGAGEE TO RECOVER
DEFICIENCY
1. Where mortgage foreclosed: Creditor may
maintain action for deficiency although The
Chattel Mortgage Law is silent on this
point, because a chattel mortgage is given
only as a security and not as payment of
the debt.
2. Where mortgage constituted as security
for purchase of personal property payable
in installments: No deficiency judgment
can be asked and any contrary agreement
shall be void.
3. Where mortgaged property subsequently
attached and sold: Mortgagee is entitled to
deficiency judgment in an action for
specific performance.
APPLICATION OF PROCEEDS OF SALE
1. Costs and expenses of keeping and sale.
2. Payment of the obligation.
3. Claims of persons holding subsequent
mortgages in their order.
4. Balance, if any, shall be paid to the
mortgagor, or person holding rights under
him.
CONCURRENCE AND PREFERENCE
OF CREDITS
CONCURRENCE OF CREDIT implies
possession by two or more creditors of equal
right or privileges over the same property or
all of the property of a debtor.
PREFERENCE OF CREDIT is the right held by
a creditor to be preferred in the payment of
his claim above other out of the debtors
assets.
GENERAL PROVISIONS
1) The debtor is liable with all his property,
present and future, for the fulfillment of
his obligations, subjects to exemptions
provided by law.
- Exempt property:
a. Present property:
1. Family home. (Arts. 152, 153
and 155, CC)
2. Right to receive support, as well
as money or property obtained
by such support, shall not be
levied upon on attachment or
execution. (Art. 205, CC)
3. Sec. 13, Rule 39, ROC.
4. Sec 118, Public Land Act. (CA
141, as amended)
b. Future property: A debtor who
obtains a discharge from his debts
on account of insolvency, is not
liable for the unsatisfied claims of
his creditors with said property.
(Sec. 68 and 69, Insolvency Law,
Act 1956)
c. Property in custodia legis and of
public dominion.
2) Insolvency shall be governed by the
Insolvency Law. (Act 1956, as amended)
3) Exemption of conjugal property or
absolute community or property, provided
that:
- Partnership or community subsists.
- Obligations of the insolvent spouse
have not redounded to the benefit of
the family.
4) If there is co-ownership, and one of the
co-owners is the insolvent debtor, his
undivided share or interest in the property
shall be possessed by the assignee in
insolvency proceedings because it is part
of his assets.
5) Property held by the insolvent debtor as a
trustee of an express or implied trust,
shall be excluded from the insolvency
proceedings
CLASSIFICATION OF CREDITS
1) Special preferred credits. (Art. 2241 and
2242, CC)
a) Considered as mortgages or pledges of
real or personal property or liens
within the purview of legal provisions
governing insolvency.
b) Taxes due to the State shall first be
satisfied.
2) Ordinary preferred credits (Art. 2244)
Preferred in the order given by law.
3) Common credits (Art. 2245) Credits of
any other kind or class, or by any other
right or title not comprised in Arts. 2241-
2244 shall enjoy no preference.
ORDER OF PREFERENCE OF CREDIT
1) Credits which enjoy preference with
respect to specific movables exclude all
others to the extent of the value of the
personal property to which the preference
refers.
2) If there are 2 or more credits with respect
to the same specific movable property,
they shall be satisfied pro rata, after the
payment of duties, taxes and fees due the
State or any subdivision thereof
3) Those credits which enjoy preference in
relation to specific real property or real
rights exclude all others to the extent of
the value of the immovable or real right to
which the preference refers.
4) If there are 2 or more credits with respect
to the same specific real property or real
rights, they shall be satisfied pro rata,
after the payment of the taxes and
assessment of the taxes and assessments
upon the immovable property or real right.
5) The excess, if any, after the payment of
the credits which enjoy preference with
respect to specific property, real or
personal, shall be added to the free
property which the debtor may have, for
the payment of other credits.
6) Those credits which do not enjoy any
preference with respect to specific
property, and those which enjoy
preference, as to the amount not paid,
shall be satisfied according to the following
rules:
- Order established by Art 2244
- Common credits referred to in Art 2245
shall be paid pro rata regardless of
dates.
S P E C I A L L A W S
WAREHOUSE RECEIPTS LAW
SCOPE
All warehouses, whether public or private,
bonded or not.
APPLICATION
The special law applies to warehouse receipts
issued by a warehouseman as defined in Sec.
58(a); while the Civil Code, to other cases
where receipts are not issued by a
warehouseman.
WHO MAY ISSUE WAREHOUSE RECEIPTS
Only a warehouseman; but a duly
authorized officer or agent of a
warehouseman may do so.
Warehouseman: Person lawfully
engaged in the business of storing
goods for profit.
Receipts not issued by a warehouseman,
although in the form of warehouse
receipts, are not warehouse receipts
FORM AND CONTENT
Need not be in particular form, but certain
essential terms must be present:
1. Location of warehouse: Because the
warehouseman may have other
warehouses.
2. Date of issue and receipt: Indicates prima
facie the date when the contract of deposit
has been perfected and when the
computation of storage charges shall
begin.
3. Consecutive number of receipt: To identify
each receipt with the goods for which it
was issued.
4. Person to whom goods are deliverable:
Determines the persons who shall prima
facie be entitled lawfully to the possession
of the goods deposited.
5. Rate of storage charges: Consideration for
the contract from the point of view of the
warehouseman.
6. Description of goods or packages: For
identification purposes.
7. Signature of warehouseman: Best
evidence of the fact that the
warehouseman has received the goods
and has bound himself to assume all
obligations connected therewith.
8. Warehousemans ownership of or interest
in the goods: To prevent abuses in the
past when warehouseman issued receipt
on their goods.
9. Statement of advances made and liabilities
incurred (if present): To preserve the lien
of the warehouseman over the goods he
stores or the proceeds thereof in his hands
- Effect of omission of any of the essential
terms:
a. validity and negotiability of receipt is
not affected.
b. warehouseman will be liable for
damages.
c. the contract will be converted to an
ordinary deposit.
- Any other terms or conditions may be
inserted, except:
a. Those contrary to this Act (e.g.
exemption from liability for misdelivery
in Sec. 10, not giving statutory notice
in case of sale of goods in Sec. 33 and
34).
b. Exemption from liability and
negligence.
c. Those contrary to law, morals, good
customs, public order or public policy.
DEFINITIONS
1) Negotiable receipt: Receipt in which it is
stated that the goods received will be
delivered to the bearer or to the order of
any person named in such receipt.
- A provision in a negotiable receipt that it
is non-negotiable is void.
2) Non-negotiable receipt: Receipt in which it
is stated that the goods received will be
delivered to the depositor or to any other
specified person.
- A negotiable warehouse receipt is not a
negotiable instrument in the same sense
as in the NIL.
DUPLICATE RECEIPTS
- Applies only to negotiable warehouse
receipts:
- Whenever more than one negotiable
receipt is issued for the same goods,
the word DUPLICATE shall be placed
on the face of the receipt except the
one first issued.
- Effect: The warehouseman shall be
liable for damages for failing to do this
to any one who purchased the
subsequent receipt (1) for value, and
(2) supposing it to be an original,
even though the purchase be after
delivery of the goods by the
warehouseman to the holder of the
original receipt.
FAILURE TO MAKE RECEIPT NON-NEGOTIABLE
- Applies only to non-negotiable warehouse
receipts:
- A non-negotiable receipt must contain
the word non-negotiable.
- Effect: Failure to do so will make a
holder who (1) purchased for value AND
(2) supposing it to be negotiable, may at
his option treat it as negotiable.
CONSTRUCTION OF WAREHOUSE RECEIPTS:
Liberal construction of the law in favor of bona
fide holders. This has no application to
actions against any party other than a
warehouseman.
OBLIGATION AND RIGHTS OF A
WAREHOUSEMAN UPON THEIR RECEIPTS
Principal obligations of a warehouseman
1. To take care of the goods, and be liable for
failure to exercise care; but he is not liable
for loss or injury which could not have
been avoided, unless there is a stipulation
to the contrary.
2. To deliver the goods to the holder of the
receipt or the depositor upon demand,
accompanied with:
a. An offer to satisfy the warehousemans
lien: Because a warehouseman may
refuse delivery until his lien is satisfied
b. An offer to surrender the receipt: For
the protection of the warehouseman
and to avoid criminal liability; this is
subject to waiver.
c. A offer to sign when the goods are
delivered, an acknowledgment that
they have been delivered.
- But warehouseman may still refuse
delivery on the grounds of some lawful
excuse:
a. Sec. 10
1. he has been requested by the
person lawfully entitled to the
goods not to make delivery;
2. he has information that the
delivery about to be made was
to one not lawfully entitled to
the goods;
b. Sec. 16: He has acquired title to
the goods which was derived from
1. transfer made by the
depositor at the time of the
deposit for storage or
subsequent thereto
2. the warehousemans lien
c. Sec. 18: If there are several
claimants to the goods
d. Sec. 21: If the goods were lost and
he had no fault
e. Sec. 36: He has already lawfully
sold the goods
Persons to whom the goods must be delivered
1. Persons lawfully entitled to the possession
of the goods or its agent
2. Persons entitled to deliver under:
a. a non-negotiable receipt; or
b. with written authority
3. person in possession of a negotiable
receipt (which was lawfully negotiated)
- A warehouseman does not have a cause of
action against a person to whom he
misdelivered the thing, unless the depositor
sues him.
Acts for which a warehouseman is liable
(1) Failure to stamp duplicate on
copies of a negotiable receipt (Sec. 6 and
15)
- When more than one negotiable receipts
are issued for the same goods, the word
duplicate must be plainly placed by the
warehouseman upon the face of every
such receipt except the 1
st
. In such
case, the warehouseman warrants:
a. that the duplicate is an accurate
copy of the original receipt
b. such original receipt is uncancelled
at the date of the issue of the
duplicate
- The duplicate imposes no other
liability upon the warehouseman.
(2) Failure to place non-negotiable on
a non-negotiable receipt (Sec. 7)
(3) Misdelivery of the goods (Sec. 10)
a. To one not lawfully entitled to
possession
- Liable for conversion (unauthorized
assumption and exercise of the
right of ownership over goods
belonging to another through
alteration or the exclusion of the
owners right)
b. To a person entitled to delivery under a
non-negotiable receipt or written
authorization OR person in possession
of a negotiable receipt
- Still liable for conversion if:
1. prior to delivery, he had been
requested NOT to make such
delivery
2. he had received notice of the
adverse claim or title of a 3
rd
person
(4) Failure to effect cancellation of a
negotiable receipt upon delivery of the
goods (Sec. 11)
- This is applicable ONLY to negotiable
receipts but NOT to a situation where
there was a valid sale in accordance
with Sec. 36
a. When the goods are delivered
already: Failure to cancel will
make him liable to any one who
purchased for value in good
faith such receipt
b. When only some of the goods
were delivered: Failure to
cancel or to state plainly in the
receipt that some goods were
delivered will make him liable to
any one who purchased for
value in good faith such receipt
(5) Issuing receipt for non-existing
goods or misdescribed goods (Sec. 20)
- General rule: A warehouseman is under
obligation to deliver the identical
property stored with him and if he
fails to do so he is liable.
- Exception: If the description consists
merely of marks or labels upon the
goods or upon the packages containing
them, etc., the warehouseman is not
liable even if the goods are not of the
kind as indicated in the marks or labels
(6) In case of lost or destroyed receipts
(Sec. 14)
- Remember that a warehouseman must
deliver to the one who has the receipt but
if such was lost, a competent court may
order the delivery of the goods only:
a. upon proof of the loss or
destruction of the receipt; and
b. upon giving of a bond with
sufficient securities
- The warehouseman is still liable to a
holder of the receipt for value without
notice since the warehouseman can
secure himself in the bond given.
(7) Failure to take care of the goods (Sec.
12)
(8) Failure to give notice in case of sales
of goods to satisfy his lien (Sec. 33) or
because the goods are perishable and
hazardous (Sec. 34)
EFFECTS OF ALTERED RECEIPTS
a. Alteration immaterial: whether fraudulent
or not, authorized or not, the
warehouseman is liable on the altered
receipt according to its original tenor;
b. Alteration material: but it was authorized,
the warehouseman is liable according to
the terms of the receipts as altered;
c. Material alteration innocently made:
though unauthorized, the warehouseman
is liable on the altered receipt according to
its original term;
d. Material alteration fraudulently made:
warehouseman is liable according to the
original tenor to a:
1. purchaser of the receipt for value
without notice; and
2. to the alterer and subsequent
purchasers with notice ( BUT his
liability is limited only to delivery as he
is excused from any other liability)
- Even a fraudulent alteration cannot divest
the title of the owner of stored goods and the
warehouseman is liable to return them to the
owner. But a bona fide holder acquires no
right to the goods under a negotiable receipt
which has been stolen or lost or which the
indorsement has been forged.
WITH REGARD TO OWNERSHIP
a. Ownership is not a defense for refusal to
deliver
- The warehouseman cannot refuse to
deliver the goods on the ground that he
has acquired title or right to the
possession of it unless such is derived:
1. directly or indirectly from a transfer
made by the depositor at the time
of the deposit for storage or
subsequent thereto;
2. from the warehousemans lien
b. Adverse title of a 3
rd
person is not a
defense for refusal to deliver by a
warehouseman to his bailor on demand,
except:
1. To persons to whom the goods
must be livered (Sec. 9)
2. To the person who wins in the
interpleader case (Sec. 17)
3. To the person he finds to be
entitled to the possession after
investigation (Sec. 18)
4. To the buyer in case there was a
valid sale of the goods (Sec. 36)
DUTY OF WAREHOUSEMAN WHEN THERE ARE
SEVERAL CLAIMANTS
- The warehouseman may either:
a. Investigate and determine within a
reasonable time the validity of the
claims, and deliver to the person whom
he finds is entitled to the possession of
the goods
- Effect: He is not excused from
liability in case he makes a mistake
b. He may bring a complaint in
interpleader
- Effect:
a) he will be relieved from liability in
delivering the goods to the person
whom the court finds to have
better right;
b) he is liable for refusal to deliver to
the rightful claimant when it is
required to have an interpleader;
c. He may not do (a) and (b)
- Effect: He will be liable after a lapse
of a reasonable time, of conversion as
of the date of the original demand for
the goods.
- This does NOT apply to cases where the
warehouseman himself makes a claim to the
goods.
COMMINGLING OF DEPOSITED GOODS
- General rule: A warehouseman may not
mingle goods belonging to different
depositors.
- Exception: In case of fungible goods of the
same kind and grade provided:
a. he is authorized by agreement
b. he is authorized by custom
- Effects:
a. each depositor shall own the entire
mass in common and entitled to his
portion
b. warehouseman is severally liable to
each depositor for the care and
redelivery of their portion as if the
goods had been kept separate
ATTACHMENT OR LEVY ON NEGOTIABLE
RECEIPTS
A warehouseman has the obligation to
hold the goods for the owner or for the
person to whom the negotiable receipt has
been duly negotiated. Therefore, the
goods cannot be attached or levied upon
under an execution, unless:
a. the document be first surrendered; or
b. the negotiation is enjoined, or
c. the document is impounded by the
court
The warehouseman cannot be compelled
to deliver the goods until:
a. the receipt is surrendered to him;
b. it is impounded by the court
- This provision does not apply if the person
depositing is not the owner of the goods or
one who has not the right to convey title to
the goods binding upon the owner.
REMEDY OF CREDITOR WHOSE DEBTOR
OWNS A NEGOTIABLE RECEIPT
Attachment of the negotiable receipt, not on
the goods.
- The goods themselves cannot readily be
attached or levied upon by ordinary legal
process
EXTENT OF WAREHOUSEMANS LIEN
a. lawful charges for
1. storage, and
2. preservation of the goods
b. lawful claims for
1. money advanced
2. labor
3. interest
4. weighing
5. insurance
6. cooperating
7. transportation
c. other charges and expenses in relation to
such goods
d. reasonable charges and expenses for
notice and advertisements of sale
e. sale of the goods where defaults has been
made in satisfying the lien
EXTENT OF THE LIEN WHEN A NEGOTIABLE
RECEIPT HAS BEEN ISSUED
a. charges for storage and preservation of
the goods
b. other charges expressly enumerated
(from b, c, d and e above) although the
amount is NOT stated
- For claims not specified, the warehouseman
shares pro rata with the other creditors of the
depositor the balance of the proceeds of the
sale for the satisfaction of the claims.
GOODS SUBJECT TO LIEN
a. goods of the depositor who is liable to the
warehouseman as debtor wherever such
goods are deposited;
b. goods of other persons stored by the
depositor who is liable to the
warehouseman as debtor with authority to
make a valid pledge
- A warehouseman has NO lien on goods
belonging to another and stored by a stranger
in fraud of the true owners right.
- The lien may be lost through:
a. voluntarily surrendering possession of
goods - constitutes a waiver or
abandonment
- A warehouseman may NOT claim
a lien on other goods of the same
depositor for unpaid charges on the
goods surrendered if the goods
were delivered to him under
different receipts.
b. wrongfully refusing to deliver the
goods to a person who holds the
receipt or the depositor upon DEMAND
accompanied with:
1. an offer to satisfy the
warehousemans lien (because
a warehouseman may refuse
delivery until his lien is
satisfied)
2. an offer to surrender the receipt
a. for the protection of the
warehouseman and to avoid
criminal liability
b. this is subject to waiver
3. an offer to sign when the goods
are delivered, an
acknowledgment that they have
been delivered
REMEDIES FOR A WAREHOUSEMAN
1. Even if without lien, all remedies allowed by
law to a creditor against his debtor for
collection of charges;
2. By refusing to deliver the goods until his
lien is satisfied;
3. All remedies allowed by law for the
enforcement of a lien against personal
property and recovery of any deficiency in
case it exists after the sale of the
property;
4. By causing the extrajudicial sale of the
property and applying the proceeds to the
value of the lien
Process:
A. Written notice to the person on whose
account the goods are held or to persons
who claim an interest in the goods
containing:
a. itemized statement of warehousemans
lien showing the sum due and when it
became due
b. brief description of the goods
c. a demand that a claim be paid on or
before a day mentioned, not less than
10 days from:
1. delivery of notice if personally
delivered
2. time when notice should reach
its destination if sent by mail
d. statement that if the claim is not paid,
the goods will be advertised for sale
and then sold at a specified time and
place
B. After the time for payment of the claim if
the notice has elapsed, the sale will be
advertised stating:
a. a description of the goods to be sold
b. the name of the owner or person on
whose account the goods were held
c. time and place of the sale
C. Publication:
a. if there is a newspaper published in
the place of sale: once a week for 2
consecutive weeks and the sale not
held less than 15 days from the time of
the 1
st
publication
b. if there is no newspaper: posted at
least 10 days before the sale in not
less than 6 conspicuous places in the
place of sale
D. Sale itself in:
a. place where the lien was acquired
b. if such place is manifestly unsuitable
for the purpose, at the nearest
suitable place
E. From the proceeds of the sale:
a. the warehouseman shall satisfy his
lien
b. including the reasonable charges of
notice, advertisement and sale
c. the balance shall be held by the
warehouseman and delivered on demand
to the person to whom he should deliver it
F. Any time before the goods are sold, any
person may pay the warehouseman for his
lien and the other expenses. The
warehouseman shall deliver the goods to
that person if he is entitled under this Act,
to the possession of the goods on payment
of the charges. Otherwise, the
warehouseman shall retain ownership of the
goods.
PERISHABLE AND HAZARDOUS GOODS
- Warehouseman will give notice to owner or
person in whose name the goods are
stored:
a. to satisfy his lien
b. to remove the goods
c. failure to do a &b will give the
warehouseman authority to sell the
goods without advertising
d. if sale is not possible, he may dispose
of the goods in any lawful manner
without liability
- Proceeds of the sale shall be disposed of in
accordance with the process in the sale of
the goods.
EFFECTS OF SALE
a. warehouseman is NOT liable for non-
delivery even if the receipt was given for
the goods when they were deposited be
negotiated
b. when the sale was made without the
publication required and before the time
specified by law, such sale is void and the
purchaser of the goods acquires no title in
them
NEGOTIATION AND TRANSFER OF RECEIPTS
- Negotiable receipts negotiable by delivery:
1. if the goods are deliverable to the bearer;
or
2. when indorsed in blank; or
3. person to whose order the goods are
delivered or by a subsequent indorsee
indorsed it to bearer
INSOLVENCY LAW
INSOLVENCY state of a person whose
liabilities are more than his assets. It is the
inability of a person to pay his debys as they
become due in the ordinary course of
business.
Balance Sheet Test relative condition of a
mans assets and liabilities that the former if
all made immediately available, would not be
sufficient to discharge the latter.
Equity Test a person may be insolvent
although he may be able to pay his debts at
some future time on a settlement and winding
up of his affairs.
INSOLVENCY vs. BANKRUPTCY
The only distinction between insolvency
and bankruptcy is a matter of
terminology and the source of the laws
relating thereto.
Either a bankruptcy or insolvency statute may
operate to discharge a debt as well as release
the debtor from imprisonment, and either
may operate on the petition of the debtor or
that of his creditors.
INSOLVENCY PRIMARILY GOVERNED BY THE
CC
Insolvency shall be governed by special laws
insofar as they are not inconsistent with
the CC. Insolvency is thus primarily governed
by the CC and subsidiarily by the Insolvency
Law.
The Insolvency Law is intended to cover the
entire subject of insolvency and bankruptcy
and must be treated as a complete body of
law upon the subject.
PURPOSES OF INSOLVENCY LAW:
1. To effect an equitable distribution of
the bankrupts property among his
creditors; and
2. To benefit the debtor in discharging
him from his liabilities and enabling
him to start afresh with the property
set apart to him as exempt.
3. The regulatory and unifying influence
of the law on credit transactions and
business usage throughout the
country.
WHAT MAY BE PERMITTED OF A DEBTOR BY
THE INSOLVENCY LAW
1. Petition the court to suspend
payments;
2. To be discharged from his debts and
liabilities by voluntary or involuntary
insolvency proceedings.
SUSPENSION OF PAYMENTS
postponement, by court order, of the
payment of debts of one who, while
possessing sufficient property to cover his
debts, foresees the impossibility of meeting
them when they respectively fall due.
PURPOSE:
To suspend or delay the payment of
debts the amount of which is not affected
although a postponement is declared.
BASIS:
Probability of the debtors inability to
meet his obligations when they
respectively fall due, despite the fact that
he has sufficient assets to cover all his
liabilities.
REQUISITES OF PETITION FOR SUSPENSION
OF PAYMENTS:
1. Petition is filed by a debtor;
2. Possessing sufficient property to cover
all his debts;
3. Foreseeing the impossibility of meeting
them when they respectively fall due;
and
4. Petitioning that he be declared in the
state of suspension of payments
RULE ON DOUBLE MAJORITY IN THE MEETING
OF CREDITORS
Majority shall be:
1. Two thirds (2/3) of the creditors voting
upon the same proposition, which
2. Represents at least three fifths (3/5) of
the total liabilities of the debtor.
KINDS OF INSOLVENCY
VOLUNTARY INSOLVENCY an insolvent
debtor owing debts exceeding the amount of
P1,000.00 may apply to be discharged from
his debts and liabilities by petition to the RTC
of the province or city in which he has resided
for six months next preceding the filing of the
petition.
DISTINCTIONS BETWEEN SUSPENSION OF
PAYMENTS AND INSOLVENCY
suspension
of payments
insolvency
Purpose
Suspend or
delay the
payment of
debts
Discharge the
debtor from
the payment of
debts
Sufficie
ncy of
property
Debtor has
sufficient
property to
pay his debts
Debtor does
not have
sufficient
property to
pay all his
debts
Effect
on
amount
of debt
Amount of
indebtedness
is not affected
The creditors
receive less
than their
credits, and in
case where
there are
preferences,
some creditors
may not
receive any
amount at all
Number
of
creditor
s
required
Number of
creditors is
immaterial
In case of
involuntary
insolvency,
three or more
creditors are
required
EFFECT OF COURT ORDER DECLARING
DEBTOR INSOLVENT
1. All the assets of the debtor
not exempt from execution are
taken possession of by the sheriff
until the appointment of a receiver
or assignee.
2. The payment to the debtor of
any debts due to him and the delivery
to the debtor or to any person for him
of any property belonging to him and
the transfer of any property by him are
forbidden.
3. All civil proceedings pending
against the insolvent debtor shall be
stayed.
4. Mortgages or pledges,
attachments or executions on property
of the debtor duly recorded and not
dissolved are not affected by the
order.
INVOLUNTARY INSOLVENCY an
adjudication of insolvency may be made on
the petition of three or more creditors,
residents of the Philippines, whose credits or
demands accrued in the Philippines, and the
amount of which credits or demands are in
the aggregate of not less than P1,000.00
DISTINCTIONS BETWEEN VOLUNTARY
INSOLVENCY AND INVOLUNTARY
INSOLVENCY
voluntary
insolvency
involuntary
insolvency
Number of
creditors
One creditor
is sufficient
Three or more
creditors are
required
Who may
petition
Filed by the
insolvent
debtor
Filed by three
or more
creditors who
possess the
qualifications
required by
law
Acts of
insolvency
Debtor
must not be
guilty of
any of the
acts of
insolvency
(Sec. 20)
Debtor must
have
committed
one or more
of such acts of
insolvency
Amount of
debt
The amount
of
indebtednes
s must
exceed
P1,000.00
Amount must
not be less
than
P1,000.00
(aggregate)
Posting of
bond
Bond is not
required
Petition must
be
accompanied
by a bond
Ex parte
adjudication
An order of
adjudication
may be
An order of
adjudication
granted only
granted ex
parte
after a hearing
Residency
duration to
vest
jurisdiction
in courts
Petition is
filed in the
RTC of the
province or
city where
the debtor
has resided
for six
months
Length of
residence is
immaterial
Requirement
of hearing
Court issues
the order of
adjudication
declaring
the
petitioner
insolvent
upon the
filing of the
voluntary
petition
The debtor is
not
adjudicated
insolvent until
after hearing
of the case
ASSIGNEE person elected by the creditors
or appointed by he court to whom an
insolvent debtor makes an assignment of all
his property for the benefit of his creditors.
