2021-Blue-Notes-Civil-Law

PHILIPPINE COPYRIGHT by THE ATENEO LAW SCHOOL & THE ATENEO CENTRAL BAR OPERATIONS 2020-2021 All Rights Reserved By the Authors This material is an intellectual creation of the Ateneo Central Bar Operations 2020-2021 and is officially published and distributed by the Ateneo Law School. Any unauthorized reprint or use of this material is prohibited. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including but not limited to photocopying, recording, or by any information storage or retrieval system without the express written consent of both the Ateneo Law School and the Ateneo Central Bar Operations 2020-2021. Furthermore, this material is confidential and shall be kept within those who received a copy directly from the Ateneo Law School and the Ateneo Central Bar Operations 2020-2021. By downloading, acquiring possession, and/or using this material, whether, by electronic or other means, the recipients agree to protect the confidentiality of the material, refraining from any action which may lead to possession, duplication, or use by third parties . Ad maiorem Dei gloriam. GRACE ANN Q. BAJO TIMOTHY JACOB J. PALAFOX 20 21 C H AI R PE R S O N S KATHLEEN KAE Z. ENDOZO ARISTEO RAPHAEL T. MARBELLA III MEG V. BUENSALIDO MARIE KAYLA C. GALIT 20 21 AD MI NI ST R A TI V E CO M MI T TE E HE A D S 20 21 A C AD E MI C C O M MI T TE E HE AD S CARLOS ROSAURO N. MANALO MA. CRISTINA ASUNCION 2021 ACADEMIC COMMITTEE UNDERSTUDIES JOANNE MARIE VALLES 20 21 OV E R A LL CI V I L LA W HE AD ATTY. AMPARITA STA. MARIA DEAN MELENCIO STA. MARIA ATTY. CHRISTINE JOY K. TAN ATTY. VIVENCIO ABAÑO ATTY. DAN KEVIN C. MANDOCDOC ATTY. TERESA V. TIANSAY ATTY. ROEL REFRAN ATTY. JESS RAYMUND LOPEZ ATTY. CECILLE MEJIA ATTY. DANIEL NICHOLAS DARVIN 20 21 CI V I L L A W F A C U LTY A D V I SE R S KARLA NIZZA BUTIU KAYE DOMINIQUE TONO ANGELICO CALDOZO MA. KRISTINA LOPEZ DE LEON PIERRE GEOFFREY MACALINO GE-AN KATHLEENA SALUD BIANCA GEORGIA PALOMA JESSE BRIAN LUI BRIAN KELVIN PINEDA IRISH SELENE AQUINO 20 21 CI V I L L A W SU B JE C T HE AD S MARTIN GERARD ERA JEWEL CULALA MARIA EON PEÑAFIEL JOHN DENNHEL CRUZ JAZZMIN BENJAMIN NORLENE JAE ANDAYA RODRICH REY REBOLLOS JESSA ANGELICA LAT ALEIX ALCALA ANTHONY JEFFERSON JULIO KARISSA S. ENRIQUEZ JENNIKA CHUA SERMAE ANGELA PASCUAL JANINE ESPIRITU 20 21 CI V I L L A W U N D E R S TU D I E S JAMES ANDREW ESPIRITU RACHEL LEIGH COLLADO NADINE ONG ROSEANNE REALUBIN JEFFREY ABRAZALDO PATRICIA JOY IGNACIO ISABELLA SABIO CAMILLE BULATAO SAMANTHA ROSE MORALES ANA SAMANTHA ISABELA PARUNGAO 20 21 CI V I L L A W V OL U NT E E R S JONATHAN DF. TORRES GAEL PAULINE R. MORALES RIA ALEXANDRA D. CASTILLO NICOLE ANN C. PAGLICAWAN JULIANNE BEATRICE N. ROSARIO 20 21 C R E ATI V E S JOSEPH BILL P. QUINTOS SAMANTHA J. MAGAOAY FREEDOM JUSTIN B. HERNANDEZ STEFI MONIKA S. SUERO KATHLEEN C. ROMINA SERMAE ANGELA G. PASCUAL 20 21 TE C H NI CA L 2 02 1 FI N AN CE AINA RAE L. CORTEZ LUMINA ALINEA O. AQUINO ANNA MARIE GRACE M. ANTONIO MARY STEPHANIE CABRERA CRUZ CLARISSE MAE D. ZAPLAN CHRISTIAN GIO R. SENARLO MAEDEN M. BORCELANGO IMI LIZA B. ESPINA FRANCIS SABIN BELTRAN ANTHONY JEFFERSON Y. JULIO 20 21 S PE CI AL P R OJ E C TS 20 21 LO GI STI C S DONN MARIE ISABELLE BALINA ALISHA BEATRICE A. VERGARA PRISHA LEIGH D. CRUZ ALITHEA C. SORIANO AARON C. CHENG MELISSA GABRIELLE P. REMULLA GRACIELLA RACHEL D. ROBLES DANELLA DIANE D. DIMAPILIS REYNALDO M. REVECHE CZAREANA JOUSCH T. PARRA 20 21 M AR K E TI N G 20 21 PU BLI C R E L A TI ON S JUSTIN LUIGI V. HERNANDEZ 20 2 0 C HAI R P E R SO N YVES PETER CARLO D. MEDINA KATRINA ISABELLE G. PIMENTEL GENICA GALE F. LAHOZ THERESE ANNE C. ESPINOSA HAZEL VIANCA I. ORTEGA VINCE ZYRENCE T. BARLONGAY 20 2 0 AD MI NI S TR ATI V E CO M MI T TE E HE A D S 20 2 0 HO TE L C O M MI TTE E HE A D S EUNICE A. MALAYO FRANCES CHRISTINE P. SAYSON MEG V. BUENSALIDO MARIE KAYLA C. GALIT 20 2 0 A CAD E MI C CO M MI T TE E HE AD S 2 02 0 A CA D E M I C CO M MIT T E E U N D E R S T U DI E S DEAN MELENCIO STA. MARIA ATTY. AMPARITA STA. MARIA ATTY. TERESA V. TIANSAY ATTY. VIVENCIO ABAÑO ATTY. ROEL REFRAN ATTY. DAN KEVIN C. MANDOCDOC ATTY. JESS RAYMUND LOPEZ ATTY. CHRISTINE JOY K. TAN 20 2 0 CI V I L LA W FA CU L TY AD V I SE R S ANA BETTINA CARONONGAN MERYL CAYLA GUINTU LORD JAY-EM CUNTAPAY JAMES LOUIE CUEVAS BERNADETTE LOUISE GUIA ANGELINE PAMELA LEE KARLA NIZZA BUTIU ALEEZAH GERTRUDE RAYMUNDO ROSEGAIL ABAS MARIELLA GRACE ALLANIC JUSTIN NICHOLAS SY 20 2 0 CI V I L LA W SU BJE C T HE AD S ANGELICO CALDOZO KAYE DOMINIQUE TONO KRISTINE ISABELLE SESPEÑE JESSE BRIAN LUI PIERRE GEOFFREY MACALINO GE-AN KATHLEENA SALUD BIANCA GEORGIA PALOMA BRIAN KELVIN PINEDA MA. KRISTINA LOPEZ DE LEON IRISH SELENE AQUINO 20 2 0 CI V I L LA W U N D E R S TU D I E S PRAMELA MENGHRAJANI HONEYLETTE SANCHEZ ANNA YSABELLE VELUZ JOHNRICH LOJA ANGENINE STO. DOMINGO DANIELLE ISABELLE NUESA BEATRICE MARIE MEDRIANO 20 2 0 CI V I L LA W V O LU N TE E R S LARAH ANGELA REGIS GEOFFREY TUNGOL RAISSA NAVATA ALIYAH DY ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 TABLE OF CONTENTS GENERAL PRINCIPLES .........................................................................................................................1 A. WHEN LAW TAKES EFFECT ..............................................................................................................1 B. RETROACTIVITY OF LAWS ...............................................................................................................1 C. MANDATORY OR PROHIBITORY LAWS .............................................................................................1 D. WAIVER OF RIGHTS ........................................................................................................................2 E. REPEAL OF LAWS ............................................................................................................................2 F. CONFLICT OF LAWS (PRIVATE INTERNATIONAL LAW) .......................................................................2 I. INTRODUCTION ................................................................................................................................... 2 II. JURISDICTION ..................................................................................................................................... 3 IV. CHOICE OF LAW RULES...................................................................................................................... 9 IV. RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENT ....................................................... 17 G. HUMAN RELATIONS (ARTS. 19-22) ................................................................................................ 18 H. APPLICABILITY OF PENAL LAWS..................................................................................................... 20 PERSONS AND FAMILY RELATIONS ................................................................................................... 23 A. PERSONS ..................................................................................................................................... 24 I. KINDS OF PERSONS............................................................................................................................ 24 II. CAPACITY TO ACT ............................................................................................................................. 25 III. DOMICILE AND RESIDENCE OF PERSONS ........................................................................................ 25 B. RIGHTS AND OBLIGATIONS OF COUPLES IN INTIMATE RELATIONSHIPS (REP. ACT NO. 9262) ............ 26 C. MARRIAGE ................................................................................................................................... 27 I. REQUISITES........................................................................................................................................ 27 II. MARRIAGES CELEBRATED ABROAD .................................................................................................. 29 III. FOREIGN DIVORCE........................................................................................................................... 30 IV. VOID MARRIAGES............................................................................................................................ 31 V. VOIDABLE MARRIAGE ...................................................................................................................... 36 VI. UNMARRIED COHABITATION .......................................................................................................... 40 D. LEGAL SEPARATION ...................................................................................................................... 40 I. GROUNDS .......................................................................................................................................... 40 II. DEFENSES ......................................................................................................................................... 40 III. PROCEDURE .................................................................................................................................... 41 IV. EFFECTS OF FILING .......................................................................................................................... 41 V. EFFECTS OF PENDENCY .................................................................................................................... 41 VI. EFFECTS OF DECREE OF LEGAL SEPARATION (ART. 63) ................................................................... 41 VII. RECONCILIATION............................................................................................................................ 42 VIII. EFFECT OF DEATH OF ONE OF THE PARTIES .................................................................................. 42 E. RIGHTS AND OBLIGATIONS BETWEEN HUSBAND AND WIFE............................................................ 42 F. PROPERTY RELATIONS OF THE SPOUSES......................................................................................... 43 I. MARRIAGE SETTLEMENTS ................................................................................................................. 43 II. DONATIONS BY REASON OF MARRIAGE ........................................................................................... 44 i ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW III. VOID DONATIONS BY THE SPOUSES ................................................................................................ 45 IV. ABSOLUTE COMMUNITY OF PROPERTY .......................................................................................... 47 V. CONJUGAL PARTNERSHIP OF GAINS ................................................................................................ 49 VI. REGIME OF SEPARATION OF PROPERTY .......................................................................................... 55 VII. JUDICIAL SEPARATION OF PROPERTY ............................................................................................ 55 VIII. PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE ................................................................ 56 G. THE FAMILY ................................................................................................................................. 58 I. CONCEPT OF FAMILY ......................................................................................................................... 58 II. EFFECTS ON LEGAL DISPUTES ........................................................................................................... 58 III. FAMILY HOME ................................................................................................................................. 59 H. PATERNITY AND FILIATION ........................................................................................................... 60 I. LEGITIMATE CHILDREN...................................................................................................................... 60 II. PROOF OF FILIATION ........................................................................................................................ 61 III. ILLEGITIMATE CHILDREN ................................................................................................................. 62 IV. ACTION TO IMPUGN LEGITIMACY ................................................................................................... 62 V. LEGITIMATED CHILDREN .................................................................................................................. 63 I. ADOPTION .................................................................................................................................... 66 I. DOMESTIC ADOPTION LAW............................................................................................................... 66 II. LAW ON INTER-COUNTRY ADOPTION .............................................................................................. 68 J. SUPPORT ...................................................................................................................................... 69 I. WHAT IT COMPRISES ......................................................................................................................... 69 II. WHO ARE OBLIGED TO GIVE SUPPORT ............................................................................................. 69 III. SOURCE OF SUPPORT ...................................................................................................................... 70 IV. ORDER OF SUPPORT ........................................................................................................................ 70 V. AMOUNT OF SUPPORT..................................................................................................................... 71 VI. MANNER AND TIME OF PAYMENT .................................................................................................. 71 VII. RENUNCIATION AND TERMINATION.............................................................................................. 71 VIII. SUPPORT PENDENTE LITE.............................................................................................................. 71 IX. PROCEDURE IN APPLICATION FOR SUPPORT .................................................................................. 71 K. PARENTAL AUTHORITY ................................................................................................................. 72 I. GENERAL PROVISIONS....................................................................................................................... 72 II. SUBSTITUTE PARENTAL AUTHORITY ................................................................................................ 73 III. SPECIAL PARENTAL AUTHORITY ...................................................................................................... 73 IV. EFFECT OF PARENTAL AUTHORITY OVER THE CHILD’S PERSON ...................................................... 74 V. EFFECTS OF PARENTAL AUTHORITY OVER THE CHILD’S PROPERTY ................................................. 75 VI. SUSPENSION OR TERMINATION OF PARENTAL AUTHORITY ........................................................... 75 VII. SOLO PARENTS (REP. ACT NO. 8972) .............................................................................................. 75 L. EMANCIPATION ............................................................................................................................ 77 I. CAUSE OF EMANCIPATION ................................................................................................................ 77 II. EFFECT OF EMANCIPATION .............................................................................................................. 77 M. SUMMARY JUDICIAL PROCEEDINGS IN THE FAMILY CODE ............................................................. 78 N. USE OF SURNAME ........................................................................................................................ 80 O. ABSENCE ..................................................................................................................................... 81 I. PROVISIONAL MEASURES IN CASE OF ABSENCE................................................................................ 81 II. DECLARATION OF ABSENCE.............................................................................................................. 81 III. ADMINISTRATION OF THE PROPERTY OF THE ABSENTEE ................................................................ 82 IV. PRESUMPTION OF DEATH ............................................................................................................... 82 P. CIVIL REGISTRAR .......................................................................................................................... 83 ii ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW PROPERTY ....................................................................................................................................... 86 A. CLASSIFICATION OF PROPERTY ..................................................................................................... 87 I. IMMOVABLES .................................................................................................................................... 87 II. MOVABLES ....................................................................................................................................... 89 B. OWNERSHIP ................................................................................................................................. 90 I. BUNDLE OF RIGHTS ........................................................................................................................... 90 II. ACTIONS TO RECOVER OWNERSHIP AND POSSESSION OF REAL PROPERTY AND ITS DISTINCTION. 91 III. ACTIONS FOR RECOVERY OF POSSESSION OF MOVABLE PROPERTY............................................... 92 IV. DISTINCTION BETWEEN REAL AND PERSONAL RIGHTS ................................................................... 93 V. LIMITATIONS OF OWNERSHIP .......................................................................................................... 93 C. ACCESSION ................................................................................................................................... 94 I. RIGHT TO HIDDEN TREASURE ............................................................................................................ 94 II. RULES OF ACCESSION ....................................................................................................................... 94 D. QUIETING OF TITLE ..................................................................................................................... 105 I. REQUISITES...................................................................................................................................... 105 II. DISTINCTIONS BETWEEN QUIETING TITLE AND REMOVING/PREVENTING CLOUD........................ 106 III. PRESCRIPTION/NON-PRESCRIPTION OF ACTION .......................................................................... 106 E. CO-OWNERSHIP ...................................................................................................................... 107 I. CHARACTERISTICS OF CO-OWNERSHIP ........................................................................................... 107 II. SOURCES OF CO-OWNERSHIP ........................................................................................................ 107 III. RIGHTS OF CO-OWNERS ................................................................................................................ 107 IV. TERMINATION OF CO-OWNERSHIP............................................................................................... 109 F. POSSESSION ............................................................................................................................... 110 I. CHARACTERISTICS ........................................................................................................................... 110 II. ACQUISITION OF POSSESSION ........................................................................................................ 112 III. EFFECTS OF POSSESSION ............................................................................................................... 113 IV. LOSS OR UNLAWFUL DEPRIVATION OF A MOVABLE ..................................................................... 114 V. POSSESSION IN CONCEPT OF OWNER, HOLDER, IN ONE’S OWN NAME, AND IN NAME OF ANOTHER ........................................................................................................................................................... 116 VI. RIGHTS OF THE POSSESSOR .......................................................................................................... 117 VII. LOSS OR TERMINATION OF POSSESSION ..................................................................................... 119 G. USUFRUCT ................................................................................................................................. 120 I. CHARACTERISTICS ........................................................................................................................... 120 II. CLASSIFICATION ............................................................................................................................. 122 III. RIGHTS AND OBLIGATIONS OF USUFRUCTUARY ........................................................................... 122 IV. RIGHTS OF THE OWNER ................................................................................................................ 125 V. EXTINCTION, TERMINATION, AND EXTINGUISHMENT................................................................... 125 H. EASEMENTS ................................................................................................................................... 126 I. CHARACTERISTICS ........................................................................................................................... 126 II. CLASSIFICATION ............................................................................................................................. 127 IV. RIGHTS AND OBLIGATIONS OF THE OWNERS OF THE DOMINANT AND SERVIENT ESTATES......... 128 V. MODES OF EXTINGUISHMENT ....................................................................................................... 129 VI. LEGAL V. VOLUNTARY EASEMENT ................................................................................................. 129 VII. KINDS OF EASEMENT ................................................................................................................... 129 I. NUISANCE ................................................................................................................................... 131 I. NUISANCE PER SE ............................................................................................................................ 132 iii ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW II. NUISANCE PER ACCIDENS............................................................................................................... 132 III. LIABILITIES ..................................................................................................................................... 133 IV. NO PRESCRIPTION ........................................................................................................................ 133 V. REMEDIES AGAINST PUBLIC NUISANCE ......................................................................................... 133 VI. REMEDIES AGAINST A PRIVATE NUISANCE ................................................................................... 133 VI. CRIMINAL PROSECUTION .............................................................................................................. 133 VII. JUDGMENT WITH ABATEMENT.................................................................................................... 134 VIII. EXTRAJUDICIAL ABATEMENT ...................................................................................................... 134 IX. SPECIAL INJURY TO INDIVIDUAL .................................................................................................... 134 X. RIGHT OF INDIVIDUAL TO ABATE A PUBLIC NUISANCE .................................................................. 134 XI. RIGHT TO DAMAGES...................................................................................................................... 135 XII. DEFENSES TO ACTION .................................................................................................................. 135 XIII. WHO MAY SUE ON PRIVATE NUISANCE ...................................................................................... 135 J. MODES OF ACQUIRING OWNERSHIP ............................................................................................ 135 I. OCCUPATION................................................................................................................................... 135 II. DONATIONS.................................................................................................................................... 136 III. PRESCRIPTION ............................................................................................................................... 142 PRESCRIPTION ............................................................................................................................... 143 A. TYPES OF PRESCRIPTION ............................................................................................................. 144 B. WHEN PRESCRIPTION IS INAPPLICABLE ....................................................................................... 146 C. PRESCRIPTION OR LIMITATION OF ACTIONS ................................................................................ 147 D. INTERRUPTION .......................................................................................................................... 147 E. SPECIAL TOPICS UNDER PROPERTY LAW ...................................................................................... 148 I. AIRSPACE ......................................................................................................................................... 148 II. WATERS .......................................................................................................................................... 148 III. MINERALS...................................................................................................................................... 149 IV. TRADEMARK/TRADENAME ........................................................................................................... 149 V. SUBDIVISION/CONDOMINIUM BUYER’S PROTECTIVE DECREE...................................................... 150 VII. SPECIAL ECONOMIC ZONES – PEZA .............................................................................................. 152 VIII. RECLAMATION – PEA .................................................................................................................. 153 IX. IPRA LAW....................................................................................................................................... 155 SUCCESSION .................................................................................................................................. 158 A. GENERAL PROVISIONS ................................................................................................................ 158 I. DEFINITION...................................................................................................................................... 158 II. SUCCESSION OCCURS AT THE MOMENT OF DEATH ....................................................................... 158 III. KINDS OF SUCCESSORS .................................................................................................................. 159 B. TESTAMENTARY SUCCESSION ..................................................................................................... 160 I. WILLS ............................................................................................................................................... 160 II. INSTITUTION OF HEIRS DEVISEES AND LEGATEES .......................................................................... 174 III. SUBSTITUTION OF HEIRS ............................................................................................................... 177 IV. CONDITIONAL TESTAMENTARY DISPOSITIONS AND DISPOSTIONS WITH A TERM ....................... 179 V. LEGITIME ........................................................................................................................................ 182 iv ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW C. LEGAL OR INTESTATE SUCCESSION .............................................................................................. 201 I. GENERAL PROVISIONS..................................................................................................................... 201 II. ORDER OF INTESTATE SUCCESSION................................................................................................ 205 D. PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION ............................................... 210 I. RIGHT OF ACCRETION...................................................................................................................... 210 II. CAPACITY TO SUCCEED BY WILL OR BY INTESTACY ........................................................................ 211 III. ACCEPTANCE AND REPUDIATION OF THE INHERITANCE .............................................................. 215 IV. COLLATION .................................................................................................................................... 217 V. PARTITION AND DISTRIBUTION...................................................................................................... 219 OBLIGATIONS ................................................................................................................................ 224 A. GENERAL PROVISIONS ................................................................................................................ 224 I. DEFINITION...................................................................................................................................... 224 II. ELEMENTS OF AN OBLIGATION ...................................................................................................... 224 III. SOURCES OF OBLIGATIONS ........................................................................................................... 225 B. NATURE AND EFFECTS OF OBLIGATIONS ...................................................................................... 227 I. DUTIES OF A DEBTOR IN AN OBLIGATION TO GIVE.......................................................................... 227 II. RIGHTS OF A CREDITOR IN AN OBLIGATION TO DO OR NOT TO DO ............................................... 228 III. TRANSMISSIBILITY OF OBLIGATIONS............................................................................................. 228 IV. PERFORMANCE OF OBLIGATIONS ................................................................................................. 228 V. BREACHES OF OBLIGATIONS .......................................................................................................... 229 VI. REMEDIES AVAILABLE TO CREDITOR IN CASES OF BREACH .......................................................... 233 C. KINDS OF OBLIGATIONS .............................................................................................................. 234 I. PURE ............................................................................................................................................... 234 II. CONDITIONAL OBLIGATION ........................................................................................................... 234 III. OBLIGATIONS WITH A PERIOD OR A TERM.................................................................................... 236 IV. ALTERNATIVE OR FACULTATIVE OBLIGATIONS ............................................................................. 239 V. JOINT AND SOLIDARY OBLIGATIONS .............................................................................................. 241 VI. OBLIGATIONS WITH A PENAL CLAUSE ........................................................................................... 245 D. EXTINGUISHMENT OF OBLIGATIONS ........................................................................................... 247 I. PAYMENT OR PERFORMANCE ......................................................................................................... 247 II. LOSS OF DETERMINATE THING OR IMPOSSIBILITY OR DIFFICULTY OF PERFORMANCE ................. 255 III. CONDONATION OR REMISSION OF DEBT ...................................................................................... 256 IV. CONFUSION .................................................................................................................................. 257 V. COMPENSATION ............................................................................................................................ 258 VI. NOVATION .................................................................................................................................... 259 CONTRACTS ................................................................................................................................... 262 A. GENERAL PROVISIONS ................................................................................................................ 262 I. STAGES OF CONTRACTS................................................................................................................... 262 II. CLASSIFICATIONS ........................................................................................................................... 263 III. ESSENTIAL REQUISITES .................................................................................................................. 264 B. FORMALITY ................................................................................................................................ 272 C. REFORMATION OF INSTRUMENTS ............................................................................................... 274 v ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW D. INTERPRETATION OF CONTRACTS ............................................................................................... 274 E. DEFECTIVE CONTRACTS ............................................................................................................... 275 I. RESCISSIBLE CONTRACTS................................................................................................................. 275 III. UNENFORCEABLE CONTRACTS ...................................................................................................... 279 IV. VOID OR INEXISTENT CONTRACTS ................................................................................................ 280 V. DISTINGUISH: RESOLUTION AND RESCISSION OF CONTRACTS ...................................................... 282 NATURAL OBIGATIONS................................................................................................................... 283 ESTOPPEL ...................................................................................................................................... 284 SPECIAL CONTRACTS ...................................................................................................................... 286 A. SALES......................................................................................................................................... 286 I. GENERAL PROVISIONS..................................................................................................................... 286 II. PARTIES .......................................................................................................................................... 295 III. OBLIGATION OF THE VENDOR ....................................................................................................... 296 IV. OBLIGATION OF THE VENDEE........................................................................................................ 298 V. TRANSFER OF OWNERSHIP ............................................................................................................ 299 VI. RISK OF LOSS ................................................................................................................................. 301 VII. DOCUMENT OF TITLE ................................................................................................................... 301 VIII. WARRANTIES .............................................................................................................................. 303 IX. BREACH OF CONTRACT ................................................................................................................. 305 X. PERFORMANCE OF OBLIGATION .................................................................................................... 312 XI. EXTINGUISHMENT......................................................................................................................... 313 B. TRUST ........................................................................................................................................ 317 I. DEFINITION...................................................................................................................................... 317 II. KINDS OF TRUST ............................................................................................................................. 318 C. AGENCY ..................................................................................................................................... 322 I. DEFINITION OF AGENCY .................................................................................................................. 322 II. NATURE, FORMS AND KINDS OF AGENCY ...................................................................................... 323 III. OBLIGATIONS OF THE AGENT ........................................................................................................ 331 IV. OBLIGATIONS OF THE PRINCIPAL .................................................................................................. 337 V. MODES OF EXTINGUISHMENT ....................................................................................................... 340 D. COMPROMISE ............................................................................................................................ 341 E. LOAN ......................................................................................................................................... 345 I. LOAN ............................................................................................................................................... 345 II. COMMODATUM............................................................................................................................. 346 III. SIMPLE LOAN................................................................................................................................. 346 IV. INTERESTS ON LOAN ..................................................................................................................... 347 E. DEPOSIT ..................................................................................................................................... 352 F. ANTICHRESIS .............................................................................................................................. 361 G. LEASE ........................................................................................................................................ 363 I. GENERAL PROVISIONS..................................................................................................................... 363 II. LEASE OF RURAL AND URBAN LANDS ............................................................................................. 363 III. RIGHTS AND OBLIGATIONS OF LESSOR AND LESSEE ..................................................................... 366 vi ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW IV. SPECIAL RULES FOR LEASE OF RURAL/URBAN LANDS ................................................................... 370 LAND TITLES & DEEDS .................................................................................................................... 373 A. TORRENS SYSTEM ...................................................................................................................... 373 I. CONCEPT AND BACKGROUND ......................................................................................................... 373 II. CERTIFICATE OF TITLE ..................................................................................................................... 376 B. AGRARIAN TITLES AND ANCESTRAL LAND DOMAINS.................................................................... 379 I. CONCEPT AND REGISTRATION OF AGRARIAN TITLES ...................................................................... 379 II. CONCEPT AND REGISTRATION OF ANCENTRAL LANDS AND DOMAINS ......................................... 381 C. CITIZENSHIP REQUIREMENT ........................................................................................................ 384 I. INDIVIDUALS ................................................................................................................................... 384 II. CORPORATIONS ............................................................................................................................. 384 D. ORIGINAL REGISTRATION ........................................................................................................... 384 I. WHO MAY APPLY............................................................................................................................. 386 II. REGISTRATION PROCESS AND REQUIREMENTS ............................................................................. 388 III. REMEDIES ...................................................................................................................................... 397 IV. CADASTRAL REGISTRATION .......................................................................................................... 404 E. SUBSEQUENT REGISTRATION ...................................................................................................... 411 I. VOLUNTARY DEALINGS ................................................................................................................... 412 II. INVOLUNTARY DEALINGS ............................................................................................................... 415 F. NON-REGISTRABLE PROPERTIES .................................................................................................. 419 TORTS............................................................................................................................................ 424 A. PRINCIPLES ................................................................................................................................ 424 I. ABUSE OF RIGHT; ELEMENTS........................................................................................................... 424 II. UNJUST ENRICHMENT .................................................................................................................... 424 III. LIABILITY WITHOUT FAULT ............................................................................................................ 425 IV. ACTS CONTRARY TO LAW .............................................................................................................. 430 V. ACTS CONTRARY TO MORALS ........................................................................................................ 430 B. CLASSIFICATION OF TORTS .......................................................................................................... 431 I. ACCORDING TO MANNER OF COMMISSION ................................................................................... 431 II. ACCORDING TO SCOPE ................................................................................................................... 431 C. THE TORTFEASOR ....................................................................................................................... 432 I. DIRECT TORTFEASOR ....................................................................................................................... 432 II. JOINT TORTFEASORS ...................................................................................................................... 432 III. PERSONS MADE RESPONSIBLE FOR OTHERS ................................................................................. 433 D. PROXIMATE CAUSE .................................................................................................................... 441 I. CONCEPT ......................................................................................................................................... 441 II. EFFICIENT INTERVENING CAUSE..................................................................................................... 441 III. CAUSE IN FACT .............................................................................................................................. 442 IV. CAUSE AS DISTINGUISHED FROM CONDITION .............................................................................. 443 V. LAST CLEAR CHANCE ...................................................................................................................... 444 E. LEGAL INJURY ............................................................................................................................. 444 CONCEPT OF LEGAL INJURY ...................................................................................................................... 444 vii ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW F. INTENTIONAL TORTS ................................................................................................................... 445 I. GENERAL ......................................................................................................................................... 445 II. INTERFERENCE WITH RIGHTS TO PERSONS AND PROPERTY .......................................................... 445 III. INTERFERENCE WITH RELATIONS .................................................................................................. 449 G. NEGLIGENCE .............................................................................................................................. 450 I. CONCEPT ......................................................................................................................................... 450 II. GOOD FATHER OF A FAMILY OR REASONABLY PRUDENT PERSON ................................................ 450 III. STANDARD OF CARE; EMERGENCY RULE....................................................................................... 450 IV. UNREASONABLE RISK OF HARM ................................................................................................... 451 V. EVIDENCE ....................................................................................................................................... 451 VI. PRESSUMPTION OF NEGLIGENCE ................................................................................................. 452 VII. DEFENSES ..................................................................................................................................... 454 H. SPECIAL LIABILITY IN PARTICULAR ACTIVITIES .............................................................................. 456 I. IN GENERAL; CONCEPTS .................................................................................................................. 456 II. PRODUCTS LIABILITY; MANUFACTURERS OR PROCESSORS ........................................................... 457 III. NUISANCE...................................................................................................................................... 458 IV. VIOLATION OF CONSTITUTIONAL RIGHTS; VIOLATION OF CIVIL LIBERTIES................................... 459 V. VIOLATION OF RIGHTS COMMITTED BY PUBLIC OFFICERS ............................................................ 460 VI. PROVINCES, CITIES AND MUNICIPALITIES ..................................................................................... 460 VII. OWNER OF MOTOR VEHICLE ....................................................................................................... 460 VIII. PROPRIETOR OF BUILDING OR STRUCTURE OR THING ............................................................... 461 IX. HEAD OF FAMILY ........................................................................................................................... 461 X. VIOLATIONS OF DATA PRIVACY ...................................................................................................... 461 I. STRICT LIABILITY .......................................................................................................................... 462 I. ANIMALS; POSSESSOR AND USER OF AN ANIMAL ........................................................................... 462 II. NUISANCE....................................................................................................................................... 462 III. PRODUCTS LIABILITY; CONSUMER ACT ......................................................................................... 462 DAMAGES ...................................................................................................................................... 464 A. GENERAL CONSIDERATIONS ....................................................................................................... 464 I. CLASSIFICATION .............................................................................................................................. 464 III. WHEN RECOVERABLE .................................................................................................................... 470 B. DAMAGES IN CASE OF DEATH...................................................................................................... 472 C. GRADUATION OF DAMAGES ....................................................................................................... 473 I. DUTY OF INJURED PARTY................................................................................................................. 473 II. RULES ............................................................................................................................................. 473 viii GENERAL PRINCIPLES Civil Law ATENEO CENTRAL BAR OPERATIONS 2020/21 GENERAL PRINCIPLES TOPIC OUTLINE UNDER THE SYLLABUS A. WHEN LAW TAKES EFFECT B. RETROACTIVITY OF LAWS C. MANDATORY OR PROHIBITORY LAWS D. WAIVER OF RIGHTS E. REPEAL OF LAWS F. CONFLICT OF LAWS I. Introduction (In General) II. Jurisdiction III. Principles on Choice of Law IV. Choice of Law Rules V. Recognition and Enforcement of Foreign Judgment G. HUMAN RELATIONS H. APPLICABILITY OF PENAL LAWS Civil Law – branch of law that regulates relations of assistance, authority and obedience among family members as well as members of a society for the protection of private interests New Civil Code: took effect on August 30, 1950 CIVIL LAW A. WHEN LAW TAKES EFFECT When the Laws Become Effective General Rule: Fifteen (15) days after completion of publication in Official Gazette or a newspaper of general circulation. (Art. 2) Exception: The law can provide for its own date of effectivity and manner of publication. An immediate effectivity clause does not preclude the requirement of publication. Mandatory Publication Publication is mandatory and must be in full (otherwise, it is not deemed published at all) since its purpose is to inform the public of its contents. Compliance with the Law Ignorance of the law excuses no one from compliance therewith (Ignorantia legis non excusat). (Art. 3) Note: Applies only to mandatory and prohibitory laws (Consunji v. CA, G.R. 137873, 2001). B. RETROACTIVITY OF LAWS General Rule: Laws are not retroactive. (Art. 4) Exceptions: (PIERCER) 1. Penal laws when favorable to the accused who is not a habitual delinquent or recidivist 2. Interpretative statutes 3. When the law itself Expressly provides Exceptions to the exception: i. Ex post facto law ii. When retroactivity impairs the obligations of contracts iii. Bills of Attainder i. Remedial statutes ii. Curative statutes iii. Emergency laws iv. Laws creating new substantive Rights C. MANDATORY OR PROHIBITORY LAWS General Rule: Acts executed against the provisions of mandatory or prohibitory laws shall be void. (Art. 5) Page 1 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Exception: If the law expressly provides for the validity of acts committed in violation of a mandatory or prohibitory provision of a statute. D. WAIVER OF RIGHTS Right - A legally enforceable claim of one person against another, that the other shall do a given act, or shall not do a given act. Kinds of rights a. Natural Rights – Those which grow out of the nature of man and depend upon personality. Example: right to life, liberty, privacy, and good reputation. b. Political Rights – Consist in the power to participate, directly or indirectly, in the establishment or administration of government. Example: right of suffrage, right to hold public office, right of petition. c. Civil Rights– Those that pertain to a person by virtue of his citizenship in a state or community. Example: property rights, marriage, equal protection of laws, freedom of contract, trial by jury. 1. Real rights – enforceable against the whole world (absolute rights) 2. Personal rights – enforceable against a particular individual (relative rights) General Rule: Rights may be waived. (Art. 6) Requisites of a valid waiver: (Herrera v. Borromeo) 1. Existence of a right 2. Knowledge of the existence of such right 3. An intention to relinquish the right Exceptions: When waiver is i. Contrary to law, public order, public policy, morals, good customs (e.g. waiver of future inheritance, political rights, future support) ii. Prejudicial to a third person with a right recognized by law. CIVIL LAW E. REPEAL OF LAWS Repeal of Laws (Art. 7) 1. Express repeal - repeal of the repealing law will not revive the old law (unless expressly provided). 