SYLLABUS FOR THE 2012 BAR EXAMINATIONS CIVIL LAW I. Effect and Application of Laws A.

When law takes effect (Civil Code, Art. 2) - after 15 days following the completion of their publication in the Official Gazette or in a newspaper of general circulation in the Philippines, unless otherwise provided. *The law can provide its own date of effectivity, i.e., it can provide for a period less than or greater than 15 days after publication before the law takes effect. Publication is MANDATORY even if the law provides its own date of effectivity. Internal regulations of administrative agencies which bind only the agency need not be published. B. Ignorance of the law (Civil Code, Art. 3) COMPLIANCE WITH THE LAW Ignorance of the law excuses no one from compliance therewith. (Ignorantia juris neminem excusat) C. Retroactivity of laws (Civil Code, Art. 4) Generally, rules are not retroactive. Exceptions: 1. When the law itself expressly provides Exception to the exception: ex facto law when retroactivity impairs the obligation of contract 2. Remedial statutes 3. Curative statutes 4. Laws interpreting other laws 5. Laws creating new rights 6. Penal laws when favorable to the accused who is not a habitual delinquent D. Mandatory or prohibitory laws (Civil Code, Art. 5) ACTS VIOLATING MANDATORY OR PROHIBITORY LAWS ARE VOID Exception: When law itself authorizes their validity E. Waiver of rights (Civil Code, Art. 6) * Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with a right recognized by law. REQUISITES FOR A VALID WAIVER: 1. Person making the waiver must have the right he is waiving 2. He must have the capacity to make the waiver 3. The waiver must be made in a clear and unequivocal manner 4. Such waiver is not contrary to law, public order, public policy, morals or good customs or is prejudicial to third person. F. Repeal of laws (Civil Code, Art. 7) * Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse, or custom or practice to the contrary. REPEAL OF LAWS Express repeal - repeal of repealing law will not revive the old law Implied repeal - takes place when the provisions of the subsequent law are incompatible with those of the previous law Requisites: 1. Both laws cover the same subject matter 2. The latter law is repugnant to the earlier law Repeal of the repealing law revives the old law unless the contrary is expressly provided in the last law.

G. Judicial decisions (Civil Code, Art. 8) - form a part of the legal system of the Philippines (including interpretation of the law and Constitution) STARE DECISIS Doctrine of stare decisis requires courts to follow the rule established in earlier decisions of the Supreme Court The doctrine, however, is not inflexible, so that when in the light of changing conditions, a rule has ceased to be beneficial to the society, the courts may depart from it. H. Duty to render judgment (Civil Code, Art. 9) * No court or judge shall decline to render judgment by reason of the silence, obscurity or insufficiency of the laws. I. Presumption and applicability of custom (Civil Code, Arts. 10-12) * In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. *Customs which are contrary to law, public order or public policy shall not be countenanced. * A custom must be proved as a fact, according to the rules of evidence. J. Legal periods (Civil Code, Art. 13, as amended by Book I, Sec. 31 of the Administrative Code of 1987 (EO 292)) * When the law speaks of years, months, days or nights, it shall be understood that years are of 365 days each; months, of thirty days; days, of twenty-four hours; and nights, from sunset to sunrise. If months are designated by their name, they shall be computed by the number of days which they respectively have. In computing a period, the first day shall be excluded, and the last day included. K. Applicability of penal laws (Civil Code, Art. 14) Penal laws and those of public security and safety obligatory upon all who live or sojourn in the Philippines, subject to the principles of public international law and to treaty stipulations. L. Conflict of laws (Civil Code, Arts. 15-18) - when there is uncertainty what law is to be applied. STATUS LAWS -Laws relating to family rights and duties or to the status, condition and legal capacity of persons binding upon Filipino citizens even though living abroad. CONFLICTS RULES
Real property personal property Order of succession Amount of successional rights Intrinsic validity of testamentary provisions Forms/solemnities of wills, contracts & other public instruments (when executed before Lex loci celebrationis (law of the country where executed) and Lex situs/lex rei sitae (law of the country where it is situated) National law of the decedent

the consular officials of the Philippines)

Philippine laws

II. Human Relations (Civil Code, Arts. 19-22) Exclude: Independent Civil Actions and prejudicial questions which will be covered by the examinations in Remedial Law Art 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Art 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same. Art 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damages. (acts contra bonus mores) ABUSE OF RIGHTS: when the right is exercised for the purpose of prejudicing or injuring another. Art 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same. - ACCION IN REM VERSO: Action for recovery of what has been paid without just cause Requisites: 1. Defendant has been enriched 2. Plaintiff suffered a loss 3. Enrichment of defendant is without just or legal ground 4. Plaintiff has no other action based on contract, quasi contract, crime or quasi-delict Distinguished from solutio indebeti: Mistake is an essential element in solutio indebeti but not in accion in rem verso. PERSONS I. Persons and Personality (Civil Code) A. Capacity to act - acquired and lost - in some instance, modified or restricted - is not limited on account of religious belief or political opinion 1. Civil personality (Art. 37) KINDS OF CAPACITY a. Juridical capacity fitness to be the subject of legal relations; inherent in every NATURAL person and is lost through death b. Capacity to act power to do acts with legal effect; may be acquired and lost 2. Restrictions on capacity to act (Arts. 38-39) *Mere restrictions but do not exempt from certain obligations which arise from his acts or from property relations such as easement. a. minority b. insanity or imbecility c. state of being a deaf-mute d. prodigality e. civil interdiction *Modify or limit capacity to act:

a. age b. insanity or imbecility c. state of being a deaf-mute d. penalty e. prodigality f. family relations g. alienage h. absence i. insolvency j. trusteeship 3. Birth (Arts. 40-41) PERSONALITY: *PD 603 The civil personality of the child shall commence from the time of his conception, for all purposes favourable to him, subject to the requirements of Article 41 of the Civil Code. Khju ygtttttttttttttttttttttth BUT conceived child shall be considered born for all purposes favorable to it provided: 1. it is alive at the time it is completely delivered from the mothers womb 2. BUT if it had an inter-uterine life of at less than 7 months, if it lives for at least 24 hours after its complete delivery from the maternal womb. Art 41. For civil purposes, the fetus is considered born if it is alive at the time it is completely delivered from the mothers womb. However if the fetus had an intra-uterine life of less than 7months, it is not deemed born if I dies within 24 hours after its complete delivery from the maternal womb. 4. Death (Arts. 42-43) * Civil personality extinguished by death(Art 42) a) Compare Art. 43 with Rule 131, Sec. 3 (jj) presumption of survivorship DOUBTS AS TO ORDER OF DEATH: (Art 43) - As between 2 or more persons called to succeed each other, if there is doubt as to which of them died first, whoever alleges the death of prior to the other shall prove the same, in the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other. This rule applies only to cases involving succession. *Rule 131 Sec 3 (jj) : determined from the probabilities resulting from the strength and age of the sexes - both <15 older deemed survived - both >60 younger - <15 and >60 former - >15 but <60, male survived(if male and female); older (if same sex) - <15 or >60 and between 15&60 latter 5. Juridical Persons, Civil Code, Arts. 44-46 JURIDICAL PERSONS 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 What law governs: 1 and 2 by laws creating them Private corporations regulated by laws of general application on the subject

Partnerships and associations for private interest by the provision of the CCP concerning Partnership B. Domicile and residence (Arts. 50-51) Domicile of natural person for civil rights and obligations place of habitual residence Domicile of juridical person place where their legal representation is established or where they exercise their principal functions, if not fix in the law creating them. Domicile and residence is synonymous only for election purposes. There must be animus revertendi. For purposes of settlement of estate, it must be filed at the residence of the deceased at the time of his death. II. Marriage (Family Code) Exclude: Muslim Code (P.D. 1083) A. Nature of marriage 1. Marriage is 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 B. Requisites 1. Kinds of requisites (Family Code, Arts. 2-3) a. Essential requisites i. legal capacity of the contracting parties who must be male and a female; ii. consent freely given in the presence of the solemnizing officer b. Formal requisites i. authority of the solemnizing officer ii. a valid marriage license EXCEPT: (a) either or both of the contracting parties are at the point of death (articulo mortis) (b) residence of either party is so located that there is no means of transportation to enable such party to appear personally before the LCR (c) marriages among Muslims or members of the ethnic cultural communities, PROVIDED, solemnized in accordance with their customs, rites, or practices. (d) man and woman who have lived together as h and w for at least 5 years and without any legal impediment to marry each other. iii. A marriage ceremony with the appearance of the contracting parties before the solemnizing officer and their personal declaration that they take each other as H and W in the presence of at least 2 witnesses of legal age. Declaration must be entered in the marriage certificate and signed by them. EXCEPT: (a) marriage in articulo mortis when the party is unable to sign, sufficient for one of the witnesses to the marriage to write the name of said party, which fact shall be attested by the solemnizing officer. 2. Effect of absence of requisites (Art. 4) a. Essential - absence any of these render the marriage void ab initio; defect renders the marriage voidable b. Formal absence render the marriage void ab initio; but defect or irregularity does not affect the validity of the

marriage but the party/ies responsible for irregularity shall be civilly, criminally and administratively liable. 3. Essential requisites (Art. 5) a) Age 18 or upwards; not incestuous and marriage between relatives. b) Consent freely given 4. Formal (Arts. 7, 31, 32) * Authorized solemnizing officer a. Any incumbent member of the judiciary within the courts jurisdiction; b. Any priest, rabbi, imam, or minister of any church or religious sect duly authorized by his church or religious sect and registered with the civil registrar general, acting within the limits of the written authority; provided that at least one of the contracting parties belongs to the solemnizing officers church or religious sect. c. Any ship captain or airplane chief in cases of articulo mortis; d. Any military commander of a unit to which a chaplain is assigned, in the absence of the latter, during a military operation in cases of articulo mortis within the zone of military operation; e. Any consul-general, consul or vice consul between Filipino citizens abroad. * Marriage license a. issued by the LCR of the city or municipality where either of the contracting party habitually resides. b. by a consul in case of marriage between Filipino abroad. Between 18 and 21- parents consent Between 21 and 25 parentals advise; If none or unfavourable, ML shall not be issued till after 3 months after publication of the application. *In these cases, certificate that parties have undergone counselling. (failure to this, ML shall be issued after 3 months following publication.) *LCR prepares a notice to be posted for 10 consecutive days on a bulletin board outside the office of the LCR in a conspicuous place. 5. Ceremony (Art. 6) - No required form appearance of the solemnizing officer. or religious rite. Only personal contracting parties before the

6. Solemnizing authority (Art. 7-8, 10) - The marriage shall be solemnized publicly in the chambers of the judge or in open court, in the church, chapel or temple, or in the office of the consul-general, consul or vice consul, and not elsewhere, EXCEPT a. in cases of articulo mortis or b. in remote places c. both parties request in writing to be at a house or place designate by them a) Exceptions (Art. 35 (2)) - Solemnizing officer has no legal authority but either or both parties believed in good faith that the solemnizing officer had the legal authority to do so, marriage is not void. 7. License required (Arts. 3 (2), 9, 11, 20, 26) *Marriage license valid in any part of the Philippines for a period of 120 days from the date of issue.

Art. 26 (lex loci celebrationis) All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country, EXCEPT: i. Those contracted by any party below 18 years of age even with the consent of parents or guardian; ii. Those bigamous or polygamous marriages EXCEPT: declaration of presumptive death or absence of either spouse iii. Those contracted through mistake of one contracting party as to the identity of the other; iv. Those subsequent marriages that are void v. at the time of the celebration, psychologically incapacitated to comply with the essential marital obligations of marriage, even if becomes manifest only after solemnization. vi. those incestuous marriages; vii. between relatives not allowed by law to marry each other by reason of public policy. a) Foreign national (Art. 21) Before ML issued: * The foreigner must submit a certificate of legal capacity to contract marriage issued by their respective diplomatic or consular officials. * Stateless persons or refugees from other country must submit affidavit stating the circumstances showing such capacity to contract marriage. b) Exceptions (Arts. 27, 31-32, 34) i. at the point if death or articulo mortis ii. in articulo mortis between passengers or crew members by a ship captain or by an airplane pilot not only while the ship is at sea or at the plane is in flight, but also during stopovers at ports of call. iii. in articulo mortis between persons within the zone of military operations, whether AFP members or civilians by military commander iv. at least 5 years live-in without any legal impediment to marry each other. 8. Marriage certificate (Art. 22) Exclude: Duties of a Civil Registrar under Arts. 12-19, 23-25 Art. 22 The marriage certificate in which the parties shall declare that they take each other as husband and wife, shall also state: i. The full name, sex and age of each contracting party; ii. their citizenship, religion and habitual residence; iii. the date and precise time of the celebration of marriage; iv. That the proper marriage license has been issued according to law; v. That either or both of the contracting parties have secured the parental consent in appropriate cases; vi. That either or both of the contracting parties have complied with the legal requirements regarding parental advice in appropriate cases; vii. That the parties have entered into a marriage settlement, if any, attaching a copy thereof.
Absence essential requisites FLAW of any or formal STATUS OF MARRIAGE Void ab initio

the marriage will still be valid if either or both contracting parties believed in good faith that the solemnizing officer had legal authority [Article 35 (2)] Defect in essential requisite Irregularity in formal requisite

Voidable Valid but party responsible for such irregularity shall be civilly, criminally and administratively liable

OTHER REQUIREMENTS EITHER OR BOTH PARTIES IS 18 years old and above but below 21 21 years old and above but below 25 18 years old and above but below 25 EFFECTS Lack of parental consent Lack of parental advice/lack of marriage counseling

WHAT IS NEEDED Parental consent Parental advice Marriage counseling

Marriage is VOIDABLE Of NO EFFECT on the validity of marriage However, this will suspend the issuance of the marriage license for a period of 3 months from the completion of publication of the application for marriage license. If the parties get married during the 3-month period without a license, the marriage shall be VOID. On the other hand, if they are able to obtain a license during the 3month period, the marriage will still be valid but may be held civilly and criminally liable.

B. Effect of marriage celebrated abroad and foreign divorce (Art. 26) *If a Filipino married to a foreigner and the latter subsequently obtains a valid divorce abroad capacitating him/her to remarry, the Filipino spouse shall likewise have the capacity to remarry under the Philippine law. C. Void and voidable marriages 1. Void marriages (Arts. 5, 35, 36-38, 52-53) a) Absence of requisites (Art. 35) Void Ab Initio under Article 35 1. Contracted by any party below 18 years old 2. Solemnized by unauthorized solemnizing officer (Except if either or both parties believed in good faith that the officer had authority) 3. Solemnized without license (Except when license not required)

Except: If the marriage is solemnized by unauthorized person,

4. Bigamous or polygamous marriages (Except Article 41 marriage contracted by a person whose spouse has been absent for 4 years (ordinary absence) or 2 years (extraordinary absence) where such person has a well founded belief that his/her absent spouse was already dead and after the absent spouse is judicially is declared presumptively dead 5. Mistake in identity 6. Subsequent marriage void under Article 53 Article 53 provides that a person whose marriage has been annulled may remarry as long as he complies with Art. 52 which requires that after the marriage is annulled the properties of the spouses must be partitioned and distributed and the presumptive legitime of the children must be distributed. Furthermore, the judgment of annulment or absolute nullity, the partition and distribution of the spouses properties and the delivery of the childrens presumptive legitime must be recorded in the appropriate civil registry and registries of property. Failure to comply with these requisites will make the subsequent marriage void ab initio. NOTE: The enumeration of void marriages under Art 35 is not exclusive. Void under Art 5: contracted between same sex b) Psychological incapacity (Art. 36) VOID under Article 36: where one party, who at the time of the celebration of the marriage, was psychologically incapacitated to comply with the essential marital obligations. c) Incestuous marriages (Arts. 37-38) VOID FOR BEING INCESTUOUS (Art 37) 1. Between ascendants and descendants of any degree 2. Between brothers and sisters, whether full or half blood VOID FOR REASON OF PUBLIC POLICY (Art 38) 1. Between collateral blood relatives up to the 4th civil degree 2. Between step-parents and step-children 3. Between parents-in law and children-in law 4. Between adopting parent and adoptive child 5. Between surviving spouse of the adopter and the adopted 6. Between surviving spouse of the adopted and the adopter 7. Between adopted and legitimate child of adopter 8. Between adopted children of same adopter 9. Between parties where one with the intention to marry the other, killed that the other persons spouse or his/her own spouse RULE ON BIGAMOUS MARRIAGE (ARTICLE 41) General Rule: Marriage contracted by any person during the subsistence of a previous marriage is VOID Exception: If before the celebration of the subsequent marriage, the prior spouse had been absent for 4 consecutive years (ordinary absence) or 2 years (extraordinary absence) and the spouse has a well-founded belief that the absent spouse was already dead. In this case, the subsequent marriage is valid but it shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse. Exception to Exception: If both spouses of the subsequent marriage acted in bad faith, such marriage is void ab initio. 2. Prescription (Art. 39) * The action or defense for the declaration of nullity of a marriage shall not prescribe.

3. Subsequent marriage (Arts. 40-44) *Previous marriage null and void - There must be a final judgment declaring previous marriage void. * Absent for 4 years with well-founded belief of death or 2 years where there is danger of death - Spouse present must institute a summary proceeding for the declaration of presumptive death of the absentee spouse, without prejudice to reappearance. - In case of reappearance, and recording of Affidavit of Reappearance, the subsequent marriage is automatically terminated *Effects of Reappearance: i. The children of the subsequent marriage conceived prior to its termination shall be considered legitimate; ii. The absolute community of property or the conjugal partnership shall be dissolved and liquidated, but if either spouse contracted said marriage in bad faith, his or her share of the net profits of the community property or conjugal partnership property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or in default of children, the innocent spouse; iii. Donation by reason of marriage shall remain valid, EXCEPT if the donee contracted the marriage in bad faith, such donations made to said donee are revoked by operation of law; iv. The innocent spouse may revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable; v. The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate and intestate succession. vi. If both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio and all donations by reason of marriage and testamentary dispositions made by one in favour of the other are revoked by operation of law. 4. Annullable marriage (Arts. 14, 45-46) GROUNDS 1. Lack of parental consent, UNLESS after attaining the age of 21, such party freely cohabited with the other. 2. Unsound mind of either party, UNLESS after coming to reason, freely cohabited with the other. 3. Consent obtained by fraud, UNLESS after acquiring full knowledge of the facts, freely cohabited with the other. Circumstances constituting fraud: a. Non-disclosure of conviction by final judgment of crime involving moral turpitude b. Concealment of pregnancy by another man c. Concealment of sexually transmissible disease, regardless of nature, existing at the time of marriage d. Concealment of drug addiction, habitual alcoholism, homosexuality and lesbianism *No other misrepresentation or deceit as to character, health, rank, fortune or chastity shall constitute fraud as will give grounds for action for the annulment of marriage. 4. Consent obtained by force, intimidation or undue influence, UNLESS having disappeared or ceased, freely cohabited with the other. 5. Impotency, continuous and incurable

6. Affliction of sexually transmissible disease found to be serious and which appears incurable 5. Voidable marriages (Art. 45-47) a. parties between 18 and 21 without parental consent b. party of unsound mind c. consent obtained thru fraud, force, intimidation or undue influence d. physically incapable of consummating the marriage e. STD afflicted
ARTICLE 45 The STD is a ground for annulment The STD does not have to be concealed The STD must be serious and incurable ARTICLE 46 The STD is a type of fraud which in turn is a ground for annulment The STD must be concealed The STD does not have been to be serious and incurable PRESCRIPTIVE
PERIOD

Impotence of one party Serious STD

Potent party

Within 5 years after marriage Within 5 years after marriage

Healthy party

d Cannot be ratified but action prescribes Cannot be ratified but action prescribes

EFFECTS OF TERMINATION OF MARRIAGE VOIDABLE DECLARATION

BIGAMOUS MARRIAGE OF NULLITY

(ART

ANNULMENT

41) Status of children

GROUNDS FOR
ANNULMENT

WHO CAN FILE a. Party under age b. Parent or guardian

RATIFICATION Free cohabitatio n after reaching 21

Children of subsequent marriage conceived before its termination legitimate

Lack of parental consent

Insanity of one party

Sane spouse

a. Within 5 years after attaining 21 b. Before child reaches 21 2 views: Sempio-Diy Before death of other party Dean Del Castillo Within 5 years from the time the right of action accrues Anytime before the death of either party During the lucid interval or after regaining sanity also before death of other party Within 5 years from discovery of fraud Within 5 years from the cessation of cause

Illegitimate except Art 36 and Art 53 (Psycho incapacity and subsequent marriage where there is annulment)

Children conceived or born before annulment decree legitimate

Property Relations Free cohabitatio n after insane regains sanity

ACP/CPG shall be liquidated.

Same Same

Guardian of insane spouse Insane spouse

Spouse who contracted the marriage in bad faith, his/her share in the net profits of community property shall be forfeited in favor of common children or if there are none, children of the guilty spouse by previous marriage or in default, the innocent spouse

Fraud

Injured party

Force, intimidation or undue influence

Injured party

Free cohabitatio n after knowledge of fraud Free cohabitatio n after cause has disappeare

Donation s Propter Nuptias

Shall remain VALID except

Same

Same

a. If donee contracted the marriage in bad faith, donations

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

or prescription

As to effect on property

No community property, only coownership (Art 147)

Absolute community exists unless another system is agreed upon in marriage settlement

As to effect on children

Children are illegitimate Exceptions: a. In case of psycho incapacity (Art 36) b. Children born of subsequent marriage (Art 53)

Children are legitimate if conceived before decree of annulment

Insuranc e

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

Same Same

As to how marriage may be impugne d

a. May be attacked directly or collaterally but for purpose of remarriage, there must be judicial declaration of nullity. b. Can still be impugned even after death of parties

a. Cannot be attacked collaterally, only directly, i.e. there must be a decree of annulment

b. Can no longer be impugned after death of one of the parties

Successi on

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

Same

Same

6. Presence of prosecutor (Art. 48) a. to take steps to prevent collusion between the parties: and b. to take care that the evidence is not fabricated or suppressed. *Cases of annulment or declaration of absolute nullity of marriage, no judgment shall be based upon a stipulation of facts or confession of judgment. 7. Pendency of action (Art. 49) * absence of written agreement between spouses, the Court shall provide for the: a. support of the spouses; b. the custody and support of their common children; c. choice of the parent with whom they wish to remain d. visitational rights of other parent. 8. Effects of nullity (Arts. 50-54) Exclude: A.M. No. 02-11-10-SC, Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages; R.A. 6955, entitled An Act to Declare Unlawful the Practice of Matching Filipino Women for Marriage to Foreign Nationals on a Mail Order Basis and Other Similar Practices; R.A. 9208 or the Anti-Trafficking in Persons Act of 2003

DISTINCTION BETWEEN VOID AND VOIDABLE MARRIAGE VOID Inexistent from the time of performance VOIDABLE

As to nature

Valid until annulled

As to susceptibi lity to
ratification

Cannot be ratified

Can be ratified either by free cohabitation

* Art. 43 S2,3,4,5 and Art. 44: and a. inventory, liquidation, partition and distribution of the properties b. custody of children and delivery of their presumptive legitimes (considered advances of legitime) * Children conceived or born before the judgment has become final and executor shall be considered legitimate. III. Legal Separation A. Grounds (Art. 55 and R.A. 9262 or the Anti-Violence Against Women and Their Children Act of 2004) 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 change in religious or political affiliation 3. Attempt to corrupt or induce petitioner to engage in prostitution or connivance in such corruption or inducement 4. Final judgment sentencing respondent to imprisonment of more than 6 years 5. Drug addiction or habitual alcoholism 6. Lesbianism or homosexuality 7. Subsequent bigamous marriage 8. Sexual infidelity or perversion 9. Attempt by respondent against the life of the petitioner 10. Abandonment for more than one year without justifiable cause B. Defenses (Arts. 56-57) 1. Condonation 2. Consent 3. Connivance 4. Mutual fault both given ground 5. Collusion 6. Prescription action for legal separation must be filed within five years from the time of the occurrence of the cause of action C. Cooling-off period (Art. 58) * Trial after six months shall have elapsed since filing of the petition. D. Reconciliation efforts (Art. 59) 1. Legal separation proceedings if still pending shall be terminated 2. Final decree of legal separation shall be set aside but the separation of property and any forfeiture of the share of the guilty spouse shall subsist unless the spouses agree to revive their former property regime E. Confession of judgment (Art. 60) - not allowed to be the basis of judgment or decree F. Effects of filing petition (Art. 61) 1. spouses shall be entitled to live separately; 2. court to designate either of them or a third person to administer the absolute community or conjugal partnership property G. Effects of pendency (Art. 62) Court: 1. provide for the support of the spouses; 2. custody and support of their common children; 3. parent of choice and visitational rights of the other

H. Effects of legal separation (Arts. 63-64) a. Spouses are entitled to live separately b. Marriage bond is not severed c. Dissolution of property regime d. Forfeiture of the share of the guilty spouse in the net profits of the ACP/CPG e. Custody of minor children to innocent spouse (subject to Article 213 which provides that parental authority shall be exercised by parent designated by the Court) f. Guilty spouse is disqualified from intestate succession and provisions made by him in favor of the innocent spouse in a will shall be revoked g. Innocent spouse may revoke the donation made by him in favor of the offending spouse. However, alienations, liens and encumbrances registered in good faith before the recording of the complaint for revocation in the registries of property shall be respected.* h. Innocent spouse may revoke designation of guilty spouse as beneficiary in insurance policy even if such designation be stipulated as irrevocable.* *Revocation must be brought within 5 years from the time the decree of legal separation has become final. 1. Reconciliation (Arts. 65-67) Exclude: A.M. No. 02-11-11-SC or the Rule on Legal Separation -Joint Manifestation under oath duly signed by spouses shall be filed with the court in the same proceeding for legal separation Effects: a. If proceeding is still pending - terminate at whatever stage; b. Final decree - set aside, but the separation of property and any forfeiture of the guilty spouse already effected shall subsist, UNLESS the spouses agree to revive their former property regime. IV. Rights and Obligations Between Husband and Wife A. Essential obligations (Art. 68) 1. to live together 2. observe mutual love, respect and fidelity 3. render mutual help and support B. Family domicile (Art. 69) * The husband and wife shall fix the family domicile. In case of disagreement, the court shall decide. * The Court may exempt one spouse from living with the other if the latter should live abroad or other valid reason for exemption: EXCEPT, if not compatible with the solidarity of the family. C. Support (Art. 70) RULES: 1. jointly responsible for the support of the family. 2. expenses for support and other conjugal obligations shall be paid from: (in order) a. the community property, b. income or fruits of their separate properties c. separate properties D. Management of household (Art. 71) - it is the right and duty of both spouses. - expenses shall be paid: a. the community property, b. income or fruits of their separate properties c. separate properties

- governed by the rules on ordinary donations. E. Effect of neglect of duty (Art. 72) - aggrieved party may apply to the court for relief. F. Exercise of profession (Art. 73) Exclude: R.A. 7192 or the Women in Development and Nation Building Act; R.A. 8187, or the Paternity Leave Act of 1996; R.A. 9710 or The Magna Carta of Women. Either spouse may exercise any legitimate profession or business without the consent of the other. The other spouse may object on valid, serious and moral grounds. * In case of disagreement, the court shall decide whether a. The objection is proper AND b. Benefit has accrued to the family before and after the objection. If benefit accrued to the family before the objection, the resulting obligation shall be enforced against the ACP. If benefit accrued to the family after the objection has been made, the resulting obligation shall be enforced against the separate property of the spouse who has not obtained consent. V. Property Relations of the Spouses WHAT GOVERNS PROPERTY RELATIONS BETWEEN SPOUSES 1. Marriage settlement future spouses may agree upon the regime of ACP, CPG or complete separation of property or any other regime. *In the absence of or void settlement, ACP shall govern. 2. Provision of the Family Code if there is no marriage settlement or when the regime agreed upon is void, the system of ACP shall govern 3. Local custom A. Marriage settlements (Arts. 76-81) REQUISITES OF VALID MARRIAGE SETTLEMENT 1. In writing 2. Signed by the parties 3. Executed before the celebration of marriage 4. If a party executing the settlement needs parental consent, the parent/guardian whose consent is needed must be made a party to the agreement 5. If the party executing the settlement is under civil interdiction or any other disability, the guardian appointed by the court must be made a party to the settlement 6. Registration to LCR (to bind 3rd persons) General rule: In the absence of property relations stipulations, Philippine laws shall govern. EXCEPT: 1. both spouses are aliens; 2. with respect to the extrinsic validity of contracts affecting property not situated in the Philippines and executed in the country where the property is located; 3. with respect to the extrinsic validity of contracts entered into in the Philippines but affecting property situated in a foreign country whose laws require different formalities for its extrinsic validity. * Stipulations in consideration of a future marriage, including donations between the prospective spouses, shall be VOID if the marriage does not take place. B. Donations by reason of marriage (Arts. 82-83, 86, 43(3), 50) Definition: those which are made before the celebration of marriage and in consideration of the same, and in favor of one or both of the future spouses. General Rule: Future spouses cannot donate to each other more than 1/5 of their present property (excess shall be considered void) Exception: If they are governed by ACP GROUNDS TO REVOKE DONATION PROPTER NUPTIAS 1. Marriage is not celebrated or is judicially declared void ab initio 2. Marriage without the needed parental consent 3. Marriage is annulled and donee in bad faith 4. If it is with a resolutory condition and the condition is complied with 5. In legal separation and donee is the guilty spouse 6. Donee commits acts of ingratitude such as: a. If the donee commits an offense against the person, honor or property of the donor, his wife or his children under his parental authority b. If the donee imputes to the donor any criminal offense or any act involving moral turpitude unless the crime was committed against the donee himself, his wife or his children under his authority c. If the donee unduly refuses to support the donor when he is legally or morally bound to give such support *PRESCRIPTIVE PERIOD FOR FILING ACTION FOR REVOCATION OF DONATION PROPTER NUPTIAS 1. If marriage is not celebrated (except donations contained in the marriage settlement which are automatically rendered void if the marriage does not take place) 5 years (Art. 1149) from the time marriage is not solemnized on the fixed date 2. If marriage is judicially declared void, it depends: a. if subsequent marriage is void pursuant to Art. 40 in relation to Arts. 52 and 53, because contracted by a spouse before prior void marriage is judicially declared void by operation of law if donee-spouse contracted subsequent void marriage in bad faith. b. Judicially declared void on grounds other than Art. 40 in relation to Arts. 52 and 53 5 years from finality of judicial declaration of nullity (if action to recover property) 3. When marriage takes place without the required parental consent 5 years 4. If resolutory condition is complied with 5 years from happening of condition 5. When marriage is annulled and donee in bad faith 5 years from finality of decree 6. If donee commits an act of ingratitude 1 year from donors knowledge of that fact 7. In cases of legal separation 5 years from the time the decree of separation has become final C. Void donations by the spouses (Art. 87) General Rule: Spouses cannot donate to each other, directly or indirectly (donations made by spouses to each other during the marriage are void) Exception: Moderate gifts on the occasion of any family rejoicing Applied to common law spouses D. Absolute Community of Property 1. General provisions (Arts. 75-85, 88-90) - ACP commences at the precise moment that the marriage is celebrated. Any stipulation for the commencement at any other time shall be void.

- No waiver of right, interests, shares and effects of the ACP during the marriage can be made except in case of judicial separation of property. *Creditors may petition to rescind the waiver to the extent of the amount sufficient to cover the debt of spouse who made the waiver. - Provisions on co-ownership apply on matters not provided for. 2. What constitutes community property (Arts. 91-93) -The community property consists of all the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter. EXCLUSIONS FROM COMMUNITY PROPERTY 1. Property acquired during the marriage by gratuitous title and its fruits except if its expressly provided by the donor, testator or grantor that they shall form part of the community property 2. Property for personal and exclusive use of either spouse (jewelry forms part of the ACP) 3. Property acquired before the marriage by one with legitimate descendants by former marriage and its fruits and income 3. Charges upon and obligations of the community property (Arts. 94-95) CHARGES UPON THE ACP 1. Support of spouses, their common children and legitimate children of either spouse 2. Debts and obligations contracted during the marriage by designated administrator - spouse, both spouses or by one with the consent of the other 3. Debts and obligations contracted by either spouse without the consent of the other to the extent that it benefited the family 4. Taxes, liens, charges and expenses upon community property 5. Taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used by the family 6. Expenses for professional or vocational course 7. Antenuptial debts which redounded to the benefit of the family 8. Donated or promised to common legit children for profession, vocational course or self improvement 9. Other ante-nuptial debts, support of illegitimate child and liabilities for crime, quasi-delicts in absence of separate property 10. Expenses of litigation between spouses unless the suit is found to be groundless If the community property is insufficient to cover all these liabilities, except those falling under par. 9, the spouses shall be solidarily liable for the unpaid balance with their separate properties. 4. Ownership, administration, enjoyment and disposition of the community property (Arts. 96-98) Administration of community property belongs to both spouses jointly. - In cases of disagreement, the decision of the husband prevails. - If the wife decides to go to court, she must do so within 5 years from the date of the contract implementing the husbands decision.

* If one spouse is incapacitated other spouse may assume sole powers of administration EXCEPT: a. power of disposition or encumbrance Both spouses must approve any dispositions or encumbrances and consent of the other spouse regarding the disposition must be in writing, otherwise, the matter should be brought to court and the court will give the authority, if proper. - If one spouse acts without the consent of the other or without court approval, such disposition/encumbrance is VOID. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the 3rd person which may be perfected as a binding contract upon acceptance by the spouse or court approval. * Neither spouse may donate ACP without the consent of the other. EXCEPT: a. moderate donations for charity or on occasions of family rejoicing or family distress 5. Dissolution of community regime (Arts. 99-101) *TERMINATION OF ACP i. Death of either spouse ii. Legal separation iii. Annulment or marriage declared void iv. Judicial separation of property during marriage General rule: Separation in fact shall not affect the ACP EXCEPT: i. spouse who leaves the conjugal home or refuses to live therein, without just cause, shall not have the right to be supported. *Abandonment left the conjugal dwelling without any intention of returning (a period of 3 months or has failed within the same period to give any information as to his whereabouts shall be prima facie presumed to have no intention of returning to the conjugal dwelling) ii. consent of one spouse to any transaction is required by law, judicial authorization shall be obtained in a summary proceeding. iii. insufficiency of ACP, separate property of both spouses shall be solidarily liable for the support of the family. 6. Liquidation of the absolute community assets and liabilities (Arts. 102-104) *PROCEDURE FOR DISSOLUTION OF ACP i. Inventory of all properties ii. Debts and obligation of ACP are paid iii. Remains of the separate properties of the spouses are returned to the owner iv. Net remainder of the ACP is divided equally between husband and wife v. Presumptive legitimes of children are delivered vi. Adjudication of conjugal dwelling and custody of common children * PROCEDURE UPON TERMINATION OF ACP BY DEATH -the same as settlement of the estate of the deceased. RULE: i. The surviving spouse shall liquidate, judicially or extrajudicially, within 1 year from the date of death of the spouse. After 1 year and no liquidation is made, any disposition or encumbrance involving the ACP shall be VOID.

ii. IF the SS contracted subsequent marriage, without compliance to the above, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage. E. Conjugal Partnership of Gains 1. General provisions (Arts. 105-108) *The spouses contribute the following to a common fund: i. Proceeds, products, fruits and income of separate properties of spouses ii. Everything acquired by spouses through their efforts iii. Everything acquired by spouses through chance * Upon dissolution of marriage or of CPG: net gains or benefits shall be divided equally between them * Commence at the precise moment of the marriage * No waiver can be made except on judicial separation of property. * Creditors may petition to rescind the waiver to the extent of the amount sufficient to cover the debts. * governed by the rules on the contract of partnership in all that is not conflict with what is expressly determined by the FC. 2. Exclusive property of each spouse (Arts. 109-115) *EXCLUSIVE PROPERTY IN CPG i. That brought into the marriage as his/her own ii. That acquired during the marriage gratuitously iii. That acquired by redemption, barter or exchange with exclusive property iv. That purchased with exclusive money of spouse *Spouses retain the ownership, administration and enjoyment of their exclusive properties. May alienate or dispose the exclusive property without the consent of the other spouse and appear alone in court to litigate with regard to the same. *Each spouse may transfer the administration of exclusive property by means of a public instrument and recorded in the RoD of the place where the property is located. 3. Conjugal partnership property (Arts. 116-120) * Presumption of CPG all property acquired during the marriage, either in the name of one or both spouses. * WHAT CONSTITUTES CPG i. Those acquired during the marriage with conjugal funds ii. Those obtained from labor, industry, work or profession of either or both spouse iii. Fruits of conjugal property due or received during the marriage and net fruits of separate property iv. Share in the hidden treasure v. Those acquired through occupation vi. Livestock in excess of what was brought to the marriage vii. Those acquired by chance viii. Property bought on instalments paid partly from exclusive funds of either or both spouses and partly from conjugal funds belongs to the CPG if ownership was vested during the marriage; subject to reimbursement upon liquidation of the partnership. ix. Interest of credits falling due during the marriage on the principal x. Improvements made on the separate property, when the cost of the improvement made by the conjugal partnership and any resulting increase in value are more than the value

of the property at the time of improvement; subject to reimbursement of the value of property upon liquidation. 4. Charges upon and obligations of the Conjugal Partnership of Gains (Arts. 121-123) *Charges upon CPG i. Support of the spouses, their common children and legit children of either spouse ii. Debts and obligations contracted by one without the consent of the other to the extent that the family benefited iii. Debts and obligations contracted during the marriage by administrator- spouse, both spouses or one with the consent of the other iv. Taxes, liens, charges, expenses upon conjugal property v. Taxes and expenses for mere preservation of separate property vi. Expenses for professional, vocational or self-improvement courses of either spouse vii. Antenuptial debts to extent family benefited viii. Value of what is donated or promised to common legit children for professional, vocation or self improvement courses ix. Expenses of litigation 5. Administration of the Conjugal Partnership of Gains (Arts. 124-125) *Administration belongs to the spouses jointly. - In case of disagreements, husband decision shall prevail; subject to recourse to the court by wife which must be availed of within 5 years from the date of the contract implementing such decision. - Other spouse may assume sole powers of administration if one spouse is incapacitated or unable to participate in the administration. EXCEPT: Disposition or encumbrance, which requires authority of the court or written consent of the other spouse. -Absent of consent or authority, disposition is void. - The transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person with regard to the other spouse. 6. Dissolution of the regime of Conjugal Partnership of Gains (Arts. 126-128) * CPG terminates i. death of either spouse ii. legal separation iii. annulment or marriage declared void iv. judicial separation of property during the marriage General rule: Separation in fact shall not affect the CPG EXCEPT: i. spouse who leaves the conjugal home or refuses to live therein, without just cause, shall not have the right to be supported. ii. consent of one spouse to any transaction is required by law, judicial authorization shall be obtained in a summary proceeding. iii. insufficiency of CP property, separate property of both spouses shall be solidarily liable for the support of the family. *In case of abandonment, the aggrieved spouse may: i. petition for receivership ii. judicial separation of property iii. authority to be the sole administrator of the CP property. 7. Liquidation of the conjugal partnership assets and liabilities (Arts. 129-133)

*PROCEDURE FOR DISSOLUTION OF CPG i. Inventory of all property ii. Amounts advanced by CP as payment for personal debts and obligations of either spouse are credited iii. Reimbursement for use of exclusive funds iv. Debts and obligations of the CP are paid v. Remains of exclusive properties are returned vi. Indemnify loss of deterioration of movables belonging to either spouse used for the benefit of the family vii. Net remainder of conjugal property is divided equally viii. Delivery of childrens presumptive legitimes ix. Adjudication of conjugal dwelling to the spouse with whom the majority of children choose to remain and custody of children * PROCEDURE UPON TERMINATION OF CPG BY DEATH - the same as settlement of the estate of the deceased. RULE: i. The surviving spouse shall liquidate, judicially or extrajudicially, within 1 year from the date of death of the spouse. After 1 year and no liquidation is made, any disposition or encumbrance involving the ACP shall be void. ii. IF the SS contracted subsequent marriage, without compliance to the above, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage. BEFORE EFFECTIVITY OF THIS CODE: (August 31, 1988) - Respective capital, fruits and income of each partnership(marriage contracted) shall be determined upon such proof as may be considered according to the rules on evidence. - In case of doubt, the same shall be divided between the different partnerships in proportion to the capital and duration of each. F. Separation of property of the spouses and administration of common property by one spouse during the marriage (Arts. 134-142) General rule: Separation of property during the marriage shall not take place. Except: -by judicial order: judicial separation of property (voluntary or for sufficient cause) * Voluntary Dissolution -Spouses may jointly file a verified petition with the court. * Sufficient cause for Judicial separation 1. spouse sentenced to a penalty which carries with it civil interdiction. 2. spouse declared an absentee. 3. loss of parental authority by other spouse 4. abandonment 5. abused of power of administration 6. separated in fact for 1 year and reconciliation is highly improbable. * In the same proceedings, where separation of property was decreed, the spouse may revive the property regime that existed between them. * In case of voluntary dissolution, the revival shall be a bar to another voluntary dissolution. G. Regime of separation of property (Arts. 143-146) - may refer to present or future property or both. - may be total or partial.

* In partial separation, the property not agreed upon as separate shall pertain to the absolute community. * Each spouse shall own, dispose of, possess, administer and enjoy his or her own separate estate, without need of the consent of the other. To each spouse shall belong all earnings from his or her profession, business or industry and all fruits, natural, industrial, or civil, due or received during the marriage from his or her separate property. * Both spouses shall bear the family expenses in proportion to their income, or, in case of insufficiency or default thereof, to the current market value of their separate properties. * The liability of the spouses to creditors for family expenses shall be solidary. H. Property regime of unions without marriage (Arts. 147-148) 1) Live in - their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on coownership. * In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. - A party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the formers efforts consisted in the care and maintenance of the family and of the household. - Neither party can encumber or dispose by acts inter vivos of his/her share in the property acquired during cohabitation and owned in common without the consent of the other, until after the termination of their cohabitation. 2) In case of void marriage, where one party is in good faith - the share of the party in bad faith shall be forfeited in favor of (a) their common children; in case of waiver or default (b) respective surviving descendants; in their absence, (c) innocent party. 3) Other cases of cohabitation - Only the properties acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in proportion to their respective contributions. - In the absence of proof to the contrary, their contributions and corresponding shares are presumed to be equal. Even in joint deposits of money and evidences of credit. - If one of the parties is validly marriage to another, his/her share in the co-ownership shall accrue to the ACP or CPG existing in such valid marriage. - Party in bad faith, not married, share shall be forfeited the same as above. - If both parties in bad faith, rule on forfeiture shall likewise apply. VI. The Family A. The family as an institution (Arts. 149-151) Art. 149 The family, being the foundation of the nation, is a basic social institution which public policy cherishes and protects. Consequently, family relations are governed by law

and no custom, practice or agreement destructive of the family shall be recognized or given effect. Family relations include those between husband and wife, parents and children, among other ascendants and descendants and among brothers and sisters, full or half blood. Suit between members of the same family it should appear from the verified complaint or petition that earnest efforts towards a compromise have been made but failed Allegation of earnest efforts is JURISDICTIONAL, if it is absent, the court can dismiss the case BUT this rule is inapplicable to the following cases: i. Civil status or persons ii. Validity of marriage or legal separation iii. Any ground for legal separation iv. Future support v. Jurisdiction of courts vi. Future legitime B. The family home (Arts. 152-165)Exclude: Arts.157,161and 162 1. It is constituted jointly by the husband and the wife or by an unmarried head of the family 2. It is the dwelling house where they and their family reside, and the land on which it is situated Under the FC, a family home is deemed constituted from the time it is occupied as a family residence THE FAMILY HOME IS EXEMPT FROM 1. Execution 2. Forced Sale 3. Attachment EXCEPTIONS TO EXEMPTION OF FAMILY HOME (ARTICLE 155) 1. Non-payment of taxes 2. Debts incurred prior to constitution of home 3. Debts secured by mortgages on the premises 4. Debts due laborers, mechanics, architects, builders, materialmen and others who have rendered service or furnished materials for the construction of the building NOTE: The exemption is limited to the value allowed by FC BENEFICIARIES OF A FAMILY INCOME 1. Husband and wife, or unmarried head of the family 2. Parents, ascendants, brothers & sisters living in home and depend on head of family for support SALE, ALIENATION, DONATION, ASSIGNMENT OR ENCUMBRANCE OF THE FAMILY HOME 1. The person who constituted the same must give his/her written consent 2. The spouse of the person who constituted the family home must also give his/her written consent 3. A majority of the beneficiaries of legal age must also give their written consent 4. In case of conflict, the court shall decide REQUISITES FOR CREDITOR TO AVAIL OF THE RIGHT UNDER ARTICLE 160 (sale of the property under execution) 1. He must be a judgment creditor; 2. His claim is 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 (P300T in urban; P200T in rural)

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 obligations enumerated in Article 155 must be paid b. Then the judgment in favor of the creditor will be paid, plus all the costs of execution c. The excess, if any, shall be delivered VII. Paternity and Filiation A. Legitimate children (Arts. 163-171) Art 163 The filiation of children may be by nature or by adoption. Natural filiation may be legitimate or illegitimate. * Legitimate 1) children conceived or born during the marriage of the parents. 2) children conceived as a result of artificial insemination of the wife with the sperm of the husband or that of a donor or both; PROVIDED, both of them authorized such insemination in a written instrument executed and signed by them before the birth of the child and registered with the civil registry. * Illegitimate 1) children conceive and born outside a valid marriage Presumption regarding the childs filiation if the marriage is terminated and the mother contracts another marriage within 300 days after the termination of the former marriage:

Termination of 1st marriage

2nd marriage

180 days after 2nd marriage

300 days after termination of 1st

presumed conceived during the 1st marriage

presumed conceived during the 2nd marriage

IMPUGNING THE LEGITIMACY OF A CHILD General Rule: Only the husband can impugn the legitimacy of a child Exception: The heirs of the husband may impugn the childs filiation in the following cases: 1. If the husband dies before the expiration of period for filing the action 2. If the husband dies after filing without desisting 3. If the child was born after the death of the husband GROUNDS TO IMPUGN THE LEGITIMACY OF THE CHILD: 1. It was physically impossible for the husband to have sexual intercourse with his wife within the first 120 days of the 300

days which immediately preceded the birth of the child because of: a. Physical incapacity of the husband to have sexual intercourse with his wife b. The fact that the husband and wife were living separately in such a way that sexual intercourse was not possible, or c. Serious illness of the husband which absolutely prevented intercourse 2. If its proved that for biological or other scientific reasons, the child could not have been that of the husband, except in the case of children conceived through artificial insemination 3. In case of children conceived through artificial insemination, the written authorization or ratification of either parent was obtained through mistake, fraud, violence, intimidation or undue influence PERIODS FOR FILING OF ACTION TO IMPUGN THE LEGITIMACY OF A CHILD -The action to impugn the legitimacy of the child shall be brought: 1. If the husband (or his heirs, in proper cases) resides in the city or municipality where the child was born or where his birth certificate was recorded within 1 year 2. If the husband (or his heirs) does not reside in the city or municipality where the childs birth took place or was recorded but his residence is in the Philippines within 2 years 3. If the childs birth took place or was recorded in the Philippines while the husband has his residence abroad, or vice-versa within 3 years The period shall be counted from the knowledge of the childs birth or its recording in the civil register. HOWEVER, if the childs birth was concealed from or was unknown to the husband or his heirs, the period shall be counted from the discovery or knowledge of the birth of the child or of the act of registration of said birth, whichever is earlier. B. Proof of filiation (Arts. 172-174) ACTION TO CLAIM LEGITIMACY The child can bring the action during his lifetime If the child dies after reaching majority without filing an action, his heirs can no longer file the action after death If the child dies during minority in the state of insanity, his heirs can file the action for him within 5 years from the childs death If the child dies after commencing the action, the action will survive and his heirs will substitute for him If the child is a minor or incapacitated or insane, his guardian can bring the action in his behalf LEGITIMATE FILIATION MAY BE ESTABLISHED BY ANY OF THE FOLLOWING 1. Records of birth or final judgment 2. Admission of legitimate filiation in a public document or in a private handwritten instrument and signed by the parent concerned; 3. in the absence of these evidences, the legitimate filiation may be proved by: a. Open and continuous possession of the status of a legitimate child b. Any other evidence allowed by the Rules of Court

RIGHTS OF LEGITIMATE CHILDREN 1. Bear surname of parents 2. Receive support from parents, ascendants and in proper cases, from brothers and sisters 3. Received legitimate and other successional rights C. Illegitimate children (Art. 175 and Art. 176 as amended by R.A. 9255 allowing illegitimate children to use the surname of their father) - may be established in the same way and on the same evidence as legitimate children. PERIODS FOR FILING THE ACTION TO ESTABLISH ILLEGITIMATE FILIATION 1. If the action is based on the record of the birth of the child or on admission by the parent of the childs filiation in a public document or in a private handwritten signed document during the lifetime of the child (1,2) 2. If the action is based on the open and continuous possession by the child of the status of an illegitimate child, or on other evidences allowed by the Rules of Court and special laws during the lifetime of the alleged parent (3a,b) RIGHTS OF ILLEGITIMATE CHILDREN 1. Use the surname of the mother/father 2. Receive support according to the provision of the FC 3. Receive legitimate (1/2 of that of a legitimate child) and other successional rights D. Legitimated children (Arts. 177-182) Exclude: A.M. No. 06-11-5-SC or the Rule on DNA Evidence 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 Legitimation takes place by the subsequent marriage of the childs parents Effect of legitimation: It confers on the child the rights of legitimate children Effects of legitimation retroact to the time of the childs birth Legitimation may be impugned only those who are prejudiced in their rights within 5 years from the time the cause of action accrues VIII. Adoption A. Domestic Adoption Act of 1998 (R.A. 8552) 1. Who can adopt *Filipino Any person provided he is: a. Of age b. In possession of full civil capacity and legal rights c. In a position to support and care for his legitimate and illegitimate children, in keeping with the means of the family d. At least 16 years older than the person to be adopted, unless: i. The adopter is the natural parent of the child to be adopted, or ii. The adopter is the spouse of the legitimate parent of the person to be adopted *Alien a. same qualifications as a Filipino (a, b, c,di, dii) b. a citizen of a country where Philippines has diplomatic relations

c. has been living in the Philippines for atleast 3 continuous years and continuous to live until the adoption decree is entered, EXCEPT: i. former Filipino citizen seeks to adopt a relative within the 4th degree ii. one who seeks to adopt a son/daughter of the Filipino spouse iii. married to a Filipino and seeks to adopt jointly a relative within 4th civil degree d. certified by his country to have legal capacity to adopt e. certified by his country that the adopted child is allowed to enter in his country *Guardian a. after termination of guardianship with respect to ward b. clearance of his/her financial accountabilities 2. Who can be adopted a. any person below 18 who has been voluntarily committed to DSWD or judicially declared available for adoption b. legitimate child of the other spouse c. illegitimate child of a qualified adopter to improve the child status d. a person of legal age who has been considered as his/her own child by the adopter since minority e. child whose adoption has been previously rescinded f. child whose biological or adoptive parents have died; PROVIDED that no proceedings shall be initiated within 6 months from the time of death of said parents. 3. Rights of an adopted child (include Family Code, Arts. 189 and 190 on successional rights) EFFECTS OF ADOPTION 1. Deemed a legitimate child of the adopter 2. Acquired reciprocal rights and obligations arising from parent-child relationship 3. Right to use surname of the adopter 4. Parental authority of natural parents terminates and vested in adopter 5. Remains intestate heir of natural parents and blood relatives 6. Legitimate brothers and sisters (whether full or half blood) 4. Rescission of adoption Exclude: 1. Rule on Adoption (A.M. No. 02-6-02-SC ) 2. R.A. 9523, entitled An Act Requiring Certification of the Department of Social Welfare and Development (DSWD) to Declare a Child Legally Available for Adoption as a Prerequisite for Adoption Proceedings. *Who may petition for rescission? - Adoptee only. *Grounds: (RASA) a. Repeated physical and verbal maltreatment b. Attempt on life c. Sexual assault/violence d. Abandonment and failure to comply with parental obligation *Remedy of adopter against the erring adoptee a. Disinheritance *Effects of rescission: a. Restoration of previous legal custody (for minors) b. Extinguishment of reciprocal rights

c. Cancellation of amended birth certificate and restoration of original birth certificate Vested rights respecting criminal sanctions remain. EFFECTS OF THE RESCISSION OF THE ADOPTION a. If the adopted is still a minor, the court shall reinstate the parental authority of the natural parents, unless the latter are disqualified or incapacitated, in which case, the court shall appoint a guardian over the person and property of the minor in the same proceeding b. If the adopted is physically or mentally handicapped, the court shall appoint a guardian over this person or property or both in the same proceeding c. All reciprocal rights and obligations between the adopter and the adopted arising from parent-child relationship are extinguished d. The adopted shall revert to his surname prior to the adoption e. The court shall order the amendment of the records adopted in the civil registries B. Inter-Country Adoption Act of 1995 (R.A. 8043) 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. Sec. 7. Inter-Country Adoption as the Last Resort. The Board shall ensure 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. Towards this end, the Board shall set up the guidelines to ensure that steps will be taken to place the child in the Philippines before the child is placed for inter-country adoption: Provided, however, That the maximum number that may be allowed for foreign adoption shall not exceed six hundred (600) a year for the first five (5) years. 1. Who can adopt Sec. 9. Who May Adopt. An alien or a Filipino citizen permanently residing abroad may file an application for inter-country adoption of a Filipino child if he/she: (a) is at least twenty-seven (27) years of age and at least sixteen (16) years older than the child to be adopted, at the time of application unless the adopter is the parent by nature of the child to be adopted or the spouse of such parent: (b) if married, his/her spouse must jointly file for the adoption; (c) has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and has undergone the appropriate counseling from an accredited counselor in his/her country; (d) has not been convicted of a crime involving moral turpitude; (e) is eligible to adopt under his/her national law; (f) is in a position to provide the proper care and support and to give the necessary moral values and example to all his children, including the child to be adopted; (g) agrees to uphold the basic rights of the child as embodied under Philippine laws, the U.N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement the provisions of this Act; (h) comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption is allowed under his/her national laws; and

(i) possesses all the qualifications and none of the disqualifications provided herein and in other applicable Philippine laws. 2. Who can be adopted Exclude: Arts. 183-188, 191-193 of the Family Code Sec. 8. Who May be Adopted. Only a legally free child may be the subject of inter-country adoption. In order that such child may be considered for placement, the following documents must be submitted to the Board: (a)Child study; (b)Birth certificate/foundling certificate; (c)Deed of voluntary commitment/decree of abandonment/death certificate of parents; (d)Medical evaluation /history; (e)Psychological evaluation, as necessary; and (f)Recent photo of the child. * Legally-free child means a child who has been voluntarily or involuntarily committed to the DSWD, in accordance with the Child and Youth Welfare Code. IX. Support A. What it comprises (Art. 194) - comprises everything indispensable for: (SDCMET) 1. sustenance 2. dwelling 3. clothing 4. medical attendance 5. education 6. transportation RULES REGARDING SUPPORT TO ILLEGITIMATE BROTHERS AND SISTERS (WHETHER FULL OR HALF BLOOD) 1. If the one asking for support is below majority age, he is entitled to support from his illegitimate brother or sister to the full extent, without any condition; 2. If the one asking for support is already of majority age, he is entitled to support only if his need for support is not due to a cause imputable to his fault or negligence B. Who are obliged (Arts. 195-197, 199-200, 206-208) 1) spouses 2) legitimate ascendants and descendants 3) parents and their legitimate children and the legitimate and illegitimate children of the latter 4) parents and their illegitimate children and the legitimate and illegitimate children of the latter 5) legitimate brothers and sisters, whether full or half blood 6) brothers and sisters not legitimately related, whether full or half blood *only the separate property of the person obliged to give support shall be answerable. * in case no separate property, the ACP or CPG shall advance the support which shall be deducted from the share of the spouse obliged upon the liquidation.

C. Support during marriage litigation (Art. 198)

DURING THE
MARRIAGE

PENDING LITIGATION

AFTER LITIGATION

SPOUSES From the community property From the community property assets except if Art 203 applies, that if the claimant spouse is the guilty spouse, he/she will not be entitled to support. if the spouses are under conjugal partnership of gains, support is considered an advance of such spouses' share; the rule does not apply if the spouses are under absolute community of property, based on Art 153 From the community property No obligation to support except if there is legal separation, in which case the court may require the guilty spouse to give support

CHILDREN From the community property From the separate property of the spouses

*RULES GOVERNING SUPPORT BETWEEN BROTHERS AND SISTERS 1. As long as need for support is not due to cause imputable to claimant's fault or negligence & he is not yet of age, the illegitimate brothers / sisters are entitled to support 2. If the claimant is not yet of age, even if cause is imputable to him, he is entitled to support 3. There is a difference in rules concerning support and succession where a barrier exists between legitimate and illegitimate children
SOURCES OF MUTUAL SUPPORT Spouses Usually conjugal partnership or absolute community; sometimes the separate property

Common children of spouses

Conjugal partnership or absolute community of the parents

Illegitimate Children

In Absolute Community separate property of the parent-spouse concerned;

but if the separate property is insufficient. then the absolute property is liable but such support is considered as advances on the share of the parent-spouse In Conjugal Partnership the separate property of the parent-spouse concerned,

but if such is insufficient or there is none, then the conjugal partnership is liable IF all legal obligation have been covered OR can be covered; but such support shall be deducted from the share of the parent-spouse (they are not advances)

E. When demandable (Art. 203) * The obligation to give support shall be demandable from the time the person who has a right to receive the same needs it for maintenance, but it shall not be paid except from the date of judicial or extrajudicial demand. * Support pendente lite may be claimed. * Payment shall be made within first five days of each corresponding month. When the recipient dies, his heirs shall not be obliged to return what he has received in advance. F. Options (Art. 204) 1. To give a fixed monthly allowance; or 2. To receive and maintain the recipient in the giver's home or family dwelling Exception: when there is a legal or moral obstacle thereto G. Attachment (Art. 205) * The right to receive support as well as any money or property obtained as such support shall not be levied upon on attachment or execution. *In case of contractual support, the excess in amount beyond that required for legal support shall be subject to levy on attachment or execution. *Support given by 3rd person without knowledge on the obligor - 3rd person (stranger) shall have a right to claim from the obligor, unless it appears that he gave it without any intention of being reimbursed. X. Parental Authority A. General provisions (Arts. 209-215) CONCEPT (PATRIA POTESTAS) Parental authority is the mass of rights and obligations which parents have in relation to the person and property of their children until their emancipation, and even after under certain circumstances. * Under Art 209, Parental authority and responsibility includes the caring for and rearing of such children for civic consciousness and efficiency and the development of their moral, mental and physical character and well-being. It may not be renounced or transferred except in cases authorized by law. CHARACTERISTICS OF PARENTAL AUTHORITY 1. It is a natural right and duty of the parents (Art. 209 FC) 2. It cannot be renounced, transferred or waived except in cases authorized by law (Art 210 FC) 3. It is jointly exercised by the father and the mother (Art. 211, FC) 4. It is purely personal and cannot be exercised through agents 5. It is temporary WHO EXERCISES? 1. father and mother jointly - In case of disagreement, the fathers decision shall prevail, unless there is a judicial order to the contrary. 2. In case of absence of either parent parent present 3. In case of death of either parent surviving parent 4. In case of remarriage of surviving parent still the surviving parent, unless the court appoints a guardian over the child 5. In case of separation of parents parent designated by the court

Legitimate ascendants Brothers and sisters

Separate property Separate property

LEGAL SUPPORT Based on law

CONTRACTUAL SUPPORT Based on contract, so it can be between strangers

Exempt from execution and attachment

Not exempt from attachment and execution because it is not a legal obligation

EXCEPTION: if the giver contracts with a person whom he is obliged by law to support, in which case only the excess of what is obliged (based on need) can be attached or subject to execution

LEGACY OF SUPPORT If contained in a will, apply the rules of contractual support because there is no more obligation to support to speak of since the giver is already dead

CONTRACTUAL SUPPORT Follow rules of contracts which says that obligation must be fulfilled (support must be given) no matter what happens (even if you lose your job).

BUT if the change in circumstances are manifestly beyond that contemplation of the parties, support may be adjusted accordingly

D. Amount (Arts. 201-202) Amount of support shall be in proportion to the means of the giver and to the need of the recipient - Subject to reduction or increase.

 The court shall take into account all relevant considerations, especially the choice of the child over 7 years old, unless the parent is unfit. TENDER AGE PRESUMPTION - A child under 7 years of age shall not be separated from the mother unless the court finds compelling reasons to order otherwise. In case of death, absence or unsuitability of both parents, the surviving grandparent shall exercise substitute parental authority. B. Substitute and special parental authority (Arts. 216-219) ORDER OF SUBSTITUTE PARENTAL AUTHORITY 1. Surviving grandparent 2. Oldest brother or sister over 21 3. Childs actual custodian, over 21 In case of foundlings, abandoned children, neglected children or abused children, summary judicial proceedings shall be instituted so that they may be entrusted to: 1. Heads of childrens homes 2. Orphanages, or 3. Similar institutions duly accredited by the proper government agency The following exercise special parental authority over the minor child while under their supervision, instruction or custody: 1. The 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 omissions 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.
DISTINCTION BETWEEN SUBSTITUTE PARENTAL AUTHORITY AND SPECIAL PARENTAL AUTHORITY Substitute Parental Authority Special Parental Authority It is exercised in case of death, absence, or if unsuitability of parents. Hence, it is not exercised by the parents of parental authority over the minor children. It is exercised concurrently with the parental authority of the parents and rest on the theory that while the child is in the custody of the person exercising special parental authority, the parents temporarily relinquish parental authority over the child to the latter

4. The Early Childhood Care and Development Act (R.A. 8980) RIGHTS AND DUTIES OF PARENTS AND THOSE EXERCISING PA 1. To keep them in their company, to support, educate and instruct them by right precept and good example, and to provide for their upbringing in keeping with their means; 2. To give them love and affection, advice and counsel, companionship and understanding; 3. To provide them with moral and spiritual guidance, inculcate them honesty, integrity, self-discipline, self-reliance, industry and thrift, stimulate their interest in civic affairs, and inspire in them compliance with the duties of citizenship; 4. To enhance, protect, preserve and maintain their physical and mental health at all times; 5. To furnish them with good and wholesome educational materials, supervise their activities, recreation and association with others, protect them from bad company, and prevent them from acquiring habits detrimental to their health, studies and morals; 6. To represent them in all matters affecting their interests; 7. To demand from them respect and obedience; 8. To impose discipline on them as may be required under the circumstances; and 9. To perform such other duties imposed by law. LIABILITY OF PARENTS FOR TORTS COMMITTED BY THEIR MINOR CHILDREN Parents and other person exercising parental authority are civilly liable for the injuries and damages caused by the acts or omissions by their unemancipated minor children, PROVIDED they are living in their company and under their parental authority This is subject to the appropriate defenses provided by law, D. Effects of parental authority upon the property of the children (Arts. 225-227) Exclude: R.A. 9231, entitled An Act Providing for the Elimination of the Worst Forms of Child Labor and Affording Stronger Protection for the Working Childwhich will be covered under Labor Law EFFECT 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 E. Suspension or termination of parental authority (Arts. 228233) *GROUNDS FOR SUSPENSION OF PARENTAL AUTHORITY (CTGCS) 1. Conviction of parent for crime with civil interdiction (authority is automatically reinstated upon service of the penalty or upon pardon or amnesty of the offender) 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 (2-5 PA revived if the court finds that the cause has ceased and will not be repeated)

C. Effect of parental authority upon the persons of the children (Arts. 220-224) Exclude: 1. Rule on Guardianship of Minors (A.M. No. 03-02-05-SC) 2. Rules on Custody of Minors and Writ of Habeas Corpus in Relation to Custody of Minors (A.M. No. 03-04-04-SC) 3. Solo Parents' Welfare Act of 2000 (R.A. 8972)

*GROUNDS FOR TERMINATION OF PARENTAL AUTHORITY 1. Death of parents 2. Death of child 3. Emancipation of child -Other causes 4. adoption of the child 5. appointment of a general guardian 6. judicial declaration of abandonment of the child 7. upon final judgment of a competent court divesting the party concerned of PA 8. upon declaration of incapacity of person exercising PA If the parents exercising parental authority has subjected the child or allowed him to be subjected to sexual abuse, he shall be permanently deprived of parental authority. CASES WHERE PARENTAL AUTHORITY MAY BE REVIVED (I.E. SUSPENDED PARENTAL AUTHORITY) 1. Adoption of child 2. Appointment of general abandonment 3. Judicial declaration of abandonment 4. Final judgment divesting parental authority 5. Judicial declaration of absence or incapacity or person exercising parental authority 1. Child Abuse Law (R.A. 7610) - "Special Protection of Children Against Abuse, Exploitation and Discrimination Act." - "Child abuse" refers to the maltreatment, whether habitual or not, of the child which includes any of the following: (1) Psychological and physical abuse, neglect, cruelty, sexual abuse and emotional maltreatment; (2) Any act by deeds or words which debases, degrades or demeans the intrinsic worth and dignity of a child as a human being; (3) Unreasonable deprivation of his basic needs for survival, such as food and shelter; or (4) Failure to immediately give medical treatment to an injured child resulting in serious impairment of his growth and development or in his permanent incapacity or death. - Sec. 27. Who May File a Complaint. - Complaints on cases of unlawful acts committed against the children as enumerated herein may be filed by the following: (a) Offended party; (b) Parents or guardians; (c) Ascendant or collateral relative within the third degree of consanguinity; (d) Officer, social worker or representative of a licensed child-caring institution; (e) Officer or social worker of the Department of Social Welfare and Development; (f) Barangay chairman; or (g) At least three (3) concerned responsible citizens where the violation occurred. XI. Emancipation (Arts. 234 and 236, as amended by R.A. 6809 which lowered the age of majority) * Emancipation takes place by the attainment of majority. - it terminates Parental authority over the person and property of the child. * Unless otherwise provided, majority commences at the age of eighteen years. XII. Summary Judicial Proceedings in Family Law Cases

- decided in an expeditious manner, without regard to technical rules. * Separation in fact -Where one spouse seeks judicial authorization for a transaction where consent of the other spouse is required but cannot be obtained or withheld, a verified petition may be filed in court. - Court shall notify the other spouse and order the other spouse to show cause why the petition should not be granted. * Claims for damages by either spouse, except costs of the proceedings, may be litigated only in a separate action. XIII. Retroactivity of the Family Code (Art. 256) Exclude: Arts. 254-255, 257 of the Family Code - Retroactive insofar as it does not prejudice or impair vested or acquired rights. XIV. Funerals (Civil Code, Arts. 305-310) Exclude: Care and Education of Children (Arts. 356-363, Civil Code) * Duty and the right to make arrangements for the funeral of a relative shall be in accordance with the order established for support. * In case of descendants of the same degree, or of brothers and sisters, the oldest shall be preferred. * In case of ascendants, the paternal shall have a better right. *FUNERAL 1. in keeping with the social position of the deceased. 2. in accordance with the expressed wishes of the deceased. 3. In the absence of wishes, religious beliefs or affiliation shall determine. 4. In case of doubt, decision of the family. * No human remains shall be retained, interred, disposed of or exhumed without the consent of the relative allowed by law. XV. Use of Surnames Arts. 364-369, 369-380 (other articles repealed by Family Code)
1 2 3 4 5 CHILD CONCERNED Legitimate child Legitimated child Adopted child Illegitimate child Conceived prior to annulment of marriage Conceived after annulment of marriage SURNAME TO BE USED Fathers surname Fathers surname Adopters surname Mothers surname Fathers surname

the the the the

Mothers surname

WIFE Valid marriage (before the husband dies)

a. b.

c.

SURNAME TO BE USED maidens first name and surname + her husbands surname maidens first surname + her husbands surname e.g. Marife Tan her husbands full name, but prefixing a word indicating that

d.

she is his wife e.g. Mrs. Happy Tan retain the use of her maiden name and surname (use of husbands surname is not a duty but merely an option of the wife)

NO PERSON LEFT INCHARGE OF THE ADMINISTRATION - 2 years having elapsed without any news THERE IS ADMINISTRATOR LEFT - 5 years WHO CAN ASK FOR DECLARATION OF ABSENCE 1. spouse present 2. heir instituted in a will, who may present an authentic copy of the same 3. relatives who may succeed by the law of intestacy 4. those who may have right over the property subordinated to the condition of his death * Judicial declaration of absence takes effect six months after its publication in a newspaper of general circulation. C. Administration of the property of the absentee (Arts. 387389) *WIFE AS ADMINISTRATRIX - cannot alienate or encumber the husbands property, or that of the conjugal partnership without judicial authority. *CEASE OF ADMINISTRATION 1. absentee appears personally or by means of an agent 2. death of absentee is proved and his heirs appear 3. a third person appears showing document that he has acquired the absentees property by purchase or other title D. Presumption of death (Arts. 390-392) Exclude: Arts. 393-396 on contingent assets *7 years absence presumed dead for all purposes EXCEPT for succession *10 years presumed dead for succession EXCEPT disappeared at the age of 75, absence of 5 years sufficient that succession may be opened PRESUMED DEAD FOR ALL PURPOSESINCLUDING DIVISION OF THE ESTATE AMONG THE HEIRS 1. person on board a vessel lost during sea voyage, or an aeroplane which is missing had not been heard for 4 years since the loss 2. person in the armed forces who has taken part in war 4 years missing 3. person in danger of death existence unknown for 4 years *In case of reappearance, he shall recover his property in the condition in which it may be found, and the price of the property that may have been alienated or the property acquired therewith; but he cannot claim either fruits or rents. XVII. Civil Registrar A. Arts. 407-413 *TO BE RECORDED - acts, events and judicial decrees concerning the civil status of persons. * TO BE ENTERED 1. births 2. marriages 3. deaths 4. legal separations 5. annulments of marriage 6. judgments declaring marriages void ab initio 7. legitimations 8. adoptions 9. acknowledgments of natural children

Marriage is annulled - wife is the guilty party she shall resume her maiden name and surname choices: a. resume using her maiden name and surname b. continue employing her husbands surname, unless: i. the court decrees otherwise, or ii. the wife of the former husband is married again to another person she shall continue using the name and surname she was employing prior to the legal separation (Tolentino v CA) choices: same as widowed spouse

- wife is the innocent party

Legally separated

Divorce (at least if they allow it later or for those who got divorced during the Japanese occupation BETWEEN PERSONS 4

younger person is obliged to use such additional name of surname as will avoid confusion b. son may used the word Junior e.g. Marife Lomibao-Tan, Jr. grandsons and other male descendants, shall either : i. add a middle name e.g. Happy Chris Tan ii. add the mothers surname e.g. Happy Lomibao Tan iii. add the Roman numerals II, III and so on

BETWEEN ASCENDANTS AND DESCENDANTS

c.