CREDITORS NOT ENTITLED TO VOTE IN THE
ELECTION OF ASSIGNEE
1. Those who did not file their claims at
least two days prior to the time
appointed for such election
2. Those whose claims are barred by the
statute of limitations
3. Secured creditors unless they
surrender their security or lien to the
sheriff or receiver or unless they shall
first have the value of such security
fixed
4. Holders of claims for unliquidated
damages arising out of pure tort.
EFFECTS OF ASSIGNMENT
38
1. Assignee takes the property in the
plight and conditions that the insolvent
held it.
2. Upon appointment, the legal title to
all the property of the insolvent is
vested in the assignee, and the
38
SERVICEWIDE v. CA: Assignment of Credit/Consent: As
provided in Article 2096 in relation to Article 2141 of the Civil
Code, a thing pledged may be alienated by the pledgor or owner
with the consent of the pledgee. This provision is in accordance
with Act No. 1508 which provides that a mortgagor of personal
property shall not sell or pledge such property, or any part thereof,
mortgaged by him without the consent of the mortgagee in writing
on the back of the mortgage and on the margin of the record
thereof in the office where such mortgage is recorded.
A mortgage credit may be alienated or assigned to a
third person. Since the assignee of the credit steps into the shoes
of the creditor-mortgagee to whom the chattel is mortgaged, it
follows that the assignees consent is necessary in order to bind
him of the alienation of the mortgaged thing by the debtor-
mortgagor This is tantamount to a novation.
control of the property is vested in
the court.
3. All actions to recover all the estate,
debts, and effects of the insolvent shall
be brought by the assignee and not by
the creditors.
4. The assignment shall:
a. Dissolve any attachment
levied within one month next
preceding the commencement
of insolvency proceedings;
b. Vacate and set aside judgment
entered in any action
commenced within 30 days
immediately prior to the
commencement of insolvency
proceedings;
c. Vacate and set aside execution
issued thereon;
d. Vacate and set aside any
judgment entered by default or
consent of the debtor within 30
days prior to the
commencement of insolvency
proceedings
BOND OF THE ASSIGNEE
After his election, the assignee is
required to give a bond for the faithful
performance of his duties.
Purpose:
1. To establish his official character
2. To establish his right to sue in that
capacity
The bond is solely for the benefit of the
creditors of the insolvent, and that third
persons have no remedy against the sureties
if the assignee, purporting to be as such,
wrongfully takes property from such third
persons and converts it to his own use.
PROPERTIES OF INSOLVENT THAT PASS TO
THE ASSIGNEE
1. All real and personal property,
estate, and effects of the debtor,
including all deeds, books, and papers
in relation thereto;
2. Properties fraudulently conveyed;
3. Right of action for damages to real
property
4. The undivided share or interest of
the insolvent debtor in property held
under co-ownership
PROPERTIES OF INSOLVENT THAT DO NOT
PASS TO THE ASSIGNEE
1. Property exempt from execution;
2. Property held in trust;
3. Property of the conjugal partnership
or absolute community except
insofar as the debtors obligations
redounded to the benefit of the family.
4. Property to which a mortgage or
pledge exists unless the creditor
surrenders his security or lien.
5. After-acquired property except fruits
and income of property owned by the
debtor
6. Non-leviable assets like life
insurance policy which do not have any
cash surrender value
7. Right of action for tort which is
purely personal in nature.
POWERS OF THE ASSIGNEE
1. To sue and recover all the estate,
debts, and claims belonging to or due
to the debtor;
2. To take into his possession all the
estate of the debtor except property
exempt from execution;
3. In case of non-resident or
absconding or concealed debtor, to
demand and receive of every
sheriff all the property and money in
his possession belonging to the debtor.
4. To sell, upon order of the court, any
estate of the debtor which has come
into his possession;
5. To redeem all mortgages and
pledges and to satisfy any
judgment which may be an
encumbrance on any property sold by
him.
6. To settle all accounts between the
debtor and his debtors subject to
the approval of the court;
7. To compound, under the order of the
court, with any person indebted to
such debtor;
8. To recover any property
fraudulently conveyed by the
debtor.
CREDITORS LIABILITY FOR FRAUDULENTLY
ASSIGNING HIS CREDIT
A creditors transfer or assignment of his
credit to another without the knowledge and
at the back of other creditors of the insolvent
may be a shrews surprise move that enables
the transferor creditor to collect almost if not
the entire amount of the said creditor.
REMEDY OF THE ASSIGNEE: SECTION 37 OF
THE INSOLVENCY LAW:
The creditor coming within this purview is
liable to an action by the assignee for double
the value of the property so embezzled or
disposed of, to be received for the benefit of
the insolvents estate.
Section 37 constitutes a sort of penal
clause which shall be strictly construed.
When Sec. 37 does not apply: Not
applicable where what has been disposed of is
the creditors own credit and not the
insolvents property.
DIVIDENDS IN INSOLVENCY
Dividends in insolvency parcel if the fund
arising from the assets of the estate, rightfully
allotted to a creditor entitled to share in the
fund, whether in the same proportion with
other creditors or in a different proportion. It
is paid by the assignee only upon order of the
court.
CLASSIFICATION AND PREFERENCE OF
CREDITORS
PREFERENCE an exception to the general
rule. By it, one person is given a superior
right or claim over another. Hence, the law on
preferences is strictly construed. (The general
rule is that the purpose of insolvency
proceeding is the equitable distribution of the
insolvents assets among the debtors
creditors.)
RULES ON ORDER OF DISTRIBUTION
1. The priorities fixed by law govern
2. The claims which are given priority
must be paid in full in the order of
their priority, before the general
creditors receive anything.
3. Creditors claiming preference must
sufficiently establish their credits and
their right to preference to entitle them
to such preference.
ORDER OF DISTRIBUTION
1. Equitable claims under Sec. 48;
2. Preferred claims with respect to
specific movable property and specific
immovable property under Art. 2241
and 2242 of the CC.
3. Preferred claims as to unencumbered
property of the debtor which shall be
paid in the order named in Art. 2244 of
the CC.
4. Common or ordinary credits which
shall be paid pro rata regardless of
dates under Art. 2245 of the CC.
With reference to specific movable and
immovable property of the debtor, the taxes
due the State shall first be satisfied.
The preferred claims enumerated in Art. 2241
and 2242 are considered as mortgages and
pledges of real or personal property or
liens within the purview of the Insolvency
Law.
EQUITABLE CLAIMS UNDER THE INSOLVENCY
LAW
Section 48 of the Insolvency Law: Any
property found among the property of the
insolvent, the ownership of which has not
been conveyed to him by legal and irrevocable
title, shall not be considered to be property of
the insolvent and shall be placed at the
disposal of its lawful owners, on order of the
court on petition of the assignee or any
creditor whose right to the estate of the
insolvent has been established.
1. Paraphernal property belonging to the
wife of the insolvent;
2. Property held by the insolvent on
deposit, administration, lease, or
usufruct;
3. Merchandise held by the debtor on
commission;
4. Negotiable instruments for collection or
remittance;
5. Money held by the debtor for
remittance;
6. Amounts due the insolvent for sales or
merchandise on commission;
7. Merchandise bought by the insolvent
on credit where no delivery is made or
where the right of ownership or
possession has been retained by the
seller;
8. Goods or chattels wrongfully taken by
the insolvent or the amount of the
value thereof.
ALTERNATIVE RIGHTS OF SECURED
CREDITOR
1. To maintain his right under his
security or lien and ignore the
insolvency proceedings it is the
duty of the assignee to surrender to
him the property encumbered;
2. To waive his right under the
security or lien thereby, share in
the distribution of the assets of the
debtor;
3. To have the value of the
encumbered property appraised
and then share in the distribution
of the assets of the debtor with
respect to the balance of his credit.
Waiver release or surrender of the claim to
the receiver, sheriff, or assignee.
The following do not constitute waiver:
1. Mere recommendation that the
assignee be appointed;
2. Voting of a secured claim.
COMPOSITION
An agreement, made upon a sufficient
consideration, between an insolvent or
embarrassed debtor and his creditors,
whereby the latter for the sake of immediate
or sooner payment, agree to accept a
dividend less than the whole amount of their
claims, to be distributed pro rata, in discharge
and satisfaction of the whole debt.
composition accord
Designates an
arrangement
between a debtor
and the whole
body of his
creditors (or at
least a
considerable
portion of them)
for the liquidation
of their claims by
the dividend
offered.
An agreement between
a debtor and a single
creditor for a discharge
of the obligation by a
part payment or on
different terms.
REQUIREMENTS FOR A VALID OFFER OF
COMPOSITION
1. The offer of the terms of composition
must be made after the filing in court
of the schedule of property and
submission of his list of creditors;
2. The offer must be accepted in writing
by a majority of the creditors
representing a majority of the claims
which have been allowed;
3. It must be made after depositing in
such place designated by the court, the
consideration to be paid and the costs
of the proceedings; and
4. The terms of the composition must be
approved or confirmed by the court.
WHEN COURT MAY CONFIRM A COMPOSITION
1. If it is in the best interest of the
creditors;
2. The debtor has not been guilty of any
of the acts, or of a failure to perform
any of the duties which would create a
bar to his discharge; and
3. The offer and its acceptance are in
good faith and have not been made or
procured in a manner forbidden by the
Act.
EFFECTS OF CONFIRMATION OF
COMPOSITION
1. The consideration shall be distributed
as the judge shall direct;
2. The insolvency proceedings shall be
dismissed;
3. The title to the insolvents property
shall revest in him; and
4. The insolvent shall be released from
his debts.
5. The substitution, in a certain sense,
composition for the insolvency
proceedings.
6. A lawful composition and its
performance by the insolvent has the
same effect of a written discharge,
although no written discharge is
granted.
7. For all legal and practical purposes, the
insolvency ended on the date of the
confirmation of composition and the
firm was restored to its status quo. It
reacquired its personality. Its
properties ceased to be in custodia
legis.
WHEN CONFIRMATION MAY BE SET ASIDE
1. Any time within six months after the
composition has been confirmed;
2. Fraud was practiced in procuring such
composition;
3. Knowledge thereof has come to the
petitioner after the confirmation of
such composition.
DISCHARGE
The formal and judicial release of an insolvent
debtor from his debts with the exception of
those expressly reserved by law.
WHEN AN INSOLVENT DEBTOR MAY APPLY
FOR A DISCHARGE
General rule: A debtor may apply to the RTC
for a discharge at three months to one year
after the adjudication of insolvency.
Exception: The property of the insolvent has
not been converted into money without his
fault, thereby delaying the distribution of
dividends among the creditors in which case
the court may extend the period.
DEBTS RELEASED BY A DISCHARGE
1. All claims, debts, and liabilities, and
demands set forth in the schedule; and
2. All claims, debts, liabilities and
demands which were or might have
been proved against the estate in
insolvency
DEBTS NOT RELEASED BY DISCHARGE
1. Taxes or assessments due the
Government;
2. Any debt created by the fraud or
embezzlement of the debtor;
3. Any debt created by the defalcation of
the debtor as a public officer or while
acting in a fiduciary capacity;
4. Debt of any person liable for the same
debt, for or with the insolvent debtor,
either as a partner, joint contractor,
indorser, surety or otherwise;
5. Debts of a corporation (Reason:
Corporation is not granted a discharge)
6. Claim for support (Reason: It will
make the law a means of avoiding the
enforcement of the obligation)
7. Discharged debt but revived by a
subsequent new promise to pay
(Reason: Discharge does not end the
moral obligation to pay)
8. Debts which have not been duly
schedules in time for proof and
allowance.
Exception: The creditors had notice or
actual knowledge of the insolvency
proceedings
9. Claims for:
a. Unliquidated damages;
b. Secured creditors;
c. Not in existence or not mature
at the time of the discharge;
d. Contingent at the time of the
discharged.
LEGAL EFFECTS OF DISCHARGE
Discharge takes effect from the
commencement of the proceedings in
insolvency.
1. Releases the debtor from all claims,
debts, liabilities and demand set forth
in the schedule or which were or might
have been proved against his estate in
insolvency.
2. Operates as a discharge of the
insolvent and future acquisitions but
permits mortgages and other lien
3. It is a special defense which may be
pleaded and be a complete bar to all
suits brought on any such debts,
claims, liabilities or demands.
4. It does not operate to release any
person liable for the same debts, for or
with the debtor, either as partner, joint
contractor, indorser, surety, or
otherwise.
5. The certificate of discharge is prima
facie evidence of the fact of release,
and the regularity of such discharge.
Remedy of guarantor or surety when
debtor declared judicially insolvent: File a
contingent claim in the insolvency proceeding,
if his rights as such guarantor or surety are
not to be barred by the subsequent discharge
of the insolvent debtor from all his liabilities.
WHEN DISCHARGE MAY BE REVOKED
Discharge may be revoked by the court which
granted it upon petition of any creditor:
1. Whose debt was proved or provable
against the estate in insolvency, on
the ground that the discharge was
fraudulently obtained; and provided,
2. The petition is filed within one year
after the date of the discharge.
FRAUDULENT PREFERENCES AND TRANSFERS
TRANSFER includes the sale and every
other and different modes of disposing of or
parting with property, or the possession of
property, absolutely or conditionally, as a
payment, pledge, mortgage, gift, or security.
WHEN PREFERENTIAL TRANSFER EXISTS
1. There must be a parting of the
insolvents property;
2. For the benefit of the creditor;
3. Consequent diminution of the
insolvents estate;
4. With the result that such creditor
receives a greater proportion of his
claim than other creditors of the same
class.
General rule: A debtor is not prohibited from
paying one creditor in preference to another
Exception: In cases mentioned in the
Insolvency Law
Deposit of money to ones credit on a
bank does not create any preference.
Reason: The estate of the depositor is not
diminished for there is an obligation on the
part of the bank to pay the amount of the
deposit as soon as the depositor may see fit
to draw a check against it.
WHEN FRAUDULENT PREFERENCE EXISTS
Fraudulent preference when the debtor
procures any part of his property to be
attached, sequestered, or seized on execution
or makes any payment, pledge, mortgage,
assignment, transfer, sale or conveyance of
any part of his property, whether directly or
indirectly, absolutely or conditionally, to any
one under the following circumstances:
1. The debtor is insolvent or in
contemplation of insolvency;
2. The transaction in question is made
within 30 days before the filing of a
petition by or against the debtor;
3. It is made with a view to giving
preference to any creditor or person
having a claim against him; and
4. The person receiving a benefit thereby
has reasonable cause to believe:
a. That the debtor is insolvent;
b. That the transfer is made with a
view to prevent his property
from coming to his assignee in
insolvency, or to prevent the
same from being distributed
ratably among his creditors, or
to defeat the object of or any
way hinder the operation or
evade the provisions of the
Insolvency Law.
*Date of registration of sale of real property
should determine whether the sale was
prohibited by the Insolvency Law or not.
WHEN PRESUMPTION OF FRAUD EXISTS
1. If such payment, pledge, mortgage,
conveyance, sale, assignment or
transfer is not made in the usual and
ordinary course of business of the
debtor; or
2. If such seizure is made under a
judgment which the debtor has
confessed or offered to allow, that fact
shall be prima facie evidence of fraud.
EQUAL EXCHANGE NOT A PREFERENCE
An exchange of securities within the thirty-day
period is not a fraudulent preference under
the law, even when both parties know that the
debtor is insolvent, if:
1. The security given up is a valid one at
the time the exchange;
2. Of equal value with the one received in
exchange.
Reason: Exchange takes nothing away from
the other creditor
Equal value: Not necessary that their value
should be mathematically equal, but it is
sufficient if they are substantially equal.
WHEN FRAUDULENT TRANSFER EXISTS
1. Any payment, pledge, mortgage,
conveyance, sale, assignment, or
transfer of property of whatever
character;
2. Made by the insolvent;
3. Within one month before the filing of
the petition in insolvency against him
Exception: Transfer for a valuable pecuniary
consideration in good faith
Effect of fraudulent transfer: Such transfer
is VOID
RIGHT OF ASSIGNEE TO RECOVER PROPERTY
OR ITS VALUE
The creditors of the insolvent are not
authorized to institute an independent action.
In all actions or proceedings to set aside or
nullify fraudulent preferences or transactions
as VOID, the assignee appears for, and
represents the general creditors.
EFFECT OF DEATH OF INSOLVENT DEBTOR
1. Death after the order of
adjudication the proceedings shall
be continued and concluded in like
manner and with like validity and
effects as if he had lived.
2. Death before the order of
adjudication the proceedings shall
be discontinued.
Remedy: File claims in the proper
testate or intestate proceedings
WHEN RECEIVER MAY BE APPOINTED
Anytime before the election of an assignee,
when it appears by the verified petition of a
creditor:
1. That the assets of the insolvent or a
considerable portion thereof have been
pledged, mortgaged, transferred,
assigned, conveyed, or seized on legal
process in violation of Sec. 70;
2. That it is necessary to commence an
action to recover the same;
The receiver shall deliver all the property,
assets, or effects remaining in his hands to
the assignee who shall be substituted for him
in all pending actions or proceedings.
WHEN PETITION MAY BE DISMISSED
At anytime before the appointment of an
assignee:
1. Voluntary petition upon the
application of the debtor, if no creditor
files written objections;
2. Involuntary petition
a. Upon the application of the
petitioning creditors; or
b. By written consent of all
creditors filed in court, in which
case, the proceedings may be
dismissed at any time.
After the appointment of an assignee,
dismissal is not allowed without the consent of
all parties interested in or affected thereby.
WHEN APPEAL MAY BE TAKEN TO THE
SUPREME COURT
From an order granting or refusing:
1. An adjudication in insolvency and in
the latter case, from the order fixing
the amount of costs, expenses,
damages, and attorneys fees allowed
the debtor;
2. A creditors claim when the amount in
dispute exceeds P300.00
3. A claim for property not belonging to
the insolvent, presented under Sec. 48
(equitable claims)
4. Settling an account of an assignee;
5. Setting apart homestead or other
property claimed as exempt from
execution.
6. A discharge to the debtor.
SAMPLE QUESTIONS
a. What are the preferred claims that shall be
satisfied first from the assets of an insolvent
corporation?
How shall the remaining non-preferred
creditors share in the estate of the insolvent
corporation above?
Multiple choice: Choose the right answer.
1. The parties to a bailment are the:
a. bailor;
b. bailee;
c. comodatario;
d. all the above;
e. letters a and b
2. A deposit made in compliance with a legal
obligation is:
a. an extrajudicial deposit;
b. a voluntary deposit;
c. a necessary deposit;
d. a deposit with a warehouseman;
e. letters a and b
3. A contract of antichresis is always:
a. a written contract;
b. a contract, with a stipulation that the
debt will be paid through receipt of the
fruits of an immovable;
c. Involves the payment of interests, if
owing;
d. All of the above;
e. Letters a and b
4. An, assignee in a proceeding under the
Insolvency Law does not have the duty of:
a. suing to recover the properties of the
state of the insolvent debtor;
b. selling property of the insolvent
debtor;
c. ensuring that a debtor corporation
operate the business efficiently and
effectively while the proceedings are
pending;
d. collecting and discharging debts owed
to the insolvent debtor.
5. In order to obtain approval of the proposed
settlement of the debtor in an insolvency
proceeding.
a. the court must initiate the proposal
b. 2/3 of the number of creditors should
agree to the settlement;
c. 3/5 of the number of creditors should
agree to the settlement;
d. 1/3 of the total debts must be
represented by the approving
creditors;
e. Letters a and b
Before he left for Riyadh to work as a
mechanic, Pedro left his Adventure van with
Tito, with the understanding that the latter
could use it for one year for his personal or
family use while Pedro works in Riyadh. He
did not tell Tito that the brakes of the van
were faulty. Tito had the van tuned up and
the brakes repaired. He spent a total amount
of P15,000.00. After using the vehicle for two
weeks, Tito discovered that it consumed too
much fuel. To make up for the expenses, he
leased it to Annabelle. Two months later,
Pedro returned to the Philippines and asked
Tito to return the van. Unfortunately, while
being driven by Tito, the van was accidentally
damaged by a cargo truck without his fault.
a) Who shall bear the P15,000.00 spent
for the repair of the van? Explain.
b) Who shall bear the costs for the vans
fuel, oil and other materials while it
was with Tito? Explain.
c) Does Pedro have the right to retrieve
the van even before the lapse of one
year? Explain.
d) Who shall bear the expenses for the
accidental damage caused by the cargo
truck, granting that the truck driver
and truck owner are insolvent? Explain.
A real estate mortgage may be foreclosed
judicially or extrajudicially. In what instance
may a mortgagee extrajudicially foreclose a
real estate mortgage?
Aaron, a well-known architect, is suffering
from financial reverses. He has four creditors
with a total claim of P26 Million. Despite his
intention to pay these obligations, his current
assets are insufficient to cover all of them. His
creditors are about to sue him. Consequently,
he was constrained to file a petition for
insolvency.
a) Since Aaron was merely forced by
circumstances to petition the court to
declare him insolvent, can the judge
properly treat the petition as one for
involuntary insolvency? Explain.
b) If Aaron is declared an insolvent by the
court, what would be the effect, if any,
of such declaration on his creditors?
Explain.
c) Assuming that Aaron has guarantors
for his debts, are the guarantors
released from their obligations once
Aaron is discharged from his debts?
Explain.
d) What remedies are available to the
guarantors in case they are made to
pay the creditors? Explain.
Ricardo mortgaged his fishpond to AC Bank to
secure a P1 Million loan. In a separate
transaction, he opened a letter of credit with
the same bank for $500,000.00 in favor of HS
Bank, a foreign bank, to purchase outboard
motors. Likewise, Ricardo executed a Surety
Agreement in favor of AC Bank. The outboard
motors arrived and were delivered to Ricardo,
but he was not able to pay the purchase price
thereof.
a) Can AC Bank take possession of the
outboard motors? Why?
b) Can AC Bank also foreclose the
mortgage over the fishpond? Explain.
TORTS & DAMAGES CIVIL LAW
Torts and Damages
TABLE OF CONTENTS
Title 1. Torts 271
I. In General 271
II. Negligence Torts 272
III. Intentional Torts 280
IV. Other Torts 281
V. Strict Liability Tort 282
VI. Torts with Independent Civil Action 285
VII. Civil Liability Arising from Crime 287
Title 2. Damages 288
I. Definition and Concept 288
II. Kinds of Damages 288
TORTS
I. IN GENERAL
A. What is a TORT?
Essentially, "tort" consists in the violation of a
right given or the omission of a duty imposed
by law. Tort is a breach of a legal duty.
(Naguiat vs. NLRC)
A tort is civil wrong, other than breach of
contract, for which a court of law will afford a
remedy in the form of an action for damages.
Elements:
1) A legal duty
2) Breach
3) Causation
4) Damage
B. What is a QUASI-DELICT?
Whoever by act or omission causes damage to
another, there being fault or negligence, is
obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing
contractual relation between the parties, is
called a quasi-delict and is governed by the
provisions of the Civil Code Chapter on quasi-
delicts. (Art. 2176)
Elements:
1) Act or omission
2) Damage or injury is caused to another
3) Fault or negligence is present
4) There are no pre-existing contractual
relations between the parties
5) Causal connection between damage
done and act/omission
C. What is the relation of quasi-
delict to tort?
Quasi-delict, known in Spanish legal treatises
as culpa aquiliana, is a civil law concept while
torts is an Anglo-American or common law
concept. Torts, in common law, embrace both
delicts and quasi-delicts. Quasi-delict is
seemingly a refinement of the torts concept in
that it refers particularly to wrongful,
negligent, injurious acts outside the ambit of
penal laws.
Our concept of culpa aquilania embraces both
negligent and intentional acts. (Barredo vs.
Garcia)
D. How is a quasi delict different from a
crime?
Crime
Quasi-delict
public interest private concern
RPC punishes and
corrects the act
CC repairs the
damage by
indemnification
punishes only
when there is a
penal law
covering the act
includes all acts in
which "any kind of
fault or negligence
intervenes."
subsidiary liability
of employer
solidary liability of
employer
ERs defense is
that employees
resources must
first be exhausted
ERs defense is that
accused observed due
diligence of a good
father of a family
(Barredo vs. Garcia)
Acquittal from an accusation of criminal
negligence, whether on reasonable doubt or
not, shall not be a bar for a subsequent civil
action, not for civil liability arising from the
criminal act, but for damages due to a quasi-
delict. (Elcano vs. Hill, 1977)
E. What is the relation of quasi-delict to
breach of contract and delict?
CONTRAC
T
QUASI
DELICT
DELICT
Vinculu
m Juris
Contract Negligent
act/
omission
(culpa,
imprudence)
Act/omis
sion
committ
ed by
means
of dolo
(delibera
te,
maliciou
s, in bad
faith)
Proof
Neede
d
Preponder
ance of
evidence
Preponderan
ce of
evidence
Proof
beyond
reasona
ble
doubt
Defens
e
availab
le
Exercise of
extraordin
ary
diligence
(in
contract of
carriage),
Force
Majeure
Exercise of
diligence of
good father
of a family
in the
selection
and
supervision
of
employees
Pre-
existin
g
contra
There is
pre-
existing
contract
No pre-
existing
contract
No pre-
existing
contract
ct
Burden
of proo
f
Contractu
al party.
Prove the
ff.:
1. existen
ce of a
contra
ct
2.
breach
Victim.
Prove the
ff.:
1. damage
2. negligen
ce
3. causal
connecti
on
between
negligen
ce and
damage
done
Prosecut
ion.
Accused
is
presume
d
innocent
until the
contrary
is
proved.
F. What are some classifications of tort?
1. Negligence tort
2. Intentional tort
3. Strict liability tort
4. Other Torts (Human relations torts)
II. NEGLIGENCE TORT
A. What are the elements of negligence
tort (Art. 2176)?
1. Legal duty
2. Breach
3. Causation
4. Damage
B. What is NEGLIGENCE?
Negligence is lack of due care required by a
particular situation, conduct which falls below
the standard required by law. (US vs. Barias,
1912)
An accident pertains to an unforeseen event in
which no fault or negligence attaches to the
defendant. (Jarco Marketing vs. CA, 1999)
C. What is the relation of negligence to the
elements of negligence tort?