2. Implied repeal - 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. ————- end of topic ————E. REPEAL OF LAWS Repeal of Laws (Art. 7) (b) Express repeal - repeal of the repealing law will not revive the old law (unless expressly provided). (c) Implied repeal - 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. ————- end of topic ————F. CONFLICT OF LAWS (PRIVATE INTERNATIONAL LAW) I. INTRODUCTION Private International Law or Conflict of Laws that part of the municipal law of the state, which directs its courts and administrative agencies, when confronted with a legal problem involving a foreign element, whether or not they should apply foreign laws. Foreign Element – a factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states. (Saudi Arabian Airlines v. Court of Appeals, G.R. No. 122191, 1998) Page 2 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Threefold Functions of Private International Law (CJS) 1. Prescribe conditions under which a court or agency is Competent to entertain a suit or proceeding involving facts containing a foreign element; 2. Specify circumstances under which foreign Judgment will be recognized as valid and binding in the forum; and 3. Determine for each class of cases the particular System of law by reference to which the rights of parties must be ascertained. Difference Between Private (PRIL) and Public International Law (PIL) Public international law (PIL) - the law that regulates the relations of States and other entities possessing international personality. Remedies and Sanctions Transactions Involved Nature BASIS PrIL Municipal or national in character PIL International in character Private transactions between individuals Generally affected by public interest, or those that are of interest only to sovereign states May be peaceful or forcible Resort to municipal tribunals Sources Private International Law is not a separate, distinct branch of law; nor is it a mere part of Civil Law but rather it traverses and concerns almost every department of law. a. Codification s b. Special Legislation c. Multilateral Treaties and International Conventions d. Bilateral Treaties e. Case Law f. International Custom g. Constitution a. Customs b. Treatises c. Principles of law recognize d by civilized nations d. Judicial Decision e. Teaching s of the most highly qualified publicists II. JURISDICTION Three Stages in Judicial Resolution Of Conflict Problems 1. Jurisdiction 2. Choice of law 3. Recognition and enforcement of judgments (Raytheon International v. Rouzie, G.R. No. 162894, 2008) Major Questions in Analyzing a Conflict of Laws Problem 1. Jurisdiction - where can or should litigation be initiated? 2. Choice of law - which law will the court apply? 3. Recognition and enforcement of foreign judgments - where can the resulting judgment be enforced? (Hasegawa vs. Kitamura, G.R. No. 149177, 2007) Jurisdiction Over the Subject Matter • Power to hear and determine cases of general class to which the proceedings in question belong. • It is conferred by the sovereign authority, which organizes the courts and defines it powers. • Jurisdiction over subject matter is fixed by law and cannot be conferred by consent of the parties or their voluntary submission. (Davao Light v. Court of Appeals, G.R. No. 111685 2001) Page 3 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 • To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, the movant must show that the court or tribunal cannot act on the matter submitted to it because no law grants it the power to adjudicate the claims. (Hasegawa vs. Kitamura, G.R. No. 149177, 2007) Jurisdiction Over Persons It is the competence of a court to render decision that will bind the parties to the suit. Jurisdiction Over the Res It is the jurisdiction over the subject matter of the controversy, regardless of the persons who may be interested therein. It may be classified as follows: (a) Action in Rem – purpose is to affect the interests of all persons in a thing, thus the court of the forum may render judgment as long as it has jurisdiction over the res. (b) Quasi in Rem – purpose is to affect interests of particular persons in a thing, thus the court of the forum may render judgment as long as it has jurisdiction over said persons. (c) Action in Personam – purpose is to impose personal liability upon the defendant Note: In all kinds of jurisdiction, due process requires that the State must have a reasonable basis for exercising jurisdiction; to be reasonable the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair play and substantial justice (Salonga, Private International Law, p. 44, 1995). Minimum Contacts The concept of minimum contacts protects the defendant against the burdens of litigating in a distant or inconvenient forum and it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns. (World-Wide Volkswagen Corporation v. Woodson, 1980) One basic principle underlies all rules of jurisdiction in international law, a state does not have jurisdiction in the absence of some CIVIL LAW reasonable basis for exercising it. To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair play and substantial justice. (HSBC v. Sherman, G.R. No. 72494, 1989) A casual presence of a corporation or its agent in a state in single or isolated incidents is not enough to establish jurisdiction. The activities of its agents in transacting business for the corporation in the forum state are minimum contacts that make it reasonable and in conformity with the due process clause. The activities of the corporation in the state were systematic and continuous rather that irregular or casual, which resulted in large volume interstate business. The corporation received the benefits and protection of the laws of the state, and therefore established the minimum contacts to be under their jurisdiction. (International Shoe Co. v. Washington, 326 U.S. 310, 1945) Foreign Corporations Doing Business Doing business implies a continuity of commercial dealings, and contemplate to that extent the performance of acts, or the exercise of some of the functions normally incident to and in progressive prosecution of commercial gain or of the purpose and object of the business organization. The following acts shall not be deemed “doing business” in the Philippines: (a) Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; (b) Having a nominee director or officer to represent its interests in such corporation; (c) Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative’s or distributor’s own name and account; (d) The publication of a general advertisement through any print or broadcast media; (e) Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines; Page 4 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW (f) Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export; (g) Collecting information in the Philippines; and (h) Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. (Sec.1, IRR of Foreign Investments Act) clause, said clause does not operate to deny or divest jurisdiction from the State. (HSBC v. Sherman, G.R. No. 72494, 1989). Service of Summons on Foreign Corporations Service may be made on a foreign corporation which has transacted or is doing business in the Philippines on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers, agents, directors or trustees within the Philippines. If the foreign private juridical entity is not registered in the Philippines, or has no resident agent but has transacted or is doing business in it, as defined by law, such service may, with leave of court, be effected outside of the Philippines through any of the following means: (a) By personal service coursed through the appropriate court in the foreign country with the assistance of the department of foreign affairs; (b) By publication once in a newspaper of general circulation in the country where the defendant may be found and by serving a copy of the summons and the court order by registered mail at the last known address of the defendant; (c) By facsimile; (d) By electronic means with the prescribed proof of service; or (e) By such other means as the court, in its discretion, may direct (Revised Rules on Civil Procedure, Rule 14, Sec. 14 A.M. No. 19-1020-SC) Although venue may be changed or transferred from one province to another by agreement of the parties in writing, such an agreement will not be held valid where it practically negates the action of the claimants. (Sweet Lines, Inc. v. Teves, G.R. No. L-37750, 1978) Choice of Forum While the parties are free to select the forum for resolving disputes by way of a choice of forum Specifically, this jurisdiction only refers to the court’s jurisdiction over the subject matter in a judicial proceeding. It is fixed by law and determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. (Hasegawa vs. Kitamura, G.R. No. 149177, 2007) Three Ways of Disposing Conflict of Law Cases 1. Dismiss the case, either because of: (a) Lack or jurisdiction; (b) Refusal to assume jurisdiction over the case on the ground that the controversy may be suitably tried elsewhere (forum non conveniens); or (c) Act of State doctrine ▪ Except: Violation of International Law principle 2. Assume jurisdiction over the case and apply internal law of the forum (lex fori); or 3. Assume jurisdiction over the case and take into account or apply the law of some other State (Salonga, p. 44). Test to Determine Most Convenient Forum A Philippine court in a conflict-of-laws case may assume jurisdiction if it chooses to do so, provided, that: 1. The forum is one to which the parties may conveniently resort to; 2. The forum is in the position as to make an intelligent decision as to the law and the facts; and 3. The forum has or is likely to have power to enforce its decision (Principle of Page 5 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Effectiveness). (The Manila Hotel Corporation v. NLRC, GR No. 120077, 2000) Act of State Doctrine Courts will not inquire into the validity of acts of a foreign government done within its own territory. Every sovereign state is bound to respect the independence of every other sovereign state. (French v. Banco Nacional de Cuba, 23 N.Y.2d 46,1968) III. PRINCIPLES ON CHOICE OF LAW Choice of law - deals with the problem that arises when two or more states have a connection to cases about which their respective laws differ. Each court must then choose which laws to apply based on choice of law rules that themselves rest on public policy. Choice of Law seeks to answer two important questions: 1. What legal system should control a given situation where some of the significant facts occurred in two or more states; and 2. To what extent should the chosen legal system regulate the situation (Saudi Arabian Airlines v. CA, GR No. 122191, 1998). Application of Internal Law Three Instances when the Forum Must Apply Internal Law 1. When the application of internal law is decreed; 2. Where there is failure to plead and to prove foreign law; and 3. Where the case involves any of the exceptions to the application of foreign law. Application of Foreign Law Proof of Foreign Law In the Philippine jurisdiction, it is settled that foreign law must be treated as a fact that must be pleaded and proved by the party invoking it. Foreign law may either be: (a) Written; or (b) Unwritten. CIVIL LAW Proof of Written Foreign Law Written law may be evidenced by: (a) An official publication; or (b) A copy attested by the officer having legal custody of the record, or by his deputy. Note: If the record is not kept in the Philippines, the proponent of the foreign law must also submit a certificate that such officer has the custody of the record. The certificate may be made by any of the following officers and must be authenticated by the seal of his office: (a) Secretary of the embassy or legation (b) Consul general (c) Consul (d) Vice consul (e) Consular agent (f) Any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept. (Rules of Court, Rule 132, Sec. 24) Proof of Unwritten Foreign Law The following are admissible: 1. The oral testimony of expert witnesses; and 2. Printed and published books of reports of decisions of the courts of the State concerned if proved to be commonly admitted in such courts. (Wildvalley Shipping Co., Ltd. v. CA, GR No. 119602, 2000) Exceptions: The strict rules of evidence to prove foreign law do not apply in: (LECION) 1. Election cases, 2. Land registration, 3. Cadastral, 4. Naturalization and 5. Insolvency proceedings, and 6. Other cases not herein provided for, except by analogy or in a suppletory character and whenever practicable and convenient. (Rules of Court, Rule 1, Sec. 4) Doctrine of Processual Presumption Where the foreign law is not properly pleaded or proved, the presumption of identity or similarity arises, i.e., the foreign law is the same as the Page 6 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 domestic law. (EDI-Staffbuilders International v. NLRC, 2007) Exceptions to the application of foreign law (PIMP-A-VIP) i. Enforcement of the foreign law would run counter to an important Public policy ii. Application of foreign law would infringe good Morality as understood in the forum iii. When the foreign law is Penal in nature iv. Where the foreign law is Procedural in nature v. When the question involves Immovable property in the forum vi. When the foreign law is fiscal or Administrative in nature vii. Where the application of foreign law would involve Injustice or injury to the citizens or residents in the forum viii. Where the application of foreign law would endanger Vital interests of the State of the forum. Note: The courts of the forum will not enforce any foreign claim (or statute) obnoxious to the forum's public policy. Thus, in Cadalin v. POEA, the Court ruled that even if Bahrain’s Amiri Decree No. 23 prescribes a one-year prescriptive period for labor benefits claimed by the Filipino petitioners, to enforce such foreign law as regards the claims in question would contravene the Philippine’s public policy on the protection of labor. A foreign law, stating that a parent is not obliged to support the child, does not find applicability in our jurisdiction when such is contrary to an established public policy of the forum. Prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country. (Del Socorro, v. Van Wilsem, GR No. 193707, 2014) Rule on Procedural Laws General Rule: The forum applies its own procedural law (lex fori) in resolving a conflicts of CIVIL LAW law case while the foreign law is limited to the substantive aspects. Exception: Prescription of actions is sui generis in conflict of laws. It may be viewed either as procedural or substantive, depending on the characterization given such a law. Exception to the Exception: The characterization of a statute of limitation becomes irrelevant when the country of the forum has a "borrowing statute.” Borrowing Statute – directs the State of the forum to apply the foreign statute of limitations to the pending claims based on a foreign law. In short, it has the practical effect of treating the foreign statute of limitation as one of substance An example is Section 48 of the Philippine Code of Civil Procedure, which provides that, “If by the laws of the state or country where the cause of action arose the action is barred, it is also barred in the Philippines Islands.” (LWV Construction v. Dupo, G.R. No. 172342, July 13, 2009) Exception to the Exception to the Exception: The Court of the forum will not enforce any foreign claim obnoxious to the forum’s public policy. Nature of Conflict of Law Rules Distinguish Internal Rule from Conflict Rule as to their Legal Effects INTERNAL RULE CONFLICT RULE Immediately solves Decides only which the question raised law or jurisdiction will whether the particular give the final solution act is allowed, commanded or prohibited Two Parts of a Conflict of Law Rule 1. Factual Situation – takes the form of factual events or operative facts; and 2. Point of Contact or Test Factor – prescribes the municipal law to which the question should referred or connected Page 7 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Example: Article 16 of the Civil Code may be divided as follows: 1. Real property as well as personal property (Factual Situation) 2. Is subject to the law of the country where it is situated (or the situs of the res) (Point of Contact) (b) Transmission – reference is made to a third State Points of Contact (DRONS-SAFES-IF) 1. Domicile, Residence, place of Origin, Nationality, or place of Sojourn of a person; 2. Seat of a legal or juridical person; 3. Locus Actus or the place where an act has been done; 4. Lex Fori or the place where judicial or administrative proceedings are instituted or done; 5. Place where an act is intended to come into Effect 6. Situs of a thing or the place where a thing is, or is deemed to be situated. 7. Lex loci Intentionis or the intention of the contracting parties as to the law that should govern their agreement; 8. Flag of a ship (Saudi Arabian Airlines v. CA, G.R. No. 122191, 1998) (b) Acceptance of Renvoi – reference is to the entirety, including the conflicts rule of the other State; and if the State of the forum finds that the matter is referred back to it, the court might conclude that the reference to the other State has not provided a direct solution, in such case, the court might accept the reference and apply its own internal law (remission) or the laws of the third State (transmission). • Also called single renvoi. Characterization - process of assigning a disputed question to its correct legal category Stages of Characterization 1. Classification of the problem (e.g. whether the question relates to contracts, property, torts, succession etc). Note: As a matter of convenience, the classification should be determined in accordance with the law of the forum. 2. Determination of foreign law based on point of contact test 3. Selection, extent of application of the proper law Renvoi - a method of disposing a conflict problem by referring a matter for judgment or consideration to another State. Types of Renvoi (a) Remission – reference is made back to the law of the forum Theories to Solve Renvoi Problem (a) Rejection of Renvoi – the reference of the matter for judgment is confined exclusively to the internal law of the other State. (c) Desistment or Mutual Disclaimer of Jurisdiction – reference is also to the entirety, including the conflicts rule of the other State; and if the State of the forum finds that the matter is referred to back to it, the court might conclude that the other State has no rule of law applicable to the situation, in such case, the court left is with no other alternative but to apply its own internal law. (d) Foreign Court Theory – the law to be applied by the court of the forum is that law the court of the State referred would have applied. • Double renvoi may arise, i.e., the court of the forum, in applying the foreign court theory, finds that the referred State accepts the renvoi. In which case, the court of the forum shall therefore apply what the court of the State referred would have applied. • Example: X was a citizen of State B but domiciled in State C. A left immovables in State B. As the courts of State B follows the foreign court theory, it will therefore decide the case exactly as State C will decide. Page 8 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 - - Assuming that State B’s court determines that State C’s court would have referred the matter to State B’s internal laws alone, State B would therefore apply its own (State B’s) internal laws as State B would. (No renvoi in this scenario) Assuming however that the State B’s court determines that State C’s court would have referred the matter to State B’s laws in its entirety; Then State C would have found that State B’s conflict rules refers the matter back to State C’s again or a third State; Thus, State C, which adopts the acceptance of the renvoi theory, would have therefore applied its own laws or that of the third State. The court of the forum, State B, thus decides the case the way State C would. IV. CHOICE OF LAW RULES PROPERTY Lex situs rule - the Civil Code gives exclusive importance to the lex situs, regardless of the nature of the property; thus, it provides that real property as well as personal property is subject to the law of the country where situated. (Art.16) Immovables Scope of Lex Situs Rules as to Immovables (a) Capacity to take and transfer immovables; Exception: Lex rei sitae is not applicable where the issue is the authority of a State official to validly dispose of property belonging to the State and the validity of the procedures adopted to effect its sale. (Laurel v. Garcia, G.R. No. 92013, 1990). (b) Formalities of conveyance; (c) Essential validity and effect of the transfer; (d) Interpretation and effect of conveyance; (e) Validity and effect of mortgages and other encumbrances; (f) Marital interest in land; and (g) Equitable interest in land CIVIL LAW Elements of a Conflict Of Laws Problem as to Immovables: (C-FEI) 1. There is a dispute over the title or ownership of an immovable, such that the: (a) Capacity to take and transfer immovables, (b) Formalities of conveyance, (c) Essential validity and effect of the transfer, or (d) Interpretation and effect of a conveyance, are to be determined; and 2. A foreign law on land ownership and its conveyance is asserted to conflict with a domestic law on the same matters. Hence, the need to determine which law should apply. Exception To The Lex Situs Rule As To Immovables: (SCOFT) i. Succession - capacity to succeed, order of succession, amount of successional rights and intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property. (Arts. 16 and 1039) ii. Parties’ Contractual Obligations where the issue involves the rights and liabilities of the parties inter se as a matter of contractual obligation, even though the subject matter of the contract is the land, the governing law is the law that regulates the contract as a whole. iii. Principal Obligation Secured - validity and effect of the principal obligation, which the encumbrance secures are determined by principles applicable to contracts in general. iv. Contract to Transfer - while the validity of the transfer of immovable is governed by the lex situs rule, the validity of the contract to transfer is determined by the proper law of the contract. Page 9 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 v. CIVIL LAW When the property within the situs belongs to a Foreign State. (Holy See v. Rosario, G.R. No. 101949, 1994) states whose nationality he possesses (Hague Convention on Conflict of Nationality Laws, Art. 3). PERSONAL LAW, NATIONALITY AND DOMICILE Personal Law Also known as statuta personal refers to laws that concern persons, their legal condition and civil status. Modes of Acquisition of Nationality (BiNCReS) (a) Birth (either Jus Sanguinis or Jus Soli) (b) Naturalization – grant of citizenship upon application by some act which would qualify an individual for a new nationality. (c) Repatriation – recovery of original nationality upon fulfillment of certain conditions. (d) Subjugation – when a State is defeated or conquered, all the citizens acquire the nationality of the conquering State. (e) Cession – when a State has been ceded in another State, all the people of the territory acquire the nationality of the State in which their territory has been merged. Two Approaches to Determine Personal Law 1. Nationality 2. Domicile Nationality Refers to a personal and more or less permanent membership in a political community. Under the conflicts rules of the Civil Code, the national law of an individual regulates his civil status and condition, his family rights and duties, the intrinsic validity of his will and the rights of succession to his properties (Arts. 15, 16 par. 2 and 1069). Determination of Nationality As a rule, each State is free to determine by its own municipal law the persons it considers as its nationals. Thus, any question as to whether a person is a national of particular State shall be determined by the municipal law of that State. (Hague Convention on Conflict of Nationality Laws in 1930, Art. 2). Who are Filipino citizens: (AFEN) (a) Those who are citizens of the Philippines at the time of the Adoption of this Constitution; (b) Those whose Fathers or mothers are citizens of the Philippines; (c) Those born before January 17, 1973, of Filipino mothers, who Elect Philippine citizenship upon reaching the age of majority; and (d) Those who are Naturalized in accordance with law (Phil. Const., Art. IV, Sec. 1) Note: A person having two or more nationalities may be regarded as a national by each of the Modes of Losing Nationality (ReDRES) (a) Release – a citizen may apply for release from citizenship of his State. (b) Deprivation – the State concerned may deprive their citizens of nationality. Example; the Philippines may deprive their citizens of nationality upon entry into the military service of a foreign power. (c) Expiration – of nationality may result from a long stay abroad without any indication of a desire to return. (d) Renunciation – a person may repudiate his nationality in favor of another. (e) Substitution – loss of nationality ipso facto by naturalization abroad or by marriage. Instances when Dual or Multiple Nationalities Arise: 1. Concurrent application of jus soli and jus sanguinis at birth; 2. Refusal of certain States to accept a full application of the doctrine of expatriation; 3. Marriage; or 4. Any formal or voluntary act of the individual. Note: If the litigation arises in a third country, the forum may recognize exclusively in its territory the nationality of the State with which under the circumstances he appears to be in fact most Page 10 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 closely connected (Hague Convention on Conflict of Nationality Law, Art. 5). Special Treatments affecting Nationality of Persons in Mixed Marriages involving Filipinos Foreign woman married to a Filipino becomes ipso facto a Filipino provided she is not disqualified to be a citizen of the Philippines under its naturalization law. However, to settle the matter of the wife’s citizenship once and for all, the Court deemed it proper to adopt the procedure followed in the Bureau of Immigration, to wit: The wife must file a petition for the cancellation of her alien certificate of registration alleging, among other things that: 1. She is married to a Filipino citizen; and 2. She is not disqualified from acquiring her husband's citizenship pursuant to the Naturalization Law, as amended. 3. Upon the finding that that the petitioner does not belong to any of the groups disqualified from becoming naturalized Filipino citizen, the Bureau of Immigration shall conduct an investigation and thereafter promulgate its order or decision granting or denying the petition. If granted, the Commissioner of Immigration shall cancel the petitioner's registration as an alien (Mo Ya Lim Yao v. CIR, G.R. No. L-21289, 1971). Filipinos married to aliens – retain their citizenship unless by their act or omission they are deemed under the laws to have renounced their citizenship (1987 Phil. Const., Art. IV, Sec. 4). Domicile 1. In other jurisdictions, domicile serves as the necessary connection to determine an individual’s personal law. 2. It is the place with which a person has a settled connection for legal purposes, either because: he resides there or it is the place assigned to him by law. CIVIL LAW Importance of Domicile in the Philippines 1. Inadequacy of nationality principle in determining personal law of: • Stateless persons, • Persons of multiple nationality, and • Persons belonging to countries of composite system of law on territorial basis 2. Personal status of individuals from States following the domiciliary principle may be the subject of litigation in the Philippines; 3. Occasional reference by Philippine law to the lex domicilii in determining the validity of certain acts. Example: 1. Formal validity of a will (Art. 816) or 2. Revocation of a will outside the Philippines (Art. 829) Basic Principles of Domicile 1. Every person must have a domicile. 2. A person cannot have two simultaneous domiciles. 3. Every natural person, as long as he is free and sui juris, may change his domicile. 4. A domicile once acquired is retained unless a new one is obtained. 5. The presumption is in favor of the continuance of an existing domicile. • Thus, the burden of proof is on the one who alleges that a change of domicile has taken place. Law which determines Domicile The forum determines domicile according to its own standards. Kinds of Domicile 1. Domicile of Origin – the domicile of a person’s parents at the time of his birth. 2. Constructive Domicile – the domicile established by law after birth in case of persons under legal disability, regardless of their intention or voluntary act. 3. Domicile of Choice – is the place voluntarily chosen by a person sui juris as his home and Page 11 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW to which, whenever he is absent he has the intention of returning. marriage, divorce, and sometimes even succession. Essential Requisites of Domicile of Choice 1. Capacity 2. Freedom of Choice 3. Residence or physical presence in the place where domicile is alleged to have been acquired; 4. Intention to make the place of residence the permanent place of abode, or simply home (animus samper manendi). • The primary intention required is intention to make a home rather than an intention to acquire a domicile. Otherwise, persons could choose to be domiciled in a State of low burdens and high benefits irrespective of where they actually happened to live. • As a rule, the motive or reason prompting a person to make a given place his home is immaterial. Note: Personal status is ordinarily not terminable at a person’s own will. Note: The husband and the wife shall fix the family domicile but in case of disagreement, the court shall decide. (Family Code, Art. 69) Philippine Conflict Rule on Formal and Substantive Validity of Marriage 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. (Family Code, Art. 26) Summary of Rules on Domicile of Choice (a) To acquire a fresh domicile, residence and intention must concur. (b) To retain an existing domicile, either residence or intention to remain must be present. (c) To abandon a domicile, residence in the new place and intention to abandon the old place must concur. MARRIAGE, ADOPTION AND FAMILY RELATIONS Personal status • It is the legal position of an individual in his society. • It includes such matters as the beginning and end of legal personality, capacity to have rights in general, family relations and its various aspects such as: birth, legitimation, adoption, emancipation, Capacity to Contract Marriage It refers to his power to acquire and exercise rights. In Conflict of Laws, the inquiry is to ascertain what system of law will determine a person’s capacity to enter into a legal transaction when there is conflict between the law of the place where the transaction is entered into and some system of law, such as the law of the domicile or the nationality, which can claim to regulate that person’s act. Formal Validity of Marriages If the marriage is valid by the law of the place of celebration or lex loci celebrationis, it is also valid in other places. Substantive Validity of Marriages General Rule: Law of the place of celebration (lex loci celebrationis) Exceptions: i. Philippine law governs marriage between Filipino nationals abroad solemnized by a consul-general of the Philippines. (Family Code, Art. 10) ii. Marriages prohibited under Philippine Law will not be upheld as valid in the Philippines. (Family Code, Art. 26) (i) Contracted by any party below eighteen years of age even with consent (Family Code, Art. 35 (1)) (ii) Bigamous or polygamous marriage not falling under Art. 41 (Family Code, Art. 35 (4)) Page 12 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (iii) Contracted through mistake of one party as to the identity of the other (Family Code, Art. 35 (5)) (iv) Subsequent marriages void under Art. 53 (Family Code, Art. 35 (6)) (v) Psychological incapacity (Family Code, Art. 36) (vi) Incestuous marriage (Family Code, Art. 37) (vii) Marriage against public policy (Family Code, Art. 38) Requisites to Uphold Marriages Contracted Abroad 1. Existence of the foreign law as a question of fact; 2. Alleged foreign marriage by convincing evidence (Adong v. Cheong Seng Gee, G.R. No. 18081, 1922) Annulment of marriages 1. Jurisdiction to Annul – acquired by the following forums: (a) Where the spouses are domiciled in; and (b) In which either parties are nationals 2. Governing Law on Annulment or Nullity – lex loci celebrationis determines the cause or ground for annulment. Recognition of Foreign Divorce Decrees (a) Between Filipino citizens – not entitled to recognition because of the local policy against absolute divorce. Note: Divorce between Filipinos is void and ineffectual under the nationality rule. Any settlement of property submitted as an incident of a divorce obtained in a foreign country between Filipino spouses cannot be enforced. (Spouses Lavadia v. Heirs of Luna, 2014) (b) Between alien spouses – entitled, if valid under their national law. (c) Mixed marriages – entitled, even the Filipino spouse may seek for divorce (Republic v. Manalo, G.R. 221029, 2018) Note: Whether the Filipino spouse initiated the foreign divorce proceeding or not, a favorable decree dissolving the marriage bond and capacitating his or her alien spouse to remarry will have the same result: the Filipino spouse will effectively be without a husband or wife. A Filipino who initiated a foreign divorce proceeding is in the same place and in "like circumstance as a Filipino who is at the receiving end of an alien initiated proceeding. Therefore, the subject provision should not make a distinction. (Id.) BUT, J. Perlas-Bernabe joined the dissent of J. Caguioa. How Foreign Divorce Decrees can be Recognized (a) In an action instituted specifically for the purpose (e.g. special proceeding for cancellation or correction of entries in the Civil Registry under Rule 108) (Fujiki v. Marinay, 2013) (b) In another action where a party invokes the foreign decree as an integral aspect of his claim or defense. (Medina v. Koike, 2016) CATEGORY Personal Status Capacity to Contract Marriage Formal Validity of Marriages Substantive Validity of Marriages Annulment GOVERNING LAW Personal law or national law of the person (lex nationalii) Personal law or national law of the person (lex nationalii) Law of the place of celebration (lex loci celebrationis) Law of the place of celebration (lex loci celebrationis) Exception: Marriage before the Philippine consular and marriages prohibited under Philippine law. Law of the place of celebration (lex loci celebrationis) SUCCESSION Successional Rights The national law of the decedent governs whatever may be the nature of the property and Page 13 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 regardless of the country wherein said property may be found. This includes: (a) Order of succession (b) Amount of successional rights (c) Intrinsic validity of testamentary provisions (Civil Code, Art. 16 par. 2) and (d) Capacity to succeed (Civil Code, Art. 1039) Note: When the factual situation involves property, there must be an initial characterization of property. As a rule, lex rei sitae shall initially govern. Intrinsic validity of rules on succession arises only when the lex rei sitae characterizes such property as a descendible interest of the decedent. Thus, the nature and extent of the title of the spouse at the time of the acquisition and the dissolution of the community lands must be determined in accordance with the lex rei sitae. In the Philippines, upon death of the decedent, the property relationship of the spouses dissolves and the properties are to be treated as conjugal properties to be distributed between the estate of the decedent and the surviving spouse and not as a descendible interest of the decedent. (Gibbs v. Government G.R. No. L-35694, 1933) Whatever public policy or good customs may be involved in our system of legitimes, Congress has not intended to extend the same to the succession of foreign nationals. For it has specifically chosen to leave, inter alia, the amount of successional rights, to the decedent's national law. (Cayetano v. Leonidas, G.R. No. L-54919, 1984) Rules on Wills (a) Formal Validity of Wills – the laws governing the formal validity of wills involving a foreign element are the following: i. For Filipinos 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 (lex loci celebrationis). (Civil Code, Art. 816) Except: Joint wills (Civil Code, Art. 819) ii. CIVIL LAW (a) with the formalities prescribed by the law of the place in which he resides (lex domicilii), or (b) according to the formalities observed in his country (lex nationalii), or (c) in conformity with those which the Civil Code prescribes (Civil Code, Art. 817). Note: The formal validity of wills depends upon the observance of law in force at the time it is made. (Civil Code, Art. 795) (b) Revocation of wills i. If made by non-domiciliary outside the Philippines – validity of revocation depends on the: (a) law of the place where the will was made be (lex loci celebrationiis), or (b) according to the law of the place in which the testator had his domicile at the time (lex domicilii) ii. If done in the Philippines – when it is in accordance with the provisions of the Civil Code. (Civil Code, Art. 829) (c) Probate. It is the court process of proving the validity of the will. Hence, lex fori applies. (d) Administration of Estate. Lex fori applies, that is, the law of the State where appointment is sought. Accordingly, administration extends only to the assets of the decedent found in the State where the letters of administration was granted. Hence, there may be two (2) or more administrators of an estate: (a) principal administrator – granted to the person(s) in the jurisdiction of the decedent’s last domicile; (b) ancillary administrator – granted in any other jurisdiction. It is the general theory that the ancillary administrator must remit the balance of the estate in his territorial jurisdiction to the principal administrator. For Aliens abroad – his will produces effect in the Philippines if made: Page 14 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CATEGORY Order of succession Amount of successional rights Intrinsic validity of testamentary provisions Capacity to Succeed Formal validity of wills Revocation of wills GOVERNING LAW National law of decedent Filipinos in a foreign country – law of the country in which he may be (lex loci celebrationis) Exception: Joint wills Aliens abroad – a. law of his residence (lex domicilii) b. national law (lex nationalii) c. Civil Code Made by non-domiciliary outside the Philippines – a. law of the place where the will was made be (lex loci celebrationiis) b. law of the testator’s domicile at the time (lex domicilii) Probate Administration If done in the Philippines – Philippine law Lex fori CONTRACTS Validity of Contracts 1. Extrinsic Validity – lex loci celebrationis or lex loci contractus (Civil Code, Art. 17, par. 1) 2. Intrinsic Validity – lex loci contractus or the proper law of the contract whether: (a) Expressed or lex voluntatis (b) Implied from the contract or lex loci intentionis CIVIL LAW No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal systems, however, is that the intrinsic validity of a contract must be governed by the lex contractus or “proper law of the contract.” This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci intentionis) (Phil. Export and Foreign Loan Guarantee Corp. v. V.P. Eusebio Construction Inc. G.R. No. 140047, 2004). Note: In the absence of an effective choice of law or lex loci contractus, the law which has the closest and most substantial connection shall govern, specifically, the center-of-gravity or grouping of contracts approach is used. Center-of-gravity Approach Takes into account the various legal systems with the contract and applies the law of the place where the transaction has its center of gravity or the most important connection. Example: Details of performance, e.g. the rules on manner of demand, days of grace, notice of dishonored, should be governed by the law of the place where the contract is to be performed. Capacity to Contract Lex nationalii (Civil Code, Art. 16 par. 1) Choice of Forum or Jurisdiction Where the relationship between the parties is affected with public interest and multiple and substantive contacts of the contract are with Philippine Law, Philippine courts and agencies may not be ousted of their jurisdiction. (Pakistan International Airlines v. Ople, G.R. No. 61594, 1990) Choice of Seat of Arbitration The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be in Metro Manila, unless the arbitral tribunal shall decide on a different place of arbitration. (Alternative Dispute Resolution Act, Sec. 30) Page 15 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Note: Courts of the forum will not enforce any foreign claim obnoxious to the forum’s public policy. Here in the Philippines, employment agreements are more than contractual in nature. (Triple Eight Integrated Services v. NLRC, G.R. No. 129584, 1998) CATEGORY Extrinsic validity Intrinsic validity Capacity GOVERNING LAW Lex loci celebrationis or lex loci contractus Lex contractus or the proper law of the contract whether: a. Express (lex voluntatis) b. Implied (lex loci intentionis) National law TORTS AND CRIMES Tort The nature and extent of tort liability is governed by the law of the place where the wrong was committed (lex loci delicti commissi). Obligation Theory The tort committed anywhere in the world gives rise to an obligation which follows the defendant wherever he may be found. Modern Theories in Tort Liability (a) Doctrine of Elective Concurrence - either the laws of the state where the actor engaged in his conduct and where the injury was incurred may be invoked. (b) Theory of Most Significant Relationship – the applicable law shall be the law of the country which has the most significant relationship to the situation. In determining the state which has the most significant relationship, the following points of contact are to be taken into account: 1. place where the injury occurred 2. place of conduct causing the injury 3. domicile, residence, nationality place of incorporation and place of business of the parties 4. place where the injury occurred (Saudi Arabian Airlines v. CA, G.R. No. 122191, CIVIL LAW 1998) Note: This theory is adopted by the SC. (c) State-interest Analysis – this principle provides for the following methodology: 1. Separate false or spurious conflicts (i.e. only one State has an interest in applying its tort law) – apply the law of such interested State. 2. If there is a true conflict (i.e. more than one State has interest) – apply the law of such State which has greater interest in upholding its tort law. (d) Caver’s Principle of Preference – where a State does not have a statutory question of tort liability in conflict cases, the following guidelines may be used. i. The State of Injury sets a higher standard for protection against the injury compared to the State of conduct - the laws of the State of Injury applies ii. The State of Conduct and Injury sets a lower standard than the home State of the injured person - the laws of the State of Conduct and Injury applies iii. The State of Conduct has established special controls over conduct of the kind in which the defendant was engaged when caused the injury - the benefits of the laws of the State of Conduct should be accorded to plaintiff; iv. The State in which a Relationship has its Seat has imposed a standard of conduct on one party to that relationship for the benefit of the other party which is higher compared to that of the State of injury – the laws of the seat of the relationship applies. Conditions 1. The tort is not penal in character 2. The enforcement of the tortious liability will not contravene the enforcing State’s public policy Page 16 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 3. The enforcing State’s judicial machinery is adequate for such enforcement Crimes Principles of criminal liability (a) Territorial Principle – crimes are punishable by the State in whose territory they are committed. (b) Nationality Principle – a State has power to enact criminal laws which apply even to violations committed thereof by its citizens in other States. (c) Protective Principle – determines jurisdiction by reference to the national interest injured by the offense. (d) Universality Principle – determines jurisdiction by reference to the custody of the person committing the offense. (e) Passive Personality Principle - determines jurisdiction by reference to the nationality or the national character injured by the offense. Note: The Philippine conflict rule on criminal liability follows territoriality principle with a mixture of protective principle (RPC, Art. 2). IV. RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENT Distinction Between Enforcement RECOGNITION When foreign judgment is given a res judicata effect that is has in the State where it was rendered Examples: 1. Declaratory judgment 2. Judgment without affirmative relief, e.g. dismissal of complaint; 3. Judgment which determines parties interest in a thing or status (quasi in Recognition and ENFORCEMENT When, in addition to the foreign judgment being recognized, a party is given affirmative relief to which the judgment entitles him. rem action), e.g. divorce, adoption, quieting of title. Requisites for Recognition or Enforcement of Foreign Judgment 1. Foreign judgment was rendered by a judicial or quasi-judicial tribunal which has jurisdiction over the parties and the case in the proper judicial proceedings; 2. The judgment must be valid under the laws of the court that rendered it; 3. The judgment must be final and executory to constitute res judicata in another action; 4. The State where the foreign judgment was obtained allows recognition or enforcement of Philippine judgments (reciprocity requirement); 5. The judgment must specify the performance or delivery (e.g. in a suit for collection of money, the award must be a fixed sum) 6. The judgment must not be contrary to the public policy or good morals of the country where it is sought to be enforced; 7. The judgment must not have been obtained by fraud, collusion, mistake of fact or law. Note: The fraud available against a foreign a judgment is extrinsic fraud. Degree of Conclusiveness of Judgment 1. Judgment in Rem - conclusive upon the title of the thing 2. Judgment in Personam – presumptive evidence of a right as between the parties and their successors in interest by a subsequent title. (Rules of Court, Rule 39, Sec. 48) Grounds to Repel Foreign Arbitral Award Philippine conflict rules on foreign judgments follow the Anglo-American system of limited or qualified recognition, to wit: The judgment or final order of foreign country may be repelled by evidence of: (JN-C-FM) 1. Want of Jurisdiction, 2. Want of Notice to the party, 3. Collusion, Page 17 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 4. Fraud, or 5. Clear Mistake of law or fact. (Rules of Court, Rule 39, Sec. 48) Grounds for Refusal of Recognition and Enforcement of an Award (In2-NU-DICS) At the request of the party against whom it is invoked: (a) Incapacity of the parties to the agreement; (b) Invalidity of the agreement under the law to which the parties have submitted it to or under the law of the country where the award was made; (c) Party against whom the award was invoked was not given proper Notice of the appointment of the arbitrator or of the arbitration proceedings; (d) Party against whom the award is invoked was Unable to present his case; (e) Award deals with a Difference not contemplated within the terms of the submission to arbitration; (f) Composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or with the law of the country where the agreement took place; (g) Award has not yet become binding on the parties or has been Set aside or suspended by a competent authority of the country in which that award was made. CIVIL LAW G. HUMAN RELATIONS (ARTS. 19-22) Principle of Abuse of Rights (Art. 19) One’s right is exercised for the purpose of prejudicing or injuring another. Requisites/Elements: 1. There is a legal right or duty 2. Which is exercised in bad faith 3. For the sole intent of prejudicing or injuring another. (Sps. Andrada v. Pilhino Sales Corporation, G.R. No. 156448, 2011) Standards to Observe in the Exercise of One’s Rights or Performance of Duty: 1. Act with justice 2. Give everyone his due 3. Observe honesty and good faith. Acts Contrary to Law (Art. 20) Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same. Acts Contra Bonos Mores (Art. 21) When persons willfully cause loss or injury to another. Elements: 1. There is an act which is legal. 2. But contrary to morals, good customs, public order, or public policy. 3. Done with intent to injure. Based on the finding of the competent authority in the country where recognition and enforcement is sought (a) The Subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the Public policy of that country (New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Article V). Note: • Similarities: In Arts. 19-21, at the core is bad faith or malice and the aggrieved party must be indemnified. • Differences: Under Arts. 19 & 21, the act must be done intentionally. Art. 20, however, does not distinguish (the act may be done either willfully or negligently, as long as the act is be contrary to law). ————- end of topic ————- Actions for Breach of Promise to Marry General Rule: Breach of promise to marry is not actionable. Exception: When one party has already made real efforts to prepare and spend for the wedding. Page 18 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Such act is unjustifiably contrary to good customs for which the defendant must be held answerable for damages in accordance with Art. 21 of the NCC. (Wassmer v. Velez, G.R. No. L-20089, 1964) Unjust Enrichment / Accion in rem verso (Art. 22) Action for recovery of what has been paid without just cause Conditions for Unjust Enrichment to Arise First, a person must have been benefited without a real or valid basis or justification. Second, the benefit was derived at another person’s expense or damage (Art. 22 and Loria v. Muñoz, G.R. 187240, 2014). Requisites (EWLN) 1. Defendant had been Enriched. 2. Plaintiff suffered a Loss. 3. Unjust enrichment of defendant is Without just or legal ground. 4. Plaintiff has No other action based on contract, quasi-contract, crime, or quasidelict. Note: Mistake is an essential element in solutio indebiti but not in accion in rem verso. Duty to Indemnify One for Damage to Property When defendant was benefitted even if not due to fault or negligence. (Art. 23) Duty of Courts to Protect a Party in a Contract When such party is at a disadvantage on account of his: (MIgIMenTO) (a) Moral dependence (b) Ignorance (c) Indigence (d) Mental weakness (e) Tender age (f) Other handicap (Art. 24) Thoughtless Extravagance (Art. 25) May be stopped by order of courts if the following requisites are present: 1. During an acute public want or emergency; and 2. Person seeking to stop it is the government or a private charitable institution. Rights to Personal Dignity and Privacy (Art. 26) Every person shall respect the dignity, personality, privacy and peace of mind of others. The following acts produce a cause of action for damages, prevention and other relief: (PMIV) i. Prying into the privacy of another’s residence Note: It includes "any act of intrusion into, peeping or peering inquisitively into the residence of another without the consent of the latter." It may extend to places where he has the right to exclude the public or deny them access. It covers places, locations, or even situations which an individual considers as private such as a business office located within his residence. (Spouses Hing v. Choachuy, Sr., G.R. No. 179736, 2013). ii. Meddling with or disturbing the private life or family relations of another iii. Intriguing to cause another to be alienated from friends iv. Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition Relief Against Public Officials (Art. 26) When one suffers material or moral loss because a public officer fails without cause to perform his duty, the officer is not protected by his office and is personally liable. Unfair Competition through Unjust, Oppressive, or Highhanded Methods (Art. 28) Article 28 does not prohibit competition with regard to enterprises. What it seeks to be prevented is not competition per se but the use of unjust, oppressive or highhanded methods which may deprive others of a fair chance to engage in business or earn a living (Willaware Products Page 19 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Corp. v. Jesichris Manufacturing Corp., G.R. No. 195549, 2014). ————- end of topic ————H. APPLICABILITY OF PENAL LAWS Territoriality Rule (Art. 14) General Rule: Penal laws and laws of public security and safety shall be obligatory upon all who live or sojourn in the Philippine territory Exceptions: i. Treaty stipulations ii. Principles of Public International Law iii. Laws of Preferential Application Example: Foreign Ambassadors, ministers Note: Consuls do not enjoy the privilege of immunity Page 20 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Governing Laws (Arts. 14-17) LAW Penal Laws MATTERS/ PERSONS BOUND All those who live or sojourn in Philippine territory Status Laws (relating to family rights and duties, status, legal capacity) Citizens of the Philippines, including those living abroad Property Laws Real and personal property Laws on Forms and Solemnities Forms and solemnities of contracts, wills, public instruments GOVERNING PRINCIPLE/ DOCTRINE Principle of Territoriality: Law of the place where crime was committed Exception: 1. Article 2 of the Revised Penal Code Principle of Generality: Law applies to everyone in the territory Exception: 1. Treaty stipulations which exempt some persons within the jurisdiction of Philippine Courts 2. Heads of State and Ambassadors Principle of Nationality: National law of the person Lex situs or Lex rei sitae: Law of the place where property is situated Exception: For testate or intestate succession, the national law of the person whose succession is under consideration. As to the: a. Order of succession b. Amount of successional rights c. Intrinsic validity of the testamentary provisions. Note: The enumeration is governed by the national law of the decedent, regardless of place of death. Lex loci celebrationis: Law of the country in which they are executed Exception: If executed before Philippine diplomatic or consular officials abroad, Philippine laws shall govern. Page 21 of 474 PERSONS AND FAMILY RELATIONS Civil Law ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 II. III. PERSONS AND FAMILY RELATIONS TOPIC OUTLINE UNDER THE SYLLABUS A. PERSONS I. Kinds of Persons II. Capacity to act III. Domicile and residence of persons B. RIGHTS AND OBLIGATIONS OF COUPLES IN INTIMATE RELATIONSHIPS (REP. ACT NO. 9262) C. MARRIAGE I. Requisites II. Marriages celebrated abroad III. Foreign divorce IV. Void marriages V. Voidable marriages VI. Unmarried cohabitation D. LEGAL SEPARATION I. Grounds II. Defenses III. Procedure IV. Effects of filing petition V. Effects of pendency VI. Effects of decree of legal separation VII. Reconciliation VIII. Effect of death of one of the parties E. RIGHTS AND OBLIGATIONS BETWEEN HUSBAND AND WIFE F. PROPERTY RELATIONS OF THE SPOUSES I. Marriage settlements II. Donations by reason of marriage III. Void donations by the spouses IV. Absolute community of property V. Conjugal partnership of gains VI. Regime of separation of property VII. Judicial separation of property VIII. Property regime of unions without marriage G. THE FAMILY I. Concept of family Effects on legal disputes Family home H. PATERNITY AND FILIATION I. Legitimate children II. Proof of filiation III. Illegitimate children IV. Action to impugn legitimacy V. Legitimated children I. ADOPTION I. Domestic Adoption Law II. Law on Inter-Country Adoption J. SUPPORT I. What it compromises II. Who are obliged to give support III. Source of support IV. Order of support V. Amount of support VI. Manner and time of payment VII. Renunciation and termination VIII. Support pendente lite IX. Procedure in applications for support K. PARENTAL AUTHORITY I. General provisions II. Substitute parental authority III. Special parental authority IV. Effect of parental authority over the child’s person V. Effects of parental authority over the child’s property VI. Suspension or termination of parental authority VII. Solo parents (Rep. Act No. 8972) L. EMANCIPATION I. Cause of emancipation II. Effect of emancipation M. SUMMARY JUDICIAL PROCEEDINGS IN THE FAMILY CODE N. USE OF SURNAMES O. ABSENCE Page 23 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 I. II. III. IV. Provisional measures in case of absence Declaration of absence Administration of the property of the absentee Presumption of death P. CIVIL REGISTRATION A. PERSONS I. KINDS OF PERSONS Natural Persons When Personality Begins (Art. 40-43) General Rule: Determined by birth; extinguished by death but commences from conception (PD 603 amending Art. 40) Exception: The conceived child shall be considered born for all purposes favorable to it (provisional personality), provided it be born later under the following conditions: • If it had an intra-uterine life of 7 months or more, it is alive at the time it is completely delivered from the mother’s womb • If it had an intra-uterine life of less than 7 months, only if it lives for at least 24 hours after its complete delivery from maternal womb Rules on Survivorship (Art. 43) The Civil Code is used in determining survivorship where there is absence of proof as to who died ahead of the other • Doubt as to order of death between two or more persons called to succeed each other—No presumption: whoever alleges the death of one prior to the other shall prove the same. • In the absence of proof, it is presumed that they died at the same time and there shall be no transmission of rights from one to the other. This rule applies only to cases involving succession between two persons Juridical Persons Civil Personality (Art. 44-47) The State and its political subdivisions Other corporations, institutions, and entities for public interest or purpose created by law Corporations, partnerships, and associations for private interest or purpose Laws Governing Juridical Persons (Art. 45): a. The State, its political subdivisions, and corporations, institutions, and entities for public interest or purpose: governed by the laws creating or recognizing them. Page 24 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 b. Private corporations: governed by the Revised Corp. Code (R.A. 11232) c. Partnerships and associations: governed by the provisions of the New Civil Code on partnerships, except those registered with the SEC which should be governed like corporations Extinguishment By termination of existence either through law, dissolution or expiration of corporate life Rights of a Juridical Person (Art. 46) a. Acquire and possess property of all kinds b. Incur obligations c. Bring civil or criminal actions II. CAPACITY TO ACT Juridical Capacity v. Capacity to Act (Art. 37) JURIDICAL CAPACITY TO ACT CAPACITY Fitness to be the Power to do acts with subject of legal legal effect relations Passive Active Inherent Not inherent; attained or conferred Lost only through Lost through death death and other causes Can exist without Cannot exist without capacity to act juridical capacity Cannot be limited or Can be restricted, restricted modified, or limited Restrictions on Capacity to Act (MInD-ICIP) a. Minority b. Insanity c. State of being Deaf-mute d. Imbecility e. Civil Interdiction f. Prodigality - state of squandering money or property with a morbid desire to prejudice the heirs of a person (Martinez v. Martinez, G.R. No. 445, 1902) NOTE: But these do not exempt the incapacitated person from certain obligations CIVIL LAW Circumstances that Modify or Limit Capacity to Act (FAT-DA-PAPIII) a. Family relations b. Alienage c. Trusteeship d. State of being Deaf-mute e. Age f. Penalty g. Absence h. Prodigality i. Insanity j. Insolvency k. Imbecility (Art. 39) III. DOMICILE AND RESIDENCE OF PERSONS Place of Domicile (Art. 50-51) • For natural persons, it is the place of habitual residence • For juridical persons o General rule: In accordance with the law creating or recognizing them, or any other provision o Exception: If the law is silent, the residence shall understood to be the place where their legal representation is established or where they exercise their principal functions NOTE: A person may have as many residences as he wants, but he can only have one domicile. Under the Family Code, the husband and wife shall fix the family domicile. In case of disagreement, the Court shall decide (Art. 69) A minor follows the domicile of his parents • Domicile of origin can only be lost when a change of domicile occurs • If the child is illegitimate, the domicile of the mother is followed Requirements for the Acquisition of New Domicile 1. Bodily presence in new locality; 2. Intention to remain therein (animus manendi); and Page 25 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 3. Intention to abandon the old domicile (animus non revertendi) Kinds of Domicile a. Domicile of Origin: received by a person at birth b. Domicile of choice: the place freely chosen by a person sui juris ————- end of topic ————B. RIGHTS AND OBLIGATIONS OF COUPLES IN INTIMATE RELATIONSHIPS (REP. ACT NO. 9262) Definition of violence Any act or a series of acts committed by any person against a woman who is his wife, former wife, or against a woman with whom the person has or had a sexual or dating relationship, or with whom he has a common child, or against her child whether legitimate or illegitimate, within or without the family abode, which result in or is likely to result in physical, sexual, psychological harm or suffering, or economic abuse including threats of such acts, battery, assault, coercion, harassment or arbitrary deprivation of liberty (Sec. 3(a)) This includes, but is not limited to: a. Physical violence: acts that include bodily or physical harm (Sec. 3A); b. Sexual violence: an act which is sexual in nature, committed against a woman or her child. It includes, but is not limited to: 1. Rape, sexual harassment, acts of lasciviousness, treating a woman or her child as a sex object, making demeaning and sexually suggestive remarks, physically attacking the sexual parts of the victim's body, forcing her/him to watch obscene publications and indecent shows or forcing the woman or her child to do indecent acts and/or make films thereof, forcing the wife and mistress/lover to live in the conjugal home or sleep together in the same room with the abuser; 2. Acts causing or attempting to cause the victim to engage in any sexual CIVIL LAW activity by force, threat of force, physical or other harm or threat of physical or other harm or coercion; 3. Prostituting the woman or child (Sec. 3B). Psychological violence: acts or omissions causing or likely to cause mental or emotional suffering of the victim such as but not limited to intimidation, harassment, stalking, damage to property, public ridicule or humiliation, repeated verbal abuse and mental infidelity. It includes causing or allowing the victim to witness the physical, sexual or psychological abuse of a member of the family to which the victim belongs, or to witness pornography in any form or to witness abusive injury to pets or to unlawful or unwanted deprivation of the right to custody and/or visitation of common children (Sec. 3C). Economic Abuse: acts that make or attempt to make a woman financially dependent which includes, but is not limited to the following: 1. Withdrawal of financial support or preventing the victim from engaging in any legitimate profession, occupation, business or activity, except in cases wherein the other spouse/partner objects on valid, serious and moral grounds as defined in Article 73 of the Family Code; 2. Deprivation or threat of deprivation of financial resources and the right to the use and enjoyment of the conjugal, community or property owned in common; 3. Destroying household property; 4. Controlling the victims' own money or properties or solely controlling the conjugal money or properties (Sec. 3D) NOTE: Couples who are not married are also covered by VAWC as long as there is at least a dating or sexual relationship. Violence as a Ground for Legal Separation In cases of legal separation, where violence as specified in this Act is alleged, Article 58 of the Family Code shall not apply. The court shall proceed on the main case and other incidents of the case as soon as possible. The hearing on any Page 26 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 application for a protection order filed by the petitioner must be conducted within the mandatory period specified in this Act. (Sec. 19) NOTE: Under this ground, the 6 months coolingoff period mandated under Article 58 of the Family Code is inapplicable. Custody of Children (Sec. 28) • The woman victim of violence is entitled to the custody and support of her child/children. NOTE: Children below 7 years old or older but with mental or physical disabilities shall be automatically given to the mother, with right to support unless court finds compelling reasons to order otherwise. NOTE: A victim suffering from battered woman syndrome shall not be disqualified from having custody of her children. In no case shall custody of minor children be given to the perpetrator of a woman suffering from Battered woman syndrome. ————- end of topic ————C. MARRIAGE Definition of Marriage (Art. 1) 1. Special contract; 2. Permanent union; 3. Between a man and a woman; 4. Entered into in accordance with law; and 5. For the establishment of conjugal and family life I. REQUISITES Essential Requisites of Marriage: (LCI) (Art. 3) 1. Legal capacity of contracting parties; a. Must be between a male and female b. Must be at least 18 years old 2. Consent freely given, in the presence of the solemnizing officer; and 3. Absence of any Impediment Formal Requisites of Marriage: (ALC) (Art. 4) 1. Authority of solemnizing officer; CIVIL LAW 2. Valid marriage License (except in cases where a marriage license is not required); and a. Valid only for 120 days from issue in any part of the Philippines 3. Marriage Ceremony where the contracting parties appear before the solemnizing officer, with their personal declaration that they take each other as husband and wife in the presence of not less than two witnesses of legal age Effects of the Absence of Requisites for Marriage General Rule: Absence of any of the essential or formal requisites – void ab initio Exceptions: a. If solemnized by an unauthorized person, the marriage will still be valid if either or both contracting parties believed in good faith that the solemnizing officer had legal authority (Art. 35[2]) b. In instances where marriage license need not be procured: 1. Marriage in articulo mortis (one or both of the parties at the point of death) (Art. 27) 2. If the residence of either party is so remote there is no means of transportation to enable such party to appear personally before the civil registrar (Art. 28) 3. Marriage solemnized outside the Philippines where no marriage license is required by the country where it was solemnized (Art. 26) 4. Marriage among Muslims or among members of ethnic cultural communities in accordance with their customs (Art. 33) 5. Marriage between persons who have lived together as husband and wife for at least five years and without any legal impediment to marry each other during the 5-year period of cohabitation (Art. 34) Procedural Requirements in Case of Cohabitation for Five Years: a. The parties must execute an affidavit stating that they have lived together for at least 5 Page 27 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 years and are without legal impediment to marry each other; and b. The solemnizing officer must execute a sworn statement that he had ascertained the qualifications of the parties and that he had found no legal impediment to their marriage NOTE: Absence of any of these procedural requirements do not make the marriage void. What is indispensable is the 5-year cohabitation as husband and wife. The 5-year period should be a period of cohabitation characterized by exclusivity – meaning no third party was involved at any time – that is, unbroken. (Niñal v. Bayadog, G.R. No. 133778, 2000) The absence of the legal impediment must be throughout the 5-year period. (Office of the Administrator v. Necessario, A.M. No. MTJ-071691, 2013) Effect of Defects in the Requisites for Marriage (Art. 4) • Defect in any of the essential requisites – voidable • Irregularity in any of the formal requisites – does not affect the validity of the marriage by will make the party responsible civilly, criminally, or administratively liable Authorized Solemnizing Officers: (JPCCCM) (Art. 7) a. Incumbent member of the Judiciary (judge – within the court’s jurisdiction; Justices – within Philippine territory) b. Any Priest, rabbi, imam or the minister of any church or religious sect1. Registered with the civil registrar general; 2. Within limits of the written authority of the church or sect; and 3. At least one of the contracting parties belongs to the church or religious sect. c. Ship Captain or airplane chief1. At least one of the parties is in articulo mortis; CIVIL LAW 2. Between passengers or crew members; and 3. While the ship is at sea or the plane is in flight and also during stopover at ports of call d. Military Commander1. Of a unit to which a chaplain is assigned; 2. Chaplain is absent at the time of marriage; 3. During military operations; 4. Must be one in articulo mortis; and 5. Between persons within the zone of military operations or whether members of the armed forces or civilians e. Consul-general, consul, or vice-consulBetween Filipino citizens abroad f. Mayor- effective January 1, 1992 (LGC); Venues for Marriage (Art. 8) (Directory) General Rule: Must be solemnized publicly, and not elsewhere, in the: a. Chambers of the judge or in open court b. Church, chapel, or office of consul-general, consul, or vice-consul Exceptions: (a) Marriage at the point of death (in articulo mortis) (b) Marriage in remote places (c) Marriage at a house or place designated by the parties in a sworn statement upon their written request to the solemnizing officer Other Requirements (Art. 14-15) EITHER OR BOTH REQUIRES PARTIES 18 years old and Parental consent above but below 21 Marriage counseling 21 years old and Parental advice above but below 25 Marriage counseling Effects of Lack of Parental Consent, Parental Advice, or Marriage Counselling If Required GROUND EFFECTS Lack of parental Marriage is voidable consent Page 28 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Lack of parental advice or failure to attach certificate of marriage counseling No effect on validity of marriage. However, this will suspend the issuance of the marriage license for 3 months from the completion of publication of the application. (Art. 16) If they get married during the 3-month period with a license, the marriage shall be valid but civil and criminal liability may attach. (Art. 16) If they get married during the 3-month period without a license, the marriage shall be void for lack of a formal requirement. No marriage license will be issued in the absence of Certificate of Compliance issued by the Family Planning Office. (R.A. 10354, Sec. 15) Marriage Certificate While a marriage certificate is considered the primary evidence of a marital union, it is not regarded as the sole and exclusive evidence of marriage. The fact of marriage may be proven by relevant evidence other than the marriage certificate. Hence, even a person’s birth certificate may be recognized as competent evidence of the marriage between his parents. (Anonuevo v. Int. Estate of Jalandoni, G.R. No. 178221, 2010) II. MARRIAGES CELEBRATED ABROAD General Rule: Marriages solemnized outside the Philippines in accordance with the laws of the CIVIL LAW foreign country shall be valid here (lex loci celebrationis) • Basis: Principle of Comity • However, if solemnized inside the Philippine Consulate abroad, Philippine laws must be observed Exceptions to Lex Loci Celebrationis: a. Where either or both parties are below 18 years old b. Bigamous or polygamous marriage (except Art. 41 on presumptive death of spouse) c. Mistake in identity d. Marriage void under Art. 53 – contracted following the annulment or declaration of nullity of a previous marriage but before recording of partition e. Psychological incapacity f. Incestuous marriage g. Marriage void for reasons of public policy Thus, what is dispensed with are merely the authority of the solemnizing officer and the marriage license requirements. Is the “marriage ceremony” requirement dispensed with, thus allowing common-law marriage? – NO, Art. 26 of the Family Code uses the word “solemnized”. However, if solemnized abroad, the ceremony prescribed in the place of celebration shall apply. Is the same-sex marriage of Filipinos abroad valid? NO, Article 15 of the Civil Code provides that laws relating to family rights and duties, or to status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. In the Philippines, a person has legal capacity to marry only a person of the opposite sex. Hence, public policy mandates that only a man and woman can marry each other. To establish a valid marriage, it is necessary to prove: 1. The foreign law as a question of fact; and 2. The celebration of marriage pursuant thereto by convincing evidence (Ching Huat v. Co Heong) Page 29 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 NOTE: If such law of the other state is not pleaded nor proved and for purposes of determining the validity of a marriage in the said state, the laws of such state, in the absence of proof to the contrary, will be presumed by the Court to be the same as the laws of its own state (Processual presumption) III. FOREIGN DIVORCE Requisites for a Filipino Spouse to Gain Capacity to Remarry under Philippine Law After Divorce with Foreigner-spouse (Art. 26, par. 2) 1. A valid marriage that had been celebrated between a Filipino citizen and a foreigner; and 2. A valid divorce subsequently obtained abroad by the alien spouse capacitating him or her to remarry The letter of the law does not demand that the alien spouse should be the one who initiated the proceeding wherein the divorce decree was granted. It does not distinguish whether the Filipino spouse is the petitioner or the respondent in the foreign divorce proceeding (Republic v. Manalo, G.R. No. 221029, 2018). J. Leonen: Article 26 should be interpreted to mean that it is irrelevant for courts to determine if it is the foreign spouse that procures the divorce abroad. Once a divorce decree is issued, the divorce becomes "validly obtained" and capacitates the foreign spouse to marry. The same status should be given to the Filipino spouse. The national law of Japan does not prohibit the Filipino spouse from initiating or participating in the divorce proceedings. It would be inherently unjust for a Filipino woman to be prohibited by her own national laws from something that a foreign law may allow (Racho v. Seiichi Tanaka, G.R. No. 199515, June 25, 2018) NOTE: The determinative point when the foreigner who procured the divorce should be a CIVIL LAW foreigner at the time of the divorce, and not at the time of the marriage ceremony. How to prove foreign divorce: 1. Present the divorce decree, proven as a public or official record of a foreign country by either: a. An official publication; or b. A copy thereof attested by the officer having legal custody of the document 2. If the record is not kept in the Philippines, such copy must be: a. Accompanied by a certificate issued by the proper or consular officer in the Philippine foreign service stationed in the foreign country in which the record is kept; and b. Authenticated by the seal of his office 3. Prove the conformity of the decree to the foreign law (Garcia v. Recio, 2001) J. Leonen: Settled is the rule that in actions involving the recognition of a foreign divorce judgment, it is indispensable that the petitioner proves not only the foreign divorce judgment granting the divorce, but also the alien spouse’s national law. The English translation submitted was published by Eibun-Horei-Sha, Inc., a private company in Japan engaged in publishing English translation of Japanese laws, which came to be known as the EHS Law Bulletin Series. However, these translations are "not advertised as a source of official translations of Japanese laws;" rather, it is in the KANPŌ or the Official Gazette where all official laws and regulations are published, albeit in Japanese. Accordingly, the English translation submitted by Mrs. X is not an official publication exempted from the requirement of authentication. Neither can the English translation be considered as a learned treatise. (Arreza v. Toyo, G.R. No. 213198, July 1, 2019) Page 30 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 IV. VOID MARRIAGES Marriages Void from the Beginning (Void Ab Initio): A. Void under Article 35: a. Contracted by any party below 18 years old; b. Solemnized by an unauthorized solemnizing officer • Exception: If either or both parties believed in good faith that the officer had authority c. Solemnized without a valid marriage license • Exception: When license not required d. Bigamous or polygamous marriages • Exception: Art. 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 wellfounded belief that his/her absent spouse is already dead, and had obtained a declaration of presumptive death, and at the time of marriage ceremony is in good faith together with the subsequent spouse e. Those contracted through mistake of one contracting party as to the identity of the other; and f. Those subsequent marriages that are void under Article 53. B. Psychological Incapacity (Art. 36) C. Incestuous Marriage (Art. 37) D. By Reasons of Public Policy (Art. 38) Good faith marriage (Art. 35[2]) Good faith means an honest and reasonable belief that the marriage was valid at its inception, and that no legal impediment exists to impair its validity (52 Am. Jur. 2d 96) Marriage without a valid marriage license A certification of no marriage license by the local civil registrar stating that there was not enough staff to search for the marriage license is not CIVIL LAW adequate and will not prove absence of a marriage license. The certification, in fact, proves that no diligent search was made. (Sevilla vs. Cardenas, G.R. No. 167684, 2006) A Certification of the Civil Registrar to the effect that “after a diligent search on the files of Registry Book on Application for Marriage License and License Issuance available in this office, no record could be found on the alleged issuance of this office of Marriage License No. XXXXX in favor of Mr. A and B dated XXXX” does not categorically prove that there was no marriage license. Furthermore, marriages are not dissolved through mere certifications by the civil registrar. It will be wrong to establish a doctrine that a certification that a marriage license cannot be found may substitute for a definite statement that no such license existed or was issued (Vitangcol v. People, G.R. No. 207406, 2016). The Certification by the Municipal Civil Registrar that the Office of the Local Civil Registrar “has no record nor copy of any marriage license” ever issued in favor of petitioner and respondent, coupled with respondent’s failure to produce a copy of the alleged marriage license or of any evidence to show that such license was ever issued, proves that no valid marriage license was, in fact, issued (Kho v. Republic and Kho, G.R. No. 187462, 2016) Valid Bigamous Marriages General Rule: Marriage contracted by any person during the subsistence of a previous marriage is void (Art. 35) Exception: If subsequent marriage was contracted with a valid declaration of presumptive death. J. Leonen: First marriage was not judicially declared void nor was Z judicially declared presumptively dead under the Civil Code. Parties to a marriage should not be permitted to judge for themselves its nullity, only competent courts having such authority. Prior to such declaration of nullity, the validity of the first marriage is beyond question. A party who contracts a second marriage then Page 31 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 assumes the risk of being prosecuted for bigamy. The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the basis solely of a final judgment declaring such previous marriage void. Bigamy was consummated when X subsequently married Y without his first marriage to Z having been judicially declared void (Vitangcol v. People, G.R. No. 207406, 2016). Essential Requisites for the Declaration of Presumptive Death under Art. 41 (MR-BF) 1. That the absent spouse has been Missing for 4 consecutive years, or 2 consecutive years if the disappearance occurred where there is danger of death under the circumstances laid down in Art. 391 of the Civil Code; 2. That the present spouse wishes to Remarry; 3. That the present spouse has a well-founded Belief that the absentee is dead; and 4. That the present spouse Files a summary proceeding for the declaration of presumptive death of the absentee [Republic vs Sareñogon, 2016 (citing Republic v. Cantor, 2013)] For a subsequent marriage to be valid, the prior marriage must first be dissolved either by the death of the previous spouse or the final judicial declaration of nullity or annulment of the previous marriage obtained before the subsequent marriage is entered into, regardless of the reason for the nullity or defect of the previous marriage, including lack of marriage license (Lasanas v. People G.R. No. 159031, 2014). The well-founded belief in the absentee’s death requires the present spouse to prove that his/her belief was the result of diligent and reasonable efforts to locate the absent spouse and that based on these efforts and inquiries, he/she believes that under the circumstances, the absent spouse is already dead. Mere claim of diligent search is insufficient without corroborative evidence such as testimonies of the persons from whom she inquired (Republic v. Villanueva, G.R. No. 210929, 2015). CIVIL LAW It must be shown that sincere honest-togoodness efforts had indeed been made to ascertain whether the absent spouse is still alive or is already dead. Even after the non-return of the husband who was a member of the army and assigned to Sulu and was thereafter not heard of anymore by the wife for 33 years, there was still failure on the part of said wife to actively look for her missing husband, and her purported earnest efforts to find him by asking her husband's parents, relatives, and friends did not satisfy the strict standard and degree of diligence required to create a "well-founded belief' of his death. She did not approach the AFP for information (Republic v. Tampus, G.R. No. 214243, 2016). NOTES: • 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. (Art. 42) • Without filing of the affidavit of reappearance, there will exist two valid marriages (valid bigamous marriage). • If both spouses of the subsequent marriage acted in bad faith, such marriage is void ab initio. (Art. 44) Effect of Reappearance The subsequent bigamous marriage under Art. 41 remains valid despite reappearance of the absentee spouse, unless the reappearance made in a sworn statement is recorded in the civil registry in the place where the parties to the subsequent marriage resides. In such case, the subsequent marriage is automatically terminated. However, if there was a previous judgment annulling or declaring the first marriage a nullity, the subsequent bigamous marriage remains valid. Nullity of judgment of presumptive death is the proper remedy and not an affidavit of reappearance when the person declared presumptively dead has never been absent. In this case, the husband was able to secure a declaration of presumptive death by alleging Page 32 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 fraudulent facts. (Santos v. Santos, G.R. No. 187061, 2014) Summary proceedings under the Family Code are final and executory pursuant to Article 247. Hence, a summary proceeding for the declaration of presumptive death of an absent spouse under Article 41 of the Family Code is non-appealable. (Republic v. Tango, G.R. No. 161062, 2009) However, a petition for certiorari under Rule 65 is still available (Republic v. Sarenogon, Jr., 2016). J. Leonen: For the purpose of not only terminating the subsequent marriage but also of nullifying the effects of the declaration of presumptive death and the subsequent marriage, mere filing of an affidavit of reappearance would not suffice (Castro v Gregorio, G.R. No. 188801, 2014). Effects of Termination of Subsequent Marriage: (LDBD-RI) (Art. 43) a. Children of the subsequent marriage conceived prior to its termination shall be considered Legitimate, unless the marriage is void ab initio due to bad faith of both spouses of the subsequent marriage, in which case the children shall be deemed illegitimate b. The absolute community or conjugal partnership shall be Dissolved and liquidated c. If either spouse acted in Bad faith, his/her share in the net profits shall be forfeited: a. In favor of the common children b. If none, in favor of the children of the guilty spouse by previous marriage c. In default of children, in favor of the innocent spouse. d. Donations by reason of the marriage remain valid except if the donee contracted the marriage in bad faith e. The innocent spouse may Revoke the designation of the spouse in bad faith as the beneficiary in any insurance policy, even if designation is stipulated as irrevocable f. The spouse who contracted the subsequent marriage in bad faith shall be disqualified to Inherit from the innocent spouse by testate or intestate succession CIVIL LAW NOTE: The above effects apply to voidable bigamous marriages. • Except for the first enumerated item (re: legitimate children), the above effects also apply to marriages which are annulled or declared void ab initio under Art. 40. Mistake in Identity (Art. 35[5]) The contemplated mistake refers to the actual physical identity of the other party, and not merely mistake in the name, character, age, or other attributes of the person. Subsequent Marriage Void under Art. 53 A person whose marriage has been annulled or declared null and void may remarry as long as, after the marriage is annulled/nullified, he does the following: 1. Partition and distribution of the properties of the spouses; 2. Distribution of the presumptive legitimes of the children; and 3. Recording of the judgement of annulment or absolute nullity (Art. 40), the partition and distribution, and the delivery of the presumptive legitimes in the appropriate civil registry and registries of the property. Failure to comply with these requisites will make the subsequent marriage void ab initio. Furthermore, failure to record in the proper registries will mean that such will not affect third persons (Art. 52-53). Liquidation, partition, and distribution of presumptive legitimes apply only to marriages declared void under Art. 40 and 45. (Diño v. Diño, G.R. No. 178044, 2011) Psychological Incapacity (Art. 36) Marriage where any of the parties, at the time of the celebration of the marriage, was psychologically incapacitated to comply with the essential marital obligation, even if incapacity becomes manifest only after solemnization. Psychological Incapacity must be judged on a case-to-case basis. It should refer to no less than Page 33 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 a mental (not physical) incapacity. It must be characterized by: (JIG) 1. Juridical antecedence 2. Incurability 3. Gravity (Carating-Siaynco v. Siaynco, G.R. No. 158896, 2004) Mere showing of irreconcilable differences and conflicting personalities do not constitute psychological incapacity. (Carating-Siaynco v. Siaynco, G.R. No. 158896, 2004) Mere sexual infidelity or perversion and abandonment do not by themselves constitute psychological incapacity within the contemplation of the Family Code. (Dedel v. CA, G.R. No. 151867, 2004) One of the essential marital obligations is "to procreate children based on the universal principle that procreation of children through sexual cooperation is the basic end of marriage." Constant non-fulfillment of this obligation will finally destroy the integrity or wholeness of the marriage. The senseless and protracted refusal of one of the parties to fulfill this marital obligation is equivalent to psychological incapacity. (Chi Ming Tsoi v. CA, G.R. No. 119190, 1997) A finding of psychological incapacity on the part of one spouse shows non-cognizance of one’s essential marital obligation, and therefore negates bad faith. As a consequence, moral and exemplary damages cannot be awarded. Moral damages should be predicated on specific evidence that was done deliberately and with malice by a party who had known of his or her disability and yet willfully concealed the same. (Buenaventura v. CA, GR No. 127358, 2005) The burden falls upon petitioner, not just to prove that respondent suffers from a psychological disorder, but also that such psychological disorder renders her "truly incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage." (Baccay v. Baccay, GR No. 117318, 2010) CIVIL LAW Jurisprudential guidelines: (BRE-IGO-IC) 1. Burden of proof to show the nullity of marriage is upon the plaintiff; 2. The Root cause of the psychological incapacity must be: (CCEE) a. Medically or Clinically identified; b. Alleged in the Complaint; c. Sufficiently proven by Experts d. Clearly Explained in the decision 3. The incapacity must be proven to be Existing at the time of the celebration of the marriage 4. Such incapacity must be shown to be medically or clinically permanent or Incurable 5. Such illness must be Grave enough to bring about the disability of the party to assume the essential obligations of marriage 6. Essential marital Obligations must be those embraced by Arts. 68-71, as well as Arts. 220, 221, and 225 of the Family Code. 7. Interpretations given by the National Appellate Matrimonial Tribunal of the Catholic Church in the Philippines, while not controlling or decisive, should be given great respect by our courts 8. The trial court must order the prosecuting attorney or fiscal and the Solicitor General to appear as Counsel for the State NOTE: The foregoing guidelines do not require that a physician examine the person to be declared psychologically incapacitated. What is important is that the totality of evidence can adequately establish the party’s psychological condition. (Republic v. CA & Molina, G.R. No. 108763, 1997) “Totality of Evidence” principle means that medical experts’ testimony is not required, if the totality of all other evidence presented is sufficient to prove psychological incapacity. If not, the testimony of experts is crucial. (Marcos v. Marcos, G.R. 136490, 2000) J. Leonen: The non-examination of the defending party did not invalidate the findings of the psychologist as in the case where the examination was based solely on the data given by the petitioner to the examining psychologist. What matters is that the totality Page 34 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 of evidence presented establishes the party’s psychological condition. The Psychologist’s report, corroborated with Y’s testimony, sufficiently proceed X’s paranoid personality disorder, thus incapacitating him to fully comprehend and assume the essential obligations of marriage. (Tani-De La Fuente v. De La Fuente, Jr. G.R. No. 188400, 2017) Incestuous Marriage (Art. 37) Whether the relationship is legitimate or illegitimate: a. Between ascendants and descendants of any degree b. Between brothers and sisters, whether full or half blood Void for Reasons of Public Policy (Art. 38) (exclusive list) a. Between collateral blood relatives up to 4th civil degree • There is no prohibition regarding marriages between collateral blood relatives by half-blood b. Between step-parents and step-children c. Between parents-in-law and children-in-law d. Between adopting parent and adopted child e. Between surviving spouse of the adopter and the adopted f. Between surviving spouse of the adopted and the adopter g. Between adopted and a legitimate child of adopter h. Between adopted children of same adopter i. Between parties who, with the intention to marry the other, killed the other person’s spouse or his/her own spouse • No prior criminal conviction by the court is required by the law since mere preponderance of evidence is required to prove the killing The following can marry each other: a. Brother-in-law and sister-in-law b. Stepbrother and stepsister c. Guardian and ward d. Adopted and illegitimate child of the adopter e. Parties who have been convicted of adultery or concubinage CIVIL LAW NOTE: Relationship by affinity between the surviving spouse and the kindred of the deceased spouse continues even after the death of the deceased spouse, regardless of whether the marriage produced children or not. (Vda. de Carungcong v. People, G.R. No. 181409, 2010) Subsequent Marriage Without Judicial Declaration of Nullity of Previous Void Marriage For purposes of remarriage, the only acceptable evidence that the previous marriage has been voided is a final judgment declaring such marriage null and void; if the purpose is NOT TO REMARRY, other evidence can be presented to prove the nullity of the previous marriage. (Art. 40) Even if a marriage is void, it must be declared void first by final judgment before the parties to such void marriage can remarry. The parties cannot decide for themselves the invalidity of their marriage. ABSENCE of a formal requisite of solemnization of Marriage – A judicial declaration of nullity is not needed where the parties merely signed a marriage contract on their own and NO marriage ceremony was performed by a duly authorized solemnizing officer. Such act alone, without more, cannot be deemed to constitute an ostensibly valid marriage (Morigo v. People, G.R. No. 145226, 2004). VOID Marriage under the Civil Code – If a marriage is void under a ground provided in the Civil Code and a subsequent marriage was contracted before the effectivity of the FC without having the first marriage declared null and void, the second marriage is valid. The Civil Code contains no express provision on the necessity of a judicial declaration of nullity of a marriage considered void under the Civil Code. The requirement of a judicial decree of nullity does not apply to marriages celebrated before the effectivity of the Family Code, particularly if the Page 35 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 children of the parties were born while the Civil Code was in force. (Castillo v. Castillo, G.R. No. 189607, 2016) V. VOIDABLE MARRIAGE Grounds for Annulment (PUFFIS) (Art. 45) a. Lack of Parental consent b. Either party is of Unsound mind c. Fraudulent means of obtaining consent of either party • Circumstances constituting fraud (Art. 46) i. Non-disclosure of conviction by final judgment of crime involving moral turpitude ii. Concealment of pregnancy by another man iii. Concealment of sexually transmissible disease, regardless of nature, existing at the time of marriage iv. Concealment of drug addiction, habitual alcoholism, homosexuality and lesbianism d. Force, intimidation, or undue influence in obtaining the consent of either party e. Physical Incapability of either party to consummate the marriage with the other, and such incapacity continues and appears to be incurable • Doctrine of Triennial Cohabitation: Presumption that the husband is impotent should the wife still remain a virgin after 3 years of living together with her husband. Burden of proof to prove non-impotency shifts to the husband. f. Affliction by either party of Sexually Transmissible Disease found to be serious and which appears incurable ARTICLE 45 STD ARTICLE 46 STD Ground annulment Type of fraud which is a ground for annulment for Does not have to be concealed Must be concealed Must be serious and appears to be incurable Need not be serious and appear to be incurable STD itself is a ground for annulment It is the concealment which constitutes the ground for annulment NOTE: Grounds for annulment must exist at the time of the celebration of the marriage. Page 36 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 DISTINCTION BETWEEN VOID AND VOIDABLE MARRIAGES BASIS VOID VOIDABLE As to nature Inexistent from the time of performance As to prescriptibility Does 39) Prescriptive period depends on the ground/s invoked. As to how marriage may be impugned May be attacked directly or collaterally but for the purpose of remarriage, there must be a judicial declaration of nullity Direct: Only the spouses Collateral: Any interested party in any proceeding where the determination of the validity of the marriage is necessary to give rise to or negate certain rights 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 Venue for action Family Court of the province or city where the petitioner or the respondent has been residing for at least 6 months prior to the date of filing (if the respondent is a non-resident: where he may be found in the Philippines) at the election of the petitioner. (A.M. No. 02-11-10-SC) 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 co-ownership (Art. 147/148) Absolute community exists unless they agreed upon another system in their marriage settlement As to effect on children Children are illegitimate Children are legitimate conceived before decree annulment not prescribe (Art. Valid until annulled Except those falling under the following: In case of psychological incapacity (Art. 36) Children born of subsequent marriage (Art. 53) if of Page 37 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 SUMMARY FOR VOIDABLE MARRIAGES GROUNDS FOR ANNULMENT (Art. 45) WHO CAN FILE (Art. 47) PRESCRIPTIVE PERIOD (Art. 47) Lack of consent Underage party (18-21 years old) Within 5 turning 21 Parent or guardian Before child reaches 21 Sane spouse who had no knowledge of insanity Before the death of the other party Guardian of insane spouse Any time before the death of either party Insane spouse During lucid interval or after regaining sanity also before death of other party Injured Party Within 5 years discovery of fraud parental Insanity of one party Fraud Vitiated consent years after RATIFICATION (Art. 45) Free cohabitation after reaching 21 Free cohabitation after spouse regains sanity insane after Free cohabitation with full knowledge of facts constituting the fraud Within 5 years from time force, intimidations or undue influence disappeared or ceased Free cohabitation after the cause (force, intimidation, undue influence) disappeared or ceased. Intimidation can be on the person or the property of the injured party and his/her immediate family Incapability to consummate/ STD Within 5 years after the marriage ceremony No ratification since defect is permanent, but right of action may prescribe Page 38 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 EFFECTS OF VALID BIGAMOUS MARRIAGE, DECLARATION OF NULLITY, AND ANNULMENT BASIS Status of Children Property Relations Donations Propter Nuptias Insurance Succession VALID BIGAMOUS MARRIAGE (ART. 41) – WITH DECLARATION OF PRESUMPTIVE DEATH) Children of subsequent marriage conceived before its termination – legitimate ACP/CPG shall be liquidated. The share in the net profits of community property of the spouse who contracted the marriage in bad faith, shall be forfeited in favor of common children or if there are none, children of the guilty spouse by previous marriage or in default thereof, the innocent spouse. Shall remain valid except • If donee contracted the marriage in bad faith, donations propter nuptias made to the donee are revoked by operation of law. • If both spouses acted in bad faith, donations propter nuptias made by one in favor of the other are revoked by operation of law. If one spouse acted in bad faith, the innocent spouse may revoke his designation as beneficiary in the insurance policy even if such designation be stipulated as irrevocable. If one spouse contracted the marriage in bad faith, he shall be disqualified to inherit from the innocent spouse in both testate and intestate. DECLARATION OF NULLITY Illegitimate except Art. 36 and Art. 53 Same if Art. 40 marriages: ACP/CGG; otherwise, Coownership. The share of the party in bad faith in the coownership shall be forfeited in favor of their common children. Same If void under Art. 40. If not, under 40, option belongs to the donee. (Art. 86[1]) If marriage is void, no successional rights involved. ANNULMENT Children conceived or born before annulment decree – legitimate ACP/CPG shall be liquidated. The share in the net profits of community property of the spouse who contracted the marriage in bad faith, 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. Same as Art. 40 Page 39 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 VI. UNMARRIED COHABITATION Common-Law Marriages Not Recognized in the Philippines A common-law marriage may be defined as a non-ceremonial or informal marriage by agreement, entered into by a man and a woman having capacity to marry, ordinarily without compliance with statutory formalities as those pertaining to marriage licenses (In Re; Zemmick) The agreement must be: 1. Coupled by consummation; 2. Includes at least cohabitation as husband and wife; and 3. Reputation in such a way that the public will recognize the marital status (Huard v. Mcteigh and Drewy v. State) The Philippine law does not recognize commonlaw marriages because the Civil Code and the New Family Code expressly and mandatorily provide that the intervention in a valid marriage ceremony of an ecclesiastical or civil functionary authorized by the state to solemnize marriage constitutes one of the indispensable requisites for a valid marriage. Moreover, the contracting parties must appear before the authorized solemnizer and personally declare in his presence that they take each other as husband and wife. Only ceremonial marriage, where solemnization is an inherent aspect, is recognized in the Philippines. Articles 147 and 148 govern the property regime between a man and a woman who: 1. Are capacitated/not capacitated to marry each other; 2. Live exclusively with each other as husband and wife; and 3. Without the benefit of marriage or under a void marriage ————- end of topic ————- D. LEGAL SEPARATION I. GROUNDS Grounds for Legal Separation: (PRC-FAALBILA) (Art. 55) a. Repeated Physical violence or grossly abusive conduct directed against petitioner, a common child or a child of the petitioner b. Physical violence or moral pressure to compel the petitioner to change Religious or political affiliation c. Attempt of respondent to Corrupt or induce the petitioner, a common child, or a child of the petitioner, to engage in prostitution, or connivance in such corruption or inducement d. Final judgment sentencing respondent to imprisonment of more than 6 years (even if pardoned) e. Drug Addiction or habitual Alcoholism f. Lesbianism or homosexuality g. Subsequent Bigamous marriage h. Sexual Infidelity or perversion i. Attempt by respondent against the Life of the petitioner j. Abandonment for more than 1 year without justifiable cause II. DEFENSES Grounds to Deny Legal Separation/Defenses to Legal Separation: (C4-D-GRP) (Art. 56) a. Condonation NOTE: Failure of the husband to look for his adulterous wife is not a condonation of wife’s adultery. b. Consent c. Connivance d. Collusion e. Death of either party during the pendency of the case (Lapuz-Sy v. Eufemio, G.R. No. L30977, 1972). f. Equal Guilt g. Reconciliation of the spouses during the pendency of the case (Art. 66) h. Prescription Page 40 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 III. PROCEDURE When to file/try an action for legal separation An action for legal separation shall be filed within 5 years from the time of occurrence of the cause (Art. 57). The time of discovery of the ground for legal separation is not material in the counting of the prescriptive period. The action for legal separation shall not be tried before 6 months shall have elapsed since the filing of the petition, (Art. 58) except interlocutory matters such as the determination of custody of children, alimony and support pendente lite. No legal separation may be declared unless the court has taken steps towards the reconciliation of the spouses and is fully satisfied, despite such efforts, that reconciliation is highly improbable. (Art. 59) The six-month-cooling-off-period requirement can be dispensed with if the ground for legal separation involves violence against the woman or the child. Thus, the Court shall proceed on the main case and other incidents of the case as soon as possible (Sec. 28, RA 9262). Stipulation of Facts or Confession of Judgement No decree of legal separation shall be based upon a stipulation of facts of confession of judgement. In any case, the court shall order the prosecuting attorney or fiscal assigned to it to take steps to prevent collusion between the parties and to take care that the evidence is not fabricated or suppressed. (Art. 60) IV. EFFECTS OF FILING Effects of Filing a Petition for Legal Separation (Art. 61) a. The spouses shall be entitled to live separately from each other b. The court, in the absence of a written agreement between the spouses, shall designate either of them or a third person to administer the absolute community or conjugal partnership property. The administrator appointed by the court shall have the same powers and duties as those of a guardian under the Rules of Court. V. EFFECTS OF PENDENCY Effects of Pendency of Action for Legal Separation (Art. 62 in relation to Art. 49) During the pendency of the action and in the absence of adequate provisions in a written agreement between the spouses, the Court shall provide for the following: a. The support of the spouses b. The custody and support of their common children; NOTE: The Court shall give paramount consideration to the moral and material welfare of said children and their choice as to the parent with whom they wish to remain c. Appropriate visitation rights of the other parent VI. EFFECTS OF DECREE OF LEGAL SEPARATION (ART. 63) 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 NOTE: For purposes of computing the net profits subject to forfeiture, the said profits shall be the increase in value between the market price of the community property at the time of the celebration of the marriage and at the time of dissolution. What is forfeited is not the share of the guilty spouse in the liquidation of the community property but merely the profits. (Siochi v. Gozon GR Nos. 169900 and 169977, 2010) If there is no separate property, the net remainder is the profit and therefore the remainder (which includes the profit) pertaining to the share of the guilty spouse is his/her entire share which must be forfeited (Quiao v. Quiao, 2012) Page 41 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 e. Custody of minor children to innocent spouse (subject to Art. 213: parental authority shall be exercised by parent designated by the court) The imposed custodial regime under the second paragraph of Article 213 is limited in duration, lasting only until the child’s seventh year. From the eighth year until the child’s emancipation, the law gives the separated parents freedom, subject to the usual contractual limitations, to agree on custody regimes they see fit to adopt (Dacasin vs. Dacasin, G.R. No. 168785, 2010). f. Guilty spouse is disqualified from intestate succession and provisions made by innocent spouse in his favor in a will shall be revoked by operation of law Effects Upon Finality of the Decree (Art. 64) (a) Innocent spouse may revoke the donation made by him or her in favor of the offending spouse. The revocation of the donations shall be recorded in the registries of property in the places where the properties are located. 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. (b) Innocent spouse may revoke designation of guilty spouse as beneficiary in the insurance policy even if such designation be stipulated as irrevocable. The revocation of or change in the designation of the insurance beneficiary shall take effect upon written notification to the insured. NOTE: Action to revoke the donation must be brought within 5 years from the time the decree has attained finality. VII. RECONCILIATION Reconciliation If the spouses should reconcile, a corresponding joint manifestation under oath duly signed by them shall be filed with the court in the same proceeding for legal separation (Art. 65). CIVIL LAW Effects of Reconciliation a. The legal separation proceedings, if still pending, shall thereby be terminated at whatever stage (Art. 66) b. The final decree of legal separation shall be set aside (Art. 66) c. The separation of property and any forfeiture of the share of the guilty spouse already effected shall subsist, unless the spouses agree to revive their former property regime (Art. 66) d. Joint custody of the children is restored e. The right to intestate succession by the guilty spouse from the innocent spouse is restored f. The right to testamentary succession depends on the will of the innocent spouse VIII. EFFECT OF DEATH OF ONE OF THE PARTIES Effect of Death (Sec. 21, Rule on Legal Separation, A.M. No. 02-11-11-SC) In case a party dies at any stage of proceedings before the entry of judgment, the court shall order the case closed and terminated without prejudice to the settlement of estate proper proceedings in the regular courts. If the party dies after the entry of judgment, the same shall be binding upon the parties and their successors in interest in the settlement of the estate in the regular courts. ————- end of topic ————E. RIGHTS AND OBLIGATIONS BETWEEN HUSBAND AND WIFE Obligations of Husband and Wife (L2H2DS) (Art. 68-71) a. Live together b. Observe mutual Love, respect and fidelity c. Render mutual Help and support d. Management of the Household e. Fix the family Domicile f. Joint responsibility for the Support of the family Page 42 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Fixing the Family Domicile (Art. 69) General rule: The husband and wife shall fix the family domicile Except: In case of disagreement, the court shall decide. NOTE: The Court may exempt one spouse from living with the other if the latter should live abroad or there are other valid and compelling reasons, unless it is not compatible with the solidarity of the family. Sources for Support and Management of Household (Art. 70-71): a. From the community property b. In the absence thereof, from the income or fruits of the separate properties c. In case of insufficiency or absence thereof, from their separate properties Right to Bring an Action in Court (Art. 72) When one of the spouses neglects his or her duties to the conjugal union or commits acts which tend to bring danger, dishonor, or injury to the other or to the family, the aggrieved party may apply to the court for relief. Profession (Art. 73) General Rule: Either spouse may exercise any legitimate profession, business, or activity without the consent of the other. Exception: 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 or after the objection. If benefit accrued to the family before the objection, the resulting obligation shall be enforced against the community property. 