XVI. Absence (Civil Code, Art. 43; Art. 41 Family Code) A. Provisional measures in case of absence (Arts. 381-383) - the judge may appoint a person to represent him/her. - the spouse present shall be preferred. B. Declaration of absence (Arts. 384-386)

10. naturalization 11. loss or recovery of citizenship 12. civil interdiction 13. judicial determination of filiation 14. voluntary emancipation of a minor 15. changes of name B. Correction of Clerical Errors (R.A. 9048, entitled An Act Authorizing the City or Municipal Civil Registrar or the Consul General to Correct a Clerical or Typographical Error in an Entry and/or Change of First Name or Nickname in the Civil Register Without Need of a Judicial Order.) - applicable when error is harmless or merely clerical and typographical - affidavit only filed to the LCR C. Rule 108, Rules of Court Rule 108 Cancellation or Correction of Entries in the Civil Registry - applicable when error is substantial - petition for the cancellation and change of entry WHO MAY FILE PETITION: - Any person interested in any act, event, order or decree concerning the civil status of persons which has been recorded GROUNDS OF CHANGE OF NAME: 1) ridiculous name 2) difficult to write or pronounce 3) dishonorable 4) create confusion 5) sounds alien 6) a new name is product of legitimation 7) continuous and public usage of name Exclude: Act No. 375 and the Implementing Rules and Regulations of R.A. 9048 PROPERTY I. Characteristics 1. Utility 2. Individuality/Substantivity 3. Susceptibility of appropriation II. Classification (Arts. 415-418) based on mobility 1. Immovable real property 2. Movable personal property Immovable property 1. By nature cannot be moved from place to place because of their nature a) land, buildings & all kinds of constructions adhered to soil b) mine, quarries 2. By incorporation essentially movables but attached to an immovable that it becomes an integral part of it a) trees, plants & growing fruits adhered to soil b) everything attached to an immovable that it will break if separated c) statues, paintings if intended by owner to be integral part of immovable d) animal houses if intended by owner to become permanently attached to immovable 3. By destination movables but purpose is to partake of an integral part of an immovable

a) machinery placed by owner of the tenement & tend directly to meet the needs of such works/industry b) fertilizers when applied to soil c) docks & floating structures 4. By analogy/by law contracts for public works, servitude & other real rights over immovable property Movable property 1. susceptible of appropriations that is not included in enumeration in immovable 2. immovable that are designated as movable by special provision of law 3. forces of nature brought under control by science 4. things w/c can be transported w/o impairment of real property where they are fixed 5. obligations which involve demandable sums (credits) 6. shares of stocks of agricultural, commercial & industrial entities although they may have real estate A. Hidden treasure (Arts. 438-439) MEANING (for legal purposes) any hidden and unknown deposit of money, jewelry, or other precious objects, the lawful ownership of which does not appear. RULES: -belongs to the owner of the land, building, or other property on which it is found. -1/2 shall be given to the finder when discovery is made to the property of another or of the State EXCEPT TRESPASSER (not entitled) - be of interest to science or arts, State may acquire at their just price B. Right of 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. (Art 440) Accession owner of thing becomes owner of everything it may produce or those which may be incorporated or united thereto 1. principle of justice 2. accessory follows the principal Accession continua accession to products of the thing Rights of owners: natural, industrial & civil fruits Exception: possession in good faith by another, usufruct, lease, antichresis 1. Fruits (Arts. 441-444) - right of accession to what is produced. a. natural fruits spontaneous products of the soil, and the young and other products of the animals b. industrial fruits produced by lands of any kind through cultivation or labor c. civil fruits are rents of buildings, the price of leases of lands and other property and the amount of perpetual or life annuities or other similar income *natural or industrial only such as are manifest or born -animals sufficient that they are in the womb of the mother *Third person who gather and produced has the right to reimbursement for expenses. 2. With respect to immovable property

* Whatever is built, planted or sown on the land of another and the improvements or repairs made belong to the owner of the land * All works, sowing and planting presumed made by the owner *Owner of land made construction or improvement with the materials of another -GOOD FAITH pay the value of materials and owner of materials has the right to remove them EXCEPT destroy/injury will result to the work constructed -BAD FAITH obliged to the reparation of damages and owner may remove materials in any event and has the right to be indemnified for damages a) Builder, planter, sower on land of another in the concept of owner Right of owner when another builds, plants or sows in his land: OWNER & BUILDER BOTH IN GOOD FAITH 1. Appropriate as his own after paying for indemnity 2. Oblige the planter, builder to pay for price of land or rent, except when value of lands is greater than thing built convert to rent (i) Builder, planter, sower in good faith (Arts. 448-456) Right of Builder in good faith before payment of indemnity of owner in good faith 1. Right to retain land & building 2. Right not to be compelled to pay for rent 3. Right of retention ceases when obliged to pay for value of and if he fails to do so Right of Builder in good faith when owner is in bad faith 1. Right to indemnity for value of building 2. Right to damages 3. Right to demolish w/o payment of indemnity (ii) Builder, planter, sower in bad faith (Arts. 449-450) Right of owner in good faith when builder is in bad faith 1. Right to appropriate what has been built w/o paying indemnity 2. Order demolition of building 3. Compel the builder to pay for price of land or rent 4. Right to damages Right of builder in bad faith when owner is in good faith -Right to be reimbursed for necessary expenses for preservation of land Bad faith on both builder & owner in pari delicto (no cause of action vs. each other) Right of 3rd person who owns materials 1. Right to be indemnified for value of materials irrespective of good faith or bad faith of builder or owner; if builder has no property, owner is subsidiarily liable 2. When builder is in bad faith & owner in good faith & owner compel builder to remove improvements, owner is not subsidiarily liable 3. When 3rd person is paid by builder, builder may demand from landowner the value of labor & materials b) Usufructuary (Art. 579) Art 579 The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere pleasure as he may deem proper, provided he does not

alter its form or substance; but he shall have no right to be indemnified therefor. He may, however, removes such improvements, should it be possible to do so without damage to property. 3. Lands adjoining river banks a) Alluvion (Art. 457) -accretion to the lands adjoining the banks of river which gradually receive from the effects of the current of waters; BELONGS to the owner of the land Requisites: a. deposit is gradual & imperceptible b. made through effects of current of water c. land where accretion takes place is adjacent to banks of river Rights of riparian owner Right to accretion ipso facto no need to make an express act of possession *It does not apply to owners of estates adjoining ponds or lagoons wherein land left dry by the natural decrease of the waters; however, they do not lose ownership that land inundated by them in extraordinary floods. b) Change of course of river (Arts. 461-462 and P.D. 1067 or the Water Code) Right of owner of land occupied by new river course (river bed is abandoned through natural change) i. Right to old bed ipso facto in proportion to area lost ii. 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 RIVER OPENS A NEW BED i. bed shall become of public dominion CURRENT OF RIVER IN BRANCHES i. Isolated land owners retain ownership ii. Separated portion of land owners retain ownership c) Avulsion (Arts. 459-463) Avulsion transfer of a known portion of land from one tenement to another by force of current of waters Rights of riparian owner i) Right to portion of land transferred if not claimed by owner within 2 years (prescription) ii) Right to trees uprooted if not claimed by owner w/in 6 months; subject to reimbursement for necessary expenses for gathering them & putting them in safe place 4. Islands (Arts. 464-465) Formed on seas within Philippines jurisdiction - belong to the State Formed on navigable or floatable rivers - belong to the State Formation of island in non-navigable/non-floatable 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) C. By object 1. Real or immovable Art 415 The following are immovable property: (1) Land, buildings, roads and constructions of all kinds adhered to the soil;

(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable; (3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object; (4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements; (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (6) Animal houses, pigeon houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included; (7) Fertilizer actually used on a piece of land; (8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant; (9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast; (10) Contracts for public works, and servitudes and other real rights over immovable property. 2. Personal or movable Art 416 The following things are deemed to be personal property: (1) Those movables susceptible of appropriation which are not included in Art 415; (2) Real property which by any special provision of law is considered as personalty; (3) Forces of nature which are brought under control by science; (4) In general, all things which can be transported from place to place without impairment of the real property to which they are fixed. Art 417 The following are also considered as personal property: (1) Obligations and actions which have for their object movables or demandable sums; and (2) Shares of stock of agricultural, commercial and industrial entities, although they may have real estate. *By description: an object is movable if it possesses: 1) Ability to change location 2) Without substantial injury to the immovable to which it is attached. D. By owner (Classification of Property (according to ownership): 1. Of public dominion a) intended for public use b) intended for public service or for the development of the national wealth of state Characteristics: i) outside the commerce of men cannot be alienated or leased ii) cannot be acquired by private individual through prescription c) not subject to attachment & execution d) cannot be burdened by voluntary easement

2. Of private ownership a) Patrimonial property i. 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 @Properties of provinces, cities and municipalities i. Public use ii. Patrimonial Property (i) Distinction between private property of individual persons and of state entities PROPERTY OF PRIVATE OWNERSHIP refers to all property belonging to private persons either individually or collectively and those belonging to the State and any of its political subdivisions which are patrimonial in nature - The state uses the private property for the proprietary purposes. This is subject to registration by individual persons. *PATRIMONIAL PROPERTY OF THE STATE Property of the State owned by it in its private or proprietary capacity. the state has the same rights over this kind of property as a private individual in relation to his own private property E. By nature 1. Consumable/non-consumable vs. Fungible/non-fungible Consumable those movables which cannot be used in a manner appropriate to their nature without being consumed Non-consumable any other kinds Fungible replaceable by an equal quality and quantity Non-fungible identical object must be returned III. Ownership A. Right in general OWNERSHIP IN GENERAL Definitions of Ownership Independent and general right of a person to control a thing particularly in his possession, enjoyment, disposition, and recovery, subject to no restrictions except those imposed by the state or private persons, without prejudice to the provisions of the law. 1. Bundle of rights a) Jus utendi, fruendi, abutendi, vindicandi, disponendi (possidendi) Power of a person over a thing for purposes recognized by law & within the limits established by law Attributes: i. Jus possidendi right to possess ii. Jus utendi right to enjoy iii. Jus fruendi right to fruits iv. Jus abutendi right to use and abuse v. Jus disponendi right to dispose vi. Jus vindicandi right to exclude others from possession of the thing Actions for possession: 1. movable replevin 2. immovable a) forcible entry b) unlawful detainer c) accion publiciana

d) accion reinvindicatoria vii. Principle of self help self defense Elements: a) Person exercising rights is owner or lawful possessor b) There is actual or threatened unlawful physical invasion of his property 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 3rd person negotiorum gestio viii. Right to enclose or fence w/o detriment to servitude constituted ix. Right to surface & everything under it only as far as necessary for his practical interest (benefit or enjoyment) x. Right to hidden treasure found in own property a) hidden and unknown movables w/c consist of money or precious objects b) owner is unknown c) by chance if property owner is state belongs to finder; also if in anothers property; the finder must not be trespasser (i) Actions to recover ownership and possession of real property a) forcible entry used by person deprived of possession through violence, intimidation (physical possession, 1 year unlawful deprivation) b) unlawful detainer used by lessor/person having legal right over property when lessee/person withholding property refuses to surrender possession of property after expiration of lease/right to hold property (physical possession, 1 year from unlawful deprivation) c) accion publiciana plenary action to recover possession d) accion reinvindicatoria recovery of dominion of property as owner (a) Distinctions between accion reivindicatoria, accion publiciana, accion interdictal (b) Distinction between forcible entry and unlawful detainer FE illegal from the very beginning; UD legal from the beginning and becomes illegal only after demand to vacate (ii) Actions for recovery of possession of movable property replevin (return of a movable) (iii) Requisites for recovery of property (a) Proof of right - show that he has a better title than the actual possessor; because the law presumes that the possessor is the actual owner. (b) Identity - there must be identity of property claimed and possessed. (c) Reliance on strength of own evidence, not weakness of defendants claim - must produce and rely evidence to prove his claim. 2. Distinction between real and personal rights Real Rights 1. no passive subject claim against whole world 2. object is corporeal thing (obligation) 3. creates juridical relations through mode & title

4. extinguished through loss or destruction of thing e.g. Registration Real rights arises from (OPLUMEPARP) 1. Ownership 6) Easement 2. Possession 7) Pledge 3. Lease 8) Antichresis 4. Usufruct 9) Redemption 5. Mortgage 10) Preemption Personal Rights 1. Passive and active subject 2. Object is an intangible thing (specific thing) 3. Creates juridical relations through title 4. Not extinguished through loss or destruction of thing E.g. Action to recover sum of money or debt De Facto case of Eminent Domain expropriation resulting from the actions of nature. The owner loses his property in favor of the state without any compensation. B. Modes of acquiring ownership *SOLDTIP a. Succession b. Occupation c. Law (sale) d. Donation e. Tradition f. Intellectual Creation g. Prescription 1. Original - Occupation - Intellectual Creation 2. Derivative - the rest enumerated above is derivative C. Limitations on ownership 1. General limitations: taxation, eminent domain, police power -general limitations for the benefit of the state (eminent domain, police power, taxation) 2. Specific limitations: those imposed by law (sic utere tuo, nuisance, state of necessity), easements voluntarily imposed by owner (servitudes, mortgages imposed by contract) i. specific limitations imposed by law (servitude, easements) ii. specific limitations imposed by party transmitting ownership (will, contract) iii. limitations imposed by owner himself (voluntary servitude, mortgages, pledges) iv. inherent limitations arising from conflicts with other similar rights (contiguity of property) v. owner cannot make use of a thing which shall injure/prejudice rights of 3rd persons (neighbors) vi. acts in state of necessity law permits injury or destruction of things owned by another provided this is necessary to avert a greater danger (with right to indemnity vs. principle of unjust enrichment) vii. true owner must resort to judicial process when thing is in possession of another; law creates a disputable presumption of ownership to those in actual possession a) identify property b) show that he has better title IV. Accession A. Right to hidden treasure

RULES: -belongs to the owner of the land, building, or other property on which it is found. -1/2 shall be given to the finder when discovery is made to the property of another or of the State. EXCEPT TRESPASSER (not entitled) - be of interest to science or arts, State may acquire at their just price B. General rules 1. For immovables: a) Accession discreta (natural, industrial, civil fruits) and continua (over immovables: artificial/industrial and natural) -belong to the owners b) Accession industrial (building, planting, sowing in good faith or bad faith) General Rule whatever is built, planted or sown belongs to owner of land; presumption is owner made them at his expense Exception: contrary is proven Right of owner of material 1. Right to be indemnified or paid of value of property by owner of land 2. Right to remove materials if he can do so w/o injury to work constructed if owner has not paid 3. Right to damages and demolition even if with injury to work if owner of land is in bad faith BOTH IN GOOD FAITH Right of owner when another builds, plants or sows in his land: (OWNER & BUILDER BOTH IN GOOD FAITH) 1. Appropriate as his own after paying for indemnity 2. Oblige the planter, builder to pay for price of land or rent, except when value of lands is greater than thing built convert to rent Right of Builder in good faith before payment of indemnity of owner in good faith 1. Right to retain land & building 2. Right not to be compelled to pay for rent 3. Right of retention ceases when obliged to pay for value of and if he fails to do so OWNER IN GOOD FAITH AND BUILDER IN BAD FAITH Right of owner in good faith when builder is in bad faith 1. Right to appropriate what has been built w/o paying indemnity 2. Order demolition of building 3. Compel the builder to pay for price of land or rent 4. Right to damages Right of builder in bad faith when owner is in good faith -Right to be reimbursed for necessary expenses for preservation of land OWNER IN BAD FAITH AND BUILDER IN GOOD FAITH Right of Builder in good faith when owner is in bad faith 1. Right to indemnity for value of building 2. Right to damages 3. Right to demolish w/o payment of indemnity BOTH IN BAD FAITH Bad faith on both builder & owner in pari delicto (no cause of action vs. each other) Right of 3rd person who owns materials

1. Right to be indemnified for value of materials irrespective of good faith or bad faith of builder or owner; if builder has no property, owner is subsidiarily liable 2. When builder is in bad faith & owner in good faith & owner compel builder to remove improvements, owner is not subsidiarily liable 3. When 3rd person is paid by builder, builder may demand from landowner the value of labor & materials c) Accession natural (accretion, avulsion, rivers, islands) 1. Alluvion - owner of lands adjoining banks of river belongs the accretion gradually received from effects of the water's current Requisites: a. deposit is gradual & imperceptible b. made through effects of current of water c. land where accretion takes place is adjacent to banks of river Rights of riparian owner Right to accretion ipso facto no need to make an express act of possession 2. Avulsion transfer of a known portion of land from one tenement to another by force of current of waters Rights of riparian owner a) Right to portion of land transferred if not claimed by owner within 2 years (prescription) b) Right to trees uprooted if not claimed by owner w/in 6 months; subject to reimbursement for necessary expenses for gathering them & putting them in safe place 3. Change of river bed Right of owner of land occupied by new river course 1. Right to old bed ipso facto in proportion to area lost 2. Owner of adjoining land to old bed shall have right to acquire the same by paying its value value not to exceed the value of area occupied by new bed 3. Formation of island in non-navigable river a) owner of margin nearest to islands formed if nearest to it b) owner of both margins if island is in the middle (divided into halves longitudinally) 4. building, planting & sowing 2. For movables: a) Accession continua (conjunction, adjunction, commixtion/ confusion, specification) 1. Conjunction / adjunction 2 movable things which belong to different owners are united to form a single object Test to determine w/c one is the principal: a. that to w/c the other intended to be united as ornament or for its use of perfection b. value c. volume Rights: 1. If both are in good faith owner of principal acquired the accessory with indemnification 2. If both are in good faith may separate them if no injury will be caused; if value of accessory is greater than principal, owner of accessory may demand separation even if damages will be caused to the principal (expenses to be borne by one who caused the conjunction) 3. If owner of accessory is in bad faith owner of accessory with damages to principal 4. If owner of principal is in bad faith owner of accessory shall have option of principal paying value of accessory or removal of accessory despite destruction of principal

5. Owner of accessory or principal has right to indemnity when thing adjuncts w/o his consent may demand that a thing equal in kind, value and price 2. Specification One employs the materials of another in whole or in part on order to make a thing of a different kind; transformation Rights: 1. If person who made the transformation is in good faith he shall appropriate the thing transformed as his own with indemnity to owner of material for its value 2. If material is more precious than transformed thing owner of material may appropriate the new thing to himself after indemnity paid to labor or demand indemnity for materials 3. If person who made the transformation is in bad faith, owner of material shall appropriate the work to himself w/o paying maker or demand indemnity for value of materials & damages 4. If transformed thing is more valuable than material, owner of material cannot appropriate 3. Commixtion / confusion 2 things of the same or different kinds are mixed & are not separable w/o injury 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 b) Rules for determining the principal and accessory 1. Principal thing is deemed to be that which the other has been united as an ornament or for its use or perfection. 2. Thing of the greater value is the principal. 3. Equal value, one of the greater volume. 4. In paintings and sculpture, the board deemed accessory. V. Quieting of Title to or Interest in and Removal or Prevention of Cloud over Title to or Interest in Real Property (Arts. 476481) A. Requirements 1. plaintiff must have legal or equitable title or interest; but need not be in possession 2. there is cloud on his title to real property or any interest therein by reason of any instrument or proceeding 3. such is apparently valid or effective but is in truth and in fact invalid, ineffective and may be prejudicial to said title OR 1. When contract, instrument or other obligation has been extinguished or has terminated, or has been barred by extinctive prescription. B. Distinction between removing/preventing a cloud quieting of title and

Action to remove cloud intended to procure cancellation, delivery, release of an instrument, encumbrance, or claim constituting a plaintiffs title which may be used to injure or vex him in the enjoyment of his title * Action to prevent cloud intended to prevent cloud from being cast upon title to real property or any interest therein Cloud any instrument which is inoperative but has semblance of title Requisites: 1. Plaintiff must have legal or equitable interest 2. Need not be in possession of property 3. Return to defendant all benefits received he who wants justice must do justice C. Prescription/non-prescription of action Plaintiff in possession imprescriptible Plaintiff not in possession 10 (ordinary) or 30 (extraordinary) VI. Co-ownership - exists whenever the ownership of an undivided thing or right belongs to different persons * The share of co-owners, in the benefits as well as in the charges, shall be proportional to their respective interests. Any stipulation to the contrary is void. *Presumption is equal share unless the contrary is proved. * Any of the co-owners may bring an action in ejectment A. Characteristics of co-ownership 1. In general a) plurality of subjects many owners b) unity of material (indivision) of object of ownership c) recognition of ideal shares 2. Special rules a) Concept of condominium Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas. The real right in condominium may be ownership or any other interest in real property recognized by law, on property in the Civil Code and other pertinent laws. (i) Condominium corporation (ii) Interest in real property (iii) Concept of common areas, amendment (iv) Documents to consider (master deed, declaration of restrictions, articles and by-laws of the condominium corporation or the association, where applicable)

Action to quiet title put end to vexatious litigation in respect to property involved; plaintiff asserts his own estate & generally declares that defendants claim is w/o foundation when proper: 1. contract has been extinguished or terminated 2. contract has prescribed 3. remove cloud

Sec. 4. The provisions of this Act shall apply to property divided or to be divided into condominiums only if there shall be recorded in the Register of Deeds of the province or city in which the property lies and duly annotated in the corresponding certificate of title of the land, if the latter had been patented or registered under either the Land Registration or Cadastral Acts, an enabling or master deed which shall contain, among others, the following: (a) Description of the land on which the building or buildings and improvements are or are to be located; (b) Description of the building or buildings, stating the number of stories and basements, the number of units and their accessories, if any; (c) Description of the common areas and facilities; (d) A statement of the exact nature of the interest acquired or to be acquired by the purchaser in the separate units and in the common areas of the condominium project. Where title to or the appurtenant interests in the common areas is or is to be held by a condominium corporation, a statement to this effect shall be included; (e) Statement of the purposes for which the building or buildings and each of the units are intended or restricted as to use; (f) A certificate of the registered owner of the property, if he is other than those executing the master deed, as well as of all registered holders of any lien or encumbrance on the property, that they consent to the registration of the deed; (g) The following plans shall be appended to the deed as integral parts thereof: (1) A survey plan of the land included in the project, unless a survey plan of the same property had previously bee filed in said office; (2) A diagrammatic floor plan of the building or buildings in the project, in sufficient detail to identify each unit, its relative location and approximate dimensions; (h) Any reasonable restriction not contrary to law, morals or public policy regarding the right of any condominium owner to alienate or dispose of his condominium. The enabling or master deed may be amended or revoked upon registration of an instrument executed by the registered owner or owners of the property and consented to by all registered holders of any lien or encumbrance on the land or building or portion thereof. The term "registered owner" shall include the registered owners of condominiums in the project. Until registration of a revocation, the provisions of this Act shall continue to apply to such property. 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 registered under the Land Registration or Cadastral Acts. The declaration of restrictions shall provide for the management of the project by anyone of the following management bodies: a condominium corporation, an association of the condominium owners, a board of governors elected by condominium owners, or a management agent elected by the owners or by the board

named in the declaration. It shall also provide for voting majorities quorums, notices, meeting date, and other rules governing such body or bodies. Such declaration of restrictions, among other things, may also provide: (a) As to any such management body; (1) For the powers thereof, including power to enforce the provisions of the declarations of restrictions; (2) For maintenance of insurance policies, insuring condominium owners against loss by fire, casualty, liability, workmen's compensation and other insurable risks, and for bonding of the members of any management body; (3) Provisions for maintenance, utility, gardening and other services benefiting the common areas, for the employment of personnel necessary for the operation of the building, and legal, accounting and other professional and technical services; (4) For purchase of materials, supplies and the like needed by the common areas; (5) For payment of taxes and special assessments which would be a lien upon the entire project or common areas, and for discharge of any lien or encumbrance levied against the entire project or the common areas; (6) For reconstruction of any portion or portions of any damage to or destruction of the project; (7) The manner for delegation of its powers; (8) For entry by its officers and agents into any unit when necessary in connection with the maintenance or construction for which such body is responsible; (9) For a power of attorney to the management body to sell the entire project for the benefit of all of the owners thereof when partition of the project may be authorized under Section 8 of this Act, which said power shall be binding upon all of the condominium owners regardless of whether they assume the obligations of the restrictions or not. (b) The manner and procedure for amending such restrictions: Provided, That the vote of not less than a majority in interest of the owners is obtained. (c) For independent audit of the accounts of the management body; (d) For reasonable assessments to meet authorized expenditures, each condominium unit to be assessed separately for its share of such expenses in proportion (unless otherwise provided) to its owners fractional interest in any common areas; (e) For the subordination of the liens securing such assessments to other liens either generally or specifically described; (f) For conditions, other than those provided for in Sections eight and thirteen of this Act, upon which partition of the project and dissolution of the condominium corporation may be made. Such right to partition or dissolution may be conditioned upon failure of the condominium owners to rebuild within a certain period or upon specified inadequacy of insurance proceeds, or upon specified percentage of damage to the building, or upon a decision of an arbitrator, or upon any other reasonable condition. Sec. 10. Whenever the common areas in a condominium project are held by a condominium corporation, such corporation shall constitute the management body of the project. The corporate purposes of such a corporation shall be limited to the holding of the common areas, either in ownership or any other interest in real property recognized by law, to the management of the project, and to such other purposes as may be necessary, incidental or

convenient to the accomplishment of said purposes. The articles of incorporation or by-laws of the corporation shall not contain any provision contrary to or inconsistent with the provisions of this Act, the enabling or master deed, or the declaration of restrictions of the project. Membership in a condominium corporation, regardless of whether it is a stock or non-stock corporation, shall not be transferable separately from the condominium unit of which it is an appurtenance. When a member or stockholder ceases to own a unit in the project in which the condominium corporation owns or holds the common areas, he shall automatically cease to be a member or stockholder of the condominium corporation. b) Rights and obligations of condominium owners (i) Contributions/dues Sec. 6. Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions, the incidents of a condominium grant are as follows: (a) The boundary of the unit granted are the interior surfaces of the perimeter walls, floors, ceilings, windows and doors thereof. The following 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 facilities, pipes, ducts, flues, chutes, conduits, wires and other utility installations, wherever located, except the outlets thereof when located within the unit. (b) There shall pass with the unit, as an appurtenance thereof, an exclusive easement for the use of the air space encompassed by the boundaries of the unit as it exists at any particular time and as the unit may lawfully be altered or reconstructed from time to time. Such easement shall be automatically terminated in any air space upon destruction of the unit as to render it untenantable. (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 easement for ingress, egress and support through the common areas is appurtenant to each unit and the common areas are subject to such easements. (e) Each condominium 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 or encumber his condominium and to have the same appraised independently of the other condominiums but any obligation incurred by such condominium owner is personal to him. (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; Sec. 7. Except as provided in the following section, the common areas shall remain undivided, and there shall be no judicial partition thereof. (ii) P.D. 957, The Subdivision and Condominium Buyers' Protective Decree and R.A. 6552, Realty Installment Buyer Act PD 957:

Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. Section 24. Failure to pay installments. The rights of the buyer in the event of this failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552. Where the transaction or contract was entered into prior to the effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting buyer shall be entitled to the corresponding refund based on the installments paid after the effectivity of the law in the absence of any provision in the contract to the contrary. Section 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the buyer upon full payment of the lot or unit. No fee, except those required for the registration of the deed of sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the owner or developer shall redeem the mortgage or the corresponding portion thereof within six months from such issuance in order that the title over any fully paid lot or unit may be secured and delivered to the buyer in accordance herewith. RA 6552: Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered 3844, as amended by Republic Act Numbered 6389, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made. Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void. c) Grounds for partition of common areas, or dissolution of the condominium Sec. 8. Where several persons own condominiums in a condominium project, an action may be brought by one or more such persons for partition thereof by sale of the entire project, as if the owners of all of the condominiums in such project were co-owners of the entire project in the same proportion as their interests in the common areas: Provided, however, That a partition shall be made only upon a showing: (a) That three years after damage or destruction to the project which renders material part thereof unfit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction, or (b)That damage or destruction to the project has rendered one-half or more of the units therein untenantable and that condominium owners holding in aggregate more than thirty percent interest in the common areas are opposed to repair or restoration of the project; or (c) That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project; or (d) That the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the condominium owners holding in aggregate more than seventy percent interest in the common areas are opposed to continuation of the condominium regime after expropriation or condemnation of a material portion thereof; or (e) That the conditions for such partition by sale set forth in the declaration of restrictions, duly registered in accordance with the terms of this Act, have been met.

Sec. 12. In case of involuntary dissolution of a condominium corporation for any of the causes provided by law, the common areas owned or held by the corporation shall, by way of liquidation, be transferred pro-indiviso and in proportion to their interest in the corporation to the members or stockholders thereof, subject to the superior rights of the corporation creditors. Such transfer or conveyance shall be deemed to be a full liquidation of the interest of such members or stockholders in the corporation. After such transfer or conveyance, the provisions of this Act governing undivided co-ownership of, or undivided interest in, the common areas in condominium projects shall fully apply. Sec. 13. Until the enabling or the master deed of the project in which the condominium corporation owns or holds the common area is revoked, the corporation shall not be voluntarily dissolved through an action for dissolution under Rule 104 of the Rules of Court except upon a showing: (a) That three years after damage or destruction to the project in which the corporation owns or holds the common areas, which damage or destruction renders a material part thereof unfit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction; or (b) That damage or destruction to the project has rendered one-half or more of the units therein untenantable and that more than thirty percent of the members of the corporation, if non-stock, or the shareholders representing more than thirty percent of the capital stock entitled to vote, if a stock corporation, are opposed to the repair or reconstruction of the project, or (c) That the project has been in existence in excess of fifty years, that it is obsolete and uneconomical, and that more than fifty percent of the members of the corporation, if nonstock, or the stockholders representing more than fifty percent of the capital stock entitled to vote, if a stock corporation, are opposed to the repair or restoration or remodeling or modernizing of the project; or (d) That the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the members holding in aggregate more than seventy percent interest in the corporation, if nonstock, or the stockholders representing more than seventy percent of the capital stock entitled to vote, if a stock corporation, are opposed to the continuation of the condominium regime after expropriation or condemnation of a material portion thereof; or (e) That the conditions for such a dissolution set forth in the declaration of restrictions of the project in which the corporation owns or holds the common areas, have been met. Sec. 14. The condominium corporation may also be dissolved by the affirmative vote of all the stockholders or members thereof at a general or special meeting duly called for the purpose: Provided, That all the requirements of Section sixty-two of the Corporation Law are complied with. Sec. 15. Unless otherwise provided for in the declaration of restrictions upon voluntary dissolution of a condominium corporation in accordance with the provisions of Sections thirteen and fourteen of this Act, the corporation shall be deemed to hold a power of attorney from all the members or stockholders to sell and dispose of their separate interests in the project and liquidation of the corporation shall be effected by a sale of the entire project as if the corporation owned the whole thereof, subject to the rights of the corporate and of individual condominium creditors.

Sec. 16. A condominium corporation shall not, during its existence, sell, exchange, lease or otherwise dispose of the common areas owned or held by it in the condominium project unless authorized by the affirmative vote of all the stockholders or members. B. Source of co-ownership 1. law 2. contracts 3. succession 4. fortuitous event/chance commixtion 5. occupancy 2 persons catch a wild animal C. Rights of co-owners 1. Right to benefits proportional to respective interest; stipulation to contrary is void 2. Right to use thing co-owned a. for purpose for which it is intended b. without prejudice to interest of ownership c. without preventing other co-owners from making use thereof 3. Right to change purpose of co-ownership by agreement 4. Right to bring action in ejectment in behalf of other coowner 5. Right to compel co-owners to contribute to necessary expenses for preservation of thing and taxes 6. Right to exempt himself from obligation of paying necessary expenses and taxes by renouncing his share in the pro-indiviso interest; but cant be made if prejudicial to coownership 7. Right to make repairs for preservation of things can be made at will of one co-owner; receive reimbursement therefrom; notice of necessity of such repairs must be given to co-owners, if practicable 8. Right to full ownership of his part and fruits 9. Right to alienate, assign or mortgage own part; except personal rights like right to use and habitation 10. Right to ask for partition anytime 11. Right of pre-emption 12. Right of redemption 13. Right to be adjudicated thing (subject to right of others to be indemnified) 14. Right to share in proceeds of sale of thing if thing is indivisible and they cannot agree that it be allotted to one of them Duties/Liabilities 1. Share in charges proportional to respective interest; stipulation to contrary is void 2. Pay necessary expenses and taxes may be exercised by only one co-owner 3. Pay useful and luxurious expenses if determined by majority 4. Duty to obtain consent of all if thing is to be altered even if beneficial; resort to court if non-consent is manifestly prejudicial 5. Duty to obtain consent of majority with regards to administration and better enjoyment of the thing; controlling interest; court intervention if prejudicial appointment of administrator 6. No prescription to run in favor co-owner as long as he recognizes the co-ownership; - requisites for acquisition through prescription a. he has repudiated through unequivocal acts b. such act of repudiation is made known to other co-owners c. evidence must be clear and convincing

7. Co-owners cannot ask for physical division if it would render thing unserviceable; but can terminate co-ownership 8. After partition, duty to render mutual accounting of benefits and reimbursements for expenses 9. Every co-owner liable for defects of title and quality of portion assigned to each of the co-owner Rights of 3rd parties 1. creditors of assignees may take part in division and object if being effected without their concurrence, but cannot impugn unless there is fraud or made notwithstanding their formal opposition 2. non-intervenors retain rights of mortgage and servitude and other real rights and personal rights belonging to them before partition was made 1. Distinction between rights to property owned in common and full ownership over his/her ideal share * Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto; and he may alienate, assign or mortgage it (limited to the portion which may be allotted to him in the division upon the termination of co-ownership) and even substitute another person in its enjoyment, except when personal rights are involved. 2. Right to oppose acts of alteration - if prejudicial to the common interest, the courts may afford adequate relief. 3. Right to partition a. may be exercised by each co-owner at any time. EXCEPT i. when physical division would render the thing unserviceable for the use for which it is intended. EXCEPT i. when it shall be sold and its proceeds distributed ii. there is an agreement to keep the thing undivided for a certain period of time, not exceeding 10 years, extendible iii. in case where donor or testator prohibit the partition for a period which shall not exceed 20 years. iv. when prohibited by law b. may be made by agreement of parties or by judicial proceeding. c. shall not prejudice 3rd persons, who shall retain the rights of mortgage, servitude or any other real rights belonging to them before the division was made; or personal rights. 4. Right to contributions for expenses (necessary expenses, taxes) -proportional to the share * Each co-owner shall have the right to compel the other coowners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes. -Co-owner may exempt himself from obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and taxes. 5. Waiver -not allowed if prejudicial to co-ownership 6. Right to redemption of co-owners share -may be exercised by the co-owner when another co-owner sold his share to 3rd person; only limited to a reasonable price D. Termination/extinguishment 1. Effect of partition *UPON PARTITION

- there shall be a mutual accounting of benefits received and reimbursement of expenses made. - each co-owner shall pay for damages caused by reason of his negligence or fraud. *AFTER - every co-owner shall be liable for defects of title and quality of the portion assigned to each of the other co-owners 2. Rights against individual co-owners in case of partition - he may allot the property to himself and indemnify the other co-owners 3. Partition in case co-owners cannot agree -property shall be sold and its proceeds distributed VII. Possession Possession holding of a thing or enjoyment of a right 1. occupancy actual or constructive (corpus) 2. intent to possess (animus possedendi) A. Characteristics *AS TO WHO MAY EXERCISE - may be exercised 1. in ones own name or 2. in that of another *TWO CONCEPTS 1. concept of owner 2. the holder of the thing or right to keep or enjoy it, the ownership pertaining to another person *AS TO INTENT 1. good faith possessor who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it; always presumed. 2. bad faith possesses contrary to the foregoing; aware of defect. @Mistake upon a doubtful or difficult question of law may be the basis of good faith. @ One who alleges bad faith on the part of the possessor rests the burden of proof. *AS TO SUBJECT -only those susceptible of being appropriated *Degrees of possession: 1. holding w/o title and in violation of right of owner 2. possession with juridical title but not that of owner 3. possession with just title but not from true owner 4. possession with just title from true owner B. How acquired (Art. 531) -Possession is acquired by the material occupation of the thing or the exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and legal formalities established for acquiring such right. How acquired: a. material occupation possession as a fact 1. physical 2. constructive - tradicion brevi manu (one who possess a thing short of title of owner lease ); -tradicion constitutum possesorium (owner alienates thing but continues to possess depositary, pledgee, tenant)

cannot be recognized at the same time in 2 different personalities except co-possession *RULE ON PREFERENCE(question arise regarding fact of possession) 1. present possessor is preferred 2. two possessors the one longer in possession 3. dates of possession the same one who presents a title 4. both with title and equal judicial resolution/placed in judicial deposit pending determination of its possession or ownership b. subject to action of our will- possession as a right 1. tradicion simbolica delivering object or symbol of placing thing under control of transferee (keys) 2. tradicion longa manu pointing out to transferee the things which are being transferred c. proper acts and legal formalities established for acquiring rights donation, sale @WHO MAY ACQUIRE 1. person who enjoy it 2. legal representative 3. agent 4. any person without any power whatever (needs ratification of person in whose name the act of possession was execute without prejudice to the juridical consequences of negotiorum gestio in a proper case) *POSSESSION THRU SUCCESSION @Possession of hereditary property is deemed transmitted to the heir without interruption and from the moment of the death of the decedent, in case the inheritance is accepted. - One who has renounces an inheritance is deemed never to have possessed the same. @One who succeeds by hereditary title: 1. shall not suffer the consequences of the wrongful possession of the decedent, if he was not aware of the flaws affecting it 2. the effect of possession in good faith shall benefit him from the date of death of the decedent. *Minors and incapacitated may acquire the possession of things with the assistance of their legal representatives in order to exercise the rights which from the possession arise in their favor. *POSSESSION THRU ACQUISITION @Possession cannot be acquired 1. through force or intimidation as long as there is a possessor who objects thereto. @Acts that do not affect possession 1. acts merely tolerated 2. acts executed clandestinely and without the knowledge of the possessor of a thing 3. by violence *Remedy of a person who believes he has an action or right to deprive another of the holding of a thing 1. demand the delivery of a thing; and 2. invoke the aid of the competent court, if there is refusal *Possession as a fact cannot be recognized at the same time in two different personalities EXCEPT -in cases of co-possession

C. Effects of possession *Every possessor has a right to be respected in his possession and should he be disturbed therein he shall be protected in or restored to said possession. 1. Possessor in good faith (Arts. 544, 526-527) a. Possessor in good faith entitled to fruits received before possession is legally interrupted ( natural and industrial considered received gathered or severed; civil (deemed to accrue daily) proportion) b. Improvements caused by nature or time to inure to the benefit of person who has succeeded in recovering possession c. Wild animals possessed while in ones control; domesticated possessed if they retain habit of returning back home d. One who recovers, according to law, possession unjustly lost is deemed to have enjoyed it w/o interruption *Liabilities: a. cost of litigation b. if acted with fraudulent intent or negligence, liable for loss or deterioration a) Right to pending fruits (Art. 545) i. Possessor in good faith entitled to part of net harvest and part of expenses of cultivation if there are natural or industrial fruits ( proportionate to time of possession); -owner has option to require possessor to finish cultivation and gathering of fruits and give net proceeds as indemnity for his part of expenses; -if possessor in good faith refuses to accept the above concession barred from indemnification in other manner b) Right to be reimbursed (i) Necessary and useful expenses (Arts. 546-547) *NECESSARY EXPENSES -right available to both possessors in good faith or in bad faith; BUT only possessor in good faith has right of retention over thing if unpaid by the owner * USEFUL EXPENSES - only to possessor in good faith - with right of retention; -owner has option of paying expenses or paying the increase in value of property which thing acquired by reason of useful expenses; otherwise the possessor can removed if without damage to the principal thing will result (ii) Expenses for pure luxury (Art. 548) *Possessor in good faith and bad faith may not be entitled to payment for luxurious expense. BUT may remove them provided principal is not injured provided owner does not refund the amount expended 2. Possessor in bad faith (Arts. 449, 549, 552) Art 449 He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity. *Liabilities: a. Reimburse the fruits received and those which the legitimate possessor could have received

b. liable for deterioration or loss in every case even if caused by fortuitous event c. cost of litigation D. Loss or unlawful deprivation of a movable (Arts. 559, 1505(3)) Possession not lost: 1. Even for time being he may not know their whereabouts, possession of movable is not deemed lost so long as they remain under the control of the possessor 2. When agent encumbered property without express authority except when ratified 3. Possession may still be recovered: a. Unlawfully deprived or lost b. Acquired at public sale in good faith with reimbursement to the price paid REASON: Buyer requires no better title to the goods than the seller had EXCEPT: a. Provision of law enabling the apparent owner to dispose as if he is owner b. Sale under order of the court c. Purchases made at merchant stores, fairs or markets d. Negotiable document of title Possession is equivalent to title a. possession is in good faith b. owner has voluntarily parted with the possession of the thing c. possessor is in concept of an owner 1. Period to recover (Arts. 1140, 1134, 1132, 1133) *MOVABLES - actions to recover lapsed after 8 years from the time the possession thereof is lost - ownership prescribed though uninterrupted possession of 4 years in good faith; 8 years if in bad faith - possessed through a crime can never be acquired through prescription *IMMOVABLES - ownership are acquired by ordinary prescription through possession of 10 years; 30 years if in bad faith 2. Finder of lost movable (Arts. 719-720) - return it to the previous possessor - if unknown, deposit it with the mayor of the city or municipality where the finding has taken place (mayor shall publicly announced for two consecutive weeks) - if cannot be kept without deterioration, or without expenses which considerably diminish its value, it shall be sold at public auction 8 days after publication - after 6 months, no owner appeared, the thing found or value shall be awarded to the finder. 3. Distinguished from voidable title (Art. 1506) Art 1506 Seller has voidable title, but not avoided at the time of the sale; buyer in good faith acquires a good title to the goods. E. In concept of owner, holder, in ones own name, in name of another 1. in concept of owner owner himself or adverse possessor Effects: a. may be converted into ownership through acquisitive prescription b. bring actions necessary to protect possession c. ask for inscription of possession

d. demand fruits and damages from one unlawfully detaining property 2. in concept of holder usufruct, lessee, bailee 3. in oneself personal acquisition a. he must have capacity to acquire possession b. intent to possess c. possibility to acquire possession 4. in name of another agent; subject to authority and ratification if not authorized; negotiorum gestio a. representative has intention to acquire for another and not for himself b. person from whom it is acquired has intention of possessing it F. Rights of the possessor 1. Right to be respected in his possession; if disturbed protected by means established by law; spoliation 2. Possession acquired and enjoyed in concept of owner can serve as title for acquisitive prescription a. Possession has to be in concept of owner, public, peaceful and uninterrupted b. Title short of ownership 3. Person in concept of owner has in his favor the legal presumption of just title (prima facie) 4. Possession of real property presumes that movables are included 5. Co-possessors deemed to have exclusively possessed part which may be allotted to him; interruption in whole or in part shall be to the prejudice of all G. Loss/termination Loss of possession: 1. abandonment of the thing renunciation of right; intent to lose the thing 2. assignment made to another by onerous or gratuitous title 3. destruction or total loss of the thing or thing went out of commerce 4. possession of another if new possession lasted longer than 1 year ( possession as a fact); real right of possession not lost except after 10 years VIII. Usufruct MEANING: right to enjoy anothers property with correlative duty of preserving its form and substance a. things movable/immovable b. rights provided it is not strictly personal A. Characteristics 1. legal constituted by law 2. voluntary contracts, wills 3. mixed prescription 4. total or partial 5. simultaneous or successive 6. pure or conditional 7. With a term constituted on a right B. Classification 1. total or partial 2. simultaneous or successive 3. pure or conditional C. Rights and obligations of usufructuary *RIGHTS 1. Right to civil, natural & industrial fruits of property 2. Right to hidden treasure as stranger

3. Right to transfer usufructuary rights gratuitous or onerous; -but is co-terminus with term of usufruct; fruits proportionate at duration of usufruct; -but cant do acts of ownership such as alienation or conveyance except when property is: a. consumable b. intended for sale c. appraised when delivered; if not appraised & consumable return same quality (mutuum) 4. Right not exempt from execution and can be sold at public auction by owner 5. Naked owner still have rights but w/o prejudice to usufructuary; may still exercise act of ownership bring action to preserve 6. Right to fruits growing at time usufruct begins; growing fruits at termination of usufruct belongs to owner 7. Right to necessary expenses from cultivation at end of usufruct 8. Right to enjoy accessions & servitudes in its favor & all benefits inherent therein 9. Right to make use of dead trunks of fruit bearing trees & shrubs or those uprooted/cut by accident but obliged to plant anew 10. Right of usufructuary of woodland ordinary cutting as owner does habitually or custom of place; cannot cut down trees unless it is for the restoration of improvement of things in usufruct must notify owner first 11. Right to leave dead, uprooted trees at the disposal of owner with right to demand that owner should clear & remove them if caused by calamity or extraordinary event impossible to replace them 12. Right to oblige owner to give authority & furnish him proofs if usufruct is extended to recover real property or real right 13. Right to necessary expenses 14. Right to introduce useful & luxurious expenses but with no obligation of reimbursement on part of owner; may remove improvement if can be done w/o damage 15. Right to set-off improvements against damages he made against the property 16. Right to administer when property is co-owned; if coownership cease usufruct of part allotted to co-owner belongs to usufructuary not affected 17. Right to demand the increase in value of property if owner did not spend for extraordinary repairs when urgent & necessary for preservation of thing *OBLIGATIONS 1. Pay expenses to 3rd persons for cultivation & production at beginning of usufruct; who have right to fruits should reimburse expenses incurred 2. Generally, usufructuary has no liability when due to wear & tear, thing deteriorates, obliged to return in that state; except when there is fraud or negligence, then he shall be liable 3. Before entering into usufructuary: a) Notice of inventory of property (appraisal of movables & description) b) Posting of security 1. not applicable to parents who are usufructuary of children except when 2nd marriage contracted 2. excused allowed by owner, not required by law or no one will be injured failure to give security: owner may demand that: a. immovables be placed under administration b. NI can be converted into registered certificates or deposited in bank

c. Capital & proceeds of sale of movables be invested in safe securities d. Interest on proceeds or property under admin belong to usufructuary e. Owner may retain property as administrator w/ obligation to deliver fruits to usufructuary until he gives sufficient security f. Effect of security is retroactive to day he is entitled to fruits 4. Take care of property as a good father of family 5. Liable for negligence & fault of person who substitute him 6. If usufruct is constituted on animals duty bound to replace dead animals that die from natural causes or became prey; if all of them perish w/o fault but due to contagious disease / uncommon event deliver remains saved; - if perish in part due to accident continue on remaining portion; if on sterile animals as if fungible replace same kind & quality 7. Obliged to make ordinary repairs wear & tear due to natural use of thing and are indispensable for preservation; owner may make them at expense of usufructuary during existence of usufruct 8. Obliged to make expenses due to his fault; cannot escape by renouncing usufruct 9. Pay legal interest from extraordinary expenses made by owner 10. Payment of expenses, charges & taxes affecting fruits 11. Payment of interest on amount paid by owner charges on capital 12. Obliged to notify owner of act of 3rd person prejudicial to rights of ownership he is liable if he does not do so for damages as if it was caused through his own fault 13. Expenses, cost & liabilities in suits brought with regard to usufructuary borne by usufructuary D. Rights of the owner RIGHTS of naked owner 1. Alienate thing 2. Cant alter form or substance 3. Cant do anything prejudicial to usufructuary 4. Construct any works and make any improvement provided it does not diminish value of usufruct or prejudice right of usufructuary OBLIGATIONS of owner 1. extraordinary expenses; usufructuary obliged to inform owner when urgent and there is the need to make them 2. expenses after renunciation of usufruct 3. taxes & expenses imposed directly on capital 4. if property is mortgaged, usufructuary has no obligation to pay mortgage; if attached, owner to be liable for whatever is lost by usufructuary 5. if property is expropriated for public use owner obliged to either replace it or pay legal interest to usufructuary of net proceeds of the same E. Extinction/termination (DEMRLTP) 1. death of usufructuary unless contrary intention appears 2. expiration of period of usufruct 3. merger of usufruct & ownership 4. renunciation of usufructuary express 5. total loss of thing 6. termination of right of person constituting usufruct 7. prescription use by 3rd person loss in part remaining part shall continue to be held in usufruct

usufruct cannot be constituted in favor of a town, Corp or assoc. for more than 50 years usufruct constituted on immovable whereby a building is erected - & building is destroyed right to make use of land & materials if owner wishes to construct a new building pay usufructuary the value of interest of land & materials both share in insurance if both pays premium; if only owner then proceeds will go to owner only effect if bad use of the thing owner may demand the delivery of and administration of the thing with responsibility to deliver net fruits to usufructuary at termination of usufruct: i. thing to be delivered to owner with right of retention for taxes & extraordinary expenses w/c should be reimbursed ii. security of mortgage shall be cancelled after delivery IX. Easements or Servitudes (Arts. 613, 615-616) Meaning: an encumbrance imposed upon an immovable for the benefit of another immovable belonging to different owner. TWO PROPERTIES INVOLVED 1. dominant estate immovable in favor of which the easement is established 2. servient estate subject of easement A. Characteristics *MANNER OF USE 1. continuous those the use of which are or may be incessant without the intervention of any act of man. 2. discontinuous those which are used at intervals and depend upon the acts of man. *VISIBILITY 3. apparent those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same. 4. non-apparent those which show no external indication of their existence. *OBLIGATION TO THE SERVIENT ESTATE OWNER 5. positive one which imposes upon the owner of the servient estate the obligation of allowing something to be done or of doing it himself. 6. negative those which prohibit the owner of the servient estate from doing something which he could lawfully do if the easement did not exist. *OTHER CHARACTERISTICS 7. inseparable cannot be detached from the estate to which they actively or passively belong. 8. indivisible cannot be modified even if the servient estate is divided into two or more persons, each of them must bear it on the part which corresponds to him. *ESTABLISHMENT 1. by law - legal 2. will of owners - voluntary B. Classification 1. Legal easements - imposed by law - for their object either for public use or the interest of private persons

- may be modified by agreement of the interested parties, whenever the law does not prohibit it or no injury is suffered by a third person. i. Easement relating to waters lower estate obliged to receive the waters, including the stones which they carry, which naturally and without the intervention of man descend from the higher estates. ii. Easement of right of way iii. Easement of party wall existence is presumed, unless there is title or exterior sign or proof to the contrary iv. Easement of light and view to admit light v. easement of drainage can be demanded if impossible to give an outlet through the house itself to the rain water collected vi. Easement of intermediate distances and works for certain construction and planting prohibits the building of by nature is dangerous or noxious. vii. Easement against Nuisance prohibits the proprietor or possessor from committing nuisance through noise, jarring, offensive odor, smoke, heat, dust, water, glare and other causes viii. Easement for lateral and subjacent support prohibits the proprietor to make excavations upon his land as to deprive any adjacent land or building of sufficient support a) Right of way - demand made after payment of proper indemnity - made by the owner of or any person with real right to an immovable which is surrounded by other immovables pertaining to other persons and without adequate outlet to a public highway @This is not compulsory if the isolation of the immovable is due to the proprietors own acts. @ Established at the point least prejudicial to the servient estate and where the distance from the dominant estate to a public highway may be the shortest. *Width shall be that which is sufficient for the needs of the dominant estate and may accordingly be changed from time to time *Vendor obliged to grant right of way without indemnity - if his land is isolated by the vendee, he may demand right of way after paying an indemnity *Donor with indemnity - if his land is isolated, may demand right of way but not liable for indemnity @If permanent easement the necessary repair shall be made by the dominant estate; shall reimbursed the servient owner a proportionate share of the taxes. @Animal path shall not exceed in any case the W-75 m @ Animal trail shall not exceed 37m and 50 cm @Compulsory easement or for a watering place for animals after payment of indemnity - can be imposed only for reasons of public use in favour of a town or village - shall not exceed W-10 m 2. Voluntary easements (Art. 688) -every owner of a tenement or land may establish thereon easements which he may deem suitable, and in the manner and form he may deem best, provided he does not contravene the laws, public policy or public order.

*Even there is usufructuary, he may impose it without the consent of the former provided it will not injure the right of usufruct. *Naked owner and beneficial owner is different perpetual voluntary easement is possible provided with consent of both owners *Co-ownership consent of all co-owners required before voluntary easement *The consent of one co-owners bind himself and his successors not to prevent the exercise of the right granted. a) Effect of zoning ordinance - Factories and shops may be maintained provided the least possible annoyance is caused to the neighbourhood C. Modes of acquiring easements 1. Continuous and apparent a. by virtue of a title; or b. by prescription of 10 years How computed: Positive 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 servient estate. Negative from the day on which the owner of the dominant estate forbade, by an instrument acknowledged before a notary public, the owner of the servient estate from executing an act which would be lawful without the easement. 2. Continuous non-apparent; and discontinuous, whether apparent or not a. acquired by virtue of a title b. cannot be acquired by prescription; hence deed of recognition by the owner or by a final judgment is needed. 3. Easement established or maintained by the owner of both @Upon establishment of easement, all the rights necessary for its use are considered granted. - Owner of dominant estate cannot use the easement except for the benefit of the immovable originally contemplated. Neither can he exercise the easement in any other manner than that previously established. 1. Compulsory easements (Arts. 620-624) - Negative easement which requires an instrument executed before a notary public - Continuous non-apparent and discontinuous, whether apparent or not 2. Easement of light and view (Arts. 669-673) owner of wall, not a party wall can make openings to admit light at the height of the ceiling and of the size 30cm2 with an iron grating imbedded in the wall and with a wide screen. -windows, balconies, or other similar projections leave a distance of 2m between the wall in which they are made and such contiguous property - oblique views 60cm *Non-observance of distance does not give rise to prescription

- prohibits the part owner to open through the party wall any window or aperture of any kind, EXCEPT if with consent of the others. PRESCRIPTION FOR ACQUISITION from the time of opening of the window if party wall -from the time of formal prohibition upon the proprietor of the adjoining land or tenement if the window is through the wall D. Rights and obligations of dominant and subservient estate * Servient owner bound himself upon the establishment of 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. *DOMINANT 1. may make, at his own expense, on the servient estate any works necessary for the use and preservation of the servitude, but without altering it or rendering it more burdensome (several owners of dominant contribute proportional to the benefits derive) 2. to notify the owner of the servient estate for any works he may cause to be done *SERVIENT 1. cannot impair the use of the servitude 2. if he should make use of the easement, obliged to contribute to the expenses proportional to the benefits 3. may changed the place or manner established of easement at his expense if the same is inconvenient or prevent him from making improvements or repairs; PROVIDED no injury is caused to the dominant estate 4. retains ownership of the portion on which the easement is established. E. How terminated @right of way dominant owner has joined it to another abutting on a public road. - new road is opened giving access to the isolated estate * servient owner may demand extinguishment of easement, returning what he may have received by way of indemnity. 1. Merger of ownership of dominant and servient estates 2. Non-use for 10 years DISCONTINUOUS EASEMENT computed from the day on which they ceased to be used CONTINUOUS EASEMENT from the day on which an act contrary to the same took place. 3. Estates fall in the condition that the easement cannot be used 4. Expiration of term or fulfilment of condition, in cases of temporary or conditional easement 5. Renunciation of the owner of dominant estate 6. Redemption agreed between owners *If dominant estate belongs to several persons in common, the use of easement by any one of them prevents prescription with respect to the others. X. Nuisance (Arts. 694-707) A. Definition: any act, omission, establishment, condition of property, or anything else which: 1. injures or endangers the health or safety of others; or 2. annoys or offends the senses; or 3. shocks, defies or disregards decency or morality; or

4. obstructs or interferes with the free passage of any public highway or street, or any body of water; or 5. hinders or impairs the use of property. B. Classification -either public or private *Public nuisance affects a community or neighbourhood or any considerable number of persons, although the extent of the annoyance, danger or damage upon individuals may be unequal. *Private nuisance affects a single private entity or a limited number of people. C. Remedies @Abatement of a nuisance does not preclude the right of any person injured to recover damages for its past existence. *PUBLIC NUISANCE 1. prosecution under Penal Code or any local ordinances; or 2. civil action; or 3. abatement, without judicial proceedings. @WHO CAN COMMENCE - District health officer - Mayor if civil action - Private person (without committing a breach of peace) a. it is specially injurious to himself NECESSARY a. that demand first made upon the owner b. demand is rejected c. abatement is approved by the DHO and executed with the assistance of local police d. value of destruction does not exceeds 3T pesos *PRIVATE NUISANCE 1. civil action 2. abatement, without judicial proceedings @WHO CAN COMMENCED -Any person injured (without committing a breach of the peace or doing unnecessary injury) NECESSARY a. that demand first made upon the owner b. demand is rejected c. abatement is approved by the DHO and executed with the assistance of local police *Public officer or private person extrajudicially abating nuisance liable for damages 1. if unnecessary injury is caused 2. alleged nuisance is later declared by the court to be not real nuisance XI. Modes of Acquiring Ownership (Art. 712) 1) Occupation 2) Law 3) Donation 4) Tradition 5) Intellectual Property/Creation 6) Prescription 7) Succession A. Occupation (Art. 713) 1. There should be a corporeal thing (tangible) which must have a corpus (body) & that thing should have no owner 2. There must be actual occupancy; thing must be subjected to ones control/disposition 3. There must be an intention to occupy

4. Accomplished according to legal rules What are the things susceptible to occupation? 1. things that are w/o owner res nullius; abandoned stolen property cannot be subject of occupation 2. animals that are the object of hunting & fishing -kinds of animals: a) wild considered res nullius when not yet captured; when captured & escaped become res nullius again b) domesticated animals originally wild but have been captured & tamed; now belong to their capturer; has habit of returning to premises of owner; becomes res nullius if they lose that habit of returning & regain their original state of freedom c) domestic/tame animals born & ordinarily raised under the care of people; become res nullius when abandoned by owner 3. hidden treasure (only when found on things not belonging to anyone) 4. abandoned movables Animals: a) Swarm of bees -owner shall have right to pursue them to anothers land (owner to identify latter for damages, if any) - land owner shall occupy/retain the bees if after 2 days, owner did not pursue the bees b) Domesticated animals -may be redeemed within 20 days from occupation of another person; if no redemption made, they shall pertain to the one who caught them c) Pigeons & fish -when they go to another breeding place, they shall be owned by the new owner provided they are not enticed Movables: 1)Treasure found on anothers property -consist of (1) money, precious objects & 2) hidden & owner is unknown - finding must be by chance in order that stranger may be entitled to of the treasure 2) Movable found w/c is not treasure - must be returned to owner - if finder retains the thing found may be charged with theft - if owner is unknown, give to mayor; mayor shall announce finding of the movable for 2 weeks in way he deems best - If owner does not appear 6 months after publication, thing found shall be awarded to finder - if owner appears, he is obliged to pay 1/10 of value of property to finder as price - if movable is perishable or cannot be kept w/o deterioration or w/o expenses it shall be sold at public auction 8 days after the publication What cannot be acquired by occupation 1. Ownership of a piece of land because when a land is without an owner, it pertains to the state land that does not belong to anyone is presumed to be public land (Regalian doctrine) but when a property is private and it is abandoned can be object of occupation

B. Donation 1. Definition (Arts. 725-726, 746) - an act of liberality whereby a person disposes gratuitously of a thing or right in favour of another, who accepts it. - a person gives to another a thing or right on account of the latters merits or of the services rendered by him to the donor which does not constitute a demandable debt or imposes upon the donee a burden which is less than the value of the thing given. *Acceptance must be made during the lifetime of the donor and of the done. 2. Characteristics a) Unilateral obligation imposed on the donor b) Consensual perfected at time donor knows of acceptance 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 a) Extent to which donor may donate property - donor must be owner of the property donated - comprehend to the present property of the donor *Donation cannot comprehend future property FUTURE PROPERTY anything which the donor cannot dispose of at the time of the donation b) Reservations and reversions -May donate all his property, or part thereof PROVIDED: 1. he reserves sufficient means for the support of himself, and of all relatives who are entitled to be supported by the donor -legitimes shall not be impaired -When without reservation, the donation shall be reduced on petition of any person affected. except: conditional donation & donation mortis causa except: future property *Ownership of property and the usufruct may be donated to different persons; PROVIDED the donees are living REVERSION may be validly established in favor of only the donor EXCEPT: Reversion in favor of another which are living at the time of donation -if violated, reversion is void, BUT does not nullify the donation @Donation is presumed to be in fraud of creditors when at the time of the donation, the donor did not reserve sufficient property to pay his debts prior to the donation. 3. Kinds a) Donation inter vivos (Art. 729) take effect during the lifetime of the donor though the property shall be delivered only after the donors death *The fruits of the property belong to the donee, unless the donor provides otherwise. - donation subject to resolutory condition -donation with fixing of an event or imposition of a suspensive condition

b) Donation by reason of marriage (Family Code, Arts. 82-83, 86) -made before its celebration - in favor of one or both of the future spouses REVOCATION BY THE DONOR 1. if marriage is not celebrated or judicially declared void ab initio 2. marriage takes place without the consent of parents or guardian, as required by law 3. marriage is annulled, and the donee acted in bad faith 4. upon legal separation, donee is the guilty spouse 5. donation with resolutory condition and the condition is complied with 6. donee committed act of ingratitude c) Donation mortis causa (Art. 728) donation to take effect upon the death of the donor d) Onerous donation (Art. 733) -governed by rules on Contracts e) Simple, modal, conditional - Illegal or impossible conditions in simple and remuneratory donations shall be considered as not imposed. Kinds of Donation inter vivos
Pure/ Simple a) Considerat ion Merits of donee Remuneratory Conditional Onerous

Applicable Applicable e) warranty against eviction & hidden defects In bad faith only f) revocation Applicable Applicable Applicable Applicable In bad faith only In bad faith only Applies Applicable Not Applicable

In case of doubt with regards to nature of donation: inter vivos Badges of mortis causa: 1. Title remains with donor (full or naked ownership)& conveyed only upon death 2. Donor can revoked ad mutuum 3. Transfer is void if transferor survives transfer
Donation Inter Vivos Disposition and acceptance to take effect during lifetime of donor and donee Already pertains to the donee unless there is a contrary intent Donation Mortis Causa Disposition happens upon the death of donor

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

Even if there is a term of effectivity and effectivity is upon the death of the donor, still entitled to fruits Formalities required - follow law on succession to be valid, and donation must be in the form of a will

b) law to apply/ forms Law on donations Law on donations Extent of burden Law on obligations imposed>oblic on excess>donatio n c) form of acceptanc e Required d) reservation w/regards to personal support & legitime Required Required Required

Formalities required - follow law on donations and certain kinds of donations & law on obligations and contracts (suppletory) Irrevocable at the instance of the donor; may be revoked only by reasons provided by law Revoked only for reasons provided for by law (except onerous donations)

Revocable ad mutuum (exclusive will of donor)

4. Formalities required a) How made and accepted * ACCEPTANCE i. must be made personally or thru agent -if thru agent, obliged to make the notification and notation shall be made to the documents in case of donation of immovable property ii. made during the lifetime of the donor and the donee

* DONATION i. may be made orally or in writing b) Perfection - from the moment the donor knows of the acceptance of the donee c) Differences between formalities for donation of real, personal properties (i) Movables (Art. 748) 5,000 & below may be oral or written, if oral it must be with simultaneous delivery of thing/document & acceptance need not be in writing above 5,000 - must be written and accepted also in writing (ii) Immovables (Art. 749) - must be in a public instrument & acceptance must also be in a public instrument (in same instrument or in other instrument) 5. Qualifications of donor, donee Who may GIVE donations - All persons who may contract and dispose of their property *Donors capacity shall be determined as of the time of the making of the donation. Who may ACCEPT donations: - All those who are not specially disqualified by law therefor may accept donations. 1. natural & juridical persons w/c are not especially disqualified by law 2. minors a) by themselves - if pure & simple donation - if it does not require written acceptance b) by guardian, legal representatives if needs written acceptance 1. natural guardian not more than 50,000 2. court appointed - more than 50,000 3. conceived & unborn child, represented by person who would have been guardian if already born. *Donations made to incapacitated persons shall be VOID, though simulated under the guise of another contract or through a person who is interposed. 6. Effects of donation/limitations a) In general - The donation may comprehend all the present property of the donor, or part thereof, Provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donations, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced on petition of any person affected. - Donation cannot comprehend future property. - The done is subrogated to all the rights and actions which in case of eviction would pertain to the donor. - Donor is not obliged to warrant the things donated EXCEPT: onerous donation, in which case the donor shall be liable for eviction to the concurrence of the burden. b) Double donations - shall be governed by the provisions concerning the sale of the same thing to two or more different persons.

c) Excessive/inofficious - No person may give or receive, by way of donation, more than he may give or receive by will. The donation shall be INOFFICIOUS in all that it may exceed this limitation. d) Scope of amount (Arts. 750-752) Donation made: a) to several persons jointly understood to be in equal shares, and there shall be no right of accretion among them, unless the donor has otherwise provided. b) to husband and wife jointly there shall be a right of accretion, if the contrary has not been provide by the donor. PAYMENT OF DEBTS: a) donation imposes upon donee payment of debts of the donor donee is understood to be liable to pay only the debts which appear to have been previously contracted. EXCEPT: contrary declaration appears. b) In no case shall the donee be responsible for debts exceeding the value of the property donated, unless a contrary intention appears. c) no stipulation of payment of debts in donation - Donee responsible only when the donation is made in fraud of creditors. EXCEPT: there is stipulation regarding payment of debts. e) In fraud of creditors (Art. 759) - presumed when at the time of the donation, the donor did not reserve sufficient property to pay his debts prior to the donation. 7. Void donations (Arts. 739-740, 1027) Art 739- The following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation -the action for the declaration of nullity of donation may be brought by the spouse of the donor or donee; and the guilt of donor and donee may be proved by preponderance of evidence in the same action. (2) Those made between persons found guilty of adultery or concubinage (3) Those made to a public officer or his wife, descendants and ascendants, by reason of his office Art 740 Incapacity to succeed by will - shall be applicable to donations mortis causa Other persons disqualified to receive donations: 1. priest who heard confession of donor during his last illness 2. relatives of priest within 4th degree, church, order, community where priest belongs 3. physician, nurse, etc. who took care of donor during his last illness 4. individuals, corporations, associations not permitted 5. guardians & trustees with respect to property entrusted to them EXCEPT: when they are relatives 6. husband & wife 8. Revocation or reduction a) Grounds for revocation, grounds for reduction REVOCATION OF DONATIONS applies only to donation inter vivos not applicable to onerous donations (because both parties, the donor and donee, have given equal considerations)

i. donation made by donor without children or descendant at the time of donation ii. failure to comply with condition in case of conditional donations iii. ingratitude
BIRTH OF CHILD NON-FULFILLMENT OF CONDITION needs court action INGRATITUDE

transmitted heirs

to

instance of donor but may be transmitted to heirs Action may be exercised against or extend to donees heirs

action; unless there is filing prior to death of the donor. Action cannot be extend to the donee; unless filing has been made prior to death.

Action may be exercise against or extends to donees heirs

Ipso jure revocation, no need for action., court decision is merely declaratory

needs court action

Extent: portion which may impair legitime of heirs

Extent: whole portion but court may rule partial revocation only Property must returned; be

Extent: Whole portion returned

b) How done With regards to donations made by person without children or descendants at time of donation: 1. If donor, after donation, should have legitimate, legitimated or illegitimate children, even though they may be posthumous. 2. If child came out to be alive & not dead contrary to belief of donor 3. If donor subsequently adopts a minor child @revoked or reduced insofar as it exceeds the portion that may be freely disposed of by will, taking into account the estate of the donor at the time of the birth, appearance or adoption c) Effects *Birth, appearance or adoption -property affected shall be returned, or its value if the done has sold the same -If property is mortgage, the donor may redeem the mortgage, by paying the amount guaranteed, with a right to recover the same from the donee. c) Prescription *Birth, appearance or adoption -after 4 years from the birth of the 1st child, or from his legitimation or adoption or from the time the information was received regarding the existence of the child believed to be dead -action cannot be renounced and transmitted, upon the death of the donor, to his legitimate and illegitimate children and descendants. *Non-fulfilment - after 4 years from non-compliance with the condition *Ingratitude -1 year from knowledge of the fact e) Inofficious donations (Arts. 760-761, 771-773) 1. shall be reduced with regards to the excess 2. action to reduce to be filed by heirs who have right to legitime at time of donors death and their heirs and successors in interest 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 or reduced with regard to the excess 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 @Reduction shall not prevent the donation from taking effect during the life of the donor, nor shall it bar the donee from appropriating the fruits. f) Ingratitude (Arts. 765, 769) 1. Donee commits offense against person, honor, property of donor, spouse, children under his parental authority

Property must be returned, insofar as it exceeds the free disposal (consideration: whole estate at the time of the birth, appearance or adoption) Alienation/mortg ages 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

Property returned

to

be

Alienations/mortga ges imposed are void unless registered with Register of Deeds

Alienations and mortgages effected before the notation of complaint for revocation shall subsist; Later 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 Prescription of action is 4 years from birth, etc.