Negligence is the breach (element no. 2) of
the legal duty (element no. 1) to observe a
certain standard of conduct in a particular
situation.
D. What are the tests of negligence?
Since negligence is the lack of due care
required by the circumstances, the test is
whether due care was observed.
1. Ordinarily prudent man;
2. Reasonable man;
3. And most commonly, good father of
the family or bonus paterfamilias
A standard of extraordinary diligence is
imposed by law in certain situations, such as
in the case of a common carrier.
E. What is the emergency rule?
Under the "emergency rule," an individual
who suddenly finds himself in a situation of
danger and is required to act without much
time to consider the best means that may be
adopted to avoid the impending danger, is not
guilty of negligence if he fails to undertake
what subsequently and upon reflection may
appear to be a better solution, unless the
emergency was brought by his own
negligence. (Valenzuela vs. CA)
F. Who has the burden of proving
negligence?
Generally, it is the plaintiff or injured party. In
cases where the law creates a presumption of
negligence, such as for common carriers or for
persons vicariously liable, the burden is then
placed on the defendant.
G. When is negligence presumed?
In motor vehicle mishaps:
a) A driver was negligent, if he had been
found guilty of
1. reckless driving OR
2. violating traffic regulations at
least twice within the next
preceding two months. (Art.
2184)
b) Driver has been negligent if at the time
of the mishap, he was violating any
traffic regulation. (Art. 2185)
Other cases:
There is prima facie presumption of
negligence on the part of the DEFENDANT if
the death or injury results from his possession
of dangerous weapons or substances, such as
firearms and poison, EXCEPT when the
possession or use thereof is indispensable in
his occupation or business. (Art. 2188)
Elsewhere, the Civil Code provides for other
instances where negligence is presumed.
Example: Art. 1756 regarding common
carriers.
H. What is RES IPSA LOQUITUR?
The doctrine of res ipsa loquitur (the thing
speaks for itself) states that the happening of
an injury permits an inference of negligence
where plaintiff produces substantial evidence
that injury was caused by an agency or
instrumentality under exclusive control and
management of defendant, and that the
occurrence was such that in the ordinary
course of things would not happen if
reasonable care had been used. (Layugan vs.
IAC)
To be applicable, res ipsa loquitur requires:
1) Evidence of the specific acts of
negligence is absent and not readily
available;
2) The accident is of a kind which does
not necessarily occur unless someone
is negligent;
3) The instrumentality which caused the
injury was under the exclusive control
of the person in charge; and
4) The injury suffered must not have been
due to any voluntary action or
contribution of the injured person.
In this jurisdiction, res ipsa loquitur is not a
rule of substantive law but a mere evidentiary
rule. Mere invocation and application of the
doctrine does not dispense with the
requirement of proof of negligence.
Prof. Services Inc. vs. Agana
For purposes of apportioning
responsibility in medical negligence cases, an
employer-employee relationship in effect exists
between hospitals and their attending and
visiting physicians. The control test is
determinative.
Recent years have seen the doctrine of
corporate negligence as the judicial answer to
the problem of allocating hospitals liability for
the negligent acts of health practitioners,
absent facts to support the application of
respondeat superior or apparent authority. Its
formulation proceeds from the judiciarys
acknowledgment that in these modern times,
the duty of providing quality medical service is
no longer the sole prerogative and
responsibility of the physician.
I. What is CAUSATION?
Causation is the bringing about of a result,
and a necessary element in establishing legal
liability.
J. What is PROXIMATE CAUSE?
Proximate legal cause is that acting first and
producing the injury, either immediately or by
setting other events in motion, all constituting a
natural and continuous chain of events, each
having a close causal connection with its
immediate predecessor, the final event in the
chain immediately effecting the injury as a
natural and probable result of the cause which
first acted, under such circumstances that the
person responsible for the first event should, as
an ordinarily prudent and intelligent person,
have reasonable ground to expect at the
moment of his act or default that an injury to
some person might probably result. (Vda. De
Bataclan vs. Medina, 1957)
A prior and remote cause cannot be made the
basis of an action if such remote cause did
nothing more than furnish the condition and
give rise to the occasion by which the injury
was made possible, if there intervened
between such prior or remote cause and the
injury, a distinct, successive, unrelated and
efficient cause of the injury, even though such
injury would not have happened for such
condition or occasion. If no danger existed in
the condition except because of the
independent cause, such condition was not
the proximate cause and if an independent
negligent act which results in injury because
of the prior defective condition, such
subsequent act or condition is the proximate
cause. (Manila Electric Co. vs. Remoquillo,
1956)
K. What is the relation of proximate cause
to the elements of negligence tort?
The most basic element of any tort action is the
causal connection between the act or omission
of the tortfeasor and the plaintiffs injury such
that without it, no action will prosper.
L. When is proximate cause presumed?
RULE: Injured party must show that the
violation of the enactment is the proximate
cause of his injury or that it substantially
contributed to it.
EXCEPTION: However, the character and
purpose of a particular statute may be such
that the courts will deem a reasonable
connection between the injury and the
violation sufficient to award damages based
on negligence. In this case, proximate cause
is presumed and the injured party need not
establish proximate cause in the traditional
sense.
If the very injury which a particular statute
intends to prevent happens, the violation of
the statute is presumed to be, the proximate
cause of the injury. The violation of ordinance
intended to promote safety is in itself
negligence. (Teague vs. Fernandez)
M. Is the presumption that the violation of
the statute is the proximate cause
disputable?
It depends.
DISPUTABLE in the ff. cases:
violation creates a prima facie case of
negligence
violation constitutes evidence of
negligence
The defense that the violation was either
justifiable or excusable under the
circumstances of the case is available. The
legal grounds or excuse for violation of a
statute:
1. Anything that would make complying
with the statute IMPOSSIBLE;
2. Anything over which the defendant has
NO CONTROL and places him in a
position contrary to that required by
the statute;
3. An EMERGENCY not of the defendants
making causing him to violate the
statute; and
4. Conduct that is precisely excused or
EXEMPTED by the statute.
CONCLUSIVE: It is not available in cases
where the statute provides for negligence per
se.
N. What is NEGLIGENCE PER SE?
Negligence per se is the legal doctrine
whereby certain acts are considered
intrinsically negligent. It is the law that
determines which acts constitute negligence
per se. (Anonuevo vs. CA, 2004)
Illustration: The law requires registration of
service and repair enterprises for motor
vehicles. There is thus a statutory duty
imposed on petitioner and it is for his failure
to comply with this duty that he was guilty of
negligence rendering him liable for damages
to private respondent for the destruction of
the car which was serviced by the petitioner
due to the fire. (Cipriano vs. CA, 1996)
O. What Civil Code provisions on
obligations are applicable in quasi-delict?
The provisions of Articles 1172 to 1174 are
also applicable to a quasi-delict. (Art. 2178)
Art. 1172. Responsibility arising from
negligence in the performance of every kind of
obligation is also demandable, but such
liability may be regulated by the courts,
according to the circumstances.
Art. 1173. The fault or negligence of the
obligor consists in the omission of that
diligence which is required by the nature of
the obligation and corresponds with the
circumstances of the persons, of the time and
of the place. When negligence shows bad
faith, the provisions of Articles 1171 and
2201, paragraph 2, shall apply.
If the law or contract does not state the
diligence which is to be observed in the
performance, that which is expected of a good
father of a family shall be required.
Art. 1174. Except in cases expressly specified
by the law, or when it is otherwise declared by
stipulation, or when the nature of the
obligation requires the assumption of risk, no
person shall be responsible for those events
which could not be foreseen, or which, though
foreseen, were inevitable.
Art. 1171. Responsibility arising from fraud is
demandable in all obligations. Any waiver of
an action for future fraud is void.
Art. 2201, par.2
In case of fraud, bad faith, malice or wanton
attitude, the obligor shall be responsible for all
damages which may be reasonably attributed
to the non-performance of the obligation.
P. What are some of the defenses to
prevent or mitigate negligence tort
liability?
1. I was not negligent. I exercised due
diligence. (Art. 2176)
2. Even if I was negligent, it was not the
proximate cause of the damage. (Art.
2176)
3. There was no damage. (Art. 2176)
4. I was not negligent. What happened
was a fortuitous event.
RULE: No person shall be seen responsible for
those events which, could not foreseen, or
which, though foreseen, were inevitable.
EXCEPTIONS (LAS):
1. Cases expressly specified by law
2. Nature of obligation requires assuming
the risk
3. Cases declared by stipulation (Art.
1174)
Q. What is a FORTUITOUS EVENT?
A fortuitous event presents the following
essential characteristics:
1. The cause of the unforeseen and
unexpected occurrence, or the failure
of the debtor to comply with his
obligation, must be independent of the
human will;
2. It must be impossible to foresee the
event or if it can be foreseen, it must
be impossible to avoid;
3. The occurrence must be such as to
render it impossible for the debtor to
fulfill his obligation in a normal manner
and
4. The obligor (debtor) must be free from
any participation in the aggravation of
the injury resulting to the creditor.
(Juntillla vs. Fontanar, 1985)
DEFENSES
The plaintiff voluntarily assumed the risk. Volenti non fit injuria.
What is the maxim of VOLENTI NON FIT INJURIA?
RULE: The maxim volenti non fit injuria
states that when a person voluntarily assents
to a known danger, he must abide by the
consequences.
Illustration: The owner of an animal is
answerable only for damages caused to a
stranger, and that for damage caused to the
caretaker of the animal. A caretaker of
animals voluntarily assumes the risks of his
occupation. The owner would be liable only if
he had been negligent or at fault under article
1902 of the Civil Code. (Afialde vs. Hisolde)
EXCEPTION: If an emergency is found to
exist or if the life or property if another is in
peril or when he seeks to rescue his
endangered property. (Ilocos Norte Electric
Company vs. CA, 1989)
I was just exercising my rights.
Damnum absque injuria.
What is the maxim of DAMNUM ABSQUE
INJURIA?
If damage results from a person's exercising
his legal rights, it is damnum absque injuria.
Since conjunction of damage and wrong is
absent, damage sustained is not actionable.
I was negligent and I am the proximate
cause of the damage but the plaintiff
was guilty of contributory
negligence.
What is the effect of plaintiffs negligence
on his right to recover?
IF it is the immediate and proximate CAUSE of
his injury, he CANNOT recover damages.
IF only CONTRIBUTORY, the immediate and
proximate cause of the injury being the
defendant's lack of due care, the plaintiff may
recover damages, but the courts shall
MITIGATE the damages to be awarded. (Art.
2179)
I was negligent and I am the proximate
cause of the damage, but I already
paid.
Responsibility for fault or negligence under
the preceding article is entirely separate and
distinct from the civil liability arising from
negligence under the Penal Code. BUT THE
PLAINTIFF CANNOT RECOVER DAMAGES
Damage v. Injury
INJURY is the illegal invasion of a legal
right;
DAMAGE is the loss, hurt, or harm which
results from the injury; and
DAMAGES are the recompense or
compensation awarded for the damage
suffered.
Thus, there can be damage without injury
in those instances in which the loss or
harm was not the result of a violation of a
legal duty. These situations are often
called damnum absque injuria. In order
that a plaintiff may maintain an action for
the injuries of which he complains, he must
establish that such injuries resulted from a
breach of duty which the defendant owed
to the plaintiff. There must be damnum et
injuria. (Custodio vs. CA)
TWICE FOR THE SAME ACT OR OMISSION OF
THE DEFENDANT. (Art. 2177)
Article 2177 of the Civil Code forbids ACTUAL
double recovery of damages for the same
negligent act or omission. Hence, an award of
damages in a civil case does not preclude an
award of damages in the subsequent criminal
case. (Padua vs. Robles)
I was negligent but the defendant had
the last clear chance.
What is the doctrine of LAST CLEAR
CHANCE?
The doctrine of last clear chance (also
supervening negligence or discovered
peril) states that where both parties are
negligent, but the negligent act of one is
appreciably later in time than that of the
other, or when it is impossible to determine
whose fault or negligence should be attributed
to the incident, the one who had the last clear
opportunity to avoid the impending harm and
failed to do so is chargeable with the
consequences thereof. An antecedent
negligence of a person doesnt preclude the
recovery of damages for the supervening
negligence of, or bar a defense against liability
sought by another, if the latter, who had the
last fair chance, could have avoided the
impending harm by the exercise of due
diligence. (PBCom vs. CA, 1997)
Illustration: A calesa being driven on the
road side of the road and a car converged on
a bridge. A collision was averted when the car
swerved suddenly but the calesa still fell of
the bridge. Although the plaintiff was guilty of
negligence in being in the wrong side of the
bridge, the defendant was nevertheless civilly
liable for the legal damages resulting from the
collision, as he had a fair opportunity to avoid
the accident after he realized the situation
created by the negligence of the plaintiff and
failed to avail himself of that opportunity;
while the plaintiff could by no means then
place himself in a position of greater safety.
(Picart vs. Smith, 1918)
Last clear chance is inapplicable in culpa
contractual. (Consolidated Bank vs. CA,
2003)
Waiver
What is the test of validity of a waiver?
A waiver, to be valid and effective, must be
couched in CLEAR and UNEQUIVOCAL TERMS
which leave no doubt as to the INTENTION of
a person to give up a right or benefit which
legally pertains to him. (Gatchalian vs.
Delim, 1991)
Prescription
- 4 years for Quasi-Delict (Art. 1146)
- 1 year for defamation (Art. 1147)
PERSONS LIABLE
A. Who is liable for the obligation
imposed by Article 2176?
The obligation imposed by Article 2176 is
demandable from:
1. one's own acts or omissions,
2. acts or omissions of persons for whom
one is responsible. (Art. 2180)
A tortfeasor (liable directly or vicariously)
may be a natural or a juridical person.
B. What is VICARIOUS LIABILITY?
Vicarious liability is the imposition of liability
on one person for the actionable conduct of
another, based solely on a relationship
between the two persons. The liability is
primary and solidary. (Blacks Law
Dictionary)
Extra-contractual liability of this kind has been
limited to cases wherein moral culpability
can be directly imputed to the person
charged.
BASES:
a. Doctrine of Imputed Negligence
This doctrine places upon one person the
responsibility for anothers negligence.
b. Respondeat superior
It means nothing more than look to the man
higher up, (usually the employer or person
under whose control the tortfeasor was under)
which is a manifestation of vicarious liability.
c. Bonus paterfamilias.
The relationship of pater familias is the basis
of civil law liability, particularly for an
employer. It is a defense for all instances of
vicarious liability based on Art. 2180.
C. Who are liable vicariously?
a. The FATHER and, in case of his death
or incapacity, the MOTHER, are
responsible for the damages caused by
the minor children who live in their
company.
b. GUARDIANS are liable for damages
caused by the minors or incapacitated
persons who are under their authority
and live in their company.
c. The OWNERS and MANAGERS of an
establishment or enterprise are
likewise responsible for damages
caused by their employees in the
service of the branches in which the
latter are employed or on the occasion
of their functions.
d. EMPLOYERS shall be liable for the
damages caused by their employees
and household helpers acting within
the scope of their assigned tasks, even
though the former are not engaged in
any business or industry.
C. Who are liable vicariously? (continued)
e. The STATE is responsible in like
manner when it acts through a special
agent; but not when the damage has
been caused by the official to whom
the task done properly pertains, in
which case what is provided in Article
2176 shall be applicable.
f. Lastly, TEACHERS or HEADS of
establishments of arts and trades shall
be liable for damages caused by their
pupils and students or apprentices, so
long as they remain in their custody.
(Art. 2180)
Rule on Construction: Because it imposes
strict liability, Art. 2180 should be interpreted
strictly and cannot be extended to persons not
enumerated therein.
D. Instances where there is vicarious
liability.
Parents and Guardians
Article 2180 (a) has been REPEALED by Art.
221 of the Family Code. Now, parent(s)
exercising parental authority is liable for the
torts of their children.
Art. 221 (Family Code) PARENTS and
OTHER PERSONS EXERCISING PARENTAL
AUTHORITY shall be civilly liable for the
injuries and damages caused by the acts or
omissions of their unemancipated children
living in their company AND under their
parental authority subject to the appropriate
defenses provided by law.
Despite the lowering of the age of majority
from 21 to 18, parents are still liable for the
torts committed by their children below 21
years of age. (Art 236, par 3 FC, as
amended by RA 6809).
REQUISITES for liability to attach:
Parents (mnemonic: 21 + Authority &
Company):
1. The child is below 21 years old
2. The child is under the parental
authority of the parents
3. The child is living in the company of
the parents
Guardians (mnemonic: Authority &
Company)
1. The ward if minor is below 21 years
old. If Incapacitated, the guardian is
liable for the acts of the ward
regardless of the latters age.
The child is under the parental
authority of the parents
2. The tortfeasor is under his authority
3. The tortfeasor is living in his company
Is a minor or insane tortfeasor with NO
parent or guardian liable?
Yes. He shall be answerable with his own
property in an action against him where a
guardian ad litem shall be appointed. (Art.
2182)
Owners and managers of establishments
or enterprises
Who are
liable
For
whose
acts
Requisites
for liability to
attach
Owners and
managers of an
establishment
or enterprise
Their
employees
The damage
was caused in
the service of
the branches
in which the
employees are
employed
-OR-
The damage
was caused on
the occasion of
their functions
The term owners and managers of an
establishment or enterprise is used in the
sense of an EMPLOYER; hence, managers
cannot be liable since they themselves are
employees of the enterprise.
Art 2180, par 4 may be unnecessary as Art
2180, par 5 already covers the cases under
par 4.
Employers
The liability of an employer is based primarily
on the presumption that he failed to exercise
due diligence in the selection and supervision
of his employees.
REQUISITES OF LIABILITY:
1) existence of the employer-employee
relationship
2) THE EMPLOYER WAS CHOSEN BY THE
EMPLOYEE;
3) THE WORK BEING PERFORMED WAS IN
ACCORDANCE WITH A VALID ORDER; AND
4) THE ILLICIT ACTS OF THE EMPLOYEE WAS
ON THE OCCASION OR BY REASON OF THE
FUNCTIONS ENTRUSTED TO HIM.
The employer can interpose the defense of
due diligence in selection and supervision of
his employees.
BAR QUESTION
After working overtime up to midnight, Alberto,
an executive of an insurance company drove a
company vehicle to a favorite videoke bar
where he had some drinks and sang some songs
with friends to unwind. At 2:00 a.m., 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?
Suggested 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) of the
Civil Code, employers are liable for damages
caused by their employees who were 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. vs. 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 2:00 a.m.
after coming out from work. The time of the
accident (also 2:00 a.m.) was outside normal
working hours.
Alternative Answer:
The insurance company is liable if Alberto was
negligent in the operation of the car and the
car was assigned to him for the benefit of the
insurance company, and even though he was
not within the scope of his assigned tasks
when the accident happened. In one case
decided by the Supreme Court, where an
executive of a pharmaceutical company was
given the use of a company car, and after
office hours, the executive made personal use
of the car and met an accident, the employer
was also made liable under Art. 2180 of the
Civil Code for the injury caused by the
negligent operation of the car by the
executive on the ground that the car which
caused the injury was assigned to the
executive by the employer for the prestige of
the company. The insurance company was
held liable even though the employee was not
performing within the scope of his assigned
tasks when the accident happened
(Valenzuela vs. CA, 253 SCRA 303 [1996]).
State
General Rule: The State cannot be sued.
(Sec 3, Art XVI, Consti)
Exceptions:
a. There is express legislative consent
b. The State filed the case
Instances where the state gives its
consent to be sued:
a. Art. 2180 (6) is an example of an
express legislative consent. Here, the
State assumes a limited liability for the
acts of its special agents.
b. Art. 2189 provides for state liability for
damages caused by defective condition
of public works.
c. Local Government Code provides for
the liability of local government units
for the for the wrongful exercise of its
proprietary (as opposed to its
governmental) functions. The latter is
the same as that of a private
corporation or individual. (Mendoza vs.
De Leon)
Who is a special agent?
A special agent is
a. A public official required to do a
particular task that is foreign to said
officials usual government functions,
or
B. A PRIVATE INDIVIDUAL WHO IS
COMMISSIONED FOR A SPECIAL GOVERNMENT
TASK.
The agent must be empowered by a definite
order or commission to perform some act.
This act must be the one that gives rise to the
injury claimed. (Merritt vs. Government)
If the States agent is not a public official and
is commissioned to perform non-
governmental functions, then the State
assumes the role of an ordinary employer and
can be held liable for the agents tort.
Does state immunity mean that injured
persons are deprived of remedy?
No. A regular official is liable under Art 2176
for the damage he causes. But as a rule, even
if injury is caused in the course of the
performance of a governmental duty, no
recovery can be had from the governments
officers so long as they performed their duty
honestly and in good faith or that they did not
act wantonly or maliciously.
Teachers and heads of establishments of
arts and trades
Art. 2180 must be read together with the
provisions of the Family Code, thus:
Art. 218. The school, its administrators and
teachers, or the individual, entity or institution
engaged in child care shall have special
parental authority and responsibility over the
minor child while under their supervision,
instruction or custody.
Authority and responsibility shall apply to all
authorized activities whether inside or outside
the premises of the school, entity or
institution.
Art. 219. Those given the authority and
responsibility under the preceding Article shall
be principally and solidarily liable for damages
caused by the acts or omissions of the
unemancipated minor. The parents, judicial
guardians or the persons exercising substitute
parental authority over said minor shall be
subsidiarily liable.
The respective liabilities of those referred to in
the preceding paragraph shall not apply if it is
proved that they exercised the proper
diligence required under the particular
circumstances.
All other cases not covered by this and the
preceding articles shall be governed by the
provisions of the Civil Code on quasi-delicts.
Who are liable?
Persons exercising substitute parental
authority (SATI)
1) School
2) Administrators
3) Teachers
4) Individual/entity/institution engaged in
child care
Substitute parental authority is intermittent
What are the requisites for liability to
attach under the Family Code?
REQUISITES:
1) The tortfeasor is a minor (below 18
only)
2) Under their supervision, instruction or
custody
RA 6809 does not provide that persons
exercising subsidiary parental authority are
liable for the torts of those who are between
18 and 21, unlike in the case of parents and
guardians.
Cases which do not fall under the provision on
substitute parental authority will be governed
by Art 2180 of the Civil Code.
What are the requisites for liability to
attach under Article 2180?
REQUISITES:
1) The defendant must be the teacher or
the head of a school of arts and
trades;
2) THE DAMAGE TO THE PLAINTIFF MUST BE
CAUSED BY THE ACT OR OMISSION OF A
STUDENT WHO, AT THE TIME OF ITS
COMMISSION, WAS UNDER THE CUSTODY OF
THE DEFENDANT; AND
3) Proof of the amount of damage.
Custody means the protective and
supervisory custody the school and its head
and teachers exercise over the students for as
long as they are at attendance in the school,
including break times (lunch or recess).
E. Do tortfeasors vicariously liable under
Art. 2180 have a defense?
Yes. Responsibility ceased when they prove
that they observed all the diligence of a good
father of a family to prevent damage. (Art.
2180)
F. What is the liability of joint tortfeasors?
The responsibility of two or more persons who
are liable for quasi-delict is SOLIDARY. (Art.
2194)
G. May they recover what they paid and
from whom?
Yes. Whoever pays for the damage caused by
his dependents or employees may recover
from the latter what he has paid or delivered
in satisfaction of the claim. (Art. 2181)
III. INTENTIONAL TORTS
What are intentional torts?
A. Abuse of Rights
Every person must, in the exercise of his
rights and in the performance of his duties,
act with justice, give everyone his due, and
observe honesty and good faith. (Art. 19)
Every person who, contrary to law, wilfully or
negligently causes damage to another, shall
indemnify the latter for the same. (Art. 20)
Art 19 contains a mere declaration of
principles. The declaration is implemented by
Art. 20. (Globe Mackay vs. CA)
A right, though by itself legal because
recognized or granted by law as such, may
nevertheless become the source of some
illegality. When a right is exercised in a
manner which does not conform with the
norms enshrined in Article 19 (i.e. to act with
justice; to give everyone his due; and to
observe honesty and good faith) and results in
damage to another, a legal wrong is thereby
committed for which the wrongdoer must be
held responsible. An action for damages under
either Article 20 or Article 21 would be proper.
(Cebu Country Club, Inc., et al. vs. Ricardo F.
Elizagaque)
REQUISITES to find the existence of an
abuse of right under Article 19:
1) There is a legal right or duty;
2) Which is exercised in BAD FAITH;
3) FOR THE SOLE INTENT OF PREJUDICING OR
INJURING ANOTHER.
Good faith is presumed and the burden of
proving bad faith is on the party alleging it.
B. Acts contra bonus mores
Any person who wilfully causes loss or injury
to another in a manner that is contrary to
morals, good customs or public policy shall
compensate the latter for the damage. (Art.
21)
REQUISITES:
1) A person has a legal right
2) Such right is violated by another in a
manner contrary to morals, good
customs or public policy;
3) Act is done with intent to injure;
4) There is a loss or injury suffered as a
result of said violation. (Ruiz vs.
Secretary of Defense; Albenson vs. CA)
There is an act which is legal but which may
be contrary to morals, good custom, public
order, or public policy. (Albeson vs. CA)
Illustrations:
a. Breach of promise to marry,
seduction and sexual assault
Mere breach of promise to marry is not an
actionable wrong. But to formally set a
wedding and go through all the above-
described preparation and publicity, only to
walk out of it when the matrimony is about to
be solemnized, is quite different. This is
palpably and unjustifiably contrary to good
customs for which defendant must be held
answerable in damages in accordance with
Article 21. (Wassmer vs. Velez)
Who are
liable
For whose
Acts
Requisite for
Liability to
Attach
Teacher- in-
charge
(the one
designated
to exercise
supervision
over
students)
pupils and
students
pupils and
students
remain in
teachers
custody
regardless of
the age
Head of
establishme
nt of arts
and trades
Apprentices custody
regardless of
the age
School
(generally
not held
liable)
a. if the
tortfeasor
is a
student of
the school
(Art 218
FC)
b. if the
tortfeasor
is a
teacher/
employee
of the
school, it is
liable as
employer
under 2180
(5) of CC
(St. Francis
vs. CA)
c. if the
tortfeasor
is a
stranger, it
is liable for
breach of
contract.