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 (R.A. 10572, 2013) NOTE: This is without prejudice to the rights of creditors who acted in good faith. ————- end of topic ————F. PROPERTY RELATIONS OF THE SPOUSES What Governs Property Relations Between Spouses (Art. 74) a. Marriage Settlement – future spouses may agree upon the regime of ACP, CPG, complete separation of property, or any other regime b. Family Code – if there is no marriage settlement or when the regime agreed upon therein is void, the system of ACP shall govern c. Local customs General Rule: Property Relations are governed by Philippine laws (Art. 80) Exceptions: a. When there is a contrary stipulation in the marriage settlement b. When both are aliens, even if married in the PH c. As to extrinsic validity of contracts affecting property not situated in the Philippines (Art. 80). I. MARRIAGE SETTLEMENTS Requisites of a Valid Marriage Settlement: (WSB-TCR) 1. In Writing; 2. Signed by the parties; 3. Executed Before the celebration of marriage 4. To fix the Terms and conditions of their property relations; 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 (Art. 79); and 6. Registration (merely to bind 3rd persons) Page 43 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Requisites for a Valid Modification of Marriage Settlement: a. In writing; b. Signed by the parties; c. Executed before the celebration of the marriage, unless: i. there is a revival of property regime in case of reconciliation in legal separation proceedings (Art. 6667) ii. there is sufficient cause for judicial separation of property under Art. 135 iii. spouses file for voluntary dissolution of property regime under Art. 136 d. Registration: to bind 3rd persons Effectivity of a Marriage Settlement in Consideration of Future Marriage Everything stipulated in the settlements or contracts referred to in the preceding articles in consideration of a future marriage, including donation made between prospective spouses, shall be void if the marriage does not take place. Stipulations not dependent on the celebration of the marriage shall be valid (Art. 81). II. DONATIONS BY REASON OF MARRIAGE Requisites: (BCF) (Art. 82) 1. Made Before celebration of marriage; 2. In Consideration of marriage; and 3. In Favor of one or both future spouses General Rule: Future spouses cannot donate to each other more than 1/5 of their present property. Any excess shall be considered void (Art. 84). Exception: If they are governed by ACP (because they own everything in common) Grounds to Revoke Donation Propter Nuptias: (CARNIVAL) (Art. 86) a. Marriage without the needed parental Consent b. c. d. e. i. ii. iii. f. g. Marriage is Annulled and donee is in bad faith If it is with a Resolutory condition and the condition is complied with Marriage is Not celebrated Donee commits acts of Ingratitude such as: Commits an offense against the person, honor or property of the donor, his wife, or children under his parental authority 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 children under his authority Unduly refuses to support the donor when he is legally or morally bound to give such support Marriage is judicially declared Void Ab initio In Legal separation and donee is the guilty spouse NOTE: In case of donations included in the marriage settlement, when the marriage thereafter is not celebrated or is judicially declared void ab initio, all donations made by reason of said marriage shall be void, while those not dependent shall remain valid. DONATION PROPTER ORDINARY DONATION NUPTIAS VS BASIS DONATIONS PROPTER NUPTIAS ORDINARY DONATIONS Formalities Governed by the rules on ordinary donations except if future property, it must conform with the formalities of wills Governed by rules on donations (Arts. 725-773 NCC) Page 44 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Present Property If in marriage settlement: May be donated but up to 1/5 of donor's present property (Art. 84) ; otherwise Art. 752 applies No person may give or receive, by way of donation, more than he may give or receive by will. (Art. 752 NCC) Future Property May be included provided, donation is mortis causa Cannot be included Grounds for Revocation Art. 86 of Family Code Arts. 752, 760, 764, 765 NCC III. VOID DONATIONS BY THE SPOUSES Void Donations by Spouses (Art. 87) General Rule: Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void. Exceptions: a. Moderate gifts which the spouses may give each other on the occasion of any family rejoicing b. Donation mortis causa NOTE: The prohibition shall also apply to persons living together as husband and wife without a valid marriage. Page 45 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 BASIS DONATIONS PROPTER NUPTIAS ORDINARY DONATIONS Formalities Governed by the rules on ordinary donations except if future property, it must conform with formalities of wills Governed by rules on donations (Arts. 725-773 NCC) Present Property May be donated but up to 1/5 of donor's present property No person may give or receive, by way of donation, more than he may give or receive by will. (Art. 752) Future Property May be included provided donation is mortis causa Cannot be included Art. 86 of Family Code Arts. 752, 760, 764, 765 NCC Grounds revocation for Prescriptive Periods for Filing Action for Revocation of Donation Propter Nuptias (Based on Sta. Maria) If marriage is not celebrated 5 years (Art. 1149 NCC) from the time marriage is not (Except: donations in marriage settlements solemnized on the fixed date automatically void if marriage not celebrated) If marriage is judicially declared void (Note: deleted items – no distinction made by law) When marriage takes place without the required parental consent If resolutory condition is complied with When marriage is annulled and donee is in bad faith If donee commits an act of ingratitude In case of legal separation By operation of law if donee-spouse contracted subsequent void marriage in bad faith, and if not, 5 years from finality of judicial declaration of nullity 5 years from celebration of marriage 5 years from happening of condition 5 years from finality of decree 1 year from donor’s knowledge of that fact 5 years from the time the decree of separation has become final Page 46 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 IV. ABSOLUTE COMMUNITY OF PROPERTY Absolute Community of Property (ACP) The property regime of spouses in the absence of a marriage settlement or when the regime agreed upon is void (Art. 75) NOTE: It shall commence at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the regime at any other time, shall be VOID (Art. 88). No waiver of rights, interests, shares and effects of the ACP during the marriage, except in case of judicial separation of property. The waiver must be in a public instrument. Creditors of the spouse who made such waiver may petition the court to rescind the waiver to the extent that is sufficient to cover the amount of the credit (Art. 89). Property acquired during the marriage, whether acquisition appears to have been made in the name of one or both spouses, is PRESUMED to belong to the community (Art. 93). The original property regimes subsisting under the New Civil Code when the Family Code took effect are immutable and remain effective. Art. 256 provides that the Family Code shall have retroactive effect insofar as it does not prejudice or impair the vested or acquired rights in accordance with the Civil Code or other laws. General Rule: The community property consists of all the property owned by the spouses before, at the time of, or after the celebration of the marriage (Art. 91). Exceptions/Exclusions from Community Property (Art. 92) a. Those indicated in the marriage settlement (Art. 91) b. Property acquired during the marriage by gratuitous title plus its fruits and income, except when the donor, testator, or grantor expressly provides otherwise c. Property for personal and exclusive use, except jewelry d. Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage and its fruits and income Presumption of Community Property: (Art. 93) Property acquired during the marriage is presumed to belong to the community, unless it is proved that it is one of those excluded therefrom. Charges Upon and Obligations of the ACP (Art. 94) a. Support of spouses, their common children and legitimate children of either spouse b. Debts and obligations contracted during the marriage • By a designated administrator-spouse for the benefit of the community • By both spouses • By one with the consent of the other • By either spouse without the consent of the other to the extent that it benefited the family c. Taxes, liens, charges and expenses including major or minor repairs upon community property d. Taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used by the family e. Expenses for professional or vocational course f. Ante-nuptial debts which redounded to the benefit of the family g. Donated or promised to common legitimate children for profession, vocational course or self-improvement h. Other ante-nuptial debts, support of illegitimate child, and liabilities for crime or quasi-delicts in the absence of separate property are chargeable against the separate properties of the spouses but may be advanced by the ACP in case of absence or insufficiency of the exclusive property of the debtor-spouse i. Expenses of litigation between spouses unless the suit is found to be groundless Page 47 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 NOTE: If the community property is insufficient to cover all these liabilities (except those falling under cases of absence or insufficiency of the exclusive property of the debtor-spouse), the spouses shall be solidarily liable for the unpaid balance with their separate properties. A loan used for the family business is one which redounds to the benefit of the family, even if the business fails (ROS v. Phil National Bank, GR No. 170166, 2011). Under the Family Code, one spouse cannot sell property which is part of the community properties without the written consent of the other spouse or the authority of the court. Without such consent or authority, the entire sale is void. While the law does not require a person dealing with registered land to inquire further than what the Torrens Title on its face indicates, the rule is not absolute. If there are other surrounding circumstances relevant to the sale which show that the purchaser should have taken the necessary precaution required of a prudent buyer, the purchaser cannot be considered in good faith. (Nobleza v. Nuega G.R. No. 193038, 2015) In order to be considered a buyer in good faith, the following must be shown: (a) the diligence in verifying the validity of the title covering the property; and (b) the diligence in inquiring into the authority of the transacting spouse to sell conjugal property in behalf of the other spouse. Mere reliance on the SPA given by the selling spouse without further questioning despite knowing that the lots were conjugal property is insufficient. (Spouses Aggabao v. Parulan, G.R. No. 165803, 2010) Administration, Enjoyment, and Disposition of Community Property (Art. 96) General rule: It shall belong to both spouses jointly Exceptions: a. In case of disagreement, the husband’s decision shall prevail subject to recourse by the wife in court to be availed within 5 CIVIL LAW years from the date of the contract implementing the husband’s decision b. In case of incapacity of one spouse or inability to administer the common properties, the other spouse may assume sole powers of administration, except powers of disposition and encumbrance which requires authority from the court or written consent of the other spouse In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization of the court before the offer is withdrawn by either or both offerors. Donation of Community Property General rule: Neither spouse may donate any community property without the consent of the other Exception: Moderate donations for charity or on occasions of family rejoicing or family distress Dissolution of the ACP (Art. 99) a. Upon death of either spouse b. Decree of legal separation c. Marriage is annulled or nullified d. Judicial separation of property during the marriage (Arts. 134-138) Liquidation of the ACP (Art. 102) a. Inventory of all properties • Inventory of community property • Inventory of separate property of the wife • Inventory of separate property of the husband b. Debts and obligations of ACP are paid • In case of insufficiency of assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties. c. Remainder of the separate properties of the spouses are returned to the owner Page 48 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 d. Net remainder of the ACP is divided equally between husband and wife • Unless a different proportion is agreed upon in the marriage settlement or there has been a voluntary waiver of such share e. Presumptive legitimes of children are delivered f. Adjudication of conjugal dwelling and custody of common children • Given to the spouse to whom the majority of the common children choose to remain In an absolute community regime, the net profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution. In a conjugal partnership of gains regime, the net profits of the conjugal partnership of gains are all the fruits of the separate properties of the spouses and the products of their labor and industry. In this case, since the petitioner is the guilty party in the legal separation, his share from the net profits is forfeited in favor of the common children. In both regimes (assuming that it was ACP), petitioner, as the guilty spouse, is not entitled to any property at all. The husband and the wife did not have any separate properties. Therefore, there is no separate property which may be accounted for in the guilty party’s favor. (Quiao v. Quiao G.R. No. 176556, 2012) V. CONJUGAL PARTNERSHIP OF GAINS When applicable: If the spouses agree in the marriage settlement to be governed by the regime of conjugal partnership of gains Governing law: The marriage settlement shall primarily govern but the provisions of the Family Code on CPG shall apply suppletorily. The rules on contract of partnership shall also apply in all that is not in conflict with the marriage settlement and the provisions of the Family Code on CPG. The spouses contribute the following to a common fund (Art. 106): CIVIL LAW a. Proceeds, products, fruits and income of separate properties of spouses b. Everything acquired by spouses through their efforts c. Everything acquired by spouses through chance It shall commence at the precise moment that the marriage is celebrated. Any stipulation, express or implied, for the commencement of the regime at any other time shall be void. No waiver of rights allowed during the marriage except in case of judicial separation of property. The waiver must be in a public instrument. The fruits, natural, industrial, or civil, due or received during the marriage from the common property, as well as the net fruits from the exclusive property of each spouse are included in the conjugal partnership properties. (Art. 117(3)) What Constitutes CPG (FOLCHIC) (Art. 117) a. Fruits of conjugal property due or received during the marriage and net fruits of separate property b. Those acquired through Occupation c. Livestock in excess of what was brought to the marriage d. Those acquired by onerous title during the marriage with Conjugal funds e. Share in Hidden treasure f. Those obtained from labor, Industry, work or profession of either or both spouse g. Those acquired by Chance Exclusive Property in CPG (Art. 109) a. That brought into the marriage as his/her own b. That acquired during the marriage gratuitously (net fruits and income are conjugal) c. That acquired by redemption, barter or exchange with exclusive property d. That purchased with exclusive money Presumption of Conjugality (Art. 116) Property acquired during the marriage, whether acquisition appears to have been made in the name of one or both spouses, is presumed to be Page 49 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 conjugal. The party who invokes the presumption must first prove that the property was acquired during the marriage. Otherwise, the presumption of conjugality will not apply. (Tan v. Andrade, G.R. Nos. 171904 & 172017, 2013) Installment purchases (Art. 118) Property bought on installments paid partly from exclusive funds and party from conjugal funds: • Belongs to the buyer/s: If full ownership vested before the marriage • Belongs to the conjugal partnership: If full ownership vested during the marriage In either case, any amount advanced by the partnership or by either or both spouses shall be reimbursed by the owner upon liquidation. Credits in Installment (Art. 119) Whenever an amount or credit payable within a period of time belongs to one of the spouses: • Belongs to the spouse: Sums collected in partial payments or by installments during the marriage • Belongs to the conjugal partnership: Interests falling due during the marriage on the principal Rules in Cases of Improvement of Exclusive Property General Rule: The ownership of improvements made on the separate property of the spouses at the expense of the partnership or through efforts of both spouses shall pertain to the partnership. (Art. 120) Accession– if the cost of the improvement and any resulting increase in value are equal or less than the value of the entire property at the time of the improvement, the entire property remains the exclusive property of the owner-spouse (subject to reimbursement of improvement cost to the CPG) Reverse Accession – if the cost of the improvement and any resulting increase in value are more than the value of the entire property at the time of the improvement, the property CIVIL LAW becomes conjugal (subject to reimbursement of the value of the property of the owner-spouse) Charges upon CPG (Art. 121) Same as that under ACP, except that under taxes and expenses for preservation of separate property of either spouse during the marriage → property need not be used by the family NOTE: If the conjugal partnership is insufficient, the spouses shall be solidarily liable for the unpaid balance with their separate properties. The conjugal partnership property shall likewise be liable for the payment of the personal debts of either spouse insofar as they have redounded to the benefit of the family. (Art. 121) Payment of criminal indemnities can be advanced by the conjugal partnership assets even before these are liquidated. It may be enforced against the partnership assets after the responsibilities in Article 121 have been covered. No prior liquidation of those assets is required. (Pana v. Heirs of Juanite, Sr., G.R. No. 165201, 2012) J. Leonen: Although the mortgage is void as a spouse's consent is indispensable for the disposition or encumbrance of conjugal properties, the principal obligation [loan contracted during their marriage] remains valid. Article 122 of the Family Code applies to debts that were contracted by a spouse and redounded to the benefit of the family. It applies specifically to the loan that X contracted, but not to the mortgage. In this case, the loan was used as additional working capital for Y’s printing business. There is a presumption that it redounded to the benefit of the family; hence, the conjugal partnership may be held liable for the loan amount. Although petitioner cannot foreclose the mortgage over the conjugal property in question since mortgage was void, it can still recover the loan amount from the conjugal partnership. (Philippine National Bank v. Reyes, Jr., G.R. No. 212483, 2016.) Administration and Enjoyment of CPG (Art. 124): Same as that under ACP Page 50 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Donation of Conjugal Property (Art. 125): Same as that under ACP CIVIL LAW time that either parent is chosen to be the custodian. (Beckett v. Sarmiento, Jr., 2013). Dissolution of the CPG (Art. 126): Same as that under ACP An extrajudicial dissolution of the conjugal partnership without judicial approval is void. A notary public should not facilitate the disintegration of a marriage and the family. In so doing, a notary public may be held accountable administratively. (Rodolfo Espinoso v. Juliet Omana, A.C. 9081, 2011) Liquidation of the CPG (Art. 129) a. Inventory of all property b. Amounts advanced by CP in payment of personal debts and obligations of either spouse is credited c. Reimbursement for use of exclusive funds d. Debts and obligations of the CP are paid • In case of insufficiency of assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties. e. Remains of exclusive properties are returned f. Indemnify loss of deterioration of movables belonging to either spouse used for the benefit of the family g. Net remainder of conjugal property is divided equally • Unless a different proportion is agreed upon in the marriage settlement or there has been a voluntary waiver or forfeiture of such share h. Delivery of children’s presumptive legitimes i. Adjudication of conjugal dwelling and custody of children • Given to the spouse to whom the majority of the common children choose to remain. An earlier judgment on the custody of the child does not serve as res judicata on a subsequent judgment. Grant of custody is never final and can always be re-examined and adjusted. The welfare, the best interests, the benefit, and the good of the child must be determined as of the Page 51 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 DISTINCTION BETWEEN ABSOLUTE COMMUNITY PROPERTY AND CONJUGAL PARTNERSHIP OF GAINS ABSOLUTE COMMUNITY OF PROPERTY CONJUGAL PARTNERSHIP OF GAINS What it consists of All the property owned by the spouses before, at the time of, or after the celebration of the marriage. (Art. 91) 1. Fruits of conjugal property due or received during the marriage and net fruits of separate property 2. Those acquired through Occupation 3. Livestock in excess of what was brought to the marriage 4. Those acquired during the marriage with Conjugal funds 5. Share in Hidden treasure 6. Those obtained from labor, Industry, work or profession of either or both spouse 7. Those acquired by Chance (Art. 117) 8. The ownership of improvements made on the separate property of the spouses at the expense of the partnership or through efforts of both spouses shall pertain to the partnership (Art. 120) What remains as exclusive property 1. Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage and its fruits and income 2. Property for personal and exclusive use, except jewelry 3. Property acquired during the marriage by gratuitous title plus its fruits and income, except when the donor, testator, or grantor expressly provides otherwise (Art. 92) 1. That brought into the marriage as his/her own 2. That acquired during the marriage gratuitously 3. That acquired by redemption, barter or exchange with exclusive property 4. That purchased with exclusive money (Art. 109) Presumption Property acquired during the marriage is presumed to belong to the community, unless it is proved that it is one of those excluded therefrom (Art. 93) All property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved (Art. 116) Charges and Obligations Page 52 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 1. Debts and obligations contracted during the marriage: • By either spouse without the consent of the other to the extent that it benefited the family • By designated administrator-spouse By both spouses • By one with the consent of the other 2. Taxes, liens, charges and expenses including major or minor repairs, upon community property 3. Support of spouses, their common children and legitimate children of either spouse 4. Expenses of litigation between spouses unless the suit is found to be groundless 5. Ante-nuptial debts which redounded to the benefit of the family 6. Taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse used by the family 7. Expenses for professional or vocational course 8. Other ante-nuptial debts, support of illegitimate child, and liabilities for crime or quasi-delicts in absence of separate property are chargeable against the separate properties of the spouses but may be the advanced by the ACP in case of absence or insufficiency of the exclusive property of the debtor-spouse 9. Donated or promised to common legitimate children for profession, vocational course or self-improvement (Art. 94) 1. The support of the spouse, their common children, and the legitimate children of either spouse 2. All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the conjugal partnership of gains, or by both spouses or by one of them with the consent of the other 3. Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have benefited 4. All taxes, liens, charges, and expenses, including major or minor repairs upon the conjugal partnership property 5. All taxes and expenses for mere preservation made during the marriage upon the separate property of either spouse 6. Expenses to enable either spouse to commence or complete a professional, vocational, or other activity for selfimprovement 7. Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the family 8. The value of what is donated or promised by both spouses in favor of their common legitimate children for the exclusive purpose of commencing or completing a professional or vocational course or other activity for self-improvement 9. Expenses of litigation between the spouses unless the suit is found to be groundless (Art. 121) Liquidation 1. Inventory of all properties • Inventory of community property • Inventory of separate property of the wife • Inventory of separate property of the husband 2. Debts and obligations of ACP are paid 3. Remainder of the separate properties of the spouses are returned to the owner 1. Inventory of all property 2. Amounts advanced by CP as payment for personal debts and obligations of either spouse are credited 3. Reimbursement for use of exclusive funds 4. Debts and obligations of the CP are paid 5. Remains of exclusive properties are returned Page 53 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 4. Net remainder of the ACP is divided equally between husband and wife 5. Presumptive legitimes of children are delivered 6. Adjudication of conjugal dwelling and custody of common children (Art. 102) CIVIL LAW 6. Indemnify loss of deterioration of movables belonging to either spouse used for the benefit of the family 7. Net remainder of conjugal property is divided equally 8. Delivery of children’s presumptive legitimes 9. Adjudication of conjugal dwelling and custody of children (Art. 129) Page 54 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW VI. REGIME OF SEPARATION OF PROPERTY VII. JUDICIAL SEPARATION OF PROPERTY When applicable: If provided under the marriage settlement (Art. 134) When applicable: In case of a judicial order, which may either be voluntary or for sufficient cause. (Art. 134) Voluntary separation (Art. 136) The spouses may jointly file a verified petition with the court Properties Included The parties may agree on the extent of their separation of property regime. It may involve present or future property or both. It may be total or partial. If it is partial, the property not agreed upon as separate shall pertain to the absolute community (Art. 144) Rights and Liabilities of the Spouses Each spouse shall: a. Own, dispose of, possess, administer and enjoy his or her own separate estate, without need of the consent of the other b. Own all earnings from his or her own profession, business or industry c. Own all fruits, natural, industrial or civil, due or received during the marriage from his or her separate property (Art. 145) 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. (Art. 146) Grounds for Transfer of Administration of Exclusive Property of Either Spouse: (GACA) (ART. 142) a. One spouse becomes Guardian of the other b. One spouse is judicially declared Absent c. One spouse is sentenced to penalty with Civil interdiction d. One spouse becomes a fugitive from justice or is hiding as an Accused in a criminal case If the other spouse is not qualified by reason of incompetence, conflict of interest, or any other just cause, the court shall appoint a suitable person to be the administrator. All creditors of the absolute community or of the conjugal partnership of gains, as well as the personal creditors of the spouse, shall be listed in the petition and notified of the filing thereof The court shall take measures to protect the creditors and other persons with pecuniary interest Sufficient cause for judicial separation (Art. 135): a. That the spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction b. That the spouse of the petitioner has been judicially declared an absentee c. That loss of parental authority of the spouse of petitioner has been decreed by the court d. That the spouse of the petitioner has abandoned the latter or failed to comply with his or her obligations to the family as provided for in Article 101 e. That the spouse granted the power of administration in the marriage settlements has abused that power f. That at the time of the petition, the spouses have been separated in fact for at least one year and reconciliation is highly improbable. In the cases provided for in letters (a), (b) and (c), the presentation of the final judgment against the guilty or absent spouse shall be enough basis for the grant of the decree of judicial separation of property. Page 55 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 VIII. PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE Applicability ARTICLE 147 ARTICLE 148 A. To a man and woman who are: 1. Capacitated to marry each other: a. At least 18 years old b. Not Article 37 (incestuous void marriage) c. Not Art. 38 (void marriage by reason of public policy) d. Not bigamous 2. Live exclusively with each other as husband and wife 3. Without the benefit of marriage a. To a man and woman who are: 1. Not capacitated to marry each other (under 18 years old) 2. Live exclusively with each other as husband and wife 3. Without the benefit of marriage b. Adulterous relationship (e.g. concubinage) c. Bigamous or polygamous marriage (Art. 35(4)) d. Incestuous marriages under Art. 37 e. Void marriages by reason of public policy under Art. 38 B. Other void marriages/live-in Note: If capacitated, but relationship is NOT exclusive, it will fall under this provision Salaries Wages and Owned by parties in equal shares Exclusively owned and if any of the spouses is married, his salary is the property of the ACP/CPG of his legitimate marriage Properties acquired through exclusive funds Remains exclusive provided that there is proof that it was acquired by exclusive funds Remains exclusive Property acquired while living together Presumed to have been obtained by their joint efforts, work or industry and shall be owned by them in equal shares Only the properties acquired by both parties through their actual joint contribution of money, property, or industry shall be owned by them in common proportion to their respective contributions. If a party did not participate in the acquisition—deemed to have contributed jointly if efforts consisted in the care and maintenance of the family and the household Without proof of actual contribution by both parties, there can be no presumption of co-ownership and equal sharing Page 56 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Encumbrance or disposal of his/her share 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 Forfeiture Share will be forfeited in favor of their common children, descendants, or innocent party. In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. If the party who acted in bad faith is not validly married to another, his/her share shall be forfeited in favor of their common children, descendants, or innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation. Rules on forfeiture of shares will apply even if both are in bad faith. If the party who acted in bad faith is not validly married to another, his or her shall be forfeited in favor of their common children, descendants, or innocent party Page 57 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 The registration of a property in the name of the paramour who had no income whatsoever at the time of the donation by another’s husband is tantamount to a donation which is void under Article 87 of the Family Code. The paramour then holds the property under a constructive trust under Article 1456 in favor of the conjugal partnership of the husband with the legitimate spouse (Joaquino v. Reyes, G.R. No. 154645, 2004). Under Art. 147, property acquired by both spouses through their work and industry shall be governed by the rules on equal co-ownership. Any property acquired during the union is prima facie presumed to have been obtained through their joint efforts. Here, the former spouses both agreed that they acquired the subject property during the subsistence of their marriage. Thus, it shall be presumed to have been obtained by their joint efforts, work or industry, and shall be jointly owned by them in equal shares (Barrido v. Nonato, 2014). Under Article 148, there must be proof of actual joint contribution by both the live-in partners before the property becomes co-owned by them in proportion to their contribution. Otherwise, there are no presumptions of co-ownership and equal sharing. (Villanueva v. CA, G.R. No. 143286, 2004, reiterated in Ventura v. Sps. Paulino, G.R. No. 202932, 2013) No co-ownership exists between parties to an adulterous relationship. In such a relationship, it is necessary for each of the partners to prove his or her actual contribution to the acquisition of property in order to lay claim to any portion of it. Presumptions of co-ownership and equal contribution do not apply. (Rivera v. Heirs of Villanueva, G.R. No. 141501, 2006) Art. 148 of the Family Code provides that only the property acquired by both of the parties through their actual joint contribution of money, property, or industry shall be owned in common and in proportion to their respective contributions. Such contributions and corresponding shares were prima facie presumed to be equal. However, for this presumption to arise, proof of actual contribution was required. Petitioner failed to prove that she made an actual contribution to purchase the condominium unit. (Soledad L. Lavadia v. Heirs of Juan Luces Luna G.R. No. 171914 2015) ————- end of topic ————G. THE FAMILY I. CONCEPT OF FAMILY Family (Art. 149) Basic social institution which public policy cherishes and protects. Family Relations a. Between husband and wife b. Between parents and children c. Among other ascendants and descendants d. Among brothers and sisters, full or half blood. (Art. 150) II. EFFECTS ON LEGAL DISPUTES Suit Between Family Members (Art. 151) General Rule: No suit between members of the same family shall prosper unless it should appear from the verified complaint or petition that earnest efforts toward a compromise have been made, but that the same have failed. If it is shown that no such efforts were in fact made, the same case must be dismissed. Exception: These rules shall not apply to cases which may not be the subject of compromise under the Civil Code. Allegation of “earnest efforts” is jurisdictional: if it is absent, the court can dismiss the case. BUT this rule is inapplicable in the following cases: (CLV-FJF) a. Civil status of persons b. Any ground for Legal separation c. Validity of marriage or legal separation d. Future support e. Jurisdiction of courts f. Future legitime Page 58 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Spouses Jointly Sued The husband and wife shall sue or be sued jointly except as provided by law (Section 4, Rule 3 of the 1997 Rules of Civil Procedure) The term “jointly” means that the spouses shall be sued together and it does not refer to the nature of the civil liability. This is so because when the spouses are sued for the enforcement of an obligation entered into by them or of an obligation which redounded to the benefit of the family, they are being impleaded in their capacity as representatives of the absolute community or the conjugal partnership and not as independent debtors such that the concept of joint or solidary liability, as between them, does not arise (Alipio v. CA) The necessity of being jointly sued is also because generally the spouses are joint administrators of either the absolute community property or the conjugal partnership of gains. However, if what is involved in the litigation is his or her separate and exclusive property, the spouse may appear alone in court (Article 111). III. FAMILY HOME Family Home (Art. 152) The dwelling house where they (husband and wife or an unmarried head of the family) and their family reside, and the land on which it is situated. Constitution of a Family House (FH): a. jointly by the husband and wife or by an unmarried head of a family b. from the time it is occupied as a family residence so long as any of its beneficiaries actually resides therein (Art. 153) Other Rules: a. FH must be owned by person constituting it b. FH must be permanent c. FH continues despite death of one or more spouses or unmarried head of family for 10 years or as long as there is a minor beneficiary (Art. 159) d. Only one FH can be constituted CIVIL LAW Beneficiaries of a Family Home a. Husband and wife, or unmarried head of the family b. Parents (may include parent-in-laws) c. Ascendants d. Brothers and sisters (legitimate/illegitimate) living in the family home and dependent on head of family for support. (Art. 154) Qualified Property Actual value of the family home shall not exceed P300,000 in urban areas and P200,000 in rural areas. (Art.157) Rules regarding Subsequent Improvements of Family Home Any subsequent improvement of the family home by the persons constituting it, its owners, or any of its beneficiaries will still be exempt from execution, forced sale or attachment provided the following conditions obtain: a. The actual value of the property at the time of its constitution does not exceed Php 300,000 in urban areas and Php 200,000 in rural areas under Art. 157; and b. The improvement does not result in an increase in its value exceeding the statutory limit. Otherwise, the family home can be the subject of a forced sale, and any amount above the statutory limit is applicable to the obligations under Art. 160. To warrant the execution sale of a family home under Art. 160, the following facts should be established: 1. There was an increase in its actual value; 2. The increase resulted from voluntary improvements on the property introduced by the persons constituting the family home, its owners or any of its beneficiaries; and 3. The increased actual value exceeded the maximum allowable under Article 157. (Eulogio v. Bell, G.R. No. 186322, 2015) Page 59 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Exempt from Execution (Art. 153) General Rule: The FH is exempted from: a. Execution b. Forced Sale • The right to exemption from forced sale is a personal privilege granted to the judgment debtor which must be asserted before the public auction. Failure to do so would estop the party from later claiming on the exemption. It is a right that can be waived or be barred by laches by failure to set up and prove the status of the property as a family home at the time of levy. (De Mesa v. Acero, G.R. No. 185064, 2012) c. Attachment Exceptions: (Art. 155) a. Non-payment of taxes b. Debts incurred prior to constitution of home c. Debts secured by mortgages on the premises d. 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 the Family Code. Sale, Alienation, Donation, Assignment, or Encumbrance of the Family Home (Art. 158) a. The person who constituted the same must give his/her written consent. b. The spouse of the person who constituted the family home must also give his/her written consent. c. A majority of the beneficiaries of legal age must also give their written consent. d. In case of conflict, the court shall decide. Requisites for Creditor to Avail of The Right to Execute: (Art. 160) 1. He must be a judgment creditor; 2. His claim is not among those excepted under Art. 155; and 3. He has reasonable grounds to believe that the family home is worth more than the maximum amount fixed in (Art. 157) CIVIL LAW Procedure: a. Creditor must file a motion in the court proceeding where he seeks to obtain a writ of execution against the FH. b. Hearing on the motion where the creditor must prove that the actual value of the FH exceeds the maximum amount fixed by the Family Code, either at the time of its constitution or as a result of improvements introduced thereafter. c. If creditor proves that the actual value exceeds the maximum amount, the court will order its sale in execution. d. If FH is sold for more than the value allowed, the proceeds shall be applied as follows: • First, the obligations enumerated in Art. 155 must be paid (listed above) • Then the judgment in favor of the creditor will be paid, plus all the costs of execution • The excess, if any, shall be delivered to the judgment debtor. ————- end of topic ————H. PATERNITY AND FILIATION The filiation of children may be by nature or by adoption. Natural filiation may be legitimate or illegitimate (Art. 163) I. LEGITIMATE CHILDREN Those conceived or born during a valid marriage. (Art. 164) This also includes children who are: a. Conceived as a result of artificial insemination b. Conceived or born of a voidable marriage before decree of annulment; c. Conceived or born before judgment of absolute nullity under Art. 36 (psychological incapacity) becomes final and executory; d. Conceived or born of a subsequent marriage under Art. 53 (failure to record the judgment, partition and distribution of properties, and delivery of children’s presumptive legitime); e. Legally adopted; and f. Legitimated, conceived and born outside of wedlock of parents without impediment at the Page 60 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 time of conception and who subsequently married authority to record the paternity of an illegitimate child on the information of a third person. (Cabatania v. CA, G.R. No. 124814, 2004) It is well settled that a record of birth is merely a prima facie evidence of the facts contained therein. It is not conclusive evidence of the truthfulness of the statements made by the interested parties. (Benitez-Badua v. CA, G.R. No. 105625, 1994) A child born inside a valid marriage is legitimate. Hence a child born inside a bigamous marriage, which is void, is considered a child under the first marriage, which has not been nullified or annulled (Concepcion v. CA, G.R. No. 123450, 2005) unless the husband timely impugns the legitimacy of the child. An agreement by parties as to the status of a child is void. Only the law determines legitimacy or illegitimacy. Thus, the child, in the eyes of the law, is legitimate under the first marriage notwithstanding the admission in pleadings by the wife and her second husband that the child is their legitimate son. Similarly, any declaration of the mother that her child is illegitimate has no probative value. (Concepcion v. CA, G.R. No. 123450, 2005) b. An admission of legitimate or illegitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned. Exception: In the absence of these pieces of evidence, the legitimate filiation may be proved by (Art. 172, par. 2): a. Open and continuous possession of the status of a legitimate (or illegitimate) child “Continuous” does not mean that the possession of status shall continue forever but only that it shall not be of an intermittent character while it continues. The possession of such status means that the father has treated the child as his own, directly and not through others, spontaneously and without concealment though without publicity. (Mendoza v. CA, G.R. No. 86302, 1991) Requisites for Children by Artificial Insemination to be Considered Legitimate 1. The artificial insemination must be made on the wife; 2. Either the sperm of the husband or a thirdparty donor may be used; 3. The artificial insemination has been authorized or ratified by both spouses on a written instrument executed and signed by them before the birth of the child; and 4. The written instrument is recorded in civil registry together with the birth certificate of the child (Art. 164, par. 2) There must be evidence of the manifestation of the permanent intention of the supposed father to consider the child as his, by continuous and clear manifestations of parental affection and care, which cannot be attributed to pure charity. Such acts must be of such a nature that they reveal not only the conviction of paternity, but also the apparent desire to have and treat the child as such in all relations in society and in life, not accidentally, but continuously. (Jison v. CA, G.R. No. 124853, 1998) II. PROOF OF FILIATION General Rule: Filiation of legitimate or illegitimate children is established by any of the following (Art. 172, par. 1): a. The record of birth appearing in the civil register or a final judgment A certificate of live birth purportedly identifying the putative father is not competent evidence of paternity when there is no showing that the putative father had a hand in the preparation of said certificate. The local civil registrar has no b. c. Any other means allowed by the Rules of Court and special laws The due recognition of an illegitimate child in a record of birth, a will, a statement before a court of record, or in any authentic writing is, Page 61 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 in itself, a consummated act of acknowledgement of the child, and no further court action is required. In fact, any authentic writing is treated not just a ground for compulsory recognition; it is in itself a voluntary recognition that does not require a separate action for judicial approval. (Eceta v. Eceta, G.R. No. 157037, 2004) The father’s SSS Form E-1 satisfies the requirement for proof of filiation and relationship of petitioner to the Aguilar spouses under Article 172 of the Family Code. Filiation may be proved by an admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned, and such due recognition in any authentic writing is, in itself, a consummated act of acknowledgment of the child, and no further court action is required. (Aguilar v. Siasat, G.R. 200169, 2015) A thumb mark has been repeatedly considered a valid mode of signature. Thus, the document executed by the putative father evidencing his voluntary recognition of filiation is valid. (San Agustin v. Sales, G.R. No. 189289, 2016) Rules in Filing an Action (Art. 173 in relation to 175): General rule: Only the child can bring an action to claim legitimacy/illegitimacy: General rule: It must be filed during his or her lifetime Exception: For illegitimate children, when the action is based on par. 2 of Art. 172, the action may be brought ONLY during the lifetime of the alleged parent (Ara v. Pizzaro, G.R. No. 1872773; J. Leonen). Exception: The right may be transmitted to the heirs of the child in the following cases: g. Death during minority; h. Insanity; or i. When the action has already been instituted by the child NOTE: Under a & b, the heirs shall have a period of 5 years within which to institute the action. CIVIL LAW III. ILLEGITIMATE CHILDREN Those conceived AND born outside a valid marriage. (Art. 165) These include those who are: a. Born of marriages which are void ab initio such as bigamous and incestuous marriages and void marriages by reason of public policy b. Conceived and born of voidable marriages after the decree of annulment c. Conceived and born out of wedlock IV. ACTION TO IMPUGN LEGITIMACY Grounds to Impugn the Legitimacy of the Child (Art. 166) (Exclusive List) (PBA) a. 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: i. Physical incapacity of the husband to have sexual intercourse with his wife ii. Fact that the husband and wife were living separately in such a way that sexual intercourse was not possible, or iii. Serious illness of the husband which absolutely prevented intercourse b. If it’s 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 c. In case of children conceived through Artificial insemination, when the written authorization or ratification of either parent was obtained through mistake, fraud, violence, intimidation, or undue influence. (Note: This assumes that there was written authorization) Who may Impugn the Legitimacy of a Child General Rule: Only the husband can impugn the legitimacy of a child. Page 62 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Exceptions: The heirs of the husband may impugn the child’s filiation in the following cases: (Art. 171) a. If the husband dies before the expiration of period for filing the action b. If the husband dies after filing without desisting c. If the child was born after the death of the husband Periods for Filing of Action to Impugn Legitimacy a. If the husband (or his heirs, in proper cases) resides in the same city or municipality where the birth took place: within 1 year b. If the husband (or his heirs) does not reside in the city or municipality where the child’s birth took place or was recorded but his residence is in the Philippines: within 2 years. c. If the child’s birth took place or was recorded in the Philippines while the husband has his residence abroad, or vice-versa: within 3 years. (Art. 170) NOTE: the period shall be counted from the knowledge of the child’s birth OR its recording in the civil register. However, if the child’s birth was concealed from or was unknown to the husband or his heirs, the period shall be counted from the discovery or knowledge of the birth of the child or of the act of registration of said birth, whichever is earlier. Presumption on the Status of a Child in Case of Successive (Valid) Marriages (Art. 168) In the absence of proof to the contrary: a. Presumed to have been conceived during the first marriage: If the child was born before 180 days after celebration of 2nd marriage provided born within 300 days after the termination of the 1st marriage. b. Presumed to have been conceived during the second marriage: If the child was born after 180 days following the celebration of the 2nd marriage, if born within 300 days after termination of 1st marriage. c. No presumption: If the child was born after 300 days following the termination of the first CIVIL LAW marriage. In such a case, the legitimacy or illegitimacy of the child shall be proved by whoever alleges such (Art. 169) V. LEGITIMATED CHILDREN Requisites for Legitimation: (Art. 177-178) 1. The child was conceived and born out of wedlock; 2. The parents, at the time of child’s conception, were not disqualified by any impediment to marry each other or were disqualified only because either or both of them were below 18; and 3. There is a valid marriage subsequent to the child’s birth. NOTE: Legitimation takes place by the subsequent marriage of the child’s parents. Annulment of a voidable marriage shall not affect the legitimation. Effect of Legitimation (Art. 179 – 181) a. Confers on the child the rights of legitimate children b. Retroacts to the time of the child’s birth c. The descendants shall benefit in case the child died before the celebration of the marriage Legitimation may be impugned only by those who are prejudiced in their rights within 5 years from the time the cause of action accrues (Art. 182), NOTE: Parents need not die for the cause of action to accrue. Page 63 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 SUMMARY ON FILIATION LEGITIMATE ILLEGITIMATE LEGITIMATED Those conceived or born during a valid marriage (Art. 164) Those conceived AND born outside a valid marriage (Art. 165) For a child to be considered legitimated, the following requisites must be met: (Art. 177) a. The child was conceived and born out of wedlock b. The parents, at the time of child’s conception, were not disqualified by any impediment to marry each other or were disqualified only because either or both of them were below 18 c. There is a valid marriage subsequent to the child’s birth These include children who are: a. Conceived as a result of artificial insemination, provided written authorization or ratification is given by the spouses before the birth of the child b. Conceived or born of a voidable marriage before decree of annulment c. Conceived or born before judgment of absolute nullity under Art. 36 (psychological incapacity) becomes final & executory d. Conceived or born of a subsequent marriage under Art. 53 (failure to record the judgment, partition and distribution of properties, and delivery of children’s presumptive legitime) e. Legally adopted f. Legitimated, conceived and born outside of wedlock of parents without impediment at the time of conception and who subsequently married These children include those who are: a. Born of marriages which are void ab initio such as bigamous and incestuous marriages and void marriages by reason of public policy b. Conceived and born of voidable marriages after the decree of annulment c. Conceived and born out of wedlock Legitimation takes place by the subsequent marriage of the child’s parents. Page 64 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 RIGHTS OF LEGITIMATE/LEGITIMATED VIS-À-VIS ILLEGITIMATE CHILDREN Surname RIGHTS OF LEGITIMATE CHILDREN (Art. 174) RIGHTS OF ILLEGITIMATE CHILDREN (Art. 176) Bear the surnames of the father and mother Use of surname of the mother, and has no right to use the surname of the father Exception: They may be allowed to use the surname of their father only if there is primary evidence of such illegitimate filiation between them but without need of establishing such filiation in a judicial proceeding. In such case, the father during his lifetime, may institute an action to prove non-filiation. Support Has the right to receive support from their parents, their ascendants, and in proper cases, their brothers and sisters Has right to receive support from both parents but only the separate property of the person obliged to give support shall be answerable, provided that in case the obligor has no separate property, the absolute community or the conjugal partnership, if financially capable, shall advance the support, which shall be deducted from the share of the spouse obliged upon the liquidation of ACP or CPG Successional Rights Preferential successional rights in both intestate and compulsory succession Has successional rights in both intestate and compulsory succession but only consisting of 1/2 of the share of a legitimate child Page 65 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 i. a. Use the surname of the mother if the requisites of R.A. 9255 are not complied with b. Use the surname of the father if the child’s filiation has been expressly recognized by the father, either through: • Record of birth in civil register • Father’s admission in public document • Father’s admission in private handwritten document (R.A. 9255, Sec. 1, effective March 19, 2004) ii. b. NOTE: The father under R.A. 9255, Sec. 1 has the right to file an action to prove non-filiation during his lifetime. If the mother of an illegitimate child objects, although the father was able to sufficiently establish the paternity of his child in a public document, there is no legal basis for the court to change the surname of the child. Child has the right to choose whose surname to use. (Grande v. Antonio, G.R. No. 206248, 2014) ————- end of topic ————I. ADOPTION I. DOMESTIC ADOPTION LAW Who may adopt: a. Filipino Citizen1. Of legal age; 2. In possession of full civil capacity and legal rights; 3. Of good moral character; 4. Has not been convicted of any crime involving moral turpitude; 5. Emotionally and psychologically capable of caring for children; 6. In a position to support and care for his legitimate and illegitimate children, in keeping with the means of the family; and 7. At least 16 years older than the person to be adopted, unless: The adopter is the natural parent of the child to be adopted, or The adopter is the spouse of the legitimate parent of the person to be adopted Alien 1. Possessing the same qualifications as above stated for Filipino nationals; 2. His/her country has diplomatic relations with the Philippines; 3. He/she has been living in the Philippines for at least 3 continuous years prior to the filing of the application for adoption and maintains such residence until the adoption decree is entered; 4. He/she has been certified by his/her diplomatic or consular office or any appropriate government agency that he/she has the legal capacity to adopt in his/her country; 5. His/her government allows the adoptee to enter his/her country as his/her adopted son/daughter Requirements no. 3 and 4 may be waived in the following instances: i. A former Filipino citizen who seeks to adopt a relative within the 4th degree of consanguinity or affinity; or ii. One who seeks to adopt the legitimate child of his/her Filipino spouse iii. One who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a relative within the 4th degree of consanguinity or affinity of the Filipino spouse c. Guardians – with respect to the ward after the termination of the guardianship and clearance of his/her financial accountabilities All statutory requirements for adoption must be met, and when a court issues an adoption decree despite the fact that all the said requirements are not met, such decree is a nullity (In re O’Keefe, 164 Misc 473, 1937) Page 66 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Rule on Adoption by Spouses General Rule: Husband and wife shall jointly adopt. Exceptions: a. One spouse seeks to adopt the legitimate son/daughter of the other b. One spouse seeks to adopt his/her own illegitimate son/daughter: Provided, that the other spouse has signified his/her consent or c. The spouses are legally separated from each other. NOTE: In case husband and wife jointly adopt, or one spouse adopts an illegitimate child of the other, joint parental authority shall be exercised. J. Leonen: The law requires that for adoption to be valid, the spouse seeking to adopt must first obtain the consent of his or her spouse and the consent of the adopter’s children 10 years old and above. To secure this, personal service of summons should have been effected on the spouse and all legitimate children to ensure that their substantive rights are protected. It is not enough to rely on constructive notice as in this case. Surreptitious use of procedural technicalities cannot be privileged over substantive statutory rights. (Castro v Gregorio, G.R. No. 188801, October 15, 2014) Who may be adopted: (BAILORP) a. Any person Below 18 years of age who has been administratively or judicially declared available for adoption b. Under R.A. 9523, a child which can be certified as “legally Available for adoption” includes a person below eighteen (18) years of age or a person over eighteen (18) years of age but is unable to fully take care of him/herself or protect him/herself from abuse, neglect, cruelty, exploitation, or discrimination because of physical or mental disability or condition c. Illegitimate son/daughter by a qualified adopter to improve his/her status to that of legitimacy CIVIL LAW d. Legitimate son/daughter of one spouse by the other spouse e. Person of legal age if, prior to the adoption, said person has been consistently considered and treated by the adopter as his/her Own child since minority; f. Child whose adoption has been previously Rescinded g. 