Fruits to be returned at filing of complainant

Prescription is 4 years from nonfulfilment

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 at Heirs cant file

Right

of

action

2. Donee imputes to donor any criminal offense or any act 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 Exclude: Intellectual creations PRESCRIPTION I. Definition (Art. 1106) - 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 A. Acquisitive (Art. 1117) Who may acquire by prescription: a. person who are capable of acquiring property or rights by other legal modes b. minors either personally or through guardians Things subject to prescription: commerce of men a. private property b. patrimonial property of the state 1. Characteristics a. a derivative mode b. purely statutory in origin c. results in acquisition of ownership - Runs against a. Minors and other incapacitated persons who have parents, guardians or legal representatives b. Absentees who have administrators, appointed by them or by the court c. Persons living abroad, who have managers or administrators d. Juridical persons, EXCEPT the state and its subdivisions * It does not run: i. between husband and wife ii. between parents and children, during minority or insanity of the latter iii. between guardian and ward during the continuance of the guardianship * Prescription runs in favor of or against a married woman * Prescription obtained by a co-proprietor or co-owner benefits the other all things within the

*Persons with capacity to alienate property may renounce prescription already obtained, but not the right to prescribe in the future 2. Ordinary - kind of acquisitive prescription which requires possession of the things in good faith and with just title for the time fixed by law Possession: a. in the concept of an owner b. public c. peaceful d. uninterrupted *Interruption may be a. naturally when through any cause it should cease for more than one year -one year or less counted in favor of the prescription b. civilly produced by judicial summons to the possessor c. express or tacit recognition by the possessor of the owners right *PERIOD OF ORDINARY PRESCRIPTION: uninterrupted adverse possession 4 years for movables; in good faith 10 years for ownership of immovables and other real rights: ordinary a) Good faith (Art. 1127) - consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership. - not aware that there exists in his title or mode of acquisition any flaw which invalidates it. b) Just title (Arts. 1129-1130) - present when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. - title for prescription must be true and valid - it is to be proved; never presumed a) Titulo Colorado b) Titulo putativo title must be one which would have been sufficient to transfer ownership if grantor had been the owner through one of the modes of transferring ownership but there is vice/defect in capacity of grantor to transmit ownership 3. Extraordinary (Arts. 1137 and 1132, second par.) *PERIOD OF PRESCRIPTION: uninterrupted adverse possession 8 years for movables; without need of any condition 30 years for immovables: without need of title or of good faith 4. Requisites (Arts. 1118-1125) Requisites for ordinary prescription: 1. possession in good faith 2. just title 3. within time fixed by law 4. in concept of an owner 5. public, peaceful, uninterrupted 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 1. void for lack of legal solemnities 2. plaintiff desist from complaint/allow proceedings to lapse 3. possessor is absolved from complaint b) express or tacit renunciation c) possession in wartime 5. Period (Arts. 1132, 1134, 1138) Rules in computation of time: a. The present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor or predecessor in interest; b. It is presumed that the present possessor who was also the possessor at a previous time, has continued to be in possession during the intervening time, unless there is proof to the contrary; c. The first day excluded and 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 6. What cannot be required by acquisitive prescription Things not subject to prescription: (PIMR) 1. public domain or property of the State or any of its subdivision not patrimonial in character 2. intransmissible rights 3. movables possessed through a crime 4. registered land EXCEPT: -another title recorded and the time shall begin to run from the recording of the latter B. Extinctive - rights and actions may be lost by prescription *estoppel by laches 1. Characteristics a. fixed by law b. does not look to the act of possessor but to the neglect of the owner c. applies to all kinds of rights d. bars the cause of action to enforce right 2. Requisites (CTPL) a. capacity to acquire b. thing capable of acquisition c. possession of thing under certain condition d. lapse of time provided by law 3. Periods - fixed by law II. No Prescription Applicable A. By offender (Art. 1133) - movables possessed through a crime can never be acquired through prescription by the offender B. Registered lands (P.D. 1529) Section 47. Registered land not subject to prescriptions. No title to registered land in derogation of the title of the registered owner shall be acquired by prescription or adverse possession. C. Art. 1143, Civil Code Rights not extinguished by prescription: 1. demand right of way 2. abate public /private nuisance *Others: 3. declare contract void 4. recover property subject to expressed trust (e.g. coownership) 5. probate of a will 6. quiet title 1. Action legal to demand a right of way (Art. 649) - not compulsory if the isolation of the immovable is due to the proprietors own acts. 2. To abate a nuisance - either public or private D. Action to quiet title if plaintiff is in possession Plaintiff in possession imprescriptible E. Void contracts (Art. 1410) - action or defense for the declaration of the inexistence of a contract does not prescribe. F. Co-ownership or co-heir in partition (Art. 494) - no prescription shall run so long as co-ownership is expressly or impliedly recognized. 1. Distinguished from laches *PRESCRIPTION - concerned with the fact of delay - matter of time - statutory - applies at law - based on a fixed time *LACHES - concerned with the effect of delay - question of inequity of permitting a claim to be enforced - not statutory - applies in equity - not based on a fixed time G. Property of public dominion - cannot be acquired by acquisitive prescription III. Prescription or limitation of actions A. To recover movables (Art. 1140) 8 years - action to recover movables from time possession is lost B. To recover immovables (Art. 1141) 30 years - action over immovables from time possession is lost

C. Other actions (Arts. 1142-1149) 10 years (MWOJ) - mortgage action - upon written contract - upon obligation created by law - upon a judgement 6 years (OQ) - upon an oral contract - upon a quasi-contract 5 years - actions where 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 IV. Interruption (Art. 1155) *The prescription of actions is interrupted 1. when they are filed before the court, 2. when there is a written extrajudicial demand by the creditors, and 3. when there is any written acknowledgment of the debt by the debtor. OBLIGATIONS I. Definition - a juridical necessity to give, to do or not to do. II. Elements of an Obligation 1. Active subject (obligee/creditor ) the one in whose favor the obligation is constituted 2. Passive subject (obligor/debtor ) the one who has the duty of giving, doing or not doing 3. Object prestation; the conduct which has to be observed by the debtor/obligor 4. Vinculum Juris juridical/legal tie 5. Causa (causa debendi/causa obligationes) - why obligation exists Requisites of Object: a. licit - if illicit, it is void b. possible - if impossible, it is void c. determinate or determinable - or else, void d. pecuniary value III. Different Kinds of Prestations *Real obligation -obligation to give to deliver the thing agreed upon includes that of delivering all its accessions and accessories, even though they may not have been mentioned. *Personal obligation -obligation to do something (may be decreed what has been poorly done be undone: executed at his cost) -obligation in not doing if obligor does what has been forbidden, it shall be undone at his expense IV. Classification of Obligations 1. natural obligation based on equity and natural law, do not grant a right of action to enforce their performance 2. civil obligation based on positive law, give a right of action to compel their performance V. Sources of obligations (Arts. 1156-1157)

1. LAW (OBLIGATION EX LEGE ) - Must be expressly or impliedly set forth and cannot be presumed 2. CONTRACT ( OBLIGATION EX CONTRACTU ) - Must be complied with in good faith because it is the law between parties; neither party may unilaterally evade his obligation in the contract, unless: a) contract authorizes it b) other party assents Parties may freely enter into any stipulations, provided they are not contrary to law, morals, good customs, public order or public policy 3. QUASI-CONTRACT ( OBLIGATION EX QUASI-CONTRACTU ) That juridical relation resulting from a lawful, voluntary and unilateral act, and which has for its purpose, the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another 2 kinds: a. Negotiorum gestio - unauthorized management; This takes place when a person voluntarily takes charge of anothers abandoned business or property without the owners authority b. Solutio indebiti - undue payment; This takes place when something is received when there is no right to demand it, and it was unduly delivered thru mistake 4. DELICTS (OBLIGATION EX MALEFICIO OR EX DELICTO ) Governing rules: 1. 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 2. Chapter 2, Preliminary title, on Human Relations ( Civil Code ) 3. Title 18 of Book IV of the Civil Code on damages What civil liability arising from a crime includes: a. restitution b. reparation of damage caused c. indemnity for consequential damages Effect of acquittal in criminal case: when acquittal is due to reasonable doubt no civil liability when acquittal is due to exempting circumstances there is civil liability when there is preponderance of evidence there is civil liability 5. QUASI-DELICT/TORTS ( OBLIGATION EX QUASI-DELICTO or EX QUASI MALEFICIO ) - It is a fault or act of negligence ( or omission of care ) which causes damage to another, there being no pre-existing contractual relations between the parties Elements: a) There must be fault or negligence attributable to the person charged b) There must be damage or injury c) There must be a direct relation of cause and effect between the fault or negligence on the one hand and the damage or injury on the other hand ( proximate cause ) A. A single act or omission can give rise to different causes of action -delicts and quasi-delicts

-civil actions arising from crimes B. Natural obligations *After voluntary fulfilment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. *Some Rules on Natural Obligations 1. When a right to sue has lapsed by extinctive prescription and obligor voluntarily performs the contract = he cannot recover what he has delivered or the value of the service he has rendered. 2. 3rd person pays a debt without the knowledge or against the will of the debtor who is not legally bound because the action has prescribed, debtor later voluntarily reimburses 3rd person = obligor cannot recover what he has paid 3. minor without consent of parent or guardian, after annulment of contract voluntarily returns the whole thing or price received = no right to demand the thing or price thus returned; or 4. voluntarily pays a sum of money or delivers a fungible thing in fulfilment of the obligation = no right to recover the same from the obligee who has spent or consumed it in good faith 5. after failure of action to enforce obligation, defendant voluntarily performs the obligation = he cannot demand the return of what he has delivered or the payment of the value of the service he has rendered. 6. heir voluntarily pays a debt of the decedent exceeding the value of the property which he received from the estate of the deceased = payment is valid and cannot be rescinded by the payer. 7. intestate heir pays a legacy in compliance with a clause in the defective will which was declared void = payment is effective and irrevocable. C. Extra-contractual obligations 1. Quasi contract a. negotiorum gestio b. solutio indebiti VI. Nature and Effect of Obligations A. Obligation to give - obligation to deliver the thing agreed upon *ACCESSORY OBLIGATIONS: 1. Exercise diligence / Preserve the thing standard of care: that of a good father of a family unless the law or stipulation requires another standard of care 2. Delivery of fruits When does the right begin to exist : from the time to deliver arises a) when there is no term/condition from the perfection of the contract b) when there is a term/condition from the moment the term or condition arises 3. Delivery of accessories & accessions ( obligation to deliver determinate thing, even if the stipulation does not mention delivery of accessories & accessions) 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 When does right to fruits arise? from the time the obligation to deliver arises

a) Conditional from the moment the condition happens b) With a term/period upon the expiration of the term/period c) Simple from the perfection of the contract 1. A determinate or specific thing - may compel the debtor to make delivery (in addition to the claim for damages) - includes delivery of all its accessions and accessories, even though not mentioned. 2. An indeterminate or generic thing - the obligee may ask that the obligation be complied with at the expense of the debtor Art 1246 When obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. B. Obligation to do or not to do - obligation to do/not to do the service agreed upon *TO BE EXECUTED AT THE COST OF THE OBLIGOR 1. fails to do the obligation to do something 2. does the obligation in contravention of the tenor of the obligation (what has been poorly done be undone) 3. obligation in not doing and does what has been forbidden him, to be undone at his expense C. Breaches of obligations 1. Complete failure to perform - may be executed at the cost of the obligor or person obliged to do something but fails to do it. *3 kinds of Performance: 1. SPECIFIC PERFORMANCE - performance of the prestation itself 2. SUBSTITUTE PERFORMANCE - someone else performs or something else is performed at the expense of debtor 3. EQUIVALENT PERFORMANCE - damages
Obligation to give (Real Obligation) Remedies Obligations to do (Personal Obligation) To do Not to do undo the things already done

Specific Thing

Generic Thing

SPECIFIC
Performance

EQUIVALENT
Performance

Can only be deman ded if obligati on is not very person al

(4) if obligation bears interest, debtor does not have to pay from time of delay (5) creditor liable for damages (6) debtor may relieve himself of obligation by consigning the thing c) Compensatio morae both parties are in default (in reciprocal obligations); the effect is: as if there is no default

SUBSTITUTE
Performance

Undo the things already done at debtor's expense

3. Fraud/dolo in the performance of obligation Voluntary execution of a wrongful act or willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission a. Causante ( causal ) - makes contract voidable b. incidente ( incidental ) - fraud in performance of obligation; does not affect validity of obligations Remedies of Person in fraud under obligations are: a. insist on specific performance (art 1233) b. resolution of contract: either fulfilment or rescission (art 1191) c. claim damages, in either case a) Waiver of future fraud is void (Art. 1171) Art 1171 Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. 4. Negligence (culpa) in the performance of obligation Elements: a) Omission of diligence required b) Diligence required per nature of obligation, circumstances of persons, time and place *FRAUD DISTINGUISHED FROM NEGLIGENCE
FRAUD There is deliberate intention to cause damage. Liability cannot mitigated. be NEGLIGENCE There is no deliberate intention to cause damage. Liability mitigated. may be

RESCISSION/ CANCELLA TION

2. Default, delay or mora no default unless creditors makes a demand; exceptions (Art. 1169) *Delay or mora - Non performance with respect to time a) Mora solvendi default on the part of the debtor; 2 kinds: (1) Mora Solvendi Ex re default in real obligations (2) Mora Solvendi Ex persona default in personal obligations Elements: (1) The obligation must be due, enforceable and already liquidated or determinate in amount (2) There must be non-performance (3) There must be a demand, unless demand is not required When demand is not necessary: (1)When law declares (2) When obligation expressly declares (3) When designation of time of delivery or rendering the service was a controlling motive (4) When demand would be useless as when debtor has rendered it beyond his powers to perform Effects: a. if determinate thing - debtor bears risk of loss (even when there is fortuitous event) b. debtor liable for damages/interest c. resolution (performance of obligation guilty of fraud, negligence, or delay and those who contravene the tenor of obligations liable for damages) b) Mora accipiendi default on part of creditor; Creditor is guilty of default when he unjustifiably refuses to accept payment or performance at the time payment/performance can be done Effects: (1) responsibility of debtor is reduced to fraud and gross negligence (2) debtor is exempted from risk of loss of thing / creditor bears risk of loss (3) expenses by debtor for preservation of thing after delay is chargeable to creditor

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 simple may be excused in certain cases

b)

a) Diligence normally required is ordinary diligence or diligence of a good father of a family WHO EXERCISES IT? 1. employer with regard to the selection and supervision of their employees 2. common carriers on goods as stipulated 3. those who exercises parental authority

b) Exception: common carriers which are required to exercise extraordinary diligence - common carriers on transporting passengers - common carriers transporting goods without any stipulation 5. Contravention of the tenor of obligation - breach or irregularity attributable to the debtor 6. Legal excuse for breach of obligation: fortuitous event; requisites *Fortuitous Events - events which could not be foreseen, or which though foreseen, were inevitable REQUISITES (Nakpil & Sons vs. CA): 1. The cause of the breach of the obligation must be independent of the will of the debtor 2. The event must be either unforeseeable or unavoidable 3. The event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner 4. The debtor must be free from any participation in, or aggravation of injury to the creditor Rule on Fortuitous Event: General Rule no liability for fortuitous event Exemption a) when expressly declared by law ( bad faith, subject matter is generic, debtor is in delay ) b) when expressly declared by stipulation or contract c) when nature of obligation requires assumption of risk D. Remedies available to creditor in cases of breach - generally transmissible (except: law, stipulation, personal obligation): 1. Specific performance (Exact performance - specific, substitute, equivalent) a) Substituted performance by a third person on obligation to deliver generic thing and in obligation to do, unless a purely personal act -Attach and execute debtor's property (present and future) which is not exempt (art 2236) 2. Rescission (resolution in reciprocal obligations) -power to rescind obligations in reciprocal obligations is implied CONDITION: - one of the obligors should not comply with what is incumbent upon him. *Injured party may choose: a. rescission b. fulfilment of obligation *he may also seek rescission even after he has chosen fulfilment, if the latter become impossible. 3. Damages, in any event *Injured party claim damages in either action (resolution) 4. Subsidiary remedies of creditors (Art. 1177) a. pursue the property in possession of the debtor to satisfy their claims; b. after which, may exercise all the rights and bring all the actions of the latter for the same purpose; save those which are inherent in his person c. may also impugn the acts which the debtor may have done to defraud them a) Accion subrogatoria (art 1171)

Requisites: a. Creditor must have right of return against debtor b. The debt is due and demandable c. There is a failure of the debtor to collect his own debt from 3rd persons either through malice or negligence d. Debtor's assets are insufficient e. The right of account is not purely personal b) Accion pauliana Requisites: a. There is a credit in favor of plaintiff b. The debtor has performed an act subsequent to the contract, giving advantage to other persons c. The creditor is prejudiced by the debtor's acts which are in favor of 3rd parties and rescission will benefit the creditor d. The creditor has no other legal remedy e. The debtor's acts are fraudulent c) Accion directa (Arts. 1652, 1608, 1729, 1893) -sublessee subsidiary liable to the lessor to any rent due from the lessee -vendor may bring an action against every possessor whose right is derived from the vendee - laborer have action against the owner up to the amount owing from the latter to the contractor - principal may bring action against the substitute appointed by his agent without authority with respect to the obligations which the substitute contracted VII. Kinds of Civil Obligations 1. Demandability - Pure and Conditional, Obligation with a Period 2. Plurality of object Simple, Facultative or Alternative Obligations 4. Plurality of subject - Joint and Solidary Obligations 5. Performance - Divisible and Indivisible 6. Sanctions for breach - Obligations with a Penal Clause A. Pure (Arts. 1179-1180) *Pure whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties -demandable at once, no term, no condition B. Conditional (Art. 1181) *Conditional contains a condition, a future and an uncertain event or a past event unknown to the parties - the acquisition or extinguishment or loss of rights shall depend upon the happening of the event which constitutes the condition -VOID: if fulfilment of the condition depends upon the sole will of the debtor -ANNUL THE OBLIGATION: if condition is impossible, contrary to good customs or public policy and those prohibited by law - condition deemed fulfilled when the obligor voluntarily prevents its fulfilment Kinds: 1. Suspensive condition happening of condition gives rise to obligation Effects: 1) effectivity is retroactive 2) no retroactivity with reference to fruits or interest & prescription 3) creditor may preserve rights 4) debtor recovery of payment by mistake or even w/o mistake

2. Resolutory condition happening of condition extinguishes obligation Effects: 1. no retroactive effect 2. obligation extinguished 3. restore to each other what was received plus interest/fruits 3. Potestative: casual or mixed dependent on sole will of 1 party a) Obligations subject to potestative suspensive conditions are void (Art. 1182) - if on part of debtor & suspensive - void iv. Casual dependent on chance or hazard v. Mixed chance, or any of parties vi. With term a) Positive extinguished if time expires or indubitable of condition to happen b) Negative effective from moment of time elapsed or evident it can't happen vii. Impossible and illegal (1) To do - both the condition and the obligation are void (2) Not to do disregard the condition, the obligation is still valid Impossible condition physically not feasible Illegal condition prohibited by law, good custom, public policy and morals 4. Effect of the happening of suspensive condition or resolutory condition (Art. 1187) -may give rise or extinguishes the obligations. RECIPROCAL = the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. UNILATERAL = debtor appropriate the fruits and interests received; unless from the nature and circumstances of the obligation it should be inferred that the intention was different. *SUSPENSIVE: before the happening of the condition i. the creditor may bring appropriate action for the preservation of his right. ii. the debtor may recover what he has paid by mistake. *RESOLUTORY - with obligation to give = to return to each other what they have received upon fulfilment of the conditions - in case of loss, deterioration or improvement of the thing: (same as above) a) Extent of retroactivity - in obligation to give = retroacts to the day of the constitution of the obligation. - in obligation to do and not to do = the court determines the retroactive effect of the condition that has been complied with 5. Effect of improvement, loss or deterioration of specific thing before the happening of a suspensive condition in obligation to do or not to do (Art. 1189)

Loss w/ fault on the part of debtor Obliged to pay damages Lost: 1. perishes 2. goes out of commerce 3. disappears in such a way that its existence is unknown or it cannot be recovered

Deterioration Creditor choose: may

Improvement 1. By nature or by time: Inure to the benefit of the creditor 2. By expense of the debtor: Debtor has rights granted to usufructuary. i.e. -no right to be indemnified -he may remove the improvements provided no damage to property (Art 579) Creditor gets it

1. rescission; or 2. fulfilment *With indemnity for damages in either case

w/o fault

Obligation extinguished

Impairment to be borne by the creditor

REQUISITES FOR THE AFOREMENTIONED RULE: 1. There is a suspensive condition 2. There is an obligation to give or deliver a determinate thing 3. There is loss, deterioration or improvement before the happening of the condition 4. The condition happens 6. Effect when a resolutory condition in obligation to do or not to do happens and there is improvement, loss or deterioration of the specific thing (Art. 1190, par. 3) -provision of 2nd paragraph, Art 1187 shall be observed, i.e. court shall determine C. Obligation with a period or a term (Art. 1193) -With a period future & certain, past & uncertain, payable when able * When stipulation says payable when able it is with a period, remedy: a) agreement among parties b) court shall fix period of payment when parties unable to agree Kinds: a. Resolutory ( in diem ) takes effect at once but terminate upon arrival of the day certain; b. Suspensive ( ex diem ) takes effect on the day stipulated 1. Presumption that period is for the benefit of both debtor and creditor (Art. 1196) - unless from the tenor of the obligation or other circumstances it should appear that the period has been established in favor of one or of the other. 2. Effect if suspensive period is for the benefit of both debtor and creditor Day certain has been fixed = demandable only when that day comes

3. Effect if given to debtor alone - when period depends upon the will of the debtor, the courts shall also fix the duration of the period. a) Instances when debtor losses benefit of period (Art. 1198) a. insolvency of debtor, unless security provided b. did not deliver security c. impaired security- thru fault or fortuitous event; unless gives new ones d. violate undertaking in consideration of extension of period e. attempts to abscond 4. Resolutory period - take effect at once, but terminate upon arrival of the day certain *DAY CERTAIN that which must necessarily come, although it may not be known when NOTE: If uncertainty consist in whether the day will come or not = obligation is conditional (regulated by Conditional obligation) 5. Definite or indefinite period a) Instances when courts may fix the period (Art. 1197) WHEN COURTS MAY FIX PERIOD: a) parties, from the nature and circumstances, intended a period though not appeared in the obligation b) period is dependent upon the will of the debtor c) there is just cause authorizing the fixing of period, in action for rescission brought (art 1191, 3rd paragraph) d) in lease where there is no period stipulated (art 1687, 2nd, 3rd, 4th sentence) e) debtor pays when his means permit him to do so = deemed to be one with period (art 1180) *Once fixed by the court = period cannot be changed by them b) Creditor must ask court to set the period before he can demand payment REASON: to incur delay or failure on the part of the debtor D. Facultative or Alternative (Art. 1199) *Facultative only one prestation has been agreed upon but another may be given in substitution Effect of loss or deterioration thru negligence, delay or fraud of obligor: a) of thing intended as substitute - no liability b) of the substitute after substitution is made with liability, on account of his delay, negligence or fraud. * Alternative bound by different prestations but only one is due. Art 1199 A person bound by different prestations shall completely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking. 1. Effect of loss of specific things or impossibility of performance of alternative, through fault of debtor/creditor or through fortuitous events - debtor lose the right of choice when among the alternative prestations, only one is practicable. a. the choice is with debtor

(1) If only 1 is left either because of fortuitous events or due to debtor's acts, perform what is left. The effect is that the debtor loses the right of choice (2) if debtor cannot make a choice because of the creditor's acts, the debtor has the right of rescission with damages (3) if all are lost due to debtor, the creditor is entitled to damages (indemnity for damages shall be fixed: basis = value of the last thing which disappeared or that of the service which last became impossible; and damages other than value of the thing or service may also be awarded) (4) if some are lost, the debtor can choose from the remaining b. the choice is expressly given to the creditor (1) if one or some are lost due to fortuitous event, the creditor chooses the remainder (2) if one or some is lost because of the fault of debtor, the creditor may choose either the remainder or the value of any which disappeared, and damages in either case (3) if all is lost due to the debtor's fault, the creditor may choose the value of any one of them, with indemnity for damages (4) if all is lost due to fortuitous event, obligation is extinguished (5) if all is lost due to creditor's fault, the obligation is extinguished *Requisites for making the choice: a) Made properly so that creditor or his agent will actually know b) Made with full knowledge that a selection is indeed being made c) Made voluntarily and freely d) Made in due time before or upon maturity e) Made to all proper persons f) Made w/o conditions unless agreed by the creditor g) May be waived, expressly or impliedly Choice produce no effect except from the time it has been communicated *Right of choice: General rule: belongs to debtor Limitations on the right of choice of the debtor: i. no right to choose those which are impossible ii. unlawful iii. could not have been the object of the obligation 2. Difference between alternative and facultative obligations
a) ALTERNATIVE Various things are due but the giving principally of one is sufficient If one of prestations is illegal, others may be valid but obligation remains FACULTATIVE a) Only one thing is due but a substitute may be given to render payment/fulfillment easy b) If principal obligations is void and there is no necessity of giving the substitute; nullity of P carries with it nullity of S c) If it is impossible to give the principal, the substitute does not have to be given; if it is impossible to give

b)

c) If it is impossible to give all except one, the last one must still be given

d) Right to choose may be given either to debtor or creditor

the substitute, the principal must still be given d) The right of choice is given only to the debtor

C. Solidary obligation * Solidary must be expressed in stipulation or provided by law or by nature of obligation a. Active on the part of creditor or obligee Effects: 1. Death of 1 solidary creditors transmits share to heirs (but collectively) 2. Each creditor represents the other in the act of recovery of payment; 3. Credit is divided equally between creditors as among themselves 4. Debtor may pay any of the solidary creditors b. Passive on the part of debtors or obligors Effects: 1. Each debtor may be requested to pay whole obligation with right to recover from co-debtors 2. Interruption of prescription to one creditor affects all 3. Interest from delay on 1 debtor is borne by all c. Mixed on the part of the obligors and obligees, or the part of the debtors and the creditors d. Conventional agreed upon by the parties e. Legal imposed by law Instances where law imposes solidary obligation: 1) obligations arising from tort 2) obligations arising from quasi-contracts 3) legal provisions regarding obligation of devisees and legatees 4) liability of principals, accomplices, and accessories of a felony 5) bailees in commodatum Effects: a) payment made before debt is due, no interest can be charged, otherwise interest can be charged b) insolvency of one others are liable for share pro-rata c) if different terms & conditions collect only what is due, later on collect from any d) no reimbursement if payment is made after prescription or became illegal e) remission made after payment is made co-debtor still entitled to reimbursement f) effect of insolvency or death of co-debtor still liable for whole amount g) fault of any debtor everyone is responsible price, damage & interest h) complete/ personal defense total or partial ( up to amount of share only ) if not personal to him Effect of loss or impossibility of the prestation: a) if without fault no liability b) if with fault even by one debtor there is liability (all debtors without prejudice to their action against the guilty or negligent debtor) (also for damage and interest) c) loss due to fortuitous event after default there is liability (because of default) 1. Mutual agency among solidary debtors (Arts. 1214, 1215) - the debtor may pay any one of the solidary creditors; - if demand, judicial or extrajudicial, is made = payment made to the creditor who demands - novation, compensation, confusion or remission of the debt by any of the solidary creditors/debtors = extinguish the obligation BUT:

VIII. Joint and Solidary Obligation A. Joint (divisible) obligation *Joint - when 2 or more creditors or 2 or more debtors concur in one and the same obligation - does not imply that each one of the creditors has a right to demand, or that each one of the debtor is bound to render entire compliance with the prestations. 1. Concurrence of two or more creditors and or two or more debtors a) Joint obligation is presumed, unless otherwise indicated by the law or nature of obligation (Art. 1207) - joint divisible is presumed, when unstated. Effects of presumption: a. Demand on one produces delay only with respect to the debt b. Interruption in payment by one does not benefit or prejudice the other c. Vices of one debtor to creditor has no effect on the others d. Insolvency of one debtor does not affect other debtors b) Obligation presumed to be divided into as many equal shares as there are creditors or debtors - the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits. c) Each credit is distinct from one another, therefore a joint debtor cannot be required to pay for the share of another debtor, although he may pay if he wants to (Art. 1209) - division is impossible and debt can be enforced only by proceeding against all the debtors; to do otherwise would prejudice the creditors d) Insolvency of a joint debtor, others not liable for his share (Art. 1209) - even there is debtor that is insolvent, the other debtors shall not be liable for his share. B. Joint indivisible obligation Art1210 The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. 1. Obligation cannot be performed in parts but debtors are bound jointly - gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. 2. In case of failure of one joint debtor to perform his part (share), there is default but only the guilty debtor shall be liable for damages - debtors who may have been ready to fulfill their promises = contribution to the indemnity shall not exceeds the corresponding portion of the price of the thing or the value of the service in which the obligation consist.

- if total payment is made by one debtor before remission was effected = other solidary debtor still responsible to his codebtor who paid the debt *The creditor responsible for extinguishment is liable to the others (co-creditors) for the share in the obligation corresponding to them. 2. Mutual guaranty among solidary debtors (Arts. 1216, 1217, 1222) RULES: a. Any of the creditors may demand any of the solidary debtors or some or all of them simultaneously. Demand to one debtor shall not be an obstacle to those which may be directed against the others so long as the debt has not been fully collected. b. two or more debtors offer to pay = creditor may choose which offer to accept. c. payment made by one of solidary debtors = extinguish the obligation d. debtor who made payment = may claim from his codebtors only the share which corresponds to each, with interest for the payment if already made. If payment is made before the debt is due, no interest for the intervening period may be demanded. e. one of solidary debtors insolvent = share shall be borne by all his co-debtors in proportion to the debt of each. f. action filed by creditor = debtor may avail himself of all defenses which are derived from the nature of the obligation and those which are personal to him or pertain to his own share. -With respect to those personal to others = he may avail it only as regards that part of the debt for which his codebtor/s are responsible. 3. Each one of solidary creditors may do whatever may be useful to the others, but not anything prejudicial to them (Art. 1212); Also, Art 1213 - Solidary creditor cannot assign his rights without the consent of the others. a) Effect of any novation, compensation, confusion or remission of debt executed by a solidary creditor - creditor who did the same is liable to the others for the share in the obligation corresponding to them. D. Divisible and indivisible (Art. 1225) *Divisible obligation that is capable of partial performance a. execution of certain number of days work b. expressed by metrical units c. nature of obligation susceptible of partial fulfillment * Indivisible one not capable of partial performance a. to give definite things b. not susceptible of partial performance c. provided by law d. intention of parties E. Obligations with a penal clause (Arts. 1226, 1228-1230) (10) With penal clause - an accessory undertaking to assume greater liability in case of breach; CHARACTERISTICS OF PENAL CLAUSES 1. Subsidiary - As a general rule, only penalty can be demanded, principal cannot be demanded, except: Penalty is joint or cumulative 2. Exclusive - takes place of damage, damage can only be demanded in the ff. cases:

a. Stipulation granting right b. refusal to pay penalty c. with dolo ( not of creditor ) Causes for reduction of penalty: a. partial/irregular performance b. penalty provided is iniquitous/unconscionable IX. Extinguishment of Obligations Modes of Extinguishment of Obligation: (PLANRFC3) 1. Payment or performance 2. Loss of the thing due 3. Condonation or remission of debt 4. Confusion or merger of rights 5. Compensation 6. Novation 7. Annulment 8. Rescission 9. Fulfillment of resolutory condition A. Payment (Arts. 1236-1238) delivery of money and performance, in any other manner of the obligation REQUISITES FOR VALID PAYMENT/PERFORMANCE *With respect to prestation itself: (1) identity (2) integrity or completeness (3) indivisibility * With respect to parties - must be made by proper party to 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. *Art 1236 Creditor is not bound to accept payment or performance by a third person who has no interest in the fulfilment of the obligation, unless there is a stipulation to the contrary. (b) 3RD person pays/performs without knowledge or against the will of the debtor = cannot compel the creditor to subrogate him in his rights; performance is done also with debtor's consent = he takes the place of the creditor. There is subrogation except if the 3rd person intended it to be a donation. c) 3rd person pays/performs without 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 *PAYMENT MADE TO AN INCAPACITATED PERSON, VALID IF: 1. Incapacitated person kept the thing delivered, or 2. Insofar as the payment has been beneficial to him (b) 3rd 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 -VALID=if redounded to the benefit of the creditor; PRESUMED IF: 1. After payment, 3rd person acquires the creditors rights 2. Creditor ratifies payment to 3rd person

3. By creditors conduct, debtor has been led to believe that third person had authority to receive payment (estoppel) (c) anyone in possession of the credit - but will apply only if debt has not been previously garnished *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 - must be according to the obligation * 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 case in the place of the domicile of the debtor * Time of payment - time stipulated * Effect of payment extinguish obligation Except: order to retain 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 fulfilment, less damages suffered by the obligee 2. Right to rescind cannot be used for slight breach 1. Dation in payment (Art. 1245) -property is alienated to the creditor in satisfaction of debt in money -governed by law of sales 2. Form of payment (Art. 1249) - payment shall be made: a. in currency stipulated b. if the 1st one is not possible, currency which is legal tender in the Philippines *Delivery of promissory notes payable to order, or bills of exchange or other mercantile documents: after been encashed or impaired thru creditors fault = produce the effect of payment -Action derived from the original obligation shall be held in abeyance before encashment 3. Extraordinary inflation or deflation (Art. 1250) - in case it supervenes, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is agreement to the contrary 4. Application of payment (Art. 1252-1254) 2 or more debts of the same kind owing to the same creditor, upon payment = debtor may declare to which of them must be applied

- when application is made by party for whose benefit the term has been constituted = application shall not be made as to debts which are not yet due RULES: 1) if debtor accepts from the creditor receipt in which the application of the payment is made = creditor cannot complain of the same, unless there is a cause invalidating the contract 2) Debts with interest = interest to be covered first before principal 3) application cannot be applied = debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied. 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 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 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 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 5. Tender of payment and consignation (Arts. 1256-1261) *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 by consignation of 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 circumstances making previous tender exempt (3) Prior Announcement/Notice of Consignation had been given to the person interested in performance of obligation (1st notice) (4) actual deposit/Consignation with proper judicial authorities (5) subsequent notice of Consignation to the interested parties (2nd notice) *Effects of Consignation: 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) *If creditor authorize the debtor to withdraw the consigned thing = creditor loses every preference which he may have over the thing.(Co-debtors, guarantors and sureties shall be released) *Consignation w/o prior tender allowed in: 1. creditor absent or unknown/ does not appear at the place of payment 2. incapacitated to receive payment at the time it is due 3. refuses to issue receipt w/o just cause 4. 2 or more creditor claiming the same right to collect 5. title of obligation has been lost *Expenses of consignation = creditor B. Loss of determinate thing due or impossibility or difficulty of performance (Arts. 1262, 1266-1267) partial or total/ includes impossibility of performance *WHEN IS THERE A LOSS: 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 : (a) Directly caused as when prohibited by law (b) Indirectly caused as when debtor is required to enter a military draft *OBLIGATION TO DELIVER A SPECIFIC THING General Rule: Extinguished Exceptions: a) Debtor is at fault b) he already incurred delay before the lost/destruction c) Debtor is made liable for fortuitous event because of a provision of law, contractual stipulations or the nature of the obligation requires assumption of risk on part of debtor *Debt of a thing certain and determinate from a criminal offense = debtor not exempted from the payment of its price, whatever may be the cause for the loss EXCEPT: -the thing having been offered by him to the person who should receive it, without justifiable reason, refuses to accept it.

*OBLIGATION 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 *OBLIGATION 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 Disputable Presumption: Loss due to debtors fault Exception: natural calamity, earthquake, flood, storm @REBUS SIC STANTIBUS (when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom) - 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: Obligor may be released in whole or in part REQUISITES: (a) The event or change could not have been forseen 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 C. Condonation or remission of debt (Art. 1270) gratuitous abandonment of debt which requires acceptance by the obligor; right to claim; donation; rules of donation applies; express or implied *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 & expressed 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: Express formalities donation of Extent: a. total a. Kinds: Principal accessory condoned also

Implied conduct is sufficient

b. partial

b. accessory principal outstanding

still

1. Kinds (Arts. 1278, 1279) - total or partial *Total two debts are of the same amount *Partial not equally the same amount a) Legal compensation (Arts. 1286-1290) - 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 Art 1286 - Compensation takes place by operation of law, even though debts may be payable at different places, but there shall be indemnity for expenses of exchange or transportation to the place of payment. b) Agreement (Art. 1282) -Parties may agree compensation of debts which are not yet due c) Voluntary (Art. 1282) agreement of parties is enough, forget other requirement as long as both consented d) Judicial (Art. 1283) set off; upon order of the court; needs pleading & proof; all requirements must concur except liquidation *Claim for damages over an action for obligation may be set off by proving right to said damages and the amount thereof. e) 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 RULE ON ASSIGNMENT OF RIGHTS: a) with Consent i. Debtor cannot set up against the assignee the compensation which would pertain to him against the assignor, (So, there will be no compensation.) EXCEPT: the assignor was notified by the debtor at the time he gave his consent, that he reserved his right to compensation b) without Consent but informed (w/knowledge) i. Debtor may set up the compensation of debts previous to cession, but not of subsequent ones. c. without Knowledge i. Debtor may set up the compensation of all credits prior to the same and also later ones until he had knowledge of the assignment 2. Obligations not compensable (Art. 1287-1288) *No Compensation; not proper 1) one of the debts arises from a depositum or from the obligations of the depositary or of a bailee in commodatum 2) creditor with claim for support due by gratuitous title 3) debts consists in civil liability arising from a penal clause F. Novation (Arts. 1291-1304) - modification/extinguishment of obligation by creating/ substituting a new one in its place

c. accessory oblig. Of pledge condoned; presumption only, rebuttable

1. Express condonations and required formality thereof (Art. 1270) - should comply with the forms of donation 2. Implied (Arts. 1271, 1272, 1274) 1. voluntary delivery of evidence of indebtedness with debtor = implies renunciation of the action which the creditor had against the debtor: to nullify this claimed to be inofficious; and the debtors and heirs may uphold by proving that the delivery of the document was made in virtue of payment of the debt. 2. private document, evidence of debt, in the possession of the debtor = presumed voluntarily delivered by creditor; rebuttable a. if in hands of joint debtor only his share is condoned b. if in hands of solidary debtor - whole debt is condoned c. Tacit voluntary destruction of instrument by creditor; made to prescribe w/o demanding D. Confusion or Merger of Rights (Arts. 1275, 1272) character of debtor & creditor is merged in same person with respect to same obligation REQUISITES: a. It must take place between principal debtor & principal creditor only b. Merger must be clear & definite c. The obligation involved must be same & identical one obligation only d. Revocable, if reason for confusion ceases, the obligation is revived *It benefited the guarantors *Confusion in the person of the guarantor does not extinguish the obligation *Confusion does not extinguish joint obligation; EXCEPT as regards the share corresponding to the creditor or debtor in whom the two characters concur. E. Compensation Set off; it is a mode of extinguishment to the concurrent amount the obligation of persons who are in their own right debtors or creditors of each other REQUISITES: a. Both parties must be mutually creditors and debtors - in their own right and as principals b. Both debts must consist in sum of money or if consumable , of the same kind or quality c. Both debts are due d. Both debts are liquidated & demandable (determined) e. Neither debt must be retained in a controversy commenced by 3rd person & communicated w/ debtor (neither debt is garnished)

*How made? a. changing object or principal conditions b. substituting person of debtor c. subrogating 3rd person in the rights of creditor REQUISITES: a. valid obligation b. intent to extinguish old obligation expressed or implied: completely/substantially incompatible old and new obligation on every point c. capacity & consent of parties to the new obligation d. valid new obligation *EFFECT OF NOVATION: a. extinguishment of principal carries accessory, except: - stipulation to contrary - stipulation pour atrui unless beneficiary consents - modificatory novation only; obliged to w/c is less onerous - old obligation is void b. old obligation subsists if: - new obligation is void or voidable but annulled already (except: intention of parties ) c. if old obligation has condition - if Resolutory & it occurred old obligation already extinguished; no new obligation since nothing to novate - if suspensive & it never occurred as if no obligation; also nothing to novate d. if old obligation has condition, must be compatible with the new obligation; if new is w/o condition deemed attached to new e. if new obligation has condition - if resolutory: valid - if suspensive & did not materialize: old obligation is enforced *KINDS: a. REAL/OBJECTIVE change object, cause/consideration or principal condition b. PERSONAL/SUBJECTIVE 1. substituting person of debtor ( passive ) - may be made without the consent of the old debtor *EXPROMISION; initiative is from 3rd person or new debtor; new debtor & creditor to consent; old debtor released from obligation; (1)what has been paid by new debtor = subject to full reimbursement & subrogation by old debtor if made w/ consent of old debtor; if w/o consent or against will, only beneficial reimbursement. (2) if new debtor is insolvent, old debtor not responsible since w/o his consent *DELEGACION; initiative of old debtor; all parties to consent; full reimbursement; (1) if insolvent new debtor not responsible old debtor because obligation extinguished by valid novation unless: i. insolvency already existing & of public knowledge or known to him at time of delegacion a. Delegante old debtor b. Delegatario - creditor c. Delegado new debtor 2. subrogating 3rd person to rights of creditor ( active ) a. conventional- agreement & consent of all parties; clearly established in order to take effect

b. legal- takes place by operation of law; no need for consent; not presumed except as provided for in law: *Presumed when(a) creditor pays another preferred creditor even w/o debtors knowledge (b) 3rd person not interested in obligation pays w/ approval of debtor (c) person interested in fulfillment of obligation pays debt even w/o knowledge of debtor
Difference from payment by 3rd person 1. debtor is not Released from debt 2. can be done consent of creditor nec. Change of debtor

1. debtor is released

w/o

2. needs consent of creditor express or implied

3. 1 obligation

3. 2 obligations; 1 is extinguished & new one created 4. new debtor is obliged to pay

4. 3rd person has no oblig. to pay if insolvent

*Subrogation transfers to the person subrogated the credit with all the rights appertaining thereto (Art 1303) *A creditor, to whom partial payment has been made, may exercise his right for the remainder, and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit. (Art 1304) CONTRACTS - a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service (Art 1305) PRINCIPAL CHARACTERISTICS: (AMOR) 1. Autonomy of wills parties may stipulate anything as long as not illegal, immoral, etc. 2. Mutuality performance or validity binds both parties; not left to will of one of parties 3. Obligatory Force parties are bound from perfection of contract: a. fulfill what has been expressly stipulated b. all consequences w/c may be in keeping with good faith, usage & law 4. Relativity binding only between the parties, their assigns, heirs; strangers cannot demand enforcement EXCEPTION TO RELATIVITY: a. Accion pauliana b. Accion directa c. Stipulation pour autrui REQUISITES OF STIPULATION POUR AUTRUI (1)Parties must have clearly and deliberately conferred a favor upon a 3rd person

(2) The stipulation in favor of a 3rd person should be a part of, not the whole contract (3) That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatsoever (4) Neither of the contracting parties bears the legal representation or authorization of 3rd party (5) The third person communicates his acceptance before revocation by the original parties d. Art 1312 e. Art 1314 REQUISITES OF ART 1312: (1) Existence of a valid contract (2) Knowledge of the contract by a 3rd person (3) Interference by the 3rd person I. Essential Requisites (Art. 1318) 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 I. Consent meeting of minds between parties on subject matter & cause of contract; concurrence of offer & acceptance Requirements: a. Plurality of subject b. Capacity c. Intelligence and free will d. Manifestation of intent of parties e. Cognition by the other party f. Conformity of manifestation and cognition Note: We follow the theory of cognition and not the theory of manifestation. Under our civil law, the offer and acceptance concur only when the offeror comes to know, and not when the offeree merely manifests his acceptance *ELEMENTS OF VALID OFFER a. definite b. complete c. intentional *ELEMENTS OF VALID ACCEPTANCE a. unequivocal b. unconditional WHEN OFFER BECOMES 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 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 OPTION - option may be withdrawn anytime before acceptance is communicated but not when supported by a consideration other than purchase price: option money

Note: Ang Yu v. CA (1994) states that 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; Equatorial v. Mayfair(264 SCRA 483) held that 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; Paranaque Kings V CA (1997) states that right of first refusal may be enforced by specific performance. PERSONS WHO CANNOT GIVE CONSENT TO A CONTRACT: 1. Minors 2. Insane or demented persons 3. Illiterates/ deaf-mutes who do not know how to write 4. Intoxicated and under hypnotic spell 5. Art 1331 - person under mistake; mistake may deprive intelligence 6. Art 1338 - person induced by fraud (dolo causante) Note: Dolus bonus (usual exaggerations in trade) are not in themselves fraudulent RULE ON CONTRACTS ENTERED INTO BY MINORS General Rule: VOIDABLE EXCEPTIONS: 1. Upon reaching age of majority they ratify the same 2. They were entered unto by a guardian and the court having jurisdiction had approved the same 3. They were contracts for necessities such as food, but here the persons who are bound to give them support should pay therefor 4. 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) Note: In the Sia Suan v Alcantara case, there is a strong dissent by J.Padilla to the effect that the minor cannot be estopped if he is too young to give consent; one that is too young to give consent is too young to be estopped. Subsequently, in Braganza v Villa-Abrille, the dissent became the ruling. Minors could not be estopped DISQUALIFIED TO ENTER INTO CONTRACTS: ( contracts entered into 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 CAUSES WHICH VITIATE FREEDOM 1. violence REQUISITE: a. Irresistable physical force b. Such force is the determining cause for giving consent 2. Intimidation REQUISITE: a. Determining cause for the contract b. Threatened act is unjust and unlawful c. Real and serious

d. Produces a well grounded fear that the person making it will carry it over 3. undue influence SIMULATED CONTRACTS a. absolute no intention to be bound at all, fictitious only void from beginning b. relative there is intention to be bound but concealed; concealed contract binds: 1. no prejudice to 3rd persons 2. not contrary to law, morals, etc. II. OBJECT The prestation REQUISITES: a) Within the commerce of man - either existing or in potency b) Licit or not contrary to law, good customs c) Possible d) Determinate as to its kind or determinable w/o need to enter into a new contract e) Transmissible III. CAUSA reason why parties enter into contract REQUISITES: a) It must exist b) It must be true c) It must be licit MOTIVE - purely private reason; illegality does not invalidate contract except when it predetermines purpose of contract; when merged into one

4.

cases specified by law - contracts entered when ward suffers lesion of more than 25%

IV. FORM in some kind of contracts only as contracts are generally consensual; form is a manner in which a contract is executed or manifested a. Informal may be entered into whatever form as long as there is consent, object & cause b. Formal required by law to be in certain specified form such as: donation of real property, stipulation to pay interest, transfer of large cattle, sale of land thru agent, contract of antichresis, contract of partnership, registration of chattel mortgage, donation of personal prop in excess of 5,000 c. Real creation of real rights over immovable prop must be written WHEN FORM IS IMPORTANT: 1) for validity (formal/solemn contracts) 2) for enforceability (statute of frauds) 3) for convenience General Rule: contract is valid & binding in whatever form provided that 3 essential requisites concur Exception: a. Law requires contract to be in some form for validity donation & acceptance of real property b. Law requires contract to be in some form to be enforceable - Statute of Frauds; contract is valid but right to enforce cannot be exercised; need ratification to be enforceable c. Law requires contract to be in some form for convenience - contract is valid & enforceable, needed only to bind 3rd parties -ex: public documents needed for the ff: 1. contracts w/c object is creation, transmission or reformation of real rights over immovables 2. cession, repudiation, renunciation of hereditary rights/CPG 3. power to administer property for another 4. cession of action of rights proceeding from an act appearing in a public inst. 5. all other docs where amount involved is in excess of 500 ( must be written even private docs ) REFORMATION OF CONTRACTS remedy to conform to real intention of parties due to mistake, fraud, inequitable conduct, accident CAUSES/GROUNDS: a. mutual: instrument includes something w/c should not be there or omit what should be there mutual mistake of fact

ABSENCE CAUSA

OF

VOID - produce no legal effect

ILLEGALITY OF CAUSA FALSITY OF CAUSA

VOID - produce no legal effect

VOIDABLE party must prove that cause is untruthful; presumption of validity but rebuttable

CAUSA STATED CONTRACT

NOT IN

PRESUMED TO EXIST - burden of proof is on the person assailing its existence

INADEQUACY CAUSA

OF

DOES NOT INVALIDATE CONTRACT PER SE Exceptions: 1. 2. 3. fraud mistake undue influence

clear & convincing proof causes failure of instrument to express true intention b. unilateral one party was mistaken other either acted fraudulently or inequitably or knew but concealed party in good faith may ask for reformation c. mistake by 3rd persons due to ignorance, lack of skill, negligence , bad faith of drafter, clerk, typist d. others specified by law to avoid frustration of true intent REQUISITES: 1. there is a written instrument 2. there is meeting of minds 3. true intention not expressed in instrument 4. clear & convincing proof 5. facts put in issue in pleadings Note: prescribes in 10 years from date of execution of instrument WHEN NOT AVAILABLE: a. simple donation inter vivos b. wills c. when real agreement is void d. estoppel; when party has brought suit to enforce it II. Kinds of Contracts *As to perfection or formation: A. Consensual perfected by agreement of parties B. Real perfected by delivery (commodatum, pledge, deposit ) C. Formal or solemn perfected by conformity to essential formalities (donation) 1. Donations (Arts. 748-749) MOVABLE a. Oral simultaneous delivery of the thing or of the document representing the right donated b. Writing value exceeds 5T pesos; otherwise void IMMOVABLE -must be in public document, specifying the property and the value of the charges *acceptance must also in writing in the same document; or separate by notifying the donor in an authentic form 2. Partnership where real property contributed (Arts. 1771, 1773) Partnership may be constituted in any form. EXCEPT: a) Real rights or immovable contributed public instrument; with inventory signed by the parties and attached to the public instrument b) having capital of 3T pesos or more, in money or property shall appear in public instrument, which must be recorded in the SEC; failure of this requirement not affect the liability of partnership and the members thereof to third persons. 3. Antichresis (Art. 2134) *Amount of principal and interest shall be specified in writing; otherwise void.

4. Agency to sell real property or an interest therein (Art. 1874) -authority to an agent shall be in writing; otherwise sale is void. 5. Stipulation to charge interest (Art. 1956) Art 1956 No interest shall be due unless it has been expressly stipulated in writing. 6. Stipulation limiting common carriers duty of extraordinary diligence to ordinary diligence (Art. 1744) -limited to the delivery of goods (loss, destruction, or deterioration) a. in writing, signed by the shipper and owner b. supported by valuable consideration c. reasonable, just and not contrary to public policy 7. Chattel mortgage -cover obligations existing (affidavit of good faith) 8. Sale of large cattle -must be in writing, for the issuance of certificate of ownership *As to cause 1. Onerous with valuable consideration 2. Gratuitous founded on liberality 3. Remunerative prestation is given for service previously rendered not as obligation *As to importance or dependence of one upon another 1. principal contract may stand alone 2. accessory depends on another contract for its existence; may not exist on its own 3. Preparatory not an end by itself; a means through which future contracts may be made *As to parties obliged: 1. Unilateral only one of the parties has an obligation 2. Bilateral both parties are required to render reciprocal prestations *As to name or designation: 1. Nominate 2. Innominate a) Do ut des I give that you may give b) Do ut facias I give that you may do c) Facio ut des I do that you may give d) Facio ut facias I do that you may do STAGES IN A CONTRACT: 1. Preparation - negotiation 2. perfection/birth 3. consummation performance III. Formality (Arts. 1356, 1357, 1358) * in whatever form UNLESS: the law requires (absolute and indispensable) 1. a contract be in some form in order that it may be valid or enforceable or requires a document or other special form 2. contract be proved in certain way Art 1358 The following must appear in a public document: 1. Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property;

2. The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; 3. The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; 4. The cession of actions or rights proceeding from an act appearing in a public document. 5. All other contracts where the amount involved exceeds 500 pesos must appear in writing, even a private one. IV. Defective Contracts (RVUV) A. Rescissible contracts (Art. 1381) Art 1381 The ff contracts are rescissible : (1) entered by guardians of wards who suffer lesion by more than 25% of the value of the thing which are object thereof; (2) agreed upon in representation of absentees who suffer lesion as above; (3) undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; (4) subject things under litigation entered by defendant without knowledge and approval of the litigants and the courts; (5) all other contracts specially declared by law to be subject to rescission. Art 1381: - the particular economic damage is to the 3rd party; it may be rescinded even if contract is valid; may be in whole or in part. 1. Difference with rescission (resolution) under Art. 1191 - when one of the obligors did not comply with what is incumbent upon him; implied in reciprocal obligations. Those which have caused injury either to one of the parties. - The injured party may choose between the fulfilment and the rescission of the obligation, with payment of damages in either case. REQUISITES: a. Contract must be rescissible (1) Under art 1381: i. Contracts entered into by persons exercising fiduciary capacity (a) Entered into by guardian whenever ward suffers damage by more than 1/4 of value of object (b) Agreed upon in representation of absentees, if absentee suffers lesion by more than of value of property (c) Contracts where rescission is based on fraud committed on creditor (accion pauliana) (d) Objects of litigation; contract entered into by defendant w/o knowledge or approval of litigants or judicial authority (e) Payment by an insolvent on debts w/c are not yet due; prejudices claim of others (f) Provided for by law - art 1526, 1534, 1538, 1539, 1542, 1556, 1560, 1567 and 1659 ii. Under art 1382 - Payments made in a state of insolvency a. Plaintiff has no other means to obtain reparation b. Plaintiff must be able to return whatever he may be obliged to return due to rescission c. The things must not have been passed to 3rd parties who did not act in bad faith d. It must be made within the prescribed period *OBLIGATION CREATED CONTRACT: Mutual Restitution BY THE RESCISSION OF THE

1. Things which are the objects of the contract & their fruits 2. Price with interest Note: Mutual restitution N.A. when: 1. creditor did not receive anything from contract 2. thing already in possession of party in good faith; subject to indemnity only; if there are 2 or more alienations liability of 1st infractor B. Voidable contracts (Arts. 1328-1344, 1390-1402) intrinsic defect; valid until annulled; defect is due to vice of consent or legal incapacity CHARACTERISTICS: a. Effective until set aside b. May be assailed or attacked only in an action for that purpose c. Can be confirmed ( Note: CONFIRMATION IS THE PROPER TERM FOR CURING THE DEFECT OF A VOIDABLE CONTRACT) d. Can be assailed only by the party whose consent was defective or his heirs or assigns *WHAT CONTRACTS ARE VOIDABLE? a. THOSE WHERE ONE OF THE PARTIES IS INCAPABLE OF GIVING CONSENT TO A CONTRACT (legal incapacity) (1) minors ( below 18 ) (2) insane unless acted in lucid interval (3) deaf mute who cant read or write (4) persons specially disqualified: civil interdiction (5) in state of drunkenness (6) in state of hypnotic spell b. THOSE WHERE THE CONSENT IS VITIATED BY MISTAKE, VIOLENCE, INTIMIDATION, UNDUE INFLUENCE OR FRAUD (vice of consent) (1) mistake false belief into something REQUISITES: 1. Refers to the subject of the thing which is the object of the contract 2. Refers to the nature of the contract 3. Refers to the principal conditions in an agreement 4. Error as to person - when it is the principal consideration of the contract 5. Error as to legal effect - when mistake is mutual and frustrates the real purpose of parties (2) violence serious or irresistible force is employed to wrest consent (3) intimidation one party is compelled by a reasonable & well-grounded fear of an imminent & grave danger upon person & property of himself, spouse, ascendants or descendants (moral coercion) (4) undue influence person takes improper advantage of his power over will of another depriving latter of reasonable freedom of choice (5) fraud thru insidious words or machinations of one of the contracting parties, other is induced to enter into contract w/o w/c he will not enter (dolo causante) *EFFECTS OF ANNULMENT: 1. Obligation to give mutual restitution 2. Obligation to do value of service

*PRESCRIPTION IN ACTION FOR ANNULMENT OF VOIDABLE CONTRACTS:

Intimidation/Violen ce/undue Influence Mistake/Fraud 4 years from time defect of consent ceases

d. If performed, restoration is in order, except if pari delicto will apply e. The right to set up the defense of nullity cannot be waived f. Imprescriptible g. Anyone may invoke the nullity of the contract whenever its juridical effects are asserted against him 1. Pactum commissorium (Arts. 2088, 2130, 1390) Art 2088 - The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void. Art 1390- Voidable or Annullable contract 1. one party incapable of giving consent 2. consent was vitiated by mistake, violence, intimidation, undue influence or fraud 2. Pactum de non alienando (Art. 2130) Art 2130 A stipulation forbidding the owner from alienating the immovable mortgaged shall be void. 3. Pactum leonina (Art. 1799) Art 1799 A stipulation which excludes one or more partners from any share in the profits or losses is void. *KINDS OF VOID CONTRACT: 1) Those lacking in essential elements: no consent, no object, no cause (inexistent ones) essential formalities are not complied with (ex: donation propter nuptias should conform to formalities of a donation to be valid ) (a) Those w/c are absolutely simulated or fictitious no cause (b) Those which cause or object did not exist at the time of the transaction no cause/object (c) Those whose object is outside the commerce of man no object (d) Those w/c contemplate an impossible service no object (e) Those w/c intention of parties relative to principal object of the contract cannot be ascertained 2) Prohibited by law (f) Those expressly prohibited or declared void by law Contracts w/c violate any legal provision, whether it amounts to a crime or not 3) Illegal/Illicit ones Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy ; Ex: Contract to sell marijuana *KINDS OF ILLEGAL CONTRACTS
CONTRACT CONSTITUTE CRIMINAL OFFENSE CONTRACT DOES NOT CONSTITUTE CRIMINAL OFFENSE BUT IS ILLEGAL OR UNLAWFUL PER SE No action for specific performance No action for restitution on either side. The law will leave you where you are No confiscation

4 years from time of discovery

Contracts entered into by minors/incapacitat ed persons

4 years from time guardianship ceases

C. Unenforceable contracts (Arts. 1403-1408, 1317) valid but cannot compel its execution unless ratified; extrinsic defect; produce legal effects only after ratified *KINDS/VARIETIES: 1. Unauthorized/No sufficient authority entered into in the name of another when: a. no authority conferred b. in excess of authority conferred ( ultra vires ) Note: Curable by RATIFICATION 2. Both parties incapable of giving consent -2 minor or 2 insane persons Note: Curable by ACKNOWLEDGEMENT 3. 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 1 year & sale of real property regardless of price f. Representation as to credit of another *2 WAYS OF 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 D. Void contracts (Arts. 1409, 1346) of no legal effect *CHARACTERISTICS: a. It produces no effect whatsoever either against or in favor of anyone b. There is no action for annulment necessary as such is ipso jure. A judicial declaration to that effect is merely a declaration c. It cannot be confirmed, ratified or cured

Parties are in pari delicto

No action for specific performance No action for restitution on either side. The law will leave you where you are Both shall be prosecuted Thing/price to be confiscated in favor of

Only one party is guilty

government 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 will be confiscated in favor of govt

No action for specific performance Innocent party is entitled to restitution Guilty party is not entitled to restitution

General Rule: parties should return to each other what they have given by virtue of the void contract in case where nullity arose from defect in essential elements 1. return object of contract & fruits 2. return price plus interest Exception: No recovery can be had in cases where nullity of contract arose from illegality of contract where parties are in pari delicto; 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 V. Effect of contracts (Art. 1311) Contracts take effect only 1. between the parties 2. their assigns and heirs (limited liability: not beyond the value of property he received from the decedent) EXCEPT: by nature, stipulation or provision of law, not transmissible *Contracts contain stipulation in favor of 3rd party = must be clearly and deliberately conferred by contracting parties 1. 3rd person may demand its fulfilment; PROVIDED, he communicated his acceptance to the obligor before its revocation/annul. 2. Mere incidental benefit or interest not sufficient to demand SALES I. Introduction A. Definition of sales (Arts. 1458, 1470) CONTRACT OF SALE One of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. B. Essential requisites of a contract of sale (CSP) 1. consent 2. subject matter 3. price *Art. 1505 C. Stages of contract of sale 1. negotiation 2. perfection by mere consent; performance may be demanded (specific performance) 3. consummation D. Obligations created (Art. 1165) 1. to make delivery (determinate thing) 2. to comply at the expense of the obligor (indeterminate or generic thing 3. obligor delays or promised to deliver the same thing to 2 or more persons who do not have the same interest = obligor responsible for fortuitous event until he has effected the delivery. E. Characteristics of a contract of sale 1. Nominate - law gave it a name 2. Principal - can stand on its own; unlike accessory contract 3. Bilateral - imposes obligation on both parties a. obligation of seller transfer ownership & deliver

@PARI DELICTO DOCTRINE - both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts & not to inexistent contracts; does not apply when a superior public policy intervenes *EXCEPTION TO PARI DELICTO RULE 1. If purpose has not yet been accomplished & if damage has not been caused to any 3rd person Requisites: a) contract is for an illegal purpose b) contract must be repudiated by any of the parties before purpose is accomplished or damage is caused to 3rd parties c) 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 2. Where laws are issued to protect certain sectors: consumer protection, labor, usury law a) 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 b) Labor if law sets the minimum laborer who agreed to receive less recover the deficiency; if law set laborer who undertakes to work additional compensation wage for laborers, any may still be entitled to max working hours & longer may demand

c) Interest paid in excess of the interest allowed by the usury law may be recovered by debtor with interest from date of payment 3. 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 4. If agreement is not illegal per se but merely prohibited & 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

b. obligation of buyer pay price Consequence: power to rescind is implied in bilateral contracts 4. Onerous with valuable consideration Consequence: all doubts in construing contract to be resolved in greater reciprocity of interest 5. Commutative equal value is exchanged for equal value Test: subjective as long as parties believe in all honesty that he is receiving equal value then it complies with the test & would not be deemed a donation; but must not be absurd. Inadequacy of price or aleatory character not sufficient ground to cancel contract of sale; inadequacy can show vitiation of consent & sale may be annulled based on vice but not on inadequacy 6. Consensual meeting of minds makes a perfect contract of sale but needs delivery to consummate. 7. Title & not a mode title gives rise to an obligation to transfer; it is a mode w/c actually transfers ownership F. Sale is title and not mode - it is a title that gives rise to an obligation to transfer. G. Sale distinguished from other contracts 1. Donation donation is gratuitous; sale is onerous donation is formal contract; sale is consensual donation is governed by law on donation; sale is governed by law on sales 2. Barter in barter, the consideration is the giving of a thing; in sale, it is giving of money as payment both are governed by law on sales; both are species of the genus sales if consideration consists party in money & partly by thing look at manifest intention; if intention is not clear (1468): a. value of thing is equal or less than amount of money sale b. value of thing is more than amount of money barter 3. Contract for piece of work test in article 1467: a. contract for delivery of an article which the vendor in the ordinary course of business manufactures or procures for general market (whether on hand or not) sale b. goods are to be manufactured specially for a customer and upon special order and not for the general market contract for piece of work. jurisprudence: a. Timing test under art 1467; Inchausti; whether the thing transferred would have never existed but for the order contract for piece of work (abandoned) b. Habituality test enunciated in Celestino v CIR; contract of sale if manufacturer engages in activity without need to employ extraordinary skills and equipment; contract for piece of work is sale of service; contract of sale is sale of things.

c. Nature of the object test enunciated in EEI v CIR; each products nature of execution differs from the others; products are not ordinary products of manufacturer. main factor in decision of the SC: essence of why parties enter into it: a. essence is object contract of sale b. essence is service contract for piece of work 4. Agency to sell in sale, buyer pays for price of object; in agency to sell, agent not obliged to pay for price, merely obliged to deliver price received from buyer. in sale, buyer becomes owner of thing; in agency; principal remains owner even if object delivered to agent in sale, seller warrants; in agency, agent assumes no risk/liability as long as within the authority given in sale, not unilaterally revocable; in agency, may be revoked unilaterally because fiduciary & even if revoked w/o ground in sale, seller receives profit; in agency, agent not allowed to profit TEST: essential clauses of whole instrument (art 1466 motherhood statement, not good law) Agency is a personal contract; sale is a real contract (to give) rescission is not available in agency 5. Dacion en pago dacion: contract where property is alienated to satisfy/extinguish obligation to pay debt in dacion: novates creditor-debtor relationship into sellerbuyer in dacion: delivery is required (real contract) 6. Lease in sale: obligation to absolutely transfer ownership of thing; in lease: use of thing is for a specified period only with an obligation to return in sale: consideration is price; in lease: consideration is rent in sale: seller needs to be owner of thing to transfer ownership; in lease: lessor need not be owner lease with option to buy: really a contract of sale but designated as lease in name only; it is a sale by instalments H. Contract of sale/contract to sell 1. Contract of sale (absolute) real obligation obligation to give remedies available: a. specific performance b. rescission c. damages 2. Contract to sell (conditional) personal obligation obligation to do remedies available: a. resolution b. damages II. Parties to a Contract of Sale -Vendor and vendee VENDOR - The person who transfers property by sale; One who negotiates the sale, and becomes the recipient of the consideration. VENDEE - A purchaser or buyer; one to whom anything is sold. A. Capacity of parties (Arts. 1489-1492)

* all persons authorized to obligate themselves may enter into a contract of sale GENERAL RULE: All parties with capacity to contract can enter into a valid contract of sale 1. Natural Persons 2. Juridical Persons- Corporation/ Partnership/ Associations/ Cooperatives Status of contract: valid Remedies available therefore are: a. specific performance b. rescission c. damages EXCEPTION TO GENERAL RULE: 1. Minors status of contract: VOIDABLE only, therefore ratifiable remedy is action for annulment (with partial restitution in so far as the minor is benefited) 2. SALE BY & BETWEEN SPOUSES a. Contract with 3rd parties status of contract is VALID b. Sale between parties Status not provided for by law but VOID according to case law Reason: i. prevent defraudation of creditors ii. avoid situation where dominant spouse takes advantage of the other iii. avoid circumvention on prohibition of donation between spouses Exception i. separation of property agreed (marriage settlement) ii. judicial separation of property c. Common Law Spouses (Paramours) Status of contract: VOID (per case law) Rationale: evil sought to be avoided is present 3. OTHERS PER SPECIFIC PROVISIONS OF LAW a. Guardian with regard to property of ward during period of guardianship b. Agent with regard to property of principal c. Executor/administrator with regard to the estate of the deceased d. Public officers with regard to the property of the State e. Officer of court & employee with regard to the property in litigation B. Absolute incapacity (Arts. 1327, 1397, 1399) Art 1327 The following cannot give consent to a contract: 1. Unemancipated minor 2. Insane or demented persons, and deaf-mutes who do not know how to write. Art 1397 The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot 1)allege the incapacity of those with whom they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake 2) base their action upon these flaws of the contract. Art 1399 When the defect of the contract consists in the incapacity of one of the contracting parties, the

incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received. C. Relative incapacity: married persons - between spouse; including common law spouses EXCEPT: -there is judicial declaration of separation of property or marriage settlement of separation of property D. Special disqualifications (Arts. 1491-1492) - in public or judicial auction, sales in legal redemption, compromises and renunciations 1. Guardian / Agent / Executors ratifiable in the sense that only private wrong is involved 2. Public Officials / Officers of Court not ratifiable in the sense that public wrong is concerned GUARDIAN/AGENT/ADMINISTRATOR 1. Legal status of contract: VOID (case law) 2. Direct or indirect 3. If mediator no need to prove collusion; inutile 4. Even if court approved sale 5. Reason: fiduciary relationship is based on trust ATTORNEYS REQUISITES: 1. Lawyer-client relationship exists 2. Subject matter property in litigation (all types) 3. Duration while in litigation (from filing of complaint to final judgment); may be future litigation Reason: due to public policy; ground for malpractice a. Client is at the mercy of the lawyer b. Law is a noble profession c. 2 Masters 2 interest; one cannot serve 2 masters at the same time Exception: CONTINGENT FEE ARRANGEMENT a. Amount of legal fees is based on a value of property involved in litigation Not a sale but service contract I give that you may do (innominate contract) so has to be governed by law on sales but because of public policy, considered VALID Reason why contingent fee is followed: i. constitutional prohibition v. impairment of contract ii. subject to control of courts (may be reduced if unconscionable or nullified) iii. canons of legal ethics iv. higher public policy litigants III. Subject Matter A. Requisites of a valid subject matter (Arts. 1459-1465) *TO BE A VALID & BINDING SUBJECT MATTER, THE FOLLOWING MUST CONCUR: 1. Existing, Future & Contingent 2. Licit 3. Determinate or determinable *EXISTING, FUTURE or CONTINGENT Refers to subject matter that are existing & not existing but capable of existence (pursuant to present technology) 1. if this is present, status of contract: VALID 2. if absent : NO CONTRACT SITUATION, THEREFORE NO CAUSE OF ACTION 3. if mere pipe dream : VOID

a. SALE OF THINGS HAVING POTENTIAL EXISTENCE (Emptio Rei Speratae) Sale of future things; no physical existence yet A resolutory condition that thing will come into existence Non happening of condition: RESOLUTORY: EXTINGUISH THE CONTRACT -Remedy: can recover what has been paid b. SALE OF HOPE (Emptio Spei) Every sale of future thing is subject to condition that they will come into existence If hope does not come true NO RECOVERY OF PAYMENT/NO RESCISSION Aleatory character but valid *LICIT & VENDOR MUST HAVE A RIGHT TO TRANSFER SUBJECT MATTER 1. LICIT must be within the commerce of men VOID SUBJECT MATTER: a. Contrary to law b. Simulated/fictitious c. Did not exist at the time of transaction d. Outside commerce of men e. Impossible service f. Intention can not be ascertained g. By provision of law 2. SELLER MUST BE OWNER only at time of consummation since tradition transfers ownership but to have a perfected contract of sale, vendor need not be owner of thing; can be validated/ratified by subsequent acquisition of title by seller *DETERMINATE & DETERMINABLE Absence: VOID; there is subject matter but intention regarding subject matter cannot be ascertained VOID B. Particular kinds 1. Specific - Determinate Particularly designated or segregated from all others of the same class 2. Generic - Determinable Test: reach a point of description where both minds concur At the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between parties Exact quantity not essential Sale of generic things VALID; still executory There can only be contract of sale when subject is finally chosen for delivery already segregated or designated; but before designation, valid contract of sale already exists 3. Undivided interest (BUYER becomes co-owner) 4. Undivided share in mass of fungible goods (BUYER becomes co-owner) IV. Obligations of the Seller to Transfer Ownership A. Sale by a person not the owner at time of delivery (Arts. 1462, 1505, 1459) *Subject Goods: a. either: i. existing goods goods owned or possessed by the seller ii. future goods goods having potential existence; to be manufactured, raised, or acquired by the seller after perfection of the contract of sale b. licit and vendor has a right to transfer the ownership at the time it is delivered.

*Perfection Stage a. sale by owner VALID b. sale by non-owner VALID; because ownership is necessary only at time when transfer title to goods; at perfection stage, no obligation on part of seller to transfer ownership law on estoppel further bolsters it: title passes by operation of law to grantee when person who is not owner of the goods sold delivers it and later on acquires title thereto since valid, action to annul is improper; there is already a perfected contract *Consummation Stage Contract of sale is valid because it has passed perfected stage, despite: a. seller not being the owner b. seller having no authority to sell What is void is the transfer of title/ownership did not pass Effect: buyer acquired no better right than transferor Legal effect: CAVEAT EMPTOR BUYER BEWARE a. co-owner sells whole property prior to partition sale of property itself is void but valid as to his spiritual share b. co-owner sells definite portion to partition sale is void as to other co-owner but valid as to his spiritual share if the buyer would have still bought such spiritual share had he known that the definite portion sold would not be acquired by him. Exception to (b): i. Subject matter is indivisible ii. Sale of definite portion is with consent of other co-owners iii. co-owner sells 1 of 2 commonly-owned lands & does not turn over of the proceeds, other co-owner, by law & equity, has exclusive claim over remaining land. General Rule: Sale by non-owner, buyer acquires no better title than seller had. Exception: a. owner by his conduct is precluded from denying sellers authority (ESTOPPEL) b. contrary is provided for in recording laws (PD 1529) c. sale is made under statutory power of sale or under order of a court of competent jurisdiction d. sale is made in a merchants store in accordance with code of commerce & special laws 1. Exceptions GENERAL RULE: SELLER WHO IS NOT OWNER AND NO AUTHORITY OR WITHOUT CONSENT FROM THE OWNER DOES NOT GIVE BETTER TITLE TO THE BUYER; unless, owner is precluded from denying the sellers authority to sell EXCEPT: (a) seller is apparent owner of goods to dispose as if he were the true owner (b) sale under statutory power or under the order of competent court (c) Purchases made in merchants stores, fairs, and markets. *There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not happen. B. Sale by a person having a voidable title (Arts. 1506, 559) EFFECT:

1. sellers title not avoided at the time of the sale = buyer in good faith, for value, acquires good title to the goods *Possession of movable acquired in good faith is equivalent to a title. 2. deprived owner of movable = may recover the possession; if buyer in good faith, upon reimbursing the price paid *SALE BY SELLER WITH VOIDABLE TITLE a. Perfection Stage Valid sale buyer acquires title of goods b. Consummation Stage Valid sale if title has not yet been avoided, buyer buys goods under following condition: a) in good faith b) for value c) without notice of sellers defect of title *TITLE AS TO MOVABLE PROPERTIES Rule: POSSESSION IS EQUIVALENT TO TITLE Requisites: a. Possession of a movable b. In good faith Exception: a. Owner lost movable owner can recover w/o reimbursing price b. Owner is unlawfully deprived owner can recover w/o reimbursing price Exception to Exception: a. movable is bought at public sale owner can only recover after reimbursing price b. acquired in good faith & for value from auction V. Price A. Meaning of price (Arts. 1469-1474) signifies the sum stipulated as equivalent of the thing sold B. Requisites for a valid price (RMCM) 1. Must be real 2. Must be in money or its equivalent 3. Must be certain or ascertainable at the time of the perfection of the contract 4. Manner of payment provided for *REAL 1. When price stated is one intended by the parties If fictitious: no intention with respect to price - VOID If False/simulated: what appears in contract is not the true price a. VALID if there is true consideration b. VOID but if none (because it is fictitious) 2. Valuable When not valuable VOID When contract is onerous, presumed to have valuable consideration Nominal consideration w/c is common law concept does not apply (P1.00) Gross inadequacy of price in ordinary sale does not render contract void unless it is shocking to conscience of man. Except: a. Judicial sale Shocking to conscience of man Higher price can be obtained at re-sale

b. Rescissible contracts due to lesion c. Sales with right to repurchase (raises presumption of equitable mortgage) Remedy is reformation *CERTAIN OR ASCERTAINABLE -CERTAIN 1. Sufficient that it is fixed with reference to another thing certain; or 2. The determination thereof be left to the judgment of a specified person or persons That thing will have on a definite day, or in a particular exchange or market, or when an amount is fixed above or below the price on such day, or in such exchange or market provided said amount be certain C. How price is determined General Rule: fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected. D. Inadequacy of price or lesion (Arts. 1355, 1470) - Gross inadequacy of price does not affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. EXCEPTION: when there is 1. fraud 2. mistake 3. undue influence E. When no price agreed (Art. 1474) Result: INEFFICACIOUS When price cannot be determined in accordance with any rules, contract of sale is INEFFICACIOUS However, when SM delivered, BUYER must pay reasonable price therefore court can fix price Determination be left to judgment of specified person/s If contract states that price is to be determined by 3rd party, contract is already perfected (there is just a suspensive condition actual fixing of price) 3rd party fixes price in bad faith or mistake court remedy can be made 3rd party is unable or unwilling to fix price parties have no cause of action Reason: a. suspensive condition does not happen yet courts have no jurisdiction b. enforceable contract has not yet arisen court with no jurisdiction to create contract between parties F. Manner of payment must be agreed upon *MANNER OF PAYMENT MUST BE AGREED UPON Deemed to be an essential requisite because it is part of the presentation of the contract Integral part of concept of price If there is failure to meet minds as regards term of payment: *CASH BASIS Must be certain or at least ascertainable Effect if absent: NO CONTRACT SITUATION G. Earnest money vs. Option money (Art.1482)

Earnest money if given in a contract of sale, considered part of the price; proof of perfection of the contract. Option money given by the offeree prior to acceptance of the offer of the offerer; not a part of the price; no perfection of the contract since acceptance is absent; in case offeree declined the offer, cannot be demanded for return. *EARNEST MONEY 1. money given as part of purchase price 2. its acceptance is proof that contract of sale exists nothing in law prevents parties from treating earnest money differently old concept: subject to forfeiture when BUYER backs out new concept: can not be forfeited part of purchase price; must be restored qualification: if old concept is stipulated VALID presumption of perfection of contract of sale and such earnest money as part of purchase price is disputable VI. Formation of Contract of Sale *3 STAGES IN LIFE OF A CONTRACT OF SALE 1. Policitacion/Negotiation Stage offer is floated, acceptance is floated but they do not meet; the time when parties indicate their interest but no concurrence of offer & acceptance 2. Perfection concurrence of all requisites; meeting of the minds 3. Consummation parties perform their respective undertakings *POLICITACION 1. offer is floated but not absolute 2. acceptance is likewise floated but conditional *RULES: 1. offer is floated prior to acceptance, may be withdrawn at will by offeror 2. offer floated with a period without acceptance, extinguished when period has ended & maybe withdrawn at will by offeror; right to withdraw must not be arbitrary otherwise, liable to damage under Art 19, 20, 21 of civil code 3. offer floated with a condition extinguished by happening/non-happening of condition 4. offer floated without period/without condition continues to be valid depending upon circumstances of time, place & person 5. offer is floated & there is counter-offer original offer is destroyed, there is a new offer; cannot go back to original offer 6. offer is floated no authority of offeror to modify offer 7. offer is accepted absolutely proceed to perfected stage A. Preparatory (Art. 1479) 1. Offer (Art. 1475) - does not produce any obligation: offer and offer with counter-offer (qualified acceptance) meeting of minds there is offer and acceptance *DOES NOT CONSTITUTE OFFER: mere invitation 1) Business advertisements of things for sale = are not definite offers but mere invitations to make an offer 2) Advertisement for bidders are simply invitations to make proposals; advertiser is not bound to accept the highest or lowest bidder

EXCEPT: if contrary appears *Offer becomes ineffective: either party: before acceptance is conveyed -Upon 1. death 2. civil interdiction 3. insanity 4. insolvency 2. Option contract (Arts. 1479, 1324) Art 1479 A promise to buy and sell a determinate thing for a price certain is reciprocally demandable *IF OFFERER ALLOWED CERTAIN PERIOD TO ACCEPT 1) offer may be withdrawn anytime by communicating such withdrawal = before acceptance EXCEPTION: -there is option money *RIGHTS OF VENDOR: CONTRACT OF SALE OF PERSONAL PROPERTY IN INSTALLMENT BASIS 1. if vendee fail to pay exact fulfilment 2. failure to pay 2 or more instalments cancel the sale or foreclose the chattel mortgage (if theres any) *In foreclosure the vendor who foreclosed does not have any right to recover any unpaid balance of the price; agreement to the contrary is void. *above rules applicable in leases of personal property with option to buy *Stipulation that the money paid as instalment or rent shall not be returned valid: provided unconscionable under the circumstances *2 SITUATIONS IN AN OPTION CONTRACT: 1. with separate consideration Legal consequence: a. option contract is valid b. offeror can not withdraw offer until after expiry period c. subject to rescission, damages but not to specific performance because this is not an obligation to give 2. without separate consideration Legal consequence: OLD RULE: a. offer is still valid, but b. option contract is void c. not subject to rescission, damages NEW RULE: Right of first refusal recognized 3. Right of first refusal *right of the lessee to be the first one to be offered for the sale of the property leased by him before it can be offered to another. creates a promise to enter into a contract of sale and it has no separate consideration, not subject to specific performance because there is no contractual relationship here & it is not an obligation to give (not a real contract) New doctrine: may be subject to specific performance Effect of new doctrine: turned the world of policitacion upside down because while valid option contract is not

subject to specific performance, right of first refusal which does not even have a separate consideration may be subject to specific performance
OPTION CONTRACT & RIGHT OF FIRST REFUSAL DISTINGUISHED OPTION CONTRACT Principal contract; stands on its own Needs consideration separate RIGHT OF FIRST REFUSAL Accessory; can not stand on its own Does not need consideration separate

- Meeting of Minds: 1. Offer certain 2. Acceptance absolute Qualified acceptance merely a counter-offer which needs to be absolutely accepted to give rise to perfected contract of sale Business ads are mere invitations to make an offer except when it appears to be otherwise Acceptance by letter/telegram binds only at time it came to knowledge of SELLER; prior thereto offer may still be withdrawn Must be exact terms to be considered absolute *When deviations allowed: a. anything that refers to price is material b. small items are insignificant, does not make acceptable unconditional when sale is subject to suspensive condition, no perfected contract of sale yet; becomes perfected only upon happening of condition

Subject matter & price must be valid Not conditional

There must be subject matter but price not important Conditional

Not subject to specific performance

Subject to performance

specific

A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve. Place of perfection: where the meeting of minds happen; when acceptance sent by mail, perfection is deemed where the offer is made Performance has nothing to do with perfection stage C. Formalities of the contract, Art. 1403 (d) (e) -A contract of sale may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth EXCEPT: -Those covered by statute of fraud (1) Agreement for the sale of goods, chattels or things in action price not less than 5H pesos EXCEPT: i. Buyer accept and receive part of such goods and chattels or the evidences of things in action ii. buyer pay some part of the purchase money iii. when auctioneer made an entry in his sales book (2) lease agreement for longer than 1 year (3) sale of real property or interest therein *FORM OF SALES 1. Form not important in validity of sale Sale being consensual, may be oral or written, perfected by mere consent as to price & subject matter If particular form is required under the statute of frauds: a. valid & binding between parties b. not binding to 3rd persons only Reason: purposes of convenience only & not for validity & enforceability; cause of action is granted to sue & compel other party to execute the document 2. When form is important for validity; exception by specific provision of law;

Recognizes recovery of damage based on abuse of rights doctrine 4. Mutual promise to buy and sell (Art. 1479) * a promise to buy and sell a determinate thing for a price certain is reciprocally demandable * accepted unilateral promise to buy or to sell a determinate thing for a price certain binding upon the promissor only if supported by a consideration distinct from the price. B. Perfection (Arts. 1475, 1319, 1325, 1326) - at the moment there is a meeting of minds to what constitute the contract of sale: upon (1) the thing which is the object of the contract and (2) upon the price. - from moment of perfection, parties may reciprocally demand performance, subject to the provisions of the law governing the forms of contracts. -offer must be certain and acceptance absolute *RULE ON ACCEPTANCE 1. if made through letter or telegram GENERAL RULE: does not bind the offerer EXCEPT: from the time it came to his knowledge -presumed to have entered into in the place where the offer was made. 2. it is may be express or implied 3. manner of acceptance, time and place may be fixed by the offerer 4. offer made through an agent offer accepted from the time acceptance is communicated to him PERFECTION - Sale is a consensual contract, perfected by meeting of minds regarding subject matter & price

a. power to sell a piece of land granted to an agent otherwise VOID b. sale of large cattle; must also be registered with Municipal treasurer otherwise VOID c. sale of land by non-Christian if not approved by Governor VOID 3. When form is important for enforceability (STATUTE OF FRAUDS) a. sale to be performed 1 year after b. Agreement to sell things with value of 500 and up c. Sale of real property or any interest therein Exception: i. When there is a note or memorandum in writing & subscribed to by party or his agent (contains essential terms of the contract) ii. When there has been partial performance/execution (seller delivers with intent to transfer title/receives price) iii. when there has been failure to object to presentation of evidence (oral) - constitutes waiver VII. Transfer of Ownership *CONSUMMATION STAGE/PERFORMANCE STAGE Stage where parties both comply with their obligation Nature of diligence required: diligence of a good father of the family unless other requirement is stipulated Consequence: Seller will be guilty of breach if thing is lost through his fault A. Manner of transfer (Arts. 1477, 1496-1501) -upon delivery; ownership acquired by the vendee delivered placed in the control and possession of the vendee - execution of instrument when sale is made through public instrument or sale of incorporeal property - movable delivery of the keys or mere consent or agreement of the contracting parties, if possession cannot be transferred at the time of the sale - tradition constitutum possessorium - placing of the titles of ownership in the possession of the vendee or use of vendee of his rights with vendors consent *DELIVERY OF THE THING -Transfer ownership (tradicion) twin obligations: a. transfer title(ownership) SELLER must be owner of thing at the time of consummation to validly transfer title b. delivery of the thing *TIME & PLACE OF DELIVERY 1. 2. 3. 4. 5. follow stipulation in contact, or follow usage in trade, or sellers place of business or his residence specific goods place where the thing is at reasonable hour