(PSBA vs.
CA)
must be
below 18
b. Disconnection of Utilities
A prior written notice to the customer is
required before disconnection of the service.
Failure to give such prior notice amounts to a
tort. (Meralco vs. CA)
c. Malicious Prosecution
RULE: One cannot be held liable in damages
for maliciously instituting a prosecution where
he acted with probable cause. Reason: It
would be a very great discouragement to
public justice if prosecutors, who had a
tolerable ground of suspicion, were liable to
be sued at law when their indictments
miscarried. (Que vs. IAC)
EXCEPTION: An action for damages brought
by one against whom a criminal prosecution,
civil suit, or other legal proceeding has been
instituted maliciously and without probable
cause, after the termination of such
prosecution, suit or other proceeding in favor
of the defendant herein. The gist of the action
is the putting of legal process in force,
regularly, for the mere purpose of vexation or
injury.
Requisites for Malicious Prosecution:
(1) Fact of the prosecution
(2) Defendant was himself the
prosecutor
(3) Action was terminated with an
acquittal
(4) Prosecutor acted without probable
cause
(5) Prosecutor was impelled by legal
malice, that is by improper or sinister
motive (Drilon vs. CA)
As to the elements of malicious prosecution,
the presence of probable cause signifies the
absence of malice. (Albenson vs. CA)
Note: It seems that the second and third
elements are REDUNDANT.
d. Public Humiliation
Carpio vs. Valmonte
Wedding coordinator accused by brides aunt
for stealing jewelry, in the presence of other
people in hotel room. True, petitioner had the
right to ascertain the identity of the
malefactor, but to malign respondent without
an iota of proof is impermissible.
e. Unjustified Dismissal
Quisaba vs. Sta. Ines
If the dismissal was done anti-socially or
oppressively, as the complaint alleges, then
the respondents violated Art. 1701 of the CC
and Art 21 of the CC.
Abuse of Rights vs. Acts Contra Bonus Mores
Article 19
(as
implemented
by Art. 20)
Article 21
Act is Contrary to law Contrary to
morals, good
customs, public
policy
Manner Willfully or
negligently
Willfully
Result Damage Injury or loss
Sanction Indemnify Compensate
IV. OTHER TORTS (OTHER HUMAN
RELATIONS TORTS)
A. Unjust Enrichment
Art. 22. (CC) Every person who through an
act of performance by another, or any other
means, acquires or comes into possession of
something at the expense of the latter without
just or legal ground, shall return the same to
him.
Art. 23.(CC) Even when an act or event
causing damage to another's property was not
due to the fault or negligence of the
defendant, the latter shall be liable for
indemnity if through the act or event he was
benefited.
Art. 2154.(CC) If something is received
when there is no right to demand it, and it
was unduly delivered through mistake, the
obligation to return it arises.
REQUISITES:
1) defendant is enriched
2) plaintiff suffered damage or loss
3) there is no just or legal ground for
defendant's enrichment
4) enrichment is at the expense of
plaintiff
B. Ostentatious Display of Wealth
Thoughtless extravagance in expenses for
pleasure or display during a period of acute
public want or emergency may be stopped by
order of the courts at the instance of any
government or private charitable institution.
(Art. 25)
C. Dereliction of Duty
Any person suffering material or moral loss
because a public servant or employee refuses
or neglects, without just cause, to perform his
official duty may file an action for damages
and other relief against he latter, without
prejudice to any disciplinary administrative
action that may be taken. (Art. 27)
REQUISITES (Amaro vs. Samanguit):
(1) Defendant is a public officer charged
with a performance of a duty in favor
of the plaintiff
(2) He refused or neglected without just
cause to perform the duty
(3) Plaintiff sustained material or moral
loss as a consequence of such non-
performance
(4) The amount of such damages, if
material
Note (Sangco): REFUSAL implies a
deliberate act which may be due to erroneous
belief in good faith or plain ignorance; while
NEGLECT which is the failure to do a thing,
may be intentional or unintentional.
Furthermore, the duty to act must be
MINISTERIAL, and must be owed only to the
person who sustains the loss by the failure to
fulfill it.
For discretionary duties, there should be
proof of malice or arbitrariness in the action.
D. Respect for Dignity, Personality, Privacy
and Peace of Mind of Another
Art. 26. Every person shall respect the
dignity, personality, privacy and peace of
mind of his neighbors and other persons. The
following and similar acts, though they may
not constitute a criminal offense, shall
produce a cause of action for damages,
prevention and other relief:
(5) Prying into the privacy of another's
residence:
(2) Meddling with or disturbing the private
life or family relations of another;
(3) Intriguing to cause another to be alienated
from his friends;(4) Vexing or humiliating
another on account of his religious beliefs,
lowly station in life, place of birth, physical
defect, or other personal condition.
Acts listed are not exclusive.
Illustration of a similar act: Wrongful
advertisement of house in the Sunday times.
The acts and omissions of the firm fall under
Article 26. Persons who know the residence of
Doctor Aramil, were confused by the
distorted, lingering impression that he was
renting his residence from Arcadio or that
Arcadio had leased it from him. Either way,
his private life was mistakenly and
unnecessarily exposed. (St. Louis Realty
Corporation vs. CA, 1984)
E. Unfair Competition
Art. 28 (CC). Unfair competition in
agricultural, commercial or industrial
enterprises or in labor through the use of
force, intimidation, deceit, machination or any
other unjust, oppressive or highhanded
method shall give rise to a right of action by
the person who thereby suffers damage.
For a defendant to be liable, the plaintiff must
show that the formers conduct was PURELY
MALICIOUS and served no legitimate purpose,
or that any trade or competitive motive was
absent.
Unfair competition includes, but is not
limited to:
1. PHYSICAL INTERFERENCES, VIOLENCE AND
THREATS (BOTH AGAINST COMPETITORS
AND THEIR CUSTOMERS);
2. Competition with malice;
3. Passing off; a tortuous interference
with anothers patronage that may, but
need not involve, trade mark
infringement, for example, selling
homemade ice cream as Magnolia ice
cream.
A civil action based on Art. 28 may be
pursued entirely independent from a criminal
action.
V. STRICT LIABILITY TORT
What is a STRICT LIABILITY TORT?
Tort liability that does not depend on actual
negligence or intent to harm but that is based
on the breach of an absolute duty to make
something safe; most often applies to ultra-
hazardous activities and products-liability
cases; also known as absolute liability, liability
without fault.
What are the types of strict liability tort?
1. Damages caused by an animal
2. Motor vehicle mishaps
3. Product Liability
4. Defective condition of public works
5. Collapse of a building
6. Things thrown or falling from a building
A. Damages caused by an animal
Who is liable for damages caused by an
animal?
The POSSESSOR of an animal or WHOEVER
MAY MAKE USE of the same is responsible for
the damage which it may cause.
NOT available as a defense: Although animal
may escape or be lost.
Available defenses: Damage should come
from force majeure or from the fault of the
person who has suffered damage. (Art.
2183)
What must be determined is possession
regardless of the ownership. It holds the
possessor liable even if the animal should
"escape or be lost" and so be removed from
his control. And it does not matter either that
the animal was tame as the law does not
speak only of vicious animals. (Vestil vs.
IAC)
B. Motor Vehicle Mishaps
Who is liable in motor vehicle mishaps?
If owner was in the motor vehicle: DRIVER
and OWNER, he is solidarily liable with his
driver IF he could have, by the use of the due
diligence, prevented the misfortune.
If the owner was NOT in the motor vehicle:
Article 2180 is applicable. (i.e. person who
caused the injury and the employer) (Art.
2184.)
The law requires every owner of a motor
vehicle to file with the proper government
office a bond executed by a government-
controlled corporation or office, to answer for
damages to third persons. The amount of the
bond and other terms shall be fixed by the
competent public official. (Art. 2186)
BAR QUESTION
A van owned by Orlando and driven by Diego,
while negotiating a downhill slope of a city
road, suddenly gained speed, obviously
beyond the authorized limit in the area, and
bumped a car in front of it, causing severe
damage to the car and serious injuries to its
passengers. Orlando was not in the car at the
time of the incident. The car owner and the
injured passengers sued Orlando and Diego
for damages cause by Diegos negligence. In
their defense, Diego claims that the downhill
slope caused the van to gain speed and that,
as he stepped on the brakes to check the
acceleration, the brakes locked, causing the
van to go even faster and eventually to hit the
car in front of it. Orlando and Diego contend
that the sudden malfunction of the vans
brake system is a fortuitous event and that,
therefore, they are exempt from any liability.
(a) Is this contention tenable? Explain.
(b) Explain the concept of vicarious
liability in quasi-delicts.
(c) Does the presence of the owner
inside the vehicle causing damage
to a third party affect his liability
for his drivers negligence? Explain.
Suggested Answer:
(a) No. Mechanical defects of a motor vehicle
do not constitute fortuitous event, since
the presence of such defects would have
been readily detected by diligence
maintenance check. The failure to
maintain the vehicle in safe running
condition constitutes negligence.
(b) The doctrine of vicarious liability is that
which renders a person liable for the
negligence of others for whose acts or
omission the law makes him responsible
on the theory that they are under his
control and supervision.
(c) In motor vehicle mishaps, the owner is
made solidarily liable with his driver if he
(the owner) was in the vehicle and could
have, by the use of due diligence,
prevented the mishap (Caedo vs. Yu Khe
Thai, 26 SCRA 410 [1968]). However, this
question has no factual basis in the
problem given, in view of the express
given fact that Orlando was not in the car
at the time of the incident.
C. Product Liability
Who is liable for death or injuries caused
by any noxious or harmful substances
used?
MANUFACTURERS and PROCESSORS of
foodstuffs, drinks, toilet articles and similar
goods shall be liable ALTHOUGH no
contractual relation exists between them and
the consumers. (Art. 2187)
D. Defective condition of public works
Who are liable for damages caused by
defective condition of public works?
LGUs (provinces, cities and municipalities)
shall be liable for damages for the death of, or
injuries suffered by, any person by reason of
the defective condition of roads, streets,
bridges, public buildings, and other public
works UNDER THEIR CONTROL OR
SUPERVISION. (Art. 2189)
Requisite for liability is supervision NOT
ownership.
E. Collapse of a building
When are proprietors liable for damages?
PROPRIETORS shall be responsible for
damages caused:
a) By the total or partial collapse of a
building or structure if it should be due
to the lack of necessary repairs. (Art.
2190)
b) By the explosion of machinery which
has not been taken care of with due
diligence, and
c) By the inflammation of explosive
substances which have not been kept
in a safe and adequate place;
d) By excessive smoke, which may be
harmful to persons or property;
e) By the falling of trees situated at or
near highways or lanes, if not caused
by force majeure;
f) By emanations from tubes, canals,
sewers or deposits of infectious matter,
constructed without precautions
suitable to the place. (Art. 2191)
F. Things thrown or falling from a building
The HEAD OF A FAMILY that lives in a building
or a part thereof. (Art 2193)
QUICKGLANCE
Person
Strictly
Liable
For What Defenses
or
Exception
s
Possessor of
an animal or
whoever
makes use of
them even if
the animal is
lost or
escaped
For the damage
it may cause
Force
majeure
Fault of the
person who
suffered
damage
Owner of
Motor Vehicle
Motor vehicle
mishaps
Solidary
liability
only if the
owner was
in the
vehicle and
if he could
have
prevented
it thru due
diligence
Person
Strictly
Liable
For What Defenses
or
Exception
s
If not in
vehicle
2180
Manufacturers
and
Processors of
foodstuffs,
drinks, toilet
articles and
similar goods
(FDTAS)
death and
injuries caused
by any noxious
or harmful
substances used
Absence on
contractual
relation
NOT a
defense
Defendant in
possession of
dangerous
weapons/
substances
such as
firearms and
poison
death or injury
results from
such possession
possession
or use
thereof is
indispensab
le in his
occupation
or business
Provinces,
Cities and
Municipalities
the death or
injuries suffered
by any person
by reason of the
defective
condition of
roads, streets,
bridges, public
buildings, and
other public
works
Public
works must
be under
their
supervision
s
Proprietor of
building/
structure
total or
partial
collapse of
building or
structure if
due to lack of
necessary rep
airs
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
by excessive
smoke, which
may be
harmful to
persons or
property
by falling of
trees situated
at or near
Responsibili
ty for
collapse
should be
due to the
lack of
necessary
repairs
Person
Strictly
Liable
For What Defenses
or
Exception
s
highways or
lanes, if not
caused by
force majeure
by
emanations
from tubes,
canals,
sewers or
deposits of
infectious
matter,
constructed
without
precautions
suitable to the
place
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
Head of the
Family that
lives in a
building or
any part
thereof
liable for
damages
caused by
things thrown
or falling from
the same
VI. TORTS WITH INDEPENDENT
CIVIL ACTION
A. Violation of Civil and Political Rights
32 CC. Any public officer or employee, or any
private individual, who directly or indirectly
obstructs, defeats, violates or in any manner
impedes or impairs any of the following rights
and liberties of another person shall be liable
to the latter for damages:
1. Freedom of religion
2. Freedom of speech
3. Freedom to write for the press or to
maintain a periodical publication
4. Freedom from arbitrary or illegal detention
5. Freedom of suffrage
6. The right against deprivation of property
without due process of law
7. The right to just compensation when
property is taken for public use
8. The right to equal protection of the laws
9. The right to be secure in ones person,
house, papers and effects against
unreasonable searches and seizures
10. The liberty of abode and of changing the
same
11. The right to privacy of communication and
correspondence
12. The right to become a member of
associations and societies for purposes not
contrary to law
13. The right to take part in a peaceable
assembly and petition the government for
redress of grievances
14. The right to be free from involuntary
servitude in any form
15. The right of the accused against excessive
bail
16. The right of the accused to be heard by
himself and counsel, to be informed of the
nature and the cause of the accusation
against him, to have a speedy and public trial,
to meet the witnesses face to face, to have
compulsory process to secure the attendance
of witnesses on is behalf;
17. Freedom form being compelled to be
witness against ones self, or from being
forced to confess his guilt, or from being
induced by a promise of immunity or reward
to make such confession, except when the
person confessing becomes a State witness.
18. Freedom of access to the courts
In any of the cases referred to in this article,
whether or not the defendants act or
omission constitutes a criminal offense, the
aggrieved party has a right to commence an
entirely separate and distinct civil action for
damages, and for other relief.
Such civil action shall proceed independently
of any criminal prosecution (if the latter be
instituted) and may be proved by a
preponderance of evidence. The indemnity
shall include moral damages. Exemplary
damages may also be adjudicated.
The responsibility herein set forth is not
demandable from a judge unless his act or
omission constitutes a violation of the Penal
code or any other penal statute.
REQUISITE: FACT OF VIOLATION
To be liable under Article 32 of the New Civil
Code, it is enough that there was a violation
of the constitutional rights of the plaintiffs and
it is not requires that defendants should have
acted with malice or with bad faith. Allowing
good faith as an excuse would defeat the main
purpose of the provision which is the effective
protection of individual rights and its objective
is to put an end to official abuse by the pleas
of good faith. (Lim vs. Ponce De Leon)
B. Defamation, Fraud, Physical injuries
Art. 33 CC. In cases of DEFAMATION,
FRAUD, and PHYSICAL INJURIES, a civil
action for damages, entirely separate and
distinct from the criminal action, may be
brought by the injured party. Such civil
action shall proceed independently of the
criminal prosecution, and shall require only
a preponderance of evidence.
Article 33 speaks only of defamation, fraud
and physical injuries. The case of reckless
imprudence resulting in physical injuries and
homicide is not one of the three crimes
mentioned in article 33 and therefore, no civil
action shall proceed independently of the
criminal prosecution. The essence of the crime
of criminal negligence, is the execution of the
imprudent or negligent act that, if
intentionally done would be punishable as a
felony, and hence the law penalizes the
negligent or careless act and no the result
thereof. (Marcia, et. al vs. CA)
The civil action for damages which it allows to
be instituted is ex-delicto. This is manifest in
the provision which uses the expressions
criminal action and criminal prosecution.
This conclusion is supported by the comment
of the Code Commission. (Madeja vs. Hon.
Caro)
1. Defamation
Defamation, which includes libel and slander,
means the offense of injuring a persons
character, fame or reputation through false and
malicious statements. It is that which tends to
injure reputation or to diminish the esteem,
respect, good will or confidence in the plaintiff
or to excite derogatory feelings or opinions
about the plaintiff.
Words which are merely insulting or offensive
are not actionable. There must be a presence
of allegations as to special damages suffered
by the plaintiff. (MVRS Publications vs. Islamis
Dawah Council of the Philippines, Inc., et al.)
REQUISITES for recovery; Prove that the
defendant
(1) Published a statement that was,
(2) defamatory,
(3)concerning the plaintiff.
2. Fraud
Under article 33 of the Civil Code, a civil
action for damages, entirely separate and
distinct from the criminal action may be
brought by the injured party in cases of
defamation, fraud and physical injuries, Estafa
falls under fraud. (Prudential Bank vs. IAC)
3. Physical Injuries
The term physical injuries is used in a
generic sense. It is not the crime of physical
injuries defined in the RPC. It includes not
only physical injuries, but consummated,
frustrated and attempted homicide. The ruling
in Corpus vs. Paje, which states that reckless
imprudence or criminal negligence is not
included in Art. 33 is not authoritative.
(Madeja vs. Hon. Caro)
C. Neglect of Duty
34 CC. When a member of the city or
municipal police force refuses or fails to
render aid or protection to any person in case
of danger to life or property, such peace
officer shall be primarily liable for damages
and the city or municipality shall be
subsidiarily responsible therefore. The civil
action herein recognized shall be independent
of any criminal proceedings, and a
preponderance of evidence shall suffice to
support such action.
D. Action for damages where no
independent civil action is provided
35 CC. When a person claiming to be injured
by a criminal offense, charges another with
the same, for which no independent civil
action is granted in this code or any special
law, but the justice of the peace finds no
reasonable ground to believe that a crime has
been committed, or the prosecuting attorney
refuses or fails to institute criminal
proceedings, the complainant may bring a
civil action for damages against the alleged
offender. Such civil action may be supported
by a preponderance of evidence. Upon the
defendants motion, the court may require the
plaintiff to file a bond to indemnify the
defendant in case the complaint should be
found to be malicious.
If during the pendency of the civil action, a
information should be presented by the
prosecuting attorney, the civil action shall be
suspended until the termination of the
criminal proceedings.
Notes: Because of the last sentence, the civil
action provided under this article cannot
strictly be considered as an independent civil
action.
It should be emphasized that the same
negligent act causing damages may produce a
civil liability arising from a crime under Art.
100 of the Revised Penal Code or create an
action for quasi-delict or culpa extra-
contractual under Arts. 2176-2194 of the New
Civil Code. (Garcia vs. Florido)
If Liability being predicated on quasi-delict the
civil case may proceed as a separate and
independent civil action, as specifically
provided for in Article 2177 of the Civil Code.
(Cinco vs. Canonoy)
VII. CIVIL LIABILITY ARISING
FROM CRIME
Responsibility for fault or negligence is
entirely separate and distinct from the civil
liability arising from negligence under the
RPC. But double recovery is not allowed. (Art.
2177)
RPC Art. 100 provides that every person who
is criminally liable for a felony is also civilly
liable. This general rule however presupposes
that the felony had resulted in damage or
injury to anothers person or property. To
create an obligation or give rise to civil
liability, an act or omission, whether
intentional or negligent, must have caused
damage or injury to another, otherwise only
criminal liability will attach.
Though the general rule provides that one
who is not criminally liable cannot be civilly
liable, RPC Arts. 101-103 provide exceptions
as they provide for vicarious liability for
certain types of offenders and subsidiary
liability in case of default of the offender.
The civil liability established by RPC Arts.
100-103 include:
a. Restitution;
b. Reparation of the damage caused;
and
c. Indemnification for consequential
damages.
Deemed instituted in every criminal
prosecution is the civil liability arising from the
crime or delict per se (civil liability ex delicto),
but not those liabilities from quasi-delicts,
contracts or quasi-contracts. (Neplum vs.
Orbeso)
An accused in a pending criminal case can
validly file, simultaneously and independently,
a separate civil action for quasi-delict against
the private complainant in the criminal case.
(Casupanan vs. Laroya)
The criminal action for violation of Batas
Pambansa Blg. 22 shall be deemed to include
the corresponding civil action and that no
reservation to file such civil action separately
shall be allowed. But a separate proceeding
for the recovery of civil liability in cases of
violations of B.P. No. 22 is allowed when the
civil case is filed ahead of the criminal case.
(Sps. Benito Lo Bun Tiong etc. vs. Vicente
Balboa)
BAR QUESTION
As a result of a collision between a taxicab
owned by A and another taxicab owned by B,
X, a passenger of the first taxicab, was
seriously injured. X later filed a criminal
action against both drivers.
(a)
(a) Is it necessary for X to reserve his right to
institute a civil action for damages against both
taxicab owners before he can file a civil action
for damages against them? Why?
(b) May both taxicab owners raise the defense
of due diligence in the selection and
supervision of their drivers to be absolved
from liability for damages to X? Reason.
Suggested Answer:
(a) It depends. If the separate civil action is
to recover damages arising from the
criminal act, reservation is necessary. If
the civil action against the taxicab owners
is based on culpa contractual or on quasi-
delict, there is no need for reservation.
(b) It depends. If the civil action is based on
quasi-delict, the taxicab owners may raise
the defense of diligence of a good father of
a family in the selection and supervision of
the driver; if the action against them is
based on culpa contractual or civil liability
arising from a crime, they cannot raise the
defense.
Alternative Answer:
No such reservation is necessary. Under
Section 1 Rule 111 of the 2000 Rules on
Criminal Procedure, what is deemed
instituted with the criminal action is only the
action to recover civil liability arising from the
crime or ex delicto. All the other civil actions
under Articles 32, 33, 34, 2176 of the New
Civil Code are no longer deemed instituted,
and may be filed separately and prosecuted
independently even without any reservation in
the criminal action (Section 3, Rule 111, 2000
Rules on Criminal Procedure). The failure to
make a reservation the criminal action is not a
waiver of the right to file a separate and
independent civil action based on these
articles of the New Civil Code (Casupanan vs.
Laroya, G.R. No. 145391, August 26, 2002)
DAMAGES
I. DEFINITION AND CONCEPT
Art. 2195. The provisions of this Title shall be
respectively applicable to all obligations
mentioned in Article 1157.
What are damages?
Damages may be defined as the pecuniary
compensation, recompense, or satisfaction for
an injury sustained, or as otherwise
expressed, the pecuniary consequences which
the law imposes for the breach of some duty
or the violation of some right (People vs.
Ballesteros). The obligation to repair the
damages exists whether done intentionally or
negligently and whether or not punishable by
law (Ocena vs. Icamina).
Elements for recovery of damages:
1. Right of action
2. For a wrong inflicted by the defendant
3. Damage resulting to the plaintiff
II. KINDS OF DAMAGES
Kinds of Damages (MENTAL)
(1) ACTUAL/COMPENSATORY- for loss actually
suffered
(2) MORAL- mental anguish, etc.
(3) NOMINAL- for rights recognized and
violated
(4) TEMPERATE/MODERATE- for damages
proved but the amount was not proven
(5) LIQUIDATED- stipulated damages in the
contract
(6) EXEMPLARY/CORRECTIVE- to serve as an
example for the common good (Art.
2197)
A. Actual or Compensatory
When is a person entitled to actual or
compensatory damages?(Art. 2199)
A)
When there is a pecuniary loss
suffered by him
When he has alleged and prayed
for such relief (Manchester Devt
Corp vs. CA)
When he has duly proved it
B)
When provided by law
Or by stipulation
No proof of pecuniary loss is necessary for:
moral, nominal, temperate, liquidated or
exemplary damages.
The assessment of such damages is
discretionary upon the court, except liquidated
ones. (Art. 2216)
Kinds of Actual Damages
CC
Art.
2200 A. Damnum emergente- value of
the loss suffered
B. Lucro cessante- profits which the
obligee failed to obtain
2205 A. Loss of earning capacity due to
injury (temporary or permanent)
B. Damage to Business Standing or
Commercial Credit
2206 A. Fixed indemnity for death = Php
50,000 (as of 2005)
B. Loss of Earning Capacity of the
Deceased
2209 Interest
2208 Attorneys Fees & Expenses of
Litigation
General Principles for Recovery
(1) The amount of damages must be fair and
just and commensurate to the loss.
- In case of contracts, only those
injuries which could have been
reasonably foreseen by the parties
by the parties at the time the
contract was entered into are
recoverable.
(2) The damages must be proximate damages
and not remote or speculative.
(3) The damages must be proven by
competent evidence (admissible or
probative)
- It is necessary to prove with a
reasonable degree of certainty,
premised upon competent proof
and on the best evidence
obtainable by the injured party, the
actual amount of loss. (Integrated
Packaging Corp. vs. CA; Fuentes
vs. CA)
(4) Complaint and prayer must specify
amount of damages and pay filing fees
before it may be accepted and admitted
for filing. (Circ. No. 7, Mar. 24, 1988;
Manchester Devt. Corp. vs. CA, 1987).
(5) The requirement of certainty does not
prevent the drawing of reasonable
inferences from the fact and circumstance
in evidence.
(6) Events which occur after the wrong
complained of may serve to render the
damage sufficiently certain.
(7) The damages must be susceptible of
ascertainment in some manner other than
by mere speculation, conjecture or
surmise and by reference to some fairly
definite standard, such as market value,
established experience or direct inference
from known circumstances.
Where, however, it is reasonably certain that
injury consisting of failure to realize otherwise
reasonably expected profits had been
incurred, uncertainty as to the precise amount
of such unrealized profits will not prevent
recovery or the award of damages. (Talisay-
Silay vs. Associacion)
What is the extent of recovery?
Recovery of all proximately traceable to the
primary negligence, including subsequent
aggravations, the probability of which the law
regards as a consequence and natural result
likely to flow form the original injury.