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. NOTE: A “child” refers to a person below eighteen (18) years of age. Written consent necessary for adoption (ABLISS) a. Adoptee, if 10 years of age or over; b. Biological parents of the child, if known, or the legal guardian, or the proper government instrumentality which has legal custody of the child; c. Legitimate and adopted children of the adopter and adoptee, 10 years old or over; d. Illegitimate children of the adopter, 10 years old or over and living with him or her e. Spouse of the adopted, if married f. Spouse of the adopter, if married Effectivity of Decree of Adoption A decree of adoption is effective as of the date the original petition was filed. This also applies in case the petitioner dies before the issuance of the decree of adoption. Where the petition for adoption was granted after the child killed a girl, no retroactive effect may be given to the decree of adoption so as to impose a liability upon the adopting parents accruing at a time when the adopting parents had no actual or physically custody over the adopted child. Retroactive effect may perhaps be given where such is essential to permit the accrual of some benefit or advantage in favor of the adopted child. To hold that parental authority had been retroactively lodged in the adopting parents so as to burden them with liability for a tortious act that they could not have foreseen nor prevented Page 67 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 would be unfair and unconscionable (Tamargo v. CA, G.R. No. 85044, 1992). Effects of Adoption a. Severance of all legal ties between the biological parents and the adoptee and the same shall then be vested on the adopters EXCEPT in cases where the biological parent is the spouse of the adopter b. Deemed a legitimate child of the adopter c. Acquired reciprocal rights and obligations arising from parent-child relationship d. Right to use surname of the adopter e. An illegitimate child adopted by her natural father can use as middle name her mother’s surname. (In re: Astorga Garcia, G.R. No. 1148311, 2005) Rules on Succession In legal and intestate succession, the adopters and the adoptee shall have reciprocal rights of succession without distinction from legitimate filiation. However, if the adoptee and his/her biological parents had left a will, the law on testamentary succession shall govern. Rescission of Adoption Who may file: Only the adoptee may file for rescission of the adoption decree • The adopters may disinherit the adoptee for causes provided in Art. 919 NCC. NOTE: If the adoptee is a minor or if over 18 years old but is incapacitated, he/she must be assisted by the Department of Social Welfare and Development as guardian/counsel. Grounds for Rescission of Adoption: (MASA) a. Repeated physical and verbal Maltreatment by the adopters despite having undergone counseling b. Attempt on the life of the adoptee c. Sexual assault or violence d. Abandonment and failure to comply with parental obligations. CIVIL LAW Effects of the Rescission of the Adoption a. The parental authority of the adoptee's biological parents, if known, OR the legal custody of the DSWD shall be restored if the adoptee is still a minor or incapacitated. b. The reciprocal rights and obligations of the adopters and the adoptee to each other shall be extinguished. c. The court shall order the Civil Registrar to cancel the amended certificate of birth of the adoptee and restore his/her original birth certificate. d. Succession rights shall revert to its status prior to adoption, but only as of the date of judgment of judicial rescission. Vested rights acquired prior to judicial rescission shall be respected. II. LAW ON INTER-COUNTRY ADOPTION Inter-Country Adoption - refers to the sociolegal 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. NOTE: A “child” refers to a person below fifteen (15) years of age unless sooner emancipated by law. Qualifications and Disqualifications of Adopter An alien or a Filipino citizen permanently residing abroad may file an application for inter-country adoption of a Filipino child if: (DEBT-CAMPS) 1. 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; 2. Eligible to adopt under his/her national law; 3. 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 Page 68 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 4. 5. 6. 7. 8. 9. abide by the rules and regulations issued to implement the provisions of this Act; Has not been convicted of a crime involving moral Turpitude; 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; At least 27 years of Age and at least 16 years older than the child to be adopted, at the time of application unless the adopter is the parent by nature of the child to be adopted or the spouse of such parent; If Married, his/her spouse must jointly file for the adoption; Possesses all the qualifications and none of the disqualifications provided herein and in other applicable Philippine laws; and 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 Qualifications and Disqualifications of Adopted Who may be adopted: Only a legally free child may be the subject of inter-country adoption Legally-free child - a child who has been voluntarily or involuntarily committed to the Department, as dependent, abandoned, or neglected, in accordance with the Child and Youth Welfare Code • No child shall be matched to a foreign adoptive family unless it is satisfactorily shown that the child cannot be adopted locally. Limitation on Voluntarily Committed Children: General rule: In case of a child who is voluntarily committed, the physical transfer of said child shall be made not earlier than 6 months from the date the Deed of Voluntary Commitment was executed by the child’s biological parent/s Exception: It does not apply to adoption by a relative or children with special medical conditions. NOTE: There are differences between the two laws in: 1. Definition of a child 2. Procedure (where to file, what petition may include, publication requirements, supervised trial custody) 3. Qualifications of adopter 4. Who may be adopted 5. Court that issues decree of adoption (Family court vs. Foreign court) ————- end of topic ————J. SUPPORT I. WHAT IT COMPRISES Support consists of everything indispensable for (METS-DC) (Art. 194): a. Medical attendance b. Education – includes schooling (formal education) or training (non-formal education) for some profession, trade or vocation, even beyond the age of majority c. Transportation – includes expenses going to and from school, or to and from place of work. (Art. 194) d. Sustenance e. Dwelling f. Clothing Makes no distinction between natural support (basic necessities) and civil support (those beyond the basics) In an action for support, the court can declare a marriage void to determine the rights of the child to be supported. There is no need that a judicial declaration of nullity be filed first before the lower court can rule that the marriage was void. (De Castro v. Assidao-De Castro, G.R. No. 160172, 2008) II. WHO ARE OBLIGED TO GIVE SUPPORT Persons Obliged to Support Each Other to the Whole Extent: (Art. 195) (SAPL) a. Spouses Page 69 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 b. Legitimate Ascendants and Descendants c. Parents and their Legitimate/Illegitimate Children/Grandchildren d. Legitimate Brothers and Sisters, whether full or half-blood Rules Regarding Support for Illegitimate Brothers and Sisters (Whether Full or Half Blood) • 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. • If the one asking for support is 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. (Art. 196) Insofar as Philippine laws are concerned, specifically the provisions of the Family Code on support, the same only applies to Filipino citizens. Petitioner cannot rely on Article 195 in demanding support from respondent, who is a foreign citizen. However, in view of respondent’s failure to prove the national law of the Netherlands, the doctrine of processual presumption shall govern, which states that if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internal law. Thus, the law in the Netherlands is presumed to be the same with Philippine law, which enforces the obligation of parents to support their children and penalizing the non-compliance therewith. Moreover, foreign law should not be applied when its application would work undeniable injustice to the citizens or residents of the forum. (Norma A. Del Socorro, for and in behalf of her minor child, Roderigo Norjo Van Wilsem v. Ernst Johan Brinkham Van Wilsem, G.R. No. 193707, 2014) III. SOURCE OF SUPPORT For the support of spouses, their common children, and legitimate children of either spouse, the absolute community or the conjugal partnership shall be liable. (Art. 94(1), Art. 121(1)) For others obliged to give support, the separate property of the obligor shall be answerable • Provided, that the absolute community or the conjugal partnership shall advance the support in case the obligor has no separate property o Under CPG, in case of insufficiency, the conjugal partnership shall be liable only after the responsibilities under Art. 121 have been covered (Art. 122) • Any advance/s made shall be deducted from the share of the obligor spouse upon liquidation of the absolute community or of the conjugal partnership (Art. 197) IV. ORDER OF SUPPORT When two or more persons are obliged to give support, liability shall devolve based on the following order: a. Spouse; b. Descendants in the nearest degree; c. Ascendants in the nearest degree; and d. Brothers and sisters (Art. 199) Rule in case of multiple obligors with one and the same obligee: The payment shall be divided between the obligors in proportion to their resources (Art. 200(1)). In case of urgency or special circumstances, the judge may order only one of them to furnish provisional support • Without prejudice to his or her right of reimbursement from the other/s (Art. 200(2)) Rule in case of multiple obligees with one and the same obligor: General rule: The obligor must satisfy all the claims Exception: In case the obligor has no sufficient means to satisfy all claims, the order above (Art. 199) shall be followed Page 70 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 • Exception: Between the spouse and a child subject to parental authority, the child is preferred. (Art. 200 (3)) V. AMOUNT OF SUPPORT The amount of support shall be in proportion to the resources or means of the giver and to the necessities of the recipient. (Art. 201) The amount of support shall be reduced or increased proportionately according to changes in the necessities of the recipient and the resources of the provider. (Art. 202). VI. MANNER AND TIME OF PAYMENT Time of payment (Art. 203): The obligation to give support can be demanded from the time the person who has the right to receive the same needs it for maintenance • However, it shall be paid only from the date of judicial or extrajudicial demand Payment shall be made within the first five (5) days of each corresponding month • In case the recipient dies, his heirs shall not be obliged to return what he has received in advance. Manner of payment (Art. 204): The obligor has two options: a. To pay the allowance fixed; or b. To receive and maintain the person who has a right to receive support in the family dwelling, unless there is a moral or legal obstacle VII. RENUNCIATION AND TERMINATION The waiver, renunciation, transmission or compensation of the right to receive support cannot still be undertaken as such acts are contrary to law, public policy, morals or good customs pursuant to Article 6 of the Civil Code. It is in violation of the mandatory obligation under Article 195 and therefore, if such prescribed acts are undertaken, they shall be void pursuant to Article 5 of the Civil Code. CIVIL LAW VIII. SUPPORT PENDENTE LITE Support shall be given during the proceedings for legal separation or for annulment of marriage, and for declaration of nullity of marriage. Who are entitled to it: Spouses and their children • As between spouses, the obligation of mutual support ceases after final judgment granting the petition o unless, in case of legal separation, the court orders the guilty spouse to furnish support to the innocent one, specifying the terms thereof Source of support: The absolute community or the conjugal partnership (Art. 198) In an action for support, adultery is a good defense and if properly proved and sustained, will defeat the action (Reyes v. Ines-Luciano, G.R. No. L-48219, 1979). However, while adultery may be a defense in an action for personal support, that is, support of the wife by the husband from his own funds, it is not a defense when the support is to be taken from the conjugal partnership property (Lerma v. Court of Appeals, G.R. No. L-33352, 1974) IX. PROCEDURE IN APPLICATION FOR SUPPORT Interlocutory nature of support pendente lite In a Petition for Review under Rule 45, petitioner argues that the CA should not have dismissed her appeal because the arrears in support pendente lite which respondent failed to pay have ceased to be provisional and have become final. The SC held that It is important to emphasize the temporary or provisional nature of support pendente lite. It is but an incident to the main action for declaration of nullity; and whether an order or resolution is final or interlocutory is not dependent on compliance or non-compliance by a party to its directive, questioning the subject interlocutory orders of the RTC, petitioner's appeal was correctly dismissed by the CA. Page 71 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 The remedy against an interlocutory order not subject of an appeal is a special civil action under Rule 65 provided that the interlocutory order is rendered without or in excess of jurisdiction or with grave abuse of discretion. Having chosen the wrong remedy in questioning the subject interlocutory orders of the RTC, petitioner's appeal was correctly dismissed by the CA (Calderon v. Roxas and CA, G.R. No. 185595, 2013). bears stressing that Section 8(g) providing for spousal and child support, fulfills the objective of restoring the dignity of women who are victims of domestic violence and provides them continued protection against threats to their personal safety and security. (PGMC v. AAA, G.R. No. 201292, August 1, 2018) J. Leonen: X prayed for support from the putative father of her child (who is also X’s father). While the grant of support was contingent on ascertaining parental relations between the child and the putative parent, it was unnecessary for the action for support to be dismissed by the appellate court. An integrated determination of filiation is "entirely appropriate" to an action for support. Concerned parties may be allowed to present evidence to establish their cause of action, inclusive of their underlying claim of paternal relations. An action for support may very well resolve that ineluctable issue of paternity if it involves the same parties, is brought before a court with the proper jurisdiction, prays to impel recognition of paternal relations, and invokes judicial intervention to do so. This also serves the interest of judicial economy — avoiding multiplicity of suits and cushioning litigants from the vexation and costs of a protracted pleading of their cause. (Abella v. Cabañero, G.R. No. 206647, 2017) K. PARENTAL AUTHORITY Can the Pension Gratuity Management Center of the AFP (PGMC) be ordered to automatically deduct a percentage from the retirement benefits of its enlisted personnel, and to give the same directly to the latter's lawful wife as spousal support in compliance with a protection order issued by the RTC pursuant to RA. No. 9262? YES. We hold that Section 8(g) of RA. No. 9262, being a later enactment, should be construed as laying down an exception to the general rule that retirement benefits are exempt from execution. It ————- end of topic ————- I. GENERAL PROVISIONS Parental Authority (patria potestas) – The mass of rights and obligations which parents have in relation to the person and property of their children until their emancipation, and even after, under certain circumstances. Characteristics of Parental Authority: 1. It is a natural right and duty of the parents over the person and property of their unemancipated children (Art. 209); 2. It cannot be renounced, transferred, except in cases authorized by law (Art. 210); 3. It is jointly exercised by the father and the mother (Art. 211); 4. It is purely personal and cannot be exercised through agents; and 5. It is temporary Rules as to the Exercise of Parental Authority a. The father and the mother shall jointly exercise parental authority over the persons of their common children. In case of disagreement, the father's decision shall prevail, unless there is a judicial order to the contrary (Art. 211); b. If the child is illegitimate, parental authority is with the mother; c. In case of absence or death of either parent, the parent present shall continue exercising parental authority (Art. 212); i. The marriage of the surviving parent shall not affect parental authority over the children, unless the court appoints Page 72 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 another person to be the guardian of the person or property of the children. d. In case of separation of the parents, parental authority shall be exercised by the parent designated by the Court. i. The Court shall take into account all relevant considerations, especially the choice of the child over 7 years of age, unless the parent chosen is unfit ii. No child under 7 years old shall be separated from the mother, unless the Court finds compelling reasons to order otherwise. Once parental authority is vested, it cannot be waived except in cases of adoption, guardianship and surrender to a children’s home or an orphan institution (Sagala-Eslao v. Court of Appeals, G.R. No. 116773, 1997) It is not enough to show that the biological mother is a lesbian so that she can be denied the custody of a child not more than 7 years of age. X must also demonstrate that she carried on her purported relationship which is not conducive to the child’s proper moral development. In choosing the parent to whom custody is given, the welfare of the minor should always be the paramount consideration. The “tender-age presumption” may be overcome only by compelling evidence of the mother’s unfitness (Pablo-Gualberto v. Gualberto, G.R. No. 154994, 2005). The matter of custody is not permanent and unalterable and can always be re-examined and adjusted. Custody, even if previously granted by a competent court in favor of a parent, is not permanent. The paramount interest of the child should always be considered (Beckett v. Sarmiento, RTJ-12-2326, 2016). A joint agreement that the father shall have custody of the child below seven is void for being contrary to law. To limit this provision’s enforceability to court sanctioned agreements while placing private agreements beyond its reach is to sanction a double standard in custody regulation of children under seven years old of CIVIL LAW separated parents. This effectively empowers separated parents, by the simple expedient of avoiding the courts, to subvert a legislative policy vesting to the separated mother sole custody of her children under seven years of age (Dacasin v. Dacasin, G.R. No. 168785, 2010). II. SUBSTITUTE PARENTAL AUTHORITY Order of Substitute Parental Authority: In default of parents or a judicially appointed guardian, substitute parental authority shall be exercised by: 1. The surviving grandparent; 2. The oldest brother or sister, over 21 years old, unless unfit or disqualified; 3. The child's actual custodian, over 21 years old, unless unfit or disqualified (Art. 216) In a custody case where the father of an illegitimate child was the actual custodian of said child, the SC ruled that while it may be argued that Article 176 has effectively disqualified the father from exercising substitute parental authority under Article 216, the Court cannot adopt a rigid view, without running afoul to the overarching consideration in custody cases, which is the best interest of the minor. The best interest demands a determination if the mother is unfit; and if so, whether it is best that custody be with her father rather than her grandparents upon whom the law accords a far superior right to exercise substitute parental authority. (Masbate and Spouses Masbate v. Relucio, G.R. No. 235498, 2018) In case of foundlings, abandoned children, neglected children, or abused children, and other children similarly situated, summary judicial proceedings shall be instituted so that they may be entrusted to: a. Heads of children’s homes b. Orphanages, or c. Similar institutions duly accredited by the proper government agency (Art. 217) III. SPECIAL PARENTAL AUTHORITY Page 73 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Person Exercising Special Parental Authority: a. School b. Administrators and teachers c. Individual, entity, or institution engaged in childcare NOTE: Special parental authority can be exercised only over minors while under their supervision, instruction, or custody. The authority and supervision also attach to all authorized activities whether inside or outside the school, entity or institution. Liability of those Exercising Special Parental Authority Over the Child 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. 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. The responsibility given to an academic institution for the welfare of its students has been characterized by law and judicial doctrine as a form of special parental authority and responsibility. This responsibility has been amplified by the enactment of the Anti-Hazing Law, in that the failure by school authorities to take any action to prevent the offenses as provided by the law exposes them to criminal liability as accomplices in the criminal acts. Thus, the institution and its officers cannot stand idly by in the face of patently criminal acts committed within their sphere of responsibility. They bear the commensurate duty to ensure that the crimes covered by the Anti-Hazing Law are not committed (People v. Bayabos, G.R. No. 171222, 2015). CIVIL LAW IV. EFFECT OF PARENTAL AUTHORITY OVER THE CHILD’S PERSON Parental Rights and Duties: a. To keep them in their company b. To support, educate and instruct them by right precept and good example c. To provide for their upbringing in keeping with their means d. To give them love and affection, advice and counsel, companionship and understanding e. To provide them with moral and spiritual guidance, inculcate in 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 f. 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 g. To represent them in all matters affecting their interests h. To demand from them respect and obedience i. To impose discipline on them as may be required under the circumstances j. To perform such other duties as are imposed by law upon parents and guardians. The person exercising substitute parental authority shall have the same authority over the person of the child as the parents. In no case shall the school administrator, teacher, or individual engaged in childcare and exercising special authority, inflict corporal punishment upon the child (Art. 233) Liability of Persons Exercising Parental Authority Civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company and under their parental authority Page 74 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Subject to appropriate defenses provided by law, ie. Exercise of diligence of a good father of a family (Libi v. IAC) V. EFFECTS OF PARENTAL AUTHORITY OVER THE CHILD’S PROPERTY Effect of Parental Authority Upon the Property of The Child: a. The father and mother shall jointly exercise legal guardianship over the property of the minor common child without court appointment b. In case of disagreement, the father’s decision shall prevail, unless there is judicial order to the contrary c. If the market value of the property or the annual income of the child exceeds P50,000, the parent is required to furnish a bond of not less than 10% of the value of the child’s property or income d. The property of the unemancipated child earned or acquired with his work or industry or by onerous or gratuitous title shall belong to the child in ownership and shall be devoted exclusively for support and education, unless the title or transfer provides otherwise • The fruits and income of the child’s property shall be limited primarily to the child’s support and secondarily to the collective daily needs of the family. The parent’s authority over the estate of the ward as a legal guardian would not extend to acts of encumbrance or disposition, as distinguished from acts of management or administration (Nario v. Philippine American Life Ins. Co., G.R. No. L22796, 1967) A parent has no power to compromise their children’s claims, for a compromise has always been deemed equivalent to an alienation, and is an act of strict ownership that goes beyond mere administration (Visaya, et al. v. Suiguitan, et al., G.R. No. L-8300, 1955) CIVIL LAW VI. SUSPENSION OR TERMINATION OF PARENTAL AUTHORITY Grounds for Suspension of Parental Authority: (CHOBA) a. Conviction of parent for crime with civil interdiction b. Treats child with excessive Harshness and cruelty c. Gives corrupting Orders, counsel, or example d. Compels child to Beg e. Subjects to or allows him to be subjected to Acts of lasciviousness Revival of Suspended Parental Authority: If under a: The authority is automatically reinstated upon service of the penalty or upon pardon or amnesty of the offender If under b-e: The suspension or deprivation may be revoked and the parental authority revived in a case filed for the purpose or in the same proceeding if the court finds that the cause therefore has ceased and will not be repeated Termination of Parental Authority: a. Death of parents b. Death of child c. Emancipation of child d. Parents exercising parental authority has subjected the child or allowed him to be subjected to sexual abuse (ground for permanent termination) Other Cases Where Parental Authority May Be Terminated (Art. 229) a. Adoption of child b. Appointment of general guardian c. Judicial declaration of abandonment d. Final judgment divesting parental authority e. Judicial declaration of absence or incapacity of person exercising parental authority VII. SOLO PARENTS (REP. ACT NO. 8972) Who are solo parents: Any individual falling under any of the following categories: Page 75 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 1. A woman who gives birth as a result of rape and other crimes against chastity even without a final conviction of the offender: provided, that the mother keeps and raises the child; 2. Parent left solo or alone with the responsibility of parenthood: 2.1. due to death of spouse; 2.2. while the spouse is detained or is serving sentence for a criminal conviction for at least one (1) year; 2.3. due to physical and/or mental incapacity of spouse as certified by a public medical practitioner; 2.4. due to legal separation or de facto separation from spouse for at least one (1) year, as long as he/she is entrusted with the custody of the children; 2.5. due to declaration of nullity or annulment of marriage as decreed by a court or by a church as long as he/she is entrusted with the custody of the children; 2.6. due to abandonment of spouse for at least one (1) year; 3. Unmarried mother/father who has preferred to keep and rear her/his child/children instead of having others care for them or give them up to a welfare institution; 4. Any other person who solely provides parental care and support to a child or children; 5. Any family member who assumes the responsibility of head of family as a result of the death, abandonment, disappearance or prolonged absence of the parents or solo parent. Provided, that a change in status or circumstance of a parent claiming benefits under this Act, such that he or she is no longer left alone with the responsibility of parenthood, shall terminate his or her eligibility for benefits under this Act (Sec. 3(a)). Comprehensive Package of Social Development and Welfare Services The package to be developed by the departments concerned will initially include: CIVIL LAW a. Livelihood development services, including trainings on livelihood skills, basic business management, value orientation, and provision of seed capital or job placement b. Counseling services, including individual, peer group, or family counseling c. Parent effectiveness service, including provisions and expansion of knowledge and skills of solo parent on early childhood development, behavior management, health care, rights and duties of parents and children d. Critical incidence stress debriefing, including preventive stress management designed to assist solo parent in coping with crisis situations and abuse e. Special projects for individuals in need of protection, including temporary shelter, counseling, legal assistance, medical care, self-concept or ego-building, crisis management and spiritual enrichment (Sec. 5) Other rights and benefits (Sec. 6-11): a. Flexible Work Schedule: Provided, it does not affect individual and company productivity and the employer is not granted an exemption by DOLE. b. No work discrimination c. Parental leaves of not more than seven (7) working days every year, provided the solo parent employee has rendered services of at least one year d. Educational Benefits such as: d.1. Scholarship programs for qualified solo parents and their children in institutions of basic, tertiary, and technical/skills education; and d.2. Nonformal education programs appropriate for solo parents and children e. Housing Benefits: e.1. Allocation in housing projects e.2. Liberal terms of payment on said government low-cost housing projects • With priority given to applicants below poverty line as declared by NEDA. f. Medical assistance Who are entitled to such rights and benefits (Sec. 4): Page 76 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Any solo parent whose income in the place of domicile falls below the poverty threshold set by NEDA and subject to the assessment of the DSWD worker in the area On the other hand, a solo parent whose income is above the poverty threshold shall enjoy the following benefits: a. Flexible Work Schedule b. Freedom from work discrimination c. Parental Leave ————- end of topic ————L. EMANCIPATION I. CAUSE OF EMANCIPATION Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of eighteen years (Art. 234). II. EFFECT OF EMANCIPATION Emancipation for any cause shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life, save the exceptions established in by existing laws in special cases. Contracting marriage shall require parental consent until the age of twenty-one. ————- end of topic ————- Page 77 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW M. SUMMARY JUDICIAL PROCEEDINGS IN THE FAMILY CODE CHAPTER 2: SEPARATION IN FACT BETWEEN HUSBAND AND WIFE coverage Includes petition: a. Involving separation in fact wherein: 1. Husband and wife are separated in fact or one has abandoned the other; 2. One of them seeks judicial authorization for a transaction where consent of the other is required by law; and • Example: Alienation, disposal, encumbrance or community or conjugal property 3. Consent of the other is withheld or cannot be obtained (Art. 239(1)) REMEDY RULES b. For judicial authority to administer or encumber specific separate property of the abandoning spouse and to use the fruits or proceeds thereof to support the family (Art. 248) Filing a verified petition in the proper court ie. family court where either spouse resides (Art. 241) Attachment (Art. 239(2)): The proposed deed, if any, embodying the transaction must be attached to the petition • If none, the transaction must be described in detail with the reason why the required consent cannot be secured. • The final deed, if any, must be submitted to and approved by the court Damages (Art. 240): Claims for damages may be litigated in a separate action • Except: Costs of the proceedings Notification (Art. 242): Upon filing of the petition, the court shall notify the other spouse whose consent is required, of said petition • It shall require the spouse to show cause why the petition should not be granted, on or before the date set in the notice for the initial conference • The notice shall be accompanied by a copy of the petition, served at the last known address of such spouse Procedure (Art. 243-247): 1. A preliminary conference shall be conducted personally by the judge without the assistance of counsel 2. If the court deems it useful, the parties may be assisted by counsel at the succeeding conferences and hearings 3. In case of non-appearance by spouse whose consent is sought, the court shall inquire into the reasons for the failure to appear and require such appearance, if possible 4. The proceedings may either be: a. If the attendance is not secured despite efforts, the court may proceed ex parte and render judgment as warranted. The judge shall endeavor to protect the interests of the non-appearing spouse b. If the petition is not resolved at the initial conference, said petition shall be decided in a summary hearing on the basis of affidavits, documentary, or oral testimonies at the discretion of the court. Page 78 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 CHAPTER 3: INCIDENTS INVOLVING PARENTAL AUTHORITY COVERAGE Involves petitions: 1. for an order providing for disciplinary measures over the child (Art. 223) 2. for approval of the bond, required from the parent in case the market value of the property or annual income of the child exceeds 50,000 (Art. 225) REMEDY Filing a verified petition in the proper court of the place where the child resides. (Art.249; 250) RULES Notification: Upon filing of the petition, the court shall notify the parents or, in their absence or incapacity, the individuals, entities, or institutions exercising parental authority over the child. Other rules under chapter 2 as may be applicable CHAPTER 4: OTHER MATTERS SUBJECT TO SUMMARY PROCEEDINGS COVERAGE Includes petitions: 1. for judicial declaration of presumptive dead (Art. 41) 2. for delivery of presumptive legitime (Art. 51) 3. for judicial determination of family domicile (Art. 69) 4. for determination of validity of objection to the profession of a spouse (Art. 73) 5. dealing with court order entrusting foundlings, abandoned or neglected or abused children and other children similarly situated to heads of children’s homes, orphanages, and similar institutions accredited by the government (Art. 217) 6. involving the annulment of husband’s decision (Art. 96 and 124) RULES Rules under chapters 2 and 3 shall govern as applicable ————- end of topic ————- Page 79 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 N. USE OF SURNAME PERSON Legitimate and legitimated children (Art. 364) SURNAME OF: PERSON Illegitimate children (Art. 368) Principally, the father Natural child acknowledged by both parents (Art. 366 par. 1) He/she has the option to choose the surname of the mother (Alfon v. Republic) Children conceived before the decree annulling a voidable marriage (Art. 369) Married woman (Art. 370) 2. Maiden first name and husband’s name (ie. Juana Dela Cruz) In case of annulment of marriage (Art. 371) Adopted child (Art. 365) Adopter Natural child acknowledged by one of the parents (Art. 366 (par. 2) Natural child by legal fiction (Art. 367) Recognizing parent SURNAME OF: Mother. It is mandatory that the mother of an illegitimate child signs the birth certificate in all cases, irrespective of whether the father recognizes the child as his or not. If mother did not sign, the local civil registrar had no authority to register the subject birth certificate. (Tinitigan v. Tinitigan, G.R. No. 222095, 2017) Three options: 1. Maiden first name and surname and add husband’s name (ie. Juana Reyes-Dela Cruz) In case of legal separation (Art. 372) Widow (Art. 373) 3. Husband’s full name, but prefixing a word indicating that she’s the wife, such as “Mrs.” (i.e., Mrs. Juana Dela Cruz) If wife is the guilty party: Resume her maiden name and surname If wife is the innocent party: May resume her maiden name and surname and may choose to continue employing her former husband’s surname unless the court decrees otherwise or she or the former husband marries another person. Wife shall continue using her name and surname employed before the legal separation Same options as that given to a married woman Father Page 80 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Identity of names and surnames The younger person is obliged to use additional name or surname as will avoid confusion. (Art. 374) May be the subject of an action for damages and other relief (Art. 377) ————- end of topic ———— Between ascendants and descendants (Art. 375): • “Junior” can be used only by a son • Grandsons and other direct male descendants shall either: o Add a middle name or the mother’s surname; or o Add the Roman numerals II, III, and so on. General Rule: Change of name or surname can only be done with judicial authority (RA 9048 as amended by RA 10172) Except: Clerical or typographical errors and change of first name or nickname Grounds for change of first name or nickname: a. The petitioner finds the first name or nickname to be ridiculous, tainted with dishonor or extremely difficult to write or pronounce; b. The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that by that first name or nickname in the community; or c. The change will avoid confusion (Sec. 3 of RA 9048 as amended by RA 10172) The following have been held to constitute proper and reasonable causes or compelling reasons or change of surname: (1) a ridiculous name, a name tainted with dishonor, or a name extremely difficult to write or pronounce; (2) a change of civil status; and (3) a need to avoid confusion (Republic v. Tañada, G.R. No. L-31563, 1971), and (4) a sincere desire to adopt a Filipino name to erase signs of a former alien nationality which unduly hamper social and business life (Uy v. Republic, G.R. No. L-22040, 1965) Usurpation of name or surname Gives a rights of action to the person whose surname is used (Art. 378) O. ABSENCE I. PROVISIONAL MEASURES IN CASE OF ABSENCE A judge may appoint a representative when: 1. A person disappears from his or her domicile; 2. His or her whereabouts are unknown; and 3. There is no agent to administer his or her property or the power conferred to the agent by the absentee has expired (Art. 381) Who may file: a. Interested party; b. Relative; or c. Friend (Art. 381) Scope of authority of representative: All that may be necessary (Art. 381) The order of the judge shall: a. Take the necessary measures to safeguard the rights and interests of the absentee; and b. Specify the powers, obligations and remuneration of his representative c. Regulated, according to the circumstances, by the rules on guardianship (Art. 382) Rules on choosing a representative: a. The present spouse shall be preferred b. If no spouse or in case they are legally separated, any competent person may be appointed (Art. 383) II. DECLARATION OF ABSENCE A judicial declaration of absence is necessary to protect the rights, interests, and benefits of interested persons such as the spouse, as well as for the protection of the absentee When may an absence be declared: • Two years without any news about the absentee or since the receipt of the last news; Page 81 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 • Five years in case the absentee has left a person in charge of the administration of his property (Art. 384) Who may ask for the declaration of absence: 1. The spouse present; 2. The heirs instituted in a will, who may present an authentic copy of the same; 3. The relatives who may succeed by the law of intestacy; 4. Those who may have over the property of the absentee some right subordinated to the condition of his death (Art. 385) When shall the judicial declaration take effect: 6 months after its publication in a newspaper of general circulation (Art. 386). However, the absence of the absentee shall be counted from the date on which the last news of the absentee was received (Jones v. Hortiguela, G.R. No. 43701, 1937). III. ADMINISTRATION OF THE PROPERTY OF THE ABSENTEE Rules on appointing an administrator (Art. 387): a. The present spouse shall be preferred b. The wife, in case appointed as administratrix of the husband’s property, cannot alienate or encumber said property or that of the conjugal partnership Except: When there is judicial authority (Art. 388) NOTE: This also applies in case the husband is appointed as administrator c. If no spouse or in case they are legally separated, any competent person may be appointed The administration shall cease in any of the following cases: a. When the absentee appears personally or by means of agent; b. When the death of the absentee is proved and his testate or intestate heirs appear c. When a third person appears, showing by a proper document that he has acquired the absentee’s property by purchase or other title (Art. 389) IV. PRESUMPTION OF DEATH A person shall be presumed dead: • For all purposes: When he or she has been absent for seven years, it being unknown whether or not he or she still lives • For purposes of succession: When he or she has been absent for ten years o Except, in case he disappeared after the age of seventy-five years, five years shall be sufficient (Art. 390). • For purposes of remarriage: When the spouse has been absent for four consecutive years (Art. 41). NOTE: Except for purposes of remarriage under Article 41, there is no need for filing a case for presumptive death. Other instances when a person is presumed dead for all purposes: a. A person on board a vessel lost during a sea voyage, or an airplane which is missing, who has not been heard for four years since the loss of the vessel or airplane; b. A person in the armed forces who has taken part in war, and has been missing for four years; c. A person who has been in danger of death under other circumstances and his existence has not been known for four years. (Art. 391) Effect of reappearance or subsequent proof of existence: The absentee shall recover: a. His or her property in the condition in which it may be found b. The price of any property that may have been alienated or property acquired therewith; However, he or she cannot claim the fruits and rents from such property. (Art. 392) ————- end of topic ————Page 82 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 P. CIVIL REGISTRAR What shall be recorded in the civil register Acts, events, and judicial decrees concerning civil status (Art. 407) This includes: a. Births; b. Marriages; c. Deaths; d. Legal separations; e. Annulment of marriages; f. Judgments declaring marriages void ab initio; g. Legitimations; h. Adoptions; i. Acknowledgments of natural children; j. Naturalization; k. Loss or recover of citizenship; l. Civil interdiction; m. Judicial determination of filiation; n. Voluntary emancipation of a minor; and o. Change of name In case of judicial orders mentioned above, the clerk of court which issued the decree has the duty to ascertain whether such order has been registered. If it has not been done, the clerk shall send a copy of said decree to the civil registry of the city or municipality where the court is functioning (Art. 409). The books making up the civil register and all documents relating thereto shall be considered public documents and shall be prima facie evidence of the facts therein. The civil registrar shall be civilly responsible to any person suffering damage thereby, for unauthorized alteration in the civil register • Except if he proves that he has taken reasonable precaution to prevent such alteration (Art. 411). General rule: An entry in a civil register shall be changed or corrected only with a judicial order CIVIL LAW Exception: for clerical or typographical errors or change in the name or nickname of a person (Sec. 3, RA 9048) Other matters pertaining to the registration of civil status • Governed by special laws (Art. 413) • Example: o The Civil Registry Law or Act. No. 3753 provides for the registration of documents evidencing the acquisition or termination of a particular civil status such as legitimation, adoption, change of name, marriage, termination of such marriage and others. J. Leonen: the current governing law on changes of first name, defines a clerical or typographical error as a recorded mistake, "which is visible to the eyes or obvious to the understanding.” To correct simply means "to make or set right; to remove the faults or error from." To change means "to replace something with something else of the same kind or with something that serves as a substitute. The applicable law for the current petition is R.A. No. 9048 (as R.A. 10172 was not yet enacted when petition was filed) which removed the correction of clerical or typographical errors from the scope of Rule 108. It also dispensed with the need for judicial proceedings in case of any clerical or typographical mistakes in the civil register, or changes of first name or nickname. However, the petition to correct X's biological sex was rightfully filed under Rule 108 as this was a substantial change excluded in the definition of clerical or typographical errors in R.A. No. 9048. It was only when R.A. No. 10172 was enacted on August 15, 2012 that errors in entries as to biological sex may be administratively corrected, provided that they involve a typographical or clerical error. However, this is not true for all cases as corrections in entries of biological sex may still be considered a substantive matter. (Republic v. Gallo, G.R. No. 207074, 2018) Page 83 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW The following changes were correctly considered merely clerical or typographical errors: a. Change of name from “Michael Gallo” to “Michelle Soriano Gallo” b. Inclusion of middle name of both parents c. Inclusion of parent’s marriage details ————- end of topic ———— Page 84 of 474 PROPERTY Civil Law ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 VII. PROPERTY TOPIC OUTLINE UNDER THE SYLLABUS A. CLASSIFICATION OF PROPERTY I. Immovables II. Movables B. OWNERSHIP I. Bundles Of Rights II. Actions to Recover Ownership and Possession of Real Property and its Distinction III. Actions for recovery of possession of movable property IV. Distinction between real and personal rights V. Modes of acquiring ownership VI. Limitations of ownership C. ACCESSION I. Accession Natural II. Rules of accession for movables D. QUIETING OF TITLE I. Requisites II. Distinctions between quieting of title and removing / preventing a cloud III. Prescription / non-prescription of action E. CO-OWNERSHIP I. Characteristics of co-ownership II. Sources of co-ownership III. Rights of co-owners IV. Termination of co-ownership F. POSSESSION I. Characteristics II. Acquisition of possession III. Effects of possession IV. Loss or unlawful deprivation of a movable V. Possession in concept of owner, holder, in one’s own name, and in name of another VI. Rights of the possessor Loss or termination of the possession G. USUFRUCT I. Characteristics II. Classification III. Rights and obligations of usufructuary IV. Rights of the owner V. Extinction, termination, and extinguishment H. EASEMENTS I. Characteristics II. Classification III. Modes of acquiring easements IV. Rights and obligations of the owners of the dominant and servient estates V. Modes of extinguishment I. NUISANCE I. Nuisance per se II. Nuisance per accidens III. Liabilities IV. No prescription V. Criminal prosecution VI. Judgment with abatement VII. Extrajudicial abatement VIII. Special injury to individual IX. Right of individual to abate a public nuisance X. Right to damages XI. Defenses to action XII. Who may sue on private nuisance J. MODES OF ACQUIRING OWNERSHIP I. Occupation II. Donations III. Prescription Page 86 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 A. CLASSIFICATION OF PROPERTY As to Mobility a) Movable b) Immovable As to Ownership a) Public property b) Private property As to Alienability a) Within the commerce of man (or which may be the objects of contracts or judicial transactions) b) Outside the commerce of man As to Existence a) Present property (res existents) b) Future property (res futurae) Note: Both present and future property may be the subject of sale but generally not the subject of donation. As to Materiality a) Tangible or corporeal b) Intangible or incorporeal As to Dependence or Importance a) Principal b) Accessory As to Capability of Substitution a) Fungible: Capable of substitution by other things of the same quality and quantity b) Non-Fungible: Incapable of such substitution, hence, the identical thing must be given or returned As to Nature or Definiteness a) Generic – one referring to a group or class b) Specific – one referring to a single, unique object As to Whether In The Custody Of The Court Or Free a) In “Custodia Legis” – in the custody of the court b) “Free” property (Tolentino, supra, p. 7-10) I. IMMOVABLES Four Juridical Classifications Of Immovable Properties: (NIDA) (Tolentino, supra, p. 8) 1. 2. 3. 4. by Nature by Incorporation by Destination by Analogy Immovable by NATURE – cannot be moved from place to place, to wit: 1. 2. 3. 4. 