2. Description goods must correspond with description or sample Effect if there is no compliance: RESCISSION may be availed of by the buyer *OBLIGATION OF BUYER 1. Pay the price Buyer is obligated to pay price according to terms agreed upon regarding time, place & amount If payment of interest is stipulated must pay; if amount of interest not mentioned apply legal rate When buyer defaults constitutes breach: subject to specific performance/rescission & damages; interest to be paid also from default 2. Accept delivery of thing sold Where to accept: at time & place stipulated in the contract; if none specified at the time & place of delivery Goods; -there is acceptance when: a. He intimates to seller that he has accepted b. When delivered & does any act inconsistent with ownership of seller c. Retains without intimating to seller that he has rejected Sale of Goods on installment: a. Goods must be delivered in full, except when stipulated b. When not examined by buyer not accepted until examined or at least had reasonable time to examine Acceptance of goods in general, absent contrary express stipulation, does not discharge seller from liability in case of breach of warranties (unless no notice or failure to give it within reasonable time) When buyer has a right to refuse goods, no need to return; shall be considered as depositary; unless there is stipulation to the contrary B. When delivery does not transfer title *EFFECTS OF DELIVERY: Title to thing is transferred/ownership is transferred Except: contrary is stipulated as in the case of: 1. contract to sell 2. sale on acceptance/approval 3. sale or return 4. there is implied reservation of ownership C. Kinds of delivery Different kinds of delivery: 1. Actual when thing sold is placed in the control & possession of the buyer 2. Constructive DIFFERENT FORMS OF CONSTRUCTIVE DELIVERY: 1. Traditio Longa Manu Delivery of thing by mere agreement; when SELLER points to the property without need of actually delivering 2. Traditio Brevi Manu Before contract of sale, the would be buyer was already in possession of the would be subject matter of sale (ex: as lessee) 3. Symbolic delivery As to movables ex: delivery of the keys to a car 4. Constitutum possessarium

*WHO BEARS EXPENSES OF DELIVERY Seller *Sale by description/sample 1. Sample goods must correspond with sample shown

 at the time of perfection of contract, seller continues to hold possession merely as a holder 5. Execution: Exception: a. when there is stipulation to contrary, execution does not produce effect of delivery b. when at the time of execution of instrument, subject matter was not subject to control of the seller subject matter should be within control of seller; he should have capacity to deliver at the time of execution of public instrument when he wants to effect actual delivery such capacity should subsist for a reasonable time after execution of instrument (reasonable time depends on circumstances of persons, places & things) Effect when 2 requisites do not concur: no constructive delivery; no compliance on part of SELLER to deliver Even when thing is mortgaged, seller can still deliver because naked title still belongs to him & can still do acts of ownership including conveyance 6. Negotiable documents of title & non negotiable instruments transferee acquires title of transferor when delivered without negotiation, it is a mere assignment 7. Intangibles/ incorporeal property through public instrument execution is equivalent to delivery if from the deed, contrary does not appear DELIVERY OF FRUITS & ACCESSIONS/ ACCESSORIES Right to fruits & accessions/accessories accrue from time sale is perfected but no real right over it until it is delivered DELIVERY THROUGH CARRIER 1. FAS FREE ALONG SIDE When goods delivered alongside the ship, there is already delivery to the buyer (twin effects deemed fulfilled) 2. FOB - FREE ON BOARD a. Shipment when goods are delivered at ship at point of shipment; delivery to carrier by placing goods on vessel is delivery to buyer b. Destination when goods reach the port even if not disembarked yet from the vessel, there is delivery to the buyer 3. CIF COST, INSURANCE, FREIGHT a. when buyer pays for services of carrier delivery to carrier is delivery to buyer; carrier is agent of the buyer b. when buyer pays seller the price from moment the vessel is at port of destination, there is already delivery to buyer. D. Double sales (Art. 1544) General Rule: FIRST IN TIME, PRIORITY IN RIGHT When does it apply: when not all requisites embodied in 1544 concur SPECIAL RULE: 1544 Requisites: 1. exactly same subject matter 2. exactly same immediate seller

3. buyers represent conflicting interest 4. both sales are valid RULES ACCORDING TO 1544: 1. MOVABLE owner is first to posses in good faith 2. IMMOVABLE First to register in good faith No inscription, first to possess in good faith No inscription & no possession in good faith Person who presents oldest title in good faith *GOOD FAITH 1. one who buys property without notice that another person has a right or interest in such property 2. one who has paid price before notice that another has claim or interest lis pendens notice that subject matter is in litigation adverse claim notice that somebody is claiming better right *POSSESSION Both actual or constructive *REGISTRATION 1. registered under Torrens system 1544 applies 2. not registered under the Torrens system 1544 still applies jurisprudence: if 2nd sale is a judicial sale (by way of levy on execution), buyer merely steps into the shoes of the judgment debtor. Outside of such situation must apply to conflicting sales over the same unregistered parcel of land 3. if sale 1 occurs when land is not yet registered & sale 2 is done when land is already registered apply FIRST IN TIME, PRIORITY IN RIGHT E. Property Registration Decree 1. Requisites for registration of deed of sale in good faith 2. Accompanied by vendors duplicate certificate of title, payment of capital gains tax, and documentary tax registration fees VIII. Risk of Loss A. General rule (Arts. 1263, 1189) Art 1263 In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation. SUSPENSIVE CONDITION: THERE IS LOSS/DETERIORATIONa) w/o D fault obligation extinguished b) w/ D fault obliged to pay damages c) deteriorates w/o D fault impairment borne by creditor d) deterioration w/ D fault C may choose between rescission of obligation and its fulfilment, with indemnity for damages in either case B. When loss occurred before perfection Res perit domino (Owner bears the loss) Owner is seller so seller bears risk of loss C. When loss occurred at time of perfection (Arts. 1493 and 1494)

 Res perit domino Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale Seller cannot anymore comply with obligation so buyer cannot anymore be compelled D. When loss occurred after perfection but before delivery a. Loss confused state 2 views: Paras: BUYER Tolentino: SELLER b. Deterioration & fruits - Buyer bears loss; E. When ownership is transferred (Art. 1504) -after delivery Res perit domino Owner is buyer so buyer bears risk of loss Delivery extinguishes ownership vis-a-vis the seller & creates a new one in favor of the buyer
CIVIL LAW COMMON LAW

- not creation of law but by merchants to allow them to deal with merchandise without having to physically carry them around -pertains to specific type of movables only: GOODS B. Purpose of documents of title 1. evidence of existence & possession of goods described therein 2. medium by which seller is able to transfer possession of goods

2 FORMS C. Negotiable documents of title a. deliver to bearer (negotiation by mere delivery) b. deliver to specific person or his order (negotiation by endorsement + delivery) even if face of instrument says NON-NEGOTIABLE, it is still NEGOTIABLE; limiting words does not destroy negotiability if order instrument & no endorsement was made equivalent to assignment D. Non-negotiable documents of title @ IMPORTANT CONSIDERATIONS 1. Negotiation gives better right than assignment
NEGOTIATION ASSIGNMENT

To have a valid contract, subject matter must be determinate or specific (law on loss, deterioration, fruits, applies only to determine subject matter) and sale is unconditional (perfection)

Perfection of unconditional contract of sale covers goods that are determinable

Delivery of subject matter is the mode which transfers ownership to the buyer

Perfection with availability of subject matter for delivery is the mode which transfers ownership to buyer;

transferor/holder title to goods

acquires

acquires title to against transferor

goods

bailee has direct obligation to holder as if directly dealt with him

acquires right to notify bailee so that he acquires obligation of bailee to hold goods for him

Not a title but a mode; tradition transfers ownership (needs delivery)

Tradition is merely a means to perform obligation

2. Assignee takes document with defects of the assignor * Obligation of bailee bailee is immediately bound to the document E. Warranties of seller of documents of title (Art. 1516) 1. the document is genuine 2. he has legal right to negotiate or transfer it 3. he has knowledge of no fact which would impair the validity or worth of the document 4. he has right to transfer title to goods and goods are merchantable/fit F. Rules on levy/garnishment of goods (Arts. 1514, 1519, 1520) 1. Non negotiable Notification is operative act to transfer title/possession of goods in favor assignee Before notification can still be garnished 2. Negotiable

Risk of loss passes at perfection (even if ownership has not yet been transferred)

Res perit domino; owner bears risk of loss

*Legal consequences from point of perfection are the same in both legal systems: upon perfection of an unconditional contract of sale involving specific or determinate subject matter, the risk of loss, deterioration and the benefits of fruits and improvements, were for the account of the buyer. IX. Documents of Title A. Definition (Art. 1636)

 Cannot be levied or garnished when documents are already with purchaser in good faith, unless: a. Document is first surrendered b. Document is pounded by court c. Negotiation is enjoined X. Remedies of an Unpaid Seller A. Definition of unpaid seller (Art. 1525) - seller of the goods: a. the whole of the price has not been paid or tendered b. when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it has received has been broken by reason of the dishonour of the instrument, the insolvency of the buyer, or otherwise. B. Remedies of unpaid seller: I. SUBJECT MATTER: MOVABLES (IN GENERAL) Any man may not take law in his own hands, must seek remedy through courts Exception: 1. DOCTRINE OF SELF HELP 2. SPECIAL REMEDIES Requisites: 1. Subject matter goods 2. Seller is unpaid not completely paid or received negotiable instrument under a condition & condition has been breached by reason of dishonor 3. Physical possession is with seller a. possessory lien b. stoppage in transitu c. special right of re-sale Can only be exercised when the 2 prior rights d. special right to rescind have been exercised - POSSESSORY LIEN Seller not bound to deliver if buyer has not paid him the price Right to retain; cannot be availed when seller does not have custody Exercisable only in following circumstances: a. goods sold without stipulation as to credit b. goods sold on credit but term of credit has expired c. buyer becomes insolvent When part of goods delivered, may still exercise right on goods undelivered Instances when possessory lien lost: a. seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to possess them b. buyer or his agent lawfully obtains possession of goods c. waiver loses lien when he parts with goods (still has stoppage in transitu) notice by seller to buyer not essential -STOPPAGE IN TRANSITU Requisites: 1. Goods are in transit When goods are in transit From the time goods are delivered to carrier for purpose of transmission to buyer Goods rejected by buyer & carrier continues to possess them When goods no longer in transit Reached point of destination

Before reaching destination, buyer obtains delivery of the goods Goods are supposed to have been delivered to buyer but carrier refused 2. Shown by seller that buyer is insolvent (failure to pay when debts become due ) How is right exercised: a. Obtain actual possession of goods b. Give notice of claim to carrier / bailee in possession thereof Notice by seller to buyer is not required; notice to carrier is essential -SPECIAL RIGHT TO RESELL THE GOODS Requisites: 1. goods are perishable 2. stipulated the right of resale in case buyer defaults in payment 3. buyer in default for unreasonable time notice by seller to buyer not essential why special there are things which seller cannot do in ordinary sale: 1. ownership is with buyer but seller can sell goods 2. title accorded to buyer is destroyed even without court intervention @Possessory lien and stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller assented thereto. - Negotiable document of title is issued no right of seller shall defeat the right of any purchaser for value in good faith to whom such document has been negotiated. - SPECIAL RIGHT TO RESCIND why special ownership of goods already with buyer but seller may still rescind; ownership is destroyed even without court intervention but in ordinary sale, need to go to court to destroy transfer of ownership Requisites: 1. Expressly stipulated 2. Buyer is in default for unreasonable time Notice needed to be given by seller to buyer *REMEDIES OF BUYER When Seller fails to deliver, buyer may seek SPECIFIC PERFORMANCE WITHOUT GIVING SELLER OPTION TO RETAIN GOODS ON PAYMENT OF DAMAGES II. SALE OF MOVABLES ON INSTALLMENT (Recto Law) REMEDIES OF UNPAID SELLER (1484) 1. Exact fulfillment should the buyer fail to pay 2. Cancel the sale if buyer fails to pay 2 or more installments 3. Foreclose on chattel mortgage if buyer fails to pay 2 or more installments XI. Performance of Contract A. Delivery of thing sold 1. Sale of movables (Arts. 1522, 1537, 1480) COMPLETENESS OF DELIVERY: MOVABLES delivery of thing plus accessories & accessions in the condition in which they were upon the perfection of the contract including the fruits a. LESS buyer has 2 options: i. reject

ii. accept (1) when accepts with knowledge that seller is not going to perform contract in full, he must pay at price stipulated (2) when accepts & consumes before knowledge that buyer will not perform contract in full, liable only for fair value of goods delivered b. LARGER buyer has 3 options; i. accept per contract & reject the rest ii. accept the whole pay price stipulated iii. reject whole if subject matter is indivisible c. MIXED WITH GOODS OF DIFFERENT DESCRIPTION buyer has 2 options: i. accept good w/c are in accordance with contract & reject the rest ii. reject goods entirely if indivisible 2. Sale of immovables (Arts. 1539, 1543) COMPLETENESS OF DELIVERY: IMMOVABLES a. sold per unit or number with statement of its area, rate at certain price deliver all that may have been stated in the contract if impossible, remedies of buyer: LESS IN AREA i. rescission (when inferior value of the thing sold exceeds 1/10 of the price agreed upon) ii. proportional reduction of price LACK IN AREA SHOULD NOT BE LESS THAN 1/10 OF AREA AGREED UPON GREATER IN AREA i. accept per stipulation & reject the rest ii. accept whole area pay at contract rate Applicable to judicial sales b. sold for lump sum When price per unit not indicated If area delivered is either greater or lesser price will not be adjusted accordingly (no increase or decrease of price) 3. Inspections and acceptance @ Actions shall prescribe in 6 months from the day of delivery. B. Payment of price - act of presenting the agreed amount with a demand to accept it. - in a manner and place agreed upon, or if none, at the place of the transaction or sell. XII. Warranties A. CONDITION When a contract contains a condition, the non-happening of which would not constitute a breach but extinguishes the obligation However, if party to the sales contract has promised that the condition should happen or be performed, the nonperformance of which may be treated by parties as breach
CONDITION Purports to existence of WARRANTY Purports to performance of

obligation

obligation

Condition must be stipulated to form part of the obligation

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

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

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

A. Express warranties - agreed or stipulated by parties B. Implied warranties (Art. 1547) deemed included in all contracts of sale whether parties are actually aware or not, whether they were intended or not; by operation of law 1. WARRANTY THAT SELLER HAS A RIGHT TO SELL refers to consummation stage since in consummation stage, it is where ownership is transferred by tradition not applicable to sheriff, auctioneer, mortgagee, pledgee 2. WARRANTY AGAINST EVICTION implied, unless contrary provision appears in contract when ownership is transferred, buyer shall enjoy the legal and peaceful possession of the thing REQUISITES OF BREACH OF WARRANTY AGAINST EVICTION: 1. buyer is evicted in whole or in part from the subject matter of sale 2. there is a final judgement 3. basis of eviction is a right prior to sale or an act imputable to vendor 4. seller has been summoned in the suit for eviction at the instance of buyer; or made 3rd party defendant through 3rd party complaint brought by buyer no appeal needed nor a need for buyer to resist eviction for right to accrue; it is enough that the aforementioned requisites are complied with warranty cannot requisites concur be enforced until aforementioned

applies to judicial sale; judgment debtor responsible for eviction unless otherwise decreed in judgment vendor not liable for eviction if adverse possession had been commenced before sale but prescriptive period is completed after transfer *LIABILITY OF SELLER: (eviction w/c caused buyer to lose whole subject matter) 1. value of thing at time of eviction ( be it greater/lesser than price of sale ) 2. value of income of fruits 3. costs of suit which caused the eviction 4. expenses of contract if buyer paid for them

5. damages & interests and ornamental expenses if sale was made in bad faith *RIGHTS OF BUYER WHEN DEPRIVED OF ONLY PART OF THE SUBJECT MATTER BUT WOULD NOT HAVE BOUGHT SUCH PART IF NOT IN RELATION FOR THE WHOLE: 1. rescission 2. mutual restitution (return what has received) 3. WARRANTY AGAINST ENCUMBRANCES (non- apparent) Requisites: a. immovable sold is encumbered with nonapparent burden or servitude not mentioned in the agreement b. nature of nonapparent servitude or burden is such that it must be presumed that the buyer would not have acquired it had he been aware thereof when breach of warranty exist: buyer may ask for rescission or indemnity warranty not applicable when non apparent burden or servitude is recorded in the Registry of Property unless there is express warranty that the thing is free from all burdens & encumbrances 4. WARRANTY AGAINST HIDDEN DEFECTS SELLER does not warrant patent defect; caveat emptor Except when hidden a. subject matter may be movable or immovable b. nature of hidden defect is such that it should render the subject matter unfit for the use of which it was intended or should diminish its fitness c. had the buyer been aware, he would not have acquired it or would have given a lower price when defect is visible or even if not visible but buyer is an expert by reason of his trade or profession, seller is not liable obligation of seller for breach depends on whether he has knowledge of such defect or not a. seller is aware seller should return price & refund expenses of contract with damages b. seller is not aware - seller should return price and interest & refund expenses ( no damages ) buyer may elect between withdrawing from contract or demanding proportionate reduction of price with damages in either case applicable to judicial sale except that judgment debtor not liable for damages action to prescribe 6 months from delivery of subject matter 5. DEFECTS ON ANIMALS even in the case of professional inspection but hidden defect is of such nature that expert knowledge is not sufficient to discover it - defect shall be considered as REDHIBITORY if vet fails to discover through ignorance or bad faith he is liable for damages a. sale of animals on teams (2 or more) when only one is defective, only one is redhibited & not the others exception: when it appears buyer would not have purchased the team without the defective one apply to sale of other things b. sale of animals at fair or public auction no warranty against hidden defects c. sale of animals with contagious disease is VOID

d. sale of unfit animals VOID if use / service for which they are acquired has been stated in the contract and they are found to be unfit therefor prescription of action: 40 days from date of delivery to buyer if sale is rescinded, animals to be returned in same condition when they were acquired; buyer shall answer for injury / loss due to his fault buyer may elect between withdrawing from sale and demanding proportionate reduction of price with damages in either case * SPECIFIC IMPLIED WARRANTIES IN THE SALE OF GOODS 1. Warranty as to fitness & quality; Requisites: a. buyer makes known to seller the particular purpose for which goods are acquired and it appears that the buyer relied on the sellers skill or judgment b. goods are bought by description from seller who deals in goods of that description in case of sale of specified article under its patent or trade name, no warranty unless there is a stipulation to the contrary measure of damage: difference between value of goods at time of delivery and value they would have had if they had answered to the warranty 2. Sale of Goods by sample If seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample C. Effects of warranties REQUISITES 1. it must be an affirmation of fact or any promise by seller relating to the subject matter of sale 2. natural tendency of affirmation or promise is to induce buyer to purchase subject matter 3. buyer purchases the subject matter relying thereon when breached, seller is liable for damages * BUYER: a) may rescind the contract or b) demand proportionate reduction of price - with damages in both. D. Effects of waivers Parties may increase or diminish implied warranty against eviction; but effect depends on good faith or bad faith on the part of the seller. 1. seller in bad faith & there is waiver against eviction null & void 2. buyer without knowledge of a particular risk, made general renunciation of warranty not waiver but merely limits liability of seller in case of eviction (pay value of subject matter at time of eviction) 3. buyer with knowledge of risk of eviction assumed its consequences & made a waiver vendor not liable (applicable only to waiver of warranty against eviction) when goods delivered to buyer, he cannot rescind sale if: 1. he knew of the breach of warranty when he accepted goods without protest 2. he fails to notify seller within reasonable time of election to rescind

3. he fails to return or offer to return goods to seller in substantially as good condition as they were in at time ownership was transferred 4. when goods deteriorated, buyer can still return them in that condition if such is due to breach or warranty E. Buyers options in case of breach of warranty (Art. 1599) 1. Accept goods & set up breach of warranty by way of recoupment in diminution or extinction of the price. 2. Accept goods & maintain action against seller for damages 3. Refuse to accept goods & maintain action against seller for damages. 4. Rescind contract of sale & refuse to receive goods/return them when already received. XIII. Breach of Contract A. Remedies of the seller (Arts. 1636, 1594) 1. Sale of movables i) Seller may maintain an action for the price of the goods: a) Where ownership passes to the buyer who neglects or refuses to pay b) contract provides for time of payment, although ownership has not passed, and the buyer wrongfully neglects or refuses to pay c) treat the goods as the buyers: after offer to deliver the goods to the buyer, if the latter refuses to receive them, may notify the buyer that he held the goods as bailee for the buyer ii) Damages for non-acceptance a) buyer wrongfully neglects or refuses to accept and pay for the goods b) if buyer repudiates the contract, he shall be liable for labor performed or expenses made before seller receive notice of repudiation iii) Rescind by giving notice: goods not delivered to the buyer a) buyer repudiated contract of sale b) buyer manifested his inability to perform his obligations c) buyer committed a breach B. Recto Law: sale of movables on installment (Arts. 14841486) -The vendor may: a) exact fulfilment of the obligation, should the vendee fail to pay b) cancel the sale : two or more instalment c) foreclose the chattel mortgage on the thing sold If vendor chooses foreclosure, no further action against buyer to recover any unpaid balance of the price; any agreement to the contrary is void. When is the law applicable: Sale on movables by installment Sale on installment: payment by several partial payments in small amount Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per installment & at the same time remedy abuse of commercial houses Nature of remedies: alternative & not cumulative Coverage: sale & financing transaction & contracts of lease with option to purchase

Action : Judicial & Extrajudicial -SPECIFIC PERFORMANCE If already chose specific performance, can no longer choose other remedies Except: after choosing, it has become impossible, rescission may be pursued -RESCISSION When chosen, there is correlative obligation to restitute But stipulation that installments paid are forfeited are valid if not unconscionable Deemed chosen when: a. Notice of rescission is sent b. Takes possession of subject matter of sale c. Files action for rescission Barring effect on recovery of balance -FORECLOSURE Barring effect on recovery of balance Extent of barring effect: purchase price Exception: mortgagor refuses to deliver property to effect foreclosure, recover also expenses incurred in attorneys fees, etc. (Perverse Buyer-Mortgagor) C. Sale of immovables *REMEDIES OF SELLER: IMMOVABLES (IN GENERAL) 1. Anticipatory breach Seller has reasonable grounds to fear loss of immovable sold & its price sue for RESCISSION 2. Non payment of price RESCISSION 1. P.D. 957, Secs. 23, 24 Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. Section 24. Failure to pay installments. The rights of the buyer in the event of this failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552. RA 6552: Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments: (a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him

which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any. (b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty (30) days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made. Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days (30) from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act. 2. Sale of immovables on installment (Maceda Law) 1592 Applies only to contract of sale -the vendee may pay even after the expiration of the period, as long as no demand for rescission has been made either judicially or by a notarial act; after demand, court may not grant him a new term. COVERAGE of Maceda Law applies to COS & CTS & Financing MACEDA LAW Coverage: REAL ESTATE defined space vs. CONDO not defined space (w/ common areas) 1. contract of sale 2. contract to sell 3. financing transactions Excluded: (ICS) 1. industrial 2. commercial 3. sale to tenants under agrarian laws D. Remedies of the buyer 1. Sale of movable - where seller maintain action for his failure or neglect to pay wherein contract provides for time of payment, although ownership has not passed = defense: seller manifested an

inability to perform the contract of sale on his part or an intention not to perform it. i) where seller has broken a contract to deliver specific or ascertained goods a) buyer may cause performance through application with the court, without giving to the seller option of retaining the goods on payment of damages ii) where there is breach to the warranty a) damages b) rescind return the goods: not liable for the price; if payment is made: seller repay IF: seller refuses to accept returned goods: - buyer hold the goods as bailee for the seller, subject to a lien to the price or part which has been paid 2. Sale of immovables *REMEDIES OF BUYER 1. Disturbed in possession or with reasonable grounds to fear disturbance: SUSPEND PAYMENT 2. In case of subdivision or condo projects If real estate developer fails to comply with obligation according to approved plan: a) RESCIND b) SUSPEND PAYMENT UNTIL SELLER COMPLIES *IMMOVABLES (BY INSTALLMENT) RIGHTS GRANTED TO BUYERS: (RA 6552) 1. Buyer paid at least 2 years installment a. Pay without interest the balance within grace period of 1 month for every year of installment payment Grace to be exercised once every 5 years b. When no payment - cancelled; buyer entitled to 50% of what he has paid + if after 5 years of installments, 5% for every year but not to exceed 90% of total payments made Cancellation to be effected 30 days from notice & upon payment of cash surrender value 2. Buyer paid less than 2 years installment a. 1st Grace period is 60 days from date installment became due b. 2nd grace period of 30 days from notice of cancellation/demand for rescission buyer can still pay within the 30 day period with interest c. No payment after 30 day period, can cancel. Purpose of law: Protect buyers in installments against oppressive conditions Notice needed waiver thereof if oppressive Apply to contracts even before law was enacted Stipulation to contrary is void Other rights of buyer in instalment basis: a. Sell rights to another b. Reinstate contract by updating during grace period & before actual cancellation c. Deed of Sale to be done by notarial act d. To pay in advance any installment or the full balance of price anytime without interest e. Have full payment annotated in certificate of title

RESCISSION (RESOLUTION) 1191

RESCISSION 1385

legal basis is substantial breach

legal basis is lesion (rescissible contract)

2. conventional redemption only extinguishes obligations pertaining to contract of sale, not extinguish contract itself; only applies to contract of sale 3. legal redemption only applies to contract of sale

principal remedy, retaliatory vs. unjust party

subsidiary remedy cannot be instituted except when other remedies exhausted

mutual restitution

mutual restitution

Nature: Judicial Extra judicial Rescission -allowed if stipulated; burden to sue shifts to party who does not like rescission court still has final say as to propriety of rescission Forfeiture of amounts valid being in nature of penal clause
CONTRACT OF SALE Governed by genus SALE Ownership passes because of tradition Non-payment is resolutory condition which may be basis of breach Perfection reciprocal obligation gives rise to demandable CONTRACT TO SELL Governed by genus SALE Ownership passes upon full payment Non payment is suspensive; non-payment extinguishes contract to sell Perfection gives rise to reciprocal suspensive conditional obligation

B. Conventional redemption (Art. 1601) takes place when seller reserves the right to repurchase thing sold coupled with obligation to return price of the sale, expenses of contract & other legitimate payments and the necessary & useful expenses made on the thing sold right is exercised only by seller in whom right is recognized in the contract or by any person to whom right was transferred; must be in the same contract * prescription 4 years from date of contract, in the absence of any stipulation to the contrary; agreement cannot exceed 10 years. C. Equitable mortgage (Arts. 1602-1604) a contract with right to repurchase is equitable mortgage if the following requisites concur: 1. price of sale with right to repurchase is unusually inadequate 2. seller remains in possession as lessee or otherwise 3. upon or after expiration of right to repurchase, another instrument extending the period of redemption or granting new period is executed 4. buyer retains for himself a part of the purchase price 5. seller binds himself to pay taxes on thing sold 6. real intention of parties is to secure the payment of a debt or performance of other obligation @IN CASE OF DOUBT IN DETERMINING WHETHER IT IS EQUITABLE MORTGAGE OR SALE A RETRO (WITH RIGHT OF REPURCHASE) IT SHALL BE CONSTRUED AS EQUITABLE MORTGAGE - Applicable even when contract appears to be an absolute sale. *WHAT TO LOOK FOR IN DETERMINING NATURE OF CONTRACT 1. language of the contract 2. conduct of parties to reveal real intent @REMEDY AVAILABLE TO VENDOR: ask for REFORMATION of contract *RATIONALE BEHIND PROVISION ON EQUITABLE MORTGAGE: 1. Circumvention of usury law 2. Circumvention of prohibition against pactum commissorium (creditor cannot appropriate the things given by way of pledge or mortgage); remedy here is foreclosure before creditor can acquire the property real intention of parties is that the pretended purchase price is money loaned & to secure payment of the loan, sale with pacto de retro is drawn up D. Distinguished from option to buy (Art. 1602) - In option to buy, the lessee/vendee is given the privilege to purchase the property; lessor/vendor still owns the property though the possession is with the lessee/vendee; there is right of first refusal. OPTION TO PURCHASE right to repurchase the thing sold granted to the vendor in a separate instrument from the deed of sale

CONTRACT OF SALE RESCISSION IS APPLICABLE CONTRACT TO SELL RESCISSION NOT APPLICABLE Nonpayment of purchase price would automatically cancel even without further action for rescission Except: If subject matter is residential lots, law on rescission applies when there is substantial breach. Maceda law applies. XIV. Extinguishment of the Sale A. Causes (Arts. 1600, 1231) 1. same grounds whereby obligations in general are extinguished: a. payment or performance b. loss of the subject matter c. condonation or remission d. confusion or merger of rights of creditor and debtor e. compensation f. novation g. annulment h. rescission i. fulfillment of a resolutory condition j. prescription

E. Period of redemption (Art. 1606) 1. No period agreed upon 4 years from date of contract 2. When there is agreement should not exceed 10 years; if it exceeded, valid only for the first 10 years. 3. When period to redeem has expired & there has been a previous suit on the nature of the contract seller still has 30 days from final judgment on the basis that contract was a sale with pacto de retro: rationale: no redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan. 4. When period has expired & seller allowed the period of redemption to expire seller is at fault for not having exercised his rights so should not be granted a new period *WHEN PERIOD OF REDEMPTION BEGINS TO RUN 1. right of legal pre-emption of redemption shall be exercised within 30 days from notice by the seller 2. deed of sale not to be recorded in Register of Deeds unless accompanied by affidavit of seller that he has given notice to all possible redemptioners 3. GR: actual knowledge notwithstanding, written notice is still required. Exception: actual knowledge by co-heirs living in same land with purchaser, or co-owner was middleman in sale to 3rd party, no need to give written notice; period of redemption begins to run from actual knowledge F. Exercise of the right to redeem (Art. 1616) -vendor shall return the price of the sale; plus: a) expenses of the contract and any other legitimate payments b) the necessary and useful expenses made G. Legal redemption (Art. 1619) - right to be subrogated, upon the same terms and conditions stipulated in the contract, in the place of one who acquires a thing by purchase or by dation in payment, or by other transaction whereby ownership is transmitted by onerous title. 1. among co-heirs any of the heirs sell his hereditary rights to stranger before partition any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse buyer of the price of the sale co-heirs have 1 month from receipt of notice in writing 2. among co-owners any or all of co-owners sells their shares to 3rd person any co-owner may exercise right of redemption by paying reasonable price of property to the buyer if 2 or more co-owners desire to exercise right of redemption, they may only do so in proportion to the share they respectively have in thing owned in common
DISTINCTION BETWEEN RIGHT OF OWNERS CO-HEIRS Heir may redeem for himself alone the hereditary right sold by a co-heir REDEMPTION OF CO-HEIRS FROM COCO-OWNERS Co-owner may redeem property but even if uses his own funds, redemption inures to the benefit of other coowners Sale of interest in particular property

3. among adjoining owners a. rural land where piece of rural land has an area not exceeding 1 hectare, adjoining owner has right to redeem unless grantee does not own a rural land if 2 or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller area shall be preferred; if both have same lot area, one who first requested shall be granted b. urban land when piece of land is small & cannot be used for any practical purpose & bought merely for speculation, owner of adjoining land can redeem 2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intended use is best justified shall be preferred. c. sale of credit in litigation when a credit or other incorporeal right in litigation is sold, debtor shall have a right to extinguish it by reimbursing the assignee for the price the latter paid therefor plus judicial costs, interest debtor may exercise right within 30 days from the date assignee demands payment from him *OTHER INSTANCES WHEN RIGHT OF LEGAL REDEMPTION IS GRANTED 1. Redemption of homesteads Public Land Act Land acquired under free patent homestead Subject to repurchase by wife, legal heirs within 5 years from date of conveyance Granted by law, need not be stipulated 2. Redemption in tax sales in case of tax delinquency/failure to pay tax assessments, property is foreclosed delinquent payer has 1 year from date of sale to redeem by paying to the Revenue District Officer the amount of tax delinquencies, & interest or purchase price. 3. Redemption by judgment debtor 1 year from date of registration of certificate of sale to redeem by paying purchaser at public auction with interest 4. Redemption in extrajudicial foreclosure 1 year from date of sale and registration 5. Redemption in judicial foreclosure of mortgage no right to redeem is granted to debtor mortgagor except when mortgagee is bank or a banking institution 90 days after finality of judgment H. Age redemption (Art. 1619) *EFFECT WHEN THERE IS NO REDEMPTION MADE: 1. jurisprudence before the NCC: buyer a retro automatically acquires full ownership 2. under present art 1607: there must be judicial order before ownership of real property is consolidated in the buyer a retro *HOW IS REDEMPTION EFFECTED: 1. Seller a retro must first pay the following:

Sale of hereditary right (1088) over no particular object

a. the price of the thing sold b. expenses of the contract and other legitimate payments made by reason of the sale c. necessary and useful expenses made on the thing sold 2. Valid tender of payment is sufficient 3. Mere sending of notice without valid tender is insufficient 4. Failure to pay useful & necessary expenses entitles vendee to retain land unless actual reimbursement is made *IN CASE OF MULTI-PARTIES 1. When an undivided thing is sold because co-owners cannot agree that it be allotted to one of them vendee a retro may compel the vendor to redeem the whole thing 2. When an undivided thing is sold by co-owners / co-heirs, vendors a retro may only exercise his right over his respective share; vendee a retro may demand that they must come to an agreement first and may not be compelled to consent to a partial redemption 3. When rights of co-owners over an undivided thing is sold as regards to their own share vendee retro cannot compel one to redeem the whole property 4. Should one of the co-heirs/co-owners succeed in redeeming the property such vendor a retro shall be considered as trustee with respect to the share of the other co-owners/co-heirs. *FRUITS 1. what controls is the stipulation between parties as regards the fruits; 2. if none: a) at time of execution of the sale a retro there are visible or growing fruits there shall be no pro-rating at time of redemption if no indemnity was paid by the vendee a retro b)at time of execution sale a retro there be no fruits but there are fruits at time of redemption pro-rated between vendor a retro & vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land. @@ASSIGNMENT Sale of credits & other incorporeal things Technical term but basically a sale
WHAT MAKES ASSIGNMENT DIFFERENT FROM SPECIES SALE: ASSIGNMENT Intangibles Consensual Recorded in registry of property or in public instrument SALE Tangibles Consensual No recording needed to such effect

assignment and of later ones until he had knowledge of the assignment 3. debtor has consented to assignment cannot set up compensation unless assignor was notified by debtor that he reserved his right to the compensation 4. debtor has knowledge but no consent - may still set up compensation of debts previous to assignment but not the subsequent ones. * TRANSFER OF OWNERSHIP by tradition & not by perfection execution of public instrument because intangibles cannot be physically transferred *ACCESSORIES & ACCESSIONS includes all accessory rights such as guaranty, mortgage, pledge or preference *WARRANTIES 1. against hidden defect - N/A because intangibles has no physical existence 2. existence & legality of credit - there is warranty except when expressly sold as a doubtful account 3. solvency of debtor - no warranty, unless a. there is stipulation b. insolvency was prior to assignment & of common knowledge warranty shall last for 1 year only 4. one who assigns inheritance right w/o enumerating rights shall be answerable for his character as an heir 5. one who sells whole of certain rights for a lump sum, shall be answerable for legitimacy of the whole in general but not for each of the various parts *BREACH OF WARRANTY 1. if in good faith - expenses of the contract & other legitimate payments made by reason of the assessment 2. if in bad faith - expenses of contract & other legitimate payments plus useful & necessary expenses *ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION presumption: buyers purpose is speculation law would rather benefit the debtor of such credits rather than the one who merely speculates for profit when credit or incorporeal right in litigation is assigned or sold, debtor has a right to extinguish it by reimbursing the assignee for the price the buyer paid plus interest right to redeem to be exercised within 30 days from demand by assignee for payment *RIGHT TO REDEEM BY DEBTOR NOT AVAILABLE IN THE FOLLOWING INSTANCES (NOT CONSIDERED SPECULATIVE) 1. assignment of credit / incorporeal right to co-heir or coworker 2. assignment to creditor in payment for his credit 3. assignment to possessor of tenement or piece of land which is subject to the right in litigation assigned @@BULK SALES LAW Protect creditor of merchant stores 3 types of transactions: 1. Sale of goods other than in ordinary course of business

Subject matter Form Binding effect to 3rd persons

*EFFECT OF ASSIGNMENT 1. lack of knowledge or consent of debtor not essential for validity but has legal effects 2. assignment of rights made w/o knowledge of debtor debtor may set up against assignee the compensation w/c would pertain to him against assignor of all credits prior to

2. Sale of all or substantially all of business 3. Sale of all or substantially all of fixtures & equipments Should cover only merchants because creditors cannot get adequate security because goods are sold ordinarily in course of business Not covered: 1. with waiver of sellers creditor 2. receiver, assignee in insolvency proceeding Duty of seller to perform the following when transaction is within the coverage of law 1. make sworn statement of listing of creditors 2. delivery of sworn statement to buyer 3. apply the proceeds pro-rata to claims of creditors shown in verified statement 4. written advance disclosure to creditors
EFFECTS OF NON-COMPLIANCE FAILURE TO: ON TRANSACTION Prepare & deliver sworn listing of creditors Apply proceeds pro-rata to listed creditors Make advance written disclosure of transactions to creditors Register sworn statement with DTI Include or omit names of creditors & correct amount due in the statement Sale for no consideration Fraudulent void &

(e) Subdivision lot. "Subdivision lot" shall mean any of the lots, whether residential, commercial, industrial, or recreational, in a subdivision project. REGISTRATION AND LICENSE TO SELL * NHA has exclusive jurisdiction to regulate the real estate trade and business - approved the plan submitted by owner who converts his land to subdivision project; basis: Subdivision Standards and Regulations. (same procedure as to condominium) - subdivision plan approved submitted to Director of Lands; condominium plan submitted to Register of Deeds in the province or city where the property lies. - Such owner or dealer shall not be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project upon filing performance bond to the NHA; A license to sell and performance bond shall not be required in any of the following transactions: (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 purchaser 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. XVI. The Condominium Act (R.A. 4726) REPUBLIC ACT NO. 4726 - June 18, 1966 AN ACT TO DEFINE CONDOMINIUM, ESTABLISH REQUIREMENTS FOR ITS CREATION, AND GOVERN ITS INCIDENTS Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas. The real right in condominium may be ownership or any other interest in real property recognized by law, on property in the Civil Code and other pertinent laws. Sec. 5. Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation: Provided, however, That where the common areas in the condominium project are owned by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens, or corporations at least sixty percent of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in

ON SELLER Criminal Liability

Fraudulent void

&

Criminal Liability

Not void

No Liability

Criminal

Not void

No Liability

Criminal

Void

Criminal Liability

Void

Criminal Liability

@ANTI-DUMMY LAW Penalizes Filipinos who permit aliens to use them as nominees or dummies to enjoy privileges reserved only for Filipinos Management, operation as officers, employees or laborers Control or non-control position XV. The Subdivision and Condominium Buyers' Protective Decree (P.D. 957) PRESIDENTIAL DECREE No. 957- July 12, 1976 REGULATING THE SALE OF SUBDIVISION LOTS AND CONDOMINIUMS, PROVIDING PENALTIES FOR VIOLATIONS THEREOF

the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws. Exclude: Electronic Commerce Act of 2000 (R.A. 8792); Public Land Law, Retail Trade and Liberalization Act, Bulk Sales Law (Act No. 3952) SUCCESSION I. General Provisions (Arts. 774-780) A. Definition/what is transmitted (Arts. 774, 776, 781) - 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 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 B. When succession occurs (Art. 777) - from the moment of the death of the decedent C. Kinds of successors: heirs, devisees, legatees (Art. 782) 1. Heir person called to the succession either by the provision of a will or by operation of law 2. Devisee person to whom gift of real property are respectively given by virtue of a will 3. Legatee person to whom gift of personal property are respectively given by virtue of a will 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 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 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 II. Testamentary Succession A. Wills 1. In general a) Definition and characteristics (Arts. 783-787) - 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 (i) Act of making a will a strictly personal act (Arts. 784-785, 787) Strictly personal act cannot be left to the discretion of a third person or through an agent or attorney (a) Exception (Art. 786) Testator may entrust to a third person: 1) the distribution of specific property or sums of money that he may leave in general to specified classes or causes

2) designation of the persons, institutions or establishments to which such property or sums of money are to be given or applied (ii) Rules of construction and interpretation (Arts. 788-794) a. Admits different interpretations (in case of doubt) = interpretation by which disposition is to be operative shall be preferred b. imperfect description = mistake and omission must be corrected c. uncertatinty upon the face of the will = intention ascertained from the words of the will, taking into considerations the circumstances under which it was made excluding such oral declarations d. words of a will = to be taken in their ordinary and grammatical sense, UNLESS a clear intention to use them in another sense can be gathered, and that other can be ascertained = interpreted to give every expression some effect rathen than become inoperative; in two modes of interpreting a will, that is to be preferred which will prevent intestacy e. technical words in a will = taken in their technical sense, UNLESS a context clearly indicates a contrary intention or it satisfactorily appears that the will was drawn solely by the testator, and that he was unacquainted with such technical sense f. invalidity of one of several dispositions = does not result in the invalidity of the other disposition, UNLESS presumed that testator would not have made such other dispositions if the first invalid disposition had not been made g. every devise or legacy = convey all the interest which the testator could devise or bequeath in the property disposed of, UNLESS it clearly appears from the will that he intended to convey a less interest. (iii) Law governing formal validity (Art. 795) = validity as to form = depends upon the law in force at the time it is made 2. Testamentary capacity and intent (Arts. 796-803) TESTAMENTARY CAPACITY: 1. All persons who are not expressly prohibited by law 2. 18 years old and above 3. Of sound mind, at the time of its execution a) Age requirement (Art. 797) Art 797 Persons of either sex under eighteen years of age cannot make a will. b) Soundness of mind (Arts. 798-801) Art 798 In order to make a will it is essential that the testator be of sound mind at the time of its execution. sound mind (at the time of making a will) not necessary that the testator be in full possession of all his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause. (i) When testator is deemed to be of sound mind - sufficient that testator was able: (NPC) i) to know the nature of the estate to be disposed of, ii) the proper objects of his bounty, and iii) the character of the testamentary act.

(ii) Presumptions -every person is of sound mind, in the absence of proof to the contrary (iii) Supervening incapacity -does not invalidate an effective will - nor is the will of an incapable validated by the supervening of capacity
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

3. Form 1. Notarial an ordinary or attested will 2. Holographic a handwritten will *COMMON REQUIREMENTS TO BOTH WILLS: 1. In writing 2. In a language or dialect known to the testator a) Rules governing the formal validity of wills (Arts. 17, 815817, 819) 1. governed by laws of the country in which they are executed 2. Filipino in a foreign country = authorized to make a will in any of the forms established by the law of the country in which he may be; PROBATED: in the Philippines 3. alien who is abroad = produces effect in the Philippines if: i) made with formalities prescribed by the law of the place in which he resides ii) according to the formalities observed in his country iii) in conformity with those which this Code prescribes 4. alien in the Philippines; made a will in accordance with the law of his country and probated there = have the same effect as if executed according to the laws of the Philippines (i) See law governing substantive validity (Arts.15, 16, 1039) Laws on family rights and duties, status, condition and legal capacity - binding upon citizen of the Philippines even living abroad Real and personal property = subject to the law of the country where it is situated (lex rei sitae/ lex situs) Capacity to succeed governed by law of the nation of the decedent b) Common requirements (Art. 804) (i) In writing - notarial (may be typewritten); holographic (handwritten) (ii) Language/dialect requirement - must be known to the testator c) Notarial wills (i) Arts. 805-806 *REQUISITES FOR VALID NOTARIAL WILL: 1. In writing 2. In a language or dialect known to the testator 3. Subscribed at the end by the testator himself or by the testators name written by some other person in his presence, and by his express direction 4. Attested & subscribed by three or more credible witnesses in the presence of the testator and of one another 5. Each and every page, except the last, must be signed by the testator or by the person requested by him to write his name, and by the instrumental witnesses of the will, on the left margin 6. Each and every page of the will must be numbered correlatively in letters placed on the upper part of each page 7. It must contain an attestation clause, stating the following: a. The number of pages used upon which the will is written b. The fact that the testator signed the will and every page, or caused some other person to write his name, under his express direction, in the presence of the instrumental witnesses

20 years

Maximum period testator can prohibit alienation or 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 from notice of sale

written

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

c. All the instrumental witnesses witnessed and signed the will and all its pages in the presence of the testator and of one another 8. It must be acknowledged before a notary public by the testator and the witnesses (ii) Special rules for handicapped testators (Arts. 807-808) *ADDITIONAL REQUISITES FOR A NOTARIAL WILL IF THE TESTATOR BE DEAF OR A DEAF-MUTE: 1. Testator must personally read the will, if able to do so; 2. Otherwise, he shall designate two persons to read it and communicate to him, in some practicable manner, its contents *ADDITIONAL REQUISITE FOR A NOTARIAL WILL IF THE TESTATOR BE BLIND: The will shall be read to the testator twice 1. Once by one of the subscribing witnesses 2. Once by the notary public before whom the will is acknowledged (iii) Substantial compliance (Art. 809) -defects and imperfections in the form of attestation or in the language used = shall not render the will invalid if it is proved that the will was in fact executed and attested in substantial compliance with all the requirements provided by law PROVIDED: -absence of bad faith, forgery or fraud or undue or improper pressure and influence (iv) Witnesses to wills(Arts. 820-824) *QUALIFICATIONS OF WITNESSES TO A NOTARIAL WILL: 1. Of sound mind 2. Of the age of 18 years or more 3. Not blind, deaf or dumb 4. Able to read and write 5. Domiciled in the Philippines 6. Have not been convicted of falsification of a document, perjury or false testimony d) Holographic wills -not subscribed and need not be witnessed because it is written by the hand of the testator (i) Requirements (Arts. 810-814) 1. In writing 2. In a language or dialect known to the testator 3. Entirely written, dated, and signed by the hand of the testator himself (a) Requirements in case of alterations (Art. 814) Art 814 In case of alteration, cancellation, erasure or alteration in a holographic will, the testator must authenticate the same by his full signature. *AMENDING A WILL: 1. Notarial only through a codicil 2. Holographic in three ways a. Dispositions may be added below the signature, PROVIDED that said dispositions are also dated and signed, and everything is written by the hand of the testator himself b. Certain dispositions or additional matter may be suppressed or inserted PROVIDED that said cancellation is signed by the testator and written by the hand of the testator himself c. Through a codicil which may either be notarial or holographic

*EFFECT OF INSERTION ON THE VALIDITY OF A HOLOGRAPHIC WILL: (Tolentino) 1. If made after the execution of the will, but without the consent of the testator, such insertion is considered as not written because the validity of the will cannot be defeated by the malice or caprice of a third person 2. If the insertion after the execution of the will was with the consent of the testator, the will remains VALID but the insertion is void 3. If the insertion after the execution is validated by the testator by his signature thereon, then the insertion becomes part of the will, and the entire will becomes VOID, because of failure to comply with the requirement that it must be wholly written by the testator 4. If the insertion made by a third person is made contemporaneous to the execution of the will, then the will is VOID because it is not written entirely by the testator (ii) Witnesses required for probate (Art. 811) a) Holographic: competent witness/es who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator Not contested at least one witness Contested three witnesses *absence resort to expert testimony b) Notarial: testify that the will was executed as required by law Not contested: at least one of subscribing witnesses Contested: all subscribing witnesses; and notary (wills executed under CCP) e) Joint wills (Arts. 818-819) -not allowed; not valid if made by Filipino even executed in a foreign country where it is authorized 4. Codicils (Arts. 825-826) a) Definition and formal requirements CODICIL - It is a supplementary or addition to a will made after the execution of the will and annexed to be taken as a part thereof by which any disposition in the original will may be explained, added to or altered REQUIREMENTS: - must be executed as in the case of a will 5. Incorporate by reference (Art. 827) *REQUISITES FOR INCORPORATION BY REFERENCE: 1. the document or paper referred to in the will must be in existence at the time of the execution of the will 2. the will must clearly describe and identify the same, stating among other things the number of pages thereof 3. it must be identified by clear and satisfactory proof as the document or paper referred to therein 4. it must be signed by the testator and the witnesses on each and every page, except in case of voluminous books of account or inventories *OTHERWISE: shall not be considered a part of the will 6. Revocation (Arts. 828-834)

- by the testator at any time before his death; any waiver or restriction of this right is void - if done outside the Philippines by a person who does not have domicile in this country = VALID when: a) done according to the law of the place where the will was made b) done according to the law of the place in which the testator had his domicile at the time -if done in the Philippines = Valid: in accordance with the provision of the CCP REVOCATION: HOW DONE (IEB) 1. By implication of law 2. By the execution of a will, codicil or other writing executed as provided in case of wills 3. By burning, tearing, canceling, or obliterating the will with the intention of revoking it, by the testator himself, or by some other person in his presence, and by his express direction *REQUISITES OF REVOCATION: 1. testamentary capacity 2. animus revocandi (intent) 3. act of revocation (subsequent with destruction) 4. compliance with formalities 5. free and voluntary a) Kinds (Art. 830) i. by the testator ii. by operation of law 7. Allowance and disallowance of wills (Arts. 838-839) -No will shall pass either real or personal property unless it is proved and allowed. *WHO MAY PETITION FOR ALLOWANCE 1. testator himself during his lifetime 2. heirs, devisees or legatees LOST WILL: 1) A lost NOTARIAL will can be probated by subsidiary evidences 2) *A lost HOLOGRAPHIC will cannot be probated REASON: will is a personal act and constitute secrecy. No evidence to be presented anymore. a) Probate requirement (Art. 838) -before personal or real property passes (i) Issues to be resolved in probate proceedings (Art. 839) WHETHER or NOT: 1. it has formalities required by law (extrinsic validity only) 2. sound and disposing mind of the deceased - voluntarily and freely made by the testator - capacity of the testator (a) Exceptions: when practical considerations demand the intrinsic validity of the will be resolved - when someone contests the allowance; like signature by testator obtained through fraud or trick, or with undue pressure (ii) Effect of final decree of probate, res judicata on formal validity - upon issuance of certificate of allowance

1) will duly executed 2) testator at the time of execution was of sound and disposing mind 3) testator not acting under duress or undue influence or fraud b) Grounds for denying probate or disallowance of will (Art. 839) 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 should be his will at the time of affixing his signature thereto B. Institution of heirs (Arts. 840-856) DEFINITION OF INSTITUTION OF HEIR: It is an act by virtue of which a testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligations *REQUISITES FOR A VALID INSTITUTION OF HEIR: 1. Designation in will of person/s to succeed 2. Will specifically assigns to such person an inchoate share in the estate 3. The person so named has capacity to succeed 4. The will is formally valid 5. No vice of consent is present 6. No preterition results from the effect of such will *THREE PRINCIPLES IN THE INSTITUTION OF HEIRS: 1. Equality heirs who are instituted without a designation of shares inherit in equal parts 2. Individuality heirs collectively instituted are deemed individually named unless a contrary intent is proven 3. Simultaneity when several heirs are instituted, they are instituted simultaneously and not successively *RULES REGARDING A PERSONS RIGHT TO DISPOSE OF HIS ESTATE: 1. If one has no compulsory heirs: a. He can give his estate to any person qualified to inherit under him b. However, he must respect restrictions imposed by special laws 2. If one has compulsory heirs: a. He can give only the disposable portion to strangers b. Legitimes of compulsory heirs must be respected 1. Preterition (Art. 854); pretermitted heir a) Definition - A compulsory heir is omitted by a testator or where a testator unintentionally fails to mention in his will, or make provision for a compulsory heir, either living at the date of the execution of the will or born thereafter b) Requisites 1. There must be an omission of one, some or all of the heir/s in the will 2. The omission must be that of a COMPULSORY HEIR

3. Compulsory heir omitted must be of the DIRECT LINE 4. The omitted compulsory heir must be LIVING at the time of testators death or must at least have been CONCEIVED before the testators death c) Effects - such compulsory heir shall share in the estate as though the testator had died intestate. (i) Effects of preterition, devisees only entitled to completion of legitime *EFFECTS OF PRETERITION: 1. The institution of heir is annulled 2. Devises and legacies shall remain valid as long as they are not inofficious 3. If the omitted compulsory heir should die before the testator, the institution shall be effectual, without prejudice to the right of representation 2. Concept Art. 854 Preterition omission of one, some or all of the compulsory heirs = annul the institution of heir 3. Compulsory heirs in the direct line *CLASSES OF COMPULSORY HEIRS: 1. Primary those who have precedence over and exclude other compulsory heirs a. Legitimate children and descendants (legitimate), with respect to their legitimate parents and ascendants 2. Secondary those who succeed only in the absence of the primary heirs a. Legitimate parents and ascendants (legitimate), with respect to their legitimate children and descendants 3. Concurring those who succeed together with the primary or the secondary compulsory heirs a. Widow or widower (legitimate) b. Illegitimate children and descendants (legitimate or illegitimate) 4. Preterition vs. Disposition less than legitime/donation inter vivos Arts. 855,906-918 *Preterited heir = share must first be taken from the part of the estate not disposed of by will, if any; if insufficient = taken proportionally from the shares of the other compulsory heir. *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 preterited is either an ascendant or descendant. Article 854 would come into play (annulment of institution of heir and reduction of devises and legacies) 2. If the impairment is partial, then the compulsory heir is entitled to completion of legitime; demand to satisfy 3. If the impairment is thru donation, then remedy is collation. *Donations 1) those subject to collation - added to the net value to determine the legitime 2) given to children charged to their legitime Illegitimate charged to legitime; if exceed - reduce 3) made to strangers charged to that disposable part; if exceeds to the disposable portion reduced *Reductions:

1) Donations respected as long as the legitime can be covered, reducing or annulling, if necessary, the devises or legacies made in the will 2) reduction of devises or legacies shall be pro rata, without any disctinction whatsoever. * Testator directed that a certain devise or legacy be paid in preference to others = it shall not suffer reduction until the others have been applied in full to the payment of legitime. 3) Devise or legacy consists of usufruct or life annuity, whose value is greater than that disposable portion = compulsory heirs may choose: i. complying with the testamentary disposition ii. delivering to the devisee or legatee the free portion of the inheritance 4) Real property: after reimbursement in cash i. reduction does not absorb one-half of its value = goes to the devisee ii. one half or more = goes to the compulsory heir 5) Devisee entitled to legitime = retain the property PROVIDED: does not exceed to his legitime share and that of disposable portion 6) if retention of property not chosen = property sold at public auction at the instance of any interested party C. Substitution of heirs (Arts. 857-870) *Voluntary heir (testate heir) who dies before the testator transmits nothing to his heirs * Compulsory heir who: transmits no right to his own heirs i. dies before the testator (DIR) ii. incapacitated to succeed iii. renounces the inheritance 1. Definition (Art. 857) SUBSTITUTION - It is the appointment of another heir so that he may enter into the inheritance in default of the heir originally instituted 2. Kinds (Arts. 858-860) *CLASSES OF SUBSTITUTION (SBRF) i. Simple or common ii. Brief or compendious iii. Reciprocal iv. Fideicommissary Substitution 3. Simple substitution (Art. 859) the testator may designate one or more persons to substitute the heir or heirs instituted in case such heir or heirs should a. die before him (PREDECEASE) b. should not wish, (RENOUNCE) or c. should be incapacitated to accept the inheritance (INCAPACITATED) i. Brief or Compendious two or more persons may be substituted for one; and one person for two or more heirs ii. Reciprocal if heirs instituted in unequal shares should be reciprocally substituted, the substitute shall acquire the share of the heir who dies, renounces, or incapacitated, unless it clearly appears that the intention of the testator was otherwise. If there is more than one substitute, they shall have the same share in the substitution as in the institution 4. Fideicommissary substitution (Arts. 863-866, 869) - if the testator institutes an heir with an obligation to deliver to another the property so inherited. The heir instituted to such condition is called the first heir or fiduciary heir, the one to receive the property is the fideicommissary or second heir

*REQUISITES FOR A FIDEICOMMISSARY SUBSTITUTION: 1. A fiduciary or first heir instituted entrusted with the obligation to preserve and to transmit to a fideicommissary substitute or second heir the whole or part of the inheritance 2. Such substitution must not go beyond one degree from the heir originally instituted 3. The fiduciary or first heir and the second heir are living at the time of the death of the testator 4. The fideicommissary substitution must be expressly made 5. The fideicommissary substitution is imposed on the free portion of the estate and never on the legitime *The fideicommissary acquires a right to the succession from the time of death of the testator, even though he should die before the fiduciary; his right passes to his heirs D. Conditional testamentary dispositions and testamentary dispositions with a term (Arts. 871-885) *CONDITIONS CONSIDERED AS NOT IMPOSED 1) declaring all or part of the estate inalienable for more than 20 years are void 2) any charge, condition or substitution whatsoever upon the legitimes; considered as not imposed. 3) Impossible conditions 4) those contrary to law 5) contrary to good customs 6) absolute condition not to contract a first or subsequent marriage EXCEPT: a) Imposed on the widow/er by the deceased spouse b) Imposed on the ascendants or descendants c) right of usufruct or some personal prestation may be devised or bequeathed = for the time remain unmarried or widow 7) condition that the heir shall make some provision in his will in favor of the testator or of any other person = void *OTHER CONDITIONS 1) potestative condition fulfilled by the heir as soon as he learns of the testators death EXCEPT: condition already been complied with and cannot be fulfilled again 2) casual or mixed condition = sufficient if it happen or fulfilled at any time before or after the death of the testator, unless he has provided otherwise - if existed or fulfilled at the time the will was executed: i) the testator was unaware = deemed as complied ii) with knowledge = deemed as complied only when it is of such nature it can no longer exist or complied with again 3) suspensive term = does not prevent the instituted heir from acquiring his rights and transmitting them to his heirs even before the arrival of the term 4) negative potestative condition or not doing or not giving something = comply by giving security that he will not do or give that which has been prohibited; in case of contravention = return what he had received, together with its fruits and interests 5) suspensive condition or term = estate placed under administration until condition fulfilled or until it becomes certain that it cannot be fulfilled, or until the arrival of the term. 6) intent of the testator of the object of the institution or application of the property or charge imposed (Gen. rule: not considered as condition unless intent appears) = heirs give security for compliance with the wishes of the testator; return what they received together with its fruits and interests, if they disregarded

-if cannot take effect in an exact manner without fault of heir = compliance in a manner most analogous to and in conformity with his wishes - person interested in condition prevents its fulfilment, without fault of the heir = condition deemed to have complied with 7) designation of day and time when the effects of an institution of an heir shall commence or cease = valid; legal heir considered as called to the succession until arrival of the period or its expiration - Commence requires giving sufficient security before legal heir can enter into possession, with the intervention of instituted heir E. Legitime (Arts. 886-914) 1. Definition (Art. 886) - It is that part of the testators property which he cannot dispose of because the law has reserved it for certain heirs called compulsory heirs 2. Compulsory heirs and various combinations (Arts. 887-903) Art 887 The following are compulsory heirs: (1) Legitimate children and descendants, with respect to their legitimate parents and ascendants (2) In default of the foregoing, legitimate parents and ascendants, with respect to their legitimate children and descendants (3) The widow or widower (4) Acknowledged natural children, and natural children by legal fiction (5) Other illegitimate children *COMPULSORY HEIRS CANNOT BE EXCLUDED i. widow/er ii. acknowledged natural children, and natural children by legal fiction iii. other illegitimate children (filiation must be duly proved) *HOW FILIATION IS PROVED: brought during lifetime of the child; or within 5 years by the heirs after death of child 1. record of birth appearing in the civil register or a final judgment 2. admission of filiation in a public document or a private handwritten instrument and signed by the parent concerned: action must be brought within the lifetime of the alleged parent 3. open and continuous possession of the status of a legitimate child 4. any other means allowed by the Rules of Court or special laws 3. Reserva troncal (Art. 891) *CONCEPT OF RESERVA TRONCAL -The ascendant who inherits from his descendant - any property which the latter may have acquired by gratuitous title - from another descendant, or a brother or sister, - is obliged to reserve such property - as he may have acquired by operation of law - for the benefit of relatives who are within the third degree - and who belong to the line from which said property came *REQUISITES (as provided in Chua v. CFI [1977] & reiterated in Gonzales v. CFI [1981]) 1) that the property was acquired by a descendant from an ascendant or from a brother or sister by gratuitous title 2) that said descendant died without an issue

3) that the property is inherited by another ascendant by operation of law 4) that there are relatives within the 3rd degree belonging to the line from which said property came 4. Disinheritance It is the act by which the testator, for just cause, deprives a compulsory heir of his right to the legitime. a) Disinheritance for cause (Art. 919) *REQUISITES FOR A VALID DISINHERITANCE: 1. Heir disinherited must be designated by name or in such a manner as to leave no room for doubt as to who is intended 2. It must be for a cause designated by law 3. It must be made in valid will 4. It must be made expressly, stating the cause in the will itself 5. The cause must be certain and true, and must be proved by the interested heir if the person disinherited should deny it 6. It must be unconditional 7. It must be total (i) Reconciliation (Art. 922) EFFECT: 1) deprives the offended party of the right to disinherit; and 2) renders ineffectual any disinheritance that may have been made (ii) Rights of descendants of person disinherited (Art. 923) - shall take the place of disinherited heir and shall preserve the rights of compulsory heirs with respect to the legitime. *disinherited parent shall not have the usufruct or administration of the property which constitutes the legitime b) Disinheritance without cause (Art. 918) - shall annul the institution of heirs insofar as it may prejudice the person disinherited. -devises and legacies valid to such extent as will not impair the legitime 5. Legacies and devisees (Arts. 924-959) Art 924 All things and rights which are within the commerce of man may be bequeathed or devised. *CHARGE WITH LEGACIES AND DEVISES 1. legatees or devisees = only to the extent of the value of the legacy or the devise received by them 2. compulsory heirs = limited to the amount of the free portion given them 3. if charge to one of the heirs = he alone shall be bound 4. not charge anyone in particular = all liable in the same proportion in which they may inherit 5. 2 or more heirs take possession of the estate = solidarily liable for loss or destruction of a thing devised or bequeathed, even though only one of them should have been negligent 6. heir bound to deliver = liable in case of eviction, if the thing is indeterminate and is indicated only by its kind 7. own in part = understood to be limited to such part; unless testator expressly declares that he gives the thing in its entirety *BELONGING TO ANOTHER

1) void if testator erroneously believed that the thing pertained to him EXCEPT: After making the will, the thing becomes his 2) testator orders thing to be acquired in order that it may be given = the heir upon whom obligation is imposed or the estate must acquire it and give it EXCEPT: i. owner refuses to alienate ii. demands an excessive price REMEDY: obliged to give just value of the thing 3) thing bequeathed belonged to the legatee or devisee at the time of the execution of the will = legacy or devise without effect, even though subsequently alienated 4)- legatee or devisee acquires gratuitously after such time = claim nothing - acquired by onerous title = can demand reimbursement from the heir of the estate 5) thing pledged or mortgaged = estate is obliged to pay debt, unless contrary intention appears 6) any charged with the thing bequeathed is burdened = passes with the legatee or devisee 7) legacy of credit or remission or release of a debt of the legatee = effective only as regards that part of the credit or debt existing at the time of the death of the testator; shall comprise all interests on the credit or debt which may due at the time of testators death LAPSED: if testator after having made it, bring an action against the debtor for the payment of his debt, even payment is not effected at the time of his death 8) legacy to the debtor of the thing pledged by him = discharged only the right of pledge 9) generic legacy of release or remission of debts = comprises those existing at the time of the execution of the will, but not subsequent ones 10) legacy or devise made to creditor = not applied to his credit; unless expressly declared -creditor has right to collect the excess, if any 11) testator orders the payment of what he believes he owes but does not in fact owe = considered not written 12) specified debt ordered paid more than the amount = excess not due; unless contrary intention appears 13) alternative legacies or devises = choice presumed left to the heir upon whom obligation to give legacy or devise may be imposed, or the executor or administrator of the estate if no particular heir is so obliged: choice once made irrevocable -if heir dies before making choice, right passes to the respective heirs 14) legacy of generic personal property = valid; even if there be no things of the same kind in the estate 15) devise of indeterminate real property = valid only if there be immovable property of its kind in the estate RIGHT OF CHOICE: belong to the executor or administrator *Whenever the testator expressly leaves the right of choice t the heir, legatee or devisee =may choose whichever he may prefer -if cannot make a choice = right passes to his heirs; but a choice once made shall be irrevocable 16) legacy for education = lasts until the legatee is of age, or beyond the age of majority in order that the legatee may finish some profession, vocation or general course; provided he pursues his course diligently 17) legacy for support = last during the lifetime of the legatee, if the testator has not otherwise provided

-if not fixed; in accordance with the social standing and the circumstances of the legatee and the value of the estate -if testator give during his lifetime = same amount; unless disproportionate to the value of the estate 18) periodical pension or certain annual, monthly, weekly amount bequeathed = legatee may petition the court for the first instalment upon the death of the testator, and for the following one which shall be due at the beginning of each period; shall not be returned even the legatee die before expiration of the period which has commenced 19) subject to usufruct = respect such right until it is legally extinguished 20) pure and simple legacies = legatee or devisee acquires right from the death of the testator and transmits it to his heirs 21) specific and determinate thing pertaining to testator = acquires ownership upon death of testator, as well as any growing fruits, or unborn offspring of the animals, or uncollected income; but not the income which was due before the latters death 22) generic or of quantity = fruits and interests from the time of the death of the testator shall pertain to the legatee or devisee if the testator so ordered. *ORDER OF PAYMENT OF LEGACY OR DEVISE IF ESTATE INSUFFICIENT (RPSESA) 1. Remuneratory legacies or devises 2. Legacies or devises declared by the testator to be preferential 3. Legacies for Support 4. Legacies for Education 5. Legacies or devises of a specific, determinate thing which forms a part of the estate 6. All others pro-rata @Summary of legitimes of compulsory heirs (see table below)
DIFFERENCES BETWEEN PRETERITION AND DISINHERITANCE: Disinheritance PRETERITION Express deprivation of legitime Tacit deprivation of legitime

SUMMARY OF CAUSES OF DISINHERITANCE: GROUNDS FOR CHILD PARE Spous DISINHERITANCE REN/ NTS/ e DESCE ASCE
NDAN TS NDAN TS

UN
WOR THIN ESS

1 Guilty/convicted of attempt against life of testator/spouse/ ascendant/desc endant

2 Accused testator/decede nt of crime punishable by imprisonment of more than 6 years, found groundless, false

3 Causes testator/decede nt to make will or change one by fraud, violence, intimidation, or undue influence

4 Unjustified refusal to support testator

Always voluntary

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

5 Convicted of adultery or concubinage with spouse of testator/decede nt

Legal cause is present

Presumed by law to be a mere oversight 6 Maltreatment of testator by word and deed *

Even a compulsory heir may be totally excluded

Compulsory heir is merely restored to his legitime

7 Leading a dishonorable or disgraceful life

8 Conviction of crime which carries penalty of civil interdiction

1 Falsifies or forges 5 a supposed will of the decedent

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

*CAUSES OF VACANCY IN SUCCESSION: (DRIP) 1. Disinheritance - The testator creates it himself 2. Repudiation - The heir does something 3. Incapacity/Predecease - Something happens to the heir *HOW VACANCIES ARE FILLED: 1. Substitution 2. Representation 3. Accretion III. Legal or Intestate Succession (Arts. 960-1014) *CAUSES FOR LEGAL OR INTESTATE SUCCESSION: 1. If a person dies without a will 2. If a person dies with a void will 3. If a person dies with a will which has subsequently lost its validity 4. When the will does not institute an heir to, or dispose of all the property belonging to the testator (legal succession shall take place only with respect to the property of which the testator has not disposed) 5. If the suspensive condition attached to the institution of the heir does not happen or is not fulfilled 6. If the heir dies before the testator, 7. If the heir repudiates the inheritance, there being no substitution, and no right of accretion takes place 8. When the heir instituted is incapable of succeeding, except in cases provided in the Code *FUNDAMENTAL UNDERLYING PRINCIPLES IN LEGAL OR INTESTATE SUCCESSION: 1. Rule of Proximity the relative nearest in degree excludes the farther one 2. Rule of Equal Division the relatives who are in the same degree shall inherit in equal shares -and acquires the rights which the latter would have if he were living or if he would have inherited A. General provisions (Arts. 960-969) 1. Relationship (Arts. 963-969) a) legitimate and illegitimate relatives of the deceased b) surviving spouse c) State * Relative nearest in degree excludes the more distant ones, saving the right of representation when proper. (rule of proximity) *Relatives in the same degree inherit in equal share subject to the rule with respect to full and half blood and maternal and paternal lines (rule of equal division) *Right to inherit ab intestato = not extend beyond 5th degree of relationship in collateral line - illegitimate child has no right to inherit ab intestato from the legitimate children and relatives of his mother or father, nor shall such children or relatives inherit in the same manner from the illegitimate child.