However, note that if the subsequent
aggravations are due to his own negligence
then the tortfeasor shall not be liable for such
since Art. 2203 imposes a duty on the injured
party to avoid loss or minimize resulting
damages.
Art.
220
1
Contra
cts and
quasi
contrac
ts
Liability
extends to
those:
1. natural and
probable
consequences
of the breach
2. those that
have been
foreseen
3. those that
could have
been
reasonably
foreseen
Provided:
obligor in good
faith
Note:
Liability
extends to
all damages
which may
be
reasonably
attributed to
the non-
performance
of the
obligation in
case of
fraud, bad
faith, malice
or wanton
attitude
(FBM-WA).
Art.
220
2
Crimes
and
quasi-
delicts
Liability
extends to all
damages
which are the
natural and
probable
consequence
Note:
WON
damage is
foreseen is
irrelevant
Actual damages for a negligent act or
omission are confined to those which "were
foreseen or might have been foreseen," or
those which were "the natural and probable
consequences" or "the direct and immediate
consequences" of the act or omission (Algarra
vs. Sandejas).
Extent of recovery in breach of contract:
The damages recoverable upon breach of
contract are, primarily, the ordinary, natural
and in a sense the necessary damage
resulting from the breach. Other damages,
known as special damages, are recoverable
where it appears that the particular conditions
which made such damages a probable
consequence of the breach were known to the
delinquent party at the time the contract was
made. This proposition must be understood
with the qualification that, if the damages are
in the legal sense remote or speculative,
knowledge of the special conditions which
render such damages possible will not make
them recoverable. Special damages of this
character cannot be recovered unless made
the subject of special stipulation. The
damages ordinarily recoverable against a
vendor for failure to deliver land which he has
contracted to deliver is the value of the use
and occupation of the land for the tune during
which it is wrongfully withheld (Daywalt vs.
Recoletos et al.).
What must be proved to allow recovery?
Proof
Fact of
Injury
Reasonable certainty only that the
fact and cause of injury must be
taken out of the area of speculation.
Usual burden of proof required in a
negligence case, prove the
substantive right, its breach and the
amount of damages flowing from
the breach.
Cause Proximate cause the cause,
which, in a natural and continuous
sequence, unbroken by any efficient
intervening cause, produces the
injury, and without which the injury
would not have occurred. (without
which test of cause in fact)
Amount Need not be proved with the same
degree of certainty. Fair and
reasonable estimate of the amount
of damage.
When pecuniary loss need not be proved
1) Liquidated damages previously agreed
upon
2) If damages other than actual are
sought (Art. 2216)
3) Loss is presumed (ex: loss of a child or
spouse)
4) Forfeiture of bonds in favor of the
government for the purpose of
promoting public interest or policy (ex:
bond for temporary stay of alien)
Damages for Personal Injury & Death
(Art. 2206)
Recoverable damages for death caused by a
crime or quasi-delict:
(a) At least three thousand pesos, even
though there may have been
mitigating circumstances.
- As of 2008, it is P75,000 (People
vs. Robert Brodett y Pajaro, Jan.
18, 2008)
(b) Loss of the earning capacity of the
deceased,
- paid to his heirs
- unless the deceased on account of
permanent physical disability not
caused by the defendant, had no
earning capacity at the time of
death;
(c) Support according to the provisions of
Article 291
- the recipient who is not a testate or
intestate heir may demand support
from the person causing the death,
for a period not exceeding five
years
(d) Moral damages
- demanded by the spouse,
legitimate and illegitimate
descendants and ascendants of the
deceased
Factors:
1. Earning Capacity
2. Obligation to Support
3. Moral Damages to heirs
Compensation should be allowed for loss of
earning capacity resulting from the death of a
minor who has not yet commenced
employment or training for a specific
profession if sufficient evidence is presented
to establish the amount thereof.
The argument for allowing compensation for
loss of earning capacity of a minor is even
stronger if he or she was a student, whether
already training for a specific profession or
still engaged in general studies. Formula
established in decided cases for computing net
earning capacity:
Net earning capacity (X) = life expectancy *
[gross annual income reasonable, necessary
living expenses]
Life expectancy= 2/3 (80- age of deceased) (MMTC
v. CA)
ATTORNEYS FEES
Attorneys Fees is the exception NOT the
general rule.
When can attorneys fees, other than
judicial costs, be recovered? (SELMUBS-
CREWD) (Art. 2208).
(1) If there is a stipulation to that effect
(2) When exemplary damages are
awarded;
(3) When the defendant's act or omission
has compelled the plaintiff to litigate
with third persons or to incur expenses
to protect his interest;
(4) In criminal cases of malicious
prosecution against the plaintiff;
(5) In case of a clearly unfounded civil
action or proceeding against the
plaintiff;
(6) Where the defendant acted in gross and
evident bad faith in refusing to satisfy
the plaintiff's plainly valid, just and
demandable claim;
(7) In actions for legal support;
(8) In actions for the recovery of wages of
household helpers, laborers and skilled
workers;
(9) In actions for indemnity under
workmen's compensation and
employer's liability laws;
(10) In a separate civil action to recover civil
liability arising from a crime;
(11) When at least double judicial costs are
awarded;
(12) In any other case where the court
deems it just and equitable that
attorney's fees and expenses of
litigation should be recovered.
In all cases, the attorney's fees and
expenses of litigation must be reasonable.
2 Concepts of Attorneys Fees
(1) Retainers agreement between the lawyer
and the client (in writing).
(2) Award as an indemnity to the client.
(BELONGS to the client hence the litigant
is the judgment creditor who may enforce
the judgment by execution) (Quirante vs.
IAC)
INTEREST
When shall interest accrue as indemnity
for damages?
- the obligation consists in the payment
of a sum of money
- debtor incurs in delay
- there being no stipulation to the
contrary
If there is no stipulated interest the legal
interest of 6%. (Art. 2209)
Interest
due
From
Art.
2210
Breach of
contract
Discretion
of the
court
Interest
imposed
on
damages
awarded
Art.
2211
Crimes
and
quasi-
delicts
Discretion
of the
court
Interest
is
awarded
as part of
damages
When shall interest earn legal interest?
- from judicial demand
- even if the obligation is silent upon this
point. (Art. 2212)
When is interest not recovered?
- When claims/ damages are
unliquidated
- EXCEPT when the demand can be
established with reasonably certainty.
(Art. 2213)
Legal Interests
The rules of thumb in the determination of
legal interests are as follows:
1. When an obligation, regardless of its
source (i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts) is
breached, the contravenor can be held
liable for damages.
2. With regard particularly to an AWARD
OF INTEREST in the concept of actual
and compensatory damages, the RATE
of interest, as well as the ACCRUAL
thereof, is imposed, as follows:
BASE RATE ACCRUAL
a. When the
obligation is
breached,
and it
consists in
the PAYMENT
OF A SUM OF
MONEY, i.e.,
a loan or
forbearance
of money,
the interest
due should
be
a) That
which may
have been
stipulated
in writing.
b) In the
absence of
stipulation,
the rate of
interest
shall be
12% per
annum
(legal
interest)
to be computed
from default,
i.e., from
JUDICIAL or
EXTRAJUDICIAL
demand under
and subject to
the provisions of
Article 1169 of
the Civil Code.
b.
Furthermore,
the
INTEREST
DUE shall
itself earn
legal
interest
from the time it
is JUDICIALLY
demanded.
BASE RATE ACCRUAL
c. When an
obligation,
NOT
constituting a
loan or
forbearance
of money, is
breached, an
interest on
the AMOUNT
OF DAMAGES
awarded may
be imposed
at the
discretion of
the court.
The actual
base for the
computation
of legal
interest shall
be on the
amount
finally
adjudged.
at the rate
of 6% per
annum.
If claim or
damages are
LIQUIDATED,
from default,
i.e., from
judicial or
extrajudicial
demand. (Art.
1169, Civil
Code)
If
UNLIQUIDATED,
from the time
the demand can
be established
with reasonable
certainty.
Hence, the
interest shall
begin to run
only FROM THE
DATE THE
JUDGMENT OF
THE COURT IS
MADE (at which
time the
quantification of
damages may
be deemed to
have been
reasonably
ascertained).
c. When the
JUDGMENT
of the court
awarding a
sum of
money
becomes
final and
executory,
the rate of
legal
interest,
whether
the case
falls under
a,b, or c,
above,
shall be
12% per
annum
from such
FINALITY UNTIL
ITS
SATISFACTION,
this interim
period being
deemed to be by
then an
equivalent to a
forbearance of
credit.
(Eastern Shipping Lines vs. CA, 1994)
Start of Delay
(1) Extrajudicial: demand letter
(2) Judicial: Filing of complaint
(3) Award
Crismina Garments vs. CA
Forbearance in the context of the usury law
is a contractual obligation of lender or creditor
to refrain during a given time period from
requiring payment of a loan then due and
payable. Here, the contract is for a piece of
work, hence not a forbearance.
When are damages mitigated?
1. In quasi-delicts contributory
negligence (Art. 2214)
2. Doctrine of avoidable consequences
a) This refers to the duty to
minimize damages once a cause
of action has accrued.
Standard: good father of a
family (Art. 2203)
3. In contracts, quasi-contracts and
quasi-delict (C-BELL):
a) plaintiff has contravened the
terms of contract
b) plaintiff derived some benefit as
result of contract
c) in case where exemplary
damages are to be awarded,
that the defendant acted upon
the advise of counsel
d) that the loss would have
resulted in any event
e) that since the filing of the
action, the defendant has done
his best to lessen the plaintiff's
loss or injury (Art. 2215)
4. In crimes mitigating circumstances
(Art. 2204)
Note: aggravating circumstances in case of
crimes can increase the damages adjudicated
(Art. 2204)
The inordinate amount of damages calls for
the moderating hand of the court, that justice
may be tempered with reason instead of being
tainted when it appears to be a result of
ruthless vindictiveness.
B. Moral
What is the nature of moral damages?
Moral damages are emphatically not intended
to enrich a complainant at the expense of the
defendant. Its award is aimed at the
restoration, within the limits of the possible,
of the spiritual status quo ante, and it must be
proportional to the suffering inflicted.
(Visayan Sawmill vs. CA)
When are moral damages awarded?
- If injury consists of any of the ff:
(PBMF-MWSSS)
a. Physical suffering
b. Besmirched reputation
c. Mental anguish
d. Fright
e. Moral shock
f. Wounded feelings
g. Social humiliation
h. Serious anxiety
i. Similar injury
- Though incapable of pecuniary
computation
- If such is the proximate result of
defendants act or omission. (Art.
2217)
What are the requisites for awarding
moral damages?
(1) there must be an injury, whether
physical, mental or psychological,
clearly sustained by the claimant;
(2) there must be a culpable act or
omission factually established;
(3) the wrongful act or omission of the
defendant must be the proximate
cause of the injury sustained by the
claimant; and
(4) the award of damages is predicated on
any of the cases stated in ART. 2219
NCC. (Villanueva vs. Salvador)
General Principles of Recovery (as
outlined in Expertravel & Tours vs. CA #1 to
7)
1. Moral damages must somehow be
proportional to the suffering inflicted.
2. In culpa contractual or breach of contract,
moral damages may be recovered when
the defendant acted in bad faith or was
guilty of gross negligence (amounting to
bad faith) or in wanton disregard of his
contractual obligation and, exceptionally,
when the act of breach of contract itself is
constitutive of tort resulting in physical
injuries.
3. By special rule in Article 1764, in relation
to Article 2206, moral damages may also
be awarded in case the death of a
passenger results from a breach of
carriage.
4. In culpa aquiliana, or quasi-delict,
(a) when an act or omission causes
physical injuries, or
(b) where the defendant is guilty of
intentional tort, moral damages may
aptly be recovered. This rule also
applies to contracts when breached by
tort.
5. In culpa criminal, moral damages could be
lawfully due when the accused is found
guilty of physical injuries, lascivious acts,
adultery or concubinage, illegal or
arbitrary detention, illegal arrest, illegal
search, or defamation.
6. Malicious prosecution can also give rise to
a claim for moral damages. The term
"analogous cases," referred to in Article
2219, following the ejusdem generis rule,
must be held similar to those expressly
enumerated by the law.
7. Although the institution of a clearly
unfounded civil suit can at times be a legal
justification for an award of attorney's
fees, such filing, however, has almost
invariably been held not to be a ground for
an award of moral damages.
8. The burden rests on the person claiming
moral damages to show convincing
evidence for good faith is presumed. In a
case involving simple negligence, moral
damages cannot be recovered. (Villanueva
vs. Salvador)
9. Failure to use the precise legal terms or
"sacramental phrases" of "mental anguish,
fright, serious anxiety, wounded feelings
or moral shock" does not justify the denial
of the claim for damages. It is sufficient
that these exact terms have been pleaded
in the complaint and evidence has been
adduced (Miranda-Ribaya vs. Bautista)
10. Even if the allegations regarding the
amount of damages in the complaint are
not specifically denied in the answer, such
damages are not deemed admitted.
(Raagas, et al. vs. Traya et al.)
11. An appeal in a criminal case opens the
whole case for review and this 'includes
the review of the penalty, indemnity and
damages. Even if the offended party had
not appealed from said award, and the
only party who sought a review of the
decision of said court was the accused, the
court can increase damages awarded
(Sumalpong vs. CA)
Cases where recovery of moral damages are allowed
(1) A criminal offense of physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other
lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander, defamation;
(8) Malicious prosecution;
(9) Article 309;
(10) Articles 21, 26, 27, 28, 29, 30, 32,
34, and 35. (Art. 2219)
(11) wilful injury to property (Art. 2220)
(12) breach of contract (Art. 2220)
(13) death of passenger from breach a
breach of carriage (Art. 1764 in
relation to Art. 2206 and (Expertravel
& Tours vs. CA)
Art. 2219. Moral damages may be
recovered in the following and analogous
cases: (not an exclusive list; 2PI-SALAMI-
309-Others)
(1) A criminal offense resulting in physical
injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other
lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of
defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(disrespect for the dead)
(10) Acts and actions referred to in Articles
21, 26, 27, 28, 29, 30, 32, 34, and 35.
Who else can recover moral damages?
- Parents of the female seduced,
abducted, raped, or abused, referred
to in No. 3
- The spouse, descendants, ascendants,
and brothers and sisters (SDABS) may
bring the action mentioned in No. 9 in
the order named.
What are the other legal grounds for
awarding moral damages?
- Willful injury to property if such
damages are justly due.
- Breaches of contract where the
defendant acted fraudulently or in bad
faith. (Art. 2220)
Labor Cases
Moral damages are recoverable only where
the dismissal of the employee:
(1) Was attended by bad faith or fraud
(2) Constituted an act oppressive to labor
(3) Was done in a manner contrary to
morals, good customs, or public policy.
BAR QUESTION
Ortillo contracts Fabricato, Inc. to supply and
install tile materials in a building he is donating
to his province. Ortillo pays 50% of the contract
price as per agreement. It is also agreed that
the balance would be payable periodically after
every 10% performance until completed. After
performing about 93% of the contract, for
which it has been paid an additional 40% as per
agreement, Fabricato, Inc. did not complete the
project due to its sudden cessation of
operations. Instead, Fabricato, Inc. demands
payment of the last 10% of the contract despite
its non-completion of the project. Ortillo
refuses to pay, invoking the stipulation that
payment of the last amount of 10% shall be
upon completion. Fabricato, Inc. brings suit for
the entire 10% plus damages. Ortillo counters
with claims for (a) moral damages for Fabricato,
Inc.s unfounded suit which has damaged his
reputation as a philanthropist and respected
businessman in his community, and (b)
attorneys fees.
(a) Does Ortillo have a legal basis for his claim
for moral damages?
(b) How about his claim for attorneys fees,
having hired a lawyer to defend him?
Suggested Answer:
(a) There is no legal basis to Ortillos claim for
moral damages. It does not fall under the
coverage of Article 2219 of the New Civil
Code.
Ortillo is entitled to attorneys fees because
Fabricatos complaint is a case of malicious
prosecution or a clearly unfounded civil action
(Art. 2208 [4] and [11], NCC).
Illustrations:
Moral damages in malicious prosecution
Mijares vs. CA
Moral damages cannot be recovered from a
person who has filed a complaint against
another in good faith, or without malice or
bad faith. If damage results from the filing of
the complaint, it is damnum absque injuria.
Castillo vs. Castillo
While it must be admitted that this case is
peculiar in that it is one filed by a daughter
against her own mother, that alone does not
justify any counterclaim, specifically for the
exemplary damages and moral damages
sought to be collected since the complaint as
has been said has been found to have some
merit. The adverse result of an action does
not per se make the act wrongful and subject
the actor to the payment of moral damages.
The law could not have meant to impose a
penalty on the right to litigate; such right is so
precious that moral damages may not be
charged on those who may exercise it
erroneously."
Moral damages in rape
People vs. Calongui
Anent the award of damages, civil indemnity
ex delicto is mandatory upon finding of the
fact of rape while moral damages is awarded
upon such finding without need of further
proof because it is assumed that a rape victim
has actually suffered moral injuries entitling
the victim to such award. No factual and legal
bases, no award of exemplary damages
should be allowed.
Moral damages in murder
People vs. Barcena
TC correctly awarded P75K as civil indemnity
which is awarded if the crime is qualified by
circumstances which warrant the imposition of
the death penalty. However, the award of
P50K as moral damages must be increased to
P75K in line with prevailing jurisprudence. In
addition, the presence of the qualifying
circumstances of minority and relationship
entitles the offended party to exemplary
damages in the amount of P25K.
People vs. Teodorico Cleopas and Pirame
(2000)
The award of P50,000 from each accused as
moral and exemplary damages, however, is
unsupported. The widow of the victim did not
testify on any mental anguish or emotional
distress, which she suffered as a result of her
husband's death.
Arcona vs. CA
As borne out by human nature and
experience, a violent death invariably and
necessarily brings about emotional pain and
anguish on the part of the victims family.
Such violent death or brutal killing not only
steals from the family of the deceased his
precious life, deprives them forever of his
love, affection and support, but often leaves
them with the gnawing feeling that an
injustice has been done to them. For this
reason, moral damages must be awarded
even in the absence of any allegation and
proof of the heirs emotional suffering.
Labor Cases
Triple Eight Integrated Services, Inc. vs. NLRC
Moral damages are recoverable where the
dismissal of the employee was attended by
bad faith or fraud or constituted an act
oppressive to labor, or was done in a manner
contrary to morals, good customs, or public
policy. Likewise, exemplary damages may be
awarded if the dismissal was effected in a
wanton, oppressive or malevolent manner.
Factors for the Amount of Moral Damages
(1) Political, social, financial status, of the
person offended as well as the
business and financial standing of the
offender.
(2) Degree of anguish
(3) Sentimental value where applicable
Illustrations:
Kierulf et al. vs. CA
The social and financial standing of a claimant
of moral damages may be considered in
awarding moral damages only if he or she was
subjected to contemptuous conduct despite
the offender's knowledge of his or her social
and financial standing.
Factors in Determining Amount
PNB vs. CA
Petitioner has not presented adequate
evidence to show that private respondent is
indeed a big time gambler. Petitioner has
besmirched private respondent's reputation
and has considerably caused him undue
humiliation. The records further show that
plaintiff is a prominent businessman, licensed
and engaged in the real estate business. He is
at the same time a consultant of Dizon-
Esguerra Real Estate Company. Defendant
treated him as a valued and VIP client.
Because of the bank's refusal to encash the
entire one million face amount of his
manager's checks, he was so embarrassed for
he was not able to purchase a house and lot
in Baguio City.
Lopez, et al. vs. Pan American World Airways
International carriers like defendant know the
prestige of such an office. For the Senate is
not only the Upper Chamber of the Philippine
Congress, but the nation's treaty-ratifying
body. And he was former Vice-President of the
Philippines. An award of P100,000,000 is
appropriate. Mrs. Maria J. Lopez, as wife of
Senator Lopez, shared his prestige and
therefore his humiliation. Mr. and Mrs. Alfredo
Montelibano, Jr. were traveling as immediate
members of the family of Senator Lopez. As
such they likewise shared his prestige and
humiliation.
Producers Bank vs. CA
In the case of Leopoldo Araneta v. Bank of
America, we held that: "The financial credit of
a businessman is a prized and valuable asset,
it being a significant part of the foundation of
his business. Any adverse reflection thereon
constitutes some financial loss to him. The
damage to private respondents' reputation
and social standing entitles them to moral
damages.
Who may recover moral damages?
Strebel vs. Figueras, et al.
As a general rule, the right of recovery for
mental suffering resulting from bodily injuries
is restricted to the person who has suffered
the bodily hurt, and there can be no recovery
for distress caused by sympathy for another's
suffering, or for fright due to a wrong against
a third person. A husband or wife cannot
recover for mental suffering caused by his
sympathy for the other's suffering.
Exception: Art. 2219
ABS-CBN vs. CA
The award of moral damages cannot be
granted in favor of a corporation because,
being an artificial person and having existence
only in legal contemplation, it has no feelings,
no emotions, no senses, It cannot, therefore,
experience physical suffering and mental
anguish, which call be experienced only by
one having a nervous system. The statement
in People vs. Manero and Mambulao Lumber
Co. vs. PNB that a corporation may recover
moral damages if it "has a good reputation
that is debased, resulting in social
humiliation" is an obiter dictum.
NAPOCOR vs. Philipp Brothers
While it is true that besmirched reputation is
included in moral damages, it cannot cause
mental anguish to a corporation, unlike in the
case of a natural person, for a corporation has
no reputation in the sense that an individual
has, and besides, it is inherently impossible
for a corporation to suffer mental anguish.
BAR QUESTION
Rosa was leasing an apartment in the city.
Because of the Rent Control Law, her landlord
could not increase the rental as much as he
wanted to, nor terminate her lease as long as
she was paying her rent. In order to force her
to leave the premises, the landlord stopped
making repairs on the apartment, and cause the
water and electricity services to be
disconnected. The difficulty of living without
electricity and running water resulted in Rosas
suffering a nervous breakdown. She sued the
landlord for actual and moral damages. Will the
action prosper? Explain.
Answer:
Yes, based on quasi-delict under the human
relations provisions of the New Civil Code
(Articles 19, 20 and 21) because the act
committed by the lessor is contrary to morals.
Moral damages are recoverable under Article
2219 (10) in relation to Article 21. Although
the action is based on quasi-delict and not on
contract, actual damages may be recovered if
the lessee is able to prove the losses and
expenses she suffered.
Alternative Answers:
(a) Yes, based on breach of contract. The
lessor has the obligation to undertake
repairs to make the apartment habitable
and to maintain the lessee in the peaceful
and adequate enjoyment of the lease for
the entire duration of the contract (Article
1654, NCC). Since there was willful
breach of contract by the lessor, the
lessee is entitled to moral damages under
Article 2220, NCC. She is also entitled to
actual damages, e.g. loss of income,
medical expenses, etc., which she can
prove at trial.
(b) Yes, based on contract and/or on tort.
The lessor willfully breached his
obligations under Article 1654, NCC,
hence, he is liable for breach of
contract. For such breach, the lessee may
recover moral damages under Art. 2220 of the
NCC, and actual damages that she may have
suffered on account thereof. And since the
conduct of the lessor was contrary to morals,
he may also be held liable for quasi-delict.
The lessee may recover moral damages under
Article 2219 (10) in relation to Article 21, and
all actual damages which she may have
suffered by reason of such conduct under
Articles 9, 20 and 21.
Yes, the action should prosper for both actual
and moral damages. In fact, even exemplary
damages and attorneys fees can be claimed
by Rosa, on the authority of Magbanua vs.
IAC (137 SCRA 328), considering that, as
given, the lessors willful and illegal act of
disconnecting the water and electric services
resulted in Rosas suffering a nervous
breakdown. Art. 20 NCC and Art. 21 NCC
authorize the award of damages for such
willful and illegal conduct.
C. Nominal
Art. 2221. Nominal damages are
adjudicated in order that a right of the
plaintiff, which has been violated or invaded
by the defendant, may be vindicated or
recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered
by him.
Art. 2222. The court may award nominal
damages:
- in every obligation in Article 1157, or
- where any property right has been
invaded.
Art. 2223. What is precluded by the
adjudication of nominal damages?
- further contest upon the right involved
- all accessory questions
- between the parties or their respective
heirs and assigns.
Requisites:
(1) A legal right has been violated.
(2) There is no loss or damage suffered or
such cannot be proven or was not
proved.
(3) The award is to vindicate the right
violated.
General Rule: One does not ask for nominal
damages and it is in lieu of the actual, moral,
temperate, or liquidated damages.
Nominal damages are incompatible with:
actual, temperate and exemplary damages.
Armovit vs. CA
Nominal damages cannot co-exist with actual
or compensatory damages.
Francisco v. Ferrer
No moral or exemplary damages was
awarded. Nevertheless, when confronted with
their failure to deliver on the wedding day the
wedding cake ordered and paid for, petitioners
gave the lame excuse that delivery was
probably delayed because of the traffic, when
in truth, no cake could be delivered because
the order slip got lost. For such prevarication,
petitioners must be held liable for nominal
damages for insensitivity, inadvertence or
inattention to their customer's anxiety and
need of the hour.
D. Temperate
What is the nature of temperate or
moderate damages?
Temperate or moderate damages, which are
more than nominal but less than
compensatory damages.
It may be recovered when some pecuniary
loss has been suffered but its amount can not
be provided with certainty. (Art. 2224)
Temperate damages must be reasonable
under the circumstances. (Art. 2225)
Requisites:
(1) There is actual damage.
(2) The pecuniary amount of the damage
cannot be proved.
(3) Amount must be reasonable.
In cases where the resulting injury might
be continuing and possible future
complications directly arising from the
injury, while certain to occur are difficult
to predict, temperate damages can and
should be awarded on top of actual or
compensatory damages; in such cases
there is no incompatibility between actual
and temperate damages.
Temperate damages are incompatible with
nominal damages hence, cannot be
granted concurrently (Citytrust Bank vs.
IAC)
Pleno vs. CA
Temperate damages are included within the
context of compensatory damages (RCPI vs.