5. Land (Art. 415 (1)) Buildings (Art. 415 (1)) Roads (Art. 415 (1)) Constructions of all kinds adhered to soil Mines, quarries, and slag dumps, while the matter forms part of the bed (Art. 415 (8)) 6. Waters, either running or stagnant (Art. 415 (8)) Note: A structure, which is merely superimposed on the soil, may be considered movable. Similarly, a shovelful of land is a movable for it is no longer adhered to the soil. Note: When the minerals have been extracted, they become movables. Buildings are always immovable under the Code. The mere fact that the parties to a contract treat the building as separate does not change its character as immovable property. (Punsalan v. Lacsamana, GR No. L-55729, 1983) Once a house is demolished, its character as an immovable ceases. (Bicerra v. Teneza, GR No. L-16218, 1962) A mortgage of land necessarily includes buildings, in the absence of stipulation of the improvements thereon. A building by itself may be mortgaged apart from the land on which it has been built. Such would be a real estate mortgage for the building would still be considered immovable property. (Leung Yee v. Strong Machinery, GR No. L-11658, 1918) Page 87 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 A valid real estate mortgage can be constituted on the building erected on the land belonging to another. (Prudential Bank v. Panis, GR No. L50008, 1987) A party to a chattel mortgage is estopped from assailing the deed as void on the ground that the house subject of the mortgage is real property. Parties are bound by their agreement, but not third persons. (Tumalad v. Vicencio, GR No. L-30173, 1971) If contracting parties stipulate that a real property be considered personal, they are consequently estopped from claiming otherwise. However, third persons acting in good faith are not affected by the stipulation characterizing the subject machinery as personal. (Serg’s Products v. PCI Leasing, GR No. 137705, 2000) Immovable by INCORPORATION – essentially movables but attached to an immovable in a fixed manner to be an integral part of it, to wit: 1. Trees, plants, and growing crops (Art. 415 (2)) 2. Everything attached to an immovable in a fixed manner (Art. 415 (3)) 3. Statues, reliefs, paintings, or other objects for use or ornamentation, placed in buildings or on land (Art. 415 (4)) 4. Animal houses, pigeon houses, beehives, fishponds, or breeding places of similar nature (Art. 415 (6)) Trees, Plants, and Growing Crops Trees and plants are immovable by by incorporation if they are planted through labor but are immovable by nature if they are spontaneous products of the soil. Note: Once cut or uprooted, they cease to be immovable. Exceptions: 1. Uprooted timber if the land is timber land (timber still forms an integral part thereof); CIVIL LAW 2. Trees blown by a typhoon (part of the land upon which they rest) Attached to an Immovable in a Fixed Manner Requisites: 1. Intent to attach permanently is essential; 2. In case of separation, the injury, breakage, deterioration must be Substantial. (Art. 415 (3)) Note: Schools of Thought in Temporary Separation May either be: 1. Immovable if there is intent to put them back; or; 2. Movable because the material fact of incorporation is what determines its condition. Statues, Reliefs, Painting, or Other Objects for Use or Ornamentation Requisites: 1. Placed by the Owner of the immovable (not the object) or his agent; 2. Intent to attach them Permanently to the tenements. (Art. 415 (4)) Animal Houses, Pigeon Houses, Beehives, Fishponds, or Breeding Places of Similar Nature Requisites: 1. Placed by the Owner of the immovable or his agent; 2. Intent to attach them Permanently to the land. (Art. 415 (6)) Note: Includes the animals found therein. Immovable by DESTINATION – movable placed on immovable for the utility it gives to the activity carried thereon: 1. Machinery, receptacles, instruments, or implements (Art. 415 (5)) 2. Fertilizer actually used on a piece of land (Art. 415 (7)) Page 88 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 3. Docks and structure which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast (Art. 415 (9)) Machinery, Receptacles, Instruments Implements for an Industry or Works Requisites: or 1. Industry or works must be Carried on inside the building or on the land; 2. Placed by the Owner of the building or property or his agent; 3. Machines must be Essential and principal elements in carrying out the industry; 4. Machines must tend Directly to meet the needs of said industry or works (adaptability). (Art. 415 (5)) Note: Incidentals are not included (movables without which the businesses can still continue or carry on their functions) Machinery is immobilized if placed by owner of plant or property; not so if placed by a tenant or usufructuary or any person having any temporary right. (Davao Sawmill Co. v. Castillo, GR No. L40411, 1935) Equipment destined only to repair or service a transportation business may not be deemed real property. (Mindanao Bus v. City Assessor, GR No. L-17870, 1962) Note: Attachment or incorporation immovable is not essential. to the Fertilizer Actually Used on a Piece of Land Fertilizers still in the barn or still wrapped inside some newspaper even though already on the ground are still movables. Docks and Floating Structures 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 are considered immovable. (Art. 415 (9)) Note: A floating house is an immovable if it is tied to a shore or bank post, otherwise it is a movable. Otherwise, it assumes the category of a vessel. Note further: Although personal property, vessels partake, to a certain extent, the nature and conditions of real property because of their value and importance in the world of commerce. Immovable by Analogy or by Law – Contracts for public works, servitude & other real rights over immovable property (Art. 415 (10)) II. MOVABLES Movable: (SIFTOS) 1. Susceptible of appropriation that are not included in enumeration in immovables. (Art. 416 (1)) 2. Immovables that are designated as movables by special provision of law. (Art. 416 (2)) 3. Forces of nature brought under control by science. (Art. 416 (3)) 4. Things which can be transported w/o impairment of real property where they are fixed (Art. 416 (4)) 5. Obligations, which have for their object movables or demandable sums (credits), obligations and actions must be legally demandable - demandable sums must be liquidated (Art. 417 (1)) 6. Shares of stock of agricultural, commercial & industrial entities although they may have real estate (Art. 417 (2)) Susceptible of Appropriation An interest in business, that is, providing telecommunication and telephone service, is personal property since it is capable of appropriation and not included in the enumeration of real properties. Thus, it could be subject of theft under the RPC. (Laurel v. Abrogar, GR No. 155076, 2009) Designated by Special Provision of Law Growing crops are considered immovable under Art. 415(2) but personal property under Chattel Page 89 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Mortgage Law (Sibal v. Valdez, GR No. L-26278, 1927) House built on leased land may be treated as personal property and be the object of a chattel mortgage, insofar as the parties are concerned. (Navarro v. Reyes, GR No. L-18456, 1963) Forces of Nature Electricity, gas, rays, heat, light, oxygen, atomic energy, water, power etc. Electricity, the same as gas, is an article bought and sold like other personal property and is capable of appropriation by another. (United States v. Carlos, GR No. 6295, 1911) Classification of Movables According to Nature 1. Consumable – cannot be utilized w/o being consumed 2. Non-consumable (Tolentino, supra, p. 10) According to Intention of the Parties/Purpose (whether it can be substituted by other things of same kind, quality and quantity) 1. Fungible (res fungibles) – only the equivalent is returned 2. Non-fungible (res nec fungibles) – the identical thing is returned; do not admit of substitution (Tolentino, supra, p. 10) Tests To Determine Whether Property Is Real Or Personal 1. Whether the property can be transported or carried from place to place 2. Whether such change of location can be made without injuring the immovable to which the object may be attached 3. Whether the object does not fall within any of the cases enumerated in Art. 415 ————- end of topic ————- disposition, and recovery, subject only to the restrictions or limitations established by law and the rights of others. (Art. 427) Possession is an essential attribute of ownership. Whoever owns the property has the right to possess it. Adjudication of ownership includes the delivery of possession if the defeated party has not shown any right to possess the land independently of her rejected claim of ownership. (Pascual vs. Daquioag, GR No. 162063, 2014) TITLE - that which constitutes a just cause of exclusive possession or which is the foundation of ownership of property. KINDS OF OWNERSHIP: 1. Full Ownership (dominium or jus in re propia) – includes all the rights of the owner 2. Naked Ownership (nuda proprietas) – where the right to the use and the fruits has been denied a. Naked ownership + Usufruct = Full ownership 3. Sole Ownership – ownership is vested only in one person 4. Co-Ownership/ Tenancy In Common – ownership is vested in two or more owners; unity of the property, plurality of the subjects; each co-owner is the owner of the whole and at the same time, the owner of an undivided part thereof. I. BUNDLE OF RIGHTS Seven Rights Of Ownership (PUFA-DVA) (De leon, Comments and Cases on Property, 77, 1993) 1. Jus Possidendi (right to possess) a. Right to hold the thing and does not necessarily include the right to use (e.g. contract of deposit) B. OWNERSHIP OWNERSHIP - the independent and general right of a person to the exclusive enjoyment and control of a thing in his possession, enjoyment, 2. Jus Utendi (right to use and enjoy) a. Includes the right to exclude any person from the enjoyment and disposal thereof Page 90 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 b. Limitation: use in such a manner as not to injure the rights of a third person 3. Jus Fruendi (right to fruits) a. Right to the fruits b. Kinds of Fruits: (NIC) i. Natural ii. Industrial iii. Civil CIVIL LAW dispossession lasts for more than a year, then an accion publiciana must be filed. The second distinction concerns jurisdiction. Ejectment cases, being summary in nature, are led with the MTC. Accion publiciana, however, can only be taken cognizance by the RTC. (Eversley Childs Sanitarium v. Spouses Anastacio and Perla Barbarona, G.R. No. 195814, 2018) 5. Jus Disponendi (right to dispose) a. Also includes the right not to dispose, or to alienate 3. Accion Reivindicatoria - filed within the same prescriptive period as accion publiciana (10 years) with the proper RTC. It involves both the issue of possession and ownership, that is: that the plaintiff is the owner of the land or possessed it in concept of owner; and the defendant dispossessed him of the land. 6. Jus Vindicandi (right to vindicate or recover) a. Includes the right of action against the holder and possessor of the thing in order to recover it 4. Writ of Possession - An order directing the sheriff to place a successful registrant under the Torrens system in possession of the property covered by a decree of the court 7. Jus Accesionis (right to accessories) When proper: (FEEEL) a) Foreclosure, judicial or extra-judicial, of mortgage. Provided that the mortgagor has possession and no third party has intervened b) Ejectment c) Execution sales d) Eminent domain proceedings e) Land registration cases 4. Jus Abutendi (right to consume) a. Includes the right to transform or abuse by its use II. ACTIONS TO RECOVER OWNERSHIP AND POSSESSION OF REAL PROPERTY AND ITS DISTINCTION IMMOVABLE PROPERTY 1. Accion Interdictal or ejectment suit – forcible entry and unlawful detainer. This summary action is filed with the proper MTC within 1 year from the forcible entry or last demand to vacate in the case of illegal detainer. 2. Accion Publiciana - plenary action to recover the right of possession which should be brought in the RTC within 10 years when dispossession has lasted for more than one year. Although both ejectment and accion publiciana are actions specifically to recover the right of possession, they have two (2) distinguishing differences. The first is the filing period. Ejectment cases must be filed within one (1) year from the date of dispossession. If the 5. Writ of Demolition – Necessarily issued with writ of possession A boundary dispute must be resolved in the context of accion reivindicatoria, not an ejectment case. The boundary dispute is not about possession, but encroachment, that is, whether the property claimed by the defendant formed part of the plaintiff’s property. (Manalang vs. Bacani, GR No. 156995, 2015) Effect of the Lapse of One-Year Period If the dispossession allegedly took place by any of such means but the action is not brought within one year from deprivation of possession, the action is properly a plenary action of accion publiciana or accion de reivindiacion. (Penta Page 91 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Pacific Realty Corp v. Ley Construction and Development Corp., GR 161589, 2014) Writ of Injunction General Rule: Generally not available as a remedy (Reason: The presumption is that the one in possession disputably have the better right) Exception: When injunction is allowed: 1. Actions for forcible entry a) Writ of preliminary injunction within 10 days from filing of the complaint to restore plaintiff in possession b) Courts shall decide within 30 days 2. Ejectment a) If possessor is a possessor in concept of an owner (possession de jure) for over a year and being disturbed by repeated intrusions of a stranger b) If an owner, still in possession, desires to prevent repeated intrusions by a stranger c) If the possessor is clearly not entitled to property DOCTRINE OF STATE OF NECESSITY State of Necessity – the principle that authorizes the destruction of a property which is lesser in value to avert the danger posed to another property the value of which is much greater. (Art. 432) Requisites of State of Necessity 1. Interference necessary to avert an imminent danger. 2. Damage to another much greater than damage to property (Art. 432) Comparative Danger – Danger must be greater than damage to property. Consider the economic and sentimental value of the property. (Tolentino, supra, p. 68-69) CIVIL LAW whether he employed rational means to avert the threatened injury. (De Leon, supra, p. 99). The owner of the sacrificial property is obliged to tolerate the act of destruction but subject to his reimbursement by all those who benefited. (De leon, supra) In case of conflict between the exercise of the right of self-help and a proper and licit state of necessity, the latter prevails because there is no unlawful aggression when a person or group of persons acts pursuant to the right given in a state of necessity. (Tolentino, supra, p. 70) III. ACTIONS FOR RECOVERY OF POSSESSION OF MOVABLE PROPERTY MOVABLE PROPERTY: REPLEVIN / MANUAL DELIVERY 1. Both principal and provisional remedy 2. Plaintiff shall state in the affidavit that he is the owner of the property claimed, particularly describing it or that he is entitled to possession, and that it is wrongfully detained by the other 3. Plaintiff must also give a bond double the amount of value of the property (Rules of Court, Rule 60, Sec. 2) Period 4 or 8 years from the time the possession thereof is lost, in accordance with Art. 1132 When Replevin Not Allowed: (WIP-CT) 1. Property is placed In Custodia legis 2. Taken for Tax assessment 3. Seized under Writ of execution 4. A machinery and equipment used for an industry and Indispensable for the carrying on of such industry (Reason: they are considered real properties) 5. Seized under Preliminary attachment. (Rules of Court, Rule 60, Sec. 2) Measure of Rational Necessity – the law does not require a person acting in a state of necessity to be free from negligence or mistake. He must be given the benefit of reasonable doubt as to Page 92 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 IV. DISTINCTION BETWEEN REAL AND PERSONAL RIGHTS Real Right v. Personal Right JUS IN REM JUS IN PERSONAM The power of a person The power belonging to obtain certain to a person to financial or economic demand from advantage over a another, as definite specific thing, a power passive subjectenforceable against debtor, the fulfilment the whole world, of a prestation to give, whether or not he to do, or not to do. possesses the thing. Has a specific object Affects all the present and future property of the debtor There is one definite There is a definite active subject (like the active subject (the owner or creditor); and a usufructuary); the rest definite passive of the world is the subject (the debtor). indefinite passive Thus a personal right subject. Thus, a real is enforceable only right follows its object against the original in the hands of the debtor or a transferee possessor (binding on who has notice or the whole world) knowledge The right is created It is exercised thru directly over a thing another person, against whom an action may be brought The right is over a The right is to a thing thing Limited by the value, Not so limited use or productivity of the things Created by both mode Created by title alone, & title except when the title is at the same time the made, as in succession Subject matter is Subject matter is generally corporeal intangible or incorporeal (for it is the fulfilment of the duty or prestation) Extinguished by loss or destruction Not extinguished by loss or destruction Modes of Acquiring Ownership (OLD-TIPS) 1. Occupation 2. Law 3. Donation 4. Tradition 5. Intellectual Creation 6. Prescription 7. Succession (Art. 712) Mode – is the process of acquiring or transferring ownership Title – is the juridical act, right or condition which gives the juridical justification for a mode or means to their acquisition but which in itself is insufficient to produce them. (De Leon, supra, p. 578-579) Difference between Mode and Title MODE TITLE Directly and Serves merely to give immediately produces the occasion for its a real right acquisition or existence The cause The means Proximate cause Remote cause Essence of the right Means whereby that which is to be created essence is or transmitted transmitted Original Mode – there being no previous or preexisting or preceding title or right of another. Derivative Mode – there was a preceding owner. (De Leon, supra, p. 580) V. LIMITATIONS OF OWNERSHIP Limitations on the Right of (CLOGS) (De leon, supra, p. 92) 1. Those arising from Conflicts of (e.g. those which take place continua) 2. Those imposed by Law easements) Ownership private rights in accession (e.g. Legal Page 93 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 3. Those imposed by the Owner himself (e.g. Voluntary easement, pledge, lease) 4. Those imposed by the Grantor of the property on the grantee a. by contract (e.g. donation) b. by last will 5. Those imposed in general by the State (Art. 435) a. Power of eminent domain b. Police power c. Power of taxation Right of Ownership not Absolute The welfare of the people is the supreme law of the land (Salus populi suprema est lex). Note: The owner bears the loss of the property owned by him (Res perit domino). Limitations Imposed On The State: 1. Eminent Domain; 2. Police Power; 3. Taxation II. RULES OF ACCESSION Accession – right of the owner of a thing, real or personal, to become the owner of everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially. (Art. 440) Note: It is not one of the modes of acquiring ownership enumerated in Art. 712. (Manresa, 6th Ed., Vol. 3, p. 116; 180-182) Classification of Accession 1. Accession Discreta 2. Accession Continua ACCESSION DISCRETA Accession Discreta – the extension of the right of ownership of a person to the products of a thing which belongs to such person. (Paras, Civil Code of the Philippines Annotated Property Articles, 414-773, 211, 2016) ————- end of topic ————C. ACCESSION I. RIGHT TO HIDDEN TREASURE Concept of Treasure: (HUM) 1. Hidden and unknown 2. Unknown owner 3. Consists of Money, jewels, or other precious objects. (not raw materials) (Art. 439) Right to Hidden Treasure (Art. 438) FINDER PERSON ENTITLED Finder is the same as Treasure totally owner of the property belongs to him. Finder is third person Finder is entitled to and he discovered it one half of the value by chance of the treasure. Finder is an intruder He is not entitled to anything Finder was given Subject to the express permission by contract of service the owner and principle of unjust enrichment It takes place with respect to: 1. Natural Fruits – spontaneous products of the soil and the young of animals. 2. Industrial Fruits – those produced by lands of any kind through cultivation or labor. 3. Civil Fruits – rent of buildings, the price of lease of lands and other property and the amount of perpetual or life annuities or other similar income. (Art. 442) General Rule: All fruits belong to the owner of a thing. (Art. 441) Exceptions: (PULPA) 1. Possession in good faith by another; (Art. 554 (1)) 2. Usufruct; (Art. 566) 3. Lease of rural lands; (Art. 1654) 4. Pledge; 5. Antichresis. (Art. 2132) ACCESSION CONTINUA Page 94 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Accession Continua – the extension of the right of ownership of a person to that which is incorporated or attached to a thing which belongs to such person. It may take place: 1. With respect to real property a. Accession industrial; b. Accession natural 2. With respect to personal property a. Adjunction or conjunction; b. Commixtion or confusion; c. Specification. (Paras, supra, p. 209210) Accession Industrial: Principles 1. Accessory follows the principal. 2. The incorporation or union must be intimate that removal or separation cannot be effected without substantial injury to either or both. 3. Good faith exonerates a person from punitive liability but bad faith may give rise to dire consequences. 4. Bad faith of one party neutralizes the bad faith of the other. 5. No one should enrich himself at the expense of another. (Paras, supra, p. 221) a. For Immovables Two Disputable Presumptions As To Improvements On Land 1. Works are made by the owner 2. Works are made at the owner’s expense (Art. 446) Rules When Landowner– Builder/Planter/Sower (LO-BPS) makes Constructions/Plantings with Materials of Another (OM) (Art. 455) LANDOWNER – OWNER OF BUILDER / MATERIALS (OM) PLANTER/ SOWER (LO - BPS) GOOD FAITH LO – BPS can acquire OM entitled to the materials, (1) full payment for provided there is full value of materials or payment (2) OM may remove materials, provided no substantial injury to work done BAD FAITH LO – BPS can acquire the materials, provided there is full payment plus damages GOOD FAITH OM is entitled to full payment for value of materials plus damages or GOOD FAITH LO-BPS can acquire the materials without paying for the value thereof and will be entitled to damages due to defects or inferior quality of materials. BAD FAITH LO – BPS can acquire the materials, provided there is full payment OM may remove materials even if there’s substantial injury to work done, plus damages BAD FAITH OM loses materials without indemnity and will be liable for damages due to defects or inferior quality of materials. OM entitled to (1) full payment for value of materials or (2) OM may remove materials, provided no substantial injury to work done Note: This chart is from Atty. Francis H. Ampil Planting — pertains to a perennial fact. Something that will grow and produce fruits year after year without having to be replanted. (Paras, supra, p. 220-221) Note: planter may be required to buy the land. Sowing — pertains to an annual crop. Something that will grow and produce fruits and then you plant again before it will produce fruits again. (Paras, supra, p. 221) Page 95 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Note: sower may be required to pay rent. Exceptions to the Rule on Builders: Possession as Mere Holder Rule does not apply where the builder, knowing that the land is not his, does not claim ownership over the land but possesses it as mere Holder, agent, usufructuary or tenant. (Paras, supra, p. 243) Rules When Landowner Sells Land To a 3rd Person Who Is In Bad Faith: Builder must go against the third person. When the third person has paid the landowner, the builder may still file a case against the third person. The third person may file a 3rd party complaint against the landowner. Exception to the exception 1. Tenant whose lease is about to expire, but still sows, not knowing that the crops will no longer belong to him. 2. A person constructs a building on his own land, and then sells the land but not the building to another. a. No question of good faith or bad faith on the part of the builder can be compelled to remove the building; b. New owner will not be required to pay any indemnity for the building (Golengco v. Regalado, 48 O.G. 5282) 3. Builder is a belligerent occupant (Republic v. Lara, 50 O.G. 5282) 4. Builder, etc. is a co-owner even if later on, during the partition, the portion of land used is awarded to another co-owner; (Viuda de Arias v. Aguilar, 40 O.G., 1941) Note: For the rule to apply, the construction must be of a permanent character, attached to the soil with an idea of perpetuity. If it is of a transitory character or is transferable, there is no accession, and the builder must remove the construction. (Alviola v. CA, GR No. 117642, 1998) A mere promise by the landowner to donate the property to the builder cannot convert the latter into a builder in good faith. If at all, he is a mere possessor by tolerance. A person whose occupation of realty is by tolerance of its owners is a not possessor in good faith. Hence, he is not entitled to the value of the improvements built thereon. (Verona Pada-Kilario v. CA, GR No. 134329, 2000) Page 96 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Rules When BPS Builds, Plants, Sows On The Land Of Another LANDOWNER (LO) A. GOOD FAITH Option 1: To purchase whatever has been built, planted or sown after paying indemnity which includes necessary expenses, useful expenses and luxurious expenses (if the LO wants to appropriate the luxurious improvements). Option 2: To oblige the BP to buy the land or the S to pay the proper rent unless the value of the land is considerably more than that of the building or trees. CIVIL LAW BUILDER/PLANTER/SOWER (BPS) To receive indemnity for necessary, useful and luxurious expenses (if the LO wants to appropriate the luxurious improvements) with right of retention over the land without obligation to pay rent until full payment of indemnity. To remove useful improvements provided it does not cause any injury (this is part of right of retention). If LO does not appropriate luxurious improvements, BPS can remove the same provided there is no injury to the principal thing (land or building). To purchase land at fair market value when value is not considerably more than that of the building or trees. If BPS cannot pay purchase price of land, LO can require BPS to remove whatever has been built, planted or sown. If the value of land is considerably more than that of the building or trees, BPS cannot be compelled to buy the land. In such case, BPS will pay reasonable rent if LO does not choose Option 1. B. GOOD FAITH Option 1: To acquire whatever has been built, planted or sown without paying indemnity except necessary expenses for preservation of land and luxurious expenses (should LO want to acquire luxurious improvements) plus damages. If BPS cannot pay the rent, LO can eject BPS from the land. BAD FAITH Loses whatever has been built, planted or sown without indemnity and liable to pay damages. Entitled to reimbursement for necessary expenses for preservation of land but no right of retention. Entitled to reimbursement for useful expenses but cannot remove useful improvements even if removal will not cause injury. Not entitled to reimbursement for luxurious expenses except when LO wants to acquire luxurious improvements (value of which will be the one at the time LO enters into possession). Option 2: To oblige BP to buy land or S to pay proper rent plus damages. Entitled to remove luxurious improvements if it will not cause injury and LO does not want to acquire them. Obliged to pay for land or proper rent and pay damages. Page 97 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Option 3: To compel BPS to remove or demolish work done plus damages. C. BAD FAITH To acquire whatever has been built, planted or sown by paying indemnity plus damages. Obliged to remove or demolish work done at his expense and pay damages. GOOD FAITH If LO acquires whatever has been built, planted or sown, BPS must be indemnified the value thereof plus damages. (If LO does not acquire whatever has been built, planted or sown, BPS cannot insist on purchasing land). BPS can remove whatever has been built, planted or sown regardless of whether or not it will cause injury and will be entitled to damages. D. BAD FAITH Same as A. Same as A. Note: This chart is from Atty. Francis H. Ampil LANDOWNER (LO) A. GOOD FAITH Option 1: To acquire whatever has been built, planted or sown provided there is payment of indemnity (which includes value of what has been built, planted or sown plus value of materials used). Option 2: To oblige BP to buy land or S to pay proper rent unless value of land is considerably more than that of building or trees. B. GOOD FAITH Same as A. RULES WHEN THREE (3) PARTIES ARE INVOLVED: BUILDER/PLANTER/SOWER (BPS) OWNER OF MATERIALS (OM) To receive indemnity from LO with right of retention over land until full payment. To receive indemnity from BPS who is primarily liable for materials; if BPS is insolvent, to proceed against LO who is subsidiarily liable with no right of retention. To buy land or to pay proper rent. To receive indemnity from BPS only (LO is not subsidiarily liable) with right of retention until full payment. or GOOD FAITH Same as A. To remove materials if there will be no injury on building or trees and will have material rent lien against BPS for payment of value of materials. BAD FAITH Whatever is the choice of LO, the OM: 1. loses the materials in favor of BPS, and 2. will have no right to receive indemnity from BPS nor LO. Page 98 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW C. GOOD FAITH Option 1. To acquire whatever has been built, planted or sown without paying indemnity except necessary expenses for preservation of land and luxurious expenses (should LO want to acquire luxurious improvements) plus damages. Option 2: To oblige BP to buy the land or S to pay proper rent plus damages. BAD FAITH BPS loses what has been built planted or sown plus liable for damages but is entitled to be indemnified for necessary expenses and luxurious expenses (should LO want to acquire luxurious improvements) and has no right of removal even if removal will not cause damage. BAD FAITH (Since both BPS and OM are in bad faith, treat them both as if they are in good faith). To buy the land or pay proper rent and liable to pay damages to LO. Option 3: To oblige BPS to demolish or remove what has been built, planted or sowed plus damages. D. BAD FAITH To acquire what has been built, planted or sown by paying indemnity plus liable to pay damages. E. BAD FAITH Same as D. To demolish or remove what has been built, planted or sowed and liable for damages. If LO chooses Option 1, OM has no right to remove materials even if there will be no injury or damage. If LO chooses Option 2, OM has right of removal, provided there will be no injury or damage. Liable to pay for damages due to defects or inferior quality of materials. Whatever is the choice of LO, OM has right to receive indemnity for value of materials from BPS only (LO has no subsidiary liability for value of materials because OM is considered in good faith only insofar as BPS is concerned). GOOD FAITH To receive indemnity from LO plus damages. GOOD FAITH To receive indemnity for value of materials principally from BPS and in case BPS is insolvent, subsidiarily from LO. GOOD FAITH Same as D. BAD FAITH No right to receive indemnity for value of materials from BPS nor LO (who ends up owning buildings or trees). Note: This chart is from Atty. Francis H. Ampil Page 99 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 A lessee cannot be a builder in good faith. He is estopped to deny his landlord’s title, or to assert a better title not only in himself, but also in some third person while he remains in possession of the leased premises and until he surrenders possession to the landlord. (Munar v. CA, GR No. 100740, 1994); (Frederico Geminiano, et al. v. CA, et al., GR No. 120303, 1996) Estoppel applies even if the lessor had no title at the time. The relation of lessor and lessee was created and may be asserted not only by the original lessor, but also by those who succeed to his title. As lessees, they knew that their occupation of the premises would continue only for the life of the lease. They cannot be considered as possessors nor builders in good faith. (Racaza v. Susan Realty, Inc., GR No. L20330, 1966); (Vda. De Bacaling v. Laguna, GR No. L-26694, 1973); (Santos v. CA, 221 SCRA 42, 1993) Even if the lessor promised to sell, it would not make the lessee possessor or builder in good faith so as to be covered by the provisions of Art. 448 of the NCC, if he improves the land. The latter cannot raise the mere expectancy of ownership of the land because the alleged promise to sell was not fulfilled nor its existence even proven. (Jurado, Civil Law Reviewer, 2008) The owner of the land on which a building has been built in good faith by another has the option to buy the building or sell his land to the builder, he cannot refuse to exercise either option. (Sarmiento v. Agana, GR No. L-57288, 1984) CIVIL LAW ornamental expenses, the lessee shall not be entitle to any reimbursement, but he may remove the ornamental objects, 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. Owner of the land on which improvement was built by another in good faith is entitled to removal of improvement only after landowner chose to sell the land and the builder refused to pay for the same. Where the land’s value is greater than the improvement, the landowner cannot compel the builder to buy the land. A “forced lease” is then created and the court shall fix the terms thereof in case the parties disagree thereon. (Depra v. Dumlao, GR No. L-57348, 1985) The right to choose between appropriating the improvement or selling the land on which the improvement of the builder, planter or sower stands, is given to the owner of the land (not the court) (Ballatan v. CA, GR No. 125683, 1999) Improvements made prior to the annotation of the notice of lis pendens are deemed to have been made in good faith. After such annotation, P can no longer invoke the rights of a builder in good faith. Should E opt to appropriate the improvements made by P, it should only be made to pay for those improvements at the time good faith existed to be pegged at its current market value. (Carrascoso v. CA, GR No. 123672, 2005) Note: For lessees, do not apply the rules on BPS. Apply Art. 1678 which states: If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor, upon termination of the lease shall pay the lessee onehalf of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. With regard to Page 100 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 ACCESSION Accession Continua Accession Discreta Natural Fruits Industrial Fruits Real Civil Fruits Accession Industrial Spontaneous products of the soil, Young and other products of animals rents of buildings price of leases of land & other property amount of perpetual or life annuities or other similar income Accession Natural Personal Adjunction/ Specification Mixed Conjunction commixtion confusion Building Planting Sowing Alluvium Avulsion Change of course of rivers Formation of islands (ISTEP) Inclusion or engraftment Soldadura or soldering Tejido or weaving Escritura or writing Pintura or Painting Page 101 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Principal Forms of Accession Natural: 1. Alluvium (Art. 457) 2. Avulsion (Art. 459) 3. Change of course of rivers (Arts. 461-462) 4. Formation of islands (Art. 464-465) the coastguard service, the Government shall declare them to be the property of the owners of the estates adjacent thereto and as an increment thereof.” (Lanzar v. Dir. Of Lands, GR No. L31934, 1977) Alluvium – the accretion which the banks of rivers gradually receive from the effects of the current of the waters and which belong to the owners of lands adjoining the said banks. (Art. 457) Avulsion – accretion which takes place when the current of a river, creek, or torrent segregates from an estate on its bank a known portion and transfers it to another estate, in which case, the owner of the estate to which the segregated portion belonged, retain the ownership thereof. (Art. 459) Accretion – act or process by which a riparian land gradually and imperceptively receives addition made by the water to which the land is contiguous. (Paras, supra, p. 265) Essential Elements of Alluvium: (GCA) 1. Deposit or accumulation of soil or sediment must be Gradual and imperceptible. (Art. 457) 2. Accretion results from the effects or action of the Current of the waters of the river. (Gov’t of the Phils. v. Cabangis, 53 Phil. 112, 1929) 3. The land where accretion takes place must be Adjacent to the bank of a river. (Art. 457) Registration under the Torrens System does not protect the riparian owner against the diminution of the area of his registered land through gradual changes in the course of an adjoining stream. (Viajar v. CA, GR No. 77294, 1998) Failure to register the acquired alluvial deposit by accretion for 50 years subjected said accretion to acquisition through prescription by third persons. (Reynante v. CA, GR No. 95907,1992) The rules on alluvion do not apply to man-made or artificial accretions to lands that adjoin canals or esteros or artificial drainage system. (Ronquillo v. CA, GR No. L-43346, 1991) Alluvium vs. Avulsion ALLUVIUM Deposit of soil is gradual and imperceptible. Soil cannot be identified. Deposit of soil belongs to the owner of the property to which it is attached. AVULSION Deposit of soil is sudden or abrupt. Soil is identifiable and verifiable. Deposit of soil belongs to the owner from whose property it was detached. Essential Elements of Avulsion: (CSK) 1. Segregation and transfer must be caused by the Current of a river, creek or torrent. (Art. 459) 2. Segregation and transfer must be Sudden or abrupt. (Canas v. Tuason, 5 Phil. 688, 1929) 3. The portion of land transported must be Known or identifiable. (Art. 459) Note: In avulsion, the owner should remove the transferred portion within two (2) years; otherwise, it becomes permanently attached. (Art. 459) Uprooted Trees - Trees uprooted and carried away by the current of the waters (Art.460) Lands added to the shores by accretions and alluvium deposits caused by the action of the sea, form part of the public domain. When they are no longer washed by the waters of the sea, and are not necessary for the purposes of public utility, or for the establishment of special industries, or for Page 102 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Rules Regarding Uprooted Trees OWNERS DO NOT OWNERS CLAIM CLAIM WITHIN WITHIN 6MOS 6MOS Belong to the owner Owners pay the of the land upon expenses incurred in which the trees may gathering them or be cast. (Art. 460) putting them in a safe place. (Art. 460) Change of Course of Rivers Requisites: 1. There must be a natural change in the course of the waters of the river. 2. The change must be abrupt or sudden. (Art. 461) 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: right to acquire the same by paying its value – Value not to exceed the value of area occupied by new bed. (Art. 461) New Riverbanks Whenever a river, changing its course by natural causes, opens a new bed through a private estate, this bed shall become of public dominion. (Art.462) New riverbed may itself be abandoned, due to natural or artificial causes authorized by law. Owners will get back this previous property if the course of the river reverts to its original place. (Sanchez v. Pascual, 11 Phil. 395, 1969) Islands Belonging to the State Islands, which may be formed: 1. On the seas within the jurisdiction of the Philippines. 2. On lakes; and 3. On navigable or floatable rivers. (Art.464) Islands Formed in Non-Navigable or NonFloatable Rivers: 1. Belong to the owners of the margins or banks of the river nearest to each of them. 2. If in the MIDDLE of the river – divided longitudinally in halves (Art.465) Note: Riverbeds that dry up continue to belong to the State as its property of public dominion, unless there is an express law that provides that the dried-up river beds should belong to some other person. (Republic vs. Santos III, GR No. 160453, 2012) Rules of Accession for Movables Adjunction or Conjunction –process whereby two (2) movable things owned by different persons are joined together without bad faith, in such a way that they form a single object. (Art. 466) Requisites: (SID) 1. The two things belong to Different owners. 2. They form a Single object. 3. They are Inseparable; that their separation would impair their nature or result in substantial injury to either component. (Paras, supra, p. 265) Classes of Adjunction: (ISTEP) 1. Inclusion (engraftment) 2. Soldadura (soldering) a. Feruminatio – same metal b. Plumbatura – different metals 3. Tejido (weaving) 4. Escritura (writing) 5. Pintura (painting) (Paras, supra, p. 291) General Rule: The owner of the principal thing acquires the accessory, indemnifying the former owner for its value. (Art. 466) Test To Determine Principal: The principal thing is deemed to be that to which the other has been united as an ornament, or for its use or perfection. (Art. 467.) Page 103 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 If it cannot determined: (Rule of importance and purpose) 1. Greater value = If they are of unequal value 2. Greater volume = If they are of equal value 3. Greater merits (Art. 467 & 468) When Separation Allowed: 1. Separation without injury (Art.469) 2. Separation with injury – accessory is much more precious than the principal; the owner of the former may demand its separation even though the principal may suffer injury. (Art.469) 3. Owner of principal in bad faith. (Art.470 (2)) Rules as to Ownership OWNER OF OWNER OF PRINCIPAL (OP) ACCESSORY (OA) GOOD FAITH / GOOD FAITH BAD FAITH Acquires the May demand reparation: accessory If no injury will be caused - indemnifies the If value of accessory is former owner for greater than principal its value even if damages will be caused to principal (expenses is to the one who caused the conjunction) GOOD FAITH BAD FAITH Owns the Loses the thing accessory incorporated Right to damages Indemnify the OP for the damages OP may have suffered BAD FAITH GOOD FAITH Pay OA value of Right to choose between accessory or OP paying him its value or principal and accessory be That the thing belonging separated to him be separated even PLUS though it be necessary to Liability for destroy the principal thing damages Takes place when two or more things belonging to different owners are mixed or combined to such CIVIL LAW extent that the components lose their identity. (Art. 472) Kinds: 1. Commixtion – mixture of solid things 2. Confusion – mixture of liquid things Rules: 1. Mixture by the will of the owners a. Rights governed by stipulations b. Without stipulation: each acquires a right or interest in proportion to the value of his material. (Paras, supra, p. 297) 2. Mixture caused by an owner in good faith or by chance a. Each share shall still be in proportion to the value of their thing (Santos v. Bernabe, 54 Phil. 19, 1929) 3. Mixed caused by owner in bad faith a. The actor forfeits his thing; b. Liable for damages. (Paras, supra, p. 297) Specification - Imparting of a new form to the material belonging to another; or the making of the material of another into a thing of a different kind. (Art. 474) When Maker is in Good Faith One who, in good faith, employs the material of another in order to make a thing of a different kind shall appropriate the thing transformed as his own, indemnifying the owner of the material for its value. (Art. 474) When the Material is of Greater Value Than the Transformed Thing The owner of the material may: 1. Appropriate the new thing to himself, after paying indemnity for the value of the work; or 2. Demand indemnity for the material. (Art. 474) When the Maker is in Bad Faith The owner of the material shall have the right to: 1. Appropriate the work to himself, without paying anything to the maker; or 2. Demand of the latter that he indemnify him for the value of the material and the damages he may have suffered. (Art. 474) Page 104 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Note: The owner of the material cannot appropriate the work in case its value, for artistic or scientific reasons, is considerably more than that of the material. (Art. 474) Quasi In Rem - suits against a particular person or persons in respect to the res; may not be brought for the purpose of settling a boundary disputes Comparison of the 3 Types of Accession ADJUNCTION MIXTURE SPECIFICATION Involves at Involves at Involves at least 2 least 2 things least 2 things things Applicable to real property or any interest therein. The law, however, does not exclude personal property from actions to quiet title. As a rule, accessory follows principal The things joined retain their nature As a rule, coownership results May either retain or lose respective natures As a rule, accessory follows principal Note: An action to quiet title is imprescriptible if brought by the person in possession of the property. Otherwise, he must invoke his remedy within the prescriptive period. (Berico v. CA, GR NO. 96306, 1993) The new object retains or preserves the nature of the original object Classifications 1. Remedial action – to remove cloud on title 2. Preventive action – to prevent the casting of a (threatened) cloud on the title. (Art. 476) ————- end of topic ————D. QUIETING OF TITLE Quieting of Title – remedy or proceeding which has for its purpose an adjudication that a claim of title to realty or an interest thereon, adverse to the plaintiff, is invalid or inoperative, or otherwise defective and hence, the plaintiff and those claiming under him may forever be free of any hostile claim. (Baricuatro, Jr. vs CA, GR No. 105902, 2000) Reasons: 1. Prevent litigation 2. Protect true title & possession 3. Real interest of both parties which requires that precise state of title be known. (Paras, supra, p. 305) Action to Quiet Title Puts an end to vexatious litigation in respect to property involved; plaintiff asserts his own estate and generally declares that defendant’s claim is w/o foundation. (Baricuatro, Jr. v. CA, GR No. 105902, 2000) I. REQUISITES Requisites of Action to Quiet Title (TICR) 1. Plaintiff must have a legal or equitable Title or interest in the real property (Art. 477) 2. Cloud in such title 3. Such cloud must be due to some Instrument, record, claim, encumbrance or proceeding which is apparently valid but is in truth invalid, ineffective, voidable or unenforceable prejudicial to the plaintiff’s title (Art. 476) 4. Plaintiff must Return to the defendant all benefits received from the latter or reimburse him for expenses that may have redounded to his benefit. (Art. 479) When Not Applicable 3. Questions involving interpretation of documents; 4. Mere written or oral assertions of claims; Exceptions: (a) If made in a legal proceeding; (b) If it is being asserted that the instrument of entry in plaintiff’s favor is not what it purports to be; 3. Boundary disputes; Page 105 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 4. Deeds by strangers to the title, unless purporting to convey the property of the plaintiff; 5. Instruments invalid on their face; 6. Where the validity of the instrument involves pure questions of law. (Paras, supra, p. 315316) II. DISTINCTIONS BETWEEN QUIETING TITLE AND REMOVING/PREVENTING CLOUD Purpose Nature ACTION TO QUIET TITLE To end vexatious litigation in respect to the property concerned Plaintiff asserts own claim and declares that the claim of the defendant is unfounded and calls on the defendant to justify his claim on the property that the same may be determined by the court ACTION TO REMOVE CLOUD Procure cancellation, release of an instrument, encumbrance or claim in the plaintiff’s titlewhich affects the title or enjoyment of the property Plaintiff declares his own claim and title, and at the same time indicates the source and nature of the defendant’s claim, pointing its defects and prays for the declaration of its invalidity Action to Remove Cloud Intended to procure cancellation, delivery, release of an instrument, encumbrance, or claim constituting a on plaintiff’s title which may be used to injure or vex him in the enjoyment of his title Cloud – is a semblance of title, either legal or equitable, or a claim or a right in real property, appearing in some legal form but which is, in fact, invalid or which would be inequitable to enforce. (Art. 476) Existence of Cloud: (AIP) 1. Instrument or record or claim or encumbrance or proceeding which is Apparently valid or effective; 2. But is, in truth and in fact, Invalid, ineffective, voidable, or unenforceable, or extinguished (or terminated) or barred by extinctive prescription 3. May be Prejudicial to the title. (Paras, supra, p. 302-303) III. PRESCRIPTION/NON-PRESCRIPTION OF ACTION Rules: 1. If plaintiff is in possession The action does not prescribe. While the owner continues to be liable to an action, proceeding, or suit upon the adverse claim, he has a continuing right to be given aid by the court to ascertain and determine the nature of such claim and its effect on his title, or to assert any superior equity in his favor. He may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. 2. If plaintiff is not in possession The action may prescribe. Even if the action is brought within the period of limitations, it may be barred by laches, where there is no excuse offered for the failure to assert the title sooner. If somebody else has possession, the period of prescription for the recovery of land is either 10 or 30 years General Rule: An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in 10 years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property. Exception: If plaintiff is in possession, the action is imprescriptible. Page 106 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 ————- end of topic ————- CIVIL LAW Right to alienate, assign or mortgage own part; except personal rights like right to use and habitation E. CO-OWNERSHIP I. CHARACTERISTICS OF CO-OWNERSHIP Co-Ownership – a form of ownership, which exists whenever an undivided thing or right belongs to different persons. (Art. 484) Elements (PUI) 1. Plurality of subjects – many owners 2. Object of ownership must be Undivided 3. Recognition of Ideal shares; no one is an owner of a specific portion of the property until it is partitioned. II. SOURCES OF CO-OWNERSHIP How Created (C-FOLDS) 1. Law 2. Contracts 3. Succession 4. Fortuitous event/chance (i.e., commixtion) 5. Occupancy (i.e.,2 persons catch a wild animal) 6. Donation Kinds of Co-ownership: 1. Ordinary – right of partition exists 2. Compulsory– no right of partition exists (party wall) 3. Legal – created by law 4. Singular/Particular–over particular/ specific thing 5. Incidental – exists independently of the will of the parties 6. Universal – over universal things (co-heirs) 7. Contractual- created by contract III. RIGHTS OF CO-OWNERS 1. Ownership Over Whole Property 2. Sale / Alienation a) Individual Interest A co-owner cannot give valid consent to another to build a house on co-owned property as such an act would be tantamount to making an alteration in the thing owned in common. Entry into the land without the knowledge of the other co-owners can be categorized as possession by stealth and W’s act of getting only the consent of one co-owner can be considered as “strategy.” Thus, it would be a case of forcible entry. (Cruz v. Catapang, GR No. 164110, 2008) b) Entire Property Any co-owner may file an action under Article 487 not only against a third person but also against another co-owner who takes exclusive possession and asserts exclusive ownership of the property. (De Guia vs. CA, GR No. 120864, 2003) A co-owner can sell an undivided part of the property co-owned but its validity is limited to his share. Hence, there is no need for consent of the other co-owners as to said sale. (Arambulo v. Nolasco, GR No. 189420, 2014) Same rule applies in a mortgage by a co-owner of his share. (Rural Bank of Cabadbaran v. Nulecio-Yap, GR No. 178451, 2014) c) Redemption by Other Co-owners Right of Redemption Right to be adjudicated thing (subject to right of others to be indemnified) 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 Note: To be exercised within 30 days from written notice of sale of undivided share of another coowner to a stranger. Redemption of the whole property by a co-owner does not vest in him sole ownership over said property. Redemption within the period prescribed by law by a co-owner will inure to the benefit of all co-owners. Hence, it will not put an Page 107 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 end to existing co-ownership. (Mariano v. CA, GR No. L-51283, 1989) Co-owners have the right to alienate their pro indiviso shares even without the knowledge or consent of another co-owner as long as the alienation covers only their shares interests in the common property. Under the NCC, each coowner “shall have the full ownership of his party and may therefore alienate it.” The effect, however, of the alienation with respect to the coowners shall be limited only to the portion which may be allotted to him in the division upon the termination of the co-ownership. (Tabasondra v. Constantino, GR No. 196403, 2016) A co-owner has no right to sell or alienate a concrete, specific or determinate part of the thing owned in common, because his right over the thing is represented by quota or ideal portion without any physical adjudication. (Cabrera v. Ysaac G.R. No. 166790, 2014) d) Prescription General Rule: A co-owner cannot acquire the whole property as against the other co-owners by acquisitive prescription. (Art. 494) Exception: When there is valid repudiation – prescription shall start from such repudiation. (Paras, supra, p. 365) Exception to the Exception: In constructive trusts, prescription does not run. (Jacinto v. Jacinto,L-17955, L-17957, 1962) (Paras, supra, p. 366) A co-owner cannot sell the property without the other co-owners’ consent; otherwise, the selling co-owner’s share shall be the only one valid. (Paulmitan v. CA, GR No. 61584, 1992) While the husband is the recognized administrator of the conjugal property under the Civil Code, there are instances when the wife may assume administrative powers or ask for the separation of property. Where the husband is absent and incapable of administering the CIVIL LAW conjugal property, the wife must be expressly authorized by the husband or seek judicial authority to assume powers of administration. Thus, any transaction entered by the wife without the court or the husband’s authority is unenforceable. Being an unenforceable contract, the 2nd Contract is susceptible to ratification. The husband continued remitting payments for the satisfaction of the obligation under the questioned contract. These acts constitute ratification of the contract. (Fabrigas v. San Francisco, GR No. 152346, 2005) 3. Benefits/ Fruits/ Interest/ Income a) Right to benefits proportional to respective interest b) Stipulation to contrary is void c) Right to full ownership of his part and fruits. (Art. 493) 4. Use/ Possession a) Right to use thing co-owned b) For purpose for which it is intended c) Without prejudice to interest of ownership d) Without preventing other co-owners from making use thereof. (Art. 486) 5. Management/Administration a) Right to change purpose of co-ownership by agreement. (Art. 486) b) Right to bring action in ejectment in behalf of other co-owner. (Art. 487) c) Right to compel co-owners to contribute to necessary expenses for preservation of thing and taxes. (Art. 488) d) Right to exempt himself from obligation of paying necessary expenses and taxes by renouncing his share in the pro indiviso interest; but can’t be made if prejudicial to coownership. (Art. 488) e) 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 coowners, if practicable. (Art. 489) f) Right to ask for partition anytime. (Art. 494) g) Right of pre-emption Page 108 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 IV. TERMINATION OF CO-OWNERSHIP PARTITION General Rule: Demandable Anytime No co-owner shall be obliged to remain in the coownership. Each co-owner may at any time demand the partition of the thing owned in common, insofar as his share is concerned. (Art. 494) Exception: A co-owner may not successfully demand a partition: (UNLAD) 1. If by Agreement (for a period not exceeding 10 years, renewable) partition is prohibited. (Art. 494) 2. When partition is prohibited by a Donor or testator (for a period not exceeding 20 years) – from whom the property came. (Art. 494) 3. When partition is prohibited by Law. (Art. 494) 4. When a physical partition would render the property Unserviceable, but in this case, the property may be allotted to one of the coowners, who shall indemnify the others, or it will be sold, and the proceeds distributed. (Art. 495) 5. When the legal Nature of the common property does not allow partition Requisites of Repudiation: (UKEO) 1. Unequivocal acts of repudiation of the coownership amounting to an ouster of the other co-owners 2. Positive acts of repudiation have been made Known 3. Evidence is clear and conclusive 4. Open, continuous, exclusive, notorious possession. (Santos v. Heirs of Crisostomo, 41 Phil. 342, 1921) Obligations of Co-Owners 1. Share in charges proportional to respective interest; stipulation to contrary is void. (Art. 485) 2. Pay necessary expenses and taxes – may be exercised by only one co-owner. (Art. 490) CIVIL LAW 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. (Art. 491) 5. Duty to obtain consent of majority with regard to administration and better enjoyment of the thing; majority means majority in the interest not in the number of co-owners; court intervention if prejudicial – appointment of administrator. (Art. 492) 6. No prescription to run in favor co-owner as long as he recognizes the co-ownership; (Art. 494) Note: For acquisitive prescription to run in favor of a co-owner, the requisites are: a) He must have repudiated the coownership 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. (Art. 495) 8. After partition, duty to render mutual accounting of benefits and reimbursements for expenses. (Art. 500) 9. Each co-owner has full ownership of his part and of the fruits and benefits pertaining thereto, and he may alienate, assign or mortgage the portion which may be allotted to him upon the termination of the coownership. It appears that while there is a single certificate of title, the three lots are distinguishable from each other. (Art. 493) Rights of Third 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. (Art. 497) 2. Non-intervenors – retain rights of mortgage and servitude and other real rights and personal rights belonging to them before partition was made. (Art. 499) Page 109 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 CONDOMINIUM ACT (RA No. 4726) Condominium – an interest in real property consisting of a separate interest in a unit in a residential, commercial or industrial 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. are opposed to the continuation of the condominium regime. 