1 Loss of parental 0 authority

1 Attempt by one 1 parent against life of the other UNLESS there is reconciliation between parents

1 Spouses given 2 cause for legal separation

1 Failure to report 3 violent death of decedent within one month, unless authorities have already taken action

1 Force, violence, 4 intimidation or undue influence to prevent another from making a will or revoking one already made or who supplants or alters the latters will

2. Right of representation (Arts. 970-977) DEFINITION OF RIGHT OF REPRESENTATION: -It is a right created by fiction of law, by virtue of which the representative is raised to the place and degree of the person represented and acquires the rights which the latter would have if he were living or if he could have inherited. RULES: a) Takes place in direct descending line but never in the ascending. b) In the collateral, it takes place only in favor of the children of brothers and sisters, whether they be full or half blood. c) The representative must be capable of succeeding the decedent. d) The division of estate shall be per stirpes, in such a manner that representative/s should not inherit more than they represent would inherit, if he were living or could inherit. e) A person may represent him whose inheritance he has renounced. (A renounces his inheritance to B; A may still represent B if the latter inherit to C) f) Heirs who repudiate their share may not be represented. B. Order of intestate succession (Arts. 978-1014, 992) *Succession pertains, in the first place, to the descending direct line.
ORDER OF LEGAL OR INTESTATE SUCCESSION: ILLEGITIMATE CHILD Legitimate Child ADOPTED CHILD legitimate child legitimate child 1 Legitimate child and legitimate and legitimate and legitimate descendants descendants descendants

6 Legitimate collateral relatives

State

State

7 State

CONCURRENCE IN LEGAL OR INTESTATE SUCCESSION EXCLUDED BY EXCLUDES CONCURS WITH Intestate Heir Legitimate Ascendants, Surviving No one children and collaterals spouse Legitimate and state Illegitimate descendants children

Illegitimate children and Descendants

Illegitimate parents, collaterals and state

No one

Surviving spouse Legitimate children and legitimate parents

Legitimate parents and legitimate ascendants

Collaterals and state

Legitimate children

Illegitimate children and surviving spouse

2 Legitimate parents and legitimate ascendants

illegitimate children and legitimate or illegitimate descendants

illegitimate children and legitimate or illegitimate descendants

Illegitimate parents

Collaterals and state

Legitimate children and illegitimate children No one

Surviving spouse

3 Illegitimate children and legitimate or illegitimate descendants

illegitimate parents

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

Surviving spouse

Collaterals other than siblings, nephews and nieces

Legitimate children Illegitimate children Legitimate parents and Illegitimate parents

4 Surviving spouse

surviving spouse

5 Legitimate siblings, nephews, nieces

illegitimate siblings, nephews, nieces

siblings, nephews, nieces

Siblings, nephews nieces

All other collaterals and state

Legitimate children, illegitimate children, Legitimate parents and illegitimate parents

Surviving spouse

Other collaterals within 5th degree

Collateral remoter in degree and state

Legitimate children Illegitimate children Legitimate parents Illegitimate parents and Surviving spouse

Collaterals in the same degree

State

No one

Everyone

No one

A MORE DETAILED SUMMARY OF INTESTATE SHARES OF THE INHERITANCE: 1. LEGITIMATE CHILDREN AND LEGITIMATE DESCENDANTS ALONE SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE

Intestate Heir Legitimate children

total no. of children plus the surviving spouse

TOTAL

Varies on no. of children

Varies on no. of children

TOTAL

1 4. LEGITIMATE CHILDREN AND ILLEGITIMATE CHILDREN

2. ONE LEGITIMATE CHILD AND SURVIVING SPOUSE SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE

Intestate Heir Legitimate child

Intestate Heir

SHARE AS LEGITIME

SHARE AS FREE DISPOSAL

TOTAL INTESTATE SHARE

Legitimate children

Remaining portion of estate after paying legitimes

Surviving spouse

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

TOTAL

3. LEGITIMATE CHILDREN AND SURVIVING SPOUSE

Illegitimate children

Intestate Heir Legitimate children

SHARE AS LEGITIME

SHARE AS FREE DISPOSAL Remainin g portion of estate after paying legitimes

TOTAL INTESTATE SHARE

share of @ legitimate child

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

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

1 for @ illegitimate child provided that legitimes wouldnt be impaired

TOTAL

Varies on no. of children

Varies on no. of children

5. ONE LEGITIMATE CHILD, ILLEGITIMATE CHILD, AND SURVIVING SPOUSE SHARE AS LEGITIME SHARE AS FREE DISPOSAL Remaining portion of estate after paying legitimes to TOTAL INTESTATE SHARE Whole estate divided by the ratio of 2 @ legitimate child

Surviving spouse

Same as share of @ legitimate child

Legitimes to be divided equally between

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

Intestate Heir Legitimate child

be divided by the ratio of 2:1 for @ legitimate child and @ illegitimate child, respectively

spouse

legitimate child, provided legitimes are not impaired

child, provided legitimes are not impaired

TOTAL

Illegitimate child

share of @ legitimate child

1 for @ illegitimate child (see above)

1 for @ illegitimate child

Varies depending on no. of illegitimate children

Varies depending on no. of illegitimate children

Surviving spouse

Same share as a legitimate child

Legitimes wouldnt be impaired

7. LEGITIMATE PARENTS, SURVIVING SPOUSE AND ILLEGITIMATE CHILDREN SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE

Intestate Heir Legitimate parents

TOTAL

Varies depending on no. of illegitimate children

Varies depending on no. of illegitimate children

1 Surviving spouse 1/8 1/8

6. LEGITIMATE CHILDREN, ILLEGITIMATE CHILDREN AND SURVIVING SPOUSE

Illegitimate children

Intestate Heir Legitimate children

SHARE AS LEGITIME

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

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

TOTAL

7/8

1/8

8. LEGITIMATE PARENTS AND ILLEGITIMATE CHILDREN SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE

Intestate Heir Legitimate parents Illegitimate children

Illegitimate children

share of @ legit child

1 for @ illegitimate child (see above)

1 for @ illegitimate child (see above)

TOTAL

Surviving

Same share as a

Same share as a legitimate

9. ILLEGITIMATE CHILDREN ALONE SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE 1

13. LEGITIMATE PARENTS AND SURVIVING SPOUSE Intestate Heir SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE

Intestate Heir

Illegitimate children alone TOTAL

Legitimate Parents Surviving spouse TOTAL

1 14. ILLEGITIMATE PARENTS ALONE

10. ILLEGITIMATE CHILDREN AND SURVIVING SPOUSE SHARE AS LEGITIME 1/3 SHARE AS FREE DISPOSAL 1/6 TOTAL INTESTATE SHARE

Intestate Heir Illegitimate parents

SHARE AS LEGITIME

SHARE AS FREE DISPOSAL

TOTAL INTESTATE SHARE 1

Intestate Heir Illegitimate children

TOTAL

Surviving spouse

1/3

1/6

15. ILLEGITIMATE PARENTS AND SURVIVING SPOUSE Intestate Heir SHARE AS LEGITIME illegitimate Parents Surviving spouse SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE

TOTAL

2/3

1/3

11. SURVIVING SPOUSE ALONE SHARE AS LEGITIME or 1/3 SHARE AS FREE DISPOSAL or 1/3 TOTAL INTESTATE SHARE 1

Intestate Heir Surviving spouse

TOTAL

16. SIBLINGS, NEPHEWS, NIECES SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE 1

Intestate Heir TOTAL or 1/3 or 1/3 1 Siblings, nephews, nieces TOTAL 12. LEGITIMATE PARENTS ALONE Intestate Heir Legitimate Parents TOTAL SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE 1 1 Surviving spouse Siblings, nephews, nieces

17. SURVIVING SPOUSE AND SIBLINGS, NEPHEWS, NIECES Intestate Heir SHARE AS LEGITIME SHARE AS FREE DISPOSAL TOTAL INTESTATE SHARE

TOTAL

IV. Provisions Common to Testate and Intestate Succession (Arts. 1015-1105) A. Right of accretion (Arts. 1015-1023) 1. Definition and requisites (Arts. 1015-1016) DEFINITION: -It is a right by virtue of which, when two or more persons are called to the same inheritance, devise or legacy, the part assigned to the one who renounces or cannot receive his share or who died before the testator, is added or incorporated to that of his co-heirs, co-devisees, or colegatees REQUISITES: 1) 2 or more persons are called to the inheritance, or to the same portion thereof, pro indiviso; 2) one of the persons thus called die before the testator, or renounce the inheritance, or incapacitated to receive it. B. Capacity to succeed by will or intestacy (Arts. 1024-1040) 1. Persons incapable of succeeding (Arts. 1027, 739, 1032) 1) Priest who heard the confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period 2) Relatives of such priest or minister of the gospel within the 4th degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong 3) Guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the guardianship have been approved, even if the testator should die after the approval thereof; EXCEPT if the guardian is his ascendant, descendant, brother, sister, or spouse 4) Attesting witness to execution of will, their spouses, parents, children or any one claiming under such witness, spouse, parents or children 5) Physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness 6) Individuals, associations, and corporations not permitted by law to inherit 2. Unworthiness vs. Disinheritance * Some grounds for disinheritance are also causes of unworthiness to succeed. UNWORTHINESS: - The testator must condone it in writing so that it shall be without effect. - The heirs incapable of succeeding or cannot inherit intestate. - Unworthiness is provided by law and refers to the doers. DISINHERITANCE: - Disinheritance concerns the act but affect the doer. - The heirs who may inherit in case of intestate succession but may be deprived of his legitime by the testators will. C. Acceptance and repudiation of the inheritance (Arts.1041-1057) Acceptance and repudiation an act which is purely voluntary and free - it always retroacts to the moment of the death of the decedent; once made is irrevocable and cannot be impugned, EXCEPT made through causes that vitiate consent or when an unknown will appears

- person who exercise = certain of the death of the person and of his right to the inheritance; having free disposal of his property - parent with respect to the inheritance left to their wards = may repudiate only by judicial authorization -representatives of corporations, association institutions = may repudiate with approval of the court - to the poor = belong to the persons designated by the testator to determine the beneficiaries and distribute the property - public official establishments = needs approval of the government - married woman = may repudiate without the consent of his husband - deaf mutes = if able to read and write, may repudiate personally or through an agent; not able, guardian may repudiate with judicial approval ACCEPTANCE: may be 1. express made in public or private document 2. tacit one resulting from acts by which the intention to accept is necessarily implied, or which would have no right to do except in the capacity of an heir *DO NOT IMPLY ACCEPTANCE 1. Acts of mere preservation or provisional administration 2. the title or capacity of an heir has not been assumed *DEEMED ACCEPTANCE 1. heirs sells, donates, or assigns his right 2. heirs renounces for the benefit of one or more of his coheirs 3. heirs renounces it for a price in favour of all his co-heirs indiscriminately 4. failure to signify to the court of his repudiation or acceptance within 30 days after the court has issued an order for distribution of the estate *REPUDIATION: made 1. public or authentic instrument 2. petition presented to the court REPUDIATION: 1) prejudicial to creditors = creditor may petition the court to authorize them to accept the inheritance in the name of the heir; benefit the creditor to the extent sufficient o cover the amount of credits 2) heir by will and ab intestate; repudiates as testamentary heir = understood to have repudiated it in both capacities; repudiates it as intestate heir without knowledge being a testamentary heir = may accept it as testamentary heir D. Collation (Arts. 908-910, 1061-1062) 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, but which the law considers as an advance from the inheritance. - It is the act by virtue of which, the persons who concur in the inheritance bring back to the common hereditary mass the property which they have received from him, so that a division may be effected according to law and the will of the testator. E. Partition and distribution of estate (Arts. 1078-1105) CONDITION: two or more heirs owned in common the whole estate of the decedent

1. Partition (Arts. 1079, 1080) CONCEPT OF PARTITION: - it is the separation, division and assignment of a thing held in common among those to whom it may belong the thing itself may be divided, or its value - every act which is intended to put an end to indivision among co-heirs and legatees or devisees deemed partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction - may be demanded by co-heir anytime EXCEPT: 1)may be prohibited by the testator: valid if period not exceed 20 years 2) voluntary heirs where some condition imposed; until condition has been fulfilled BUT: 1. co-heir may demand by giving sufficient security for the rights of voluntary heir in case the condition should be complied: provisional partition = until it is known that the condition has not been fulfilled, or can never be complied with *RIGHTS OF CO-HEIRS 1. to be reimbursed one another for the income and fruits which one of them may have received from any property of the estate, for any useful and necessary expenses made upon such property, and for any damage thereto through malice or neglect 2. before partition: i) heir sell his hereditary rights to a stranger = within 1 month from the time they were notified in writing of the sale by the vendor; any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale 3. after partition: i) title of acquisition or ownership of each property shall be delivered to the co-heir to whom said property has been adjudicated ii) title of land: assigned to two or more co-heirs title shall be delivered to the one having the largest interest; authentic copies shall be furnished to the other co-heirs at the expense of the estate 2. Partition inter vivos -respected insofar as it does not prejudice the legitime of the compulsory heir - may be availed of by parents, who desires to keep any agricultural, industrial or manufacturing enterprise intact, by ordering that the legitime of the other children to whom the property is not assigned be paid in cash. 3. Effects of partition (Arts. 1091, 1097, 1100, 1104-1105) a) confers upon each heir the exclusive ownership of the property adjudicated to him b) co-heir reciprocally bound to warranty the title to and the quality of each property adjudicated: warranty of the solvency of debtor, but do not warrant bad debts INSOLVENT HEIR other co-heirs shall be liable; with right to reimbursement should insolvents financial condition improved c) debtor of estate insolvent at the time of partition = coheirs liable d) may be rescinded or annulled as contracts -rescission on account of lesion = prescribe after 4 years from the time partition was made

*Options of the heir sued 1) indemnify the plaintiff for the loss -Indemnity may be made by payment in cash or by delivery of a thing of the same kind and quality as that awarded to the plaintiff 2) consent a new partition - not affect those who have not been prejudiced; those who have not received more than their just share e) partition with preterition = shall not be rescinded, UNLESS it be proved that there was bad faith or fraud on the part of the other persons interested; proportionately obliged to pay to the person omitted the share which belongs to him. f) omission of one or more objects or securities = not cause rescission: partition shall be completed by the distribution of objects or securities which have been omitted. g) includes a person believed to be an heir = partition void only with respect to such person Exclude: Executors and administrators (Arts. 1058-1060), which will be covered under Remedial Law PARTNERSHIP I. Contract of Partnership A. Definition - by the contract of partnership, 2 or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves B. Elements 1. There must be a valid contract 2. The parties must have legal capacity to enter into the contract 3. There must be a mutual contribution of money, property, or industry to a common fund 4. The object must be lawful 5. The purpose or primary purpose must be to obtain profits and divide the same among the parties
PARTNERSHIP DISTINGUISHED CORPORATION PARTNERSHIP FROM CO-OWNERSHIP AND

COOWNERSHIP Created by law

CORPORATION Created by law

Creation

Created by a contract, by mere agreement of the parties Has a juridical personality separate and distinct from that of each partner Realization of profits

Juridical personality

None

Has a juridical personality separate and distinct from that of each partner Depends on AOI

Purpose

Common enjoyment of a thing or right 10 years

Duration/ Term of

No limitation

50 years maximum,

existence

maximum

extendible to not more than 50 years in any one instance Stockholder has a right to transfer shares without prior consent of other stockholders Management is vested with the Board of Directors

Disposal/ Transferabil ity of interest

Partner may not dispose of his individual interest unless agreed upon by all partners

Co-owner may freely do so

1. The contract is void ab initio and the partnership never existed in the eyes of the law 2. The profits shall be confiscated in favor of the government 3. The instruments or tools and proceeds of the crime shall also be forfeited in favor of the government 4. The contributions of the partners shall not be confiscated unless they fall under no. 3 *OTHER CLASSIFICATION OF PARTNERSHIP 1) As to duration a. PARTNERSHIP AT WILL - one in which no time is specified and is not formed for a particular undertaking or venture which may be terminated anytime by mutual agreement b. PARTNERSHIP WITH A FIXED TERM - the term for which the partnership is to exist is fixed or agreed upon or one formed for a particular undertaking 2) As to legality of existence a. DE JURE PARTNERSHIP - one which has complied with all the legal requirements for its establishment b. DE FACTO - one which has failed to comply with all the legal requirements for its establishment 3) As to representation to others a. ORDINARY OR REAL PARTNERSHIP - one which actually exists among the partners and also as to 3rd persons b. OSTENSIBLE OR PARTNERSHIP BY ESTOPPEL - one which in reality is not a partnership but is considered a partnership only in relation to those who, by their conduct or omission, are precluded to deny or disprove its existence 4) As to publicity a. SECRET PARTNERSHIP - one wherein the existence of certain persons as partners is not avowed or made known to the public by any of the partners b. OPEN OF NOTORIOUS PARTNERSHIP - one whose existence is avowed or made known to the public by the members of the firm 5) As to purpose a. COMMERCIAL OR TRADING PARTNERSHIP - one formed for the transaction of business b. PROFESSIONAL OR NON TRADING PARTNERSHIP - one formed for the exercise of a profession *KINDS OF PARTNERS 1. CAPITALIST - one who contributes money or property to the common fund 2. INDUSTRIAL - one who contributes only his industry or personal service 3. GENERAL - one whose liability to 3rd persons extends to his separate property 4. LIMITED - one whose liability to 3rd persons is limited to his capital contribution 5. MANAGING - one who manages the affairs or business of the partnership 6. LIQUIDATING - one who takes charge of the winding up of partnership affairs upon dissolution 7. PARTNERS BY ESTOPPEL - one who is not really a partner but is liable as a partner for the protection of innocent 3rd persons 8. CONTINUING PARTNER - one who continues the business of a partnership after it has been dissolved by reason of the admission of a new partner, retirement, death or expulsion of one of the partners 9. SURVIVING PARTNER - one who remains after a partnership has been dissolved by death of any partner

Power to act with 3rd persons

In absence of stipulation to contrary, a partner may bind partnership (each partner is agent of partnership) Death of partner results in dissolution of partnership

Co-owner cannot represent the co-ownership

Effect of death

Death of coowner does not necessarily dissolve coownership May be dissolved anytime by the will of any or all of the co-owners Minimum of 2 persons

Death of stockholder does not dissolve corporation

Dissolution

May be dissolved at any time by the will of any or all of the partners Minimum of 2 persons

Can only be dissolved with the consent of the state

No. of incorporat ors Commenc e-ment of juridical personality

Minimum of 5 incorporators

From the moment of execution of contract of partnership

N/A

From date of issuance of certificate of incorporation by the SEC

*SIMILARITIES BETWEEN A PARTNERSHIP AND A CORPORATION 1. Both have juridical personality separate and distinct from that of the individuals composing it 2. Both can only act through agents 3. Both organizations are composed of an aggregate of individuals (except corporation sole) 4. Both distribute profits to those who contribute capital to the business 5. Both can only be organized when there is a law authorizing their organization 6. Both are taxable as a corporation *EFFECTS OF UNLAWFUL PARTNERSHIP

10. SUBPARTNER - one who is not a member of the partnership who contracts with a partner with reference to the latter's share in the partnership 11. OSTENSIBLE - one who takes active part and known to the public as partner in the business 12. SECRET - one who takes active part in the business but is not known to be a partner by outside parties 13. SILENT - one who does not take any active part in the business although he may be known to be a partner 14. DORMANT - one who does not take active part in the business and is not known or held out as a partner *RELATIONS CREATED BY A CONTRACT OF PARTNERSHIP 1. Relations among the partners themselves 2. Relations of the partners with the partnership 3. Relations of the partnership with 3rd persons with whom it contracts 4. Relations of the partners with such 3rd persons C. Rules to determine existence 1) persons who are not partners as to each other are not partners as to third persons; 2) co-ownership or co-possession does not establish a partnership; 3) sharing of gross returns does not establish a partnership; 4) receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business EXCEPT: NO PRESUMPTION OF PARTNERSHIP FROM RECEIPT OF PROFITS: (DWRAIC) i. As debt by installment ii. As wages or rent iii. As annuity iv. As interest on loan v. As consideration for sale of goodwill of business/other property by installments D. How partnership is formed -Partnership may be constituted in any form GENERAL RULE: No special form is required for the validity of the contract EXCEPTIONS: 1. Where immovable property/real rights are contributed a. Public instrument is necessary b. Inventory of the property contributed must be made, signed by the parties and attached to the public instrument otherwise it is VOID 2. Where capital is P3,000 or more, in money or property a. Public instrument is necessary b. Must be registered with SEC E. Partnership term -the term of existence of partnership is limitless F. Universal vs. Particular; General vs. Limited 1. Classification as to extent of its subject matter a. UNIVERSAL PARTNERSHIP i. UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY comprises the following: a) Property which belonged to each of the partners at the time of the constitution of the partnership b) Profits which they may acquire from all property contributed ii. UNIVERSAL PARTNERSHIP OF PROFITS - comprises all that the partners may acquire by their industry or work during the existence of the partnership

Note: Persons who are prohibited from giving donations or advantage to each other cannot enter into a universal partnership b. PARTICULAR PARTNERSHIP - has for its objects: i. Determinate things ii. Their use or fruits iii. Specific undertaking iv. Exercise of profession or vocation 2. Classification as to liability of partners a. GENERAL PARTNERSHIP - consists of general partners who are liable pro rata and subsidiarily and sometimes solidarily with their separate property for partnership debts b. LIMITED PARTNERSHIP - one formed by 2 or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for the obligations of the partnership G. Partnership by estoppel PARTNER BY ESTOPPEL; PARTNERSHIP BY ESTOPPEL Partner by estoppel - by words or conduct, he does any of the ff.: 1. Directly represents himself to anyone as a partner in an existing partnership or in a non-existing partnership 2. Indirectly represents himself by consenting to another representing him as a partner in an existing partnership or in a non existing partnership *Elements to establish liability as a partner on ground of estoppel: 1. Defendant represented himself as partner/represented by others as such and not denied/refuted by defendant 2. Plaintiff relied on such representation 3. Statement of defendant not refuted
Liabilities in estoppel All partners consented representation to Partnership is liable

No existing partnership & all those represented consented; Not all partners of existing partnership consents to representation

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

No existing partnership & not all represented consented; None of partners in partnership consented existing

H. Partnership v. Joint venture Joint venture persons or companies jointly undertake some commercial enterprise; contribute assets and shares risk. *JOINT ACCOUNTS/VENTURE

1. It exists when a merchant interests himself in the transaction of another merchant, contributing thereto the amount of capital they may agree upon, and participating in the favorable or unfavorable results thereof in the proportion they may determine. 2. Joint accounts do not adopt a firm name. 3. No suit may be maintained - investor and third persons dealing with the merchant conducting business. 4. It is not subject to any formal requirement for validity; it may be oral. I. Professional partnership - a non-trading partnership and is formed for the exercise of a profession. J. Management (Arts. 1800-1803) RULES: A. MANAGERS APPOINTED 1) The partner appointed as manager in the articles of partnership a) may execute all acts of administration despite opposition of his partners, UNLESS he acted in bad faith. b) power is irrevocable without just or lawful cause. REVOCATION vote of partners representing the controlling interest shall be necessary. 2) A power of management granted after the partnership has been constituted may be revoked at anytime. 3) 2 or more partners are managers = each one may execute all acts of administration UNLESS there is stipulation that one shall not act without the others consent; in case of opposition, majority decision shall prevail and if there is a tie, partner with controlling interest shall decide. B. MANNER OF MANAGEMENT NOT AGREED: 1) all partners considered agent and his act binds the partnership. 2) None of the partners may, without the consent of the others, make important alteration in the immovable property of the partnership. If refusal is manifestly prejudicial to the interest, courts intervention may be sought.
RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT Partner is appointed manager in the articles of partnership Power of managing partner is irrevocable without just/lawful cause; Revocable only when in bad faith Power is revocable any time for any cause Vote of partners representing controlling interest necessary to revoke power

without specification of duties/stipulati on that each shall not act w/o the other's consent Stipulated that none of the managing partners shall act w/o the consent of others Concurrence of all necessary for the validity of acts

tie, decision of partners owning controlling interest shall prevail

Absence or disability of any one cannot be alleged unless there is imminent danger of grave or irreparable injury to partnership If refusal of partner is manifestly prejudicial to interest of partnership, court's intervention may be sought

Manner of management not agreed upon

1.

All partners are agents of the partnership

2.

Unanimous consent required for alteration of immovable property

II. Rights and Obligations of Partnership RESPONSIBILITY OF PARTNERSHIP TO PARTNERS 1. To refund the amounts disbursed by partner in behalf of the partnership + corresponding interest from the time the expenses are made (loans and advances made by a partner to the partnership aside from capital contribution) 2. To answer for obligations partner may have contracted in good faith in the interest of the partnership business 3. To answer for risks in consequence of its management III. Rights and Obligations of Partners Among Themselves A. Obligations with respect to contribution of property: 1. To contribute at the beginning of the partnership or at the stipulated time the money, property or industry which he may have promised to contribute 2. To answer for eviction in case the partnership is deprived of the determinate property contributed 3. To answer to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of actual delivery 4. To preserve said property with the diligence of a good father of a family pending delivery to partnership 5. To indemnify partnership for any damage caused to it by the retention of the same or by the delay in its contribution *Effect of Failure to contribute property promised: 1. Partners becomes ipso jure a debtor of the partnership even in the absence of any demand 2. Remedy of the other partner is not rescission but specific performance with damages from defaulting partner B. Obligations with respect to contribution of money and money converted to personal use

Partner is appointed manager after constitution of partnership 2 or more persons entrusted with management of partnership

Each may execute all acts of administration

In case of opposition, decision of majority shall prevail; In case of

1. To contribute on the date fixed the amount he has undertaken to contribute to the partnership 2. To reimburse any amount he may have taken from the partnership coffers and converted to his own use 3. To pay for the agreed or legal interest, if he fails to pay his contribution on time or in case he takes any amount from the common fund and converts it to his own use 4. To indemnify the partnership for the damages caused to it by delay in the contribution or conversion of any sum for his personal benefits

D. Obligation of managing partners who collects debt from person who also owed the partnership 1. Apply sum collected to 2 credits in proportion to their amounts 2. If he received it for the account of partnership, the whole sum shall be applied to partnership credit Requisites: a. There exist at least 2 debts, one where the collecting partner is creditor and the other, where the partnership is the creditor b. Both debts are demandable c. The partner who collects is authorized to manage and actually manages the partnership E. Obligation of partner who receives share of partnership credit 1. Obliged to bring to the partnership capital what he has received even though he may have given receipt for his share only Requisites: a. A partner has received in whole or in part, his share of the partnership credit b. The other partners have not collected their shares c. The partnership debtor has become insolvent
RISK OF LOSS OF THINGS CONTRIBUTED Specific and determinate things which are not fungible where only the use is contributed Specific and determinate things the ownership of which is transferred to the partnership Fungible things (consumable) Risk is partner borne by

PROHIBITION AGAINST ENGAGING IN BUSINESS INDUSTRIAL PARTNER Industrial partner cannot engage in business (w/n same line of business with the partnership) unless partnership expressly permits him to do so CAPITALIST PARTNER Capitalist partner cannot engage in business (with same kind of business with the partnership) for his own account, unless there is a stipulation to the contrary Capitalist partner in violation shall: 1. Bring to common fund any profits accruing to him from said transaction, and Bear all losses

PROHIBITION

REMEDY

Capitalist may: 1. 2.

partners

3.

Exclude him from the firm, or Avail themselves of the benefits which he may have obtained Damages, in either case

2.

Risk is borne partnership

by

Note: It is believed that industrial partners are also entitled to the remedy granted since they are equally prejudiced

Risk is borne partnership Risk is borne partnership Risk is borne partnership

by

Things contributed to be sold

by

Things brought and appraised in the inventory

by

C. Obligations with respect to contribution to partnership capital 1. Partners must contribute equal shares to the capital of the partnership unless there is stipulation to contrary 2. Partners (capitalist) must contribute additional capital In case of imminent loss to the business of the partnership and there is no stipulation otherwise; refusal to do so shall create an obligation on his part to sell his interest to the other partners Requisites: a. There is an imminent loss of the business of the partnership b. The majority of the capitalist partners are of the opinion that an additional contribution to the common fund would save the business c. The capitalist partner refuses deliberately to contribute (not due to financial inability) d. There is no agreement to the contrary

RULES FOR DISTRIBUTION OF PROFITS AND LOSSES DISTRIBUTION OF PROFITS According to agreement 1. Share of capitalist partner is in proportion to his capital contribution Share of industrial partner is not fixed - as may DISTRIBUTION OF LOSSES According to agreement 1. If sharing of profits is stipulated apply to sharing of losses If no profit sharing stipulated losses shall be

With agreement Without agreement

2.

2.

be just and equitable under the circumstances 3.

borne according to capital contribution Purely industrial partner not liable for losses

c. Knowledge of any other partner who reasonably could and should have communicated it to the acting partner 5. Partners and the partnership are solidary liable to 3rd persons for the partner's tort or breach of trust 6. Liability of incoming partner is limited to: a. His share in the partnership property for existing obligations b. His separate property for subsequent obligations 7. Creditors of partnership preferred in partnership property & may attach partner's share in partnership assets 8. Every partner is an agent of the partnership
POWER OF PARTNER AS AGENT OF PARTNERSHIP Acts for carrying on in the usual way the business of the partnership Every partner is an agent and may execute acts with binding effect even if he has no authority Except: when 3rd person has knowledge of lack of authority 1. Act w/c is not apparently for the carrying of business in the usual way Does not bind partnership unless authorized by other partners

*Other rights and obligations of partners: 1. Right to associate another person with him in his share without consent of other partners (subpartnership) 2. Right to inspect and copy partnership books at any reasonable hour 3. Right to a formal account as to partnership affairs (even during existence of partnership): a. If he is wrongfully excluded from partnership business or possession of its property by his copartners b. If right exists under the terms of any agreement c. As provided by art 1807 d. Whenever other circumstances render it just and reasonable 4. Duty to render on demand true and full information affecting partnership to any partner or legal representative of any deceased partner or of any partner under legal disability 5. Duty to account to the partnership as fiduciary F. PROPERTY RIGHTS OF A PARTNER 1. His rights in specific partnership property 2. His interest in the partnership 3. His right to participate in the management *Nature of partner's right in specific partnership property 1. Equal right to possession 2. Right not assignable 3. Right limited to share of what remains after partnership debts have been paid *Nature of partner's right in the partnership 1. Share of profits and surplus IV. Obligations of Partnership/Partners to Third Persons OBLIGATION OF PARTNERS WITH REGARD TO 3RD PERSONS 1. Every partnership shall operate under a firm name. Persons who include their names in the partnership name even if they are not members shall be liable as a partner 2. All partners shall be liable for contractual obligations of the partnership with their property, after all partnership assets have been exhausted a. Pro rata b. Subsidiary 3. Admission or representation made by any partner concerning partnership affairs within scope of his authority is evidence against the partnership 4. Notice to partner of any matter relating to partnership affairs operates as notice to partnership except in case of fraud: a. Knowledge of partner acting in the particular matter acquired while a partner b. Knowledge of the partner acting in the particular matter then present to his mind

2.

Acts of strict dominion or ownership: a. Assign partnership property in trust for creditors

b.

Dispose good-will business

of of

c.

Do an act w/c would make it impossible to carry on ordinary business of partnership

d.

Confess judgement

e.

Enter into compromise concerning a partnership claim or liability

f.

Submit partnership claim or liability

to arbitration

WINDING UP - process of settling the business or partnership affairs after dissolution CAUSES OF DISSOLUTION: 1. Without violation of the agreement between the partners a. By termination of the definite term/ particular undertaking specified in the agreement b. By the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified c. By the express will of all the partners who have not assigned their interest/ charged them for their separate debts, either before or after the termination of any specified term or particular undertaking d. By the expulsion of any partner from the business bonafide in accordance with power conferred by the agreement 2. In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time 3. By any event which makes it unlawful for business to be carried on/for the members to carry it on for the partnership 4. Loss of specific thing promised by partner before its delivery 5. Death of any partner 6. Insolvency of a partner/partnership 7. Civil interdiction of any partner 8. Decree of court under art 1831 *GROUNDS FOR DISSOLUTION BY DECREE OF COURT (art 1831) 1. Partner declared insane in any judicial proceeding or shown to be of unsound mind 2. Incapacity of partner to perform his part of the partnership contract 3. Partner guilty of conduct prejudicial to business of partnership 4. Willful or persistent breach of partnership agreement or conduct which makes it reasonably impracticable to carry on partnership with him
Conveyance will pass title

Renounce claim of partnership Acts in contravention of a restriction on authority

g.

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

EFFECTS OF CONVEYANCE OF REAL PROPERTY BELONGING TO PARTNERSHIP Title in partnership name, Conveyance in partnership name Conveyance passes title but partnership can recover if: 1. Conveyance was not in the usual way of business, or 2. Buyer had knowledge of lack of authority Conveyance does not pass title but only equitable interest, unless: 1. Conveyance was not in the usual way of business, or 2. Buyer had knowledge of lack of authority Title in name of 1/ more partners, Conveyance in name of partner/partners in whose name title stands Conveyance passes title but partnership can recover if:

Title in partnership name, Conveyance in partner's name

1.

Conveyance was not in the usual way of business, or

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

Buyer had knowledge of lack of authority Conveyance will only pass equitable interest

5. Business can only be carried on at a loss 6. Other circumstances which render dissolution equitable - Upon application by purchaser of partner's interest: 1. After termination of specified term/particular undertaking 2. Anytime if partnership at will when interest was assigned/charging order issued *EFFECTS OF DISSOLUTION: A. AUTHORITY OF PARTNER TO BIND PARTNERSHIP General Rule: Authority of partners to bind partnership is terminated Exception: 1. Wind up partnership affairs 2. Complete transactions not finished Qualifications:

V. Dissolution (Art. 1830) *DISSOLUTION AND WINDING UP DISSOLUTION - change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business; partnership is not terminated but continues until the winding up of partnership affairs is completed

1. With respect to partners a. Authority of partners to bind partnership by new contract is immediately terminated when dissolution is not due to ACT, DEATH or INSOLVENCY (ADI) of a partner (art 1833); b. If due to ADI, partners are liable as if partnership not dissolved, when the ff. concur: i. If cause is ACT of partner, acting partner must have knowledge of such dissolution ii. If cause is DEATH or INSOLVENCY, acting partner must have knowledge/ notice 2. With respect to persons not partners (art 1834) a. Partner continues to bind partnership even after dissolution in ff. cases: (1) Transactions in connection to winding up partnership affairs/completing transactions unfinished (2) Transactions which would bind partnership if not dissolved, when the other party/obligee: (a) Situation 1 i. Had extended credit to partnership prior to dissolution & ii. Had no knowledge/notice of dissolution, or (b) Situation 2 i. Did not extend credit to partnership ii. Had known partnership prior to dissolution iii. Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on b. Partner cannot bind the partnership anymore after dissolution: (1) Where dissolution is due to unlawfulness to carry on with business (except: winding up of partnership affairs) (2) Where partner has become insolvent (3) Where partner unauthorized to wind up partnership affairs, except by transaction with one who: (a) Situation 1 i. Had extended credit to partnership prior to dissolution & ii. Had no knowledge/notice of dissolution, or (b)Situation 2 i. Did not extend credit to partnership prior to dissolution ii. Had known partnership prior to dissolution iii. Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on B. DISCHARGE OF LIABILITY Dissolution does not discharge existing liability of partner, except by agreement between: (1) partner himself (2) person/partnership continuing the business (3) partnership creditors *Rights of partner where dissolution not in contravention of agreement 1. Apply partnership property to discharge liabilities of partnership 2. Apply surplus, if any to pay in cash the net amount owed to partners *Rights of partner where dissolution in contravention of agreement 1. Partner who did not cause dissolution wrongfully: a. Apply partnership property to discharge liabilities of partnership b. Apply surplus, if any to pay in cash the net amount owed to partners c. Indemnity for damages caused by partner guilty of wrongful dissolution d. Continue business in same name during agreed term

e. Posses partnership property if business is continued 2. Partner who wrongly caused dissolution: a. If business not continued by others - apply partnership property to discharge liabilities of partnership & receive in cash his share of surplus less damages caused by his wrongful dissolution b. If business continued by others - have the value of his interest at time of dissolution ascertained and paid in cash/secured by bond & be released from all existing/future partnership liabilities *Rights of injured partner where partnership contract is rescinded on ground of fraud/misrepresentation by 1 party: 1. Right to lien on surplus of partnership property after satisfying partnership liabilities 2. Right to subrogation in place of creditors after payment of partnership liabilities 3. Right of indemnification by guilty partner against all partnership debts & liabilities C. SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS Assets of the partnership: 1. Partnership property (including goodwill) 2. Contributions of the partners Order of Application of Assets: 1. Partnership creditors 2. Partners as creditors 3. Partners as investors - return of capital contribution 4. Partners as investors - share of profits if any D. WHEN BUSINESS OF DISSOLVED PARTNERSHIP IS CONTINUED: 1. Creditors of old partnership are also creditors of the new partnership which continues the business of the old one w/o liquidation of the partnership affairs 2. Creditors have an equitable lien on the consideration paid to the retiring /deceased partner by the purchaser when retiring/deceased partner sold his interest w/o final settlement with creditors 3. Rights if retiring/estate of deceased partner: a. To have the value of his interest ascertained as of the date of dissolution b. To receive as ordinary creditor the value of his share in the dissolved partnership with interest or profits attributable to use of his right, at his option Right to Account - may be exercised by: 1. Winding up partner 2. Surviving partner 3. Person/partnership continuing the business *Manner of Winding Up 1. Judicially 2. Extrajudicially *Persons Authorized to Wind Up 1. Partners designated by the agreement 2. In absence of agreement, all partners who have not wrongfully dissolved the partnership 3. Legal representative of last surviving partner VI. Limited Partnership A. Definition

- one formed by two or more persons under the provisions of law, having as members one or more general partners and one or more limited partners. *CHARACTERISTICS 1. Formed by compliance with statutory requirements 2. One or more general partners control the business 3. One or more general partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond their capital contributions 4. May ask for the return of their capital contributions under conditions prescribed by law 5. Partnership debts are paid out of common fund and the individual properties of general partners

d. Name/place of residence of members e. Term for partnership is to exist f. Amount of cash/value of property contributed g. Additional contributions h. Time agreed upon to return contribution of limited partner i. Sharing of profits/other compensation j. Right of limited partner (if given) to substitute an assignee k. Right to admit additional partners l. Right of limited partners (if given) to priority for contributions m. Right of remaining gen partners (if given) or continue business in case of death, insanity, retirement, civil interdiction, insolvency n. Right of limited partner (if given) to demand/receive property/cash in return for contribution C. Rights and obligations of a limited partner Exclude: Questions requiring application of SEC opinions or regulations *SPECIFIC RIGHTS OF LIMITED PARTNERS: 1. Right to have partnership books kept at principal place of business 2. Right to inspect/copy books at reasonable hour 3. Right to have on demand true and full info of all things affecting partnership 4. Right to have formal account of partnership affairs 5. Right to ask for dissolution and winding up by decree of court 6. Right to receive share of profits/other compensation by way of income 7. Right to receive return of contributions provided the partnership assets are in excess of all its liabilities *WHEN GENERAL PARTNER NEEDS CONSENT/RATIFICATION OF ALL LTD PARTNERS: 1. Do any act in contravention of the certificate 2. Do any act which would make it impossible to carry on the ordinary business of the partnership 3. Confess judgement against partnership 4. Possess partnership property/assign rights in specific partnership property other than for partnership purposes 5. Admit person as general partner 6. Admit person as limited partner - unless authorized in certificate 7. Continue business with partnership property on death, retirement, civil interdiction, insanity or insolvency of gen partner unless authorized in certificate *LOAN AND OTHER BUSINESS TRANSACTIONS WITH LIMITED PARTNERSHIP 1. Allowed a. Granting loans to partnership b. Transacting business with partnership c. Receiving pro rata share of partnership assets with general creditors if he is not also a general partner 2. Prohibited a. Receiving/holding partnership property as collateral security b. Receiving any payment, conveyance, release from liability if it will prejudice right of 3rd persons *REQUITES FOR RETURN OF CONTRIBUTION OF LIMITED PARTNER: 1.All liabilities of partnership have been paid/if not yet paid, at least sufficient to cover them 2. Consent of all members has been obtained

*DIFFERENCES BETWEEN PARTNER/PARTNERSHIP

GENERAL Personally liable for partnership obligations When manner of mgt. not agreed upon, all gen partners have an equal right in the mgt. of the business Contribute cash, property or industry Proper party to proceedings by/against partnership Interest not assignable w/o consent of other partners Name may appear in firm name Prohibition against engaging in business Retirement, death, insolvency, insanity of gen partner dissolves partnership

GENERAL

AND

LIMiTED

LIMITED Liability extends only to his capital contributions No participation in management

Contribute cash or property only, not industry Not proper party to proceedings by/against partnership Interest is freely assignable

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

B. How limited partnership is formed/amended -If there is substantial compliance in good faith with the following: 1) Sign and swear to a certificate stating therein what is required by the provisions of law; 2) File for record the certificate in the Office of SEC *Certificate of articles of the limited partnership must state the ff. matters: a. Name of partnership + word "ltd." b. Character of business c. Location of principal place of business

3. Certificate is cancelled/amended withdrawal /reduction of contribution

*LIABILITY OF LIMITED PARTNER AS CREDITOR 1. Deficiency contribution in

as

to

set

forth

Nature: Since it is a contract, there must be a meeting of the minds as to consent, object, and cause. Basis: Representation. The acts of the agent on behalf of the principal within the scope of his authority produce the same legal and binding effects as if they were personally done by the principal. Hence, the distinguishing features of agency are its representative character & its derivative authority. Purpose: extend the personality of the principal through the facility of the agent *Capacity of the Parties: The principal may be a natural or a juridical person. And he must be capacitated. The rule is if a person is capacitated to act for himself or his own right, he can act through an agent. As to the agent, insofar as the third persons are concerned, it is enough that the principal is capacitated. But insofar as his obligations to his principal are concerned, the agent must be able to bind himself. *Essential Elements: 1. consent of the parties to establish the relationship; 2. object of the contract is the execution of a juridical act in relation to third persons; 3. agent acts as a representative and not for himself; and 4. agent acts within the scope of his authority *Acts That Cannot Be Done By Agent (1) Personal Acts (2) Criminal or Illegal Acts *Nature of Relationship Between Principal & Agent: Fiduciary, based on trust & confidence II. Powers (Arts. 1877-1878) Agency couched in general terms comprises only acts of administration, even if the principal states that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management. SPA Necessary: 1) to make payment as are not usually considered act of administration; 2) to effect novation 3) to compromise, submit questions to arbitration, to renounce right to appeal from judgment, to waive objections to venue of an actions or to abandon a prescription already acquired 4) to waive any obligation gratuitously 5) to enter into contract affecting immovable property 6) to make gifts not customary 7) to loan or borrow money unless urgent and indispensable for the preservation of the things which are under administration 8) to lease any real property to another for more than 1 year 9) to bind the principal to render service without compensation 10) to bind the principal in a contract of partnership 11) to obligate principal as guarantor or surety 12) to create or convey real rights over immovable 13) to accept or repudiate an inheritance 14) to ratify or recognize obligations contracted before agency

AS TRUSTEE Specific property stated as contributed but not yet contributed/wrongfully returned Money/other property wrongfully paid/ conveyed to him on account of his contribution

2. Unpaid contribution

*DISSOLUTION OF LIMITED PARTNERSHIP Priority in Distribution of Assets: 1. Those due to creditors, including limited partners 2. Those due to limited partners in respect of their share in profits/compensation 3. Those due to limited partners of return of capital contributed 4. Those due to general partner other than capital & profits 5. Those due to general partner in respect to profits 6. Those due to general partner for return of capital contributed *AMENDMENT/CANCELLATION OF CERTIFICATE Cancelled: 1. Partnership is dissolved other than by reason of expiry of term 2. All limited partners cease to be such Amended: 1. Change in name of partnership, amount/character of contribution of ltd. partner 2. Substitution of ltd. partner 3. Admission of additional ltd. partner 4. Admission of gen. partner 5. Death, insolvency, insanity, civil interdiction of gen. partner & business is continued 6. Change in character of business 7. False/erroneous statement in certificate 8. Change in time as stated in the certificate for dissolution of partnership/return of contribution 9. Time is fixed for dissolution of partnership. Return of contribution if no orig. time specified 10. Change in other statement in certificate AGENCY I. Definition of Agency - By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (Article 1868) *Characteristics: 1. consensual 2. nominate 3. preparatory 4. principal 5. unilateral; reciprocal (if for compensation)

15) any other act of strict dominion. Art 1879 - Special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. Art 1880 A special power to compromise does not authorize submission to arbitration. A. To bind principal (Arts. 1897-1902) - agent must act within the scope of his authority; in accordance with the instruction of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. B. Exception (Art. 1883) 1) agents act in his own name Except: agent transacts which involves things belonging to the principal. 2) agent exceeds the scope of his authority and the principal does not ratify the contract, it shall be void if the party is aware of the limits of the powers granted by the principal. *Stipulation exempting the agent from the obligation to render an account shall be VOID. III. Express vs. Implied Agency Classification of Agency: As to manner of creation 1. Express agent has been actually authorized by the principal, either orally or in writing 2. Implied agency is implied from the acts of the principal, from his silence or lack of action or his failure to repudiate the agency knowing that another person is acting on his behalf without authority, or from the acts of the agent which carry out the agency, or from his silence or inaction according to the circumstances Form of Agency: General Rule: appointment of an agent may be oral or written; no formal requirements Exception: when the law requires a specific form (e.g. agents sale of real property or any interest therein) *Form of Acceptance by Agent A. Express - when it is oral or written B. Implied -when it can be inferred from the acts of the agent which carry out the agency, or from his silence of inaction according to the circumstances: 1. Between persons who are present implied acceptance if the principal delivers his power of attorney to the agent and the latter receives it without any objection 2. Between persons who are absent acceptance not deemed implied from the silence of the agent EXCEPT: a. When the principal transmits his power of attorney to the agent, who receives it without any objection b. When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram *Way of Giving Notice of Agency & Its Effect 1. By special information - the person appointed as agent is considered such with respect to the person to whom it was given

2. By public advertisement - the agent is considered such with regard to any person IV. Agency by Estoppel - there is no agency at all, and the alleged agent seemed to have apparent or ostensible, although not real authority to represent another *Who can be under estoppel to deny agency? (1)Estoppel of Agent- one professing to act as agent estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in which he is engaged (2)Estoppel by the Principal a. As to agent one knowing another is acting as his agent and fails to repudiate his acts, or b. accept the benefits of them, will be estopped to deny the agency as against such other c. As to sub-agent to estop the principal from denying his liability to a third person, he must have known or be charged with knowledge of the transaction and the terms of the agreement between the agent and sub-agent d. As to third persons one who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency (3) Estoppel of Third Persons a third person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or 3rd persons in interest (4) Estoppel of the Government - government neither estopped by the mistake/error of its agents; may be estopped through affirmative acts of its officers acting within the scope of their authority *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 * To be effective, ratification need not be communicated or made known to the agent or the third party. The act or conduct of the principal rather than his communication is the key. But before ratification, the third party is free to revoke the unauthorized contract. *Effects of Ratification a. with respect to agent - relieves the agent from liability to the third party for the unauthorized transaction, and to his principal for acting without authority; may recover compensation b. with respect to principal - assumes responsibility for the unauthorized act, as fully as if the agent had acted under original authority but not liable for acts outside the authority approved by his ratification c. with respect to 3rd persons - bound by ratification to the same extent as if the ratified act had been authorized; cannot raise the question of the agents authority to do the ratified act V. General vs. Special Agency Classification: As to extent of business of the principal

1. General agency comprises all the business of the principal 2. Special agency comprises one or more specific transactions
GENERAL AGENT all acts connected with the business or employment in which he is engaged SPECIAL AGENT specific acts in pursuance of particular instructions or with restrictions necessarily implied from the act to be done no continuity of service

2. Simple or Commission agent acts in his own name but for the account of the principal *Agency Couched in General Terms: -covers only MERE ACTS OF ADMINISTRATION even if a. the principal should state that he withholds no power b. the agent may execute such acts as he may consider appropriate: c. the agency should authorize a general and unlimited management VII. Agency Requiring Special Power of Attorney *Power of Attorney: - instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal; primary purpose is to evidence agents authority to third parties within whom the agent deals *Power of Attorney, How Construed: General Rule: strictly construed and strictly pursued; held to grant only those specified powers Exception: when strict construction will destroy the very purpose of the power Sale of a Piece of Land/Any Interest Therein: agents authority must be in writing, otherwise sale is void *Special Powers of Attorney 1. To make such payments as are not usually considered as acts of administration 2. To effect novations which put an end to obligations already in existence at the time the agency was constituted 3. To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired 4. To waive any obligation gratuitously 5. To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration 6. To make gifts, except customary ones for charity or those made to employees in the business managed by the agent 7. To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration 8. To lease any real property to another person for more than one year 9. To bind the principal to render some service without compensation 10. To bind the principal in a contract of partnership 11. To obligate the principal as a guarantor or surety 12. To create or convey real rights over immovable property 13. To accept or repudiate an inheritance 14. To ratify or recognize obligations contracted before the agency 15. Any other act of strict dominion *Not Included in the Power to Mortgage: 1. to sell 2. to execute a second mortgage 3. to mortgage for the agents or any 3rd persons benefit, UNLESS clearly indicated *Power to compromise does not include submission to arbitration.

Scope of Authority

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

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

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

Termination of Authority

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

Constructio n of Principals Instructions

merely advisory in nature

VI. Agency Couched in General Terms Classification: As to authority conferred 1. Couched in general terms agency is created in general terms and is deemed to comprise only acts in the name and representation of the principal

VIII. Agency by Operation of Law Agency by estoppels one person (principal) fails to repudiate the agency, knowing that another person is acting on his behalf without authority. Person forwarded with goods, who declines an agency, bound to observe the diligence of a good father of a family in the custody and preservation of the goods until the owner should appoint an agent. IX. Rights and Obligations of Principal *Obligations of the Principal to the Agent 1. comply with all the obligations agent contracted in representation of the principal 2. advance sums necessary for the execution of the agency, when agent so requests; liable for reimbursement regardless of the undertakings success whenever agent had advanced & has no fault; includes interest 3. reimburse the agent for all advances made by him provided the agent is free from fault 4. indemnify the agent for all the damages which the execution of the agency may have caused the latter without fault or negligence on his part 5. pay the agent the compensation agreed upon or the reasonable value of the latters services *Agents Right of Retention: - specific (only for those goods connected with the agency) and until the principal effects the reimbursement and pays the indemnity *Principals Liability for Expenses: General Rule: Principal liable for the expenses incurred by the agent Exceptions: 1. If the agent acted in contravention of the principal's instructions, unless principal derives benefits from the contract 2. When the expenses were due to the fault of the agent 3. When the agent incurred them with knowledge that an unfavorable result would ensure, if the principal was not aware thereof 4. When it was stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum X. Irrevocable Agency (Arts. 1927-1930) 1. where bilateral contract depends upon agency 2. if it is the means of fulfilling an obligation already contracted 3. if partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. 4. agency remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the principal and the agent, or in the interest of a third person who has accepted the stipulation in his favor.
*Effects of Acts of Agent ACTS OF THE AGENT 1. in behalf of the principal, within the EFFECT binds principal; agent not EXCEPTION/S agent liable if he (1)expressly makes himself liable;

scope of authority

personally liable

(2)exceeds the limits of his authority without giving the parties sufficient notice of his powers binding on the principal when ratified or when the principal allowed the agent to act as though he had full powers when the transaction involves things belonging to the principal 1. remedy of the principal damages for agents failure to comply with the agency 2. remedy of the third person - If the case falls under the general rule, he can sue the agent. But when the contract involves things belonging to the principal, he can sue the principal. But if it cannot be determined without litigation who is liable, he can sue both.

2. without or beyond scope of authority

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

3. within the scope of authority but in the agents name

4. within the scope of the written power of attorney but agent has actually exceeded his authority according to an understanding between him & the principal 5. with improper motives

insofar as 3rd persons are concerned (not required to inquire further than the terms of the written power, agent acted within scope of his authority; principal estopped motive is immaterial; as long as within the scope of authority, valid (1)3rd person knew agent was acting for his own benefit: principal is not liable to 3rd third person (2) owner is

seeking recovery of personal property of which he has been unlawfully deprived 6. with misrepresentati ons by the agent a. authorized principal still liable b. beyond the scope of the agents authority GR: principal not liable Exception: principal takes advantage of a contract or receives benefits made under false representation of his agent c. for the agents own benefit principal still liable; agents motive immaterial 7. mismanageme nt of the business by the agent principal still responsible for the acts contracted by the agent with respect to 3rd persons; principal, however, may seek recourse from the agent principal civilly liable so long as the tort is committed by the agent while performing his duties in furtherance of the principals business principal is liable for damages

parties 10. agent in bad faith and prejudices 3rd persons only the agent is liable for damages

NOTE: Agent always liable for fraud but not for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. *Obligations of the Agent to the Principal (a) GENERAL: 1. act with utmost good faith & loyalty for the furtherance of principals interests 2. obey principals instructions 3. exercise reasonable care (b) SPECIFIC: 1. carry out the agency 2. answer for damages which through his non-performance the principal may suffer 3. finish the business already begun on the death of the principal should delay entail any danger (exception to the rule that death extinguishes agency) 4. observe the diligence of a good father in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed 5. advance necessary funds if there be a stipulation to do so (except when the principal is insolvent) 6. act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do (NOTE: A departure from the principals instructions may be justified by a sudden emergency, or if the instructions are ambiguous, or if the departure is so insubstantial that it does not affect the result and the principal suffers no damage thereby. Further, an agent has the right to disobey the principals instructions when the instruction calls for the performance of illegal acts, or where he is privileged to do so to protect his security interest in the subject matter of the agency.) 7. not to carry out the agency if it would manifestly result in loss or damage to the principal 8. answer for damages if there being a conflict between his & principals interests, he prefers his own 9. not to loan to himself if he has been authorized to loan money at interest 10. render an account of his transactions and deliver to the principal whatever he may have received by virtue of the agency (If the agent fails to deliver and instead converts or appropriates for his own use the money or property belonging to his principal, he may be charged with ESTAFA.) 11. be responsible in certain cases for the act of the substitute appointed by him 12. pay interest on funds he has applied to his own use Distinction Between Authority and the Principals Instructions
AUTHORITY sum total of the powers committed to the agent by the principal INSTRUCTIONS contemplates only a private rule of guidance to the agent; independent and distinct in character

8. tort committed by the agent

9. agent in good faith but prejudices 3rd

relates to the subject/business with which the agent is empowered to deal or act limitations of authority are operative as against those who have/charged with knowledge of them contemplated to be made known to third persons dealing with the agent

refers to the manner or mode of agents action

without significance as against those with neither knowledge nor notice of them not expected to be made known to those with whom the agent deals

a. with knowledge of both principals - recovery can be had from both principals b. without the knowledge of both principals - the agent can recover from neither c. with knowledge of one principal - as to the principal who knew of that fact and as to the agent, they are in pari delicto and the courts shall leave them as they were, the contract between them being void as against public policy and good morals *Attorney-In-Fact: - one who is given authority by his principal to do a particular act not of a legal character NOTE: The term is, in loose language, used to include agents of all kinds, but in its strict sense, it means an agent having a special authority created by a deed. XI. Modes of Extinguishment of Agency 1. revocation 2. withdrawal of the agent 3. death, civil interdiction, insanity or insolvency of the principal or of the agent 4. dissolution of the firm or corporation which entrusted or accepted the agency 5. accomplishment of the object or purpose of the agency 6. expiration of the period for which the agency was constituted NOTE: list not exclusive; causes particular only to agency; may be extinguished by the modes of extinguishment of obligations in general whenever they are applicable, like loss of the thing and novation *Agency is TERMINATED, as a matter of law, upon the outbreak of war. *Presumption of Continuance of Agency: - It means that when once shown to have existed, an agency relation will be presumed to have continued, in the absence of anything to show its termination. *Continuance of Agency: parties must be (1)present, (2) capacitated and (3) solvent Exceptions to Extinguishment by Death 1. if the agency is coupled with an interest 2. if the act of the agent was executed without the knowledge of the death of the principal and the third person who contracted with the agent acted in good faith 3. to avoid damage 4. if it has been constituted in the common interest of the principal and of the agent, or in the interest of a third person who has accepted the stipulation in his favor *Can the heirs continue the agency? General Rule: agency calls for personal services on the part of the agent; rights & obligations intransmissible Exception: 1. agency by operation of law, or a presumed or tacit agency 2. agency is coupled with an interest in the SM of the agency (ex. power of sale in a mortgage) *Exceptions to Extinguishment Upon Loss or Destruction of Subject Matter

*Appointment of Sub-agent: 1. If there is no prohibition from the principal and the agent appoints a subagent, the agent is responsible for all the acts of the subagent. 2. If there is a prohibition but nevertheless the agent appoints a subagent, all the subagents acts are void as to the principal. 3. If there is authority to appoint and subagent is not designated by the principal, the agent will be liable for all the acts of the subagent if the subagent is notoriously incompetent or insolvent. 4. If there is authority to appoint and subagent is designated by the principal, the agent is released from any liability from the acts of the subagent. *Responsibility of 2 or Simultaneously: General Rule: liable jointly More Agents Appointed

Exception: solidarity has been expressly stipulated; each of the agents becomes solidarily liable for (1) the non-fulfillment of the agency; of for (2) the fault or negligence of his fellow agent Exception to the exception: when one of the other agent/s acts beyond the scope of his authority innocent agent is NOT liable NOTE however that if two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. Any of them also revoke the agency. Broker: negotiate contracts relative to property in behalf of others and for a compensation or fee When Broker Entitled to Compensation: whenever he brings to his principal a party who is able and willing to take the property, and enter into a valid contract upon the terms named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly (NOTE: A broker is never entitled to commission for unsuccessful efforts.) *Law on Double Agency: -disapproved by law for being against public policy and sound morality EXCEPT where the agent acted with full knowledge and consent of the principals Compensation for a Double Agent:

1. if it is possible to substitute other material for that which was destroyed without substantial detriment to either party or if the destroyed subject matter was not in fact essential to the contract; 2. a partial loss or destruction does not always result in a complete termination of the agency, and under such circumstances, while the agency may be ended in so far as the destroyed property is concerned, it may continue in existence as to other property not affected NOTE: If the loss brought about by the principal (e.g. principal sells SM to another party even if an agent has been constituted in reference to it), principal liable for damages for his wrongful terminating act; if SM is lost without principals fault, no liability assumed by him *Change of Circumstance: General Rule - when there is a basic change in the circumstances surrounding the transaction, which was not contemplated by the parties and which would reasonably lead the agent to believe that the principal would not desire him to act, the authority of the agent is terminated Exceptions: 1. If the original circumstances are restored within a reasonable period of time, the agent's authority may be revived 2. Where the agent has reasonable doubts as to whether the principal would desire him to act, his authority will not be terminated if he acts reasonably 3. Where the principal and agent are in close daily contact, the agent's authority to act will not terminate upon a change of circumstances if the agent knows the principal is aware of the change and does not give him new instructions *Revocation termination of the agency by the subsequent act of the principal *Renunciation/Withdrawal - termination of the agency by the subsequent act of the agent *Principals Liability for Damages Despite Revocation 1. if the agency was constituted for a fixed period, the principal shall be liable for damages occasioned by the wrongful discharge of the agent before the expiration of the period fixed 2. even if there was no time fixed for the continuance of the agency, but the agent can prove that the principal acted in bad faith by revoking the agency in order to avoid the payment of commission about to be earned, the principal can be held liable for damages *Necessity of Notice of Revocation 1. as to the agent - express notice always necessary; sufficient notice if the party to be notified actually knows, or has reason to know, a fact indicating that his authority has been terminated/suspended; revocation without notice to the agent will not render invalid an act done in pursuance of the authority 2. as to 3rd persons express notice necessary a. as to former customers - actual notice must be given to them because they always assume the continuance of the agency relationship b. as to other persons - notice by publication is enough *May the agency be extinguished at will?

A. AGENT may do so but subject to the contractual obligations owing the principal (i.e. fixed period of time for the agency or purpose not yet accomplished); expressly or impliedly (a) conducted himself in a manner incompatible with his duties; (b)abandons the object of agency and acts for himself in committing a fraud upon his principal; (c)he files a complaint against the principal and adopts an antagonistic attitude towards him 1. with just cause - give due notice 2. without just cause - liable for damages if agent suffers damages thereby UNLESS the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself NOTE: The mere fact that the agent violates his instructions does not amount to renunciation, and although he may thus render himself liable to the principal, he does not cease to become an agent. B. PRINCIPAL may also revoke the agency at will Exception: agency coupled with interest a. When a bilateral contract depends upon the agency b. When the agency is the means of fulfilling an obligation already contracted c. When a partner is appointed as manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Exception to the exception: when the agent acts to defraud the principal *Implied Revocation of Agency 1. principal appoints a new agent for the same business or transaction, only if there is incompatibility); effective as between the principal and the agent only if communicated to the agent; does not prejudice rights of third persons acting in GF without knowledge of the revocation 2. principal directly manages the business entrusted to the agent, dealing directly with 3rd persons *Effect of Extinguishment Without Notice: act of agent deemed valid insofar as 3rd parties acting in good faith and without knowledge of revocation *Effect of Issuance of a SPA: The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power. COMPROMISE I. Definition (Art. 2028) -a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. * Fair compromise in a civil case encourage II. Void Compromise (Art. 2035) a. civil status of a person b. validity of marriage or a legal separation c. any ground for legal separation d. future support e. jurisdiction of courts

f. future legitime III. Effect (Arts. 2037, 2041) 1) has the effect and authority of res judicata upon the parties; but there shall be no execution except upon compliance with a judicial compromise. 2) parties cannot set up mistake of fact against one another, if litigation already commenced has withdrawn EXCEPT: may rescind or annulled a) one party concealed some documents which later on discovered b) existence of final judgment where parties are unaware EXCEPT: they are aware and judgment may be revoked 3) one of the party fails to abide or refuses = other party may enforce the compromise or regard it as rescinded and insist upon his original demand CREDIT TRANSACTIONS - include all transactions involving the purchase of loan of goods, services or money in the present with a promise to pay or deliver in the future. > Without a promise to pay or deliver in the future, there can be no security transaction. *Parties to a Bailment. 1. Bailor (Comodatario) the giver; the party who delivers the possession or custody of the thing bailed. 2. Bailee (Comodante) the recipient; the party who receives the possession or custody of the thing thus delivered. *Kinds of Bailment Contract. 1. Those for the sole benefit of the bailor. 1.1 gratuitous deposit 1.2 mandatum 2. Those for the sole benefit of the bailee 2.1 commodatum 2.2 gratuitous mutuum 3. Those for the benefit of both parties 3.1 deposit for the compensation; involuntary deposit 3.2 pledge 3.3 bailments for hire I. Loan Definition: by contract of loan, one of the parties delivers to another, either something not consumable or money or other consumable thing. *Characteristics: 1. Real Contract because the delivery of the thing loaned is necessary for the perfection of the contract (Article 1934; see also Article 1316); and 2. Unilateral Contract because once the subject matter has been delivered, it creates obligations on the part of only one of the parties, i. e. the borrower A. Commodatum vs. Mutuum *Commodatum where the bailor (lender) delivers to the bailee (borrower) a non-consumable thing so that the latter may use it for a certain time and return it; and * Mutuum where the bailor (lender) delivers to the bailee (borrower) money or other consumable thing upon the

condition that the latter shall pay same amount of the same kind and quality. *Distinctions between Commodatum and Mutuum
Commodatum (Hiram) 1. 1. 2. 3. subject matter is nonconsumable things ownership by lender retained 2. 3. Mutuum (Utang) subject matter is money or other consumable things ownership transferred to borrower may be gratuitous or onerous borrower need only pay the same amount of the same kind and quality involves only personal property loan for consumption no right to demand return before the lapse of the term agreed upon

essentially gratuitous

4.

borrower must return the same thing loaned may involved real or personal property loan for use or temporary possession right to demand the return of the thing loaned before expiration of term in case of urgent need loss is shouldered by bailor since he is the owner

4.

5.

5.

6. 7.

6. 7.

8.

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

*Distinction between Commodatum (Hiram) and Lease (Upa) 1. Commodatum is a real contract, whereas lease is a consensual contract. 2. The object of commodatum is a non-consumable (nonfungible) thing, whereas the object of lease may even be work or service. 3. Commodatum is essentially gratuitous, whereas lease is not gratuitous. *COMMODATUM: Characteristics 1. Gratuitous, otherwise it is a lease (Article 1935) 2. Purpose is the temporary use of the thing loaned (Article 1935) 3. Bailees right to use is limited to the thing loaned and not to its fruits (Article 1935) unless there is stipulation to the contrary (Article 1940) 4. Subject matter is generally non-consumable things but may cover consumables if the purpose of the contract is for exhibition. 5. Bailor needs not to be the owner; it is sufficient that he has possessory interest over subject matter (Article 1938). 6. Commodatum is purely personal in character hence death of either bailor or bailee extinguishes the contract (Article 1939)

7. General Rule: Bailee can neither lend nor lease the object of the contract to a third person. Exception: Member of bailees household Exception to the exception: a) contrary stipulation b) nature of thing forbids such use MUTUUM: Characteristics 1. Borrower acquires ownership of the thing and can therefore dispose of the thing borrowed. There is no criminal liability for failure to pay ones debt. 2. If the thing loaned is money, payment must be made in the currency which is legal tender in the Philippines and in case of extraordinary deflation or inflation, the basis of payment shall be the value of the currency at the time of the creation of the obligation. 3. If fungible thing was loaned, the borrower is obliged to pay the lender another thing of the same kind, quality and quantity. *Distinctions between Mutuum (Utang) and Lease (Upa) 1. In mutuum, the object is money or any consumable (fungible) thing, whereas in lease, the object may be any thing, whether movable or immovable, fungible or nonfungible. 2. In mutuum, the thing loaned becomes the property of the debtor, whereas in lease, the owner does not lose his right of ownership. 3. In mutuum, the relationship which is created is that of creditor and debtor, whereas in lease, the relationship that is created is that of landlord and tenant or lessor and lessee (Tolentino vs. Gonzales, 50 Phil. 558). B. Obligations of bailor and bailee *Obligations of the Bailee (Commodatum) 1. Bailee is liable for ordinary expenses for the use and preservation of the thing loaned. 2. General Rule: Bailee is not liable for loss or damage due to a fortuitous event (because the bailor retains ownership) Exceptions: a) Bailee devote thing to a different purpose b) Bailee keeps thing longer than the period stipulated or after the accomplishment of the use for which commodatum was constituted. c) Thing loaned was delivered with appraisal of its value (unless there is express stipulation to the contrary) d) Bailee lends thing to a third person not a member of his household e) Bailee, if being able to save either the thing borrowed or his own thing chose to save the latter 3. Bailees are solidarily liable when the thing is loaned to two or more bailees in the same contract. Note: 1. General Rule - Bailee is not liable for ordinary wear and tear due to use of the thing loaned. Exceptions: a.) If he is guilty of fault or negligence b.) If he devotes thing to any purpose different from that for which it has been loaned.

2. Bailee cannot retain the thing loaned as security for claims he has against the bailor, even though by reason of extraordinary expenses. (No right of retention) *Obligations of Bailor 1. To allow the bailee the use of the thing loaned for the duration of period stipulated or until the accomplishment of the purpose for which commodatum was constituted. Exceptions: a. urgent need during which time the commodatum is suspended. b. precarium b.1 if duration of the contract has not been stipulated b.2 if use or purpose of the thing has not been stipulated b.3 if use of thing is merely tolerated by the bailor 2. To refund extraordinary expenses for the preservation of the thing loaned provided bailor is notified before the expenses were incurred. Exception: urgent need hence no notice is necessary. 3. To refund 50% of the extraordinary expenses arising from actual use of the thing loaned (i.e. caused by fortuitous event) Exception: contrary stipulation 4. To pay damages to bailee for known hidden flaws in the thing loaned. Note: 1. Bailor has the right to demand return of the thing if bailee commits any act of ingratitude. (precarium) C. Interest and the suspension of usury law Rules on Interest: 1. In order that interest may be charged, it must be expressly stipulated in writing (Article 1956). Exceptions: 1. Debtor in delay is liable to pay legal interest as indemnity for damages even in the absence of stipulation for the payment of interest (Article 2209) 2. Interest due shall earn interest (compounding interest) from the time it is judicially demanded although the obligation may be silent upon this point (Article 2212) or when there is express stipulation (Article 1959). 3. Obligations to pay damages in the sum of money after the finality of judgment (12% because it has the nature of forbearance of money) Recent Jurisprudence on Mutuum (Loan) Francisco vs. Gregorio (115 SCRA 394) No interest is due where there was tender of payment prior to demand to pay or perform an agreed act. A debtor cannot be considered in delay who offered a check backed by sufficient deposit or ready to pay cash if the creditor chose that means of payment. State Investment House vs. Court of Appeals (198 SCRA 390) The appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money, is the payment of the penalty interest at the rate agreed upon; and in the absence of a stipulation of

a particular rate of penalty interest, then the payment of additional interest at a rate equal to the regular monetary interest, and if no regular interest had been agreed upon, then payment of legal interest. Tio Khe Chio vs. Court of Appeals (202 SCRA 119) Circular No. 416 of the Central Bank which took effect on July 29, 1974 pursuant to Presidential Decree No. 116 (Usury Law) raised the legal rate of interest from six (6%) percent to twelve (12%) percent. The adjusted rate mentioned in the circular refers only to loans or forbearances of money, goods or credits and court judgments thereon but not to court judgments for damages arising from injury to persons and loss of property which does not involve a loan. In the case of Philippine Rabbit Bus Lines, Inc. vs. Cruz, G.R. No. 71017, July 28, 1986, 143 SCRA 158, the Court declared that the legal rate of interest is six (6%) percent per annum and not twelve (12%) percent, where a judgment award is based on an action for damages for personal injury, not use or forbearance of money, goods or credit. In the same vein, the Court held in GSIS vs. Court of Appeals, G.R. No. 52478, October 30, 1986, 145 SCRA 311, that the rates under the Usury Law (amended by P. D. 116) are applicable only to interest by way of compensation for the use or forbearance of money; interest by way of damages is governed by Article 2209 of the Civil Code. Eastern Shipping Lines, Inc. vs. CA (234 SCRA 78) 1. In a loan, the interest due should be that stipulated in writing and in the absence thereof, the rate shall be 12% per annum. 2. In case of other obligations, interest on the amount of damages may be imposed at the courts discretion at the rate of 6% per annum. 3. When the money judgment becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction, the interim period being an equivalent to a forbearance of credit. GSIS VS. Court of Appeals (218 SCRA 233) Central Bank Circular No. 416 applies only to interest on loans. A. C. Enterprises, Inc. vs. Construction Industry Arbitration Commission (CIAC) (244 SCRA 55) a.) Obligation not based on a loan or forbearance of money is not covered by CB Circular No. 416. b.) Legal interest of 12% p. a. shall only be adjudged in cases involving loan or forbearance under CB Circular No. 416. PNB vs. CA (236 SCRA 20)

Presidential Decree No. 1684 and CB Circular No. 905 did not authorize either party to unilaterally raise the interest rate without the others consent. Ruiz vs. Caneba (191 SCRA 865) Where the courts judgment which did not provide for the payment of interest has already become final, no interest may be awarded. Sangrador vs. Villarama (168 SCRA 215) That there is no longer any ceiling on interest or interest rates on loans (Liam Law vs. Olympic Sawmill Co., 129 SCRA 439 [1984]) applies only where the parties openly and expressly agree on a specific rate of interest to accrue on the loan. Where the interest rate is not expressly stipulated, the loan shall earn 12% interest per annum. Insular Bank of Asia and America Vs. Spouses Salazar (159 SCRA 133) It is the rule that escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money on long term contracts. However, the enforcement of such stipulations are subject to certain conditions. Banco Filipino vs. Navarro (152 SCRA 346) and PNB vs. Intermediate Appellate Court (183 SCRA 133) An escalation clause can be valid only if it also includes a de-escalation clause or a stipulation that the rate of interest agreed upon shall be reduced in the event that the maximum rate of interest is reduced by law or by Monetary Board. Llorin vs. Court of Appeals (218 SCRA 436) An escalation clause must be bilateral hence it must provide for reduction or de-esclation of interest for said clause to be valid. Almeda vs. Court of Appeals (256 SCRA 292) The binding effect of any agreement between parties to a contract is premised on two settled principles: (1) that any obligation arising from contract has the force of law between the parties; and (2) that there must be mutuality between the parties based on their essential equality. Any contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties is likewise invalid. Moreover, respondent banks reliance on C. B. Circular No. 905, Series of 1982 did not authorize the bank, or any lending institution for that matter, to progressively increase interest rates on borrowings to an extent which

would have made it virtually impossible for debtors to comply with their own obligations. True, escalation clauses in credit agreements are perfectly valid and do not contravene public policy. Such clauses, however, (as are stipulations in other contract) are nonetheless still subject to laws and provisions governing agreements between parties, which agreement while they may be the law between the contracting parties-implicitly incorporate provisions of existing law. Consequently, while the Usury Law ceiling on interest rates was lifted by C. B. Circular No. 905, nothing in the said circular could possibly be read as granting respondent bank carte blanche authority to raise interest rates to levels which would either enslave its borrowers or lead to a hemorrhaging of their assets. Escalation clauses are not basically wrong or legally objectionable so long as they are not solely potestative, but based on reasonable and valid grounds. Here, as clearly demonstrated above, not only (are) the increases of the interest rates on the basis of the escalation clause patently unreasonable and unconscionable, but also there are no valid and reasonable standards upon which the increases are anchored. PNB vs. Court of Appeals (258 SCRA 549) To begin with, PNBs argument rests on a misapprehension of the import of the appellate courts ruling. The Court of Appeals nullified the interest rate increases not because the promissory note did not comply with P.D. No. 1684 by providing for a de-escalation, but because the absence of such provision made the clause so one-sided as to make it unreasonable. That ruling is correct. It is in line with our decision in Banco Filipino Savings & Mortgage Bank vs. Navarro (152 SCRA 340) that although P. D. No. 1684 is not to be retroactively applied to loans granted before its effectivity there must nevertheless be a de-escalation clause to mitigate the one-sidedness of the escalation clause. Indeed because of concern for the unequal status of borrowers vis-vis the banks, our cases after Banco Filipino have fashioned the rule that any increase in the rate of interest made pursuant to an escalation clause must be the result of agreement between the parties. In this case no attempt was made by PNB to secure the conformity of private respondents to the successive increases in the interest rate. Private respondents assent to the increases can not be implied from their lack of response to the letters sent by PNB, informing them of the increases. For as stated in one case (PNB vs. CA, 238 SCRA 20) [1994]), no one receiving a proposal to change a contract is obliged to answer the proposal. Liam Lao vs. Olympic Sawmill (129 SCRA 439) Usury is now legally non-existent. Interest can be charged as lender and borrower may agree upon. The Rules of Court in regard to allegations of usury, being procedural in nature, should be considered repealed with retroactive effect. Issue: If the debtor is sued by the creditor for the recovery of loan together with interest, does the failure of the creditor

to file a reply denying under oath the defense or usury amount to an admission thereof? Held: No. It is the failure of the creditor to deny under oath in his answer to a complaint filed by the debtor against him for the recovery of usurious interest he has collected that is contemplated by Section 9 of the Usury Law as an admission of usury. It does not apply to the present case where the creditor is the plaintiff seeking the recovery of a loan together with interest and the debtor sets up the defense that the transaction is usurious. Korean Airlines vs. Court of Appeals (234 SCRA 717) Legal interest of 6% p.a. on the amount of damages in favor of a litigant should commence from rendition of judgment of the trial court instead of the date of filing of the complaint. II. Deposit A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safekeeping it and of returning the same. Characteristics: 1. Real Contract because it is perfected by the delivery of the subject matter. 2. If gratuitous, it is unilateral because only the depository has an obligation. If onerous, it is bilateral. 3. Principal purpose of the contract of deposit is the safekeeping of the thing delivered. 4. Contract of deposit is generally gratuitous. Exception: a) contrary stipulation b) depository is in the business of storing goods c) property saved from destruction during calamity without owners knowledge; just compensation should be given the depository. *Distinctions between Deposit and Mutuum
Deposit 1. Principal Purpose 2. Return Safekeeping or mere custody Depositor can demand return at will Mutuum Consumption of the subject matter Lender must wait for the expiration of the stipulated period Money or fungible thing

3. Object

Movable (extrajudicial) and immovable property (judicial)

*Distinctions between Deposit and Commodatum

Deposit 1. Principal Purpose Safekeeping Commodatum Transfer of use

2. Nature

May be gratuitous

Always gratuitous

A. Voluntary deposit 1. Defined as one wherein the delivery is made by the will of the depositor. 2. Although generally the owner, the depositor need not be the owner of the thing deposited. 3. contract may be oral or in writing. *Obligations of the Depositary 1. Depositary is obliged to keep the thing safely and to return it when required, even though a specified term may have been stipulated in the contract. 2. Depositary is liable if the loss occurs through his fault or negligence. Loss of thing while in the depositarys possession raises a presumption of fault. Required degree of care is greater if the deposit is for compensation than when it is gratuitous. 3. Depositary is not allowed to deposit the thing with a third person. Exception: contrary stipulation 4. Depositary is liable for the loss of the thing deposited if: 4.1 he transfers the deposit with a third person without authority although there is no negligence on his part and the third person; 4.2 he deposits the thing with a third person who is manifestly careless or unfit although authorized, even in the absence of negligence; or 4.3 the thing is lost through the negligence of his employees whether the latter are manifestly careless or not. Note: Depositary is not responsible for loss of thing without negligence of the third person with whom he was allowed to deposit the thing if such third person is not manifestly careless or unfit 5. Depositary is obliged to first notify the depositor and wait for the latters decision if he will change the way or manner of the deposit. Exception: delay will cause danger 6. If thing deposited should earn interest, the depositary is under obligation (1) to collect the interest as it becomes due and (2) to take such steps as may be necessary to preserve its value and the rights corresponding to it. The depositary is bound to collect not only the interest but also the capital itself when due. 7. Depositary has the obligation not to commingle things deposited if so stipulated, even if they are of the same kind and quality (Article 1976). 8. Depositary is under obligation not to make use of the thing deposited (because deposit is for safekeeping of the subject matter and not for its use); otherwise he shall be liable for damages. Exceptions: a) express permission of the depositor b) preservation of the thing deposited requires its use (article 1977) Note:

1. If the thing deposited is non-consumable and the depositary has permission to use the thing, the contract becomes one of commodatum. 2. If the thing deposited is money or other consumable thing, the contract is converted into a simple loan or mutuum. Exception: Where safekeeping is still the principal purpose of the contract, the same shall be considered an irregular deposit. 3. Depositary is liable for loss through a fortuitous event even without his fault. (a) if it is so stipulated; (b) is he uses the thing without the depositors permission; (c) if he delays its return; (d) if he allows others to use it, even though he himself may have been authorized to use the same (article 1979) 4. 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; and (c) keep the secret of the deposit when the seal or lock is broken, with or without his fault. Note: Depositary is authorized to open the thing deposited which is closed and sealed when there is: (a) presumed authority (keys having been delivered to depositary), or (b) in case of necessity. 5. Depositary has the obligation to return not only the thing but also all its products, accessions and accessories which are a consequence of ownership. *Persons to whom Return of Thing Deposited Must be Made 1. The depositary is obliged to return the thing deposited, when required, to the depositor, to his heirs and successors, or to the person who may have been designated in the contract (Article 1972). 2. If the depositor was incapacitated at the time of making the deposit, the property must be returned to his guardian or administrator or the person who made the deposit or to the depositor himself should he acquire capacity (Article 1970). 3. Even if the depositor had capacity at the time of making the deposit but he subsequently loses his capacity during the deposit, the thing must be returned to his legal representative (Article 1988). *Place of Return of Thing Deposited 1. at the place agreed upon by the parties, and 2. in the absence of stipulation, at the place where the thing deposited might be even if it should not be the same place where the original deposit was made provided the transfer was accomplished without malice on the part of the depositary. Note: Depositor shoulders the expenses for transportation *Time of Return of Thing Deposited General Rule: Upon demand or at will, whether or not a period has been stipulated. Exceptions:

a) thing is judicially attached while in the depositarys possession b) depositary was notified of the opposition of a third person to the return or the removal of the thing deposited (Article 1986) *Right of Depositary to Return Thing Deposited 1. if deposit is gratuitous; and 2. justifiable reasons exist for its return Note: Otherwise, depositary may avail of consignation therefore there is no right to return before expiration of the term designated if deposit is for valuable consideration (Article 1989). * Alteration of Depositarys Heir 1. If in good faith, heir may either return the price he received or assign his right of action against the buyer in case the price has not been paid. 2. If in bad faith, heir is liable for damages and may be sued for estafa. *Relation between Bank and Depositor -Deposits of money in banks, whether fixed, savings and current, are governed by the provisions on mutuum and the relation between a depositor and a bank is that of a creditor and a debtor. Serrano vs. Central Bank (96 SCRA 96) A banks failure to honor a deposit is failure to pay its obligation as debtor and not a breach of trust arising from a depositarys failure to return the subject matter of the deposit. Guingona vs. City Fiscal of Manila (126 SCRA 577) While the bank has the obligation to return the amount deposited, it has, however, no obligation to return or deliver the same money that was deposited. Overseas Bank of Manila vs. Court of Appeals (172 SCRA 521) It has been held that suspension of a bank which had fallen into a distressed financial situation by order of the Central Bank cannot excuse it from its obligations to depositors who had nothing whatever to do with the Central Bank actuations or the events leading to the banks distressed state. Integrated Realty Corp. vs. Phil. National Bank (174 SCRA 295) And Fidelity Savings vs. Cenzon (184 SCRA 141) The obligation of a bank to pay interest on a deposit ceases the moment the operations the bank is completely suspended by the Central Bank. The deposit is not entitled to interest during the period the bank is not allowed to operate. *Obligations of Depositor 1. He is obliged to pay expenses for the preservation of the thing deposited, if deposit is gratuitous.