CA). ". . . There are cases where from the
nature of the case, definite proof of pecuniary
loss cannot be offered, although the court is
convinced that there has been such loss. For
instance, injury to one's commercial credit or
to the goodwill of a business firm is often hard
to show certainty in terms of money.
NOTE: In this case actual and temperate
damages were awarded. It is postulated that
the actual damages is for the car while the
temperate damages is for the lost actual
income not sufficiently proved.
E. Liquidated
What are liquidated damages?
Those agreed upon by the parties to a
contract, to be paid in case of breach thereof.
(Art. 2226)
What are the grounds for equitable
reduction of liquidated damages?
- iniquitous or
- unconscionable. (Art. 2227)
In what instance is the stipulation not
controlling?
When the breach of the contract is not the
one contemplated by the parties in agreeing
upon the liquidated damages. In this case, the
law shall determine the measure of damages.
(Art. 2228)
Notes
(1) These damages are agreed upon in a
contract in case of breach thereof.
(2) There is no need to prove the amount,
only the fact of the breach.
(3) The amount can be reduced if:
a. unconscionable as determined by
the court (Art. 2227)
b. partial or irregular performance
General Rule: The penalty shall substitute
the indemnity for damages and the payment
of the interests in case or breach.
Exceptions
(1) When there is stipulation to the
contrary.
(2) When the obligor is sued for refusal to
pay the agreed penalty.
(3) When the obligor is guilty of fraud.
F. Exemplary or Corrective
Art. 2229. Nature of exemplary or
corrective damages
- Imposed by way of example
- or correction for the public good
- in addition to the moral, temperate,
liquidated or compensatory damages.
Exemplary damages cannot be recovered as a
matter of right; discretion of the court. (Art.
2233)
Requisites to recover exemplary damages
and liquidated damages agreed upon in
addition to exemplary (Art.2234):
The plaintiff must show that he is entitled to
moral, temperate or compensatory damages
If arising
from
When exemplary
damages are
granted
Art.
2230
Crimes the crime was
committed with an
aggravating
circumstance/s
Art.
2231
Quasi-delicts defendant acted
with gross
negligence
Art.
2232
Contracts and
Quasi-
contracts
defendant acted in a
wanton, fraudulent,
reckless,
oppressive, or
malevolent manner
(WFROMM)
A stipulation whereby exemplary damages are
renounced in advance shall be null and void.
(Art. 2235)
Notes
(1) Amount need not be proven.
(2) Cannot be recovered as a matter or right;
may be waived.
An employer may be subsidiarily liable to pay
moral, actual, temperate or liquidated
damages arising from an employees criminal
offense, but NOT as to exemplary damages
because aggravating circumstances are
personal to the accused.
PNB vs. CA
However, the award of P1,000,000 exemplary
damages is also far too excessive and should
likewise be reduced to an equitable level.
Exemplary damages are imposed not to enrich
one party or impoverish another but to serve
as a deterrent against or as a negative
incentive to curb socially deleterious actions.
EXEMPLARY OR
CORRECTIVE DAMAGES
LAND TITLES AND DEEDS CIVIL LAW
Land Titles and Deeds
TABLE OF CONTENTS
I. Introduction 299
II. Torrens Certificate of Title 299
III. Original Registration 300
IV. Cadastral Registration Proceedings 305
V. Subsequent Registration 305
VI. Dealings with Unregistered Lands 309
VII. Patents 309
VIII. Remedies of Aggrieved Party 311
IX. Replacement and Reconstitution 312
I. INTRODUCTION
A. CONCEPTS AND DEFINITIONS
1. THE TORRENS SYSTEM
A system for registration of land
under which, upon landowners
application, the court may, after
appropriate proceedings, direct the
issuance of a certificate of title.
(Blacks Law Dictionary)
2. LAND TITLE
Evidence of the right of the owner or
the extent of his interest, and by which
means he can maintain control, and as
a rule assert right to exclusive
possession and enjoyment of property.
3. DEED
A written instrument executed in
accordance with law, wherein a person
grants or conveys to another certain
land, tenements, or hereditaments.
4. FEE SIMPLE
Absolute title; absolute estate in
perpetuity. Land is conferred upon a
man and his heirs absolutely and
without any limitation imposed upon
the state.
5. REGISTRATION
The State provides a public record of
the title itself upon which a
prospective purchaser or someone
else interested may rely.
6. RECORDING
Provides for the recording of
conveyance and other instrument
without guaranteeing the title, leaving
to the prospective purchasers or other
persons interested to examine the
instruments in the records and
formulate their own conclusions as to
their effect on the title.
B. NATURE
Land registration is a proceeding in rem
(Sec. 2, PD 1529). A proceeding in rem,
dealing with a tangible res, may be
instituted and carried to judgment, without
personal service Roxas vs. Enriquez.
C. PURPOSE OF REGISTRATION
The real purpose of that system is to
quiet title to land; to put a stop forever
to any questions of the legality of the
title, except claims which were noted at
the time of the registration, in the
certificate, or which may arise
subsequent thereto Legarda vs. Saleeby.
To establish and certify to the
ownership of an absolute and
indefeasible title to realty, and to
simplify its transfer Grey Alba vs. CA.
D. JURISDICTION
RTCs of province or city where the
land or a portion or it lies- land
registration proceedings and over all
petitions filed after original registration
of titles (Sec. 2, PD 1529)
MTCs- cadastral and land registration
cases covering:
o lots without controversy or
opposition
o contested lots where the value
does not exceed P100,000.00
(sec. 34, BP 129)
II. TORRENS CERTIFICATE OF TITLE
A. KINDS
1. OCT
The first title issued in the name of a
registered owner by the Register of
Deeds covering a parcel of land
which had been registered under the
Torrens System, by virtue of judicial
or administrative proceedings.
2. TCT
The certificate shall show the number
of the next previous certificate
covering the same land and also the
fact that it was originally registered,
giving the record number, the
number of the original certificate of
title, and the volume and page of the
registration book in which the latter
is found. (Sec. 43, PD 1529)
3. PATENTS
Whenever public land is by the
Government alienated, granted or
conveyed to any person, the same
shall be brought forthwith under the
operation of this Decree. It shall be
the duty of the official issuing the
instrument of alienation, grant,
patent or conveyance in behalf of the
Government to cause such
instrument to be filed with the
Register of Deeds of the province or
city where the land lies, and to be
there registered like other deeds and
conveyance.
The deed, grant, patent or
instrument of conveyance from the
Government to the grantee shall not
take effect as a conveyance or bind
the land but shall operate only as a
contract between the Government
and the grantee and as evidence of
authority to the Register of Deeds to
make registration.
It is the act of registration that shall
be the operative act to affect and
convey the land. After due
registration and issuance of the
certificate of title, such land shall be
deemed to be registered land (sec.
103, PD 1529)
B. ENFORCEABILITY OF TORRENS TITLE
The title, once registered, is notice to
the world. All persons must take notice.
No one can plead ignorance of the
registration Egao vs. CA.
III. ORIGINAL REGISTRATION
A. LAWSGOVERNINGLANDREGISTRATION
1. PD No. 1529
Property Registration Decree covers
both ordinary and cadastral registration
proceedings. It supersedes the Land
Registration Act and the Cadastral Act.
2. CA141
Public Land Act governs the
procedure for the judicial
confirmation of imperfect or
incomplete titles.
o It applies to lands of the public
domain which have been
declared open to disposition or
concession and officially
delimited and classified
o Under section 103 of PD 1529
whenever public land is
alienated, granted, conveyed to
any person by the government,
the same shall be brought
forthwith under the operation of
the Decree
3. RA No. 8371
The Indigenous Peoples Rights Act
(Oct. 29, 1997) recognize the rights
of ownership and possession of
indigenous cultural communities to
their ancestral domains and lands on
the basis of native title, and defines
the extent of these lands and
domains. It expressly converts
ancestral lands into public
agricultural lands, and individuals
members of the cultural
communicates shall have the option
to secure title to their ancestral lands
under the CA 141 or PD 1529.
B. EFFECT OF REGISTRATION
Registration does not vest or give title
to the land, but merely confirms and
thereafter protects the title already
possessed by the owner, making it
imprescriptible by occupation of third
parties. it does not give the owner any
better title than he has.
Registration is not a mode of acquiring
ownership. A certificate of title cannot
be used to protect a usurper from the
true owner or as a shield for the
commission of fraud (Vagalidad vs.
Vagalidad, GR No. 161136.
C. ORIGINALREGISTRATIONPROCEEDINGS
Steps in Original Registration
Proceedings
1) Determine if the land is registrable
2) Determine if you are qualified to apply
3) Survey the land
4) File the application (survey attached)
for land registration with the
appropriate court
5) Court sets initial hearing
6) Publication of the initial hearing
7) File an opposition to the application
8) Hearing
9) Judgment
10)Issuance of decree
1. WHAT ARE THE REGISTRABLE
LANDS?
PRIVATE LANDS
If in the public domain, the land
must be classified as alienable and
disposable. It must be classified as
such AT THE TIME OF FILING THE
APPLICATION FOR REGISTRATION.
(Republic vs. CA and Naguit, GR
No. 144057)
With the exception of agricultural
lands, all other natural resources
shall not be alienated. (sec. 2 and
3 Art. XII of the Constitution)
NON- REGISTRABLE LANDS
1.) Forest or timberland, public
forest, forest reserves lands,
mineral lands (Sec. 2 and 3
Art. XII of the Constitution)
2.) Those intended for public use,
such as roads, rivers, torrents,
ports and bridges constructed
by the State, banks, shores,
roadsteads, and others of
similar character
3.) Those which belong to the
State, without being for public
use, and are intended for some
public service or for the
development of the national
wealth. (Art. 420, CC)
2. WHO MAY APPLY? (OCEN-PAAL)
1) Those who by themselves or
through their predecessors-in-
interest have been in open,
continuous, exclusive and notorious
(OCEN) possession and occupation
of alienable and disposable lands of
the public domain under a bona fide
claim of ownership since June 12,
1945, or earlier.
2) Those who have acquired
ownership of private lands by
prescription under the provision of
existing laws.
ownership of private lands or
abandoned river beds by right of
accession or accretion under the
existing laws.
ownership of land in any other
manner provided for by law.
If co-owned, file the application
jointly.
If sold under pacto de retro, the
vendor a retro may file an application
for the original registration of the
land BUT should the period for
redemption expire during the
registration proceedings and
ownership consolidated in the vendee
a retro, the latter shall be substituted
for the applicant.
A trustee may apply for original
registration, unless prohibited by the
instrument creating the trust. (Sec.
14, PD 1529)
Persons must be natural-born
Filipino citizens (sec. 2 Art. XII of
the Constitution)
Exceptions:
(a) Aliens by way of hereditary
succession
(b) Natural born citizens who
have lost their citizenship-
limited to 5,000 sqm for
urban land and 3 hectares
for rural land (RA No. 7042
as amended by RA No.
8179)
As for private corporations, they
may not hold such alienable lands
of the public domain except by
lease of 1,000 hectares for 25
years renewable for not more than
25. (Sec. 3 Article XII of the
1987 Constitution)
Private lands may be owned for as long
as the corporation is at least 60%
Filipino. (sec. 7 Article XII of the
1987 Constitution)
3. SURVEY
The survey may be done by a public
or private surveyor. When done by a
private surveyor it has to be approved
by the Land Management Bureau. PD
239 withdrew the authority of the
Land Registration Authority to
approve original survey plans.
4. APPLICATION
The application for land registration
shall be:
in writing and
signed and sworn to by the
applicant or the person duly
authorized in his behalf
If there is more than one applicant,
the application shall be signed and
sworn to by and in behalf of each.
It shall contain:
description of the land
citizenship and civil status of the
applicant
o if married, the name of the
wife or husband
o if the marriage has been legally
dissolved, when and how
full names and addresses of all
occupants and those of the
adjoining owners, if known
if not known, it shall state the
extent of the search made to find
them. (Sec. 15, PD 1529)
If the application describes the
land as bounded by a public or
private way or road, it shall state
WON the applicant claims any
portion of the land within the
limits of the way or road, and
whether the applicant desires to
have the line of way or road
determined (Sec. 20, PD 1529)
If the applicant is a non-resident
of the Philippines, he shall file an
instrument appointing a resident
agent in the Phils. and shall agree
that service of nay legal process
(Sec. 16, PD 1529)
It must be accompanied by the
original tracing cloth plan, white or
blue copes thereof, the original and
copies of the technical description
and geodetic engineers certification.
A person claiming ownership of real
property must clearly identify the
land claimed by him. Intestate Estate
of Don Mariano San Pedro vs. CA.
5. INITIAL HEARING
The court shall issue an order setting
the date and hour of the initial
hearing within five days from filing of
the application. The initial hearing
shall be 45-90 days from the date of
the order. (Sec. 23, PD 1529)
6. PUBLICATION
The public shall be notified of the
initial hearing by means of (1)
publication; (2) mailing; and (3)
posting. The court may also cause
notice to be served and in such
manner as it may deem proper.
(a) By Publication
The Commissioner of Land
Registration shall cause it to be
published:
once in the Official Gazette
(sufficient to confer
jurisdiction) and
once in a newspaper of
general circulation in the
Philippines
The notice is addressed to:
all persons appearing to
have an interest in the land
the adjoining owners so far
as known
"to all whom it may
concern"
(b) By Mailing
Within 7 days from publication in
the OG, the Commissioner of
Land Registration shall mail a
copy of the notice to:
every person named in the
notice whose address is
known.
the Secretary of Public
Highways, to the Provincial
Governor, and to the Mayor
of the municipality or city, in
which the land lies, if the
applicant requests to have
the line of a public way or
road determined
Secretary of Agrarian
Reform, the Solicitor
General, the Director of
Lands, the Director of Mines
and/or the Director of
Fisheries and Aquatic
Resources, (as appropriate)
if the land borders on a
river, navigable stream or
shore, or on an arm of the
sea where a river or harbor
line has been established, or
on a lake, or if it otherwise
appears from the application
or the proceedings that a
tenant-farmer or the
national government may
have a claim adverse to that
of the applicant
(c) By Posting
CLR shall cause the sheriff or
his deputy to post the notice at
least 14 days before the
hearing:
in a conspicuous place on
each parcel of land included
in the application and
in a conspicuous place on
the bulletin board of the
municipal building of the
municipality or city in which
the land or portion thereof is
situated (Sec. 23, PD
1529)
7. OPPOSITION
Any person claiming an interest may
appear and file an opposition:
on or before the date of initial
hearing, or
within such further time as may
be allowed by the court.
The opposition shall state:
all the objections and
the interest claimed by the party
the remedy desired.
It shall be signed and sworn to by
him or by some other duly authorized
person. (Sec. 25, PD 1529)
If no person appears and answers
within the time allowed, the court
shall, upon motion order a default to
be recorded. By the description in the
notice "To all Whom It May Concern",
all the world are made parties
defendant and shall be concluded by
the default order.
Where an appearance has been
entered and an answer filed, a
default order shall be entered against
persons who did not appear and
answer. (Sec. 26, PD 1529)
Absence of opposition does not
justify outright registration Director
of Lands vs. Agustin.
8. HEARING
Proof of Ownership
(a) Tax declaration and receipts-
not conclusive but have strong
probative value when
accompanied by proof of actual
possession Municipality of
Santiago vs. CA
(b) Payment of taxes- payment in
one lump sum to cover all past
taxes is irregular and affects
the validity of the applicants
claim of ownership Republic vs.
Tayag
(c) Spanish titles- no longer
admissible
9. JUDGMENT
Judgment becomes final upon
expiration of 30 days from receipt of
notice of judgment (Sec. 30, PD
1529).
Other incidents:
WRIT OF POSSESSION
The writ may be issued not only
against the person defeated in
the registration case but also
against any one adversely
occupying the land during the
proceedings Vencilao vs. Vano.
The writ does not lie against a
person who entered the land after
the issuance of the decree and
who was not a party in the case.
He can only be proceeded against
in a separate action for ejectment
or reinvindicatory action Bernas
vs. Nuevo.
WRIT OF DEMOLITION
This writ is a complement of the
writ of possession Gawaran vs. IAC.
10. Issuance of Decree
Within 15 days from entry of
judgment, the court shall issue an
order directing the Land Registration
Authority to issue a decree of
registration and certificate of Title.
The decree of registration shall be
signed by the Commissioner, entered
and filed in the Land Registration
Commission. The original of the
original certificate of title shall be
sent, together with the owner's
duplicate certificate, to the Register
of Deeds where the property is
situated for entry in his registration
book. (sec. 39, PD No. 1529).
The Register of Deeds shall forthwith
send notice by mail to the registered
owner that his owner's duplicate is
ready for delivery to him upon
payment of legal fees. (sec. 40, PD
1529)
- Appeal reckoned from the
Solgens receipt of the decision.
- Becomes final 15 days from
receipt
Court retains jurisdiction over the
case until after the expiration of 1
year from the issuance of the decree
of registration Gomez vs. CA.
D. ATTRIBUTES OF AND LIMITATION
ON CERTIFICATE OF TITLE AND
REGISTERED LAND (FIIC)
1. Free from Liens and
Encumbrances except (NCTHA)
Those noted in the certificate
Liens, claims or rights existing
under the laws and Constitution
which are not required to appear
of record in the Registry of
Deeds
Unpaid real estate taxes levied
and assessed within 2 yrs
preceding the acquisition of any
right over the land
Any public highway or private
way established or recognized by
law, or any government
irrigation canal or lateral thereof,
if the certificate of title does not
state that the boundaries of such
have been determined.
Any disposition of the property
or limitation on the use thereof
by virtue of, or pursuant to,
Presidential Decree No. 27 or
any other laws on agrarian
reform. (Sec. 44, PD 1529)
2. Indefeasible
The decree of registration shall not
be reopened or revised by reason
of absence, minority, or other
disability of any person adversely
affected thereby.
Ground for reopening and
reviewing the decree of
registration: Actual fraud.
It must be reopened not later than
1 yr from and after the date of the
entry of such decree.
No petition shall be entertained
where an innocent purchaser for
value may be prejudiced. This
includes an innocent lessee,
mortgagee, or other encumbrancer
for value.
Upon the expiration of said period
of one year, the decree of
registration and the certificate of
title issued shall become
incontrovertible. The only remedy
left is an action for damages. (Sec.
32, PD 1529)
The rule on the incontrovertible
nature of a certificate of title
applies when what is involved is the
validity of the OCT, not when it
concerns that of the TCT Arguelles
vs. Timbancaya).
3. Imprescriptible
No title to registered land shall be
acquired by prescription or adverse
possession. (Sec. 47, PD 1529)
Prescription is unavailing not only
against the registered owner but
also against his hereditary
successors because the latter
merely step into the shoes of the
decedent by operation of law and
are merely the continuation of the
personality of their predecessor-in-
interest Barcelona vs. Barcelona.
4. Not Subject to Collateral Attack
A certificate of title shall not be
subject to collateral attack. It
cannot be altered, modified, or
canceled except in a direct
proceeding in accordance with law.
(Sec. 48, PD 1529)
E. JUDICIAL CONFIRMATION OF
IMPERFECT OR INCOMPLETE TITLES
General Rule: No title or right to, or
equity in, any lands of the public
domain may be acquired by
prescription or by adverse possession
or occupancy except as expressly
provided by law. (Sec. 57, CA 141)
The Public Land Act recognizes the
concept of ownership under the civil
law. This ownership is based on
adverse possession and the right of
acquisition is governed by the Chapter
on judicial confirmation of imperfect or
incomplete titles.
This applies only to alienable and
disposable (A&D) agricultural lands of
the public domain. Under Sec. 6 of CA
141, the classification of public lands
into A&D, forest lands, or mineral lands
is the prerogative of the Executive
Department.
The rule on confirmation of imperfect
title does not apply unless and until the
land classified as, say, forest land, is
released in an official proclamation to
that effect so that if may form part of
the disposable agricultural lands of the
public domain. (Bracewell vs. CA,
GR. NO 107247)
1) PERIOD OF FILING
RA No. 9176 extended the period
to file an application for judicial
confirmation of imperfect or
incomplete title to December 31,
2020. It further limited the area
applied for to 12 hectares.
2) REQUISITES
Filipino citizen
He must have, by himself, or
thru his predecessors-in-
interest, possessed and
occupied an alienable and
disposable agricultural portion
of the public domain
Such possession and occupation
must have been OCEN and in
the concept of owner since June
12, 1945
Application filed with proper court
3) PRIVATE CORPORATIONS
Where at the time the corporation
acquired the land, its predecessor-
in-interest had been in possession
and occupation thereof in the
manner and for the period
prescribed by law as to entitle him
to registration in his name, then
the proscription against
corporation acquiring alienable
lands of the public domain does
not apply for the land was no
longer public land but private
property Dir. Of Lands vs. IAC and
Acme Plywood and Veneer Co., G.R.
73002. Since the land is private,
the corporation can institute
confirmation proceedings.
* Requirements of the proceedings
are governed by PD 1529.
IV. CADASTRAL REGISTRATION
PROCEEDINGS
Unlike other kinds of registration, this is
compulsory as it is initiated by the
government.
Steps in Cadastral Registration
Proceedings (sec. 35-36, PD 1529):
1. Determination of the President that
public interest requires title to
unregistered lands be settled
2. Director of lands shall make a
cadastral survey
3. Director of Lands gives notice to
interested persons
4. Publication of notice
5. A copy of the notice shall also be
sent to the mayor and the
sanggunian
6. Geodetic engineers/ Bureau of Land
employees shall notify (re: survey)
by posting at the municipal building
7. Interested persons should
communicate with the geodetic
engineer if he requests for any
information about the land
8. Actual survey/ plotting of the land
9. Director of Lands represented by
Solgen shall institute original
registration proceedings
10. Publication, mailing posting
11. Hearing
12. Decision
13. Issuance of the decree and certificate
of title
NOTE In voluntary registration proceedings,
there is no res judicata when the applicant
fails to prove his title. In cadastral
registration, if the applicant cannot prove
that he is entitled to the land, the land
becomes public land. There is res judicata.
V. SUBSEQUENT REGISTRATION
A. TWO TYPES OF DEALINGS
1. VOLUNTARY DEALINGS
Deeds, instruments, documents
which are the results of free and
voluntary acts of parties thereto.
2. INVOLUNTARY DEALINGS
Writ, order, or process issued by the
court of record affecting registered
land, also other instruments which
are not willful acts of the registered
owner, executed without his
knowledge or consent.
B. NECESSITY/EFFECTS OF
REGISTRATION
An owner of registered land may
convey, mortgage, lease, charge or
otherwise deal with the same in
accordance with existing laws.
The deed, mortgage, lease, or other
voluntary instrument, except a will shall
ONLY operate as:
1.) A contract between the parties and
2.) Evidence of authority to the
Register of Deeds to make
registration.
The act of registration shall be the
operative act to convey or affect the
land insofar as third persons are
concerned, and in all cases under this
Decree, the registration shall be made
in the office of the Register of Deeds
for the province or city where the land
lies. (Sec. 51, PD 1529)
Every conveyance, mortgage, lease,
lien, attachment, order, judgment,
instrument or entry affecting registered
land shall, if registered, filed or
entered in the office of the Register of
Deeds be constructive notice to all
persons from the time of registering.
(sec. 52, PD 1529)
C. VOLUNTARY VS. INVOLUNTARY
DEALINGS
VOLUNTARY
DEALINGS
INVOLUNTARY
DEALINGS
Ex. Sale,
mortage, lease,
patent, powers of
attorney, trusts
Attachment,
injunction,
mandamus, levy
on execution,
notice of lis
pendens
Presentation of
the owners
duplicate
is required to
notify; mere entry
insufficient
Entry in the day
book is sufficient
notice to all
persons
An innocent
purchaser for
value of
registered land
becomes the
registered owner
the moment he
presents and files
a duly notarized
and valid deed of
sale and the same
is entered in the
day book and at
the same time he
surrenders or
presents the
Entry thereof in
the day book of
the ROD is
sufficient notice
to all persons
even if the
owners duplicate
is not presented
to the ROD.
(Lenin vs. Bass,
1952)
owners duplicate
covering the land
sold and pays the
registration fees.
It is necessary to
register the deed
or instrument in
the entry book
and a
memorandum
thereof shall also
be made in the
owners duplicate
certificate and its
original (Villasor
vs. Camon,
1951)
Entry in the day
book is sufficient
notice to all
persons of an
adverse claim
without the same
being annotated
at the back of the
(Dir. Of Lands
vs. Reyes,
1976)
General Rule: A person dealing with
registered property need not go
beyond, but only has to rely on, the
title. He is charged with notice only of
such burdens and claims which are
annotated on the title, for registration is
the operative act that binds the
property Campillo vs. PNVB.
When should a purchaser investigate?
Banks are required to exercise
more care and prudence in dealing
with registered lands for their
business is one affected with
public interest. The general rule
does not apply.
when party concerned has actual
knowledge of facts and
circumstances that would impel a
reasonably cautious man to make
inquiry Leung Yee vs. Strong
Machinery
When purchaser is in bad faith;
e.g. he had full knowledge of a
previous sale Jamoc vs. CA, 1991
When a person buys land from one
whose rights over the land is
evidenced only by a deed of sale
and an annotation in the certificate
of title but no TCT Quiniano vs. CA
D. REGISTRATION OF VOLUNTARY
INSTRUMENTS
Steps in registration in general:
1. File with the Register of Deeds the
voluntary instrument for
registration (Sec. 54, PD 1529).
It shall contain full name,
nationality, residence and postal
address of the grantee or other
person acquiring or claiming an
interest under such instrument. It
shall also contain the grantees civil
status. If the grantee is a
corporation or association, it must
show that it is qualified to acquire
private lands. (Sec. 55, PD 1529)
2. Present owners duplicate. The
issuance of a new transfer
certificate without presentation of
such is un warranted and confers
no right on the purchaser PNB vs.
Fernandez, 1935
3. Show that you have paid taxes.
RA 456 prohibits registration of
documents affecting real property
which is delinquent in the payment
of real estate taxes. If evidence of
such pament is not presented with
15 days form the date of entry of
said document in the primary
entry book of the register of deeds
the entry shall be deemed
cancelled.