5. When conditions for partition by sale set forth in the declaration of restrictions duly registered have been met. Any transfer or conveyance of a unit or an apartment office or store or other space therein shall include the transfer and conveyance of the undivided interest in the common areas or in a proper case, the membership or shareholdings in the condominium: provided however, that where the common areas in the condominium project are held by the owners of separate units as coowners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens or corporations at least 60% of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. F. POSSESSION General Rule: Common areas shall remain undivided, and there shall be no judicial partition thereof Exceptions: 1. When the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction 3 years after damage or destruction which rendered a material part thereof unfit for use; 2. When damage or destruction has rendered ½ or more of the units untenable and that the condominium owners holding more than 30% interest in the common areas are opposed to restoration of the projects; 3. When the project has been in existence for more than 50 years, and the condominium owners holding in aggregate more than 50% interest in the common areas are opposed to restoration, remodeling or modernizing; 4. When a project or a material part thereof has been condemned or expropriated and the project is no longer viable or that the condominium owners holding in aggregate more than 70% interest in the common areas ————- end of topic ————- I. CHARACTERISTICS Possession – is the holding of a thing or enjoyment of a right (Art. 523) Viewpoints of Possession 1. Right TO possession (jus possidendi) Possession de facto - right or incident of ownership 2. Right OF possession (jus possessionis) Possession de jure – this is an independent right of itself, independent of ownership Elements of Possession (OIR) 1. Occupancy or control of the thing or right – actual or constructive (corpus) 2. Intent to Possess (animus possidendi) 3. Must be by virtue of one’s own Right Extent of Possession: 1. Physical/actual – occupancy in fact of the whole or at least substantially the whole 2. Constructive – occupancy in part in the name of the whole under such circumstances that the law extends the occupancy to the possession of the whole General Rule: Subject of possession are things or rights which are susceptible of being appropriated (Art.530) Exceptions: 1. Res communes 2. Property of public dominion 3. Discontinuous servitudes 4. Non-apparent servitudes 5. Things specifically prohibited by law Page 110 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Degrees of Possession 1. Possession without title and in violation of right of owner (grammatical degree) Ex. possession of a thief 2. Possession with juridical title (juridical possession); juridical relation exist between the possessor and the owner Ex. that of a lessee, pledge, depositary, usufructuary 3. Possession with just title but not from true owner, such that of a possessor in good faith (possessory right) Ex .When a buyer acquires a thing from the seller who was not the true owner or could not transmit rights. 4. Possession with title in fee simple - This is the highest degree of possession. Acquisition of Possession from the Viewpoint of Possessor 1. Personal a. Intent to possess b. Capacity to possess c. Object must be capable of being possessed 2. Through authorized person (agent or legal representative) a. Intent to possess for principal (not for agent) b. Authority or capacity to possess (for another) c. Principal has intent and capacity to possess 3. Through Unauthorized person (but only if subsequently ratified) a. Intent to possess for another (the principal) b. Capacity of “principal” to possess c. Ratification by principal REQUIREMENTS – TO RIPEN INTO OWNERSHIP KINDS OF POSSESSION 1. Possession in the concept of an owner (Adverse Possession) – possession by the owner himself or adverse possessor 2. Possession in the concept of holder – possessor acknowledges that another is an 3. 4. 5. 6. owner (e.g. usufruct, lessee, depositary, bailee in commodatum) Possession In one’s own name – personal acquisition Possession in the name of another – agent; subject to authority and ratification if not authorized; negotiorum gestio a. Voluntary – as when an agent possesses for the principal (by virtue of agreement) b. Necessary – as when a mother possesses for a child still in the maternal womb c. Unauthorized – this will become the principal’s possession only after there has been a ratification without prejudice to the effects of negotiorum gestio Possession in good faith – not aware of any flaw or defect in his title or mode of acquisition Possession in bad faith – aware that there exists in his title or mode of acquisition some flaw or defect Effects of Possession in the Concept of Owner 1. May be converted into ownership through acquisitive prescription - Movables: 4 or 8 years - Immovables:10 or 30 years o Imprescriptible when there is Torrens certificate title over land 2. Bring actions necessary to protect possession; 3. Ask for inscription of possession; 4. Demand fruits and damages from one unlawfully detaining property. Note: Possessor in the concept of owner has in his favor the legal presumption that he possesses with just title. Burden of proving just title is on the plaintiff who seeks the recovery of property. (Art. 541) Requisites for Personal Acquisition 1. Must have capacity to acquire possession; 2. Intent to possess; 3. Possibility to acquire possession. Page 111 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Possession and ownership are distinct legal concepts. Ownership confers certain rights to the owner, among which are the rights to enjoy the thing owned and to exclude other persons from possession thereof. On the other hand, possession is defined as the holding of a thing or the enjoyment of a right. Literally, to possess means to actually and physically occupy a thing with or without a right. Thus, a person may be declared an owner but he may not be entitled to possession. (Heirs of Roman Soriano v. CA, GR No. 128177, 2001) II. ACQUISITION OF POSSESSION Good faith and Bad Faith Possessor in Good Faith is one who is not aware that there exists a flaw in the title or mode which invalidates it. (Art. 526) Ways of Acquiring Possession 1. Material occupation or exercise of a right a. Traditio Brevi Manu – when one already in possession of a thing by a title other than ownership continues to possess the same under a new title, that of ownership b. Constitutum Possessorium—when the owner continues in possession of the property alienated not as owner but in some other capacity. Possessor in Bad Faith is one who is aware of defect. (Art. 526) When Bad Faith Begins A possessor in good faith may become possessor in bad faith when he becomes aware of the flaw in his title or mode of acquisition. Example: When he is served with judicial summons, even before such time as when a letter is received from the true owner asking the possessor to stop On Good Faith/Bad Faith: Mistake upon a doubtful/difficult question of law may be the basis of good faith (Art. 526; Kasilag v. Rodriguez, GR No. 46623, 1939) Good faith is always presumed. Burden of proof lies on the one alleging bad faith. The belief must be a reasonable, not capricious, one. Possession is presumed to be enjoyed in the same character in which it is acquired, until contrary is proven. (Art. 527) While the possessor in good faith is the one who believes he is the owner, the possessor in the concept on owner is one who acts as if he is the owner. Ways of Acquiring Possession Possession is acquired in any of the following ways: 1. By the material occupation of the thing or the exercise of a right; 2. By the fact that the property is subject to the action of one’s will; and 3. By the proper acts and legal formalities established for acquiring the right. (Republic v. Ng, G.R. No. 182449, 2013) 2. By the subjection of the thing or right to our will a. Traditio Longa Manu – effected by mere consent or agreement of the parties b. Traditio Simbolica – effected by delivering an object (e.g. key) symbolizing the placing of one thing under the control of the vendee 3. By constructive possession or proper acts and legal formalities established for acquiring such right of possession (succession, donation, execution of public instruments) (Paras, supra) Possession through Succession Possession of hereditary property: 1. If accepted – deemed transmitted without interruption from moment of death 2. If not accepted (if heir refuses or is incapacitated to inherit) – deemed never to have possessed the same. (Art. 533) Effects of bad faith of decedent on heir Page 112 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 General Rule: Heir shall not suffer the consequences of the wrongful possession of the decedent (bad faith is personal) Exception: When he becomes aware of the flaws affecting the decedent’s title Note: It doesn’t matter whether the “facts” which show that the possessor is not unaware that he possesses thing properly/improperly is caused by him or by some other person Interruption of good faith may take place at: 1. The date of summons; or 2. That of the answer if the date of summons does not appear. Effects of possession in good faith is counted only from the date of the decedent’s death (Art. 534) Minors/Incapacitated: 1. May acquire material possession but not right to possession; 2. May only acquire them through guardian or legal representatives (Art. 535) Acquisition – cannot be acquired through force or intimidation. A possessor who objects must resort to the courts. Possession Cannot Be: 1. Acquired through force or intimidation as long as there is a possessor who objects thereto; (Art. 536) 2. Affected by acts merely tolerated; or 3. Clandestine and unknown acts; or 4. Acts of violence (Art. 537) Tolerated Acts – acts of little disturbances which a person, in interest of neighborliness or friendly relations, permits others to do on his property, such as passing over the land, tying a horse, or getting some water from a well. (Department of Education v. Casibang, GR No. 192268, 2016) The execution of a deed of sale is merely a prima facie presumption of delivery of possession of a piece of real property, which is destroyed when the delivery is not effected because of a legal impediment. Said construction or symbolic delivery, being merely presumptive, may be negated by the failure of the vendee to take actual possession of the land sold. (Copuyoc v. De Sola, GR No. 151322, 2006) III. EFFECTS OF POSSESSION RIGHTS OF LEGAL POSSESSOR Right to be respected in his possession; if disturbed, he shall be protected or restored by means established by laws. Legal presumption in favor of possessor: 1. Possessor who recovers possession unjustly lost shall be deemed to have enjoyed it without interruption. (Art. 561) This is important for purposes of acquisitive prescription. 2. Legal presumption of just title (prima facie) and he is not obliged to show or prove it (Art. 541) 3. Possession of real property presumes that movables are included (Art. 542) 4. Co-possessor 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 (Art. 543) Fruits For Possessors in Good Faith: Entitled to fruits received before possession is legally interrupted (natural and industrial – gathered or severed; civil – accrue daily) (Art.544) For Possessors in Bad Faith If at the time good faith ceases, there are natural or industrial fruits: 1. Entitled to part of net harvest and part of expenses of cultivation (proportionate to time of possession) 2. 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 Page 113 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 – barred from indemnification in other manner (Art. 545) Indemnity for Expenses/ Improvements For Possessors in Good Faith: 1. Right to be reimbursed for useful expenses with right of retention; owner has option of paying expenses or paying the increase in value of property which thing acquired by reason of useful expenses 2. May remove improvements if can be done w/o damage to principal thing - unless owner exercises option of paying; possessor in bad faith not entitled. (Art. 546 & 547) Regardless of Good Faith/Bad Faith: 1. Right to be indemnified for necessary expenses. 2. Possessor in good faith has right of retention over thing unless necessary expenses paid by owner 3. Not entitled to payment for luxurious expense but may remove them provided principal is not injured – provided owner does not refund the amount expended (Art. 549) 4. Improvements caused by nature or time to inure to the benefit of person who has succeeded in recovering possession. (Art. 551) 5. One who recovers, according to law, possession unjustly lost is deemed to have enjoyed it w/o interruption. (Art. 561) Liabilities/ Duties of Possessors 1. Return of fruits if in bad faith – fruits legitimate possessor could have received 2. Bear cost of litigation (Art. 550) Possessor in good faith not liable for loss or deterioration or loss except when fraud and negligence intervened (Art. 552) Possessor in bad faith liable for loss or deterioration even if caused by fortuitous event (Art. 552) Person who recovers possession not obliged to pay for improvements, which have ceased to exist at the time of occupation (Art. 553) Requisites: 1. Good faith 2. Owner voluntarily parted with the possession of the thing 3. In the concept of owner Possession as a Fact Possession as a fact cannot be recognized at the same time in two different personalities (Art. 538) Exceptions: 1. Co-possessor – there is no conflict of interest, both of them acting as co-owners, as in the case of property owned or possessed in common 2. Possession of different concepts or different degrees Rules In Case of Conflict or Dispute Regarding Possession 1. Present possessor shall be preferred 2. If there are 2 possessors, the one longer in possession 3. If the dates of possession are the same, the one who has title; 4. If both present a title, the Court will determine. (Meantime, the thing shall be judicially deposited.) (Art. 538) A Notice of Lis Pendens Is Proper In The Following Cases: (PORC-Q) 1. Action to Recover possession of real estate 2. Action to Quiet title thereto 3. Action to remove Clouds thereon 4. Action for Partition 5. Any Other proceedings of any kind in Court directly affecting the title to the land or the use or occupation thereof of the buildings thereon IV. LOSS OR UNLAWFUL DEPRIVATION OF A MOVABLE Possession of Movable Possession in Good Faith – Equivalent to Title One who has lost or has been unlawfully deprived of it may recover the thing from whomever Page 114 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 possesses it, ordinarily, w/o reimbursement. (Art. 559) Owner must prove: 1. Ownership of the thing 2. Loss or unlawful deprivation or bad faith of the possessor Note: If owner acts negligently or voluntarily parts with the thing owned, then he cannot recover from possessor. Summary of Recovery or Non-Recovery Principle Owner may a) Possessor in bad faith recover without b) Possessor in good faith reimbursement (if owner had lost the property or been unlawfully deprived of it) the acquisition being from a private person (Art. 559) Owner may If possessor acquired the recover but object in good faith at a must reimburse public sale or auction; owner the possessor to pay the price paid. Owner cannot If possessor acquired it in recover, even if good faith by purchase from he offers to a merchant’s store/ fairs/ reimburse markets in accordance with (whether or not Code of Commerce & the owner had Special laws a) if owner is by his lost or been conduct precluded from unlawfully denying the seller’s deprived) authority to sell b) if seller has voidable title which has not been avoided at the time of sale to the buyer in good faith for value and without notice of the sellers defect in title c) if recovery is no longer possible because of prescription d) if sale is sanctioned by statutory or judicial authority e) if possessor obtained the goods because he was an innocent purchaser for value and holder of a negotiable document of title to the goods Rules on Animals 1. Wild Animals – possessor is the one who has control 2. Domesticated and Tamed Animals – the possessor does not lose possession as long as habitually they return to the possessor’s premises (Art. 560) Note: For ownership, the owner must claim them within 20 days from their occupation by another person LOSS OF POSSESSION Loss of Possession (PALA) A possessor may lose his possession by: 1. Abandonment of the thing - renunciation of right; intent to lose the thing; no expectation to recover 2. Assignment made to another by onerous or gratuitous title - complete transmission of ownership rights; both possession de facto and de jure are lost 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 (Art. 555) Possession Not Lost When: 1. The movable property remain under the control of the possessor, even for time being he may not know their whereabouts (Art. 556) Page 115 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW 2. When agent encumbered immovable property without express authority – except when ratified (Art. 557) Note: This is the possession that may ripen into ownership. This is also referred to as adverse possession. Possession may still be recovered: 1. Unlawfully deprived or lost (Art. 559) 2. Acquired at public sale in good faith – with reimbursement (Art. 559) 3. Provision of law enabling the apparent owner to dispose as if he is owner 4. Sale under order of the court 5. Purchases made at merchant stores, fairs, or markets 6. Negotiable document of title Examples of Adverse Possession 1. The construction of permanent buildings 2. Collection of rentals 3. Harvesting of the fruits or fruit-bearing trees 4. The religious payment of taxes on property Possession Equivalent to Title: 1. Possession is in good faith; (Art. 559) 2. Owner has voluntarily parted with the possession of the thing - Possessor is in concept of an owner Examples of Possession in the Concept of Holder 1. That of the tenant 2. That of the usufructuary 3. That of the depositary 4. That of the bailee in commodatum Concept of Holder The holder of the thing or right to keep or enjoy it, but the ownership pertains to another person (Art. 525). V. POSSESSION IN CONCEPT OF OWNER, HOLDER, IN ONE’S OWN NAME, AND IN NAME OF ANOTHER Names Under Which Possession May be Exercised 1. In one’s own name 2. In the name of another (Art. 524) Possession in Another’s Name 1. Voluntary – by virtue of an agreement (e.g. when an agent possesses for the principal) 2. Necessary – (e.g. when a mother possesses for a child still in the maternal womb) 3. Unauthorized – this will become the principal’s possession only after there has been a ratification without prejudice to the effects of negotiorum gestio. Concept of an Owner A possessor in the concept of an owner is one who, whether in good faith or bad faith, claims to be and acts as if he is the owner. He thus recognizes no title of ownership in another with respect to the property involved. Page 116 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 VI. RIGHTS OF THE POSSESSOR Summary of Rules on Necessary/Useful/ Luxurious Possession & Possession by Lessee: BASIS GOOD FAITH BAD FAITH 1. Right to reimbursement Right to reimbursement Necessary 2. Right of retention pending full - no right of retention: must vacate Expenses reimbursement property – recourse to courts 1. Right to reimbursement of amount spent or increase in value – “plus value” – at owner’s option (Art. 546) 2. Right of retention until paid Useful expenses 3. Right of removal (provided no substantial damage or injury is caused to No right to reimbursement the principal, reducing its value) – UNLESS the winner (owner or lawful possessor) exercises the option in (1) In general, no right of refund or retention In general, no right to refund or retention but can remove if no substantial injury is but can remove if no substantial injury is caused. However, owner has OPTION to caused. However, owner has OPTION to allow: allow: Luxurious or Possessor to remove if principal suffers Possessor to remove if principal suffers no no injury Ornamental injury Expenses Or retain for himself (the owner) the Or retain for himself (the owner) the ornament by refunding the value it has at ornament by refunding the amount spent the time owner enters into possession, which means depreciated value (Art. (Art. 548) 549) Taxes and Charges Regarding gathered or severed fruits Regarding pending or ungathered fruits 1. On capital → charged to owner 2. On fruits → charged to possessor 3. Charges → prorated To possessor Cultivation expenses of gathered fruits – not reimbursed to possessor Pro-rating between possessor and owner of expenses, net harvest, and charges Production expenses of pending fruits – indemnity pro rata to possessor: (owner’s option) money allowing full cultivation and gathering of all fruits; if possessor refused, 1. On capital → charged to owner 2. On fruits → charged to owner 3. Charges → to owner Possessor must return value of fruits already received as well as value of fruits which the owner or legitimate possessor (not the possessor in BF) could have received with due care or diligence, MINUS necessary expenses for cultivation, gathering, and harvesting, to prevent the owner from being unjustly enriched Reimbursed to possessor To owner No indemnity Page 117 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 he shall lose all the right to be indemnified in any other manner. Improvements no longer existing Liability for accidental loss or deterioration Improvements due to time or nature No reimbursement No reimbursement Only if acting w/ fraudulent intent or negligence, after summons Liable in every case, even fortuitous event (whether before or after service) To owner or lawful possessor To owner or lawful possessor Page 118 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 VII. LOSS OR TERMINATION OF POSSESSION Modes of Loss or Termination of Possession (Art. 555) Cause Mode Through the 1. Abandonment Possessor’s 2. Possession of Voluntary Will and another for more than Intent 1 year. Against the 1. Possession of Possessor’s Will another for more than 1 year. 2. Final judgment in favor of another with a better right 3. Expropriation 4. Prescription in favor of another 5. Recovery or reivindication by the legitimate owner or possessor Due to the Object 1. Destruction or total loss of the thing 2. Going out of commerce 3. Escaping from possessor’s control CIVIL LAW Assignment v. Abandonment Assignment Abandonment At no time did the There was a time, no thing have a matter how short, possessor when the object did not have a possessor at all. Possession of Another 1. If a person is not in possession for more than a year but less than 10 years, he losses possession de fact. - In such a case he can no longer bring a action of forcible entry or unlawful detainer. - Constructive possession is also lost. 2. If a person loses possession for more than 10 years, he loses possession de jure, or the real right of possession - An accion publiciana or revindicatoria is still possible unless prescription has set in. Abandonment The voluntary renunciation of a thing Destruction, Total Loss and Withdrawal from Commerce A thing is lost when it perishes, goes out of commerce, or disappears in such a way that its existence is unknown, or it cannot be recovered. However, in cases of partial loss, in general, results only in the loss of possession of the part lost. Requisites of Abandonment 1. The abandoner must have been a possessor in the concept of owner; 2. The abandoner must have the capacity to renounce or alienate; 3. There must be a physical relinquishment of the thing/object; 4. There must be no more spes recuperandi (expectation to recover) and no more animus revertendi (intent to return or to get back) Possession of Stolen Property It is a disputable presumption that a person found in possession of a thing taken in doing of a recent wrongful act is the taker and doer of the whole act. The one who possesses a movable, acquired in good faith, has what is called an equivalent of title, but this is destroyed when it is proven that the said movable belongs to somebody else who has lost it, or has been unlawfully deprived of its possession. Assignment The complete transmission of ownership rights to another person, onerously or gratuitously ————- end of topic ————- Page 119 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 G. USUFRUCT I. CHARACTERISTICS Usufruct – is the right to enjoy temporarily the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides (Art. 562) Note: The right of the usufructuary includes the right to use (jus utendi) and the right to fruits (jus fruendi), while the owner retains the right to alienate or encumber (jus disponendi) the property. Characteristics or Elements of Usufruct 1. Essential – those without which it cannot be termed usufruct a. A real right, whether registered in the Registry of Property or not; b. Of a temporary nature or duration c. Purpose: to enjoy the benefits and derive all advantages from the object as a consequence of normal use or exploitation 2. Natural – that which ordinarily is present, but a contrary stipulation can eliminate it because it is not essential a. Obligation of conserving or preserving the form and substance (value) of the thing 3. Accidental – those which may be present or absent depending upon the stipulation of the parties a. Whether it be a pure or a conditional usufruct b. The number of years it will exist c. Whether it is in favor of one person or several, etc. (Paras, supra, p. 572) Usufruct Distinguished from Easement (Paras, supra, p. 574) USUFRUCT EASEMENT Object May be real or Involves only personal real property property. Can also be on rights, but not personal rights Extent What can be Limited to a enjoyed here are particular all uses and fruits use of the property Coverage Effect of death Cannot be constituted on an easement; but it may be constituted on the land burdened by an easement Usually extinguished by death of usufructuary May be constituted in favor or, or burdening, a piece of land held in usufruct Not extinguished by the death of the owner of the dominant estate Similarities between Usufruct and Easement 1. Both are real rights 2. Both rights may be registered, provided that usufruct involves real property 3. Both may ordinarily be alienated or transmitted in accordance with formalities set by law (Paras, supra, p. 575) Page 120 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Usufruct Distinguished from Lease (Paras, supra, p. 575) USUFRUCT LEASE Generally covers only a particular or specific use A real right only if, as in the case of a lease over real property, the lease is registered, or is for more than 1 year, otherwise, it is only a personal right The lessor may or may not be the owner as when there is a sub-lease or when the lessor is only a usufructuary May be created as a rule only by contract; and by way of exception by law (as in the case of an implied new lease, or when a builder has built in good faith on the land of another a building, when the land is considerably worth more in value than the building Extent Covers all fruits and uses as a rule Nature Always a real right Creator Can be created only by the owner, or by a duly authorized agent, acting in behalf of the owner Origin May be created by law, contract, last will, or prescription Cause The owner is more or less passive, and he allows the usufructuary to enjoy the thing given in usufruct The owner or lessor is more or less active, and he makes the lessee enjoy the thing being leased The usufructuary has the duty to make the ordinary repairs The lessee generally has no duty to pay for repairs The usufructuary pays for the annual charges and taxes on the fruits The lessee generally pays no taxes A usufructuary may lease the property itself to another The lessee cannot constitute a usufruct on the property leased Repairs Taxes As to other things Page 121 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 APPLICATION TO PERSONAL AND REAL PROPERTIES Some Rules Regarding Usufruct: 1. Usufruct can be constituted even if the object is subject to Mortgage 2. Usufruct cannot be constituted on an object subject to Pledge 3. Usufruct can be constituted on an object subjected previously to a Lease 4. Usufructuary can lease out the property to other parties 5. Usufructuary can construct improvements over property subject to usufruct How to Constitute Usufruct 1. Legal Usufruct – but is not evident in today’s laws 2. Will of parties (act inter vivos or last will) 3. By Prescription (Art. 563) II. CLASSIFICATION Kinds as to Origin 1. Legal – created by law such as usufruct of parents over the properties of their unemancipated children 2. Voluntary or conventional a. Created by will of the parties either by act inter vivos as in contract or donation; or b. Act mortis causa as in a last will and testament 3. Mixed – created by law and by will of the parties 4. Prescriptive – is one acquired by a third person through continuous use of the usufruct for the period required by law (Art. 563). Kinds as to Quantity or Extent 1. As to fruits a. Total b. Partial 2. As to object a. Universal – if over the entire patrimony b. Particular/Singular - if only individual things are included CIVIL LAW Kinds as to the Number of Persons Enjoying the Right 5. Simple – if only one usufructuary enjoys the right 6. Multiple – if several usufructuaries enjoy the right a. Simultaneous – at the same time b. .Successive – one after the other Note: In this case, if the usufruct is created by donation, all the donees must be alive, or at least already conceived, at the time of the perfection of the donation. Kinds as to the Quality or Kind of Objects involved 1. Usufruct over rights a. Rights must not be personal or intransmissible in character, so present or future support cannot be an object of usufruct 2. Usufruct over things a. Normal (or perfect or regular) – this involves non-consumable things where the form and substance are preserved b. Abnormal (or imperfect or irregular) – involves consumable things Kinds as to Terms or Conditions 1. Pure usufruct – no term or condition 2. With a term or period a. Ex die – from a certain day b. In diem – up to a certain day c. Ex die in diem – from a certain day up to a certain day 3. With a condition III. RIGHTS AND OBLIGATIONS OF USUFRUCTUARY a. Rights Of The Usufructuary As to the property and its fruits 1. To receive all the natural, industrial and civil fruits of the property. a. Fruits growing at the beginning of the usufruct belong to the usufructuary. Page 122 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Note: No necessity of refunding the owner for expenses incurred but without prejudice to the right of 3rd persons. (Ex. if the fruits had been planted by a possessor in good faith, the pending crop expenses and charges shall be pro-rated between said possessor and the usufructuary) b. Fruits growing at the end of usufruct belong to the owner. Note: The owner must reimburse the usufructuary for ordinary cultivation expenses and for seeds and similar expenses, from the proceeds of the fruits. Rights of innocent third parties should not be prejudiced (Arts. 566-569) c. Civil fruits accruing daily belong to the usufructuary in proportion to the time the usufruct may last (Art. 559). Both stock dividends and cash dividends are considered civil fruits. 2. To enjoy any increase which the thing in usufruct may acquire through accession and servitudes established in its favor (Art. 571) 3. To enjoy personally the thing in usufruct or to lease it to another, subject to the period of the usufruct General Rule: The lease expires at the end of the usufruct or earlier Exception: In the case of leases of rural lands which continues for the remainder of the agricultural year; If the usufruct should expire before the termination of the lease, he or his heirs and successors shall receive only the proportionate share of the rent that must be paid by the lessees. (Art 568) If the naked owner allows the lease to continue even after the expiration of the usufruct, he will be entitled to the rentals pertaining to such extension. CIVIL LAW 4. To bring an action for recovery of the property, and to oblige the owner to authorize him for the purpose and to provide him the necessary proofs (Art. 578). 5. To make useful improvements or expenses for pleasure without right of compensation and to remove the improvements provided no damage is caused to the property in usufruct. 6. To set-off the improvements against any damage the usufructuary may have caused to the property. As to the usufruct itself 1. To alienate the right of usufruct subject to its period (Art. 572). Right to transfer usufructuary rights – gratuitous or onerous; but is coterminous with term of usufruct; but cannot 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 and consumable – return same quality (mutuum) 2. To exercise the right of a co-owner with respect to the administration and collection of fruits from the co-owned property, and after the partition from his share. As to advances and damages 1. To be reimbursed for advances for extraordinary repairs and expenses on the property, and for taxes on the capital 2. To retain the property until he reimbursed for such advances 3. To be respected in his usufruct in case of alienation of the property by the owner, and to be indemnified for damages caused to it by latter. Other Rights of the Usufructuary 1. Right to hidden treasure as stranger (not entitled as owner but as finder; if somebody else is the finder, usufructuary gets nothing) (Art. 566) Page 123 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 2. Right not exempt from execution and can be sold at public auction by owner 3. Naked owner still have rights but w/o prejudice to usufructuary; may still exercise act of ownership – bring action to preserve ownership 4. Right to necessary expenses from cultivation at end of usufruct 5. Right to make use of dead trunks of fruit bearing trees and shrubs or those uprooted/cut by accident but obliged to plant anew 6. 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 7. Right to leave dead, uprooted trees at the disposal of owner with right to demand that owner should clear and remove them – if caused by calamity or extraordinary event – impossible or too burdensome to replace them 8. Right to oblige owner to give authority and furnish him proofs if usufruct is extended to recover real property or real right or any movable property 9. Right to demand the increase in value of property if owner did not spend for extraordinary repairs; when urgent and necessary for preservation of thing (Arts. 570-582) When a usufructuary introduces useful improvements which he can remove without damage but the owner wants to retain them and offers to reimburse him, the usufructuary prevails. Reason: The right of removal is granted to him by the law. The rule is different from that in Art 546 and 548 b. Obligations of the Usufructuary 1. Pay expenses to 3rd persons for cultivation and production at beginning of usufruct; those who have right to fruits should reimburse expenses incurred (Art. 567) 2. Generally, usufructuary has no liability when due to wear and tear, thing deteriorates, CIVIL LAW obliged to return in that state; except when there is fraud or negligence, then he shall be liable (Art. 573) Before the Usufruct Begins 1. To make an inventory of the property and to give security for the fulfillment of his obligation (Art. 583), but may be excused when no one will be injured thereby (Art. 585). Note: Not applicable to parents who are usufructuary of children except when 2nd marriage contracted. Caucion Juratoria – promise under oath to deliver: 1. Furniture necessary for the use of the usufructuary 2. House included in the usufruct 3. Implements, tools and other movable property necessary for an industry or vocation for which he is engaged (Art. 587) Excused – allowed by owner, not required by law or no one will be injured, when the usufructuary is the donor of the property or when there is a stipulation in a will or contract In case the naked owner refuses to make the exemption, appeal may be made to the courts and the judge should consider all the circumstances in deciding whether or not to give the grant. For Failure to Give Security Owner may demand that: 1. Immovables be placed under administration; 2. Negotiable instruments can be converted into registered certificates or deposited in bank; 3. Capital and proceeds of sale of movables be invested in safe securities; 4. Interest on proceeds or property under administration belong to usufructuary; 5. Owner may retain property as administrator with an obligation to deliver fruits to usufructuary until he gives sufficient security; 6. Effect of security is retroactive to day he is entitled to fruits. Page 124 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 IV. RIGHTS OF THE OWNER Note: Unless exempted by owner. During the Usufruct 1. To take care of the property as a good father of the family (Art. 589). 2. To answer for damages to the property caused by a person to whom he has alienated or leased his right of usufruct (Art. 590). 3. To make ordinary repairs, and to notify the owner of the urgent extraordinary repairs which shall be at the latter’s expense (Art. 592-593). 4. To permit works and improvements by the owner on the property not prejudicial to the usufruct. 5. To pay annual taxes and charges on the fruits and to pay interest on taxes on capital when such taxes have been paid by the owner (Art. 596-597). 6. To notify the owner of any prejudicial act committed by third persons, and he shall be liable should he not do so, for damages, as if it was caused through his own fault. 7. To pay for court expenses and costs regarding the usufruct. 8. Insurance At the Termination of the Usufruct 7. To return the property in usufruct unless the usufructuary has a right of retention (Art. 612). 8. To pay legal interest on the expenses for extraordinary repairs made, and the proper interest on taxes paid by the owner (Art. 594 & 597). Other obligations of the usufructuary 1. 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 (Arts. 583-602) Rights of the Naked Owner 1. Alienate thing (Art. 581) 2. Cannot alter form or substance (Art. 581) 3. Cannot do anything prejudicial to usufructuary (Art. 581) 4. Construct any works and make any improvement provided it does not diminish value or usufruct or prejudice right of usufructuary (Art. 595) Obligations of the Naked 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 and 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 V. EXTINCTION, TERMINATION, AND EXTINGUISHMENT Extinguishment of Usufruct: (PLDTERM) 1. Prescription – use by 3rd person 2. Termination of right of person constituting usufruct 3. Total Loss of thing 4. Death of usufructuary – unless contrary clearly intention appears 5. Expiration of period of usufruct for which it was constituted or by the fulfillment of any resolutory condition provided in the title creating the usufruct 6. Renunciation of usufructuary – express 7. Merger of usufruct and ownership in the same person (Art. 603) Page 125 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Other Important Points: • Loss in part – remaining part shall continue to be held in usufruct (Art. 604) • Usufruct cannot be constituted in favor of a town, corporation or association for more than 50 years (Art. 605) • Usufruct constituted on immovable whereby a building is erected – and building is destroyed – right to make use of land and materials • If owner wishes to construct a new building – pay usufructuary the value of interest of land and materials • Both share in insurance if both pay premium; if owner only – then proceeds will go to owner only (Arts. 607-608) • Effect of bad use of the thing – owner may demand the delivery of and administration of the thing with responsibility to deliver net fruits to usufructuary at termination of usufruct (Art. 610) • Thing to be delivered to owner with right of retention for taxes and extraordinary expenses w/c should be reimbursed, security of mortgage shall be cancelled (Art. 612) In case of expropriation: when naked owner alone was given indemnity - he has the option to replace with equivalent thing or pay usufructuary legal interest; usufructuary alone was paid – must give to naked owner and compel return of interest; if both – each own indemnity, the usufruct extinguished (Art. 609) If the builder is a usufructuary, his rights will be governed by Arts. 579 and 580. In case like this, the terms of the contract and the pertinent provisions of law should govern. By express provision of law, the usufructuary, do not have the right to reimbursement for the improvements they may have introduced on the property. (Moralidad vs. Parnes, GR No. 152809, 2006) ————- end of topic ————H. EASEMENTS Meaning of easement/servitude a. b. It is an encumbrance upon an immovable called the dominant estate – belonging to another person (easement of common law, Art. 613). Or in favor of a community or a person to whom the servient estate does not belong (servitude of civil law, Art. 614) An easement or servitude is a real right on another’s property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allowing somebody else to do or something to be done on his or her property, for the benefit of another person or tenement. (Pilar Development Corporation v. Dumadag, GR No. 194336, 2013) I. CHARACTERISTICS Characteristics of Easement a. A real right – an action in rem is possible against the possessor of the servient estate b. Imposable only on another’s property c. Jus in re aliena – real right that may be alienated although the naked ownership is maintained d. Limitation or encumbrance on the servient estate for another’s benefit e. There is inherence or inseparability from the estate to which it belongs i. Easements are inseparable from the estate to which they actively or passively belong (Art. 617); they are transmissible, cannot be alienated or mortgaged independently of the estate, or assigned to another immovable. f. It is indivisible (even if the tenement be divided) i. Partition of either the servient or dominant estate between two or more persons does not affect the existence of the easement g. It is intransmissible (unless the tenement affected also be transmitted) h. It is perpetual (as long as the dominant and servient estate exists unless sooner Page 126 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 extinguished by the causes enumerated in the law). (Paras, supra, p. 646-647). CIVIL LAW II. CLASSIFICATION 10. Non-apparent – show no external indication of their existence (Ex. easement of not building to more than certain height). (Art. 615) According to Purpose of Easement or the Nature of limitation 1. Positive – one which imposes upon the servient estate the obligation of allowing something to be done or of doing it himself. (Art. 616) 2. Negative – that which prohibits the owner of the servient estate from doing something which he could lawfully do if the easement did not exist. (Art 616) Doctrine of Apparent Sign Easements are inseparable from the estate to which they actively or passively pertain. The existence of the apparent sign under Art. 624 is equivalent to a title. It is as if there is an implied contract between the two new owners that the easement should be constituted, since no one objected to the continued existence of the windows. (Amor v. Florentino, GR No. L-48384, 1943) According to Party Given the Benefit 1. Real (or predial) – for the benefit of another belonging to a different owner (e.g. easement of water where lower estates are obliged to allow water naturally descending from upper estates to flow into them) (Art. 614) 2. Personal – for the benefit of one or more persons or community (e.g. easement of right of way for passage of livestock) (Art. 614) According to Right Given 1. Right to partially use the servient estate (Ex. Right of Way); 2. Right to get specific materials or objects from the servient estate; 3. Right to participate in ownership (Ex. easement of party wall) 4. Right to impede or prevent the neighboring estate from performing a specific act of ownership According to the Manner They are Exercised 1. Continuous – their use is incessant or may be incessant; (Art. 615) Note: For legal purposes for acquisitive prescription, the easement of aqueduct is considered continuous; easement of light and view is also continuous. 2. Discontinuous – used at intervals and depend upon the acts of man (E.g. right of way because it can only be used if a man passes). (Art. 615) According to Whether or Not their Existence is Indicated 9. Apparent – made known and continually kept in view by external signs that reveal the use and enjoyment of the same (Ex. right of way when there is an alley or a permanent path). (Art. 615) According to Source or Origin and Establishment of Easement 1. Voluntary – constituted by will or agreement of the parties or by a testator. (Art. 619) 2. Mixed – created partly by agreement and partly by law 3. Legal – constituted by law for public use or for private interest. (Art. 619) How Established: 1. By law (Legal) 2. By the will of the owners (Voluntary) 3. Through prescription (only for continuous and apparent easements) (Art. 619) Resultantly, when the court says that an easement exists, it is not creating one. For, even an injunction cannot be used to create one as there is no such thing as a judicial easement. The court merely declares the existence of an easement created by the parties. (La Vista Association v. CA, GR No. 95252, 1997) Page 127 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 III. MODES OF ACQUIRING EASEMENTS Easement/Servitude may be acquired by 1. Title, that is, by judicial acts like law, donation, contact, will (Art. 620) 2. Prescription of 10 years through adverse possession or frequent exercises (Art. 620). This applies only to continues and apparent easement, either: (a) Positive from the day the dominant owner begins to exercise it, e.g. party wall (b) Negative from the day in which notarial prohibition is made on servient owner e.g. not to obstruct the passage light 3. Deed of recognition by servient owner, e.g. right of way (Art. 623). 4. Final judgment, e.g. court declares existence in an action filed for the purpose (Art. 623). Resultantly, when the court says that an easement exists, it is not creating one. For, even an injunction cannot be used to create one as there is no such thing as a judicial easement. The court merely declares the existence of an easement created by the parties. (La Vista Association v. CA, GR No. 95252, 1997) 5. Apparent sign established by owner of two adjoining estates. Then one estate is alienated and the easement continuous actively or passively unless at the time of division, it is provided that the easement will cease or the sign removed before execution of deed (Art. 624). IV. RIGHTS AND OBLIGATIONS OF THE OWNERS OF THE DOMINANT AND SERVIENT ESTATES Rights Of Dominant Owner 1. Exercise all rights necessary for the use of the easement. (Art. 625) 2. Make any works necessary for the use and preservation of the servitude; subject to the following conditions: (Art. 627) (a) The works shall be at his expense, are necessary for the use and preservation of the servitude; CIVIL LAW (b) They do not alter or render the servitude more burdensome; (c) The dominant owner, before making the works, must notify the servient owner; and (d) They shall be done at the most convenient time and manner so as to cause the least inconvenience to the servient owner 3. Renounce the easement totally if he desires to exempt himself from contribution to necessary expenses. (Art. 628) 4. Ask for mandatory injunction to prevent impairment of his use of the easement. (Resolme v. Lazo, GR No. L-8654, 1914) Obligations of the Dominant Owner 1. Notify the servient owner of works necessary for the use and preservation of the servitude. (Art. 627) 2. Contribute to the necessary expenses if there are several dominant estates in proportion to the benefits derived from the works. (Art. 628) 3. Cannot alter or impose added burden on the easement. (Art. 627) (a) Cannot use the easement except for benefit originally contemplated (b) In easement of right of way, he cannot increase the agreed width of the path nor deposit soil or materials outside the boundaries agreed upon 4. Choose the most convenient time and manner in making the necessary works as to cause the least inconvenience to the servient owner. (Art. 627) Rights of the Servient Owner 1. Retain ownership of the portion on which the easement is established, and may use it in such a manner as not to affect the exercise of the easement. (Art. 630) 2. Change the place or manner of the use of the easement, provided it be equally convenient. (Art. 629) 3. Use the property subject of the easement, unless there is an agreement to the contrary. (Art. 628) The owner of the servient estate retains the ownership of the portion on which the easement Page 128 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 is established and may use the same in such a manner so as not to affect the exercise of the easement. (Pilar Development Corporation v. Dumadag, GR No. 194336, 2013) Obligations of the Servient Owner 1. Contribute to the necessary expenses in case he uses the easement, unless there is an agreement to the contrary 2. Not to impair the use of the easement 3. In case of impairment, to restore conditions to the status quo at his expense plus damages (Arts. 627-630) V. MODES OF EXTINGUISHMENT Easement/servitude are extinguished by: 1. Merger in one person of the ownership of both dominant and servient estates. 2. Non-use for 10 years. Count: (a) Discontinuous Easement: from day not used, (b) Continuous Easement: from day an act contrary to easement happens 3. Dominant and/or servient estates fall into condition wherein the easement cannot be used, e.g. flood permanently submerging the land. If the easement is revived, it has not yet prescribed. 4. Expiration of term or fulfillment of condition, in conditional or temporary easement. 