2. He is obliged to pay for losses incurred due to the character of the thing deposited. Exceptions: a) unless depositor was not aware thereof b) depositor was not expected to know the dangerous character of the thing c) unless he notified the depositary of the same; or d) depositary was aware of it without depositors advice (Article 1993) Note: Depositary has the right to retain the thing deposited in pledge until full payment of what may be due him by reason of the deposit (Article 1994). B. Necessary deposit 1) when made in compliance with a legal obligation 1.1 The judicial deposit of a thing, the possession of which is being disputed in a litigation by two or more persons (Article 538); 1.2 The deposit with a bank or public institution of public bonds or instruments if credit payable to order or bearer given in usufruct when the usufructuary does not give proper security for their conservation (Article 586); 1.3 The deposit of a thing pledged when the creditor uses the same without the authority of the owner or misuses it in any other way (Article 2104); 1.4 Those required in suits as provided in the Rules of Court; and 1.5 Those constituted to guarantee contracts with the government. In this last case, the deposit arises from an obligation of public or administrative character. 2) when it takes place on the occasion of any calamity, such as fire, strom, flood, pillage, shipwreck, or other similar events 3) deposit of effects made by travellers in hotels or inns *The keepers of hotels or inns responsible as depositaries a) notice was given to them or to their employees as to the effects b) the guests take precautions which said hotelkeepers or their substitutes advised relative to the care and vigilance of their effects. EXCEPT: i) force majeure *The act of a thief or robbers not deemed force majeure, EXCEPT: done with the use of arms or through an irresistible force ii) loss is due to the acts of guests, his family or servants iii) loss arises from the character of the things brought into hotel *VOID: i) stipulation limiting liability ii) posted notices that hotelkeepers is free from responsibility * Hotelkeeper has a right to retain the things of guests as security for unpaid lodging expenses and supplies. C. Judicial deposit (Sequestration) - takes place when an attachment or seizure of property in litigation is ordered. - object: movable or immovable *RESPONSIBILITY OF DEPOSITARY IN JUDICIAL DEPOSIT 1) cannot be relieved of his responsibility until the controversy which give rise thereto has come to an end, unless the court so orders. 2) shall comply with all the obligations of a good father of a family

*Distinctions between Extrajudicial and Judicial Deposits 1. The first is constituted by will of the contracting parties, while the second is constituted by virtue of a court order. 2. In the first, the object must be movable property, whereas in the second, the object may be either movable or immovable property. 3. The purpose of the first is the safekeeping of the thing deposited, whereas the main purposes of the second is to secure or protect the owners right. 4. The first is, as a general rule, gratuitous, whereas the second is always onerous. 5. In the first, the depository is obliged to return the thing deposited upon demand made by the depositor, whereas the second, the thing shall be delivered only upon order of the court. III. Guaranty and Suretyship Guaranty is a contract whereby a person binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. A. Nature and extent of guaranty Rules Governing the Nature and Extent of Guaranty 1. General Rule - Guaranty is generally gratuitous Exception: contrary stipulation Garcia, Jr. vs. Court of Appeals (191 SCRA 493) The peculiar nature of a guaranty or surety agreement is that it is regarded as valid despite the absence of any direct consideration received by the guarantor or surety either from the principal debtor or from the creditor. While a contract of guaranty or surety, like any other contract, must generally be supported by a sufficient consideration, such consideration need not pass directly to the guarantor or surety; a consideration moving to the principal alone will suffice. The guarantor or surety, therefore, becomes liable for the debt or duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom. 2. Guaranty is an accessory contract therefore there must be a valid principal obligation for guaranty to be valid. Guarantor may secure the performance of voidable, unenforceable, natural, conditional, and future obligations (Article 2052). 3. Guarantors liability obligation (Article 2054). cannot exceed the principal

guarantor may not be demanded (Article 2057) because in such a case the selection of the guarantor is a term of the agreement and as a party, the creditor, is therefore, bound thereby (see Articles 1159, 1306). B. Effects of guaranty *Effects of Guaranty between the Guarantor and the Creditor 1. G.R.-Guarantor has the right to the benefit of excussion or exhaustion of the debtors property before he can be compelled to pay. Exceptions: a) if guarantor has expressly renounced excussion b) if guarantor has bound himself solidarily with the debtor (suretyship) c) in case of debtors insolvency d) when guarantor has absconded or cannot be sued within the Philippines unless he left a manager or representative e) if it may be presumed that an execution on the debtors property will not satisfy the obligation f) if guarantor does not set up the benefit of excussion and fails to point out to the creditor available property of the debtor within the Philippines g) if he is a judicial bondsman and sub-surety h) where a pledge or mortgage has been given by the guarantor as a special security i) if guarantor fails to interpose it as a defense before judgment is rendered against him (Saavedra vs. Price, 68 Phil. 669) 2. A compromise between the creditor and the principal debtor benefits the guarantor but does not prejudice him. A compromise which is entered into between the guarantor and the creditor benefits but does not prejudice the principal debtor (Article 2063). 3. Guarantor is likewise entitled to the benefit of division where there are several guarantors of only one debtor and for the same debt. Guarantors liability is only joint therefore, they are not liable beyond the shares which they are respectively bound to pay (Article 2065). Exceptions: a) solidarity b) if any of the circumstances in Article 2057 should take place. Willex Plastic Industries Corporation vs. Court of Appeals (256 SCRA 478) Willex Plastic argues that the Continuing Guaranty. Being an accessory contract, cannot legally exist because of the absence of a valid principal obligation. Its contention is based on the fact that it is not a party either to the Continuing Surety Agreement or to the loan agreement between Manila Bank and Inter-Resin Industrial. Put in another way, the consideration necessary to support a surety obligation need not pass directly to the surety, a consideration moving to the principal alone being sufficient. For a guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto . It is never necessary that a guarantor or surety should receive any part or benefit, if such there be, accruing to his principal. xxx

4. Guaranty cannot be presumed. If there is any doubt on the terms and conditions of the guaranty or surety agreements, the doubt should be resolved in favor of the guarantor or surety (Philippine National Bank vs. Court of Appeals, 198 SCRA 767). However, the rule of strictissimi juris commonly refers to an accommodation surety and is not applied in case of compensated sureties. 5. The qualifications of a guarantor are: 5.1 He possesses integrity; 5.2 He has capacity to bind himself; and 5.3 He has sufficient property to answer for the obligation which he guarantees 6. Where the creditor has required and stipulated that a specified person should be a guarantor, the substitution of

Willex Plastic contends that the Continuing Guaranty cannot be retroactively applied so as to secure the payments made by Interbank under the two Continuing Surety Agreements and invokes the El Vencedor and Dio rulings to support its contention that a contract if suretyship or guaranty should be applied prospectively. In El Vencedor vs. Canlas (44 Phil. 699), we held that a contract of suretyship is not retroactive and no liability attaches for defaults occurring before it is entered into unless an intent to be so liable is indicated. There we found nothing in the contract to show that the parties intended the surety bonds to answer for the debt contracted previous to the execution of the bonds. In contrast, in this case, the parties to the Continuing Guaranty clearly provided that the guaranty would cover sums obtained and/or to be obtained by Inter-Resin Industrial from Interbank. On the other hand, in Dio vs. Court of Appeals (216 SCRA 9), the issue was whether the sureties could be held liable for an obligation contracted after the execution of the continuing surety agreement. It was held that by its very nature a continuing suretyship contemplates a future course of dealing. It is prospective in its operation and is generally intended to provide security with respect to future transactions. By no means, however, was it meant in that case that in all instances a contract of guaranty or suretyship should be prospective in application. Indeed, as we also held in Bank of the Philippine Islands vs. Foerster (49 Phil. 843), although a contract of suretyship is ordinarily not to be construed as retrospective, in the end the intention of the parties as revealed by the evidence is controlling. Dio vs. Court of Appeals (216 SCRA 91) Issue: If the contract of guaranty states that the same is to secure advances to be made from time to time, is this a valid guaranty? Held: Yes, this will be construed as a continuing guaranty/surety given to secure future debts and is not limited to a single transaction but which contemplates a future course of dealing, covering a series of transactions generally for an indefinite period of time or until revoked. *Effects of Guaranty between the Debtor and the Guarantor 1. Guaranty is a contract of indemnity. The guarantor who pays for a debtor must be indemnified by the latter. The indemnity comprises: 1.1 the total amount of the debt; 1.2 the legal interest thereon from the time the payment was made known to the debtor, even though it did not earn interest for the creditor; 1.3 The expenses incurred by the guarantor after having notified the debtor that payment had been demanded of him; 1.4 Damages, if they are due (Article 2066) Exceptions: a) Where the guaranty is constituted without the knowledge or against the will of the principal debtor, the guarantor can recover only insofar as the payment had been beneficial to the debtor (Article 2050)

b) Payment by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which, however, requires the debtors consent. But the payment is in any case valid as to the creditor who has accepted it (Article 1238) c) The right to demand reimbursement is subject to waiver. 2. Guarantor has the right of subrogation against the debtor to enable him to enforce the indemnity granted in Article 2066 and he cannot demand more than what he actually paid (Article 2067). 3. Guarantor has the right to proceed against the debtor even before payment in the following instances: 3.1 When he is sued for the payment; 3.2 In case of insolvency of the principal debtor; 3.3 When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; 3.4 When the debt has become demandable by reason of the expiration of the period for payment; 3.5 After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than ten years; 3.6 If there are reasonable grounds to fear that the principal debtor intends to abscond; 3.7 If the principal debtor is in imminent danger of becoming insolvent (Article 2071). Guarantor may either obtain release from the guaranty or demand a security that shall protect him from any proceedings by the creditor and from danger of debtors insolvency (Article 2071). *Effects of Guaranty as Between Co-guarantors 1. The obligation of several guarantors of the same debtor and for the same debt is joint and each is bound only to pay his proportionate share. Therefore, one who has paid the entire debt may seek reimbursement from each of his coguarantors the share which is proportionately owing him. Requisites: a) payment must have been made by virtue of a judicial demand or b) because the principal debtor is insolvent C. Extinguishment of guaranty 1. Being accessory and subsidiary, guaranty is terminated when the principal obligation is extinguished by: a) payment or performance; b) loss of the thing due c) condonation or remission of the debt d) confussion or merger of the rights of the creditor and debtor e) compensation f) novation Guaranty may also be extinguished if the creditor has released the guarantor although the principal obligation remains (Article 2078) or in case of material alteration which imposes a new obligation or added burden on the party promising or which takes away some obligation already imposed, changing the legal effect of the original contract and not merely the form thereof. (NASCO vs. Torrento, 20 SCRA 427 [1967]).

2. Release of one guarantor by the creditor without the consent of the other guarantors benefits all to the extent of the share of the guarantor released (Article 2078). 3. An extension of the term granted by the creditor to the debtor without guarantors consent extinguishes the guaranty (Article 2029). 4. The guarantor who pays is entitled to be subrogated to all the rights of the creditor (Article 2067). If there can be no subrogation because of the fault of the creditor, as when the creditor releases or fails to register a mortgage, the guarantors are thereby released. The same rules applies even though the guarantors be solidarily (Article 2080). D. Legal and judicial bonds 1. A judicial bondsman and the sub-surety are not entitled to the benefit of excussion because they are not mere guarantors, but sureties whose liability is primary and solidary. *Distinction between Guaranty and Suretyship
Guaranty 1 Guarantor is secondarily liable. 1 Suretyship Surety is primarily liable and is therefore not entitled to the exhaustion of the properties of the principal debtor Surety assumes liability as a regular party to the undertaking and undertakes to pay if the principal does not pay. Surety is an insurer of the debt.

applicable. Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation. The choice is left to the solidary creditor to determine against whom he will enforce collection. Consequently, the dismissal of the case against Judge Pantanosas may not be deemed as having discharged petitioner from liability as well. As regards Naybe, suffice it to say that the court never acquired jurisdiction over him. Petitioner, therefore, may only have recourse against his co-makers, as provided by law. Philippine National Bank vs. Court of Appeals (198 SCRA 767) A suretys liability to the creditor or promisee of the principal is said to be direct, primary and absolute. In other words, he is directly, primarily and equally bound with the principal as original promissor although he possesses no direct or personal interest over the latters obligations nor does he receive any benefits therefrom. Philippine National Bank vs. Pineda (197 SCRA 1) If the principal debtor and the surety are held liable, their liability to pay the creditor would be solidary but the nature of the suretys undertaking is such that it does not incur liability unless and until the principal debtor is held liable. Finman General Assurance Corp. vs. Salik (188 SCRA 740) In the absence of collusion, the surety is bound by a judgment against the principal even though he was not a party to the proceedings. The nature of its undertaking makes it privy to all proceedings against its principal. IV. Pledge A. Definition Pledge is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable (Article 2094) or document evidencing incorporeal rights (Article 2095) for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions. Characteristics 1. A real contract because it is perfected by the delivery of the thing pledged by the debtor who is called the pledgor to the creditor who is the pledge, or to a third person by common agreement; 2. An accessory contract because it has no independent existence of its own; 3. A unilateral contract because it creates an obligation solely on the part of the creditor to return the thing subject thereof upon the fulfillment of the principal obligation; 4. A subsidiary contract because the obligation incurred does not arise until the fulfillment of the principal obligation to which it is secured. B. Kinds

2 Guarantor binds himself to pay only when the principal cannot pay. 3

Guarantor is an insurer of the debtors solvency.

@Recent Jurisprudence on Suretyship Inciong, Jr. vs. Court of Appeals (257 SCRA 578) Issue: Petitioner argues that the dismissal of the complaint against Naybe, the principal debtor, and against Pantanosas, his co-member, constituted a release of his obligation especially because the dismissal of the case against Pantanosas was upon the motion of private respondent itself, citing Article 2080 as basis for his argument. Held: Section 4, Chapter 3, Title 1, Book IV of the Civil Code states the law on joint and several obligations. Under Article 1297 thereof, when there are two or more debtors in one and the same obligation, the presumption is that the obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. There is a solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires. Petitioner signed the promissory note as a solidary co-maker and not as a guarantor therefore Article 2080 is not

1. Voluntary created by agreement or freewill of the parties 2. Legal created by operation of law. C. Essential requirements 1. The pledge is constituted to secure the fulfillment of a principal obligation. (SECURE) 2. The pledgor or mortgagor is the absolute owner of the thing pledged or mortgaged. (OWNERSHIP) 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. (FREE DISPOSAL) 4. The thing pledged must be delivered to the creditor or to a third person by common agreement. (DELIVERY) D. Obligation of pledgee 1) to continue in possession of the thing pledged even the same was sold to another person or ownership was transferred 2) to retain the thing in his possession or in that of the third person to whom it has delivered until the debt is paid 3) to take care the thing pledged with the diligence of a good father of a family 4) right to reimbursement of the expenses made for its preservation 5) liable for loss or deterioration 6) cannot deposit the thing pledged to the third person, unless there is stipulation authorizing him to do so 7) responsible for the acts of his agents or employees with respect to the thing pledged. 8) to collect damages he suffered against the pledgor if the thing pledged has flaws not advised by pledgor 9) to compensate himself with those earnings, income, dividends or interest of the thing pledged with those which are owing him; if none, apply to the principal the excess of what is due -Pledge extends to the interest and earnings of the thing pledged, unless there is stipulation to the contrary. 10) may bring action which pertain to the owner of the thing pledged in order to recover it from or defend it against a third person. 11) bound to advise the pledgor, without delay, of any danger to the thing pledged. 12) may cause the the sale of the thing pledged in public auction if without his fault, there is danger of destruction or impairment or diminution of value of the thing pledged; the proceeds of the thing sold shall be a security for the principal obligation in the same manner as the thing originally pledged 13) may claim another thing in its stead or demand immediate payment of the principal obligation if creditor is deceived on the substance or quality of the thing pledged 14) his return of the thing pledged constitutes extinguishment of pledge; any stipulation to the contrary is void 15) his statement in writing that he renounces or abandons the pledge extinguished the pledge; no return or acceptance by the owner is necessary; pledgee becoming depositary of the thing pledge E. Rights of pledgor 1) to alienate the thing pledge with the consent of the pledgee 2) continues to be the owner of the thing pledged; unless it is expropriated

3) may require that the thing pledged be deposited to third person if the thing pledged is in danger of being lost or impaired because of negligence or wilful act of the pledgee 4) may demand return of the thing pledged upon offering another thing in pledge if there are reasonable grounds to fear the destruction or impairment of the thing pledged, without the fault of the pledgee F. Perfection (Arts. 2093, 2096) a. thing pledged be placed in the possession of: 1) the creditor, or 2) a third person by common agreement -take effect: must appear in a public instrument: i. description of the thing pledged ii. date of the pledge G. Foreclosure (Arts. 2112, 2115) (1) credit has not been satisfied in due time (2) before a Notary Public (3) sale in public auction (4) with notification to the debtor and the owner of the thing pledged, stating the amount due and place for which the public sale is to be held * After second auction, there is no sale, the creditor may appropriate the thing pledged. *Pledgor and pledgee may bid = Pledgor has better right if he should offer the same terms as the highest bidder; Pledgees offer not valid if he is the only bidder EFFECT OF SALE: (as consequence of foreclosure) 1) extinguished the principal obligation -amount more than = General rule: debtor not entitled to the excess Except: otherwise agreed - amount less = creditor not entitled to collect deficiency; any stipulation to the contrary void *REDEEM - creditor shall collect and receive the amount due - apply the same to the payment of his claim - deliver the surplus, if theres any, to the pledgor *TWO OR MORE THINGS PLEDGED - pledgee may choose which he will cause to be sold - may demand the sale of only as many of the things as are necessary for the payment of the debt. H. Pledge by operation of law (Art. 2121-2122) 1) possessor in good faith not been reimbursed for expenses who retains the thing 2) one who executed work not yet paid upon a movable who retains it 3) depositary not been paid of what may be due him by reason of the deposit who retain the thing RULES: 1) A thing pledged by operation of law may be sold after demand of the amount for which the thing is retained. 2) Public auction shall take place 1 month after such demand; No sale within that period, without just ground, debtor may require the return of the thing. *EFFECT OF SALE IN PLEDGE BY OPERATION OF LAW - remainder of the price, after payment of debt and expenses, shall be delivered to the obligor.

I. Distinguished from chattel mortgage (Arts. 2140, 1484)

Chattel Mortgage Delivery of personal property to the mortgagee is not necessary Registration in the Chattel Mortgage Register is necessary for its validity Procedure for sale of the mortgaged property is found in Section 14 of RA 1508, as amended If property is foreclosed, the excess over the amount due goes to the debtor Pledge Delivery necessary is

Exception: stipulation authorizing possession. (Article 2100)

pledgee

to

transfer

Registration in the Registry of Property is not necessary for its validity Procedure for sale of pledged thing is found in Article 2112 of the Civil Code If property is sold, the debtor is not entitled to the excess Exceptions: a) contrary stipulation (Article 2125) b) legal pledge (Article 2121) If property is sold, creditor is not entitled to recover the deficiency notwithstanding any stipulation to the contrary (Article 2115).

5. The pledgee has no right to use the thing pledged or to appropriate the fruits thereof without the authority of the owner (Article 2104; see Article 1977). But the pledgee can apply the fruits, income, dividends, or interest, if owing and thereafter to the principal of his credit. (see Article 2132). Exception: contrary stipulation 6. The pledgor may ask that the thing pledged be deposited judicially or extrajudicially. 6.1 if the creditor uses the thing without authority; 6.2 if he misuses the thing in any other way (Article 2104); 6.3 if the thing is in danger of being lost or impaired because of the negligence or willful act of the pledge. 7. Pledgor cannot ask for the return of the thing pledged until said obligation is fully paid including interest due thereon and expenses incurred for its preservation (Article 2099). Exception: Pledgor is allowed to substitute the thing pledged which is in danger of destruction or impairment with another thing of the same kind and quality (Article 2107). 8. The possession of the thing pledged by the debtor or owner subsequent to the perfection of the pledge gives rise to a prima facie presumption that the thing has been returned and, therefore, that the pledge has been extinguished. 9. When the thing pledged is later found in the hands of the pledgor or the owner, only the accessory obligation of pledge is presumed remitted, not the principal obligation itself (Article 1274). 10. The sale of the thing pledged extinguishes the principal obligation whether the price of the sale is more or less than the amount due. a. If the price of the sale is more than the amount due the creditor, the debtor is not entitled to the excess unless the contrary is provided; b. In the same way, if the price of the sale is less, neither is the creditor entitled to recover the deficiency. A contrary stipulation is void (Article 2115). @ Common Provisions Governing Pledge or Mortgage 1. Contract may be constituted only by the absolute owner of the thing pledged or mortgaged otherwise, the pledge or mortgage is void, such as that constituted by an impostor. (see De Lara vs. Ayroso, 95 Phil. 185 [1954]; Parqui vs. Philippine National Bank, 96 Phil. 157 [1954]) 2. A mortgage of conjugal property by one of the spouses is valid only as to one-half (1/2) of the entire property. (Philippine National Bank vs. Court of Appeals, 98 SCRA 207 [1960]). 3. While it is true that under Article 2085 it is essential that the mortgagor be the absolute owner of the property mortgaged, a mortgagee has the right to rely upon what appears in the certificate of title and does not have to inquire further. Stated differently, an innocent purchaser for value (like a mortgagee) relying on a torrens title issued is

If property is foreclosed, creditor is entitled to recover the deficiency from the debtor Exception: if chattel mortgage is a security for the purchase of personal property in installments (Article 1484)

*Provisions Applicable only to Pledge 1. The pledgor retains his ownership of the thing pledged. He may, therefore, sell the same provided the pledgee consents to the sale. As soon as the pledgee gives his consent, the ownership of the thing pledged is transferred to the vendee subject to the rights of the pledgee, namely, that the thing sold may be alienated to satisfy the obligation (Article 2112) and that the pledgee must continue in possession during the existence of the pledge. (Article 2093, 2098). 2. The possession of the pledgee constitutes his security. Hence, the debtor cannot demand for its return until the debt secured by it is paid. (See Article 2105; Serrano vs. Court of Appeals, 196 SCRA 107 [1991]) But the right of retention is limited only to the fulfillment of the principal obligation for which the pledge was created. (Article 2098). 3. Pledgee has the obligation to take care of the thing pledged with the diligence of a good father of the family. He is entitled to reimbursement of the expenses incurred for its preservation and he is liable for loss or deterioration by reason of fraud, negligence, delay or violation of the terms of the contract. (Articles 1174, 1170). 4. Pledgee is not authorized to transfer possession of the thing pledged to a third person.

protected. (Duran vs. Intermediate Appellate Court, 138 SCRA 491 [19685]) 4. A stipulation whereby the thing pledged or mortgaged or under antichresis (Article 2137) shall automatically become the property of the creditor in the event of non-payment of the debt within the term fixed is known as pactum commisorium or pacto commissorio which is forbidden by law and declared null and void (article 2088) *Disctinctions between Pledge and Real Mortgage
Pledge Movable property Delivery of the object pledged to the pledgee or a third person Pledge is not valid against third persons unless a description of the thing pledged and the date of the pledge appear in a public instrument. Real Mortgage Immovable property Delivery of the thing mortgaged is not necessary Mortgage is not valid against third persons if not registered.

4. The objects of a real mortgage are immovable (Article 415) and alienable real rights imposed upon immovables. Note: While a mortgage of land necessarily includes, in the absence of stipulation, the improvements thereon, a building by itself may be mortgaged apart from the land on which it is built. Possessory rights over said property before title is vested on the grantee may be validly transferred or conveyed as in a deed of mortgage. (prudential Bank vs. Panis, 153 SCRA 390 [1967]); Nartales vs. GSIS, 156 SCRA 205 [1987]). 5. In order that a mortgage may be validly constituted, it must appear in a public document duly recorded in the Registry of Property (see Gaotian vs. Gaffud, 24 SCRA 706 [1969]) Note: If the instrument of mortgage is not recorded, the mortgage is nevertheless binding between the parties. 6. A mortgage creates a real right (see Tuazon vs. Grosco, 5 Phil. 596 [1905]), a lien inseparable from the property mortgaged, which is enforceable against the whole world. Until discharged, it follows the property wherever it goes and subsists notwithstanding changes of ownership. Note: a.) If the mortgagor sells the mortgaged property, the property remains subject to the fulfillment of the obligation secured by it. (see Bonnevie vs. Court of Appeals, 125 SCRA 122 [1983]) All subsequent purchasers of the property must respect the mortgage, whether the transfer to them be with or without the consent of the mortgagee. But the mortgage must be registered (Article 2125) or, if not registered, the buyer must know of its existence. (see Phil. National Bank & Trust Corp. vs. Court of Appeals, 193 SCRA 158 [1991]) The mortgagor may not be the principal debtor (Article 2085, 2nd par.). b.) The right or lien of an innocent mortgagee for value upon the mortgaged property must be respected and protected, even if the mortgagor obtained his title through fraud. The remedy of the persons prejudiced is to bring an action for damages against the person who caused the fraud and if the latter is insolvent, an action against the Treasurer of the Philippines may be filed for the recovery of damages against the Assurance Fund (Philippine National Bank vs. Court of Appeals, 187 SCRA 735 [1990]) PACTO DE RETRO EQUITABLE MORTGAGE: Requisites: 1. Price of sale with right to repurchase is usually inadequate 2. Vendor remains in possession as lessee or otherwise 3. Upon or after expiration of right to repurchase, another instrument extending period /granting new period is executed 4. Purchaser retains a part of the purchase price 5. Vendor binds himself to pay taxes on thing sold 6. Real intention of parties is that transaction shall secure payment of debt or fulfillment of other obligation
Real Mortgage Subject matter property Chattel Mortgage Subject matter is movable

V. Real Mortgage A. Definition and characteristics Real Mortgage is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated. SPECIAL CHARACTERISTICS: 1. Subject matter is realty 2. Real right attaches to property wherever it is & whoever holds it 3. Accessory presupposes existence of valid principal obligation; cannot stand alone 4. Indivisibility even if debt is divisible; mortgage is not 5. Inseparability mortgage lien is inseparable from property 6. Retention of possession - mortgagor retains possession Characteristics 1. It is an accessory and subsidiary contract. 2. It is also unilateral because it creates only an obligation on the part of the creditor who must free the property from the encumbrance once the obligation is fulfilled. 3. The mortgagor, as a general rule, retains possession of the property mortgaged as security for the payment of the sum borrowed from the mortgagee, and pays the latter a certain percent thereof as interest on his principal by way of compensation for his sacrifice in depriving himself of the use of said money and the enjoyment of its fruits, in order to give them to the mortgagor.

is

real

Public document only

May be in private document provided there is affidavit of

good faith Right of redemption for 1 year (Extrajudicial Foreclosure) or 90 days (Judicial Foreclosure) Deficiency recovered can be No right of redemption

i. After expiry of 1 year redemption period & no redemption, title is consolidated to new owner j. Purchaser to be entitled to new certificate of title & memorandum endorsed on mortgage deed k. If there is redemption, memorandum to be annotated on certificate of title
be Recto

Deficiency recovered, Law

can except

B. Essential requisites 1. constituted to secure the fulfilment of a principal obligation 2. mortgagor is the absolute owner of the thing mortgaged 3. person has the free disposal of his property or legally authorized for the purpose 4. object of contract is immovable or alienable real rights. C. Foreclosure -non-payment of the mortgage indebtedness * Effect of Mortgage 1. The only right of a mortgagee in case of non-payment of a debt secured by real mortgage would be to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness (Guanzon vs. Argel, 33 SCRA 474 [1970]) 2. The mortgagors default does not operate to vest in the mortgagee the ownership of the encumbered property. His failure to redeem the property does not automatically vest ownership of the property to the mortgagee which would grant the latter the right to appropriate the property or dispose of it for such effect is against public policy as enunciated by Article 2088. (Reyes vs. Sierra, 93 SCRA 472 [1979]). *Extent of Mortgage General Rule: A mortgage constituted on immovable property is not limited to the property itself but also extends to all its accessions, improvements, growing fruits and rents or income (see Article 2102) as well as to the proceeds of insurance should the property be destroyed or the expropriation value of the property should it be expropriated. Exception: contrary stipulation *Foreclosure of Mortgages 1. Judicial foreclosure governed by Rule 68 of the Rules of Court. PROCEDURE: a. Mortgagee to petition in court for foreclosure b. Court to render order for debtor to pay sum due within 90 days and if not paid from date of service, property be sold at public auction c. Notice & Publication d. Public auction: sale to highest bidder e. Sheriff to issue certificate confirming judicial foreclosure f. File with ROD final decree of court confirming sale g. Memo entered in certificate of title h. If right of redemption exist, certificate of title of mortgagor not to be cancelled but memorandum shall be entered upon the certificate duplicate & original

2. Extrajudicial Foreclosure governed by Act. No. 3135 as amended, if and when the mortgagee is given a specific power or express authority to do so. - Allowed only if stipulation between party authorizes extrajudicial foreclosure a. Public auction must be conducted in the province or municipality where the property is situated under the direction of the sheriff of the province, notary public or justice of the peace of the municipality. b. Publication required: post notices for 20 days in 3 public places where property lies & if property is more than P400.00, publication must be for 3 consecutive weeks in news paper of general circulation c. If foreclosure by rural banks, exempt from publication in newspaper for loans not exceeding 3,000.00 d. Personal notice to mortgagor is not required (Bonnevie vs. Court of Appeals, 125 SCRA 122 [1983]; GSIS vs. Court of Appeals, 170 SCRA 533 [1989]). e. Debtor has the right to redeem the property sold within the term of one year from and after the date of the sale (Section 6). The reckoning date in case of registered land is from the registration of the certificate of sale since it is only from such date that the sale takes effect as a conveyance. (Jose vs. Blue, 42 SCRA 351, [1971]; Gorospe vs. Santos, 69 SCRA 191 [1976]; General vs. Barrameda, 60 SCRA 162 [1976]. Every conveyance of lands acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the applicant, his widow or legal heirs, within a period of five years from the date of the conveyance. (Section 119, C.A. No. 141 [Public Land Law], as amended) or foreclosure sale (Tupas vs. Damasco, 132 SCRA 593 [1984]). f. The purchaser may petition ex parte for possession of the property subject to security/bond for use for 12 months; the debtor may, within 30 days from sale, petition to annul the sale and extinguishment of possession. RIGHT OF REDEMPTION Payment of purchase price plus 1% per month plus taxes if paid by purchaser To be exercised within 1 year after registration of sale Note: Cerna vs. CA (220 SCRA 517): The filing of a collection suit bars the foreclosure of mortgage. *Any deficiency on amount = may file action to recover the deficient amount after the foreclosure * In settlement of estate, (debtor dies) where the creditor of the estate elects to depend on the Mortgage, he may rely on the mortgage exclusively and foreclose anytime provided not barred by prescription, but without a right to file any claim for any deficiency. *Remedies of (1) foreclosure and (2) action for collection - alternative and not cumulative EXECUTION & REGISTRATION 1. Execution of deed in a form sufficient in law (public instrument)

2. Registration with ROD where the land lies & takes effect upon registration Registration of sale in ROD: a. Deed of sale must be supported by certificate of sheriff that said sale was conducted accordingly stating the date, time, place of sale, names of creditor & debtor, description of property, name of highest bidder, selling price b. Present in ROD where land lies c. Memorandum on back of certificate is made: ROD shall enter upon original certificate of title & upon duplicate a memorandum date, time of filing, signature, file number assigned to deed; ROD to note on deed the date & time of filing & reference to volume & page of registration book in which it was registered; No duplicate need be issued d. After expiration of 1 year of redemption period title is consolidated if no redemption exercised: purchaser to file with ROD the deed of sale & sworn statement attesting to fact that there is no redemption e. New certificate of title issued in favor of vendee f. If redeemed notice of redemption shall be registered & accomplished by way of memorandum on proper certificate of title SUBJECT MATTER Real property plus all its accessions unless contrary is stipulated Future property without legal effect Future improvements deemed included Fruits & rents of mortgaged property deemed included Continuing credit secured by mortgage valid FORMS: 1. Private document void & inexistent 2. Public instrument but not recorded binding between parties but not 3rd persons without notice 3. Public document & registered valid & binding to 3rd parties MAY MORTGAGE BE REGISTERED WITHOUT DUPLICATE TITLE: Yes If being withheld by the owner, ROD notifies by mail within 24 hours to registered owner: 1. Stating that mortgage has been registered 2. Requesting that owners duplicate be produced so that memorandum be made thereof Owner refuses to comply within reasonable time; ROD to notify court & court may enter order requiring owner to produce certificate SUBSEQUENT DEALINGS IN MORTGAGED PROPERTY 1. May be further alienated stipulation to contrary is VOID Assignment must also be registered since registration is operative act to affect land If not recorded valid as to parties but not to 3rd parties, right not protected against somebody who registers & procures better right 2. May be further mortgaged stipulation to contrary is VOID No need to secure permission of mortgagee Understood unless prohibited in contract 3. Pactum commisorium not allowed a. Property is mortgaged b. There is stipulation for automatic appropriation 4. Discharge

Execute public document canceling or releasing mortgaged in form prescribed by law Present instrument with ROD where land lies together with owners duplicate for registration Memorandum of cancellation is annotated on duplicate & original WHEN MORTGAGOR DIES: MORTGAGEES REMEDIES 1. Abandon security & prosecute his claim by sharing in general distribution of assets of the estate 2. Foreclose mortgage by making executor party defendant 3. Foreclose it in due time PARTIES IN FORECLOSURE SUIT: all persons claiming interest subordinate in right to mortgagee ACTION TO FORECLOSE: Prescribes in 10 years (base in written contract) VENUE: Per stipulation or in absence thereof, where the property lies RIGHT TO DEFICIENCY allowed * Right of Mortgagee to Recover Deficiency 1. If there be a balance due to the mortgagee after applying the proceeds of the sale, the mortgagee is entitled to recover the deficiency. (Development Bank of the Philippines vs. Mirang, 66 SCRA 141 [1975]. In judicial foreclosure, the Rules of Court specifically gives the mortgagee the right to claim for deficiency in case a deficiency exists (Section 6, Rule 70). While Act No. 3135 governing extrajudicial foreclosures of mortgage does not give a mortgagee the right to recover deficiency after the public auction sale, neither does it expressly or impliedly prohibit such recovery. Note: This right to recover deficiency had been categorically resolved in State Investment vs. Court of Appeals (217 SCRA 32 [1993]). Ergo, the mortgagee is entitled to recover the deficiency in case the sale proceeds are not sufficient to cover the debt in extrajudicial foreclosures. 2. The action to recover a deficiency after foreclosures prescribes after ten (10) years from the time the right of action accrues as provided in Article 1144(2) of the Civil Code (Development Bank of the Philippines vs. Tomeldan, 101 SCRA 171 [1980]. *Waiver of Security by Creditor 1. The mortgagee may waive the right to foreclose his mortgage and maintain a personal action for recovery of the indebtedness. There is no statutory provision in our jurisdiction prohibiting a personal action to recover a sum of money even though a mortgage has been given as security for the payment of the same. (Hijos de I. de la Rama vs. Sajo, 45 Phil. 703 [1924]; Solomon and Lachica vs. Dantes, 63 Phil. 522 [1937]). 2. The mortgagee cannot have both remedies. He has only one cause of action, i. e., non-payment of the mortgage debt; hence, he cannot split up his cause of action by filing a complaint for payment of the debt and another complaint

for foreclosure. (Caltex Phils. Vs. Intermediate Appellate Court, 176 SRCA 741 [1989]). *Kinds of Redemption 1. Equity of redemption or the 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 the sale (see Top-Rate International Services, Inc. vs. Intermediate Appellate Court, 142 SRCA 467 [1986]). The mortgagors equity of redemption is simply the right of the mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90day period after the judgment becomes final, in accordance with Section 2, Rule 68 of the Rules of Court or even after the foreclosure sale but prior to its confirmation. (Limpin vs. Intermediate Appellate Court, 166 SCRA 87 [1988]). 2. Right of redemption or the right of the mortgagor to redeem the mortgaged property within a certain period (1 yr) after it was sold for the satisfaction of the mortgaged debt. *Right of Redemption 1. In all cases of extrajudicial sale, the mortgagor may redeem the property at any time within the term of one year from and after the date of registration of the sale (see Section 6, Act No. 3135; Reyes vs. Tolentino 42 SCRA 365 [1971]). 2. In judicial foreclosure of real estate mortgage, there is a right of redemption which he can exercise at any time after service of judgment of foreclosure and within the 90-day period and even thereafter provided he does so before the foreclosure sale is confirmed by the court. (Anderson vs. Reyes, 54 Phil 944). Confirmation of the sale of mortgaged real property cuts off all the rights or interests of the mortgagor and of the mortgagee and persons holding under him, and with them the equity of redemption in the property and vests them in the purchaser. Confirmation retroacts to the date of the sale. It is a final order, not interlocutory. (Ocampo vs. Domalanta, 20 SRCA 1136 [1967]; Binalbagan Estate, Inc. vs. Gatuslao, 76 Phil. 128 [1946]; Villar vs. Javier, 97 Phil 604 [1955]; Lonzome vs. Amores, 134 SCRA 380 [1985]. Exception: However, if the property has been mortgaged in favor of the DBP (CA 459), Philippine National Bank (RA 1300), banks, banking and credit institutions (RA 337, or the General Banking Act) or rural banks (RA 2670), redemption is allowed within one year from the registration of the sale. (Conzales vs. Phil. National Bank, 48 Phil. 824 [1926]). The redemption must be made within one year after the sale if the mortgagee is a bank, banking or credit institution (Section 78, R. A. No. 337; Piano vs. Cayanog, supra). Under the Revised charter of the PNB, the period is one year from the registration of the foreclosure sale. *Requisites for Valid Redemption 1. The redemption must be made within 12 months from the time of the registration of the sale. 2. Payment of the purchase price of the property plus 1% interest per month together with the taxes thereon, if any, paid by the purchaser with the same rate of interest computed from the date of registration of the sale; and 3. Written notice of the redemption must be served on the officer who made the sale and a duplicate filed with the

proper Register of Deeds. (Rosales vs. Yboa, 120 SCRA 869 [1983]). @Recent Jurisprudence on Real Mortgages Ramirez vs. Court of Appeals (219 SCRA 598) Acceptance of redemption price after the expiration of the statutory period for redemption is deemed a waiver of the one-year period to redeem foreclosed property. Noel vs. Court of Appeals (240 SCRA 78) In the absence of proof of gross inadequacy of the price, the fact that the sale was made with what might appear as an inadequate consideration does not make the contract one of mortgage. Mercado vs. Court of Appeals (240 SCRA 616) A co-owner does not lose his part ownership of a co-owned property where his share is mortgaged by another co-owner without the formers knowledge and consent. Tarnate vs. Court of Appeals (241 SCRA 254) It is a settled rule that a mortgagee may recover any deficiency in the mortgage account which is not realized in a foreclosure sale and that the action for recovery of that deficiency may be filed even during the redemption period. Olea vs. Court of Appeals (247 SCRA 274) a.) A stipulation that the ownership of the property would automatically pass to the vendee in case no redemption is effected within a stipulated period is VOID for being a pactum commissorium which enables the mortgagee to acquire ownership of the mortgaged property without need of foreclosure. b.) Where in a contract of sale with pacto de retro, the vendor remains in physical possession of the land sold as lessee or otherwise, the contract should be considered an equitable mortgage. c.) Where the contract contains a stipulation that upon payment by the vendor of the purchase price within a certain period the document shall become null and void and have no legal force and effect, the purported sale should be considered a mortgage contract. d.) In case of doubt, a contract purporting to be sale with the right of purchase shall be considered an equitable mortgage. e.) A mortgage action prescribes after 10 years. DBP vs. Court of Appeals (249 SCRA 331)

The fact that the annulment of the sale will also result in the invalidity of the mortgage does not have an effect on the validity and efficacy of the principal obligation, for even an obligation that is unsupported by any security of the debtor may also be enforced by means of an ordinary action. Where a mortgaged is not valid, as where it is executed by one who is not the owner of the property, or the consideration of the contract is simulated or false, the principal obligation which it guaranteed is not thereby rendered null and void. That obligation matures and becomes demandable in accordance with the stipulations pertaining to it. Gabonseng vs. Court of Appeals (246 SCRA 472) The application for foreclosure of mortgage is PREMATURE where the debtors have not yet defaulted on the payment of either the principal or the interest on their loans. Ajax Marketing & Development Corporation Vs. Court of Appeals (248 SCRA 222) An action to foreclose a mortgage is usually limited to the amount mentioned in the mortgage but where the intent of the contracting parties is manifest that the mortgaged property shall also answer for future loans or advancements then the same is not improper as it is valid and binding between the parties. Filinvest Credit Corporation Vs. Court of Appeals (248 SCRA 549) a.) If the mortgagee cannot obtain possession of a mortgaged property for its sale on foreclosure, it must bring a civil action either to recover such possession as a preliminary step to the sale or to obtain judicial foreclosure. b.) Replevin is the appropriate action to recover possession preliminary to the extrajudicial foreclosure of a chattel mortgage. Philippine Bank of Communications Vs. Court of Appeals (253 SCRA 241) Issue: The mortgage contract provides: This mortgage is given as security for the payment to the MORTGAGEE on demand or at maturity, as the case may be, of all promissory notes, letters of credit, trust receipts, bills of exchange, drafts, overdrafts and all other obligations of every kind already incurred or which hereafter may be incurred . Can the bank charge penalty based on said provision? Held: 1. The obligation in this case was not a series of indeterminate sums incurred over a period of time, but two specific amounts procured in a single instance. Thus, the inapplicability of the ruling in Lim Julian vs. Lutero (49 Phil. 703) which pertains only to mortgages securing future advancements. Instead, what applies here is the general rule that an action to foreclose a mortgage must be limited to the amount mentioned in the mortgage.

2. The mortgage provision relied upon by the petitioner is known in American Jurisprudence as a dragnet clause, which is specifically phrased to subsume all debts of past or future origin. Such clauses are carefully scrutinized and strictly construed. 3. The mortgage contract is also one of adhesion as it was prepared solely by the petitioner and the only participation of the other party was the affixing of his signature or adhesion thereto. Being a contract of adhesion, the mortgage is to be strictly construed against the petitioner, the party which prepared the agreement. 4. A reading, not only of the earlier quoted provision, but of the entire mortgage contract yields no mention of penalty charges. Construing this silence strictly against the petitioner, it can fairly be concluded that the petitioner did not intend to include the penalties on the promissory notes in the secured amount. This explains the finding by the trial court, as affirmed by the Court of Appeals, the penalties and charges are not due for want of stipulation in the mortgage contract. 5. Indeed, a mortgage must sufficiently describe the debt sought to be secured, which description must not be such as to mislead or deceive, and an obligation is not secured by a mortgage unless it comes fairly within the terms of the mortgage. In this case, the mortgage contract provides that it secures notes and other evidences of indebtedness. Under the rule of ejusdem generis, where a description of things of a particular class or kind is accompanied by words of a generic character, the generic words will usually be limited to things of a kindred nature with those particularly enumerated. A penalty charge does not belong to the species of obligations enumerated in the mortgage, hence, the said contract cannot be understood to secure the penalty. 6. A mortgage and a note secured by it are deemed parts of one transaction and are construed together, thus, an ambiguity is created when the notes provide for the payment of a penalty but the mortgage contract does not. Construing the ambiguity against the petitioner, it follows that no penalty was intended to be covered by the mortgage. DBP vs. Court of Appeals (253 SCRA 414) Issue: Whether the land in dispute could have been validly mortgaged while still the subject of a Free Patent Application with the government. 1. Petitioner bank did not acquire valid title over the land in dispute because it was public land when mortgaged to the bank. We cannot accept petitioners contention that the lot in dispute was no longer public land when mortgaged to it since the Olidiana spouses had been in open, continuous, adverse and public possession thereof for more than thirty (30) years. In Visayan Realty, Inc. vs. Meer (86 Phil. 515), we ruled that the approval of a sales application merely authorized the applicant to take possession of the land so that he could comply with the requirements prescribed by law before a final patent could be issued in his favor. Meanwhile the government still remained the owner thereof, as in fact the application could still be canceled and the land awarded to another applicant should it be shown that the legal requirements had not been complied with. What

divests the government of title to the land is the issuance of the sales patent and its subsequent registration with the Register of Deeds. It is the registration and issuance of the certificate of title that segregates public lands from the mass of public domain and converts it into private property. Since the disputed lot in the case before us was still the subject of a Free Patent Application when mortgaged to petitioner and no patent was granted to the Olidiana spouses, Lot No. 2029 (Pls-61) remained part of the public domain. 2. With regard to the validity of the mortgage contracts entered into by the parties, Art. 2085, par. 2 of the New Civil Code specifically requires that the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged. Thus, since the disputed property was not owned by the Olidiana spouses when they mortgaged it to petitioner, the contracts of mortgage and all their subsequent legal consequences as regards Lot No. 2029 (Pls-61) are null and void. In a much earlier case (Vda. De Bautista vs. Marcos, 3 SCRA 434), we held that it was an essential requisite for the validity of a mortgage that the mortgagor be the absolute owner of a property mortgaged, and it appearing that the mortgage was constituted before the issuance of the patent to the mortgagor, the mortgage in question must of necessity be void and ineffective. For the law explicitly requires an imperative for the validity of a mortgage that the mortgagor be the absolute owner of what is mortgaged. State Investment House, Inc. vs. Court of Appeals (254 SCRA 368) 1. STATEs registered mortgage right over the property is inferior to that of respondent-spouses unregistered right. The unrecorded sale between respondents-spouses and SOLID is preferred for the reason that if the original owner (SOLID, in this case) had parted with his ownership of the thing sold then he no longer had ownership and free disposal of that thing so as to be able to mortgage it again. Registration of the mortgage is of no moment since it is understood to be without prejudice to the better right of third parties. 2. As a general rule, where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right thereto. This rule, however, admits of an exception as where the purchaser or mortgagee has knowledge of a defect or lack of title in his vendor, or that he was aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. In this case, petitioner was well aware that it was dealing with SOLID, a business entity engaged in the business of selling subdivision lots. In fact, the OAALA found that at the time the lot was mortgaged, respondent State Investment House, Inc., (now petitioner) has been aware of the lots location and that said lot formed part of Capital Parks/Homes Subdivision. In Sunshine Finance and Investment Corp. vs. Intermediate Appellate Court (203 SCRA 210), the Court, noting petitioner therein to be a financing corporation, deviated from the general rule that a purchaser or mortgagee of a land is not required to look further than what appears on the face of the Torrens Title. 3. The above-enunciated rule should apply in this case as petitioner admits of being a financing institution. We take judicial notice of the uniform practice of financing institutions

to investigate, examine and assess the real property offered as security for any loan application especially where, as in this case, the subject property is a subdivision lot located at Quezon City, M. M. It is a settled rule that a purchaser or mortgagee cannot close its eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. Petitioners constructive knowledge of the defect in the title of the subject property, or lack of such knowledge due to its negligence, takes the place of registration of the rights of respondents spouses. Respondent court thus correctly ruled that petitioner was not a purchaser or mortgagee in good faith hence, petitioner can not solely rely on what merely appears on the face of the Torrens Title. VI. Antichresis A. Definition and characteristics Antichresis is a contract whereby the creditor acquires the right to receive the fruits of an immovable property of his debtor, with the obligation to apply them to the payment of the interest, if owing and thereafter to the principal of his credit. *Characteristics 1. It is an accessory contract because it secures the performance of a principal obligation. 2. It is a formal contract because the amount of the principal and of the interest must both be in writing, otherwise the contract of antichresis is void. Note: 1. Delivery of the property to the creditor is required only in order that the creditor may receive the fruits and not for the validity of the contract. 2. It is not essential that the loan should earn interest in order that it can be guaranteed with a contract of antichresis. Antichresis is susceptible of guaranteeing all kinds of obligations, pure or conditional. (Javier vs. Valliser, (CA) N. 2648-R, April 29, 1950; Sta. Rosa vs. Noble, 35 O.G. 27241). 3. The fruits of the immovable which is the object of the antichresis must be appraised at their actual market value at the time of the application. (see Article 2138) 4. The property delivered stands as a security for the payment of the obligation of the debtor in antichresis. Hence, the debtor cannot demand its return until the debt is totally paid. 5. A stipulation authorizing the antichretic creditor to appropriate the property upon the non-payment of the debt within the period agreed upon is VOID. (see Article 2038). *Distinctions between Antichresis and Pledge
Antichresis Refers to real property Perfected consent by mere Pledge Refers to personal property Perfected by delivery Real contract

Consensual contract

*Distinctions between Antichresis and Real Mortgage

Antichresis Property is delivered to the creditor Creditor requires only the right to receive the fruits of the property; hence it does not produce a real right Creditor, unless there is stipulation to the contrary, is obliged to pay the taxes and charges upon the estate (Article 2135) Creditor given possession of the property shall supply the fruits thereof to the payment of interest, if owing, and thereafter to the principal of the credit Real Mortgage Debtor usually retains the possession of the property Creditor does not have any right to receive the fruits, but mortgage creates a real right over the property which is enforceable against the whole world Creditor has obligation no such

B. Registration REGISTRATION OF CHATTEL MORTGAGE 1. Execution of document 2. Payment of fees 3. ROD enters in DAY BOOK in strict order of their presentation chattel mortgages & other instruments relating thereto (primary process) 4. ROD thereafter enters in a more detailed form the essential contents of the instrument in the Chattel Mortgage Register (complementary process) EFFECT OF REGISTRATION: 1. Creates a lien attaches to the property whoever holds it; binding on subsequent purchasers 2. Constructive notice - The registration of the chattel mortgage is an effective and binding notice to other creditors of its existence and creates a real right or a lien which being recorded follows the chattel wherever it goes. The registration gives the mortgagee the symbolical possession. (Northern Motors, Inc. vs. Coquia, 68 SCRA 374 [1975]). ASSIGNMENT OF MORTGAGE: No need to be registered, permissive only & not mandatory *Registration of Assignment and Mortgage Optional 1. There is no law expressly requiring the recording of the assignment of a mortgage. While such assignment may be recorded, the law is permissive and not mandatory. 2. The assignee is subrogated to the rights and obligations of the assignor-mortgagee with respect to the chattel mortgage constituted in favor of the latter. Consequently, the assignee is bound by the terms and conditions of the chattel mortgage executed between the mortgagor and the mortgagee. (BA Finance Corporation vs. Court of Appeals, 201 SCRA 157 [1991]). SALE OF CHATTEL WITHOUT CONSENT OF MORTGAGEE VOID; criminal act EFFECT OF FAILURE TO REGISTER: Valid between parties but void against 3rd persons If instead of registration, it is delivered it shall be a pledge & not chattel mortgage (if no chattel mortgage deed executed) Actual knowledge is same effect as registration AFFIDAVIT OF GOOD FAITH: Statement That a. Mortgage is made to secure obligation specified b. Valid & just obligation c. Not entered into for purpose of fraud 1. The affidavit of good faith is an oath in a contract of chattel mortgage wherein the parties severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purpose and that the same is just and valid obligation and one not entered into for the purpose of fraud. 2. Under Section 5 of the Chattel Mortgage Law, in describing what shall be deemed sufficient to constitute a good chattel mortgage, includes the requirement of an

Mortgagee obligation

has

no

such

B. Obligations of antichretic creditor 1. The creditor is obliged, unless there is a stipulation to the contrary, to pay the taxes and charges upon the estate. If he does not pay the taxes, he is, by law (Article 1170), required to pay indemnity for damages to the debtor. (Pando vs. Gimenez, 54 Phil. 459 [1930]). 2. Another obligation of the creditor is to apply the fruits, after receiving them to the interest, if owing, and thereafter to the principal (Article 2132) in accordance with the provisions of Article 2133 or 2138. Hence, the duty of the creditor to render an account of said fruits to the debtor and the corresponding right of the latter that the said fruits be applied to the debt. (Barretto vs. Barretto, 37 Phil. 234 [1917]; Diaz and Rubillos vs. De Mendezona, 48 Phil. 666 [1926]; Macapilac vs. Gutierrez Recipe 43 Phil. 770 [1922]). *Remedy of Creditor in Case of Default 1. To bring an action for specific performance 2. To petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of the Rules of Court. The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge (see Article 1307; Tavera vs. El Hogar Filipino, Inc. 68 Phil. 712 [1939]). VII. Chattel Mortgage A. Definition and characteristics DEFINITION: a contract where personal property is recorded as security for the performance of an obligation A chattel mortgage is: 1. an accessory contract because it is for the purpose of securing the performance of a principal obligation; 2. a formal contract because for its validity, registration in the Chattel Mortgage Register is indispensable. 3. a unilateral contract because it produces only obligations on the part of the creditor to free the thing from the encumbrance upon fulfillment of the obligation.

affidavit of good faith appended to the mortgage and recorded therewith. But the absence of the affidavit vitiates a mortgage only as against third persons without notice like creditors and subsequent encumbrances. (Lilius vs. Manila Railroad Co., 62 Phil. 50 [1935]; Phil. Refining Co. vs. Jarque, 61 Phil. 229 [1935]; Giberson vs. A. N. Jurreidini Bros., 44 Phil. 216 [1922]). 3. A deed of chattel mortgage is VOID where it provides that the security stated therein is for the payment of any and all obligations hereinbefore contracted and which may hereafter be contracted by the mortgagor in favor of the mortgagee. A mortgage that contains a stipulation in regard to future advances in the credit will take effect only from the date the same are made and not from the date of the mortgage. (Jaca vs. Davao Lumber Co., 113 SCRA 107 [1982]). EFFECT OF ABSENCE OF AFFIDAVIT OF GOOD FAITH: Vitiates mortgage as against creditors & subsequent encumbrances Valid as between parties No need to be in public document CANCELLATION OF CHATTEL MORTGAGE: Mortgagee to execute a discharge of the mortgage in manner provided by law *Foreclosure of Chattel Mortgage 1. Public Sale if the mortgagor defaults in the payment of the secured debt or otherwise fails to comply with the conditions of the mortgage, the creditor has no right to appropriate to himself the personal property (Article 2141, 2088) because he is permitted only to recover his credit from the proceeds of the sale of the property at public auction through a public officer in the manner prescribed in Section 14 of Act No. 1508. (Mahoney vs. Tuason, 39 Phil. 951 [1919]); Esguerra vs. Court of Appeals, 173 SCRA 1 [1989]). 2. Private Sale if there is an express stipulation in the contract. Exception: fraud or duress Note: 1. The mortgagee may, after thirty (30) days from the time of the condition broken, cause the mortgaged property to be sold at public auction by a public officer (Section 14, Act No. 1508) 2. The 30-day period to foreclose a chattel mortgage is the minimum period after violation of the mortgage condition for the mortgage creditor with at least ten (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 mortgage obligation. After the sale of the chattel at public auction, the right of redemption is no longer available to the mortgagor. (Cabral vs. Evangelista, 28 SCRA 1000 [1969]) FORECLOSURE OF MORTGAGE There must first be non-payment & at least 30 days have elapsed since then Alternatives: 1. Judicial 2. Extra-judicial only if there is stipulation/authority PROCEDURE IN FORECLOSURE

1. Notice posted for 10 days in at least 2 public places in municipality where property is to be sold designating the time, place and purpose of sale 2. Mortgagor is notified in writing at least 10 days before sale 3. Public auction 4. 30 days after sale, officer makes a return & file with ROD where mortgage has been recorded 5. Officers return operates as a discharge of the lien created by the mortgage 6. Proceeds to be applied: a. Cost of sale b. Amount of obligation c. Subsequent mortgages d. Balance mortgagor Creation of Chattel Mortgage 1. The law as it now stands provides for only one way for executing a valid chattel mortgage, i.e., the registration of the personal property in the Chattel Mortgage Register as security for the performance of an obligation. (Article 2140; see Article 2085). Under the Chattel Mortgage Law, if the property as situated in a different province from that in which the mortgagor resides, the registration must be in both registers (Section 4, Act No. 1508); otherwise, the chattel mortgage is void. (Registration of CM is resident of mortgagor and the place where property is situated) 2. It has been ruled however that if the chattel mortgage is not recorded, it is nevertheless binding between the parties. (Filipinas Marble Corporation vs. Intermediate Appellate Court, 142 SCRA 180 [1986]; Article 2125). RECOVERY OF DEFICIENCY: Allowed *Right of Mortgagee to Recover Deficiency 1. The creditor may maintain an action for the deficiency although the Chattel Mortgage Law is silent on this point (Ablaza vs. Ignacio, (unrep) 103 Phil. 1151 [1958]; Garrido vs. Tuason, 24 SCRA 727 [1968] Phil. National Bank vs. Manila Investment & Construction, Inc., supra; Bank of the Philippine Isalnd vs. Olutanga Lumber Co., 47 Phil. 20 [1924]). The action may be sought within ten (10) years from the time the cause of action accrues. 2. If the chattel mortgage is constituted, whether by the debtor-vendee or a third person, as security for the purchase of personal property payable in installments, no deficiency judgment can be asked and any agreement to the contrary shall be void (Article 1484). (RECTO LAW) 3. The chattel mortgagee is entitled to deficiency judgment in an action for specific performance (Article 1484 [1]) where the mortgaged property is subsequently attached and sold. The execution sale in such case is not a foreclosure sale. (Industrial Finance Corporation vs. Ramirez, 77 SCRA 152 [1977]). (In this case, the creditor/mortgagee filed an action for specific performance, as a result the property is attached and sold (may be the same property that is being mortgaged), in case there is deficiency, the judgment creditor may still collect) *some rules 1. The law primarily governs chattel mortgage. Provisions on pledge of NCC in so far as not in conflict with CML also govern chattel mortgages. 2. Chattel Mortgage may be rescinded for being in fraud of creditors.

3. Growing fruits are covered by chattel mortgage but they may not be pledged. (Reason: because pledge requires delivery of the thing to be perfected.) 4. Machinery placed on plant or building owned by another can be the object of chattel mortgage. 5. General Rule: Chattel Mortgage cannot cover debts subsequently contracted. 6. Rules: Chattel Mortgage must be registered to bind 3rd parties: a. registered in place where mortgagor resides and where property (chattel) is located. If mortgagor resides abroad, register in place where property is located. b. Motor Vehicles: register also in Land Transportation Office c. Shares of Stock: place of domicile of corporation and shareholder. No need for notation in books of corporation d. Vessels: Phil. Coastguard 7. To be valid against 3rd persons: a. affidavit of good faith b. contract must be registered 8. General Rule: In Chattel Mortgage, there is recovery of deficiency judgment. Exception: when Recto Law applies 9. Requisites of CML: a. constituted to secure the fulfillment of principal obligation b. mortgagor is absolute owner of the thing mortgaged c. persons constituting the mortgage have the free disposal of the property and in the absence thereof, they be legally authorized for the purpose d. recorded to bind 3rd persons 10. Formal Requisites of CM: a. substantial compliance with form in Sec. 5 of CML b. signed by at least 2 witnesses c. must contain an affidavit of good faith d. certificate of oath (notarial acknowledgment) 11. Affidavit of Good Faith - where the parties severally swear that the mortgage is made for the purpose of securing the obligation specified and for no other purpose and that the same is a just and valid obligation and not one entered into for fraud - property given in CM must be described to enable the parties or any other person after reasonable inquiry and investigation to identify it 12. Future property may not be covered by CM but when such property is a: a. renewal of, or in substitution for goods on hand when the mortgage was executed, or b. purchased with proceeds (not of your own money) of said goods, said property may be covered by CM 13. Criminal Acts - removal of chattel to another city or province without written consent of mortgagee, selling property already pledged, or mortgaged without written consent of mortgagee 14. A chattel mortgage may be foreclosed judicially or extrajudicially, in the latter case, before a notary or sheriff, or creditor or mortgagee when stipulated, even without need of notice (when mortgagee forecloses) 15. Pactum Commissorium applies to Chattel Mortgage. VIII. Quasi-contracts SOURCES: certain acts that (LUV) 1) lawful 2) voluntary 3) unilateral BASE ON THE PRINCIPLE: No one shall be unjustly enriched or benefited at the expense of another A. Negotiorum gestio

- where one voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in position to do so. NOT APPLICABLE: 1) property is not neglected or abandoned (contract entered by unauthorized person is UNENFORCEABLE) 2) the manager is in fact authorized by the owner (agency) *LIABILITY AND OBLIGATIONS OF OFFICIOUS MANAGER 1) perform his duties with all the diligence of a good father of a family 2) pay damages which through his fault or negligence may be suffered by the owner of property or business 3) if he delegated another person, he shall be liable for the acts of the delegates 4) two or more officious manager = solidary responsibility, unless the management was assumed to save the thing or business from imminent danger 5) liable for any fortuitous event: i) if he undertakes risky operations which the owner was not accustomed to embark upon; ii) if he has preferred his own interest to that of the owner iii) if he fails to return the property or business after demand by the owner iv) if he assumed the management in bad faith EXCEPT: i) when the management was assumed to save the property or business from imminent danger EXCEPTION TO THE EXCEPTION: i) if he is manifestly unfit to carry on the management ii) if by his intervention he prevented a more competent person from taking up the management 6) to be reimbursed for his necessary and useful expenses and damages he may have suffered in the performance of his duties i) even though no benefit have been derived ii)no imminent and manifest danger to the property or business PROVIDED: i) officious manager has acted in good faith ii) property or business is intact, ready to be returned to the owner B. Solutio indebiti - something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. IX. Concurrence and Preference of Credits A. Meaning of concurrence and preference - where debtor is declared insolvent, his debts and obligations due shall be paid based on prioritization according to the provisions of the law. *Liability for Obligations - The debtor is liable with all his property, present and future, for the fulfillment of his obligations, subject to the exemptions provided by law. B. Preferred credits on specific movables *Preferred Credits with Respect to Specific Movable 1. Duties, taxes and fees due thereon to the state or any subdivision thereof;

2. Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them; 3. Claims for the unpaid price of movable sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same, and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity; neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally; 4. Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage upon the things mortgaged, up to the value thereof; 5. Credits for making repairs, safekeeping or preservation or personal property on the movable thus made, repaired, kept or possessed; 6. Claims for laborers wages, on the goods manufactured or the work done; 7. For expenses of salvage, upon the goods salvaged; 8. Credits between the landlord and the tenant arising from the contract of tenancy on shares, on the share of each in the fruits or harvest; 9. Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses, until their delivery and for thirty days thereafter; 10. Credits for lodging and supplies usually furnished to travelers by hotelkeepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests; 11. Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested; 12. Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased on the fruits of the same, but not on money or instruments of credit; 13. Claims in favor of the depositor if the depository has wrongfully sold the thing deposited, upon the price of the sale. * In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully taken, the creditor may demand them from any possessor within thirty (30) days from the unlawful seizures. Summary: 1.) taxes 2.) malversation by public officials 3.) vendors lien 4.) pledge, chattel mortgage 5.) mechanics lien 6.) laborers wages 7.) salvage 8.) tenancy

9.) carriers lien 10.) hotels lien 11.) crop loan 12.) rentals - one year 13.) deposit C. Exempt property 1. Family home constituted jointly by husband and wife or by unmarried head of a family (Article 152, Family Code). Exceptions: a.) for non-payment of taxes; b.) for debts incurred prior to the constitution of the family home; c.) for debts secured by mortgages on the premises before or after such constitution; and d.) for debts due to laborers, mechanics, architects, builders, material men and others who have rendered service or furnished material for the construction of the building 2. Right to receive support as well as any money or property obtained as such support. (Article 205, Family Code) 3. Tools and implements necessarily used by him in his trade or employment; 4. Two horses, or two cows, or two carabaos or other beasts of burden, such as the debtor may select, not exceeding one thousand pesos in value and necessarily used by him in his ordinary occupation; 5. His necessary clothing and that of all his family. 6. Household furniture and utensils necessary for housekeeping and used for that purpose by the debtor, such as the debtor may select, of a value not exceeding one thousand pesos; 7. Provisions for individual or family use insufficient for three months; 8. The professional libraries of attorneys, judges, physicians, pharmacists, dentist, engineers, surveyors, clergymen, teachers and other professionals, not exceeding three thousand pesos in value; 9. One fishing boat and net, not exceeding the total value of one thousand pesos, the property of any fisherman, by the lawful use of which he earns a livelihood; 10. So much of the earnings of the debtor for his personal services within the month preceding the levy as are necessary for the support of his family; 11. Lettered gravestones; 12. All moneys, benefits, privileges or annuities accruing or in any manner growing out of any life insurance, if the annual premiums paid do not exceed five hundred pesos, and if they exceed the sum, a like exemption shall exist which shall bear the same proportion to the moneys, benefits privileges and annuities so accruing or growing out of such insurance that said five hundred pesos bears to the whole premiums paid; 13. The right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the government;

14. Copyrights and other properties especially exempted by law (Section 12, Rule 39) 15. Property under legal custody and of the public dominion. @ACP or CPG shall not be among the assets to be taken possession of by the assignee for the payment of the insolvent debtors obligation EXCEPT: insofar obligation has redounded to the benefit of the family D. Classification of credits 1. liens 2. mortgages or pledges of real or personal property 3. credit with reference to other property @@Taxes shall first be satisfied. E. Order of preference of credits 1. Those credits which enjoy preference with respect to specific movable, excluded all others to the extent of the value of the personal property to which the preference refers (Article 2246). 2. If there are two or more credits with respect to the same specific movable property, they shall be satisfied pro-rata, after the payment of duties, taxes, and fees due the State or any subdivision thereof (Article 2247). 3. Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the extent of the value of the immovable or real right to which the preference refers (Article 8). 4. If there are two or more credits with respect to the same specific real property or real rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the immovable property or real right (Article 2249). 5. The excess, if any, after the payment of the credits which enjoy preference with respect to specific property, real or personal, shall be added to the free property which the debtor may have, for the payment of the other credits (Article 2250). 6. Those credits which do not enjoy any preference with respect to specific property and those which enjoy preference, as to the amount not paid, shall be satisfied according to the following rules: a. In the order established in Article 2244; (with reference to other property) b. Common credits (not comprised in the preferred credits) shall enjoy no preference and shall be paid pro rata regardless of dates. (Article 2251). *Preferred Credits with Respect to Specific Immovable Property 1. Taxes due upon the land or building; 2. For the unpaid price of real property sold upon the immovable sold; 3. Claims of laborers. Masons, mechanics and other workmen, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works; 4. Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals, and other works, upon said buildings, canals or other works;

5. Mortgage credits recorded in the Registry of Property, upon the real estate mortgage; 6. Expenses for the preservation or improvement of real property when the law authorizes reimbursement, upon the immovable preserved or improved; 7. Credits annotated in the Registry of Property, by virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits; 8. Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divided; 9. Claims of donors or real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated; 10. Credits of insurers, upon the property insured, for the insurance premium for two years. Summary: creates encumbrance to an immovable 1.) taxes 2.) vendors lien 3.) contractors lien 4.) lien of materialmen 5.) mortgage 6.) expenses of preservation 7.) recorded attachments 8.) warranty in partition 9.) conditional donations 10.) premiums for 2 year insurers Note: The foregoing enumeration is not an order of preference (Carried Lumber Co. vs. ACCFA, 83 SCRA 411 [1975]). *Order of Preference with Respect to Other Properties of the Debtor (Art 2244) 1. Proper funeral expenses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court; 2. Credits for services rendered to the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency; 3. Expenses during the last illness of the debtor or of his or her spouse and children under his or her parental authority, if they have no property of their own; 4. Compensation due to the laborers of their dependents under laws providing for indemnity for damages in cases of labor accident or illness resulting from the nature of the employment; 5. Credits and advancements made to the debtor for support of himself or herself, and family, during the last preceding insolvency; 6. Support during the insolvency proceedings, and for three months thereafter; 7. Fines and civil indemnification arising from a criminal offense; 8. Legal expenses, and expenses incurred in the administration of the insolvents estate for the common interest of the creditors, when properly authorized and approved by the court;

9. Taxes and assessments due the national government, other those mentioned in Articles 2241, No. 1, and 2242, No. 1; 10. Taxes and assessments due any province, other than those mentioned in Articles 2241, No. 1 and 2242, No. 1; 11. Taxes and assessments due any city or municipality other than those mentioned in Articles 2241, No.1 and 2242, No. 1; 12. Damages for death or personal injuries caused by a quasi-delict; 13. Gifts due to public and private institutions of charity or beneficence; 14. Credits which without special privilege, appear in (a) a public instrument; or (b) in the final judgment, if they have been the subject of litigation. These credits shall have preference among themselves in the order of priority of the dates of the instruments and of the judgments, respectively (Article 2244) Summary: (FWEWSSFLTTDA) 1) funeral expenses 2) wages of employees one year 3) expenses of last illness 4) workmens compensation 5) support for one year 6) support during insolvency and 3 mos. thereafter 7) fines in crimes 8) legal expenses - administration 9) taxes (national, province, city and municipality) 10) tort 11) donations 12) appearing in public instrument or final judgment Note: 1. In contrast with Articles 2241 and 2242, Article 2244 creates no liens on determinate property which follow such property. What Article 2244 creates are simply rights in favor of certain creditors to have the cash and other assets of the insolvent applied in a certain sequence or order of priority (Republic vs. Peralta, 150 SCRA 37 [1987]). 2. Article 2244 relates to the property of the insolvent that is not burdened with the liens or encumbrances created or recognized by Article 2241 and 2242. 3. Recent Jurisprudence on Concurrence of Credits and Preference

1. To the extent that claims for unpaid wages fall outside the scope of Articles 2241(6) and 2242(3), they would come within the ambit of the category of ordinary preferred credits under Article 2242. 2. The right of first preference as regards unpaid wages recognized by Article 110 of the Labor Code does not constitute a lien on the property of the insolvent debtor in favor or workers. It is a right to a first preference in the discharge of the funds of the judgment debtor. BPI vs. Court of Appeals (229 SCRA 223) Whenever a distressed corporation asks SEC for rehabilitation and suspension of payments, preferred creditor may no longer assert such preference, but shall stand on equal footing with other creditors. This rule will enable the rehabilitation receiver to effectively exercise his powers free from judicial and extrajudicial interference that might unduly hinder rescue of the company. DBP vs. NLRC (229 SCRA 350) 1. Article 110 of the Labor Code as amended must be viewed and read in conjunction with the provisions of the Civil Code on concurrence and preference of credits. 2. The Civil Code and Labor Code provisions require judicial proceedings in rem in adjudication of creditors claims against the debtors assets to become operative. 3. RA 6715 expanded worker preference to cover not only unpaid wages but also other monetary claims of laborers, to which even claims of the Government must be deemed subordinate. 4. Amendatory provisions of RA 5715 which became effective on 21 March 1989 should only be given prospective application. X. Insolvency Law *every insolvent debtor may be permitted: 1) to suspend payments; or 2) be discharged from his debts and liabilities A. Definition of insolvency - The condition of a person who is unable to pay his debts because of lack of means to pay one's debts. - Such a relative condition of a man's assets and liabilities that the former, if all made immediately available, would not be sufficient to discharge the latter. - Or the condition of a person who is unable to pay his debts as they fall due, or in the usual course of trade and business. B. Suspension of payments - instituted by the debtor upon filing petition (contains schedule and inventory of his SAL and the proposed agreement he requests of his creditor) - debtor possessing sufficient property to cover all his debts foresees the impossibility of meeting them when they respectively fall due - lapse after three months shall have passed without the proposed agreement being accepted by the debtor - upon filing, no creditor shall sue or institute proceedings to collect his claim from the debtor

a) A foreclosing bank creditor cannot be held liable for unpaid wages and the like of the employees of the mortgagor. The employees should file their claims in a bankruptcy proceeding on their employer. (Development Bank of the Philippines vs. National Labor Relations Commissions, 186 SCRA 841 [1990]). b) From the provisions of Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the Revised Rules and Regulations Implementing the Labor Code, a declaration of bankruptcy or a judicial liquidation must be present before the workers preference may enforced. (Development Bank of the Philippines vs. Santos, 171 SCRA 138 [1989]). DBP vs. NLRC (236 SCRA 117)

EXCEPT: (PMEFM) 1) claims for personal labor 2) maintenance 3) expenses of last illness 4) funeral of the wife or children of the debtor *incurred in 60 days immediately preceding the filing of the petition 5) legal or contractual mortgages EXCEPT: when they attend the meeting and voting - creditors representing 3/5 of the liabilities necessary to holding of a meeting - majority vote rule; to form majority, necessary: 2/3 of the creditors voting unite upon the same proposition, and claims represented by the 2/3 amount to atleast 3/5 of the total liabilities - objection to the decision in favor of the debtor within 10 days after the meeting by any creditor who attended, dissented and protested against the vote of the majority (regarded as incidental motion) GROUNDS FOR OBJECTION: a) defects in the call and holding of a meeting and the deliberations prejudiced the rights of the creditor b) fraudulent connivance between one or more creditors and the debtor to vote in favor of the proposed agreement c) fraudulent conveyance of claims for the purpose of obtaining a majority *If the debtor fails to perform the agreement decided upon, all the rights of the creditors had against the debtor shall revest in them. In such case, the debtor may be made subject to bankruptcy and insolvency proceedings. C. Voluntary insolvency - one instituted by the debtor himself - the insolvent debtor, owing debts exceeding in amount the sum of 1T pesos, may apply to be discharged from his debts and liabilities by petition to the court with schedule and inventory verified by the affidavit (includes among others application to adjudged an insolvent) D. Involuntary insolvency - instituted by three or more creditors by petition (residents of the Philippines; aggregate amount not less than 1T pesos; not creditor by assignment within 30 days prior to filing of said petition) GROUNDS: 1) debtor is about to depart or has departed from the Philippines, with intent to defraud his creditors 2) being absent to the Philippines, with intent to defraud his creditors, he remains absent 3) performs any acts with intent to defraud his creditors 4) being a merchant or tradesman he has generally defaulted in the payment of his current obligations for a period of 30 days 5) 30 days after demand, failed to pay any moneys deposited with him or received by him in a fiduciary capacity 6) execution of final judgment issued against him and found to be without sufficient property subject to execution to satisfy the judgment Exclude: Warehouse Receipts Law, Usury Law, Insolvency Law 1. Distinctions *Suspension of Payment