4. Pay fees and DST (government is
exempt)
5. Register of Deeds shall enter the
instruments filed with him relating
to registered land. He shall note in
such book the date, hour and
minute of reception of all
instruments, in the order in which
they were received. They shall be
regarded as registered from the
time so noted, and the
memorandum of each instrument,
when made on the certificate of
title to which it refers, shall bear
the same date. (sec. 56, PD
1529)
6. All deeds and voluntary
instruments shall be presented
with their respective copies and
shall be attested and sealed by the
Register of Deeds, endorsed with
the file number, and copies may
be delivered to the person
presenting them. (sec. 56, PD
1529)
7. TCT shall be issued.
E. REGISTRATION OF DEEDS OF SALE
(CONVEYANCES) AND TRANSFERS
1. ENTIRE PROPERTY IS SUBJECT
SECTION 57
a. An owner shall execute and
register a deed of conveyance
in a form sufficient in law.
b. The Register of Deeds shall
thereafter make out in the
registration book a new
certificate of title to the grantee
and shall prepare and deliver to
him an owner's duplicate
certificate.
c. The Register of Deeds shall note
upon the original and duplicate
certificate the date of transfer,
the volume and page of the
registration book in which the
new certificate is registered and
a reference by number to the
last preceding certificate.
d. The original and the owner's
duplicate of the grantor's
certificate shall be stamped
"canceled".
e. The deed of conveyance shall
be filed and indorsed with the
number and the place of
registration of the certificate of
title of the land conveyed.
2. PORTIONOF PROPERTYISSUBJECT
SECTION 58
a. Have the plan showing all the
portions or lots into which it has
been subdivided and the
corresponding technical
descriptions verified and
approved. Otherwise, such deed
may only be annotated by way
of memorandum to serve as a
notice to third persons of the
fact that certain unsegregated
portion of the land described
therein has been conveyed
b. The original of the plan and a
certified copy of the technical
descriptions shall be filed with
the Register of Deeds for
annotation in the corresponding
c. Officer shall issue a new
certificate of title and cancel the
grantor's certificate partially
with respect only to said portion
conveyed, OR certificate may be
canceled totally and a new one
issued describing therein the
remaining portion
3. SUBSISTINGENCUMBRANCES/
ANNOTATIONS
Encumbrances or annotations that
appear in the registration book shall
be carried over in the new certificate
or certificates; except so far as they
may be simultaneously released or
discharged. (Sec. 59, PD 1529)
F. MORTGAGES AND LEASES
Mortgage and leases shall be
registered in the manner provided in
Section 54 of this Decree. Such deed of
mortgage or lease shall take effect
upon the title only from time of
registration. (Sec. 60, PD 1529)
Upon presentation for registration of
the deed of mortgage or lease with the
owner's duplicate, the Register of
Deeds shall enter upon the original of
the certificate of title and also upon the
owner's duplicate certificate a
memorandum thereof and shall sign.
(Sec. 61, PD 1529)
G. POWERS OF ATTORNEY; TRUSTS
Powers of attorney to deal with
registered land shall be registered with
the Register of Deeds of the province
or city where the land lies. Revocation
of power shall be registered in like
manner (Sec. 64, PD 1529).
To transfer registered land in trust or
to create or declare a trust or other
equitable interests in such land without
transfer, the particulars of the trust
shall not be entered on the certificate;
but only a memorandum thereof shall
be entered by the words "in trust", or
"upon condition", or other apt words,
and by a reference by number to the
instrument. A similar memorandum
shall be made upon the original
instrument (Sec. 65, PD 1529).
No instrument which transfers,
mortgages or in any way deals with
registered land in trust shall be
registered, unless the enabling power
thereto is expressly conferred in the
trust instrument, or unless a final
judgment or order of a court of
competent jurisdiction has construed
the instrument in favor of the power, in
which case a certified copy of such
judgment or order may be registered
(Sec. 66, PD 1529).
Whoever claims an interest in
registered land by reason of any
implied or constructive trust shall file
for registration with the Register of
Deeds a sworn statement. Such claim
shall not affect the title of a purchaser
for value and in good faith before its
registration (Sec. 68, PD 1529).
H. INVOLUNTARY DEALINGS
1. ATTACHMENT
An attachment, or a copy of any
writ, order or process issued by a
court of record, intended to create
or preserve any lien, status, right,
or attachment upon registered land,
shall be filed and registered in the
Registry of Deeds for the province or
city in which the land lies.
It shall contain a reference to the
number of the certificate of title to
be affected and its registered owner.
If not claimed on all the land,
include a description sufficiently
accurate for identification of the land
affected.
A restraining order, injunction or
mandamus issued by the court shall
be entered and registered on the
certificate of title affected, free of
charge. (sec. 69, PD 1529)
The duplicate certificate must be
presented for registration. If not,
the Register of Deeds shall, within
36 hours, send notice by mail to the
registered owner, stating that such
paper has been registered, and
requesting him to send or produce
his duplicate certificate so that a
memorandum of the attachment or
other lien may be made thereon.
If the owner neglects or refuses to
comply within a reasonable time,
the Register of Deeds shall report
the matter to the court so that it
may order the owner to produce his
certificate. (sec. 70, PD 1529)
In case of conflict between a vendee
and an attaching creditor, if the
attaching creditor registered first then
he acquires a valid title over the
property. But where a party has
knowledge of a prior existing interest,
which is unregistered at the time he
acquired a right to the same land, his
knowledge of that prior unregistered
interest has the effect of registration
as to him Ruiz vs. CA, 2001.
2. EXECUTION AND TAX
DELINQUENCY SALES
Whenever registered land is:
- sold on execution
- taken or sold for taxes or for
any assessment or
- to enforce a lien of any
character, or for any costs and
charges incident to such liens
Any execution, any officer's return,
or any deed, demand, certificate, or
affidavit, or other instrument made
in the course of the proceedings,
shall be filed with the Register of
Deeds and registered in the
registration book, and a
memorandum made upon the
proper certificate of title in each
case as lien or encumbrance. (Sec.
74, PD 1529)
3. NOTICE OF LIS PENDENS
This does not create a lien.
Notice of lis pendens may involve
actions that deal not only with title or
possession of a property but also
with the use or occupation of
property. The litigation must directly
involve a specific property which is
necessarily affected by judgment. It
is proper in the ff cases:
- action to recover possession of
real estate
- action to quiet title
- action to remove clouds upon
the title
- action for partition or
- other proceedings of any kind in
court directly affecting the title
to land or the use or occupation
thereof or the buildings thereon
A memorandum or notice must be
filed and registered so that
judgment shall have an effect on the
land and 3
rd
persons. It should
contain:
- institution of such action or
proceeding
- in which court it is pending
- date of the institution
- number of the certificate of title
- description of the land affected and
- the registered owner (sec. 76,
PD 1529)
It is not proper in:
- preliminary attachments
- proceedings for probate of wills
- levies on execution
- proceedings for administration
of estates
- proceedings the object of which
is a money judgment
* In case of subsequent sales or
transfers, the Register of Deeds is
duty bound to carry over the notice
of lis pendens on all titles to issued.
Before final judgment, the court
may order the cancellation:
- After showing that notice is only
for purpose of molesting an
adverse party
- When it is shown that it is not
necessary to protect the right of
the party who caused the
registration thereof
- When the consequences of the
trial are unnecessarily delaying
the determination of the case to
the prejudice of the other party
- When party who caused
registration filed a verified
petition
- Deemed cancelled when
certificate issued by clerk of
court stating manner of disposal
of proceeding is registered at
any time after final judgment in
favor of the defendant, or other
disposition of the action such as
to terminate finally all rights of
the plaintiff (Sec. 77, PD
1529)
4. ADVERSE CLAIM
WHEN IS A CLAIM ADVERSE?
When a person claims any part or
interest in registered land adverse to
the registered owner, arising
subsequent to the date of the original
registration. (Sec. 70, PD 1529)
The adverse claim shall be effective
for a period of 30 days from the date
of registration. After that the
annotation of adverse claim may be
cancelled upon filing of a verified
petition therefor by the party in
interest. After cancellation, no second
adverse claim based on the same
ground shall be registered by the
same claimant (Sec. 70, PD 1529).
Requisites:
1. The adverse claimant must
state the ff in writing:
- his alleged right or interest
- how and under whom such
alleged right or interest is
acquired
- the description of the land
in which the right or
interest is claimed and
- the number of the
2. The statement must be signed and
sworn to before a notary public or
other officer authorized to
administer oath and
3. The claimant should state his
residence or the place to which all
notices may be served upon him.
Non-compliance with the above
requisites renders the adverse
claim non registrable and
ineffective.
VI. DEALINGS WITH
UNREGISTERED LANDS
No deed, conveyance, mortgage, lease,
or other voluntary instrument affecting
land not registered under the Torrens
system shall be valid, except as between
the parties thereto, unless such
instrument shall have been recorded
under PD 1529. (Sec. 113, PD 1529)
The recording of the deed and other
instruments relating to unregistered lands
shall be effected by any of annotation on
the space provided therefor in the
Registration Book, after the same shall
have been entered in the Primary Entry
Book.
In case the Register of Deeds refuses to
record, said official shall advise the party
in interest in writing and the latter may
appeal the matter to the Commissioner of
Land Registration. Any recording made
under this section shall be without
prejudice to a third party with a better
right.
Tax sale, attachment and levy, notice of
lis pendens, adverse claim with respect to
unregistered lands shall likewise be
admissible to record.
Fees shall be same amount of fees
prescribed for similar services for the
registration of deeds or instruments
concerning registered lands.
VII. Patents
The classification of public lands is a
function of the executive branch of
government Republic vs. Imperial, 2000.
Lands of the public domain which are
alienable or open to disposition may be
further classified as:
- agricultural
- residential, commercial, industrial,
or for similar productive purposes
- educational, charitable or other
similar purposes
- reservations for townsites and for
public and quasi- public uses
MODES OF DISPOSITION
Public lands suitable for agricultural
purposes can be disposed of only as
follows:
- homestead settlement
- sale
- lease
- confirmation of imperfect or
incomplete titles
o judicial legalization
o administrative legalization (free
patent)
Kinds Applicant Requirements
Homest
ead
Patent
The Public
Land Act
provides
that any
Filipino
citizen over
the age of
18 or head
of the family
may enter a
homestead
- Max of 12
hectares of
agricultura
l land
- Applicant
must have
cultivated
and
improved
at least
1/5 of the
land
continuous
ly since
the
approval of
the
application
resided for
at least 1
yr in the
municipalit
y in which
the land is
located or
in an
adjacent to
the same
- Payment
of fee
required
Sales
Patent
Public
Agricult
ural
Lands
Lands
for
residen
tial,
comme
rcial or
industri
al
purpos
es
Lands
for
Any Filipino
of lawful age
or the head
of a family
may
purchase
any tract of
public
agricultural
land not to
exceed 12
hectares.
-Filipino
citizen of
legal age
- not the
owner of a
home lot in
the mun
where he
- Sold thru
sealed
bidding
- Purchase
price may
be paid in
full upon
the making
of the
award or
in not
more that
10
installment
s from the
date of the
award
- Purchaser
shall have
not less
than 1/5 of
the land
cultivated
w/in 5 yrs
from the
date of the
award
- Before any
patent is
issued he
must show
actual
occupancy,
cultivation
and
improveme
nt of at
least 1/5
of the land
until the
date of
final
payment.
- Lands
reclaimed
by the
govt and
foreshore
shall be
disposed
by lease
only
- Marshy
residen
tial
purpos
es
reisides
- have
established
in good faith
his residence
on a parcel
of public
land which is
not needed
for public
service (RA
730)
lands and
other lands
may be
sold on
condition
that the
purchaser
shall make
improveme
nts of a
permanent
character
for the
purpose
for which
the land is
purchased
w/in 18
moms.
From the
date of the
award.
- exception
to CA 141
- area does
not exceed
1,000 sqm
- it shall be
an
essential
condition
of this sale
that the
occupants
has
constructe
d his
house on
the land
and
occupants
has
constructe
d his
house on
the land
and
actually
resided
therein
Free
patent
To any
natural born
Filipino
citizen
(filing ended
Dec. 31,
2000)
-does not own
more than 12
hectares of
land
- continuously
occupied and
cultivated,
either by
himself or his
predecessors-
in-interest,
tracts of
agricultural
public lands
subject to
disposition for
at least 30
years prior to
March
28,1990
- paid real
property taxes
on the
property while
the same has
not been
occupied by
any person
Special
patent
Issued upon
the
promulgation
of a special
law or act of
Congress or
by the Sec of
DENR as
authorized by
an EO
e.g. issued by
the Pres. In
1988 to the
Public Estates
Authority
under PD
1085 over 3
reclaimed
islands in the
name of PEA
VIII. REMEDIES OF AGGRIEVED
PARTY
Motion
for
New
Trial
- 15 days from notice of
judgment
Grounds:
- Fraud, accident,
mistake, excusable
negligence
- Newly discovered
evidence
- Awarded excessive
damages, or
insufficiency of
evidenc, or that the
decision is against law
Appeal - 15 days from notice
- appealable to the CA
or to the SC in the
same manner as in
ordinary actions
Relief
from
Judgm
ent
- 60 days after petitioner
learns of judgment, but not
more than 6 months after
judgment was entered
Grounds: Fraud, accident,
mistake, excusable
negligence
Petition Requisites:
for
Review
1. petitioner must have
an estate or interest in
the land
2. he must show actual
fraud
3. petition must be filed
within one year form
the issuance of the
decree by LRA
4. property has not yet
passed to an innocent
purchaser for value.
Walstrom vs. Mapa, GR No.
38387
Grounds:
- extrinsic fraud,
- void decision for want
of due process
- lack of jurisdiction
Under the Torrens system of
registration, the Torrens still
becomes indefeasible and
incontrovertible one year
form the issuance of the final
decree and is generally
conclusive evidence of the
ownership (Calalang vs.
Register of Deeds). This
applies as well to title
acquired through homestead
or free patents Iglesia ni
Cristo vs. CFI, GR No. L-
35273
Action
for
Reconv
eyance
- before issuance of
decree, or within/after
1 year from entry
- if based on implied
trust, 10 years;
- if based on expressed
trust and void
contract,
imprescriptible
- if based on fraud, 4
years from the
discovery
It does not reopen
proceedings but a mere
transfer of the land from
registered owner to the
rightful owner Esconde vs.
Barlongay. It is available in
case of fraud thereby
creating a constructive trust
between parties Huang vs.
CA. It is not available if the
property has already been
transferred to an innocent
purchaser for value.
Damag
es
It can be availed of when
reconveyance is no longer
possible as when the land has
been transferred to an
innocent purchaser for value
Ching vs. CA.
Action
for
Compe
nsation
from
the
Assura
nce
Fund
39
Requisites:
- A person sustains loss
or damage or is
deprived by any
estate or interest in
land
- On account of bringing
of land under the
Torrens system
- Through (FEMOM)
fraud, error, mistake,
omission, or
misdescription in the
certificate of entry in
the registration book
- Without negligence on
his part
- And is barred from
bringing an action for
recovery of the land.
- The action has not
prescribed. It must be
instituted within 6
years from the time
the right to bring such
action first occurred--
> date of issue of the
Against whom filed: against
the Register of Deeds and the
National Treasurer if FEMOM
is caused by court personnel,
Register of Deeds, his deputy
or other employees of the
Registry
If other those above
mentioned: the Register of
Deeds, the National
Treasurer and other person
or persons, as co-defendants.
Annulm
ent of
Judgm
ent
Grounds: extrinsic fraud and
lack of jurisdiction.
Ordinary remedies of appeal,
motion for new trial etc
should no longer be available.
If based on extrinsic fraud,
file 4 within years from
discovery.
If based on lack of
jurisdiction, before it is
barred by laches or estoppel
Galicia vs. Marquez 2007.
Reversi
on
Instituted by the
government, thru Solgen in
all cases where lands of
public domain are held in
violation of the Constitution
or were fraudulently
conveyed.
39
Upon registration, there shall be paid to the Register of
Deeds of 1% of the assessed value of the real estate
on the basis of the last assessment for taxation purposes,
as contribution to the Assurance Fund.
Indefeasibility of title,
prescription, laches, and
estoppel do not bar reversion
suits.
Crimin
al
Action
Perjury, Forgery, Others
involving fraud
IX. REPLACEMENT AND
RECONSTITUTION
A. REPLACEMENT
In case of loss or theft of an owner's
duplicate certificate of title, due notice
under oath shall be sent by the owner
or by someone in his behalf to the
Register of Deeds of the province or
city where the land lies as soon as the
loss or theft is discovered. If a
duplicate certificate is lost or
destroyed, or cannot be produced by
a person applying for the entry of a
new certificate to him or for the
registration of any instrument, a
sworn statement of the fact of such
loss or destruction may be filed by the
registered owner or other person in
interest and registered.
Upon the petition of the registered
owner or other person in interest, the
court may, after notice and due
hearing, direct the issuance of a new
duplicate certificate, which shall
contain a memorandum of the fact
that it is issued in place of the lost
duplicate certificate, but shall in all
respects be entitled to like faith and
credit as the original duplicate, and
shall thereafter be regarded as such
for all purposes of this decree.
B. RECONSITUTION
Original copies of certificates of title
lost or destroyed in the offices of
Register of Deeds as well as liens and
encumbrances affecting the lands
covered by such titles shall be
reconstituted judicially in accordance
with the procedure prescribed in
Republic Act No. 26 insofar as not
inconsistent with this Decree. The
procedure relative to administrative
reconstitution of lost or destroyed
certificate prescribed in said Act is
hereby abrogated.
Notice of all hearings of the petition
for judicial reconstitution shall be
given to the Register of Deeds of the
place where the land is situated and
to the Commissioner of Land
Registration. No order or judgment
ordering the reconstitution of a
certificate of title shall become final
until the lapse of thirty days from
receipt by the Register of Deeds and
by the Commissioner of Land
Registration of a notice of such order
or judgment without any appeal
having been filed by any of such
officials.
PRIVATE INTERNATIONAL LAW CIVIL LAW
Private International Law
TABLE OF CONTENTS
Section 1. Conflict of Laws 315
Section 2. Jurisdiction 315
Section 3. Choice of Law 317
Section 4. Recognition and Enforcement of Judgment 324
CONFLICT OF LAWS
PRIVATE INTERNATIONAL LAW : that part
of municipal law which governs cases
involving a foreign element
o The principles of conflict of laws
incorporated in municipal laws of many
states are based on comity of nations.
o COMITY: is the recognition which one
nation allows within its territory to the
legislative, executive, or judicial acts of
another nation having due regard both
to international duty and convenience,
and to the rights of its own citizens or
of other persons who are under the
protection of its laws (Hilton v.
Guyot, 1895)
o FOREIGN ELEMENT may refer to
parties, property, events, or
transactions.
PRIVATE INTERNATIONAL LAW
vs.
PUBLIC INTERNATIONAL LAW
Basis PRIL PIL
Parties
Individuals or
corporations
Primarily
states and
international
organizations
Sources
- treaty
- custom
- generally
recognized
principles
of law
- judicial
decisions
- teachings
of the most
highly
qualified
publicists
- National
conflict
rules
-
International
conflict
rules
Remedies
- diplomatic
protest
- negotiation,
conciliation,
arbitration
- adjudicatio
n before
internation
al tribunal
- use of force
- war
- resort to
forum
court or
administrat
ive
tribunals
PRIL v. Municipal law: presence of foreign
element
SOURCES
1. Codes and statutes
2. Treaties and international conventions
3. Treatises, commentaries, and studies
of learned societies
4. Judicial decisions
3 PHASES INVOLVED IN THE JUDUCIAL
RESOLUTION OF A CONFLICTS CASE
(Hasegawa v. Kitamura, 2007)
1. Jurisdiction
- Where can or should litigation be
initiated?
2. Choice of law
- Which law will the court apply?
3. Recognition and enforcement of
judgments
- Where can the resulting judgment
be enforced?
JURISDICTION
JURISDICTION
40
: the power of a court to
TRY a case, RENDER judgment, and EXECUTE
it in accordance with law
ASPECTS OF JURISDICTION:
1. Jurisdiction over the parties
2. Jurisdiction over the property (res)
3. Jurisdiction over the subject-matter
JURISDICTION OVER THE PARTIES
o Over the plaintiff: acquired by the filing of
suit
o Over the defendant: acquired by entry of
appearance or service of legal process
JURISDICTION OVER THE PROPERTY
o Acquired by:
- seizure of the property by legal
process or
- institution of legal proceedings
wherein the courts power over the
property is recognized and made
effective
JURISDICTION OVER THE SUBJECT-MATTER
o conferred by LAW (e.g., BP 129)
o CANNOT be conferred by consent of the
parties
o SUBJECT MATTER: refers to the nature of
the cause of action and of the relief sought
(Idonah Perkins v. Roxas, 1941)
BASIS OF THE EXERCISE OF JURISDICTION
TRADITIONAL BASIS: States PHYSICAL
POWER over persons and
property within its
territory
40
This more properly refers to judicial jurisdiction, as
opposed to legislative jurisdiction or the ability of the sate
to promulgate laws and enforce them on all persons and
property within its territory.
This explains the distinctions made
between actions in personam
41
and actions in
rem or quasi in rem
42
, dating back to the case
of Pennoyer v. Neff(1878).
o In actions in personam, wherein the
defendant is a non-resident who does not
voluntarily submit himself to the authority
of the court, personal service of summons
within the state is essential to the
acquisition of jurisdiction over her person.
- This method of service is possible if
such defendant is physically present in
the country. If he is not found therein,
the court cannot acquire jurisdiction
over his person and therefore cannot
validly try and decide the case against
him.
- An exception was laid down in
Gemperle v. Schenker wherein a non-
resident was served with summons
through his wife, who was a resident
of the Philippines and who was his
representative and attorney-in-fact in
a prior civil case filed by him;
moreover, the second case was a mere
offshoot of the first case.
o On the other hand, in a proceeding in rem
or quasi in rem, jurisdiction over the
person of the defendant is not a
prerequisite to confer jurisdiction on the
court provided that the court acquires
jurisdiction over the res. Nonetheless
summons must be served upon the
defendant not for the purpose of vesting
the court with jurisdiction but merely for
satisfying the due process requirements.
(Asiavest Limited v. CA, 1998)
In the US: The conceptual basis for the
exercise of jurisdiction has
shifted from territorial power to
considerations of MINIMUM
CONTACTS and FUNDAMENTAL
FAIRNESS.
o International Shoe Co. v.
Washington (1945): Due process only
requires that the defendant who is not
present within the territory of the
forum have minimum contacts with it
such that the maintenance of the suit
does not offend traditional notions of
fair play and substantial justice.
41
Actions in personam are directed against specific
persons and seek personal judgments.
42
Actions in rem or quasi in rem are directed against the
thing or property or status of a person and seek
judgments with respect thereto as against the whole
world.
o Mullane v. Central Hanover Bank &
Trust Co. (1950): The standard for
adequate notice is WON it is
reasonably certain to inform those
affected or, where conditions do not
reasonably permit such notice, WON
the form chosen is not substantially
less likely to bring home notice than
other of the feasible and customary
substitutes.
o Shaffer v. Heitner (1977): The
minimum contacts and fundamental
fairness test should be satisfied
regardless of whether the proceedings
are in rem, quasi in rem, or in
personam, and the minimum contacts
must exist among the forum,
defendant, and the cause of action.
o Long-arm statutes: statutes that
allow the forum state to exercise
jurisdiction over a non-resident
defendant, provided that the
prospective defendant has sufficient
minimum contacts with the forum
state.
2 types:
- first type enumerates factual
situations likely to satisfy the
minimum-contacts test;
- second type is much broader
and provides jurisdiction over
an individual or corporation
as long as that jurisdiction is
not inconsistent with
constitutional restrictions
3 WAYS OF DEALING WITH
A CONFLICTS CASE:
1. Dismiss the case because of
a. lack of jurisdiction or
b. forum non conveniens
2. Assume jurisdiction over the case and
apply the internal law of the forum
3. Assume jurisdiction over the case and take
into account or apply the law of some
other State or States
(Hasegawa v. Kitamura, 2007)
Doctrine of FORUM NON CONVENIENS
o literal meaning: the forum is inconvenient
o emerged in private international law to
deter the practice of global forum
shopping- that is, to prevent non-resident
litigants from choosing the forum or place
wherein to bring their suit for malicious
reasons, such as to secure procedural
advantages, to annoy and harass
the defendant, to avoid overcrowded
dockets, or to select a more friendly
venue.
o Under this doctrine, a court, in conflicts of
law cases, may refuse impositions on its
jurisdiction where it is not the most
convenient or available forum and the
parties are not precluded from seeking
remedies elsewhere.
o Whether a suit should be entertained or
dismissed on the basis of said doctrine
depends largely upon the facts of the
particular case and is addressed to the
sound discretion of the trial court.
o Philippine Court may assume jurisdiction
over the case if it chooses to do so,
provided the local judicial machinery is
adequate in that the following requisites
are met:
1. The Philippine Court is one to which
the parties may conveniently resort to;
2. The Philippine Court is in a position to
make an intelligent decision as to the
law and the facts; and
3. The Philippine Court has or is likely to
have power to enforce its decision.
o The doctrine of forum non conveniens
should NOT be used as a ground for a
motion to dismiss because Sec. 1, Rule 16
of the Rules of Court does not include said
doctrine as a ground.
o The propriety of dismissing a case based
on this principle of forum non conveniens
requires a factual determination, hence it
is more properly considered a matter of
defense. (Bank of America NT&SA v.
CA, 2003)
CHOICE OF LAW
APPROACHES TO CHOICE OF LAW
1. Traditional approach: simplicity,
convenience, uniformity
2. Modern approach: reaching appropriate
results in particular cases
TRADITIONAL APPROACH THEORIES:
1. Vested Rights Theory
o An act done in a foreign jurisdiction
gives rise to the existence of a right if
the laws of that state provide so. This
right vests in the plaintiff and he
carries it with him to be enforced in
any forum he chooses to bring suit
o The applicable law is the law of the
place of occurrence of the LAST ACT
necessary to complete the cause of
action.