-debtor has enough assets to meet liabilities but cannot meet them as they fall due - always initiated by debtor *Insolvency - debtor has more liabilities than assets - initiated by creditors/other persons if involuntary; initiated by debtor if voluntary 2. Fraudulent Preference - any act of insolvent which gives rise/has tendency to give preference to a creditor to the assets of the insolvent prejudicial to the right of other creditors of said insolvent 3. Effect on Actions Upon Adjudication of Insolvency a. suits pending in court (1) secured obligations suspended until assignee appointed (2) unsecured obligations terminated except to fix amount of obligation (3) foreclosure suits pending continue b. suit not yet filed - cannot be filed anymore, but claims may be presented to assignee 4. Debts and Obligations not Affected by Discharge of Insolvent (AFSACN) a. assessments due to national and local government b. debts due to fraud/embezzlement c. debts in which he is bound solidarily d. alimony e. corporate debts f. debts not included in the schedule submitted by debtor LEASE *The contract of lease may be of things, or of work and service I. Lease of Things - one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. - no lease for more than 99 years shall be valid II. Lease of Work or Services - one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the relation of principal and agent does not exist between them. GENERAL RULE: Consumable goods cannot be the subject matter of a contract of lease EXCEPT: 1) When they are merely to be exhibited 2) when they are accessory to an industrial establishment III. Lease of Rural and Urban Lands A. Qualified persons - any person EXCEPT: 1) husband and wife 2) guardian and ward 3) agents and principal 4) justices 5) executors and administrators B. Registration - to the Registry of Property

- needed to bind third person NEEDS AUTHORITY BEFORE REGISTRATION 1) husband with respect to the wifes paraphernal real estate 2) the father or guardian as to the property of the minor or ward 3) manager (SPA) C. Prohibitions 1) Lessee cannot assign the lease without the consent of the lessor EXCEPTION: there is stipulation to the contrary 2) Lessee may sublease the thing leased, in whole or in part EXCEPT: there is express prohibition in the contract *sublessee subsidiarily liable to the lessor for any rent due from the lessee; however, not responsible beyond the amount of rent due from him at the time of the extra-judicial demand by the lessor; his payment in advance deemed not to have been made as lessors claimed is concern *Warranty in sales applies here. IV. Rights and Obligations of Lessor and Lessee *LESSOR 1) to deliver the thing in such a condition as to render it fit for the use intended; 2) to make 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 4) may judicially eject the lessee: CAUSES: a) when the period agreed or that which is fixed has expired; b) lack of payment of the price stipulated; c) violation of any of the conditions agreed upon in the contract; d) lessee devotes the thing leased to any use or service not stipulated which causes the deterioration thereof; or different from that which may be inferred from the nature of the thing leased. *LESSEE 1) to pay the price of the lease according to the terms stipulated; 2) to use the thing leased as a diligent father of a family, devoting it to the use stipulated; and in the absence of stipulation, to that which may be inferred from the nature of the thing leased, according to the custom of the place; 3) to pay the expenses for the deed of lease. 4) may suspend the payment of the rent in case the lessor fails to make the necessary repairs or to maintain him in the peaceful and adequate enjoyment of the property leased; 5) bring to the knowledge of the lessor, within the shortest possible time, every usurpation or untoward act which any third person may have committed; otherwise liable for damages which may be suffered by the proprietor 6) to advise the owner, within possible shortest time, of the need of all necessary repairs; otherwise liable for damages which may be suffered by the proprietor/lessor; or may order the repairs at the lessors cost 7) have a direct action against the intruder or mere act of trespass which a third person may cause on the use of the thing leased; mere act of trespass third person claims no right whatever. 8. return the thing leased upon termination of the lease, just as he received it;

9) responsible for the deterioration or loss of the thing leased, EXCEPT: a) lost or impaired by the lapse of time b) ordinary wear and tear c) it is without his fault d) due to earthquake, flood, storm or other natural calamity 10) liable for any deterioration caused by members of his household and by guests and visitors 11) to move for the issuance of WRIT OF PRELIMINARY MANDATORY INJUNCTION TO RESTORE POSSESSION - if there is an appeal to ejectment case - higher court is satisfied: a) lessees appeal is frivolous or dilatory b) lessors appeal is prima facie meritorious 12) to be paid for of the value of the useful improvements he made in good faith to the thing leased without altering its from or substance; or if lessor refuse to pay = may remove the improvements, even though the principal thing may suffer damage thereby. EXCEPT: Ornamental expenses (not entitled for reimbursement; but may remove, provided, no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished) *RIGHTS COMMON TO BOTH: IN CASE OF FAILURE OF EITHER TO PERFORM OBLIGATIONS: 1) may ask for rescission of the contract and indemnification for damages 2) may allow the contract to remain in force and claim indemnity for damages EFFECT: 1) DESTRUCTION OR LOSS BY FORTUITOUS EVENT a) total = leased is extinguished b) partial = lessee may choose: i) proportional reduction of the rent; ii) rescission of the lease 2) DWELLING PLACE OR ANY OTHER BUILDING; ITS USE BRINGS IMMINENT AND SERIOUS DANGER TO LIFE AND HEALTH a) lessee may terminate, even if at the time of perfection of the contract he knew of the dangerous condition or waived the right to rescind 3) NECESSARY URGENT REPAIRS: CANNOT BE DEFERRED a) less than 40 days = lessee obliged to tolerate the work, although very annoying to him and he may be deprived of a part of the premises b) last more than 40 days = 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. EXCEPT: main purpose is for dwelling and becomes uninhabitable = lessee may rescind the contract CESSION OR CONTINUATION: 1) lease was made for a determinate time = ceases upon the day fixed, without need of a demand 2) if at the end of the contract the lessee should continue enjoying for 15 days with the acquiescence of the lessor = implied new lease (security of the third person to the principal contract ceases with respect to the new lease) EXCEPT: notice by either is given 3) lessee continues with lessors objection = lessee with responsibilities of possessor in bad faith 4) third party purchaser of a piece of land under lease = may terminate the lease EXCEPT: a) lease recorded in the Registry of Property;

b) purchaser knows of the existence of the lease c) sale is fictitious for the purpose of extinguishing lease (presumed when sale is not recorded to the Registry of Property) d) purchaser in a sale with the right of redemption until the end of the redemption *TIME FOR PAYMENT -custom of the place shall be followed *PLACE FOR PAYMENT (same as Art 1251) 1) designated in the obligation; 2) wherever the thing might be at the time of obligation 3) domicile of debtor/lessee V. Special Rules for Lease of Rural/Urban Lands *RURAL: 1) lessee shall have no right to a reduction of the rent on account of the sterility of the land leased, or by reason of the loss of fruits due to ordinary fortuitous events Except: loss of more than one-half of the fruits through extraordinary and unforeseen fortuitous events EXCEPTION TO THE EXCEPTION: i) stipulation to the contrary ii) fruits are lost after they have been separated from their stalk, root or trunk EXTRAORDINARY FORTUITOUS EVENTS -understood to be: fire, war, pestilence, unusual flood, locusts, earthquake, or others which are uncommon, and which the contracting parties could not have reasonably foreseen 2) DURATION: a) not fixed = understood to have been made for i) seasonal fruits = all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year ii) trees that yield once = which it may yield once, although two or more years may have to elapse for the purpose 3) incoming lessee or outgoing lessee = to allow for the preparatory labor; and whatever may be necessary for the gathering or harvesting and utilization of the fruits; all in accordance with the custom of the place *URBAN: 1) REPAIRS: a) special stipulation b) custom of the place with regard to the kind of repairs c) doubt = understood to be chargeable against the lessor 2) PERIOD: not fixed, understood as a) year to year = rent agreed is annual b) month to month = rent agreed is monthly EXCEPT: lessee occupied the premises for over 1 year (court may fix longer period) c) week to week = rent agreed is weekly EXCEPT: lessee has been in possession for over 6 months d) day to day = rent is paid daily EXCEPT: lessee stayed for over 1 month e) lease of the furniture shall be deemed to be for the duration of the lease of the premises VI. Household Service

- shall always be reasonably compensated; any stipulation to the contrary is VOID - compensation is in addition to the house helpers lodging, food, and medical attendance (must be free of charge) - cannot be terminated before expiration by neither party if period is fixed, except for a just cause *VOID 1) contract for more than two (2) years; however, renewable from year to year 2) HH cannot afford to acquire suitable clothing (if stipulation that HH is charged/responsible for clothing) *DURATION 1) not determined: either party may give notice to put an end to the service relation i) compensation paid by day = notice on any day that the service shall end at the close of the following day ii) paid by week = latest: first business day of the week at the end of the seventh day from the beginning of the week iii) paid by month = latest: fifth day of the month at the end of the month *RIGHTS/OBLIGATIONS OF HOUSEHELPERS 1) to be furnished by the head of the family suitable and sanitary quarters as well as adequate food and medical attendance that is free of charge 2) to be given an opportunity for at least elementary education which cost is part of the compensation, unless there is stipulation to the contrary 3) to be treated in a just and humane manner; in no case shall physical violence be used upon the HH 4) not to be required to work for more than 10 hours a day 5) to be allowed for 4 days vacation each month with pay 6) if he has no relatives in the place where the head of the family lives, with sufficient means = head of the family shall bear HH funeral expenses 7. if unjustly dismissed = to be paid compensation already earned plus 15days by way of indemnity 8) if leaves without justifiable reason = salary due and unpaid to HH forfeited. For not exceeding 15 days 9) upon extinguishment of contract, HH may demand a written statement on the nature and duration of the service and the efficiency and conduct of the HH VII. Contract of Labor *capital and labor - relation not merely contractual - neither shall act oppressively against the other, or impair the interest or convenience of public *Labor contracts 1) impressed with public interest that labor contracts must yield to the common good 2) in case of doubt = all labor legislation and contracts shall be constructed in favour of the safety and decent living for the laborer 3) VOID: practically amounts to involuntary servitude 4) wage = a) paid in legal currency; b) withholding shall not be made EXCEPT: i) for a debt due ii) as lien on the goods manufactured or the work done c) not subject to execution or attachment EXCEPT:

i) debts incurred for food, shelter, clothing and medical attendance 5) employer shall neither retain nor seize any tool or other articles belonging to the laborer A. Obligation in case of death/injury of laborers 1) owner of enterprises and other employers obliged to pay compensation a) if death or personal injury arose out of and in the course of the employment, even though purely accidental or entirely due to fortuitous cause b) employees contract any illness or disease caused by such employment or as the result of the nature of the employment EXCEPT: i) mishap due to employees own notorious negligence ii) voluntary act iii) drunkenness COMPENSATION EQUITABLY REDUCED - employees lack of due care contributed to his death or injury SOLIDARY LIABILITY: FELLOW WORKER AND EMPLOYER - death or injury is due to the negligence of a fellow worker EXCEPT: The only cause of the death or injury is fellow workers intentional or malicious act EXCEPTION TO THE EXCEPTION - employer did not exercise due diligence in the selection or supervision of the plaintiffs fellow worker VIII. Contract for Piece of Work (CPW) - by the contract for a piece of work, the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. - contractor may either employ only his labor or skill, or also furnish the material. -VOID: agreement waiving or limiting the contractors liability for any defect in the work EXTINGUISHMENT 1) lost of material through fortuitous event 2) rescinded death of contractor in a piece of work *RIGHTS AND OBLIGATIONS OF CONTRACTOR 1) FURNISH MATERIAL a) contractor shall deliver the thing produced to the employer and transfer dominion over the thing b) suffer the loss if the work should have been destroyed before its delivery EXCEPT: there is delay in receiving 2) contractor warrants title and against hidden defects; work executed in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. 3) ONLY WORK OR SKILL a) cannot claim compensation if the work should be destroyed before its delivery EXCEPT: i) there is delay in receiving it ii) destruction was caused by the poor quality of the material, provided communicated in time to the employer 4. if employer act is required for the execution of work and he incurs in delay or fails to perform the act = contractor is entitled to a reasonable compensation COMPUTATION OF COMPENSATION: a) duration of the delay and amount of compensation stipulated

b) what the contractor has saved in expenses by reason of the delay, or is able to earn by a different employment of his time and industry 5) work cannot be completed on account of defect of materials furnished by employer or because of the orders from the employer = right to an equitable part of the compensation proportionally to the work done, and reimbursement for proper expenses made 6) BUILDING OR STRUCTURE = responsible for the damages if the edifice falls, within 15 years from the completion of structure, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract; solidarily liable with the engineer and architect = if they supervise the construction 7) cannot withdraw from the contract nor demand an increase in the price EXCEPT: there has been change in the plans and specifications EXCEPTION TO THE EXCEPTION i) change is authorized by the proprietor in writing; ii) additional price has been determined in writing by both parties 8) responsible for the work done by persons employed by him 9) liable for all the claims of labourers and others employed by him, and of third persons for death or physical injuries during the construction 10. has a right to retain the executed work upon movable by way of pledge until he is paid *RIGHTS/OBLIGATIONS OF EMPLOYER: 1) less quality of work = may require that the contractor remove the defect or execute another work; or at the contractors cost if he refuses 2) his acceptance of the work relieves the contractor of liability for any defect in the work EXCEPT: a) defect is hidden and cannot be recognized by special knowledge of the employer b) express reservation of rights against the contractor by reason of the defect c) acceptance of the building (action: brought within 10 years after the collapse) 3) may withdraw at will from the construction of the work, indemnifying the contractor for all the contractors expenses, work, and the usefulness which the owner may obtain therefrom and damages 4) to pay the heir of the deceased/unable (due to circumstances beyond his control) contractor in a piece of work in proportion to the price agreed upon, the value of the part of the work done, and of the materials prepared, provided the latter yield him some benefit *RIGHTS OF THIRD PERSONS/LABORERS or FURNISHERS 1) has action against the owner up to the amount owing from the latter to the contractor at the time the claim is made; 2) not affected by the following: a) payments made by the owner to the contractor before they are due b) renunciation by the contractor of any amount due him from the owner *TIME AND PLACE OF COMPENSATION - at the time and place of delivery of the work, unless there is stipulation to the contrary

-PARTIAL DELIVERY: the sum shall be paid at the time and place of delivery unless there is stipulation LAND TITLES AND DEEDS LAND TITLE evidence of the owners right or extent of interest, by which he can maintain control and as a rule assert right to exclusive possession and enjoyment of property DEED instrument in writing by which any real estate or interest therein is created, alienated, mortgaged or assigned or by which title to any real estate may be affected in law or equity Contents: 1. Grantor 2. Grantee 3. Words of grant 4. Description of Property 5. Signature of grantor 6. Witnesses *Registrable Lands: 1. Public agricultural lands (PAL) 2. Private lands(PL) *Non-registrable lands: Those found in Civil Code provisions dealing with nonregistrable properties (e.g. property of public domain) Specific kinds of non-registrable properties or lands: a. Forest or timberland, public forest, & forest reserve b. Mangrove swamps c. Mineral lands d. Foreshore land & seashore NOTE: Foreshore land is the strip of land that lies between the high and low water marks and is alternatively wet and dry according to the flow of the tide. It is part of the public domain and not susceptible of disposition except by lease (Roble vs. Arbase, 632 SCRA) e. Navigable rivers, streams & creeks f. Lakes g. Military Reservations h. Watershed i. Grazing lands j. Previously titled land k. Alluvial deposit along river when man-made *TYPES OF ESTATES: 1. FREEHOLD ESTATE indicates title of ownership a. Fee simple absolute title; conferred without limitation, qualification or restriction b. Fee tail pass title to grantee & his heirs c. Life state held for duration of life of grantee 2. LESS THAN FREEHOLD ESTATE a right short of title a. Estate for years lease for a period agreed upon, lessor retains ownership of land b. Tenancy from period to period lease running from month to month or year to year with automatic renewal c. Tenancy at will person is permitted to occupy land of another without stipulation as to period *3 STAGES OF DEVELOPMENT OF LEGAL SYSTEM OF TRANSFERRING TITLES: 1. Production & delivery of deed by grantor to grantee without registration

2. Recording of deed of conveyance to bind 3rd persons 3. Registration of title *REGISTRATION guarantees the title but RECORDING does not; need to examine other docs *PURPOSE OF REGISTRATION: 1. Serve as constructive notice 2. Prevent fraudulent claims 3. Protect interest of strangers to transaction *MODES OF ACQUIRING LAND TITLES: 1. Title by public grant conveyance of public land by government to a private individual; based on the Public Land Acts 2. Title by acquisitive prescription open, continuous, exclusive, notorious possession of a property 3. Title by accretion alluvium 4. Title by reclamation filling of submerged land by deliberate act and reclaiming title thereto; government filling up of parts of the sea for conversion to land. The SC has ruled that only the National Government may engage in reclamation projects. (Republic vs. CA; P.D. 3-A.) 5. Title by voluntary transfer private grant; voluntary execution of deed of conveyance 6. Title by involuntary alienation no consent from owner of land; forcible acquisition by state E.g. eminent domain/expropriation 7. Title by descent or devise hereditary succession to the estate of deceased owner 8. Title by emancipation patent or grant for purpose of ameliorating sad plight of tenant-farmers; not transferable except by hereditary succession based on P.D. No. 27 I. Torrens System A. Concept and background TORRENS SYSTEM A system for registration of land under which, upon the landowners application, the court may, after appropriate proceedings, direct the issuance of a certificate of title. Purposes: 1. quiet title to land once registered, owner might rest secure 2. To avoid possible conflicts of title regarding real property, 3. To facilitate transactions relative thereto by giving the public the right to rely upon the face of the Torrens certificate of title and to dispense with the need of inquiring further EXCEPT: when the party concerned has actual knowledge of facts and circumstances that should imply a reasonably cautious man to make such further inquiry. Probative Value: Torrens Title may be received in evidence in all courts of the Philippines, and shall be conclusive as to all matters contained therein, principally the identity of the owner of the covered land thereby. *ADVANTAGES: 1. Abolishes endless fees 2. Eliminates repeated examination of titles 3. Reduces records enormously 4. Instantly reveals ownership 5. Protects against encumbrances not noted on the Torrens certificate

6. Makes fraud almost impossible 7. It assures. 8. Keeps up the system without adding to burden of taxation; systems beneficiaries pay the fees 9. Eliminates tax titles 10. Gives eternal title as state ensures perpetuity 11. Furnishes state title insurance rather than private title insurance 12. Makes possible the transfer of titles or loans within hours instead days *PERSONS BOUND WHEN TITLE NOT REGISTERED: 1. Grantor 2. Heirs & devisees 3. Persons with actual notice B. Certificate of title TORRENS TITLE certificate of ownership issued under the Torrens System of registration by the government through road naming & declaring owner in fee simple of property described therein free from all liens except those expressly noted PROCESS: 1. Within 15 days from finality of order of judgment directing registration of title court to order LRA to issue decree of registration and certificate of title 2. Clerk of court will send order of court & copies of judgment 3. Administrator to issue decree of registration & original & duplicate of OCT signed by Administrator, entered & file decree of registration in LRA 4. Send to ROD original & duplicate of title & certificate for entry in his registration book 5. Enter in record book, dated, signed, numbered & sealed take effect upon date of entry 6. ROD to send notice to registered owner ready for delivery after payment of fees 7. ROD shall send duplicate & note on each certificate of title to whom it is issued 8. Original copy to be filed in ROD; bound in consecutive order *PROCEDURE IN LAND REGISTRATION CASE: 1. Survey of land by Bureau of Lands or duly licensed private surveyor 2. Filing of application for registration by applicant 3. Setting of date of initial hearing of application by RTC 4. Clerk of court to transmit to Land Registration Authority (LRA) the application, date of initial hearing & other pertinent docs 5. Publication of notice of filing of application, date & place of hearing in OG and in newspaper of general circulation 6. Service of notice contiguous owners, occupants & those who have interest in property 7. Filing of answer or opposition to application 8. Hearing of case by RTC 9. Promulgation of judgment by court 10. Issuance of decree by RTC decision; Instruct LRA to issue decree of confirmation & registration 11. Entry of decree of registration in Land Titles Administration

12. Sending of copy of decree to Register of Deeds (ROD) 13. Transcription of decree of registration in registration book & issuance of the owners duplicate original certificate of title of the applicant by the LRA - upon payment of prescribed fees ANNOTATIONS AT BACK OF CERTIFICATE need court order, otherwise null & void II. Regalian Doctrine A. Concept - all lands are presumed to belong to the State. - all lands of public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forest or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. B. Effects - those not appearing as owned by any private individual presumed to belong to the State. C. Concept of native title, time immemorial possession - where there is no showing that the land had been classified as alienable before the title was issued, any possession thereof, no matter how lengthy, cannot ripen into ownership. III. Citizenship Requirement A. Individuals and corporations 1. PRIVATE LANDS: a. At least 60% capital is Filipino to acquire private land b. Restricted as to extent reasonably necessary to enable it to carry out purpose which it was created c. If engaged in agricultural restricted to 1,024 ha. 2. PATRIMONIAL PROPERTY OF STATE a. Lease for 25 years renewable for another 25 years b. Limited to 1,000 ha. c. Apply to both Filipinos & foreign private corporation 3. ALIENABLE LANDS OF THE PUBLIC DOMAIN (limited to agricultural land) - only Filipino citizens may acquire Limitations: 1) not more than 12 hectares = purchase, homestead or grant 2) not more than 500 hectares = lease *FORMER FILIPINO PRIVATE LAND: purchased 1) 5,000 square meters for urban land 2) 3 hectares for rural land IV. Original Registration A. Who may apply 1. Under P.D. 1529 (Sec. 14, PD No. 1529) 1. Those who, by themselves or through their predecessors-ininterest, have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier; 2. Those who have acquired ownership of private lands by prescription under the provisions of existing laws;

3. Those who have acquired ownership of private lands or abandoned river beds by right of accession or accretion; and 4. Those who have acquired ownership of land in any other manner provided for by law. * Persons who cannot file an application for registration 1. A public land sales applicant insofar as the land covered by his sales application is concerned. Ratio: he acknowledged that he is not the owner of the land and that the same is public land. 2. A mortgagee or his successor in interest to the mortgage, notwithstanding the lapse of the period for the mortgagor to pay the loan secured to redeem it. Ratio: such act would amount to a pactum commissorium. 3. An antichretic creditor cannot also acquire by prescription the land surrendered to him by the debtor. Ratio: His possession is not in the concept of owner. 4. A person or entity whose claim of ownership to land had been previously denied in a reinvidicatory action. 1. ORIGINAL REGISTRATION UNDER PD NO. 1529 NATURE: proceeding brought before the Regional Trial Court ( as a land registration court) to determine title or ownership of land on the basis of an application for registration or answer by a claimant in a cadastral registration. Kinds of Original Registration 1. Voluntary by filing with the proper court a) Under P.D. No. 1529 (Property Registration Decree) b) Under Sec. 48 of CA No. 141, Public Land Act 2. Involuntary cadastral proceedings compulsory registration initiated by the government, to adjudicate ownership of land involuntary on the part of the claimants but they are compelled to substantiate their claim or interest through an answer 2. Under C.A. 141 -Filipino citizens who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of public domain under a bona fide claim of acquisition since June 12, 1945 or prior thereto or since time immemorial (CA No. 141, Section 48, as amended by PD No. 1073). 3. Under R.A. 8371 November 1997 Sec. 12. Option to Secure Certificate of Title under Commonwealth Act 141, as amended, or the Land Registration Act 496.- Individual members of cultural communities, with respect to individually-owned ancestral lands who, by themselves or through their predecessors-in interest, have been in continuous possession and occupation of the same in the concept of owner since the immemorial or for a period of not less than thirty (30) years immediately preceding the approval of this Act and uncontested by the members of the same ICCs/IPs shall have the option to secure title to their ancestral lands under the provisions of Commonwealth Act 141, as amended, or the Land Registration Act 496. For this purpose, said which are agricultural agricultural, residential, including those with a individually-owned ancestral lands, in character and actually used for pasture, and tree farming purposes, slope of eighteen percent (18%) or

more, are hereby classified as alienable and disposable agricultural lands. The option granted under this Section shall be exercised within twenty (20) years from the approval of this Act. Sec. 56. Existing Property Rights Regimes.- Property rights within the ancestral domains already existing and/or vested upon effectivity of this Act, shall be recognized and respected. B. Registration process and requirements A. REQUISITES (STEPS) IN ORDINARY LAND REGISTRATION PROCEEDINGS (P.D. 1529): (SFS-TP-SFH-PIEST) The following requisites must also be complied with in the confirmation of imperfect or incomplete title under Section 48 (b) of the Public Land Act 1. Survey of the land by the Bureau of Lands or a duly licensed private surveyor; NOTES: must be drawn in a tracing cloth plan approved ONLY by the Director of Land Management 2. Filing of Application for Registration by the applicant; NOTES: always at the RTC it is then indorsed to the MTC if there is no controversy over the land or it value is less than P100,000 in cases of delegated jurisdiction to the MTC, appeal is direct to the Court of Appeals Bureau of Land must always be furnished with a copy of the petition and all pertinent documents 3. Setting of date for initial hearing by the court; 4. Transmittal of Application and date of initial hearing together with all documents or other evidences attached thereto by the Clerk of Court to the Land Registration Authority; 5. Publication of Notice of Filing of Application and date and place of hearing once in the Official Gazette and once in a newspaper of general circulation in the Philippines; NOTES: it is at this point that the court acquires jurisdiction over the subject matter this is done by the Administrator who acts as the clerk of court 6. Service of Notice upon contiguous owners, occupants and those known to have interest in the property by the sheriff; 7. Filing of Answer or Opposition to Application by any person whether named in the notice or not; 8. Hearing of the case by the court; 9. Promulgation of judgment by the court; 10. Issuance of decree or order by the court declaring the decision final and instructing the Land Registration Authority to issue a Decree of Confirmation and Registration; NOTE: that it is not the court BUT the LRA which issues the decree of confirmation and registration 11. Entry of Decree in the Land Registration Authority; NOTE: This serves as the reckoning date to determine the 1year period from which one can impugn the validity of the registration. 12. Sending of copy of Decree to the corresponding Register of Deeds; and

13. Transcription of Decree in the registration book and issuance of Owners Duplicate Original Certificate of Title of the applicant by the Register of Deeds upon payment of the prescribed fees. *APPLICATION IN ORDINARY REGISTRATION PROCEEDINGS WHO MAY APPLY: 1. Those in open, continuous, exclusive, notorious possession of patrimonial property of state under bona fide claim of ownership since June 12, 1945 or earlier 2. Those who acquired ownership of private land by prescription

*PROCEEDINGS FOR ORDINARY REGISTRATION (LAND REGISTRATION ACT) /PROCEEDING FOR JUDICIAL CONFIRMATION OF IMPERFECT TITLE UNDER THE PUBLIC LAND ACT There exist a title to be confirmed Land applied for belongs to the state Court may dismiss without prejudice to file new application Dismiss with prejudice Risk to have application denied without losing land Risk involves loss of land CHAPTER 6: JUDGMENT & DECREE

3. Those who acquired ownership of private lands by right of accretion 4. Those who acquired ownership in any manner provided for by law MUNIMENT OF TITLE instruments or written evidence which applicant hold or posses to enable him to substantiate & prove title to his estate *TRANSACTION TOOK PLACE BEFORE ISSUANCE OF DECREE: 1. Record instrument in ROD in same manner as if no application was made 2. Present instrument to RTC, motion praying that same be considered in relation to the pending application *TRANSACTION TOOK PLACE AFTER ISSUANCE OF DECREE: Register directly with ROD for purpose of cancelling such title & issuing a TCT *PUBLICATION, ANSWER & DEFAULT *NOTICE IN CONSPICUOUS PLACE IN LAND & BULLETIN BOARD OF MUNICIPALITY 14 days before hearing *HEARING within 7 days after publication in OG not less than 45 not more than 90 days from date of order *TO WHOM NOTICE MUST BE SENT: 1. City/municipal mayor & provincial governor 2. Department of Agrarian Reform, Solicitor General & Director of Lands, Director of Fisheries, Director of Mines 3. Adjoining owners & those who have rights or interest thereto *REQUISITES OF OPPOSITION: 1. Set forth objections to the application 2. State interest claimed by oppositor GENERAL DEFAULT is when no person appears and answers within time prescribed while SPECIAL DEFAULT is when a party appears at initial hearing without having filed an answer and asks court for time to file answer but failed to do so within period allowed CHAPTER 5: HEARING & EVIDENCE WHO CONDUCTS HEARING: 1. RTC 2. Refer to Referee - Commissioner

DECREE issued by LRA containing technical description of land; issued after finality of judgment 1. Decrees dismissing application 2. Decrees of confirmation and registration Final 1 year after decree, unless there is an innocent purchaser for value Subject only to appeal Once final, cannot be subject to attack and is deemed conclusive against the world 3. Put end to litigation 4. Purpose of Torrens system is protected Amendment after 1 year is allowed - creation or extinguishment of new rights; inclusion of new owners not allowed JUDGMENT decision of court constituting its opinion after taking into consideration the evidence submitted WRIT OF POSSESSION order to sheriff to deliver the land to the successful party litigant; no prescription 1. Against loser 2. Against anyone unlawfully & adversely occupying WHEN WRIT MAY NOT ISSUE: when party entered into property after issuance of final decree, is not an oppositor in registration proceeding, and is in possession of land for at least 10 years RES JUDICATA: 1. Former judgment must be final 2. Rendered by court having jurisdiction over subject matter & parties 3. Judgment on merits 4. Identity of parties, subject matter and causes of action C. Remedies *REMEDIES AVAILABLE TO REGISTRATION PROCEEDINGS: AGGRIEVED PARTY IN

1. MOTION FOR NEW TRIAL - must be brought within 15 days from notice of judgment GROUNDS: a. Fraud, accident, mistake, excusable negligence which ordinary prudence could not have guarded b. Newly discovered evidence which could not be discovered & produced at trial c. Evidence insufficient to justify decision, decision is against the law

2. APPEAL must be brought 15 days from notice of judgment 3. REVIEW OF DECREE OF REGISTRATION available to party deprived of day in court; - became non-party due to misrepresentation; - invoke actual fraud; - before expiration of 1 year; - specific acts intended to deceive; - will no longer prosper if already transferred to innocent purchaser for value Requisites: a. Plaintiff is owner of land registered in name of defendant b. Registration procured through actual fraud c. Property has not issued to innocent purchaser for value d. Action is filed within 1 year after issuance of decree of registration 4. RELIEF FROM JUDGMENT 60 days from knowledge 6 months after entry of order; available to party to case, FAME; after judgment; person deprived of right is party to case 5. RECONVEYANCE action in personam; available so long as property not yet passed to innocent purchaser for value; bad faith or with notice of defect 6. RECOVERY FOR DAMAGES REQUISITES: a. Person is wrongfully deprived of his land by registration in name of another actual or constructive fraud b. No negligence on his part c. Barred/ precluded from bringing an action d. Action for compensation has not prescribed *MEANS TO RECOVER POSSESSION: 1. Forcible entry 2. Unlawful detainer 3. Accion publiciana 4. Accion reindivicatoria D. Cadastral registration - a kind of original registration which is compulsory initiated by the government, to adjudicate ownership of land involuntary on the part of the claimants but they are compelled to substantiate their claim or interest through an answer V. Subsequent Registration A. Voluntary dealings (WITH REGISTERED LAND) - need to present title to record the deed in registry & to make memorandum on title OPERATIVE ACT registration by owner; if deed is not registered, it is binding only between parties PROCESS OF REGISTRATION: 1. File instrument creating or transferring interest and certificate of title with ROD a. Owners duplicate b. Payment of fees & documentary stamp tax c. Evidence of full payment of real estate tax d. Document of transfer 1 copy additional for city/provincial assessor 2. ROD shall make a memorandum on the certificate of title, signed by him

3. Issue TCT 1. REGISTRATION OF REAL ESTATE MORTGAGE i) Execution of deed in a form sufficient in law (public instrument) ii) Registration with ROD where the land lies & take effect upon registration a. Present deed of mortgage together with owners duplicate b. Payment of fees c. ROD shall enter upon original certificate of title & upon duplicate a memorandum date, time of filing, signature, file number assigned to deed d. ROD to note on deed the date & time of filing & reference to volume & page of registration book in which it was registered iii) No duplicate need be issued 2. REGISTRATION OF CHATTEL MORTGAGE i) Execution of document ii) Payment of fees iii) ROD enters in DAY BOOK in strict order of their presentation chattel mortgages & other instruments relating thereto (primary process) iv) ROD thereafter enters in a more detailed form the essential contents of the instrument in the Chattel Mortgage Register (complementary process) 3. REGISTRATION OF TRUST i) Sworn statement claiming interest by reason of an implied trust with description of land & reference to number of certificate shall be registered in ROD ii) Provided not prohibited to do so by instrument creating the trust APPOINTMENT OF TRUSTEE BY COURT Certified copy of decree shall be presented to ROD & surrender duplicate certificate Cancel duplicate & new certificate shall be entered by ROD ACTION FOR RECONVEYANCE BASED ON IMPLIED TRUST Prescribes in 10 years If acknowledged in written form becomes express trust prescribes upon repudiation 4. REGISTRATION OF LEASE i) File with ROD the instrument creating lease together with Owners Duplicate of certificate of title ii) ROD to register by way of memorandum upon certificate of title iii) No new certificate shall be issued B. Involuntary dealings - No presentation required; annotation in entry book is sufficient INVOLUNTARY DEALINGS transactions affecting land in which cooperation of registered owner is not needed: it may even be against his will 1. ATTACHMENT A writ issued at the institution or during progress of an action commanding the sheriff to attach the property, rights, credits or effects of the defendant to satisfy demands of the plaintiff Kinds: a. Preliminary b. Garnishment

c. Levy on execution 1. REGISTRATION OF ATTACHMENT/OTHER LIENS i) Copy of writ in order to preserve any lien, right or attachment upon registered land may be filed with ROD where land lies, containing number of certificate of title of land to be affected or description of land ii) ROD to index attachment in names of both plaintiff & defendant or name of person whom property is held or in whose name stands in the records iii) If duplicate of certificate of title is not presented: a. ROD shall within 36 hours send notice to registered owner by mail stating that there has been registration & requesting him to produce duplicate so that memorandum be made b. If owner neglects or refuses ROD shall report matter to court c. Court after notice shall enter an order to owner to surrender certificate at time & place to be named therein iv)Although notice of attachment is not noted in duplicate, notation in book of entry of ROD produces effect of registration already *EFFECT OF REGISTRATION OF ATTACHMENT: 1. Creates real right 2. Has priority over execution sale 3. But between 2 attachments one that is earlier in registration is preferred 4. If not registered actual knowledge is same as registration DUTY OF ROD Basically ministerial but may refuse registration in ff circumstances: 1. Title to land is not in the name of defendant 2. No evidence is submitted to show that he has present or possible future interest in land 3. Unless: heir ATTACHMENT How continued, reduced or discharged Any method sufficient in law Document to be registered 2. EXECUTION SALE To enforce a lien of any description on registered land, any execution or affidavit to enforce such lien shall be filed with ROD where land lies Register in registration book & memorandum upon proper certificate of title as adverse claim or as an encumbrance To determine preferential rights between 2 liens: priority of registration of attachment 3. TAX SALE Sale of land for collection of delinquent taxes and penalties due the government In personam (all persons interested shall be notified so that they are given opportunity to be heard) Notice to be given to delinquent tax payer at last known address Publication of notice must also be made in English, Spanish & local dialect & posted in a public & conspicuous place in place wherein property is situated & at main entrance of provincial building Sale cannot affect rights of other lien holders unless given right to defend their rights: due process must be strictly observed Tax lien superior to attachment

No need to register tax lien because it is automatically registered once the tax accrues But sale of registered land to foreclose a tax lien need to be registered PROCEDURE OF REGISTRATION OF TAX SALE: 1. Officers return shall be submitted to ROD together with duplicate title 2. Register in registration book 3. Memorandum shall be entered in certificate as an adverse claim or encumbrance 4. After period of redemption has expired & no redemption (2 years from registration of auction sale) cancellation of title & issuance of new one 5. Before cancellation, notice shall be sent to registered owner: to surrender title & show cause why it shall not be cancelled ACTUAL KNOWLEDGE IS EQUIVALENT TO REGISTRATION OF ADVERSE CLAIM 1. Make a statement in writing setting forth alleged interest, from whom acquired, how acquired, no. of certificate of land, name of registered owner, description of land in which right/interest is claimed signed & sworn to 2. Statement shall be entitled to registration as adverse claim on certificate of title 3. Effective for 30 days from date of registration 4. After 30 days, may be cancelled by filing of verified petition by party in interest Any party may petition in court to cancel adverse claim Court to grant speedy hearing If adverse claim is adjudged invalid may be cancelled 5. No 2nd adverse claim based on same ground shall be registered by same claimant 4. REGISTRATION OF LIS PENDENS PURPOSE: keep subject matter within the power of the court until the entry of final judgment --- therefore creates merely a contingency & not a lien Effect of registration: 1. Impossibility of alienating the property in dispute during the pendency of the suit may be alienated but purchaser is subject to final outcome of pending suit 2. ROD duty bound to carry over notice of lis pendens on all new titles to be issued Cancellation of lis pendens: 1. Before final judgment court may order cancellation after showing that notice is only for purpose of molesting an adverse party or it is not necessary to protect rights of party who caused it to be registered 2. ROD may also cancel by verified petition of party who caused such registration 3. Deemed cancelled when certificate of clerk of court stating manner of disposal of proceeding is registered *Notice Of Lis Pendens Is An Involuntary Transaction Sufficient that there is entry in day book 5. OTHER PARTIES WHO NEED TO REGISTER: 1. ASSIGNEE IN INVOLUNTARY PROCEEDING FOR INSOLVENCY Duty of the officer serving notice to file copy of notice to ROD where the property of debtor lies Assignee elected or appointed by court shall be entitled to entry of new certificate of registered land upon presentment

of copy of assignment with bankrupts certificate of title (duplicate) New certificate shall not state that it is entered to him as assignee or trustee in insolvency proceedings * JUDGMENT/ORDER VACATING INSOLVENCY PROCEEDINGS Order shall also be registered Surrender title issued in name of assignee & debtor shall be entitled to entry of new certificate 2. GOVERNMENT IN EMINENT DOMAIN Copy of judgment file in ROD which states description of property, certificate number, interest expropriated, nature of public use Memorandum shall be made or new certificate of title shall be issued TRANSMISSION BY DESCENT AND DEVISE WHEN OWNER OF PROPERTY DIES testate or intestate, Administrator shall file with ROD registration of property in his name to be vested with ownership as trustee so he can sell, etc, convey, etc Not necessary if already empowered in the will WHEN JUDICIAL PROCEEDING NOT NECESSARY Heirs may partition estate immediately & no need to be burdened with cost/expenses of an administrator 1. In absence of debts 2. Heirs are all of legal age PARTITION/SETTLEMENT OF ESTATE 1. JUDICIAL After entry of final judgment of partition, copy certified by clerk of court to be filed with ROD Each owner to give separate certificate of title (duplicate) If ordered to be sold, purchaser shall be entitled to a certificate of title entered in his name upon presentment of order confirming sale 2. EXTRAJUDICIAL a. Decedent died intestate b. No debts c. Heirs are all of legal age, or minors represented by guardian *Procedure: Heirs to execute public instrument to be filed with ROD If disagree with each other, file in court ordinary action for partition If there is only 1 heir, may adjudicate to himself entire estate via affidavit to be filed with ROD If there are movables involved, bond to be filed equivalent to value of property as certified under oath by parties conditioned upon payment if any just claim which may be filed by creditor within 2 years after distribution Publication in newspaper of general circulation for 3 weeks; not binding to those without notice Final after 2 years *ORAL PARTITION, WHEN DEEMED VALID In provinces when person dies leaving property not covered by Torrens system to avoid legal expenses, heirs make a list of property, pay off debts & assign to each Statute of frauds do not operate because it is not a conveyance but a separation of property and designation of part which belongs to them WILLS AND LETTERS OF ADMINISTRATION

Executor required to file with ROD a certified copy of his letters of administration or the will if there is a will in order that ROD may register upon certificate a memorandum with reference to file no & date of filing COURT AUTHORITY NEEDED IN ORDER TO SELL 1. May be dispensed with if will empowers him sell 2. Without authority first secured, heir may sell subject to result of pending administration CHAPTER 16: ASSURANCE FUND State creates a fund for the compensation of persons injured by divesting/cutting off of rights due to the indefensibility of title; following that act of registration is operative act by which State transfers title; created to relieve innocent persons from harshness of doctrine that certificate of title is conclusive evidence of an indefeasible title to land. Upon entry of certificate in name of owner or TCT, of 1% shall be paid to ROD based on assessed value of land as contribution to assurance fund; if no assessment yet, sworn declaration of 2 disinterested persons subject to determination by court. Money shall be under custody of the National treasurer; invest it until principal plus interest aggregates to 500,000, excess shall be paid to the Assurance Fund; annual report of Treasurer to Secretary of Budget WHO IS ENTITLED: 1. Claimant must be owner, purchaser or encumbrancer in good faith who suffered actual damage by loss of land; in short he is deprived of his land or interest therein 2. No negligence attributable to him 3. Claimant is barred from filing action to recover said land 4. Action to recover from assurance fund has not prescribed *LOSS/DAMAGES SHOULD NOT BE DUE TO FOLLOWING REASONS: 1. Breach of trust 2. Mistake in resurvey resulting in expansion of area in certificate of title *LOSS/DAMAGES SHOULD BE DUE TO THE FOLLOWING REASONS: 1. Omission, mistake, misfeasance of ROD or clerk of court 2. Registration of 3rd persons as owner 3. Mistake, omission, misdescription in certificate of title, duplicate or entry in books 4. Cancellation *AGAINST WHOM ACTION IS FILED: 1. Action due to deprivation of land due to mistake, negligence, omission of ROD, etc ROD and National Treasurer as defendants; Sol-Gen must appear 2. Private persons involved should also be impleaded *LIABILITY: 1. Satisfy claims from private persons first 2. When unsatisfied secondary liable is the National Treasurer who shall pay thru assurance fund; thereafter Government shall be subrogated to rights of plaintiff to go against other parties or securities *MEASURE OF DAMAGES: Based on amount not greater than fair market value of land

Amount to be recovered not limited to 500,000 which is maintained as standing fund If fund is not sufficient, National Treasurer is authorized to make up for deficiency from other funds available to Treasury even if not appropriated *WHERE AND WHEN TO FILE ACTION AGAINST ASSURANCE FUND: 1. Any court of competent jurisdiction RTC in city where property lies or resident of plaintiff 2. Action prescribes in 6 years from time plaintiff actually suffered loss 3. If plaintiff is minor, insane or imprisoned has additional 2 years after disability is removed to file action notwithstanding expiration of regular period *FORMAL REQUISITES OF A DEED 1. Full name 2. Nationality 3. Place of residence 4. Postal address of grantee or other persons acquiring or claiming interest 5. Civil status 6. Whether or not corporation 1. ROD to keep an entry book day book 2. Enter in order of reception all deeds & voluntary instruments, write & processes re land -year, month, day, time, minute of reception of instrument; Registered from time of entry 3. Fees of 5 pesos per document to be paid within 15 days 4. Note memorandum & sign & issuance of certificate 5. Documents are numbered & indexed & indorsed with reference to certificate of title public records 6. Subject to reasonable regulation Cost borne by vendor *PETITION SEEKING SURRENDER OF DUPLICATE TITLE In voluntary and involuntary conveyances when duplicate cannot be produced, petition in court may be filed to compel surrender of certificate of title duplicate to ROD After hearing, may order issuance of new certificate and annul the old certificate; new certificate shall contain annotation re annulment of old certificate AMENDMENT AND ALTERATION OF CERTIFICATE OF TITLE A certificate of title cannot be altered, amended except in direct proceeding in court; summary proceeding Entries in registration books not allowed to be altered except by order of court Grounds: 1. New interest not appearing on the instrument have been created 2. Interest have terminated or ceased 3. Omission or error was made in entering certificate 4. Name of person on certificate has been changed 5. Registered owner has married 6. Marriage has terminated 7. Corporation which owner registered land has dissolved and has not conveyed the property within 3 years after its dissolution What corrections are permitted in title (which does not include lands included in original; technical description as long as original decree of registration will not be reopened

and rights or interest of persons not impaired; old survey was incorrect; substitution of name of registered owner) 1. Alterations which do not impair rights and 2. Alterations which impair rights with consent of all parties 3. Alterations to correct obvious mistakes 6. RECONSTITUTION OF ORIGINAL CERTIFICATE OF TITLE As consequence of war records have been destroyed When reconstituted have same validity as old title Can only be done judicially by filing a petition for reconstitution with RTC To be published in OG for 2 consecutive issues and on main entrance of municipality at least 30 days before hearing In rem proceedings Court to order reconstitution if it deemed fit; issue order to ROD Lack of essential data fatal 7. TRANSACTION EVIDENCED BY LOST DOCUMENT HOW REGISTERED ROD forbidden to effect registration of lost or destroyed documents Steps by interested parties: 1. Procure authenticated copy of lost or destroyed instrument 2. Secure an order from court *PUBLIC LANDS all lands owned by the government - either inalienable and alienable Inalienable public domain: timber and miner lands Alienable/ Disposable - public agricultural land *PUBLIC LAND MAY BE ALIENATED, CONVEYED TO PRIVATE PERSON. PROCEDURE: 1. Official issuing instrument of conveyance to issue instrument 2. File instrument with ROD 3. Instrument to be entered in books and owners duplicate to be issued 4. Instrument only contract between Government and private person and does not take effect as conveyance if unregistered, it is registration which is operative act of conveying land; evidence of authority for ROD to register 5. Fees to be paid by grantee 6. After issuance of certificate of title, land is deemed registered land within the purview of the Torrens system NATURE OF TITLE TO PUBLIC LANDS CONVEYED: INDEFEASIBLE AND CONCLUSIVE In absence of registration, title to public land is not perfected and therefore not indefeasible In case of 2 titles obtained on same date one procured through decree of registration is superior than patent issued by director of lands 2 titles procured by one person one from homestead patent, one from judicial decree & sold to 2 different persons, one who bought it for value and in good faith & one who register first shall have preference *CLASSIFICATION OF LAND OF PUBLIC DOMAIN: Classification is exclusive prerogative of executive & not by judiciary Anyone who applies for confirmation of imperfect title has burden of proof to overcome the presumption that the land sought to be registered forms part of public domain (Regalian doctrine)

UNDER THE CONSTITUTION: 1. Agricultural only one subject to alienation 2. Forest or timber 3. Mineral lands 4. National park UNDER THE PUBLIC LAND ACT: 1. Alienable/disposable a. Agricultural b. Residential, commercial, industrial c. Educational, charitable d. Town sites and for public and quasi-public uses 2. Timber lands - inalienable 3. Mineral lands inalienable If patent or title is issued void ab initio for lack of jurisdiction Not subject to acquisitive prescription; even if in possession for long time, will not ripen into ownership Except: mineral lands and forest lands acquired before inauguration of Commonwealth in November 15, 1935; vested rights which are protected FISHPONDS -Before: included in definition of agriculture, conversion of agricultural land to fishponds does not change character of land -Now: restricted meaning; fishponds have a distinct category; cannot be alienated but may be leased from government. DIRECTOR OF LANDS Quasi-judicial officer Findings of fact conclusive on higher court with absence of fraud, mistake other than error of judgment; but not with regard to finding of law Empowered to alienate and dispose lands *MODES OF ALIENATING PUBLIC LANDS: (HSC) 1. Homestead settlement 2. Sale 3. Confirmation of imperfect or incomplete title a. Judicial legalization b. Administrative legalization Lease not included since lease does not transfer ownership; * free-title grant: free distribution of public lands to encourage people to cultivate; government furnishes the applicant with tools plus cash allowance to enable him to cultivate *CONFIRMATION OF IMPERFECT TITLE: 1. Last extension granted by Government was until December 31, 1987 2. Right made available to person qualified to acquire alienable and disposable public land thru open, continuous, exclusive, notorious (OCEN) possession under bonafide claim of ownership since June 12, 1945. a. Prior to transfer of sovereignty from Spain to US, have applied for purchase but did not receive title, without default on their part provided they have occupied since their application b. In OCEN possession since June 12, 1945 or earlier c. Members of cultural minorities in OCEN who has claim of ownership for at least 30 years *MAXIMUM LAND THAT CAN BE APPLIED: 144 hectares

In case of foreigner, sufficient that he is already Filipino citizen at the time of his application Corporation who has less 60% Filipino ownership cannot apply confirmation of imperfect title; can only lease *PERSONS COMPETENT TO QUESTION LAND GRANT Persons who obtained title from State or through persons who obtained title from State *PATENT WHEN GOVERNMENT GRANT DEEMED ACQUIRED BY OPERATION OF LAW: 1. Deed of conveyance issued by government patent/grant 2. Registered with ROD mandatory: operative act to convey & transfer title 3. Actual physical possession, open & continuous Land ceased to be part of public domain & now ownership vests to the grantee Any further grant by Government on same land is null & void Upon registration, title is indefeasible *TITLE ISSUED PURSUANT TO REGISTRATION OF PATENT 1. Indefeasible when registered, deemed incorporated with Torrens system; 1 year after issuance of patent 2. May not be opened one year after entry by LRA; otherwise, confusion, uncertainty & confusion on government system, of distribution of public lands may arise & this must be avoided Except: annullable on ground of fraud, may be reopened even after 1 year because registration does not shield bad faith Court in exercise of equity jurisdiction may direct reconveyance even without ordering cancellation of title *AIM OF HOMESTEAD PATENT: Benevolent intention of government to distribute disposable agricultural land to destitute citizens for their home and cultivation As a matter of public policy, may be repurchased even if after 5 years provided not for profit Right of repurchase not allowed if sold within family & not for cultivating or living but for speculation purpose *RESTRICTIONS: 1. Cannot be alienated within 5 years after approval of application for patent 2. Cannot be liable for satisfaction of debt within 5 years after approval of patent application 3. Subject to repurchase of heirs within 5 years after alienation when allowed already 4. No corporation, partnership, association may acquire unless solely for commercial, industrial, educational, religious or charitable purpose or right of way subject to consent of grantee & approval of Secretary of Natural resources EXCEPTIONS: 1. Action for partition because it is not a conveyance 2. Alienations or encumbrances made in favor of the government ERRED HOMESTEADER NOT BARRED BY PARI DELICTO Pari delicto rule does not apply in void contract Violation of prohibition results in void contract Action to recover does not prescribe HOMESTEADER

If he dies, succeeded by heirs in the application LEGAL RESTRICTION IN DISPOSITION BY NON-CHRISTIANS (CULTURAL MINORITIES) Conveyance is VALID if able to read and can understand language where deed is written Otherwise, not valid unless approved by Commission on National Integration Safeguard is to protect them against fraud/deceit *CADASTRAL REGISTRATION PROCEEDINGS PURPOSE: Another means to bring lands under operation of Torrens System Ordinary registration is slow for lack of initiative on part of landowners, innovation was conceived to hasten and accelerate registration Government initiates that all lands within a stated region are up for registration whether or not owners are interested to settle their titles NATURE OF PROCEEDINGS: In rem No defendant & no plaintiff Compulsory PROCEDURE: (CFPFHDI) 1. CADASTRAL SURVEY In opinion of Phil president pursuant to requirement of public interest, title of land within a specified area needs to be settled and adjudicated Order Director of Lands to make survey and plan Director gives notice to persons claiming interest in lands & to gen public of day of survey published in OG and posted in conspicuous place on lands to be surveyed Geodetic engineers commences survey During survey, boundaries are marked by monuments 2. FILING OF PETITION After survey and plot been made, Director represented by Sol Gen institutes cadastral proceeding by filing petition in court against holders, claimants, possessors, occupants Parcel of lots given their cadastral numbers 3. PUBLICATION OF NOTICE OF HEARING Court to order date of hearing LRA to notify public by publishing notice 1x in OG and 1x in newspaper of general circulation & copy mailed to person whose address is known & other copies posted in conspicuous place designated by law 4. FILING OF ANSWER Any person claiming interest in any part of lands subject to petition is required to file answer Answer must give the ff details: a. Age of claimant b. Cadastral number of lot claimed c. Name of barrio or municipality where lot is located d. Name of owners of adjoining lots e. If in possession & without grant no. of years in possession f. If not in possession state interest claimed g. If assessed of taxation assessed value h. Any encumbrances affecting said lots 5. HEARING OF CASE In any convenient place where land lies Like an ordinary RTC trial Conflicting claims are determined

Lots claimed are awarded to persons entitles if they could prove title If none could prove title land is declared public domain 6. DECISION Claimants are notified of decision 7. ISSUANCE OF DECREE AND CERTIFICATE OF TITLE Upon order of court, LRA to enter decree of registration Decree made basis for issuance of OCT Decree is now being directly prepared and issued on regulation forms of such certificate NATURE OF TITLE COVERED BY 2 ACTS: Title in good faith & for value Errors in plan do not annul decree of registration Cancellation & correction are permitted *LAND ALREADY REGISTERED Jurisdiction is limited only to correction of technical errors Court cannot issue decree on land already decreed REVISION of decree allowed when substantial rights are not impaired; what is prohibited is registered land to be registered again in name of another Jurisdiction subsists to all incidental matters VI. Non-registrable Properties (TMLA) - timber land or forest land - mineral land - land of public use - all natural resources except agricultural lands VII. Dealings with Unregistered Lands Exclude: 1. History of land laws 2. Remedies sufficiently covered under Remedial Law 3. Registration of judgments, orders and partitions 4. Assurance fund 5. Registration of patents 6. Administrative structure of the Register of Deeds 7. Consultas. TORTS AND DAMAGES Book ITorts *ELEMENTS OF QUASI DELICT/TORTS (ADFNC) 1. act or omission 2. damage or injury is caused to another 3. fault or negligence is present 4. there is no pre-existing contractual relations between the parties 5. causal connection between damage done and act/omission

*Distinguished from other sources of obligation

CONTRACT QUASI DELICT DELICT

Vinculum Juris

Contract

Negligent act/ omission (culpa, imprudence)

Act/omission committed by means of dolo (deliberate, malicious, in bad faith)

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

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

Not a bar to recover civil damages

I. Principles A. Abuse of right; elements (LBP) a. there is legal right or duty b. exercised in bad faith c. sole intent of prejudicing or injuring another Art 19 Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due and observe honesty and good faith. B. Unjust enrichment Art 22 Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same. Kinds: 1) Negotiorum Gestio 2) Solutio Indebiti

Proof Needed

Preponderanc e of evidence

Preponderanc e of evidence

Proof beyond reasonable doubt

Defense available

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

Exercise of diligence of good father of a family in the selection and supervision of employees

Preexisting contract

There is preexisting contract

No pre-existing contract

No pre-existing contract

C. Liability without fault - with vicarious liability - if he is benefited thereto Art 23 Even when an act or event causing damage to anothers 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. *WHAT MUST BE PROVED 1. Negligence - In action for Quasi Delict, plaintiff must prove negligence of defendant Exception: a. In cases where negligence is presumed or imputed by law - this is only rebuttable/presumption juris tantum b. Principle of res ipsa loquitur (the thing speaks for itself) grounded on the difficulty in proving thru competent evidence, public policy considerations 2. Damage/injury 3. Causal connection between negligence and damage (to be actionable) -Defendants negligence must be the proximate cause of the injury sustained by the plaintiff to enable plaintiff to recover. Thus, if plaintiffs own conduct is the cause of the injury there can be no recovery. If plaintiff's negligence is only contributory he is considered partly responsible only, may still recover from defendant but must be reduced by the courts in proportion to his own negligence D. Acts contrary to law Art 20 Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

Burden of proof

Contractual party. Prove the ff.: 1. existence of a contract 2. breach

Victim. Prove the ff.: 1. damage 2. negligenc e 3. causal connectio n between negligenc e and damage done

Prosecution. Accused is presumed innocent until the contrary is proved.

CIVIL LIABILITY IN QUASI-DELICT vs. DELICT DIFFERENCE Liability Employer of QUASI-DELICT Solidary DELICT Subsidiary

Reservation Requirement

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

Civil aspect is Impliedly instituted with criminal action

E. Acts contrary to morals (contra bonus mores) Art 21 Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damages. - includes cases where 1. there was financial damage 2. social humiliation was caused to one of the parties 3. where there was moral seduction ELEMENTS: 1) acts that is legal 2) but contrary to morals, good customs, public order, or public policy 3) done with intent to injure BREACH OF PROMISE TO MARRY -can be maintained if the plaintiff incurred expenses for the wedding and other incidents thereof DESERTION BY A SPOUSE - spouse has legal obligation to live with her/his spouse; nonperformance of duty to the other is contrary to law, morals and good customs II. Classification of Torts A. According to manner of commission: intentional, negligent and strict liability *INTENTIONAL - include conduct where the actor desires to cause the consequences of his act or believes the consequences are substantially certain to result from it. - includes assault, battery, false imprisonment, defamation, invasion of privacy, and interference of property *NEGLIGENCE - involves voluntary act or omissions which result in injury to others, without intending to cause the same. -the actor fails to exercise due care in performing such acts or omissions. *STRICT LIABILITY - a tort where the person is made liable independent of fault or negligence upon submission of proof of certain facts. B. According to scope: general or specific - remedies that either preventive or compensatory may be directed to specific person or to general public. III. The Tortfeasor: PERSONS LIABLE FOR QUASI DELICT A. The direct tortfeasor TORTFEASOR - Whoever by act or omission causes damage to another, there being fault or negligence is obliged to pay for the damage done (art 2176). 1. Natural persons - the actor 2. Juridical persons - civilly liable as natural person; liability is always vicarious or imputed, since they act only through their officers and employees

*Employee or officer concerned is not free from liability but the corporation may be held directly and primarily liable under the concept of vicarious liability. CLOSE CORPORATION - stockholders who are personally involved in the operation of the corporation may be personally liable for corporate torts CORPORATION BY ESTOPPEL - persons who assume to act as corporation shall be liable as general partners for all debts, liabilities and damages incurred -lack or corporate personality cannot be used as defense PARTNERSHIP - partnership is solidarily liable with the partners if the latter commit tortuous acts while acting in the pursuit of partnership business (principle of mutual agency) B. Persons made responsible for others 1. In general *PERSONS EXPRESSLY MADE LIABLE BY LAW (even w/o fault) a. POSSESSOR OF AN ANIMAL OR WHOEVER MAKES USE OF THEM EVEN IF THE ANIMAL IS LOST OR ESCAPED Except: 1. Force majeure 2. Fault of the injured/damaged person b. OWNER OF MOTOR VEHICLE - In motor vehicle mishap, the owner is solidarily liable with the driver if: 1. he was in the vehicle, and 2. could have through due diligence prevented the misfortune c. MANUFACTURERS & PROCESSORS OF FOODSTUFFS, DRINKS, TOILET ARTICLES & SIMILAR GOODS - they are liable for death and injuries caused by any noxious or harmful substances used although no contractual relation exists between them and the consumers d. DEFENDANT IN POSSESSION OF DANGEROUS WEAPONS OR SUBSTANCES, SUCH AS FIREARMS AND POISON - there is prima facie presumption of negligence on the part of defendant if death or injury results from such possession Exception: The possession or use thereof is indispensable in his occupation or business e. PROVINCES, CITIES & MUNICIPALITIES -shall be liable for damages for the death or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision f. PROPRIETOR OF BUILDING OR STRUCTURE - responsible for the damages resulting from any of the ff.: i) total or partial collapse of building or structure if due to lack of necessary repairs ii) 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 iii) by excessive smoke, which may be harmful to persons or property iv) by falling of trees situated at or near highways or lanes, if not caused by force majeure

Art 218 School, admin, teachers engaged in child care are made expressly liable

Art 2180 Teachers, head of establishment in Arts and trades are made expressly liable No such express solidary nor subsidiary liability is stated

Liability of school, admin, teachers is solidary and parents are made subsidiary liable Students involved must be minor

Students involved necessarily minor

not

v) by eman ations from tubes, canals , sewers or depos its of infecti ous matter , constr Issues: 1. whether or not schools are liable? Gen rule: schools are not liable as party defendants exception: a) FC 218 schools are expressly made liable b) St. Francis case ruling schools liability as employer c) PSBA case ruling school has liability based on contract So that a) if culprit is a teacher, follow St. Francis ruling (sue school as employer) b) if culprit is a stranger, follow PSBA ruling (sue school based on contract) c) if culprit is a student - apply 2180 2. Does 2180 apply to school of arts & trades only? No. applies to all including academic institution per weight of jurisprudence based on obiter of Justice JBL Reyes in the Exconde case 3. basis of liability of teacher principle of loco parentis (stand in place of parents)/special parental authority 4. so long as they remain in their custody not literal anymore; before: boarding & living with teacher due to peculiar characteristic of trade & arts school as long as they are in the protective, supervisory capacity of teacher special parental authority (i) Elements; definition *QUASI-DELICT/TORTS ( OBLIGATION EX QUASI-DELICTO or EX QUASI MALEFICIO ) - from the Latin word torquere means to twist - also called culpa aquiliana (source of obligation: Lex Aquilia) - it is an unlawful violation of private right which causes damage to another, there being no pre-existing contractual relations between the parties. Elements: a) There must be fault or negligence attributable to the person charged b) There must be damage or injury c) There must be a direct relation of cause and effect between the fault or negligence on the one hand and the damage or injury on the other hand ( proximate cause ) (ii) Distinguished from culpa contractual and culpa criminal
QUASIDELICT/CULPA AQUILIANA CULPA CONTRACTUAL CULPA CRIMINAL/DELICT

ucted without precautions suitable to the place g. ENGINEER, ARCHITECT OR CONTRACTOR - if damage of building or structure is caused by defect in construction which happens within 15 years from construction; action must be brought within 10 years from collapse h. HEAD OF FAMILY THAT LIVES IN A BUILDING OR PART THEREOF - liable for damages caused by things thrown or falling from the same a) Quasi-delicts under Art. 2180, and the Family Code, Arts. 218-219, 221 PERSONS VICARIOUSLY LIABLE the obligation imposed in 2176 is demandable not only for ones own act or omission but also for those persons for whom one is responsible (Art 2180). VICARIOUS LIABILITY law on imputed negligence; a person who himself is not guilty of negligence is made liable for conduct of another Reason: 1. public policy deeper pocket/capacity to pay 2. violation of duty on account of relationship he is negligent Note: Family Code, art 218 - The school, its administration & teachers or the individual, entity or institution engaged in child care Art 21 Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damages. shall have special parental authority & responsibility over the minor child under their supervision, instruction or custody (authority & responsibility shall apply to all authorized activities whether inside or outside the premises or the school, entity or institution). Family Code, art 219 - those given the authority & responsibility shall be solidarily & principally liable for damages caused by act/omission of the unemancipated minor; parents, judicial guardian or person exercising substitute parental authority over said minor shall be subsidiarily liable.
*Difference between Articles 218 & 2180

Governed mainly by Art 2176 of the CCP Fault or negligence

Governed by Art 1170 1174 of the CCP on Obligations and Contracts Fraud, negligence or delay

Governed by 365 of the RPC

Art

Imprudence and negligence either: a. Reckless imprudence b. simple imprudence

Reckless imprudence - consist voluntary, but without malice, doing or failing to do an act from which material damage results by reason of inexcusable lack of precaution on the part of the person performing or failing to perform such act, taking into consideration his employment or occupation, degree of intelligence, physical condition and other circumstances regarding persons, time and place. Simple imprudence - consist in the lack of precaution displayed in those cases in which the damage impending to be caused is not immediate nor the danger clearly manifest. b) Indirect liability for intentional acts - concept of quasi-delict includes acts which are criminal in character or in violation of penal law, whether voluntary or negligent; not limited to acts which are not criminal - independent civil action arising from crime *intentional acts of children vicarious liability of parents *intentional acts of employees vicarious liability of employers c) Presumption of negligence on persons indirectly responsible - after proven that the persons to whom they are responsible committed the tortuous act d) Nature of liability; joint or solidary - solidary liability 2. In particular a) Parents - The father, and in case of his death or incapacity, the mother are responsible for damage caused by: i. minor children ii. who live in their company Note: Father and Mother shall jointly exercise parental authority over common children. In case of disagreement, father's decision shall prevail (art 211). b) Guardians - Guardians are liable for damages caused by the minor or incapacitated persons who are i. under their authority & ii. live in their company c) Owners and managers of establishments and enterprises - Owners & managers of establishment or enterprise are responsible for damages caused by their employees i. in the service of the branches in which the latter are employed OR ii. in occasion of their function d) Employers - Employers shall be liable for damages caused by their employees & household helpers i. acting w/in the scope of their assigned task ii. even though the former are not engaged in any business or industry (unlike in RPC subsidiary liability of employer attaches in case of insolvency of employer for as long as the employer is engaged in business/industry) *Defenses available to employers: i. exercise of due diligence in selection and supervision of employees

Separate source of obligation independent of a contract Presumptive liability of employer;

Foundation of liability is the contract; breach of contract Employer has primary and direct liability in breach of contract through negligence of his employee Diligence of a good father of a family in the selection and supervision of employee is not a defense; Defense of good father of a family is not a proper defense

Employers liability is subsidiary

Can be rebutted by proof of the exercise of due care in their selection and supervision Defense of good father of a family in the selection and supervision of employees is a proper and complete defense Affect private interest Negligence is direct, substantive and independent of contract

No pre-existing obligation (except of course the duty to be careful in all human actuations Proof: Preponderance of evidence Ordinarily, the victim has to prove the negligence of the defendant. This is because his action is based on alleged negligence on the part of the defendant.

Negligence is merely incidental to the performance of an obligation already existing because of a contract There is a preexisting obligation (a contract, either express or implied) Proof: Preponderance of evidence As long as it is proved that there was a contract and that it was not carried out, it is presumed that the debtor is at fault, and it is his duty to prove that there was no negligence in carrying out the terms of the contract.

This is not a proper defense. Here, the employees guilt is automatically the employers civil guilt, if the former is insolvent. Affect the public interest Negligence is direct, substantive and independent of contract

No pre-existing obligation (except the duty never to harm others) Proof: Guilt beyond reasonable doubt Accused is presumed innocent until the contrary is proved, so prosecution has the burden of proving the negligence of the accused.

ii. act/omission was made outside working hours and in violation of company's rules and regulations (i) Meaning of employers - One who employs the services of others; - one for whom employees work and who pays their wages or salaries. *employer- employee relationship must be proved so that liability may arise (ii) Requisites (a) Employee chosen by employer or through another - hiring (b) Services rendered in accordance with orders which employer has authority to give - the control test = employer controls not only the end but also the manner and means to be used (c) Illicit act of employee was on the occasion or by reason of the functions entrusted to him - within the scope of their assigned task (d) Presumption of negligence - only juris tantum, not juris et de jure (meaning disputable or rebuttable) Presumption an inference as to the existence of a fact not actually known, arising from its usual connection with another which is known - a conjecture based on past experience as to what course human affairs ordinarily take. - may be presumption juris (law) or presumption hominis (facts) *EMPLOYER - is presumed to be negligent and the presumption flows from the negligence of the employee (employees negligence must be proved first, before presumption to the employer) - premise of employers liability is negligence or fault on the part of the employee; once fault is established, the employer can then be made liable on the basis of the presumption that the employer failed to exercise diligence of a good father of a family in the selection and supervision of its employees. * negligence of servant is conclusively negligence of the master (iii) Employer need not be engaged in business or industry (Art 2180, 1st paragraph) - not necessary for the employer to be engaged in any business or industry to be liable for the negligence of his employee who is acting within the scope of his assigned task (iv) Defense of diligence in selection and supervision *Employer can escape liability if he can establish that he exercised proper diligence in the selection and supervision of his employee (v) Nature of employers liability -primary and solidary PRIMARY - party may recover from the employer directly, regardless of the solvency of their employees. SOLIDARY

- aggrieved party may choose to sue either of them or both of them (employer with right of reimbursement from the employee) e) State - The state is responsible when it acts through a special agent, but not when the same is caused by an official to whom task done properly pertains in which case art 2176 is applicable; however, in doctrine of non-suability of state = state cannot be sued unless it permits; suability does not mean liability; f) Teachers and heads of establishments of arts and trades - Teachers or heads of establishments of arts & trades shall be liable for damages caused by their i. pupils, students & apprentices ii. as long as they remain in their custody C. Joint tortfeasors (Art. 2194, Civil Code) - two or more persons liable for quasi-delict; all liable as principal - responsibility is solidary - person injured has his election to sue all or some of the parties jointly, or one of them separately, because the tort is in its nature a separate act of each individual IV. Act of Omission and Its Modalities A. Concept of act -omission of statutory duty imposed by law - AFFIRMATIVE DUTIES IMPOSED BY LAW ON CERTAIN ACTORS 1) imposed because of the public interest involved or special relationship between individuals, particularly employeremployee relationship 2) affirmative duties that become legal duties because they refer to principles of social conduct so universally recognized as to be demanded that they be observed as a legal duty 3) imposed by law or jurisprudence that are considered purely moral obligation - determined in the a) nature of activity b) expertise of the cator c) effects thereof in the determination of negligence @The scope of legal duty has expanded in obedience to the urge of morals *SOME ACTS 1) Duty to Rescue a) to the Rescuer - it is compassion that hurries us without reflection to the relief of those who are in distress - in consideration of the nature of man to come to rescue to their fellows, any person causes injury, because of the acts or omissions, to another and the latter being rescued is liable for the injuries to the rescuer. - there is liability to the rescuer; and the law does not discriminate between the rescuer oblivious of the peril and the one who counts the costs; enough that the act, whether impulsive or deliberate, is the child of the occasion; danger invites rescue - Santiago vs de Leon : it was held that one who was hurt while trying to rescue another who was injured through negligence may recover damages; delay of the electric company in coping with the emergency reported to them was considered conclusive evidence of negligence - conduct which might otherwise be considered contributory negligence may not be considered where a person is injured in attempting to save others from imminent danger of

personal injury or death. In determining whether one making or attempting such rescue exercised ordinary care, all the surrounding circumstances are to be considered including the existence emergency, the a alarm, excitement and confusion usually present, the uncertainty as to the means employed, the necessity for immediate action, and the liability to err in the choice of the best course of action to pursue. (Corpus Juris Secumdum) @Is a person who did not rescue another who is in distress liable to the latter? - In the Philippines, there is no legal duty to rescue. A person is not liable for quasi-delict even if he did not help a person in distress. EXCEPT: -limited duty: to rescue helpless person, under certain circumstances (crime against security, Art 275 of the RPC) - individuals who are required by law to take care another person; legally compelled to rescue the other person under their care or custody: parents-children or guardian-wards 2) Owner, Proprietors and Possessors GENERAL RULE: Owner is not liable to any person who might be damaged if he is merely exercising his right: enjoy, dispose of and recover. a) as to trespasser General Rule: owner has no duty to maintain his property in danger-free state just to prevent trespasser from being injured. Exceptions: a) tolerated possession - owner is liable if plaintiff is inside his property by tolerance or by implied permission -CASE LAW: Rodrigueza vs. Manila Railroad: Although plaintiff undoubtedly assumed the risk of any loss that might have resulted from fires occasioned by defendants locomotives if operated and managed with ordinary care, BUT he cannot be held to have assumed the risk of any damage that might result from the unlawful negligent acts of defendant. Nobody is bound to anticipate and defend himself against the possible negligence of another. Rather he has a right to assume that the other will use the ordinary care of the ordinarily prudent man. b) Visitors - owner owe a duty of care to visitors i) Common carriers - duty imposed also to common carrier - may be held liable for negligence to persons who stay in their premises even if they are not passengers; - duty to observe utmost diligence of very cautious persons with due regard for all circumstances: not only to passengers during the course of the trip but for so long as the passengers are within it premises and where they ought to be in pursuance to the contract of carriage - CASE LAW: LRT, et al vs. Vda Navidad: deceased was where he was supposed to be with the intention of boarding a train after he purchased the ticket or train. - liability to persons other than passengers = general rule of negligence relating to the duties of the owners or occupiers of property generally to trespassers, licensees or invitees; liable if injuries caused through negligence of the carriers employees (based in Art 2176 of CCP or quasi-delict; not on contract)

c) Children and Attractive Nuisance - serves as a limitation to the rule on contributory negligence - liability exists even if the child is trespasser so long as he is not of sufficient age or discretion. ATTRACTIVE NUISANCE - under the rule, an owner is liable if he maintains in his premises dangerous instrumentalities or appliances of a character likely to lure children in play and he fails to exercise ordinary care to prevent children of tender age from playing therewith or resorting thereto. - includes turntables, explosives, electrical conduits, smoldering fires and rickety structures - nuisance because it attracts children GENERAL RULE: attractive nuisance not applicable to bodies of water, artificial as well as natural, in the absence of some unusual condition or artificial feature other than the mere water and its location. SWIMMING POOL, POND OR RESERVOIR OF WATER - is not considered a nuisance - SC: nature has created streams, lakes and pools which attract children. Lurking in their waters is always the danger of drowning. Against this danger children are to know the danger, and the owner of private property is not liable if he merely duplicated the work of nature by creating an artificial pool on his own property without adding new danger. REQUISITES/CONDITIONS THAT MADE THE OWNER LIABLE: 1) the place where the condition exists is one upon which the possessor knows or has reason to know that children are likely to trespass; 2) the condition is one which the possessor knows or has reason to know and which he realizes or should realize will involve an unreasonable risk of death or serious bodily harm to such children; 3) the children because of their youth do not discover the condition or realized the risk involved intermeddling with it or in coming within the area made dangerously by it; 4) the utility to the possessor of maintaining the condition and the burden of eliminating the danger are slight as compared with the risk to children involved; (risk benefit analysis) 5) the possessor fails to exercise reasonable care to eliminate the danger or otherwise to protect the children *Turntable cases - refer to a class of cases where the owner of the property is held liable to children who are trespassing thereon and injured, upon the ground that the owner is bound to know that children may be attracted and may be injured thereby, although the owner is guilty of no negligence except in maintaining the property in such condition that children may trespass thereon to their harm. d) State of Necessity DEFINITION: a situation of present danger to legally protected interests, in which there is no other remedy than the injuring of anothers also legally protected interest. -safeguarding of a right at the expense of another right. - owners and possessors owe a duty to allow trespassers, who are in state of necessity, to enter their properties. - owner of the thing has no right to prohibit the interference of another with the same, if the interference is necessary to avert an imminent danger and threatened damage, compared to damages arising to the owner from the interference made, is greater. (Art 432 CCP)

- owner may demand from the person benefited, indemnity for damages. b) as to use of property that injures others REASON: ownership is not absolute; subject to limitations imposed by the very fact of the owners membership in the community. - Owner cannot use his property in such a manner as to injure the right of others, sic utero tuo ut alienum non laedas (Art 431 CCP) c) Liability as to Proprietors of Buildings - affirmative duty of due care in maintaining the same - if collapse is due to the lack of necessary repairs (Art 2190) 3) Employers and Employees a) employers - employers liable to the damages incurred to the employees - employers, by engaging the services of another as employee, impliedly agree to use reasonable care to provide reasonably safe premises and places in and about which the servant is required to work, to furnish reasonably safe and suitable machinery, and a sufficient supply of proper materials, tools, and appliances for the work to be done, and at all times during the continuance of work to repair and to keep in the same safe suitable condition the places, machinery, and appliances; to provide competent workmen; and so for as the servant could not be assumed to know the perils of the work itself, or of the particular portion of it in which he was engaged, to instruct him and to warn him of any secret danger which the master was aware; bound to exercise that measure of care which reasonably prudent men take under similar circumstances - employer has the duty to properly maintain the work place or the provision of adequate facilities to ensure the safety of the employees; failure is considered negligence per se b) employees - bound to exercise due care in the performance of their functions for the employees; absence such due care, may be held liable; liability based on negligence committed while in the performance of the duties - existence of the contract constitutes no bar to the commission of torts by one against the other and the consequent recovery of damages. -CASE LAW: Araneta vs De Joya: VP who signed the checks and disbursed funds of the corporation for an unauthorized trip abroad of another employee may be held liable; guilty of neglecting to perform his duties properly to the damage of the company 4) Banks - nature of business is one affected with public interest - under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship - CASE LAW: Phil Bank of Commerce vs CA: SC found there was contributory negligence on the part of the depositor, but considered the negligence of the bank and its employees as the proximate cause of the loss. - banks have to reflect every transaction down to the last centavo and deliver the money to whomever the depositor directs; failure to do so can cause the depositor not a little embarrassment if not financial loss and perhaps even civil and criminal litigation. 5) Common carriers

- from the nature of their business and for reason of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them according to all circumstances of each case. - common carriers responsible for all the loss, destruction, or deterioration of the goods EXCEPT: a) flood, storm, earthquake, lightning, or other natural disaster or calamity; b) act of public enemy in war, whether international or civil; c) act or omission of the owner of the goods; d) the character of the goods or defects in the packing or in the containers; or e) order or act of competent authority. PRESUMPTION: common carriers have been at fault or have acted negligently - cases where there is no liability - in case of death or injuries to passengers DEFENSE: Case is for the enforcement of an obligation arising from breach of contract = proof of the exercise of due diligence in the selection and supervision of employees cannot be made; the selection and supervision defense is only available to vicarious liability BREACH OF CONTRACT - gives rise to action based on quasi-delict - quasi-delictual liability may be due to the passenger himself or third person who may be injured thereby; - presumption of negligence does not apply if the action is based on quasi-delict - nature of the business still requires the exercise of the highest degree of care demanded by circumstances. 6) Doctors/Physicians - experts, who because of their training and the very nature of work, are required to exercise utmost diligence in the performance of their tasks. - Patients have consigned their fates and lives to the skill of their doctors; duty of the physician to bring skill and care to the preservation and maintenance of the health of the people = breach of this trust, liable a) Standard of Care - action: medical malpractice or negligence (particular form of negligence which consists in the failure of a physician or surgeon to apply his practice of medicine that degree of care and skill which is ordinarily employed by the profession generally under the similar conditions, and in like surrounding circumstances; type of claim which a victim has available to him or to her to redress a wrong committed by a medical professional which has caused bodily harm; elements: duty, breach, injury and proximate causation) - doctor must use at least the same level of care that any reasonably competent doctor would use to treat a condition under the same circumstances; reasonable average merit among the ordinarily good physicians. i) General Practitioner vs. Specialist *General Practitioner standard of care demanded is ordinary and diligence in the application of his knowledge and skill in his practice of the profession; degree of skill and care of the average qualified practitioner, taking into account the advances of the profession

*Specialist legal duty to the patient is that of an average specialist, not that of an average physician; that special degree of skill and care which physicians, similarly situated who devote special study and attention to the treatment of such organ, disease, or injury ordinarily possess, regard being in the state of scientific knowledge at the time; standard of care and skill of the average member of the profession practising the specialty, taking into account the advances in the profession b) Captain of the Ship Doctrine - doctor is the head of the surgical team, likened to the ship captain; he has the responsibility to see to it that those under him perform the task in the proper manner; liability of the surgeon not only for the wrongful acts of those who are under his physical control but also those wherein he has extension of control. - doctor cannot blame the assisting nurse for his own omission ( nurse may be held jointly and solidarily liable if also negligent) c) Not Warrantors - Physicians are not warrantors of cures or insurers against personal injuries or death of the patient - no practitioners can guarantee results because of difficulties and uncertainties in the practice of profession - once the doctor or specialist exercises reasonable care and skill, not responsible for a mistake in diagnosis d) Proof - exercise of reasonable care and skill = matter of expert opinion; expert witness - reliance on the doctrine res ipsa loquitur; limited where the court can determine the standard of care; does not automatically apply to all cases of medical negligence; where layman, as a matter of common knowledge and observation, can conclude that there is negligence on the part of the doctor; applied when the circumstances attendant upon the harm justify an inference of negligence as the cause of that harm. e) Liability of Hospitals and Consultants *CONSULTANT doctors/physicians who are not resident doctors/physicians of the hospital but only visiting or attending doctor/physician *Captain of the ship doctrine = may apply to consultant *HOSPITAL - liable if there is employer-employee relationship - should exercised significant control in the hiring and firing of consultants and in the conduct of their work within the hospital premises to be liable; 7) Lawyers - CANON 18 Code of Professional Responsibility: A lawyer shall serve his client with competence and diligence - it is his responsibility not to undertake a legal service he knows or should know that he is not qualified to render - also enjoined not to handle any legal matter without adequate preparation. - shall not neglect a legal matter entrusted to him and his negligence in connection therewith shall render him liable. V. Proximate Cause A. Concept Concept of proximate cause the adequate and efficient cause which in the natural order of events and under the

particular circumstances surrounding naturally produce the event

the

case,

would

PROXIMATE CAUSE - not necessarily the last link in the chain of events but that which is the procuring efficient and predominant cause. - not necessarily the sole cause 1. Definition - that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. 2. Test *Tests of Proximate Cause Two-part test a. Cause-in-fact Test b. Policy Test NOTE: In determining the proximate cause of the injury, it is first necessary to determine if the defendants negligence was the cause-in-fact of the damage to the plaintiff (Causein-fact test) If the defendants negligence was not the cause-in-fact, the inquiry stops If it is, the inquiry shifts to the question of limit of the defendants liability (Policy test) a) Cause in fact test - determination if defendants negligence was the cause-infact of the damage; by looking into the past of any given event; causal connection - determination whether the defendants act or omission is a causally relevant factor: i) but for test or sine qua non test - where if the first object had not been, the second never had existed - damage would have not resulted had there been no negligence on the part of the defendant *defendants negligence not a cause in fact if the plaintiffs damage/injury could not have been avoided even the absence of defendants negligence. ii) substantial factor test - makes the negligent conduct the cause in fact of the damage if it was substantial factor in producing the injuries - causes set in motion by the defendant must continue until the moment of the damage iii) Necessary and sufficient (NESS) test - act or omission is a cause-in-fact if it is necessary element of a sufficient set *NECESSARY -circumstance in whose absence the event cannot occur *SUFFICIENT - circumstance in whose presence the event must occur. *Two ways by which co-presence may manifest itself: a. Duplicative causation When two or more sets(of cause in fact? Or candidate condition as a cause in fact) operate simultaneously to produce the effect; the effect is over-determined (overdetermined means beyond determination, such that the copresence of two or more set of probable or candidate cause -in- fact which simultaneously produces the effect

result to the impossibility of determining which of the set is the ultimate cause-in-fact.) b. Pre-emptive causation When, though coming about first in time, one causal set trumps(meaning pre-empt? Cover-up?) another potential set lurking in the background; the causal potency of the latter is frustrated(meaning the co-presence of cause-in-fact can be manifested not only by duplicative causation operating in simultaneous manner but also by coming about(of one causal set) first in time or pre-empting another potential causal set lurking in the background.) *Multiple causation If there are a number of candidate conditions/cause, which, taken one at a time, would not in fact have been sufficient to cause the accident and the accident was a cumulative effect of all the candidate conditions. b) Policy test - determination of the limit of liability of the defendant i) foreseeability or foresight perspective ii) hindsight test or directness perspective 3. Distinguished from immediate cause - The last of a series or chain of causes tending to a given result, and which, of itself, and without the intervention of any further cause, directly produces the result or event. 4. Distinguished from intervening cause - one that destroys the causal connection between the negligent act and injury and thereby negates liability NOT INTERVENING CAUSE: DOES NOT NEGATE LIABILITY - cause is already in operation at the time the negligent act is committed Example: A throws hot object to B, B to C(injured) = A is liable because he is the one who set in motion; no efficient intervening cause - those foreseeable intervening cause such as wind - unforeseen and unexpected act or cause = does not negate liability against the actor, if negligence directly and proximately cooperates with the independent cause in the resulting injury; if act of third person is duplicative in nature or if it merely aggravated the injury that resulted because of a prior cause. 5. Distinguished from remote and concurrent *REMOTE CAUSE - cause which some independent force merely took advantage of to accomplish something not the natural effect thereof CASE LAW: Gabeto vs. Araneta : stopping of the rig by the defendant in the middle of the street was too remote from the accident that presently ensued to be considered the legal or proximate cause thereof; appreciable interval of time elapsed before the horse started on his career up the street. *NEAREST CAUSE That cause which is the last link in the chain of events; the nearest in point of time or relation Proximate cause is not necessarily the nearest cause but that which is the procuring efficient and predominant cause *CONCURRENT CAUSE Where several causes producing the injury are concurrent and each is an efficient cause without which the injury would

not have happened, the injury may be attributed to all or any of the causes and recovery may be had against any or all of the responsible persons. Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination the direct and proximate cause of a single injury to a third person, and it is impossible to determine what proportion each contributed to the injury, either of them is responsible for the whole injury, even though his act alone might not have caused the entire injury; they become joint tort-feasors and are solidarily liable for the resulting damage under Article 2194 of the Civil Code. B. Cause in fact 1. Substantial factor test - defendants conduct is a substantial factor in bringing about the damage or injury (he sets the motion until it produces injury) 2. Concurrent causes - defendant is still liable in case there is concurrent causes brought about by acts or omissions of third persons. - where there is concurrent causes or negligence, joint tortfeasors are solidarily liable. C. Legal cause 1. Natural and probable consequences - connection of cause and effect between the negligence and the damage - person is liable for all natural and probable consequences of his acts, foreseeable or not 2. Foreseeability - not necessarily foreseeable to be enjoined - Third persons or those dependents to the plaintiff may recover damages against the defendant; not considered foreseeable plaintiffs Art 2202 CCP- In crimes and quasi-delicts, the defendants shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant D. Efficient intervening cause - novus actus interviens - new and independent cause, not under the control of the original wrongdoer; it must break the continuity of causal connection between the original negligent act or omission and the injury so that the former cannot be said to have been the efficient cause of the latter There is no efficient intervening cause if the force created by the negligent act or omission have either: 1. remained active itself, or 2. created another force which remained active until it directly caused the result, or 3. created a new active risk of being acted upon by the active force that caused the result NOTES: A cause is not an intervening cause if it was already in operation at the time the negligent act is committed. Foreseeable intervening causes cannot be considered sufficient intervening causes. The intervention of unforeseen and unexpected cause is not sufficient to relieve the wrongdoer from consequences of negligence if such negligence directly and proximately

cooperates with the independent cause in the resulting injury. E. Cause vs. Condition *CAUSATION -It is important because you have to establish, except those where there is presumption of negligence because you only have to establish the act or omission and the injury, loss or damage and not anymore the proximate cause, that the act is the proximate cause or the legal cause of the injury, loss or damage. *CONDITIONS a) Types of Dangerous Condition - even if the defendant had only created a condition, he may be held liable for damages if such condition resulted in harm to either person or property i) inherently dangerous - dangerous even if they are stored or handled with utmost care - the smallest application of force, or small change in conditions can release or otherwise set in motion large forces that can cause harm EXAMPLE: radioactive waste or hazardous chemicals ii) where a person places a thing in a dangerous position - object which are place in such a way that other peoples right of way is not recognized - also includes cases where object s are placed in an unstable position where the application of small force will permit the release of some greater force iii) products that are dangerous because defective - includes defective construction of building F. Last clear chance - the person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party. - the negligence of a claimant does not preclude a recovery for the negligence of defendant where it appears that the latter, by exercising reasonable care and prudence, might have avoided injurious consequences to claimant notwithstanding his negligence. VI. Legal Injury A. Concept - violation or invasion of legal right - reason for violation: sacredness of human personality Art 26 Every person shall respect the dignity, personality, privacy and peace of mind of his neighbours and other persons. The following and other similar acts, though they may not constitute a criminal offense shall produce a cause of action for damages, prevention and other relief: (1) Prying into the privacy of anothers 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 births, physical defects, or other personal condition. B. Elements of right -either civil or political rights; constitutional rights

C. Violation of right or legal injury *rights with independent civil actions - Art 32 violation of civil and political rights - Art 33 physical injuries, fraud, defamation - Art 34 - failure or refusal of a city or municipal police force to render aid or protection to any person in case of danger of life or property (neglect of public officers) *right to file civil action - person injured by a criminal offense, for which no independent civil action is granted, but justice of the peace found no reasonable grounds to believe that a crime has been committed (this will be suspended until the termination of the criminal proceedings if an information is presented by the prosecutor) D. Classes of injury 1. Injury to persons 2. Injury to property 3. Injury to relations VII. Intentional Torts A. General Kinds of Intentional torts: I. Intentional Torts[IT] in connection with Human Relations II. IT against Human Dignity III. Torts with Independent Civil Action (can also be committed by negligence, hence can be part of negligent tort) IV. Civil liability arising from delict 1. Concept INTENTIONAL TORTS Include conduct where the actor desires to cause the consequences of his act or believes that the consequences are substantially certain to result from it. They are found in Chapter 2 of the Preliminary Title of the CCP entitled Human Relations. Although this chapter covers negligent acts, the torts mentioned herein are mostly intentional in nature or torts involving malice or bad faith. 2. Classes a) Interference with persons and property - violation of constitutional right of another against unreasonable searches and seizures = superior officers of the law enforcement officers who conducted the raid can be held liable; principle of accountability of public officials; not the actor alone who is liable but also any person who indirectly violated the Constitutional right of the plaintiff *SUBORDINATE OFFICER - may not be held liable if he was led to believe that there was legal basis and authority to act upon the order of his superior officer Doctrine of state immunity - can be used only if the officers act within the ambit of their powers (i) Physical harms (1) illegal arrest and detention Suspension of the Writ of Habeas Corpus - it does not destroy every persons right and cause of action for damages for illegal arrest and detention and other violations of constitutional rights

- what is suspended is merely the right of the individual to seek release from his detention through the writ of habeas corpus as a speedy means of obtaining his liberty. (2) dismissal of employee without due process = deprivation of property without due process; right to work is a property right (3) physical injuries - includes battery (intentional infliction of harmful or offensive bodily contact) - bodily injuries causing death (ii) Non-physical harms (1) defamation - it includes crime of libel (written defamation) and slander (written defamantion) *DEFAMATION - an invasion of the interest in reputation and good name, by communication to others which tends to diminish the esteem in which the plaintiff is held, or to excite adverse feelings or opinion against him REQUISITES: 1) imputation must be defamatory; 2) malicious; 3) must be given publicity; and 4) victim must be identifiable REASON OF PUNISHMENT: to protect the reputation of every individual; good name is as much as a constitutional right as possession of life, liberty or property b) Interference with relations Art 26 CCP 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: Par (2) Meddling with or disturbing the private life of family relations of another; Par (3) Intriguing to cause another to be alienated from his friends; - Art 68 Family Code imposes on the spouses the obligation to live together, observe mutual love, respect and fidelity, and render mutual help and support. - Interference with such obligations may result in tort liability = alienation of affection (depriving one spouse of the affection, society, companionship and comfort of the other) - gist of the tort is an interference with one spouses mental attitude toward the other and the conjugal kindness of marital relations resulting in some actual conduct which materially affects it. - extends to all cases of wrongful interference in the family affairs - if PARENTS: may be presumed that they have acted with commendable motives, parents presumed that they want the best interest of their child; clear case of want of justification and unworthy motives is required to be shown before they should be held responsible - not a RELATIVE: requirement of malice is necessary and with design and intent to alienate the affections of plaintiffs spouse

B. Interference with rights to persons and property 1. Intentional physical harms a) General - civil liability arising from delict (i) Concept BASIC RULE: Every person criminally liable for a felony is also civilly liable. - a crime has a dual character: 1. offense against the State because of the disturbance of the social order 2. offense against the private person injured by the crime *Not all offenses give rise to civil liability - violation of game laws - infraction of the rule of traffic when nobody is hurt (ii) Kinds CIVIL LIABILITY per RPC: 1) restitution 2) reparation of the damage caused 3) indemnification for consequential damages (equivalent of actual and compensatory damages) DEATH OF PERSONS LIABLE 1) after final judgment = civil liability does not extinguish (only criminal liability) 2) before final judgment = i) civil liability arising/dependent from crime: relieves the accused both criminal and civil ii) civil liability independent or may be instituted independently (physical injuries, fraud, homicide or murder, libel) = if opted to file separately, does not extinguish; file against the estate or legal representative PARDON - does not extinguish civil liability; civil liability subsists notwithstanding service of sentence or for any reason the sentence is not served by pardon or commutation of sentence b) Violation of persons security, physical injuries (Art. 33, Civil Code) Art 33 In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence. (i) Battery (physical injury) - an intentional infliction of a harmful or offensive bodily contact; bodily contact is offensive if it offends a reasonable persons sense of dignity (ii) Assault (grave threat) intentional conduct by one person directed at another which places the latter in apprehension of immediate bodily harm or offensive act Includes bodily injuries causing death Physical injuries which resulted because of negligence or imprudence is not included in Article 33; they are already covered by Article 2176 of the Civil Code c) False imprisonment (illegal detention) - constitutional right: not to be deprived of liberty without due process of law

d) Trespass to land - foundation of liability - Art 21 and Art 451 (owner of land entitled to damages from builder, sower or planter) - requires intent or bad faith (i) Concept - a tort that is committed when a person unlawfully invades the real property of another (ii) Elements -plaintiff peacefully possesses the property - the possession is by virtue of a valid or legal right - such peaceful possession was destructed by the defendant e) Interference with personal property - theft or robbery is obviously trespass (i) Trespass to chattels - - include cases covered by accession continua where the person took possession of the property of another was in bad faith (ii) Conversion - it may also cover cases where the defendant deprived the plaintiff of personal property for the purpose of obtaining possession of real property. DISCONNECTION OF ELECTRICITY or GAS SERVICE - unjustified disconnection of electricity service; the right of the electric company to disconnect should be exercised in accordance with law and rules or after prior notice. 2. Intentional non-physical harms (VVDDMIFSU) a) General -BASES OF LIABILITY: Arts 21 and 26 (i) Concept *The sacredness of human personality is a concomitant of every plan for human amelioration. The touchstone of every system of laws, of the culture and civilization of every country, is how far it dignifies man. (ii) Kinds (DISI) -Discriminations (a) in labor on account of gender, etc. (b) of disabled -Infliction of Emotional Distress - Sexual Harassment - Interference with Relations b) Violation of personal dignity Art 26 CCP Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief: (1) Prying into the privacy of anothers residence (2) Meddling with or disturbing the private life of 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. *Vexation and Humiliation

Discrimination against a person on account of his physical defect, which causes emotional distress, may result in liability on the part of the offending party. Sexual Harassment falls under this category SEXUAL HARASSMENT - committed when a person demands, requests or otherwise requires any sexual favor from the other, regardless whether accepted by the object of said act. (1) Qui Pro Quo cases - conditions employment benefits, honors, awards, or privileges on sexual favors (2) Hostile environment - involve the allegation that employees or students work or study in offensive or abusive environment - may be a result where refusal to grant the sexual favors results in intimidating, limiting, segregating or classifying the employee which in any way would discriminate, deprive or diminish employment opportunities or otherwise adversely affect said employee. - standard: reasonable c) Infliction of emotional distress - such as wounded feelings and sleepless nights d) Violation of privacy - against human dignity 1. Violation of the right of privacy Reasonableness of a persons expectation of privacy depends on a two-part test: a) whether by his conduct, the individual has exhibited an expectation of privacy b) whether this expectation is one that the society recognizes as reasonable NOTES: RIGHT TO PRIVACY - privacy covers many aspects of a persons life; it protects solitude necessary for creative thought - personal right that can be waived and ceases upon death GENERAL RULE: Right to privacy can be invoked only by natural persons; Juridical persons cannot invoke such right because the entire basis of right to privacy is an injury to the feelings and sensibilities of a party, a corporation would have no such ground. EXCEPTION: Right against unreasonable searches and seizure can be invoked by a juridical entity. GENERAL RULE: Right to privacy is purely personal in nature, hence: 1) it can be invoked only by the person whose privacy is claimed to have been violated 2) It can be subject to waiver of the person whose privacy is sought to be intruded into 3) the right ceases upon the death of the person EXCEPTION: a privilege may be given to the surviving relatives of a deceased person to protect his memory but the privilege exist for the benefit of the living, to protect their feelings and to prevent the violation of their own rights in the character and memory of the deceased Standard to be applied in determining if there was a violation of the right is that of a person with ordinary sensibilities. It is relative to the customs of time and place and is determined by the norm of an ordinary person Four Types of Invasion of Privacy

(i) Appropriation *Commercial appropriation of likeness The unwarranted publication of a persons name or the unauthorized use of his photograph or likeness for commercial purposes is an invasion of privacy. With respect to celebrities, however, the right of publicity is often treated as a separate right that overlaps but is distinct from the right of privacy. They treat their names and likeness as property and they want to control and profit therefrom. (ii) Intrusion *Intrusion upon plaintiffs seclusion or solitude or into his private affairs It is not limited to cases where the defendant physically trespassed into anothers property. It includes cases when the defendant invades ones privacy by looking from outside (Example: peeping-tom). GENERAL RULE: there is no invasion of right to privacy when a journalist records photographs or writes about something that occurs in public places. EXCEPTION: when the acts of the journalist should be to such extent that it constitutes harassment or overzealous shadowing the freedom of the press has never been construed to accord newsmen immunity from tort or crimes committed during the course of the newsgathering There is no intrusion when an employer investigates an employee or when the school investigates its student; NOTE: There are instances where the school might be called upon to exercise its power over its student for acts committed outside the school premises and beyond school hours in the following: 1.In cases of violation of school policies or regulations occurring in connection with school sponsored activity offcampus; or 2.In cases where the misconduct of the student involves his status as a student or affects the good name and reputation of the school. COMMON CARRIERS DUTY vs RIGHT TO PRIVACY GENERAL RULE: Common carriers duty to exercise extraordinary diligence in ensuring safety of its passenger = it has the duty to make sure that no dangerous objects are brought inside the vehicle EXCEPT: -When fairness demands that in measuring a common carriers duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety and their rights to privacy (iii) Public disclosure of private facts *Publication of Embarrassing Private facts Requisites: 1. Publicity is given to any private or purely personal information about a person; 2. Without the latters consent; and 3. Regardless of whether or not such publicity constitutes a criminal offense, like libel or defamation, the circumstance that the publication was made with intent of gain or for commercial and business purposes invariably serves to aggravate the violation of the right. Public Figure - A person, who by his accomplishments, fame or mode of living or by adopting a profession or calling

which gives the public a legitimate interest in his doings, his affairs and his character. NOTE: Public figures, most especially those holding responsible positions in government enjoy a more limited right to privacy compared to ordinary individuals. The interest sought to be protected is the right to be free from unwarranted publicity, from the wrongful publicizing of the private affairs and activities of an individual which are outside the realm of legitimate public concern. The publication of facts derived from the records of official proceedings which are not otherwise declared by law as confidential, cannot be considered a tortious conduct. (iv) False light in the public eye *Publicity which places a person in a false light in the public eye The interest to be protected in this tort is the interest of the individual in not being made to appear before the public in an objectionable false light or false position. If the publicity given to the plaintiff is defamatory, hence an action for libel is also warranted; the action for invasion of privacy will afford an alternative remedy May be committed by the media by distorting a news report.
Tort of Putting Another in False Light Defamation

1. As to gravamen of claim The gravamen of claim is not the reputational harm but rather the embarrassment of a person being made into some-thing he is not The gravamen of claim is the reputational harm

2. As to publication The statement should be actually made in public Publication is satisfied if a letter is sent to a third person

3. As to the defamatory character of the statements Defendant may still be held liable even if the statements tells something good about the plaintiff What is published lowers the esteem in which the plaintiff is held

e) Disturbance of peace of mind - every person shall respect the peace of mind of his neighbour and other persons - base of liability: Art 26 CCP - solitude is necessary for creative thought f) Malicious prosecution An action for damages brought by one against another whom a criminal prosecution, civil suit, or other legal proceeding has been instituted maliciously and without

probable cause, which terminates in favor of the person prosecuted Elements: 1. The fact of the prosecution and the further fact that the defendant was himself the prosecutor; and that the action was finally terminated with an acquittal 2. That in bringing the action, the prosecutor acted without probable cause 3. The prosecutor was actuated or impelled by legal malice NOTES: Malice is the inexcusable intent to injure, oppress, vex, annoy or humiliate Presence of probable cause signifies absence of malice Absence of malice signifies good faith on the part of the defendant; good faith may even be based on mistake of law Acquittal presupposes that a criminal information is filed in court and final judgment rendered dismissing the case; nevertheless, prior acquittal may include dismissal by the prosecutor after preliminary investigation (Globe Mackay and Radio Corp. vs. CA; Manila Gas Corp vs. CA) g) Defamation Damages may be awarded in cases where the plaintiff suffered humiliation through the positive acts of the defendant directed against the plaintiff NOTES: Under Article 21, damages are recoverable even though no positive law was violated. An action can only prosper when damage, material or otherwise, was suffered by the plaintiff. An action based on Articles 19-21 will be dismissed if the plaintiff merely seeks recognition. Under Articles 19 and 21, the defendant may likewise be guilty of a tort even if he acted in good faith (Grand Union Supermarket vs. Espino) Defamation is an invasion of the interest in reputation and good name, by communication to others which tends to diminish the esteem in which the plaintiff is held, or to excite adverse feelings or opinion against him Includes the crime of libel and slander RPC considers the statement defamatory if it is an imputation of circumstance tending to cause the dishonor, discredit or contempt of natural or juridical person or to blacken the memory of one who is dead Requisites for one to be liable for defamatory imputations: a. It must be defamatory b. It must be malicious c. It must be given publicity d. The victim must be identifiable NOTES: Test in determining the defamatory character of the imputation: A charge is sufficient if the words are calculated to induce the hearers to suppose and understand that the person/s against whom they were uttered were guilty of a certain offense, or are sufficient to impeach their honesty, virtue, or reputation, or to hold the person/s up to public ridicule Dissemination to a number of persons is not required, communication to a single individual is sufficient publication

GENERAL RULE: Every defamatory imputation is presumed to be malicious, even if it be true, if no good intention or justifiable motive for making it is shown EXCEPTIONS: 1. A private communication made by any person to another in the performance of any legal, moral or social duty; and 2. A fair and true report, made in good faith, without any comments or remarks, of any judicial, legislative or other official proceedings which are not of confidential nature, or of any statement, report, or speech delivered in said proceedings or of any other act performed by public officers in the exercise of their functions it is not sufficient that the offended party recognized himself as the person attacked or defamed, it must be shown that at least a third person could identify him as the object of the libelous publication In order to escape liability, the defendant may claim that the statements made are privileged (i) Defenses (a) Absence of elements *NOT SUFFICIENTLY IDENTIFIED: GROUP LIBEL - the statements directed against a fairly large group - there is actionable defamation only if the libel can be said to reach beyond the mere collectivity to do damage to a specific individual group members reputation. CASE LAW: Uy Tioco vs. Yang Shu Wen - defamatory remarks directed at a class or group of persons in general language only, are not actionable by individuals composing the class or group unless the statements are sweeping or all-embracing as to apply to every individual in that group or class or sufficiently specific so that each individual in a class or group can prove that the defamatory statement specifically pointed to him, so that he can bring the action separately.; sugar planters do not have common or general interest or each has a separate and distinct reputation in the community. (b) Privilege Two kinds of privilege communication: 1)Absolutely privilege those which are not actionable even if the author acted in bad faith 2)Qualifiedly privilege not actionable unless found to have been made without good intention or justifiable motive (i) Complaint against public officials addressed to proper authorities - qualified privileged because the filing is done in the performance of ones duty as a citizen - rule: it is the right and duty of every citizen to make a complaint of any misconduct on the part of public officials, which comes to his notice; author is not guilty of libel (ii) Report to a Superior Officer; test is bona fides (good faith or sincerity) - report by a subordinate to his/her superior officer - report is sent as an explanation of a matter submitted in obedience to a lawful duty EXCEPT: copies furnished to several agencies which had no interest, right or duty to prosecute said charge with malice; (iii) allegations in pleadings; test is relevance - allegations and averments in the pleadings filed in court as long as relevant or pertinent to the issues. (iv)Publication of a Judicial Proceeding or Pleading (v) Fair Comments - on matters of public interest - to any public figure (bona fides) - privileged communications had its genesis in the Bill of Rights guaranteeing freedom of speech and of the press

h) Fraud or misrepresentation (formerly deceit) *Fraud Elements of deceit 1 )The defendant must have made false representation to the plaintiff 2) The representation must be one of fact 3) The defendant must know that the representation is false or be reckless about whether it is false 4) The defendant must have acted on the false representation 5) The defendant must have intended that the false representation should be acted on 6) The plaintiff must have suffered damage as a result of acting on the false representation Half-truths are likewise included; it is actionable if the withholding of that which is not stated makes that which is stated absolutely false i) Seduction Seduction, by itself, is also an act contrary to morals, good customs and public policy The defendant is liable if he employed deceit, enticement, superior power or abuse of confidence in successfully having sexual intercourse with another even if he satisfied his lust without promising to marry the offended party j) Unjust dismissal The right of the employer to dismiss an employee should not be confused with the manner in which the right is exercised and the effects flowing therefrom; if the dismissal was done anti-socially and oppressively, the employer should be deemed to have violated Article 1701 of the Civil Code (which prohibits acts of oppression by either capital or labor against the other) and Article 21 An employer may be held liable for damages if the manner of dismissing is contrary to morals good customs and public policy Example: false imputation of misdeed to justify dismissal or any similar manner of dismissal which is done abusively C. Interference with relations 1. General a) Concept - against human dignity - base: Art 26 - malice should be proved b) Kinds (1) family - Alienation of Affection - Loss of consortium - CriminalConversation (2) friends - Meddling with or Disturbing family relations - Intriguing to Cause another to be alienated from his friends 2. Family relations a) Alienation of affection - tort liability which resulted from the interference with obligations of husband and wife to observe mutual love and respect or where comfort of married life is destroyed b) Loss of consortium - meddling of the so-called friends who poison the mind of one or more members of the family against the other members;

CASE LAW: - members of the group cannot prevent spouse from attending in the group nor they were duty bound to cooperate with the other spouse from preventing her. - religious sec cannot be held liable for tort of alienation of affection if upon their invitation the wife of plaintiff joined their group over the objection of the husband c) Criminal conversation (adultery) - not necessary that there is adultery or concubinage - not necessary that there is deprivation of household services 3. Social relations a) Meddling with or disturbing family relations - the law wants to stop this to prevent a happy family to be broken or estranged. b) Intriguing to cause another to be alienated from his friends - as provided under Art 26 of CCP 4. Economic relations - also called as business torts *Kinds of Business Torts: 1. Interference with Contractual Relations 2. Interference with prospective advantage 3. Unfair competition 4. Security related torts a) Interference with contractual relations Elements: a. existence of a valid contract b. knowledge on the part of the third person of the existence of the contract c. interference of the third person without legal justification. The existence of a contract is necessary and the breach must occur because of the alleged act of interference; No action can be maintained if the contract is void malice is not essential Elements of privilege to interfere 1) the defendants purpose is a justifiable one, and 2) the actors employ no means of fraud or deception which are regarded as unfair Extent of Liability: A. Rule in Daywalt vs. La Corporation 39PHIL587 Defendant cannot be held liable for more than the amount for which the contracting party who was induced to break the contract can be held liable B. Rule under Article 2201 and 2202 Civil Code 1) if in bad faith: defendant is liable for all natural and probable consequences of his act or omission, whether the same is forseen or unforseen 2) if in good faith: defandant is liable only for consequences that can be foreseen (2) Interference with prospective advantage It is a tort committed when there is no contract yet and the defendant is only being sued for inducing another not to enter into a contract b) Unfair competition Unfair Competition in agricultural, commercial, or industrial enterprises, or in labor, through the use of force, intimidation,

deceit, machination or any unjust or oppressive or highhanded method shall give rise to a right of action by a person who thereby suffers damage (Article 27 Civil Code) Cases Included: a. passing off and disparagement of products b. interference c. misappropriation d. monopolies and predatory pricing (4) Securities related torts Kinds a. Fraudulent Transactions b. Misstatements or Omission of statement of a material fact required to be stated defendants are free from liability if they can prove that at the time of the acquisition the plaintiff knew of the untrue statement or if he was aware of the falsity(In Pari Delicto) Extent of Damages: not exceeding triple the amount of the transaction Prescriptive Period: Action must be brought within 2 years after discovery of facts constituting the cause of action and within 5 yrs after such cause of action accrued. 5. Political relations - violation of political right, like civil rights, cause of action in filing independent civil case for damages Art 32 any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: (1) freedom of religion (2) freedom of speech (3) freedom to write for the press or to maintain or to maintain a periodical publication (4) freedom from arbitrary or illegal detention (5) freedom of suffrage (6) the right against deprivation of property without due process of law (7) the right to a just compensation when private property is taken for public use (8) the right to 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 privacy of communication and correspondence (12) the right to become a member of associations or societies for purposes not contrary to law (13) the right to take part in a peaceable assembly to petition the Government for redress of grievances (14) the right to be free from involuntary servitude in any form (15) the right of accused against excessive bail (16) the right of the accused to be heard by himself and counsel, to be informed of the nature and cause of the accusation against him, to have a speedy and public trial, to meet the witnesses face to face, and to have compulsory process to secure the attendance of witness in his behalf (17) freedom from being compelled to be a witness against ones self, or from being forced to confess guilt, or from being induced by a promise of immunity or reward to make such confession, except when the person confessing becomes a State witness; (18) freedom from excessive fines, cruel and unusual punishment, unless the same is imposed or inflicted in accordance with a statute which has not been judicially declared unconstitutional; and

(19) freedom of access to the courts. In any of the cases referred to in this article, whether or not 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 being instituted), and may be proved by a preponderance of evidence. The indemnity shall include moral damages. Exemplary damages may also be adjudicated The responsibility herein set forth is not demandable from a judge unless his act or omission constitutes a violation of the Penal Code or other penal statute. a) Violation of right to suffrage (Civil Code, Art. 32) - political rights granted by the Constitution; aside from criminal liability (punishable under special law), there is civil liability - base of liability: Art 32 par 5 b) Violation of other political rights (freedom of speech, press, assembly and petition, etc.) - aside from criminal liability, also carries civil liability EXAMPLE: (i) Prohibition, interruption, and dissolution of peaceful meetings (Art 131 RPC) (ii) Interruption of religious worship (Art 132 RPC) (iii) Offending the religious feelings (Art 133 RPC) *ARTICLE 2 SECTION 11 of the Constitution The State values the dignity of every human person and guarantees full respect for human rights. - rights guaranteed under the Bill of Rights of the Constitutions; directed against public officers or employees *Good faith does not necessarily excuse violation. 6. Defenses a) Absence of element - absence of elements of torts such as damage/injury b) Privilege (i) Consent - no wrong is done to him who consents (doctrine of volenti non fit injuria) - one who knows, appreciates and deliberately exposes himself to danger assumes risks thereof. (doctrine of assumption of risk) (ii) Self-defense and defense of others - threat or injury to ones person or to another, relative or not (iii) Necessity - interference is necessary to avert an imminent danger and the threatened damage - when a person seeks to rescue his endangered property (iv) Defense of property - owner may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property. (v) Authority of law - with a valid or legal order in case of public officer or employee

- deprivation of property by competent authority and for public use and upon payment of just compensation c) Prescription - 4 years (torts) counted from the date of the accident d) Waiver - right is a personal right which can be waived - waiver should be made after the incident; otherwise, if before = VOID e) Force majeure - person acting because of the force or intimidation employed is not liable in quasi-delict or torts. VIII. Negligence A. Concept NEGLIGENCE - is the omission of that degree of diligence which is required by the nature of the obligation and corresponding to the circumstances of persons, time and place (Art 1173 CCP) - conduct which creates undue risk of harm to others TEST OF NEGLIGENCE: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? - requires test of foreseeability: involves the question of probability *Motive is not material in negligent cases * Mere intoxication is not negligence; such intoxication is of little consequence in negligent cases if it was not shown that such drunkenness contributed to the accident or that the accident would have been avoided had he been sober. *If both parties negligent, but plaintiffs negligence was not as great as defendant = apportioned damages * Acts of insane = does not excuse him or his guardian from liability *Age, sex and condition of the person may be considered in determining negligence B. Good father of a family or reasonably prudent man - to be observed if the law does not state the diligence which is to be observed in the performance - reasonable man is deemed to have knowledge of facts that a man should be expected to know based on ordinary human experience (PNR vs. IAC, 217 SCRA 409). - A prudent man should also be expected to know the basic laws of nature and physics, like gravity, etc C. Standard of care 1. Civil Code, Art. 1173 - 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 (Art 1173) - which the circumstances justly demand 2. Emergency rule EMERGENCY RULE a person is not expected to exercise the same degree of care when he is compelled to act instinctively under a sudden peril because a person confronted with a sudden emergency may be left with no time for thought and must make a speedy decision upon impulse or instinct

Applicable only to situations that are sudden and unexpected such as to deprive actor of all opportunity for deliberation But action must still be judged by the standard of the ordinary prudent man Absence of foreseeability D. Unreasonable risk of harm - if unreasonable risk resulted harm, the plaintiff may recover CASE LAW: Phoenix Construction vs. IAC, 148 SCRA 353 -the collision would not have occurred had the dump truck not been parked askew without any warning light or reflectors; not a static condition as they claimed - even the other driver is negligent, the accident is presumed risk or danger, but the same would never happen if Phoenix had been vigilance to the way their driver parked their truck. E. Evidence culpable negligence - the person claiming damages has the burden of proving that the damage is caused by the fault or negligence F. Presumption of negligence 1. Legal provisions Art 2184 xxx It is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months Art 2185 Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation. Art. 2188 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. 2. Res ipsa loquitur - the thing speaks for itself -it is relied upon in negligence cases; function is to aid the plaintiff in proving the elements of a negligence case by circumstantial evidence; not applicable if there is direct proof of absence or presence of negligence; applies only in the absence of proof of the circumstances under which the act complained of was performed. - grounded in the logic of ordinary human experience: negligence may be deduced from the mere occurrence of the accident REQUISITES: a) accident is of a kind which ordinarily does not occur in the absence of someones negligence b) accident is caused by an instrumentality within the excusive control of the defendant or defendants c) The possibility of contributing conduct which would make the plaintiff responsible is eliminated G. Defenses 1. Complete - completely bars recovery; as distinguished to partial which mitigates liability a) Absence of element

- absence of any elements of quasi-delict such as negligence - in case of employers vicarious liability = absence of proof that employee-employer relationship exists (i) Due diligence diligence required by law/contract/depends on circumstances of persons, places, things - if the required diligence proven to have been exercised, no liability. (ii) Acts of public officers - lawful order of the public officers, defendant/common carrier is not liable to the damage of goods transported b) Accident or fortuitous event FORTUITOUS EVENT - no person shall be responsible for those events which cannot be foreseen, or which through foreseen were inevitable Exception: assumption of risk c) Damnum absque injuria a principle that involves damage without injury, therefore no liability is incurred; there is no legal injury A person may have suffered physical hurt or injury, but for as long as no legal injury or wrong has been done, there is no liability. There is no liability even if there is damage because there was no injury There can be damage without injury. 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 d) Authority of law LAW specific provision of law e) Assumption of risk doctrine Volenti non fit injuria - Intentional exposure to a known danger - One who voluntarily assumed the risk of an injury from a known danger cannot recover in an action for negligence or an injury is incurred - Plaintiffs acceptance of risk (by law/contract/nature of obligation) has erased defendants duty so that his negligence is not a legal wrong - Applies to all known danger f) Last clear chance doctrine - even though a persons own acts may have placed him in a position of peril and an injury results, the injured is entitled to recover if the defendant thru the exercise of reasonable care and prudence might have avoided injurious consequences to the plaintiff. This defense is available only in an action by the driver or owner of one vehicle against the driver or owner of the other vehicle involved. Elements: a. plaintiff was in a position of danger by his own negligence b. defendant knew of such position of the plaintiff c. defendant had the least clear chance to avoid the accident by exercise of ordinary care but failed to exercise such last clear chance and d. accident occurred as proximate cause of such failure Who may invoke: plaintiff

Inapplicable to: 1. joint tortfeasors 2. defendants concurrently negligent 3. as against 3rd persons g) Prescription (Civil Code, Arts. 1144, 1146, and 1150) Injury to right of plaintiff/quasi delict - 4 years Defamation - 1 year *When no specific provision, must be counted from the day they may be brought *RELATIONS BACK DOCTRINE An act done at one time is considered by fiction of law to have been done at some antecedent period. (Allied Banking Corp vs. CA, 1989) Example: A doctor negligently transfused blood to a patient that was contaminated with HIV. If the effect became apparent only after five (5) years, the four (4) year prescriptive period should commence only when it was discovered (the time of discovery shall retroact at the time when the negligent act was done for the purpose of counting the prescriptive period) h) Waiver (Kinds of Assumption of Risks) 1. Express waiver of the right to recover There is assumption of risk if the plaintiff, in advance has expressly waived his right to recover damages for the negligent act of the defendant NOTE: a person cannot contract away his right to recover damages resulting from negligence. Such waiver is contrary to public policy and cannot be allowed. However, the waiver contemplated by this prohibition is the waiver of the right to recover before the negligent act was committed. - If waiver was made after the cause of action accrued, the waiver is valid and may be construed as a condonation of the obligation. 2. Implied Assumptions (of risk) (D3C) a) Dangerous Conditions A person who, knowing that he is exposed to a dangerous condition voluntarily assumes the risk of such dangerous condition may not recover from the defendant who maintained such dangerous conditions. Example: A person who maintained his house near a railroad track assumes the usual dangers attendant to the operation of a locomotive (Rodrigueza vs. Meralco). b) Contractual Relations There may be implied assumption of risk if the plaintiff entered into a contractual relation with the defendant. By entering into a relationship freely and voluntarily where the negligence of the defendant is obvious, the plaintiff may be found to accept and consent to it. Examples: i) the employees assume the ordinary risks inherent in the industry in which he is employed ii) when a passenger boards a common carrier, he takes the risks incidental to the mode of travel he has taken c) Dangerous Activities Persons who voluntarily participate in dangerous activities assume the risks which are usually present in such activities. Example: A professional athlete is deemed to assume the risks of injury to their trade. d) Defendants negligence

When the plaintiff is aware of the risk created by the defendants negligence, yet he voluntarily decided to proceed to encounter it, there is an implied admission. Example: If the plaintiff has been supplied with a product which he knows to be unsafe, he is deemed to have assumed the risk of using unsafe product. i) Double recovery (Civil Code, Art. 2177) PROSCRIPTION AGAINST DOUBLE RECOVERY - Responsibility for fault or negligence under quasi-delict is entirely separate and distinct from civil action arising from the RPC but plaintiff cannot recover damages 2x for same act or omission of the defendant OTHER DEFENSES: 1. CONTRIBUTORY NEGLIGENCE - the theory here is that the plaintiff was also negligent together with the defendant; to constitute a defense, proximate cause of injury/damage must be the negligence of defendant *Contributory Negligence A. Plaintiffs negligence is the cause Plaintiffs negligence is not contributory if it is necessary and sufficient to produce the result Examples: 1. Only the plaintiff was negligent 2. Defendants negligence is not a part of the causal set which is a part of the causal chain 3. Plaintiffs negligence was pre-emptive in nature B. Compound Causes Plaintiffs negligence may have duplicative effect, that is, it is sufficient to bring about the effect but his negligence occurs simultaneously with the defendant; latters negligence is equally sufficient but not necessary to bring about the effect because damage would still have resulted due to the negligence of the plaintiff Plaintiffs negligence is not merely contributory because it is a concurring proximate cause C. Part of the same causal set Neither plaintiffs negligence nor defendants negligence alone is sufficient to cause the injury; the effect would result only if both are present together with normal background conditions Negligence of the plaintiff cooperated with the negligence of the defendant in order to bring about the injury; determination of proximate cause is only a matter of degree of participation D. Defendants Negligence is the Only cause Defendants negligence was sufficient and necessary to bring about the injury However, if plaintiffs negligence increased or aggravated the resulting damage or injury liability of the defendant should also be mitigated under contributory negligence rule or under the doctrine of avoidable consequences. (What is the doctrine of avoidable consequences? Is the doctrine of avoidable consequence same with the doctrine of contributory negligence?) 2. CONCURRENT NEGLIGENCE - the theory here is that both parties are equally negligent; the courts will leave them as they are; there can be no recovery 3. EXERCISE OF DILIGENCE OF GOOD FATHER OF FAMILY IN SELECTION AND SUPERVISION OF EMPLOYEES

4. ACT OR OMISSION IS NOT THE PROXIMATE CAUSE OF THE DAMAGE 5. OTHER GROUNDS MOTION TO DISMISS a. lack of jurisdiction over person of defendant b. lack of jurisdiction over subject matter c. venue improperly laid d. plaintiff has no legal capacity to sue e. there is another action pending between same parties for same cause f. cause of action is barred by prior judgement /statute of limitations g. pleading asserting claim states no cause of action h. claim set forth in pleading has been paid, waived, abandoned, extinguished i. claim is unenforceable under the provision of statute of fraud j. condition precedent for filing claim has not been complied with IX. Special Liability in Particular Activities A. General 1. Concept - liability may be based on fraud or misrepresentation, breach of warranty, negligence or strict liability - it is to promote the consumers by providing certain safeguards when they purchase or use consumer products. B. Products liability 1. Manufacturers or processors Manufacturers and processors of foodstuffs, drinks, toilet articles and similar goods shall be liable for death or injuries caused by any noxious or harmful substances used, although no contractual relation exists. (Article 2187 Civil Code) a) Elements - covers goods, services, and credits, debts or obligations which are primarily for personal, family, household or agricultural purposes, which shall not include but not limited to, food, drugs, cosmetics and devices. b) Consumer Act [R.A. 7394, Secs. 92-107, (Ch. 1)] *PRODUCT AND SERVICE LIABILITY Alternative theories on basis of liability 1. Fraud or misrepresentation not all expression of opinion are actionable misrepresentations if they are established to be inaccurate 2. Warranties the Consumer Act recognizes that the provisions of the Civil Code on conditions and warranties shall govern all contracts of sale with conditions and warranties retailer shall be subsidiarily liable under the warranty in case of failure of both the manufacturer and distributor to honor the warranty privity of contract is not necessary 3. Negligence In product liability law, certain standards are already imposed by special laws, rules and regulations of proper government agencies; certain acts or omissions are expressly prohibited by the statutes thereby making violation thereof negligence per se it is negligence per se if manufacturer manufactured products which do not comply with the safety standards promulgated by appropriate government agencies 4. Delict

The liability may be based on criminal negligence under the RPC or violation of any special law 5. Strict liability Manufacturers and processors of foodstuffs, drinks, toilet articles, and similar goods, shall be liable for death or injuries caused by any noxious or harmful substances used although no contractual relation exists (Article 2187 Civil Code) Privity of contract is not required It does not preclude an action based on negligence (quasi-delict) for the same act of using noxious or harmful substances Article 97 and 99 of the Consumer Act imposes liability on defective products and services upon manufacturers independent of fault. Knowledge of the manufacturer is not important; the focus is on the condition of the product and not on the conduct of the manufacturer or seller Defenses: A. The manufacturer, builder, producer, or importer shall not be liable when it evidences: 1) That it did not place the product on the market 2) That although it did place the product on the market such product had no defect 3) That the consumer of third party is solely at fault (Article 97 Consumer Act) B. The supplier of the services shall not be held liable when it is proven: 1) That there is no defect in the service rendered 2) That the consumer of third party is solely at fault (Article 99 Consumer Act) Requisites: The plaintiff should allege and prove that: 1) The product was defective 2) The product was manufactured by the defendant 3) The defective product was the cause of his injury 4 Kinds of defective products (MDPA) 1. manufacturing defect 2. design defect 3. presentation defect 4. absence of appropriate warning C. Nuisance (Civil Code, Arts. 694-707) 1. Nuisance per se and nuisance per accidence NUISANCE PER SE nuisance under any and all circumstances Example: construction without provision for accumulation or disposal of waste matters which pollute water pipelines which supplies potable water to Manila area - may be abated without judicial proceedings under the Civil Code NUISANCE PER ACCIDENS becomes nuisance under certain conditions and circumstances Example: commercial and industrial activities that are so offensive to the senses that they render the enjoyment of life and property uncomfortable. 2. Public nuisance and private nuisance * Public - affects the community or neighbourhood or any considerable number of persons, although the extent of annoyance, danger or damage upon individuals may be unequal

*Private - not included in the foregoing definition 3. Attractive nuisance - considered a nuisance because it attracts certain kind of persons, the children; not a nuisance by its very nature as defined under the Civil Code D. Violation of constitutional rights -right to privacy 1. Violation of civil liberties - special torts E. Violation of rights committed by public officers - Public officers who are guilty of tortuous conduct are personally liable for their actions - Public officials may be held liable in his personal private capacity for whatever damage he may have caused by his act done with malice, bad faith or gross negligence or beyond the scope of his authority or jurisdiction. Persons liable: 1) Superior officers - principle of accountability of public officials 2) Subordinate Officers - the person who actually do the act F. Provinces, cities and municipalities PROVINCES, CITIES & MUNICIPALITIES -shall be liable for damages for the death or injuries suffered by any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision G. Owner of motor vehicle - In motor vehicle mishap, the owner is solidarily liable with the driver if: 1. he was in the vehicle, and 2. could have through due diligence prevented the misfortune H. Proprietor of building or structure or thing - responsible for the damages resulting from any of the ff.: i. total or partial collapse of building or structure if due to lack of necessary repairs ii. 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 iii. by excessive smoke, which may be harmful to persons or property iv. by falling of trees situated at or near highways or lanes, if not caused by force majeure v. by emanations from tubes, canals, sewers or deposits of infectious matter, constructed without precautions suitable to the place I. Head of family - THAT LIVES IN A BUILDING OR PART THEREOF - liable for damages caused by things thrown or falling from the same SPECIAL TORTS X. Strict Liability -the person is made liable independent of fault or negligence upon submission of proof of certain facts specified by law.

NOTE: Strict liability tort can be committed even if reasonable care was exercised and regardless of the state of mind of the actor at that time. (It is to be noted that strict liability tort can also be found either under Negligent tort or Intentional tort because its nature is simply an automatic liability independent of proof fault or negligence, the only requirement is the submission of proof of certain facts specified by law.-the preceding premise is wrong! This is precisely the reason why there is strict liability because you dont have to prove negligence or intention because the law provides liability regardless of fault, negligence or intention EXCEPT OF COURSE those where negligence or fault is presumed???Query: How do we consider those acts where negligence is presumed-is it under negligent tort where negligence is at issue or is it under strict liability tort or that negligent tort and strict liability tort are interloping or overlapping?? Types: I. Animals II. Falling objects III. Liability of the employer IV. Nuisance V. Product liability of manufacturers *Other types of Strict liability torts: I. Other cases: a. Proprietors of building as to collapse thereof b. Breach of implied warranties c. Consumer act d. Person benefited by the damage done to another w/o his fault II. Product and service liability: (-under the strict liability rule, it is to be noted that enumerations under a, b and c are other basis of liability apart from the strict liability tort, thus basis for the product and service liability may be grounded under fraud or misrepresentations, warranties and negligence. In short, product and service liability may use negligent and intentional tort to support the claim.) a. Fraud or misrepresentations b. Warranties c. Negligence d. Strict liability A. Animals 1. Possessor and user of an animal GENERAL RULE: The possessor of an animal or whoever may make use of the same is responsible for the damages which it may cause although it may escape or be lost Exception: 1. Force majeure 2. Fault of the injured/damaged person NOTES: If the acts of a third person cannot be foreseen or prevented, then the situation is similar to that of force majeure and the possessor is not liable. (Francisco, Torts and Damages) Art. 2183 is applicable whether the animal is domestic, domesticated, or wild. B. Nuisance (supra) Any act, omission, establishment, business, condition of property, or anything else which: (IASOH)

a. Injures or endangers the health or safety of others; b. Annoys or offends the senses; c. Shocks, defies or disregards decency or morality; d. Obstructs or interferes with the free passage of any public highway or street, or any body of water; or e. Hinders or impairs the use of property.(Article 694 Civil Code) There is strict liability on the part of the owner or possessor of the property where a nuisance is found because he is obliged to abate the same irrespective of the presence or absence of fault or negligence. Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefore in the same manner as the one who created it. (Article 686 Civil Code) 1. Classes a) Per se or per accidens (nature) *NUISANCE PER SE - denounced as nuisance by common law or by statute *NUISANCE PER ACCIDENS - those which are in their nature not nuisances, but may become so by reason of their locality, surroundings, or the manner in which they may be conducted, managed, etc. b) Public or private (extent of affected) *PUBLIC - affects a community or neighborhood or any considerable number of persons *PRIVATE - one that is not included in the foregoing definition; affect an individual or a limited number of individuals only 2. Easement against nuisance *REMEDIES AGAINST PUBLIC NUISANCES (CAP) 1. Prosecution under the RPC or any local ordinance 2. Civil action 3. Abatement, without judicial proceeding WHO MAY AVAIL OF REMEDIES 1. Public officers 2. Private persons - if nuisance is specially injurious to himself; the ff. steps must be made: i. demand be first made upon owner or possessor of the property to abate the nuisance ii. that such demand has been rejected iii. that the abatement be approved by the district health officer and executed with the assistance of local police iv. that the value of destruction does not exceed P3,000 *REMEDIES AGAINST PRIVATE NUISANCES (1). Civil action (2). Abatement, without judicial proceedings WHO MAY AVAIL OF REMEDIES (1). Public officers (2). Private persons - if nuisance is specially injurious to himself; the ff. steps must be made: i. demand be first made upon owner or possessor of the property to abate the nuisance ii. that such demand has been rejected iii. that the abatement be approved by the district health officer and executed with the assistance of local police iv. that the value of destruction does not exceed P3,000 C. Products liability (supra) Manufacturers and processors of foodstuffs, drinks, toilet articles and similar goods shall be liable for death or injuries

caused by any noxious or harmful substances used, although no contractual relation exists. (Article 2187 Civil Code) 1. Consumer act Consumer Act (R.A. 7394) any Filipino or foreign manufacturer, producer and importer, independently of fault shall be liable for redress for damages caused to consumers by defects resulting from: a. design; b. manufacture; c. construction; d. assembly and erection; e. formulas and handling and making up; or f. presentation or packing of their products as well as for the insufficient or inadequate information on the use and hazards thereof. Book II--Damages I. General Considerations A. Classification 1. Under Art. 2197 of the Civil Code *Kinds of Damages: (MENTAL) a) MORAL b) EXEMPLARY c) NOMINAL d) TEMPERATE e) ACTUAL or COMPENSATORY f) LIQUIDATED 2. According to purpose a)COMPENSATORY i. Actual (1) dao emergente - As adequate compensation for pecuniary loss suffered (2)lucro cessante - as indemnification to what a person fails to receive as a benefit that would have pertained to him ii. Moral - serve to alleviate the moral suffering he has undergone by reason of defendants culpable action. - awarded to compensate the victim iii) Temperate - may be awarded when some pecuniary loss has been suffered but its amount cannot be provided with certainty b) PUNITIVE/PENALTY/CORRECTIVE i) Liquidated - as agreed upon by the parties; may be reduced if iniquitous or unconscionable ii) Exemplary - required to suppress wanton acts - imposed by way of example or correction for the public good c) VINDICATION/RECOGNITION i) Nominal - to recognize the right of the plaintiff - proper in the absence of proof of actual damages 3. According to manner of determination Measure of damage = restitution in integrum a) As to determination *Moral No proof of pecuniary loss necessary; left to the discretion of the court *Actual Must be duly proved

* Temperate No proof of pecuniary loss necessary; left to the discretion of the court * Liquidated No proof of pecuniary loss necessary * Exemplary No proof of pecuniary loss necessary; left to the discretion of the court * Nominal No proof of pecuniary loss necessary; left to the discretion of the court b) Is it in the concept of recompense? *Moral Yes *Actual Yes * Temperate Yes * Liquidated Yes * Exemplary No * Nominal No 4. Special and ordinary Special those which result directly but not necessarily or by implication of law, from the act or omission complained of and exist only because of special circumstances. Ordinary those which necessarily and by implication of law result from the act or omission complained of. II. Actual and Compensatory Damages A. Concept 1. ACTUAL/COMPENSATORY - adequate compensation for a) the value of loss suffered b) profits which plaintiff failed to obtain Exception: a. provided by law b. by stipulation B. Requisites 1. Alleged and proved with certainty *WHAT MUST BE DONE TO COLLECT ACTUAL DAMAGES: 1.) Plead or allege the loss GENERAL DAMAGE - natural, necessary and logical consequences of a particular wrongful act which result in injury; need not be specifically pleaded because the law itself implies or presumes that they resulted from the wrongful act SPECIAL DAMAGES - damages which are the natural, but not the necessary and inevitable result of the wrongful act; need to be pleaded 2.) Pray for the relief that claim for loss be granted 3.) Prove the loss 2. Not speculative - need to be proved not mere speculation C. Component elements 1. Value of loss; unrealized profit * VALUE OF LOSS SUFFERED - Destruction of things, fines or penalties, medical & hospital bills, attorney's fees, interests, cost of litigation *Damages recoverable: 1. Medical & Hospital Bills 2. Loss or impairment of earning capacity (in case of physical disability) 3. Damages for death a) Minimum amount: P50,000

b) Loss of earning capacity unless deceased had permanent physical disability not caused by defendant so that deceased had no earning capacity at time of death c) Support, if deceased was obliged to give support (for period not more than 5 years) d) Moral damages 4. Attorney's fees - as a general rule, attorney's fees (other than judicial costs) are not recoverable, except: a) stipulation between parties b) when exemplary damages are awarded c) when defendant's act/omission compelled plaintiff to litigate with 3rd persons or incur expenses to protect his interest d) malicious prosecution e) clearly unfounded civil action or proceeding against plaintiff f) defendant acted in gross & evident bad faith in refusing to satisfy plaintiff's just & demandable claim g) legal support actions h) recovery of wages of household helpers, laborers & skilled workers i) actions for indemnity under workmen's compensation and employer liability laws j) separate civil action to recover civil liability arising from crime k) when double judicial costs are awarded 5. Judicial costs 6. interest - discretionary on part of the court * UNREALIZED PROFITS - future earnings *WHEN IS DAMAGES MITIGATED: 1. Contributory negligence 2. In contracts, Quasi-contracts and quasi-delict 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 2. Attorneys fees and expenses of litigation they are actual damages. It is due to the plaintiff and not to the counsel. Plaintiff must allege the basis of his claim for attorneys fees in the complaint; the basis should be one of the 11 cases specified in Article 2208 of the Civil Code.( Meaning, in the award judgment, if there is a prayer by the plaintiff for an award of attorneys fees, the same shall be awarded and given to the plaintiff of the case and not directed or awarded to the counsel. It is now the private arrangement between the plaintiff and counsel as to liability of atty.s by the plaintiff to the counsel.) When should there be prayer of attorneys fees by the plaintiff? Ans. There can be prayer of atty.s fees if it falls under any of the 11 cases specified under art. 2208. Query: Can the court award attorneys fees motu propio even w/o prayer by the plaintiff??? Can exemplary damages be awarded motu propio? Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. In all cases, the attorney's fees and expenses of litigation must be reasonable. 3. Interest Interests 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: 1. When the obligation is breached and it consists of payment of sum of money, i.e., a loan or forbearance of money: a. The interest due should be that which may have been stipulated in writing; furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded b. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extra-judicial demand under and subject to the provisions of Article 1169 of the Civil Code 2. When the obligation, not constituting a loan or forbearance or money, is breached: an interest on the amount of damages to be awarded may be imposed at the discretion of the court at the rate of 6% per annum no interest shall be adjudged on unliquidated claims or damages, except when or until demand can be established with reasonable certainty where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially Art 2210 Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract. Art 2211 In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court. D. Extent or scope of actual damages 1. In contracts and quasi-contracts Art 2201 obligor in good faith = natural and probable consequences of the breach of obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted -obligor in bad faith or with malice = responsible for all damages which may be reasonably attributed to the nonperformance of the obligation

2. In crimes and quasi-delicts Art 2202 defendants shall be liable for all the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant. WHEN LOSS NEED NOT BE PROVED: 1.) Liquidated damages previously agreed upon; liquidated damages take the place of actual damages except when additional damages incurred 2.) If damages other than actual are sought 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)
CONTRACTS & QUASI CONTRACTS 1. Damages in case of Good faith A. Natural and probable consequence of breach of obligation, and B. Parties have forseen or could have reasonably forseen at time obligation was constituted 2. Damages in case of bad faith A. it is sufficient that damages may be reasonably attributed to the non-performance of the obligation CRIMES & QUASI-CRIMES defendant is liable for all damages that are natural and probable consequence of the act/omission complained of not necessary that damages have been forseen or could have been reasonably forseen

(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; (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages. The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named Art 309 CCP Any person who shows disrespect to the dead, or wrongfully interferes with a funeral shall be liable to the family of the deceased for damages, material and moral. B. When recoverable (Arts. 2219-2220) MORAL DAMAGES - (PBMF-MWSS) a. Physical suffering b. Besmirched reputation c. Mental anguish d. Fright e. Moral shock f. Wounded feelings g. Social humiliation h. Serious anxiety 1. In seduction, abduction, rape and other lascivious acts Art 2219 Moral damages may be recovered in the following and analogous cases: Par (3) Seduction, abduction, rape, or other lascivious acts; The parents of the female seduce, abducted, raped, or abused, referred to in No. 3 of this Article, may also recover moral damages 2. In acts referred to in Arts. 21, 26, 27, 28, 29, 32, 34 & 35, Civil Code, Par (10) Acts and actions referred to in Articles 21, 26, 27,28, 29, 30, 32, 34, and 35 Art 21 acts contra bonus mores (contrary to morals) Art 26 violation of obligations to respect the dignity, personality, privacy and peace of mind of his neighbours and other persons. Art 27 public servant or employee refuses or neglects without just cause to perform his official duty. Art 28 unfair competition in agricultural, commercial or industrial enterprises or in labor Art 29 accused in criminal case acquitted on the ground that his guilt has not been proved beyond reasonable doubt and a civil action for damages has been instituted Art 32 private individual or public officer or employee who impedes or impairs the civil and political rights and liberties XXXPar 21 The indemnity shall include moral damages. Exemplary damages may also be adjudicated.

*DOCTRINE OF AVOIDABLE CONSEQUENCES - A party cannot recover damages flowing from consequences which the party could reasonably have avoided - It has a reasonable corollary: a person who reasonably attempts to minimize his damages can recover the expenses that he incurred
Doctrine of Avoidable Consequences Acts of the plaintiff occur after the act or omission of the defendant Contributory Negligence Plaintiffs act or omission occurs before or at the time of the act or omission of the defendant

III. Moral Damages A. Concept (Arts. 2217-2218) *Requisites for award of 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. 3. such act or omission is the proximate cause of the injury 4. the damages is predicated on the cases cited in Art.2219 Art 2219 CCP - Moral damages may be recovered in the following and analogous cases: (CQSAI2LMAA) (1) A criminal offense resulting in physical injuries;

Art 34 member of city or municipal police refuses or fails to render aid or protection to any person in case of danger to life or property (police primary liable; city or municipality subsidiarily responsible) Art 35 person claiming to be injured by criminal offense for which no independent civil action is granted and prosecutor finds no reasonable ground to believe that crime has been committed, civil action for damages may be instituted against the alleged offender. 3. In cases of malicious prosecution Par (8) Malicious prosecution - GENERAL RULE: No person should be penalized for the exercise of the right to litigate Exception: done in bad faith; filed reckless suit in the absence of cause of action Notes: Sentimental value of real or personal property may be considered in adjudicating moral damages The social and economic/financial standing of the offender and the offended party should be taken into consideration in the computation of moral damages Moral damages is awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone, by reason of defendant's culpable action and not intended to enrich a complainant at the expense of defendant IV. Nominal Damages A. Concept - generally based on the ground that every injury from its very nature legally imports damage B. When awarded NOMINAL DAMAGES - 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 ELEMENTS: a. Plaintiff has a right b. Right of plaintiff is violated c. Award of damages - purpose is not to indemnify but vindicate or recognize right violated V. Temperate or Moderate Damages A. Concept TEMPERATE OR MODERATE DAMAGES - more than nominal but less than compensatory where some pecuniary loss has been suffered but its amount can't be proved with certainty due to the nature of the case - 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 (Example: injury to ones commercial credit or to the goodwill of the business. B. When awarded REQUISITES: a. Some pecuniary loss b. Loss is incapable of pecuniary estimation c. Must be reasonable

VI. Liquidated Damages A. Concept (Civil Code, Art. 2226) LIQUIDATED DAMAGES- agreed upon by the parties to a contract, to be paid in case of breach thereof B. Rules governing in case of breach of contract - the provisions of contract of the parties *WHEN LIQUIDATED DAMAGES MAY BE EQUITABLY REDUCED: a. iniquitous or unconscionable b. partial or irregular performance VII. Exemplary or Corrective Damages A. Concept (Civil Code, Art. 2229) EXEMPLARY OR CORRECTIVE DAMAGE - imposed by way example or correction for the public good, in addition to the moral, temperate, liquidated or to compensatory damages Art 2235 A stipulation whereby exemplary damages are renounced in advance shall be NULL AND VOID. B. When recovered 1. In criminal offenses (Civil Code, Art. 2230) - where there is aggravating circumstance - separate and distinct from fines and shall be paid to the offended party 2. In quasi-delicts (Civil Code, Art. 2231) - if defendant acted with gross negligence 3. In contracts and quasi-contracts (Civil Code, Art. 2232) - if defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner C. Requisites 1. Arts. 2233, 2234 *Requisites for the award of exemplary damages: 1. They are imposed by way of example in addition to compensatory damages and imposed only after the claimants right to them has been established 2. They cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded 3. The act must be accompanied by bad faith or done in wanton, fraudulent, oppressive or malevolent manner VIII. Damages in Case of Death A. In crimes and quasi-delicts causing death 1. In death caused by breach of conduct by a common crime - actual damages lucro cessante - failure to receive as a benefit that would have pertained to him - includes loss or impairment of earning capacity in cases of temporary or permanent personal injury Loss of earning capacity: Variables considered are: 1. life expectancy 2. net income/earnings NOTE: life expectancy is computed as follows: { 2/3 x (80-age at death) } 2/3 x 80 50 = 20 net earnings is the total of the earnings less expenses necessary for the creation of such earnings and less living or other incidental expenses

Formula for the award of Net Earning Capacity; X=(2/3 x (80-age of death)) x ((monthly earnings x 12) Amount of living expenses {1/2 x monthly earnings x 12}) Formula for the amount of living expenses: X=1/2 x (monthly earnings x 12) IX. Graduation of Damages A. Duty of injured party 1. Art. 2203 Art 2203 The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. B. Rules 1. In crimes Art 2204 In crimes, the damages to be adjudicated may be respectively increased or lessened according to the aggravating or mitigating circumstances. 2. In quasi-delict (Civil Code, Art. 2214) Art 2214 In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover. 3. In contracts, quasi-contracts and quasi-delicts (Civil Code, Art. 2215) Art 2215 In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the damages under the circumstances other than the case referred to in the preceding article, as in the following instances: (1) That the plaintiff himself has contravened the contract; (2) That the plaintiff has derived some benefit as a result of the contract (3) In cases where exemplary damages are to be awarded, that the defendant acted upon the advice of counsel; (4) That the loss would have resulted in any event; (5) That since the filing of the action, the defendant has done his best to lessen the plaintiffs loss or injury. 4. Liquidated damages (Civil Code, Art. 2227) Art 2227 Liquidated damages, whether intended as an indemnity or penalty, shall be equitably reduced if they are iniquitous or unconscionable. 5. Compromise - a compromise entered into by parties shall be respected and enforceable against the party EXCEPT: - obtained through fraud or deceit - against the law or public policy X. Miscellaneous Rules A. Damages that cannot co-exist 1. Nominal with other damages (Art. 2223) Art 2223 The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns. 2. Actual and liquidated (Art. 2226) Actual loss or agreed loss - if there is liquidated damages, actual or compensatory damages cannot be awarded. B. Damages that must co-exist 1. Exemplary with moral, temperate, compensatory (MAcT with E or L with E) liquidated or

Art 2233 Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. Art 2234 While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages. C. Damages that must stand alone 1. Nominal damages (Art. 2222) - It may be awarded in every obligation arising from any source enumerated in Art 1157, or in every case where any property right has been invaded. Art 1157 obligations arise from: (1) Law (2) Contracts (3) Quasi-Contracts (4) acts or omissions punished by law (5) Quasi-delicts Exclude: Distinction between tort and quasi-delict Include: Pertinent Supreme Court decisions promulgated up to January 31, 2012. Important note: This bar coverage description is not intended and should not be used by law schools as a syllabus or course outline in the covered subjects. It has been drawn up for the limited purpose of ensuring that candidates reviewing for the bar examinations are guided on what basic and minimum amounts of laws, doctrines, and principles they need to know and be able to use correctly before they can be licensed to practice law. More is required for excellent and distinguished work as members of the Bar.

ARTICLE 45 The STD is a ground for annulment The STD does not have to be concealed The STD must be serious and incurable

ARTICLE 46 The STD is a type of fraud which in turn is a ground for annulment The STD must be concealed The STD does not have been to be serious and incurable PRESCRIPTIVE PERIOD a. Within 5 years after attaining 21 b. Before child reaches 21 2 views: Sempio-Diy Before death of other party RATIFICATION Free cohabitation after reaching 21

GROUNDS FOR
ANNULMENT

WHO CAN FILE b. Party under age c. Parent or guardian

Lack of consent

parental

Insanity party

of

one Sane spouse

Free cohabitation after insane regains sanity

Guardian of insane spouse Insane spouse

Fraud

Injured party

Force, intimidation Injured party or undue influence Impotence of one party Serious STD Potent party

Healthy party

Dean Del Castillo Within 5 years from the time the right or action accrues Anytime before the death of either party During the lucid interval or after regaining sanity also before death of other party Within 5 years from Free cohabitation discovery of fraud after knowledge of fraud Within 5 years from the Free cohabitation cessation of cause after cause has disappeared Within 5 years after Cannot be ratified marriage but action prescribes Within 5 years after Cannot be ratified marriage but action prescribes

EFFECTS OF TERMINATION OF MARRIAGE VOIDABLE BIGAMOUS MARRIAGE (ART 41)

DECLARATION OF
NULLITY

ANNULMENT

Status of children

Children of subsequent marriage conceived before its termination legitimate

Illegitimate except Art 36 and Art 53

Children conceived or born before annulment decree legitimate

Property Relations

ACP/CPG shall be liquidated.

Same

Same

Spouse who contracted the marriage in bad faith, his/her share in the net profits of community property shall be forfeited in favor of common children or if there are none, children of the guilty spouse by previous marriage or in default, the innocent spouse

Donations Propter Nuptias

Shall remain VALID except

Same

Same

c. If donee contracted the marriage in bad faith, donations propter nuptias made to the donee are revoked by operation of law. d. If both spouses acted in bad faith, donations propter nuptias made by one in favor of the other are revoked by operation of law.

Insurance

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

Same

Same

stipulated irrevocable

Succession

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

Same

Same

DISTINCTION BETWEEN VOID AND VOIDABLE MARRIAGE VOID (ACTION IS DECLARATION OF NULLITY) Inexistent from the time of performance VOIDABLE (ACTION IS ANNULMENT)

As to nature

Valid until annulled

As to susceptibility to ratification

Cannot be ratified

Can be ratified either by free cohabitation or prescription

As to effect on property

No community property, only coownership (Art 147) Children are illegitimate

Absolute community exists unless another system is agreed upon in marriage settlement

As to effect on children Exceptions: c. In case of psycho incapacity (Art 36) d. Children born of subsequent marriage (Art 53) As to how marriage may be impugned c. May be attacked directly or collaterally but for purpose of remarriage, there must be judicial declaration of nullity. d. Can still be impugned even

Children are legitimate if conceived before decree of annulment

c. Cannot be attacked collaterally, only directly, i.e. there must be a decree of annulment d. Can no longer be impugned

after death of parties

after death of one of the parties

SUMMARY OF LEGITIMES OF COMPULSORY HEIRS: SURVIVING

RELATIVES

LEGITIMATE CHILDREN &

DESCENDANTS

SURVIVING
SPOUSE

ILLEGITIMATE
CHILDREN

LEGITIMATE PARENTS &

ASCENDANTS

ILLEGITIMATE
PARENTS

Legitimate children alone

(divided by the # of children)

1 legitimate child surviving spouse

Legitimate children Surviving spouse

(divided by no. of children)

Same as the share @ legit child

Legitimate children Illegitimate children

of the share of @ legit child

1 legitimate child surviving spouse illegitimate children

(preferred)

of the share of @ legit child

2 or more legitimate children surviving spouse Illegitimate children

(divided by no. of children)

Same as the share of @ legit child

of the share of @ legit child

Legitimate parents alone Legitimate

parents Illegitimate children Legitimate parents and Surviving spouse

Legitimate parents Surviving spouse Illegitimate children Illegitimate children alone

1/8

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

Illegitimate children Surviving spouse Surviving spouse alone

or 1/3 if marriage in articulo mortis

Illegitimate parents alone Illegitimate parents Surviving spouse