2. Local Law Theory
o The power of the state to regulate
within its territory has no limitation
except such as may be imposed by its
own positive law.
o In conflicts problems, the court does
not enforce a foreign right but a right
created by its own law by treating the
case as a purely domestic case without
a foreign element.
MODERN APPROACHES:
1. Place of the most significant
relationship
o FACTUAL CONTACTS evaluated
depending on their RELATIVE
IMPORTANCE & RELEVANCE to the
issue at hand
2. Interest analysis
o Looks at the POLICY behind the laws of
the involved states and the INTEREST
each state has in applying its own law
o Factual contacts alone not
determinative of the outcome of the
case unless they reflected a state
policy which would be advanced by the
application of the substantive state law
3. Comparative impairment
o Subordination of the state objective
which would be least impaired
4. Functional analysis
o Looks at the policies and considers
their relative weight (policy-weighing)
o Considers whether the law of a state
reflects an emerging or regressing
policy
5. Choice-influencing considerations
(BOPIS)
a. Predictability of results;
b. Maintenance of interstate and
international order;
c. Simplification of the judicial task;
d. Application of the better rule of law;
e. Advancement of the forums
governmental interests
ESCAPE DEVICES: used to avoid the
inherent rigidity and unjust decisions that may
result from the application of traditionally-
oriented rules
1. Characterization
2. Renvoi
CHARACTERIZATION: assigning a disputed
question to an area of substantive law
1. Subject-matter characterization:
classifying a FACTUAL SITUATION into
a LEGAL CATEGORY
2. Substance-procedure
characterization
- if issue substantive: may apply
foreign law
- if issue procedural: apply forum
law
Statue of Frauds
- substantive if it forbids the creation
of the obligation (void)
- procedural if it forbids the
enforcement of the obligation (no
action shall be brought)
Statue of Limitations
- traditionally considered procedural
- substantive if they provide for a
SHORTER PERIOD for certain types
of claims that fall within a wider
classification covered by a general
statute of limitations
Specificity test: substantive
when the limitation was
directed to the newly created
liability so SPECIFICALLY as to
warrant saying that it qualified
the right
- Borrowing statute: a statute which
bars the filing of a suit in the forum
if it is already barred by the SOL in
the place where the cause of action
arose
Dpecage (to dissect)
o Nuanced single-aspect method
o Cutting up the case issue by issue and
applying the pertinent laws to the
different aspects
RENVOI (send back)
o A procedure whereby the conflicts rule of
the forum refers the jural matter to a
foreign state and in turn, the conflicts rule
of such foreign state refers the matter
back to the law of
- the forum (REMISSION); OR
- a 3
rd
state (TRANSMISSION)
4 ways of dealing with renvoi:
1. REJECT renvoi and apply internal law of
the foreign state (that applied to a purely
domestic case)
2. ACCEPT renvoi and apply the whole law
of the foreign state (including its conflict
rules)
o Effect: forum law applied
3. DESISTANCE or mutual disclaimer of
jurisdiction
o Upon reference to another states law,
the court sees that such law is limited
to its own national and has no
provision for application to a non-
national
o Same effect as acceptance: forum law
applied
4. DOUBLE RENVOI (foreign court theory)
o Forum court would apply the law the
foreign court would have applied
Renvoi does NOT apply to a false conflict.
FOREIGN LAW
PLEADING AND PROOF
Gen. Rule: Foreign law must be pleaded and
proved as a fact
o The party whose cause of action or
defense depended on the foreign law
has the burden of proving the foreign
law.
Exception: Court may take judicial notice of
foreign laws which are already within its
ACTUAL KNOWLEDGE such as when:
- they are well and generally known OR
- they have been actually ruled upon in
other cases before it and none of the
parties concerned claim otherwise
(PCIB v. Escolin, 1974)
Foreign law proved by:
1. an OFFICIAL PUBLICATION of the law; OR
2. a COPY of the law ATTESTED by the officer
having the legal custody of the record, or
by his deputy.
- If such record is not kept in the
Philippines, it must be accompanied
with a certificate that such officer has
the custody
3 Alternatives in case of failure to plead and
prove foreign law
1. DISMISS the case for failure to establish a
cause of action
2. Apply FORUM LAW
3. PROCESSUAL PRESUMPTION
Factors in deciding whether to apply domestic
law or decide against the party who has the
burden of proving the contents of foreign law:
1. degree of PUBLIC INTEREST involved
2. ACCESSIBILITY of the foreign law
materials to the parties
3. probability that the plaintiff is merely
FORUM-SHOPPING
4. SIMILARITIES between the forum law
and foreign law
EXCEPTIONS TO THE APPLICATION
OF FOREIGN LAW
1. Local law expressly so provides
2. Failure to plead and prove the foreign
law or judgment
3. Exceptions to the rule of comity:
(4P-FAG-UV)
a. The foreign law is contrary to an
IMPORTANT PUBLIC POLICY of the
forum
b. The foreign law is PROCEDURAL in
nature
c. The foreign law is PENAL in nature
d. Issues related to PROPERTY
e. The issue involved in the
enforcement of foreign claim is
FISCAL or ADMINISTRATIVE
f. The foreign law is contrary to
GOOD MORALS (contra bonus
mores)
g. The application of foreign law will
work UNDENIABLE INJUSTICE to
citizens of the forum
h. The application of foreign law
might endanger the VITAL
INTERESTS of the state
PERSONAL LAW
o Ones personal law follows him
wherever he is and governs those
transactions which affect him most
closely.
o Determined either by ones nationality
or domicile
o Most civil law countries such as the
Philippines follow the national law
theory
Nationality Domicile
Merits
- logical since
lawmakers
considered the
qualities of its
citizens in
making the
laws
- easily
verifiable from
documents
Demerits
- does not
provide
solution with
respect to
stateless
persons
those with
multiple
nationalitie
s
states with
diverse
legal
systems
- persons ties to
his nation may
be so
attenuated if
he has lived in
another
country most
of his life
Merits
- genuine link
- suitable for
countries with
a federal
system
Demerits
- not easily
determinable
- concept not
clear-cut
- if domicile of
origin given
much weight,
connection
attenuated
NATIONALITY
o Each state has the prerogative and
authority to determine by its own
municipal law who are its nationals or
citizens.
Statelessness
o De jure statelessness: person has been
stripped of his nationality by his former
govt. without having an opportunity to
acquire another
o De facto statelessness: person possessed
of a nationality but his country does not
give him protection outside its own
territory (refugee)
DOMICILE
GENERAL RULES ON DOMICILE
1. No person shall be without domicile
o Ones domicile of origin prevails until
he acquires anew domicile
2. A person cannot have 2 simultaneous
domiciles for a given purpose or a given
time under the law of a particular state
3. Domicile establishes a connection between
a person and a particular territory
4. Burden of proving a change of domicile is
on the one alleging it
3 KINDS OF DOMICILE
1. Domicile of ORIGIN
2. Domicile of CHOICE
3. CONSTRUCTIVE domicile
Domicile of Origin
o Persons domicile at birth
o Legitimate child: fathers domicile
o Illegitimate child: mothers domicile
Domicile of Choice
o Voluntary domicile
o To acquire: actual residence + animo
manendi (intent to make it ones
home)
Domicile of Origin Domicile of
Choice
- NOT lost by
mere
abandonment
and remains
until replaced
by a domicile
of choice
- Presumed to
be revived
once the
domicile of
choice is given
up and before
a new one is
acquired
(reverter or
revival
doctrine)
- deemed
extinguished
by removal of
intent even
prior to the
acquisition of
a new
domicile
Constructive Domicile
o Domicile assigned to persons legally
incapable of choosing their own
domicile:
- minors
- mentally disabled
- married women
SPECIAL PROBLEMS IN DOMICILE
1. People kept under physical or legal
compulsion (e.g. military personnel)
o Modern view: if person under
compulsion intends to remain even
after the compulsion has been
removed, he acquires domicile of
choice
2. Married women seeking to acquire a
separate domicile from their husbands
o Modern view: altogether dispenses
with any presumption that the wifes
domicile is the same as her husbands
CHOICE OF LAW PROBLEMS
PERSONAL STATUS
o Includes condition and capacity
o Embraces
- beginning and end of human
personality
- juridical capacity
- capacity to act
- family relations
- succession
o Applicable law: personal law
- if Filipino: national law (Art.15,CC)
- if alien: law of nationality or
domicile, depending on what the
aliens country follows
FAMILY RELATIONS
1. Marriage
a. extrinsic validity: lex loci celebrationis
(Art.26, FC; Hague Convention)
b. intrinsic validity: personal law
- refers to capacity
c. effects of marriage: personal law
d. property relations of spouses
- Hague Convention:
- law designated before marriage
- in default, law of state of first
habitual residence
- Art 80, FC
43
: generally follows lex
situs
43
Art. 80. In the absence of a contrary stipulation in a
marriage settlement, the property relations of the
spouses shall be governed by Philippine laws, regardless
of the place of celebration of the marriage and their
residence.
This rule shall not apply:
(1) Where both spouses are aliens;
(2) With respect to the extrinsic validity of
o Doctrine of Immutability of Matrimonial
Property Regime: The change of the
nationality on the part of the husband
or wife or both does not affect the
original property regime except when
the law of the original nationality itself
changes the marital regime, hence, the
property regime has to change
accordingly.
2. Divorce and separation
o Hague Convention: national law of
spouses and lex fori
o Grounds for divorce: lex fori
o Divorce decrees affecting Filipinos:
Art.26(2), FC
44
o Foreign divorce between foreigners
- Hague Convention: a foreign
divorce decree will be recognized in
all contracting states if, at the date
of the institution of the
proceedings,
a. either spouse had his habitual
residence there;
b. both spouses were nationals of
that state; or
c. if only the petitioner was a
national, he should have his
habitual residence there
3. Annulment and declaration of nullity
o Traditional approach: lex loci
celebrationis
o Policy-centered approach: law of the
state of marital domicile
4. Parental relations
o legitimacy: personal law of the parents
o parental authority: personal law of the
father
5. Adoption
o Process of adoption:
- personal law of the child (best
interests); or
- personal law of the adopter, if the
childs domicile is merely
constructive
o effects of adoption: personal law of the
adopting parents
- adoption does not effect changes in
the political rights of the adopted child
contracts affecting property not situated in
the Philippines and executed in the country
where the property is located; and
(3) With respect to the extrinsic validity of
contracts entered into in the Philippines not
affecting property situated in a foreign
country whose laws require different
formalities for their extrinsic validity.
44
Art.26(2).Where a marriage between a Filipino citizen
and a foreigner is validly celebrated and a divorce is
thereafter validly obtained abroad by the alien spouse
capacitating him or her to remarry, the Filipino spouse
shall have capacity to remarry under Philippine law.
PROPERTY
1. Immovables: lex situs
2. Movables:
a. lex domicilii (mobilia sequuntur
personam);
b. lex situs;
c. lex loci actus (law of the place
where the transaction was
completed); or
d. proper law of the forum (law of
the state which has the most
real connection with the
transfer)
In the Philippines:
o Gen. rule: lex situs wrt both personal and
real property (Art. 16,CC)
- capacity to acquire or transfer property
- extrinsic validity of conveyance
- intrinsic validity of conveyance UNLESS
lex intentionis is clearly established
- effects of conveyance
o Exceptions to lex situs rule:
1. where the transaction does not affect
transfer of title to or ownership of land
o applicable law: lex intentionis or
lex voluntatis
2. in contracts where real property is
offered by way of security for the
performance of an obligation such as a
loan
o applicable law: lex situs as to the
mortgage, lex intentionis as to the
loan contract
3. testate or intestate succession and
capacity to succeed
o applicable law: national law of the
decedent (Art. 16(2), CC)
4. under policy-centered approach:
a. when the situs of the movable
property at the time of the
transfer was insignificant or
accidental
b. where the issue involves
considerations other than the
validity and effect of the
transfer itself
o Situs of shares of stock is NOT the same
as situs of the income derived from the
sale of shares (CIR v. Anglo California
National Bank, 1960)
CONTRACTS
1. Extrinsic validity: lex loci celebrationis
(Sec. 9, Restatement 2
nd
; Art.17,CC)
- principle of LOCUS REGIT ACTUM:
place governs the act
2. Intrinsic validity: 3 possible law:
a. Lex loci CONTRACTUS
b. Lex loci SOLUTIONIS
c. Lex loci INTENTIONIS
LEX LOCI CONTRACTUS
o law of the place of making
o merits:
- relative ease in establishing
- certainty and stability
o demerit: unjust results when place of
making entirely incidental
LEX LOCI SOLUTIONIS
O law of the place of performance
O governs:
- time, place, and manner of
performance
- sufficiency of performance
- excuses for non-performance
O merit: always connected to the
contract in a significant way
O demerits not helpful when the contract
is performed in 2 or more states with
conflicting laws
LEX LOCI INTENTIONIS
o law intended by the parties
o may be express or implied
o express
- choice of law provision in the
contract
- must be recognized unless there
are cogent reasons for not doing so
o implied
- based on contemporaneous and
subsequent acts of the parties
- often upheld with reference to the
rule of validity of contracts which
presumes that the parties
contemplate to enter into a valid
contract
3. Capacity to contract: personal law
Choice of Forum Clause
O A case arising from a contract will be
litigated in the forum chosen by the
parties if the choice of forum clause
specifically identifies it as the ONLY
VENUE.
o When there is no fraud or
overreaching, and there is no showing
that the choice-of-forum clause would
be unreasonable and unjust, the clause
must be given effect.
Contracts with Arbitration Clause
o An arbitration clause, stipulating that
the arbitral award of an arbitral panel
in a foreign country is FINAL AND
BINDING, is not contrary to public
policy. It does not oust our courts of
jurisdiction as the international arbitral
award, the award of which is not
absolute and without exceptions, is still
judicially reviewable under certain
conditions provided for by the
UNCITRAL Model Law on ICA as applied
and incorporated in RA 9285. ( Korea
Technologies Co., Ltd. v. Lerma, 2008)
o It is regarded as the wave of
the future in international civil
and commercial disputes.
Brushing aside a contractual
agreement calling for arbitration
between the parties would be a
step backward. Consistent with
the policy of encouraging
alternative dispute resolution
methods, courts should liberally
construe arbitration clauses.
(Ibid.)
Adhesion Contracts
o Adhesion contracts are not entirely
prohibited. The one who agrees to the
contract is in reality, free to reject it
entirely; if he adheres, he gives his
consent.
o Void if there is UNDUE ADVANTAGE on
the part of the dominant party
o Ambiguity construed strictly against
the drafter
Special Contracts
1. Sale or barter of goods: lex situs
2. Simple loan granted by financial
institutions: law of the permanent place of
business
3. Loan granted by a private individual or
where subject matter of loan is personal:
law of the place where the loan was
obtained
4. Pledge, Chattel Mortgage, Antichresis: lex
situs
5. Carriage of goods by sea:
- law of the place of destination
(Art.1753, CC)
- Code of Commerce
- COGSA
6. International Air Transportation: Warsaw
Convention
Limitations to the parties choice of law
1. Cannot be a law which has NO connection
at all with the transaction or the parties
2. Law as changed will govern EXCEPT if the
change is so revolutionary that it was
never contemplated by the parties
3. Choice of law should not be interpreted to
oust the jurisdiction which the court has
already acquired over the parties and the
subject-matter.
4. Cannot contract away provisions of law
especially peremptory provisions heavily
impressed with public interest
5. Cognovit clause (confession-of-judgment
clause) valid only if the parties were of
equal bargaining power and the defendant
agreed to it voluntarily
Applicable law in the absence of effective
choice
o 2
nd
Restatement: law of the place of the
MOST SIGNIFICANT RELATIONSHIP with
the contract as a whole or with a specific
issue arising therefrom
o Factors to consider:
1. Place of contracting
2. Place of negotiating
3. Place of performance
4. Situs of the subject-matter of the
contract
5. Parties domicile, residence,
nationality, place of incorporation,
place of business
6. Place under whose local law the
contract will be most effective
SUCCESSION
1. Extrinsic validity of wills
(Arts.17, 815-817, CC)
Testator
Place of
Execution
Applicable
Law
Filipino
Philippines Philippine law
Foreign
country
1. Lex loci
celebrationi
s
2. Philippine
law
Alien
Philippines
1. law of
nationality
2. Philippine
law
Foreign
country
1. Law of
nationality;
2. Law of
domicile;
3. Lex loci
celebrationi
s;
4. Philippine
law
o Filipinos prohibited from making joint
wills, either here or abroad (Arts.818-
819,CC)
o Code silent as to validity of a joint will
executed by an alien in the Philippines.
It is suggested that it should not be
probated if it would affect heirs in the
Philippines. (Coquia and Pangalangan)
2. Intrinsic validity of wills: national law
of decedent (Arts.16(2) and 1039,CC)
3. Interpretation of wills: national law of
decedent
4. Revocation of wills (Art. 829, CC)
Testator
Place of
revocation
Applicable
law
Philippine
domiciliary
Philippines
Philippine law
Non-
domiciliary
Philippine law
Philippine
domiciliary
Foreign
country
1. Philippine
law
2. lex loci
actus (law
of the place
of
revocation)
(Coquia &
Pangalanga
n)
Non-
domiciliary
1. lex loci
celebrationi
s
2. lex domicilii
at the time
of the
revocation.
5. Probate
o Law of the forum governs procedural
matter
o Compliance with extrinsic requirements
governed by Arts.17,815-817, CC)
6. Administration of estates
o Territorial: governed by the law of the
place where the administration takes
place, and that is the law of the
country from which the administrator
derives his authority.
7. Testamentary trusts
o Extrinsic validity: rules governing wills
apply
o Intrinsic validity: lex situs since a trust
involves property
TORTS
TRADITIONAL APPROACH
1. lex loci delicti commissi applies in
matters concerning conduct and safety
2. lex domicilii of parties applies in
matters concerning loss distribution or
financial protection
Lex loci delicti commissi where tortuous
conduct and injury take place in different
states:
1. common law: place of injury
- last act (vested rights theory)
2. civil law: place of tortuous conduct
- principle is that the legality or
illegality of a persons act should
be determined by the law of the
state where he is at the time he
does such act
MODERN APPROACH
o In determining the state which has the
most significant relationship, the
following factors are to be taken into
account:
a. place of tortuous conduct
b. place of injury
c. victims and tortfeasors domicile,
residence, nationality, place of
incorporation and place of business
d. place where the relationship between
the parties is centered
FOREIGN TORT CLAIMS
o Tort liability is transitory. An action for tort
may be brought wherever the tortfeasor is
subject to suit.
Conditions for enforcement of foreign tort
claims:
1. The foreign tort is based on a civil action
and not on a crime.
2. The enforcement of the tort would not
infringe the public policy of the forum; and
3. The judicial machinery of the forum is
adequate for its proper enforcement.
ATCA (Alien Tort Claims Act)
o Grants US district courts original
jurisdiction over any civil action by an
alien for a tort committed in violation
of the law of nations or a treaty of the
US.
In the Philippines, no specific statutory law
governing the enforcement of claims arising
from foreign torts.
CRIMES
o Applicable law: lex loci delicti commissi
o 2 principles:
1. nullum crimen sine lege
2. territoriality principle
o Exceptions to the territoriality principle in
the Philippine:
1. crimes committed by state officials,
diplomatic representatives and officials
of recognized international
organizations.
- based on the theory of state
immunity from suits
- limited to official acts
2. crimes committed on board a foreign
vessel even if within the territorial
waters of the coastal state, as long as
the effect of such crime does not affect
the peace and order of the coastal
state.
3. Crimes which, although committed by
Philippine nationals abroad are
punishable under Philippine law, to
wit:
- crimes committed while on
Philippine ship or airship
- forging or counterfeiting
Philippine coins or currency
- introducing counterfeit coins or
currency into the Philippines
- Public officers or employees
committing offenses in the
exercise of their functions
- Crimes against national security
and the law of nations (Art. 2,
RPC)
CORPORATIONS AND OTHER JURIDICAL
ENTITIES
CORPORATION OR PARTNERSHIP
PERSONAL LAW
General Rule: Law of the place of
incorporation
Exceptions to incorporation test:
a. Constitutional and statutory
restrictions (Art. XII, 1987
Constitution)
b. Control Test during war Courts
may pierce the veil of corporate
identity and look into the nationality of
the stockholders to determine the
citizenship of the corporation.
Personal law of the corporation governs the
following issues:
a. existence and the legal character of the
corporation
b. capacity and powers of the corporation
c. internal organization of the corporate
enterprise
d. alteration of the charter and the
dissolution of the corporation
DOMICILE OR RESIDENCE OF FOREIGN
CORPORATIONS
o that fixed by the law creating them; or
o if not so fixed, the place where their
legal representation is or where they
exercise their principal functions. (Art.
51, CC)
A foreign corporation granted license to
operate in the Philippines acquires domicile
here.
All foreign corporations lawfully doing
business here in the Philippines shall be bound
by all laws and rules and regulations
applicable to domestic corporations except
provisions for the creation, formation,
organization or dissolution of corporations or
liabilities, responsibilities or duties of
stockholders, members or officers of the
corporation to each other.
Service of summons upon foreign corporations
doing business in the Philippines may be
made:
a. on its resident agent
b. in the absence thereof, on the
government official designated by law
or any of its officers or agents within
the Philippines
c. on any officer or agent of said
corporation in the Philippines
d. by serving summons through
diplomatic channels.
RIGHT OF A FOREIGN CORPORATION TO
BRING SUIT
General Rule: license to do business in the
Philippines required
Exceptions:
1. isolated transactions
2. action to protect trademark, trade
name, goodwill, patent or for unfair
competition
3. agreements fully transacted outside
the Philippines
4. petition filed is merely corollary
defense in a suit against the
corporation
EFFECT OF FAILURE TO SECURE A LICENSE
TO TRANSACT BUISNESS
o The foreign corporation has no right to
sue in the Philippines but it can still be
sued.
o Although the contracts entered into
may be valid as between the parties, it
may not be enforced in the Philippine
courts.
RECOGNITION AND ENFORCEMENT
OF FOREIGN JUDGMENTS
FOREIGN JUDGMENT: a decision rendered
outside the forum and encompasses
judgments, decrees and orders of courts of
foreign countries.
RECOGNITION OF FOREIGN JUDGMENT
- Passive act of giving the same effect that
it has in the State where it was rendered
with respect to the parties, the subject
matter of the action and the issues
involved without the necessity of filing an
action in the forum giving effect to the
judgment.
- Examples of foreign judgments which can
only be recognized: declaratory
judgments, judgments which give no
affirmative relief, judgments which
determine the parties interests in a thing
or status.
ENFORCEMENT OF A FOREIGN JUDGMENT
- A foreign judgment is enforced when, in
addition to being recognized, a party is
given affirmative relief to which the
judgment entitles him and it necessarily
requires the filing of an action.
- This necessarily implies recognition.
BASES OF RECOGNITION AND
ENFORCEMENT
1. COMITY- requires reciprocity between
the concerned jurisdictions
2. DOCTRINE OF OBLIGATION
- foreign judgment of a court of
competent jurisdiction imposes a
duty on the losing litigant
- based on the vested rights theory
POLICY OF PRECLUSION UNDERLYING
RECOGNITION AND ENFORCEMENT
o The policy of preclusion seeks to
protect party expectations resulting
from previous litigation, to safeguard
against the harassment of defendants,
to insure that the task of courts not be
increased by never-ending litigation of
the same disputes, and in a larger
sense to promote what Lord Coke in
the Ferrers Case of 1599 stated to be
the goal of all law: rest and
quietness.(Mijares v. Ranada, 2005)
RELATED CONCEPTS
1. Res judicata: once there is a final
judgment, resolution on the issues
litigated is binding on the parties and
their privies
2. Merger: Plaintiffs cause of action is
merged in the judgment so that he
may not relitigate that exact claim
3. Bar: successful defendant can
interpose as a defense the judgment
in his favor to avert a 2
nd
action by the
plaintiff on the same claim
4. Direct estoppel: relitigation of all
matters decided are precluded
5. Indirect estoppel: all essential
issues of fact actually litigated cannot
be relitigated
REQUISITES FOR RECOGNITION OR
ENFORCEMENT
1. Foreign court had JURISDICTION over
the parties and the case
2. Judgment VALID under the laws of the
country that rendered it
3. Judgment FINAL and EXECUTORY to
constitute res judicata in another
action
4. RECIPROCITY: state where foreign
judgment was obtained allows
recognition and enforcement of
Philippine judgments
5. Judgment is for a FIXED SUM of money
6. Foreign judgment not contrary to
PUBLIC POLICY or GOOD MORALS of
country where it is sought to be
enforced
7. Judgment not obtained by EXTRINSIC
FRAUD, COLLUSION, MISTAKE of fact
or law
PROCEDURES FOR ENFORCEMENT
1. SUMMARY PROCEEDING
o Followed in most civil law countries
o Validation proceeding: authenticated
copy of foreign judgment validated by
clerk of court
2. JUDGMENT REGISTRATION
o Authenticated copy filed in the
registrars office with the proofs
required
3. PETITION
o Followed in common law countries and
in the Philippines
o The rules are silent as to what
initiatory procedure must be
undertaken in order to enforce a
foreign judgment in the Philippines.
But there is no question that the filing
of a civil complaint is an appropriate
measure for such purpose (Mijares v.
Ranada, 2005)
EFFECT OF FOREIGN JUDGMENT IN THE
PHILIPPINES (Section 48, Rule 39, Rules of
Court)
o In an action in rem: the foreign judgment
is deemed conclusive upon the title to
the thing,
o In an action in personam, the foreign
judgment is presumptive, and not
conclusive, of a right as between the
parties and their successors in interest by
a subsequent title.
o However, in both cases, the foreign
judgment is susceptible to impeachment in
our local courts on the grounds of:
- want of jurisdiction
- want of notice to the party
- collusion
- fraud
- clear mistake of law or fact
o It has been recognized that public policy
as a defense to the recognition of
judgments serves as an umbrella for a
variety of concerns in international
practice which may lead to a denial of
recognition. (Mijares v. Ranada, 2005)

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