5. Renunciation by dominant owner 6. Redemption agreed upon by dominant and servient owners, such as payment of certain sum, doing of an act, or other prestation. In co-ownership, there is no prescription for as long as one of the co-owner exercises the easement(Art. 633). VI. LEGAL V. VOLUNTARY EASEMENT Legal Easements Those imposed by law having for their object either public use or the interest of private persons. (Art. 634) They shall be governed by the special laws and regulations relating thereto, and in the absence thereof, by the Civil Code. (Art. 635) Voluntary Easements Those which may be established by the owner of a tenement of piece of land as he may deem suitable, and in the manner and form which he may deem best, provided that he does not contravene the laws, public policy or public order. (Art. 688) VII. KINDS OF EASEMENT 4. Public – for public or communal use 5. Private – for the interest of private persons/private use, including those relating to (Art. 637-687): (WALL-DRIP) Waters Right of Way Light and View Party Wall Drainage of Building Intermediate Distances Against Nuisance Lateral and Subjacent Support a. Relating to waters Easement Relating To Waters Lower estates are obliged to receive: 6. The waters which naturally and without the intervention of man descend from the higher estates; as well as 7. Stones or earth which they carry with them Owner of the lower estate cannot construct works, which will impede the easement, nor can the owner of the higher estate make works, which will increase the burden Banks of rivers and streams, although of private ownership, are subject throughout their entire length and within a zone of 3 meters along their margins, to the easement of public use in the general interest of navigation, floatage, fishing and salvage Page 129 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Estates adjoining the banks of navigable and floatable rivers are, subject to the easement of towpath, for the exclusive service of river navigation and floatage Compulsory easements for drawing of water and for watering animals can be imposed for reasons of public use in favor of a town or village, after payment of the proper indemnity Use of any water by anyone can be disposed by having the water flow through the intervening estates but is obliged to do the following: 1. Prove that he can dispose of the water and that it is sufficient for the use intended 2. Show that the proposed right of way is the most convenient and least onerous to 3rd persons 3. Indemnify the owner of the servient estate in the manner determined by the laws and regulations Easement of aqueduct is continuous and apparent even though the flow of water may not be continuous (Arts. 637-638) b. Right of way Easement of Right of Way Right granted to a person or class of persons to pass over the land of another by using a particular pathway therein, to reach the former’s estates, which have no adequate outlet to a public highway, subject, however to payment of indemnity to the owner of the servient estate (Art. 649) Requisites: (OIL-PAN) 1. Claimant must be an Owner of enclosed immovable or one w/ real right 2. No adequate outlet to public highway 3. Right of way is Absolutely necessary 4. Least prejudicial 5. Isolation not due to claimant’s own act 6. Proper indemnity CIVIL LAW Note: Burden of proof of proving the requisites is on the owner of the dominant estate In determining the existence of an easement of right of way, the requirement of "least prejudicial to the servient estate" trumps "distance between the dominant estate and the public highway." Distance is considered only insofar as it is consistent to the requirement of least prejudicial. (Reyes v. Valentin, G.R. No. 194488, 2015) On Indemnity Not compulsory if the isolation of the immovable is due to the proprietor’s own acts Right of way is granted without indemnity if land was acquired by and is surrounded by the other estates of the vendor, exchanger or co-owner through: 7. Sale 8. Exchange 9. Partition Extinguishment: Legal or Compulsory Right of Way 10. When the dominant estate is joined to another estate (such as when the dominant owner bought an adjacent estate) which is abutting a public road, the access being adequate and convenient 11. When a new road is opened giving access to the isolated estate 12. In both cases: must substantially meet the needs of the dominant estate. Otherwise, the easement may not be extinguished. 13. Extinguishment NOT ipso facto; the servient estate may demand; if he chooses not to, the easement remains and he has no duty to refund indemnity 14. If extinguished, must return the amount received as indemnity to the dominant owner without any interest. Interest shall be deemed in payment for the rent. Article 630 expressly provides that “[t]he owner of the servient estate retains ownership of the portion on which the easement is established, Page 130 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 and may use the same in such manner as not to affect the exercise of the easement.” Thus, the owners of the servient estate retained ownership of the road right-of-way even assuming that said encumbrance was for the benefit of the owner of the dominant estate. (Mercader, Jr. vs. Bardilas, GR No. 163157, 2016) the introduction of structures or objects which, by their nature, create or increase the probability of injury, death upon or destruction of life and property found on the land is necessary, then the owner should be compensated for the monetary equivalent of the land (National Power Corporation vs. Tiangco, GR No. 170846, 2007). Under the law, and unlike in purchase of a property, should the right of way no longer be necessary because the owner of the dominant estate has joined it to another abutting on a public highway, and the servient estate demands that the easement be extinguished, the value of the property received by the servient estate by way of indemnity shall be returned in full to the dominant estate. (De Guzman v. Filinvest Development Corporation. GR No. 191710, 2015) c. Light and View The only servitude which a private owner is required to recognize in favor of the government is the easement of a public highway, way, private way established by law, or any government canal or lateral that has been pre-existing at the time of the registration of the land. If the easement is not pre-existing and is sought to be imposed only after the land has been registered under the Land Registration Act, proper expropriation proceedings should be had, and just compensation paid to the registered owner. (Eslaban v. Vda. De Onorio, GR No. 146062, 2001) Easement of right of way is discontinuous. It may be exercised only if a person passes or sets foot on somebody else’s land. An easement of right of way of railroad tracks is discontinuous because the right is exercised only if and when a train operation by a person passes over another’s property. (Bomedco v. Valdez, GR No. 124699, 2003) If the easement is intended to perpetually or indefinitely deprive the owner of his proprietary rights through the imposition of conditions that affect the ordinary use, free enjoyment and disposal of the property or through restrictions and limitations that are inconsistent with the exercise of the attributes of ownership or when Easement of Light and View Period of prescription for the acquisition shall be counted: 15. From the time of opening of the window, if through a party wall 16. From the time of the formal prohibition upon the proprietor of the adjoining land, if window is through a wall on the dominant estate (Art. 668) An easement of light and view can be acquired through prescription of 10 years counting from the time when the owner of the dominant estate formally prohibits, through a notarial instrument, the adjoining lot owner from blocking the view of a window located within the dominant estate. (Alolino v. Flores,GR No. 198774, 2016 ————- end of topic ————I. NUISANCE Nuisance – is any act, omission, establishment, business, condition of property, or anything else which: 17. Injures or endangers the health or safety of others 18. Annoys or offends the senses 19. Shocks, defies or disregards decency or morality 20. Obstructs or interferes with the free passage of any public highway or street, or any body of water 21. Hinders or impairs the use of property (Art. 694) Based on case law, the term “nuisance” is deemed to be “so comprehensive that it has been applied to almost all ways which have interfered with the rights of the citizens, either in person, Page 131 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 property, the enjoyment of his property, or his comfort.” (Rana vs. Uy, GR No. 192861 & 192862, 2014) NOTE: Lapse of time cannot legalize any nuisance, whether public or private Kinds of Nuisances 22. Public (or common) nuisance – affects the public at large or a community or considerable number of persons or their properties. Thus: A house constructed partly on a municipal street affects adversely the use of that street by the public; and An unsanitary piggery located in residential area emitting offensive odors and pernicious to the health of residents. A noisy or dangerous factory in a residential district 23. Private nuisance – affects an individual or a limited number of persons only (Art. 695). Examples: The wall of a property in danger of collapsing on the adjoining property owned by another person Obstruction to the right of way of a property and its residents 24. Nuisance Per Se – one which is a nuisance at all times and under any circumstances, regardless of location or circumstances, such as a house constructed on a public street 25. Nuisance Per Accidens – nuisance by reason of location, surrounding or in the manner it is conducted or managed. (De Leon, supra, p. 554-555). A basketball court, an object of recreation in a barangay, is a mere nuisance per accidens and not per se, as it does not pose an immediate danger to safety of persons and property. Hence, it cannot be summarily abated. (Cruz v. Pandacan Hiker’s Club, GR No. 188213, 2016) Doctrine of Attractive Nuisance Attractive Nuisance – dangerous instrumentality or appliance which is likely to attract children to play CIVIL LAW Reason for the Doctrine: The principal reason for the doctrine is that the condition or appliance in question although its danger is apparent to those of age, is so enticing or alluring to children of tender years as to induce them to approach, get on or use it, and this attractiveness is an implied invitation to such children. (Hidalgo Enterprises, Inc. v. Balandan, GR No. L-3422, 1952) One who maintains on his premises dangerous instrumentalities or appliances of a character likely to attract children in play, and who fails to exercise ordinary care to prevent children from playing therewith or resorting thereto, is liable to a child of tender years who is injured thereby, even if the child is technically a trespasser in the premises. (Hidalgo Enterprises, Inc. v. Balandan,, GR No. L-3422, 1952) Note: Generally 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. I. NUISANCE PER SE Nuisance per se is one which is a nuisance at all times and under any circumstances, regardless of location or circumstances, such as a house constructed on a public street or a fishpond obstructing creek. Squatting is unlawful and the grant of the permits fosters moral decadence. The houses are public nuisance per se and they can be summarily abated, even without the aid of the courts. The squatters can, therefore, be ousted. (City of Manila v. Gerardo Garcia, et al. GR No. L-26053, 1967) II. NUISANCE PER ACCIDENS Nuisance per accidens becomes a nuisance by reason of circumstances, location or surroundings. It is not a nuisance by its nature but it may become so by reason of locality, surrounding, or circumstances (e.g. slaughter house). Page 132 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW III. LIABILITIES He who creates a nuisance is liable for the resulting damages and his liability continues as long as the nuisance continues. that criminal prosecution is not allowable. Hence the only remedies are a civil action and abatement without judicial proceedings (extrajudicial abatement) (Art. 705) Every successive owner or possessor of property who fails or refuses to abate a nuisance in that property started by a former owner or possessor is liable therefor in the same manner as the one who created it (Art. 696). Effects on Owners Owner of nuisance property is not entitled to compensation. (Art. 436) When successor to the property may be held liable The successor, to be held liable, must knowing fail or refuse to abate the nuisance. IV. NO PRESCRIPTION Lapse of time cannot legalize any nuisance, whether public or private (Art. 689). Effect of lapse of time The action to abate a public or private nuisance is not extinguished by prescription (Art. 1143[2], Civil Code). Exception Arts. 698 and 1143(2) do not apply to easements which are extinguished by obstruction and nonuser for ten years. (See Art. 631). V. REMEDIES AGAINST PUBLIC NUISANCE The remedies against a public nuisance are: 1. Criminal prosecution under the Revised Penal Code or a local ordinance; 2. Civil action, including damages; 3. Abatement, summary and without judicial proceedings Abatement is the exercise of police power which includes the right to destroy property regarded as a public health and safety, and there is accordingly no obligation for compensation. VI. REMEDIES AGAINST A PRIVATE NUISANCE The remedies against a private nuisance are the same as in the case of public nuisance, except Subsequent owner of the property, having full knowledge of the existence of the nuisance and did not remove the nuisance, is solidarily liable for the injuries and damages caused. The successor, to be held liable, must knowingly fail or refuse to abate the nuisance All Remedies May be Simultaneously Pursued to Remove a Nuisance Aside from the remedy of summary abatement which should be taken under the parameters stated in Art. 704 (for public nuisances) and Art. 706 (for private nuisances), a private person whose property right was invaded or unreasonably interfered with by the act, omission, establishment, business or condition of the property of another, may file a civil action to recover personal damages. Abatement may be judicially sought through a civil action therefor if the pertinent requirements under the Civil Code for summary abatement, or the requisite that the nuisance is a nuisance per se, do not concur. To note, the remedies of abatement and damages are cumulative; hence, both may be demanded. (Rana v. Uy, GR No. 192861 & 192862, 2014) VI. CRIMINAL PROSECUTION Criminal prosecution is only a remedy against a public nuisance. In private nuisance, criminal prosecution is NOT a remedy. However, if indeed a crime has been committed, as defined by the Revised Penal Code, criminal prosecution can proceed. (Paras, p. 751) Page 133 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 VII. JUDGMENT WITH ABATEMENT Besides being held liable for damages or being sentenced to the penalty, the Court may also order to abate the nuisance. VIII. EXTRAJUDICIAL ABATEMENT Any person injured by a private nuisance may abate it by removing, or if necessary, by destroying the thing which constitutes the nuisance, without committing a breach of the peace or doing unnecessary injury. However, it is indispensable that the procedure for extrajudicial abatement of a public nuisance by a private person be followed. (Art. 706) Note: An extrajudicial abatement can only be applied for if what is abated is a nuisance per se and not nuisance per accidens. Requisites for extrajudicial abatement 1. The nuisance must be specially injurious to the private person affected 2. No breach of peace or unnecessary injury is committed 3. Demand has been made upon the owner or possessor of the property to abate the nuisance 4. Demand has been rejected 5. Abatement must be approved by the district health officer and executed with the assistance of the local police 6. Value of the destruction does not exceed P3,000 (Art. 704) Note: A private person or a public official extrajudicially abating a nuisance shall be liable for damages to the owner of the thing abated: 1. If he causes unnecessary injury; 2. If an alleged nuisance is later declared by the courts to be not a real nuisance. (Art. 707) While DPWH, by virtue of the AO issued by the President, may abate the billboards for being public nuisance if it is specially injurious to it, the following procedure must be necessarily followed in order to satisfy the standards of due process: CIVIL LAW 1. That demand be first made upon the owner or possessor of the property to abate the nuisance; 2. That such demand has been rejected; 3. That the abatement be approved by the district health officer and executed with the assistance of the local police and 4. That the value of the destruction does not exceed three thousand pesos. 5. (Department of Public Works and Highways v. City Advertising Ventures Corp., G.R. No. 182944, 2016). IX. SPECIAL INJURY TO INDIVIDUAL When a private person may sue on account of a public nuisance a) Ordinarily, it is the mayor who must bring the civil action to abate a public nuisance b) But a private individual can also do so, if the public nuisance is SPECIALLY INJURIOUS to himself. a. The action may be for injunction, abatement or for damages. (Art. 703, Paras, p. 750) X. RIGHT OF INDIVIDUAL TO ABATE A PUBLIC NUISANCE Requirements for Abatement of a Public Nuisance by a Private Person: I. Any private person may abate a public nuisance which is specially injurious to him by removing, or if necessary, by destroying the thing which constitutes the same, without committing a breach of the peace, or doing unnecessary injury. II. But it is necessary that: 1. Demand has been made upon the owner or possessor of the property to abate the nuisance 2. Demand has been rejected 3. Abatement be approved by the district health officer and executed with the assistance of the local police Page 134 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 4. Value of the destruction does not exceed P3,000 5. If public nuisance, it must be specially injurious to him (Art. 704) 5. Intellectual Creation 6. Prescription 7. Succession (Art. 712) XI. RIGHT TO DAMAGES A person may maintain an action for damages caused by a nuisance. I. OCCUPATION The acquisition of ownership by seizing corporeal things which have no owner, made with the intention of acquiring them, and accomplished according to legal rules. (De Leon, supra, p. 585) If the nuisance is temporary or recurrent in character, each repetition of it gives rise to a new cause of action. Requisites: The remedies of abatement and damages are cumulative; hence, both may be demanded. Even if nuisance no longer exists, the aggrieved person may still pursue a civil action for damages suffered during the existence of the nuisance. XII. DEFENSES TO ACTION Defenses 1. Estoppel - One who voluntarily places himself in a situation whereby he suffers an injury will not be heard to say that his damage is due to a nuisance maintained by another 2. The non-existence of the nuisance 3. Impossibility of abatement 4. Public necessity (Paras, p. 752) XIII. WHO MAY SUE ON PRIVATE NUISANCE Any person injured by a private nuisance may file a civil action or cause the summary abatement thereof. Possession of the real estate alone is sufficient to sustain an action. Legal title is not necessary. ————- end of topic ————J. MODES OF ACQUIRING OWNERSHIP Modes of Acquiring Ownership (OLD-TIPS) 1. Occupation 2. Law 3. Donation 4. Tradition 1. Seizure or apprehension 2. Property seized must be corporeal movable property 3. Property must be susceptible of appropriation 4. Intent to appropriate 5. Compliance with requisites or conditions of the law (De Leon, supra, p. 585). Note: The holding of the material is not required as long as there is right of disposition. Abandoned property – res derelicta, a thing is considered abandoned when: 1. The spes recuperandi (expectation to recover) is gone. 2. The animo revertendi (intention to return or to have it returned) has been given up by the owner. (De Leon, supra, p. 587). Un-owned Property – res nullius 1. Without an owner 2. Intent to appropriate 3. Compliance with the requisites or conditions of the law Some Kinds of Property Acquirable by Occupation 1. Those without an owner, like animals that are object of hunting and fishing 2. Hidden treasure (he gets half as finder, by occupation, provided he is not a trespasser). (Art. 154) 3. Abandoned movables Note: Stolen property cannot be the subject of occupation. Page 135 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Note: Hunting and fishing are regulated by special laws: Act 2590; Fisheries Act 4003 as amended by C.A.116, C.A. 147 and R.A. 659; Act 1499 as amended by Act 1685; P.D. 534; Municipal ordinances. Kinds of Animals 1. Wild – considered res nullius when not yet captured; when captured and escaped – becomes res nullius again 2. Domesticated animals – originally wild but have been captured and tamed; now belong to their capturer; has habit of returning to premises of owner; becomes res nullius if they lose that habit of returning and regain their original state of freedom 3. Domestic/tamed animals – born and ordinarily raised under the care of people; become res nullius when abandoned by owner. (De Leon, supra) Rules When Movable Found is not Treasure: 1. Must be returned to owner 2. If finder retains the thing found – he may be charged with theft 3. If owner is unknown, the movable must e deposited with the mayor; mayor shall announce publicly the finding of the movable for 2 weeks in a way he deems best 4. If owner does not appear 6 months from publication, the movable shall be awarded to the finder 5. If owner appears, he is obliged to pay the finder 1/10 of value of property as price 6. If movable is perishable or cannot be kept without deterioration or without expenses, it shall be sold at public auction 8 days after the publication. (Art. 719) Ownership of a Piece of Land Cannot be Acquired by Occupation Land that does not belong to anyone is presumed to be public land. When a land is without an owner, it pertains to the State. Note: While land cannot be acquired by occupation, it may be acquired by prescription (which is an altogether different thing). Abandonment requires: 26. A clear and absolute intention to renounce a right or a claim or to abandon a right or property; and 27. An external act by which that intention is expressed or carried into effect. (De Leon, supra) The intention to abandon implies a departure, with the avowed intent of never returning, resuming or claiming the right and the interest that have been abandoned. (Castellano v. Francisco, GR No. 155640, 2008) II. DONATIONS Nature An act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it (Art. 725) Donation is perfected from the moment the donor knows of the acceptance by the donee (Art. 724) Characteristics 1. Unilateral – obligation imposed on the donor 2. Consensual – perfected at time donor knows of acceptance Requisites of Donation (CIDAF) 1. The donor must have Capacity to make the donation of a thing or right 2. Donative Intent (animus donandi) or intent to make the donation out of liberality to benefit the donee 3. Delivery, whether actual or constructive of the thing or right donated 4. Donee must Accept or consent to donation 5. Compliance with the prescribed Form The donation is perfected once the acceptance of the donation was made known to the donor. Accordingly, ownership will only revert to the donor if the resolutory condition is not fulfilled. (Quijada v. CA, GR No. 126464, 1998) Page 136 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 KINDS OF DONATION Kinds As To Effectivity 1. Inter vivos - takes effect during the lifetime of the donor, even though the property shall not be delivered till after donor’s death or even though it is subject to resolutory or suspensive condition (Art. 729 and Art. 730). 2. Mortis Causa - takes effect upon the death of the donor and shall be governed by the rules of succession (Art. 728) 3. Propter Nuptias - Donation by reason of and in consideration of marriage, before its celebration, in favor of one or both of the future spouses (Art. 82, Family Code) Kinds As to Consideration 1. Pure and Simple – When the cause of the donation is the pure liberality of the donor in consideration of the donee’s merits, 2. Remuneratory or compensatory – Donation is given out of gratitude on account of the services rendered by the donee to the donor, provided the services do not constitute a demandable debt. 3. Modal – When the donation imposes upon the donee (necessarily future) a burden less than the value of the thing given 4. Onerous – the value of which is considered the equivalent of the consideration for which it is given and thus governed by the rules of obligations and contracts Note: Where a contract is seemingly a remuneratory donation but is silent as to the value of the burden imposed on the donee of a thing of undetermined value, the law on contract instead of the law on donations should govern. (Reyes v. Asuncion, GR No. 196083, 2015) As to Effectivity of Extinguishment 1. Pure – not subject to any condition (uncertain event) or period 2. Conditional – subject to suspensive or resolutory condition 3. With a Term – subject to a period, suspensive or resolutory CIVIL LAW Note: Illegal or impossible conditions in simple and remuneratory donations are considered as not imposed. Donation itself remains valid and only the illegal or impossible conditions are disregarded. (Art. 727) Donation Inter Vivos distinguished from Donation Mortis Causa DONATION INTER DONATION MORTIS VIVOS CAUSA Disposition and Disposition happens acceptance to take upon the death of effect during lifetime donor; acceptance by of donor and donee donee can only be done after donor’s death Already pertains to Even if there is a term the donee unless of effectivity and there is a contrary effectivity is upon the intent death of the donor, still entitled to fruits Formalities required - Formalities required follow law on follow law on donations and certain succession to be valid, kinds of donations and donation must be and law on in the form of a will obligations and contracts (suppletory) Irrevocable at the Revocable ad mutuum instance of the donor; (exclusive will of may be revoked only donor) by reasons provided by law Revoked only for reasons provided for by law (except onerous donations) Some Rules on Determination Whether Mortis Causa or Inter Vivos Where a donation was made “in consideration of love and affection” but further stipulated that “It became effective upon the death of the donor provided that in the event the donee should die before the donor, the donation would be deemed automatically rescinded,” the Court held that the same was a mortis causa since the right of Page 137 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW disposition was not transferred to donee while donor is still alive. (Sicad v. CA, GR No. 125888, 1998) (c) If oral, it must be with simultaneous delivery of the thing or of the document representing the right donated. (Art. 748) Where, however, a donation was made stipulating that it would take effect after the death of the donor but further stipulated that (1) the donor will not dispose nor take it away from the donee and that (2) the donor is parting with the beneficial ownership while he lived was held to be inter vivos. 2. Immovable Property (a) To be valid, donation must be made in a public instrument, specifiying therein the property donated and the value of the charges which the done must satisfy. (b) The acceptance of the donee may be made in the same deed of donation or in a separate public document.. (c) If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. (d) Acceptance must be be made during the lifetime the donor. (Art.749) In case of doubt, the conveyance should be deemed donations inter vivos, rather than mortis causa, in order to avoid uncertainty as to the ownership of the property subject of the deed (Villanueva v. Spouses Branoco, GR No. 173804, 2011). The reservation of the “right, ownership, possession and administration of the property” and made the donation operative upon death , in the context of an irrevocable donation, simply means that the donors parted with their naked title, maintaining only beneficial ownership of the donated property while they lived. (Del Rosario vs. Ferrer, GR No. 187056, 2012) Badges of Mortis Causa: 1. Title remains with donor (full or naked ownership) and conveyed only upon death 2. Donor can revoke ad nutum (Villanueva v. Spouses Branoco, G.R. No. 172804, 2011) Note: Transfer is void if transferor survives transferee (Del Rosario v. Peralta G. No. 187056, 2010; Villanueva v. Spouses Branoco, GR No. 172804, 2011) FORMS OF DONATION 1. Movable Property (a) If the value exceeds P5,000, the donation and acceptance shall be made in writing. Otherwise the donation shall be void. (b) If the value is below P5,000, donation may be made orally or in writing. Note: A donation mortis causa must comply with the formalities of a last will and testament otherwise; it would be void and would produce no effect. (Maglasang v. Heirs of Corazon Cabatingan, GR No. 131953, 2002) If the donation is made in such a way that the full and naked ownership will pass to the donee upon the death of the donor, then it is at that time when the donation will take effect and it is the donation mortis causa which should be embodied in the last will and testament. (Maglasang v. Cabatingan, GR No. 131953, 2002) Checklist for Donation: 1. Whether onerous or gratuitous – if onerous, governed by law on contracts 2. If gratuitous, whether mortis causa or inter vivos – if mortis causa, governed by law on succession 3. If inter vivos, whether perfected or not (made known to the donor). If no perfection, donation is void. 4. If perfected, check for the capacity of the donor to give and the donee to receive. If no capacity, donation is void. 5. Compliance with form, otherwise void. (a) Art. 748 (movable); and (b) Art. 749 (immovable) Page 138 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 DOUBLE DONATIONS Rule: Priority in time, priority in right 1. If movable – one who first takes possession in good faith 2. If immovable – one who recorded in registry of property in good faith (a) No inscription, one who first took possession in good faith (b) In absence thereof, one who presents oldest title Note: Donation of purchase money must follow the formal requirements mandated by law should the money donated exceed P5000. (Spouses Devisfruto v. Greenfell, G.R. No. 227725, July 1, 2020) PERSONS WHO MAY GIVE OR RECEIVE A DONATION 1. Capacity to be Donor All persons who may contract and dispose of their property may give donation. Those who cannot give consent to a contract cannot be donors. Note: Donor’s capacity shall be determined as of the time of the “making” and not at the “perfection” of the donation (Arts. 737) Who are Disqualified to Donate 1. Guardians and trustees with respect to property entrusted to them 2. Husband and wife, to each other. 3. Between paramours/persons guilty of adultery or concubinage at the time of donation 4. Between parties guilty of same criminal offense, in consideration thereof 5. Made to public officers, wife, descendant, ascendant, by reason of his office (Arts. 736, 739) 6. Priest who heard confession of donor during his last illness; 7. Relatives of priest within the fourth degree, church order, or community where priest belongs; 8. Physician, nurse, etc. who took care of donor during his last illness; 9. Individuals, corporations, and associations not permitted by law. Note: The prohibition against donations between spouses must likewise apply to donations between persons living together in illicit relations. (Joaquino v. Reyes, G.R. No. 154645, 2003) Note: In case of donation of the same thing to two or more different persons, the rules on double sale will apply. Pursuant to Article 1544, ownership of immovable property subject of a double sale is transferred to the buyer who first registers it in the Registry of Property in good faith. However, when the second buyer has actual or constructive knowledge of the prior sale, they cannot be a registrant in good faith (Spouses German v. Spouses Santuyo, G.R. No. 210845, January 22, 2020) 2. Capacity to be Donee All those who are not specially disqualified by law may accept donations. Who May Accept Donations 1. Natural and juridical persons not especially disqualified by law 2. Minors and other incapacitated By themselves if pure and simple donation or if it does not require written acceptance By their parents or legal representatives if the donation is onerous or conditional or needs written acceptance i. Natural guardian – not more than 50,000 ii. Court appointed – more than 50,000 3. Conceived and unborn child, represented by person who would have been guardian if already born (Arts. 738, 741 & 742) Requirements for Acceptance 4. Acceptance must be made during the lifetime of the donor and donee (Art. 746) Page 139 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 5. Acceptance may be made personally or through an agent with special or general and sufficient power, otherwise, the donation shall be void (Art. 745) 6. Authorization should be in a public instrument. 7. Minors and others who cannot enter into a contract, shall have acceptance done through parents or legal representatives (Art. 741) 8. Conceived and unborn children shall have donation accepted by persons who would legally represented them if they were already born (Art. 742) Void Donations 1. Those made between persons who are guilty of adultery or concubinage at the time of donation 2. Those made between persons found guilty of the same criminal offense, in consideration thereof 3. Those made to a public officer or his wife, descendants and ascendants, by reason of his office (Art. 739) 4. Donation between spouses during marriage, except moderate gifts (Art. 87, Family Code) 5. Those made to incapacitated persons, though simulated under the guise of another contract or through a person who is interposed. EFFECTS AND LIMITATIONS OF DONATION 1. Reservation of sufficient means for support of donor and relatives. - Donation may comprehend all present properties of the donor, or part thereof, provided he reserves sufficient means for his support and of relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Otherwise, the donation will be subject to reduction upon petition of any person affected. (Art. 750) 2. Donation of future property is prohibited. (Art. 751) 3. Donation shall be limited to what the donor may give by will. Otherwise, the donation is inofficious (Art. 752). - The limitation applies when the donor has forced or compulsory heirs. The purpose is to not diminish their legitimes. A donation would not be legally feasible if the donor has neither ownership nor real rights that he can transmit to the donee. (Hemedes v. CA, GR No. 107132, 2008) Rights and Obligations of Donor 1. Donor may reserve the right to dispose of some of the things donated, or of some amount or income charge thereon (Art. 755) 2. Donor may donate the ownership of property to one person and the usufruct to another (Art. 756) 3. Donor is not obliged to warrant the things donated except when the donation is onerous, in which case the donor is liable for eviction or hidden defects in case of bad faith on his part. (Art. 754). 4. Donor may provide for reversion in his favor. (Art. 757) Rights and Obligations of Donee: 1. If donation is made to several persons jointly, it is understood to be in equal shares and there is no right of accretion among them, unless the donor provides otherwise. If made to the husband and wife jointly, there is right of accretion. (Art. 753) 2. Donee is subrogated to all the rights and actions which in case of eviction would pertain to the donor (Art. 754) (a) If donation imposes upon the donee the obligation to pay the debts of the donor, it is understood to be liable to pay only the debts previously contracted. Note: In no case shall the donee be responsible for debts exceeding the value of the property donated, unless a contrary intention appears. (Art. 758) 3. If no stipulation regarding they payment of debts, donee is liable only when the donation has been made in fraud of creditors Note: It is always presumed to be in fraud of creditors, when at the time of donation, the Page 140 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 donor did not reserve sufficient property to pay his debts. (Art. 759) REVOCATION AND REDUCTION OF DONATION REVOCATION Revocation Of Donations 1. Affects the whole donation 2. Applies only to donation inter vivos 3. Not applicable to onerous donations 4. Donor can revoke donation if the donee fails to comply with the conditions imposed by the donor. Grounds For Revocation 1. Birth, Adoption, Reappearance of a Child It applies when the donor, at the time he made the donation, did not have any child or descendant or erroneously thought so. Donation may be revoked or reduced when: (a) Donor should have any children, after donation, even though they be posthumous (b) Donor’s child whom he believed to be dead when he made the donation, turn out to be living (c) Donor subsequently adopt a minor child (Art. 760) 2. Ingratitude The donation may also be revoked by reason of ingratitude in the following cases: (a) Donee should commit some offense against the person, honor or property of the donor, or of his wife, or children under his parental authority. (b) Donee imputes to the donor any: a. Criminal offense; or b. Any act involving moral turpitude; Note: Revocation applies even if the donee proves that the crime or act was actually committed, unless the crime or the act has been committed against the donee himself, his wife, or children under his authority. CIVIL LAW (c) Donee unduly refuses to give support when the donee is legally or morally bound to give support to the donor. Period for action prescribes within one year, counted from the time the donor: (d) Had knowledge of the fact; and (e) It was possible for him to bring the action. (Art. 769) Note: Action granted to the donor by reason of ingratitude may not be advanced and may not be transmitted to the heirs of the donor. (Art. 769 770) Exception to Rule on Intransmissibility of Action regarding Revocation Due to Ingratitude General Rule: Personal to the donor; heir cannot institute if donor did not provide for Exception: Heirs may file in the following 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 without having known the ingratitude done (e) Criminal action filed but abated by death 3. Non-compliance with conditions Donation may be revoked when the donee fails to comply with any of the conditions which the donor imposed. The alienations and mortgages made by the donee are void, subject to the limitations imposed by the Mortgage Law and Land Registration laws with regard to third persons. Action prescribes after 4 years from the noncompliance with the condition. Page 141 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Note: This action may be transmitted to the heirs of the donor, and may be exercised against the donee’s heirs. (Art. 764) When There is No Period Fixed for the Condition Imposed General rule is that if the period is not fixed in the contract, the court can fix the period. However, in a case where 50 years had passed without the condition having been fulfilled the Court refused to fix a period and ruled that the donation can be revoked for failure to comply with that condition. (Central Philippine University v. CA, GR No. 112127, 1995) Illegal and Impossible Conditions In Simple/Remunatory donations – shall be considered as not imposed (Art. 727) In Onerous/Contract – annuls obligation; obligation and conditions are void (Art. 1183) REDUCTION Grounds For Reduction 1. Birth, appearance or adoption of a child - Same cases as revocation 2. Failure to reserve - Failure of the donor to reserve sufficient means for support of himself or dependent relatives 3. Fraud against creditors - Failure of donor to reserve sufficient property to pay off existing debts 4. Inofficiousness - the donation exceeds that which the donor can give by will Inofficious donations: 1. Shall be reduced with regard to the excess 2. Action to reduce shall be filed by heirs who have right to legitime at time of donation (compulsory heirs of donor, heirs and successor-in-interest of compulsory heirs) 3. Voluntary heirs/devisees/ legatees/ Donees/ creditors of deceased donor cannot ask for reduction of donation CIVIL LAW 4. If there are 2 or more donation: recent ones shall be suppressed 5. If 2 or more donation at same time – treated equally and reduction is pro rata but donor may impose preference which must be expressly stated in donation 6. Effect of declaration as inofficious: the donation is annulled only as to the portion diminishing the legitime Cause of action arising from the inofficiousness of donation arises only upon death of the donor, as the value of the donation will be contrasted with the net value of the estate of the donor decedent. (Eloy Imperial v. CA, GR No. 112483, 1999) Automatic Revocation In contracts providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract but in order to determine whether or not the rescission was proper. The stipulation of the parties providing for automatic revocation of the deed of donation, without prior judicial action for that purpose, is valid subject to the determination of the propriety of the rescission sought. Where such propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act. (Zamboanga Barter Traders v. Plagata, G.R. No. 148433, 2008) III. PRESCRIPTION Prescription is a mode of acquiring ownership and other real rights through lapse of time (acquisitive prescription); and losing rights and action (extinctive prescription) There are two kinds of prescription. 1. Acquisitive prescription – it is the acquisition of ownership and other real rights through possession of a thing in the manner and under conditions provided by law. 2. Extinctive prescription – it is the loss or extinguishment of property rights or actions through the possession by another of a thing Page 142 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 for the period provided by law or through failure to bring the necessary action to enforce one’s right within the period fixed by law (De Leon, p. 701); also referred to as limitation of actions (Morales v. CFI, GR No. L-52278, 1980) Prescription Of Ownership And Other Real Rights Acquisitive prescription of ownership and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law. Extraordinary acquisitive prescription requires neither good faith nor just title but possession for a longer period than the ordinary. Period for acquisition 1. Movable 4 years with good faith & just title 8 years if without 2. Immovable 10 years with good faith & just title 30 years if without PRESCRIPTION TOPIC OUTLINE UNDER THE SYLLABUS A. TYPES OF PRESCRIPTION I. Acquisitive II. Extinctive B. WHEN PRESCRIPTION IS INAPPLICABLE I. By offender II. Registered lands III. Actions to demand right of way; to abate a nuisance IV. Action to quiet title if plaintiff is possession V. Void contracts VI. Action to demand partition; distinguished from laches VII. Property of public dominion C. PRESCRIPTION OR LIMITATION OF ACTIONS I. To recover movables II. To recover immovable III. Other actions D. INTERRUPTION Prescription Of Actions Mode of losing rights and actions by mere lapse of time fixed by law. Interruption of prescription of actions 1. Action is filed before the court 2. There is extrajudicial demand by the creditors 3. There is any written acknowledgement of the debt by the debtor (Jurado, Civil Law Reviewer, 2009) ————- end of topic ————- Page 143 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 A. TYPES OF PRESCRIPTION 1. ACQUISITIVE Mode of acquiring ownership and other real rights through lapse of time. General Requisites for Acquisitive Prescription: (CTPL) 4. Capacity of the possessor to acquire by prescription 5. Thing capable of acquisition by prescription 6. Possession of thing under certain conditions 7. Lapse of time provided by law Who May Acquire by Prescription 1. Person who is capable of acquiring property by other legal modes 2. State 3. Minors (through guardians or personally) (Art. 1108) Against Whom Prescription May Run 1. Minors and incapacitated person who have parents, guardians or other legal representatives; 2. Absentees who have administrators; 3. Persons living abroad who have managers or administrators 4. Juridical persons, except the state with regard to property not patrimonial in character (Art. 1108); 5. Between husband and wife (only if specifically provided for by law); 6. Between parents and children (during minority/insanity) (prescription may run) 7. Between guardian and ward (during guardianship) (prescription may run) 8. Between co-heirs/co-owners (there must be definite repudiation first) 9. Between owner of property and person in possession of property in concept of owner CIVIL LAW 2. Between parents and children, during the minority or insanity of the latter. 3. Between guardian and ward during the continuance of the guardianship. (Art. 1109) Things Subject to Prescription (Art. 1113) All things within the commerce of men 1. Private property 2. Patrimonial property of the State - To be subject of prescription, the land must be classified as alienable and disposable, and it must be expressly declared by the State that it is no longer intended for public use. (Republic v. Ching, G.R. No. 186166, 2010) It is only when alienable and disposable lands are expressly declared by the State to be no longer intended for public service or for the development of the national wealth that the period of acquisitive prescription can begin to run. (Heirs of Delfin v. National Housing Authority, GR 193618, November 28, 2016) The period of possession prior to the declaration that land is alienable and disposable agricultural land is included in the computation of possession for purposes of acquiring registration rights over a property so long as the land has already been declared as alienable and disposable at the time of the application for registration. (AFP Retirement and Separation Benefits System v Republic of the Philippines, G.R. No. 180086, 2014) Things Not Subject to Prescription 1. Property of public dominion (Art. 1113) 2. Intransmissible rights 3. Movables possessed through a crime (Art. 1133) 4. Registered land; lands covered by title (P.D. 1529, Sec. 47) Against Whom Prescription Does Not Run 1. Between husband and wife, even though there be a separation of property agreed upon in the marriage settlements or by judicial decree. Page 144 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Renunciation of Prescription Persons with capacity to alienate may renounce prescription already obtained but not the right to prescribe in the future. Renunciation may be express or tacit. Prescription is deemed to have been tacitly renounced; renunciation results from the acts which imply abandonment of right acquired. (Art. 1112) Creditors and persons interested in making prescription effective may avail it themselves notwithstanding express or tacit renunciation. (Art. 1114) a. Ordinary Ordinary Prescription 1. Possession in the concept of an owner, public, peaceful and uninterrupted; 2. Within time fixed by law (4 years for movables; 10 years for immovable); 3. Good faith 4. Just title; b. Extraordinary In extraordinary prescription, ownership and other real rights over immovable property are acquired through uninterrupted adverse possession thereof for 30 years without need of title or of good faith. (Gesmundo v. CA, G.R. No. 119870, 1999). Extraordinary Prescription 1. Possession in the concept of an owner, public, peaceful and uninterrupted; 2. Within time fixed by law (8 years for movables; 30 years for immovables): Note: Just title and good faith NOT required in extraordinary prescription; Good Faith 1. Reasonable belief that person who transferred the thing is the owner and could validly transmit ownership 2. Must exist throughout the entire period required for prescription Just Title – when the possession was acquired through one of the modes recognized by law, but the grantor was not the owner or could not transmit any right (Art. 1129, NCC); must be proved and never presumed; only Titulo Colorado is required 1. Titulo Colorado – such title where there was a mode of transferring ownership but something is wrong because the grantor is NOT the owner 2. Titulo putativo - a person believes he has obtained title but he has not because there was no mode of acquiring ownership, as when one is in possession of a thing in the mistaken belief that it had been bequeathed to him. (Doliendo v Biarnesa, G.R. No. L2765, 1906) 3. Title must be one which would have been sufficient to transfer ownership if grantor had been the owner 4. Through one of the modes of transferring ownership but there is vice/defect in capacity of grantor to transmit ownership In Concept of Owner 1. Possession NOT by mere tolerance of owner but adverse to that of the owner 2. Claim that he owns the property Public, Peaceful & Uninterrupted 1. Must be known to the owner of the thing 2. Acquired and maintained without violence 3. Uninterrupted (no act of deprivation by others) in the enjoyment of property 2. EXTINCTIVE a. Characteristics Extinction of rights and actions; also referred to as limitation of actions (Morales v. CFI, GR No. L52278, 1980) which implies that actions to enforce or preserve a right or claim must be brought within a certain period of time. Page 145 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 b. Requisites 1. Capacity to acquire by prescription 2. A thing capable of acquisition by prescription 3. Possession of the thing under certain conditions 4. Lapse of time provided by law c. 6. Actions to quiet title if plaintiff is in possession 7. Void contracts Periods Prescription of action to recover movables and immovables 1. Movable 4 years with good faith & just title 8 years if without 2. Immovable 10 years with good faith & just title 30 years if without B. WHEN PRESCRIPTION IS INAPPLICABLE IMPRESCRIPTIBLE 3. By Offender The offender can never acquire, through prescription, movables possessed through a crime (Art. 1133). The action to recover from the offender is imprescriptible. 4. Registered lands 5. Actions to demand right of way; to abate nuisance Title to lands registered under the Torrens System cannot be acquired by prescription or adverse possession as against the registered owner or hereditary successor (PD 1529). Action to recover registered land is imprescriptible. Imprescriptible 8. Actions to demand partition; distinguished from laches 9. Property of public dominion Imprescriptible Action to declare contract void imprescriptible a is Note: An action to annul a voidable contract prescribes after 4 years Action to demand partition is imprescriptible or cannot be barred by laches, absent a clear repudiation of the coownership by a co-owner. (De Leon, p. 253) Property of public dominion cannot be acquired by prescription for they are outside the commerce of men. Right of reversion or reconveyance to the State of things which are not susceptible of being appropriated is not barred by prescription. (De Leon, p. 758) Land of the public domain must be declared alienable and disposable either by the President or the Secretary of the DENR to be the subject of appropriation. The period of possession prior to the reclassification of the land as disposable cannot be considered in reckoning the prescriptive period in favor of the possessor. (Republic v. De Guzman Page 146 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Vda. De Joson, GR No. 163767, 2014) C. PRESCRIPTION OR LIMITATION OF ACTIONS 1. TO RECOVER MOVABLES Prescriptive period for action to recover movables is 8 years from the time the possession is lost. (Art. 1140) However, the action shall not prosper if it is brought after 4 years when the possessor has already acquired title by ordinary acquisitive prescription. 2. TO RECOVER IMMOVABLES The period for bringing real actions over immovables is 30 years unless the possessor has acquired ownership of the immovable by ordinary acquisitive prescription through possession of 10 years (meaning with good faith and just title). If the action is based on fraud, the prescriptive period is 4 years from discovery of fraud. 3. OTHER ACTION PRESCRIPTIVE PERIODS (ART. 1140-1149) None Right of way Abatement of nuisance 8 years Action to recover movables – from time possession is lost (Art. 1140) 30 years Real action over an immovable property – from time possession is lost (Art. 1141) 10 years Mortgage action (Art. 1142) Upon written contract Obligations arising from law Court judgment (Art. 1144) 6 years Reconveyance based on implied constructive trust Oral Contract Quasi Contract (Art. 1145) 4 years 1 year 5 years Injury to rights Quasi Delict (Art. 1146) Rescission/Annulment of contract Forcible entry Illegal detainer Defamation (Art. 1147) Other actions whose periods are not fixed by law (Art. 1149) Prescription starts from the accrual or the day the action may be brought. (Art. 1150, NCC) D. INTERRUPTION Interruption of possession for the purpose of prescription (PEN-C) 1. Natural a. Through any cause, possession ceases for more than 1 year b. If 1 year of less – as if no interruption; the time elapsed shall be counted in favor of prescription 2. Civil – when there is judicial summons to the possessor Note: Exceptions a) Void for lack of legal solemnities b) Plaintiff desists from complaint/allows proceedings to lapse c) Possessor is absolved from complaint d) Express or tacit renunciation 3. Express or tacit recognition by the possessor of the owner’s right; 4. Possession in wartime. Rules in Computation of Period 1. Present possessor may tack his possession to that of his grantor or predecessor in interest 2. Present possessor presumed to be in continuous possession even with intervening time unless contrary is proved 3. First day excluded, last day included Tacking Period 1. There must be privity between previous and present possessor 2. Possible when there is succession of rights Page 147 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 3. If character of possession different: predecessor in bad faith / possessor in good faith – use extraordinary prescription by the owners of the lands which suffer or are clearly exposed to suffer injury. (Art. 515) Note: The remedies are exclusive.(De Leon, supra, pp. 294) Interruption of prescription of actions 1. When they are filed before the court 2. When there is a written extrajudicial demand by the creditors 3. When there is any written acknowledgement of the debt by the debtor (Art. 1155) All the owners who participate in the benefits arising from the works referred to in the two preceding articles, shall be obliged to contribute to the expenses of construction in proportion to their respective interests. Those who by their fault may have caused the damage shall be liable for the expenses. (Art. 517) ————- end of topic ————E. SPECIAL TOPICS UNDER PROPERTY LAW I. AIRSPACE The owner of a parcel of land is the owner of its surface and of everything under it, and he can construct thereon any works or make any plantations and excavations which he may deem proper, without detriment to servitudes and subject to special laws and ordinances. He cannot complain of the reasonable requirements of aerial navigation. (Art. 437) The right of the owner of a parcel of land to construct any works or make any plantations and excavations on his land is subject to: 1. Existing servitudes or easements; 2. Special laws; 3. Local ordinances; 4. The reasonable requirements of aerial navigation; and 5. The rights of third persons (De Leon, supra, pp. 124-125) II. WATERS The owner of a piece of land on which there are defensive works to check waters, or on which, due to a change of their course, it may be necessary to reconstruct such works, shall be obliged, at his election, either to make the necessary repairs or construction himself, or to permit them to be done, without damage to him, 1. Ownership of Waters Public Dominion 1. Rivers and their natural beds; 2. Continuous or intermittent waters of springs and brooks running in their natural beds and the beds themselves; 3. Waters rising continuously or intermittently on lands of public dominion; 4. Lakes and lagoons formed by Nature on public lands, and their beds; 5. Rain waters running through ravines or sand beds, which are also of public dominion; 6. Subterranean waters on public lands; 7. Waters found within the zone of operation of public works, even if constructed by a contractor; 8. Waters rising continuously or intermittently on lands belonging to private persons, to the State, to a province, or to a city or a municipality from the moment they leave such lands; 9. The waste waters of fountains, sewers and public establishments. Private Ownership 1. Continuous or intermittent waters rising on lands of private ownership, while running through the same; 2. Lakes and lagoons, and their beds, formed by Nature on such lands; 3. Subterranean waters found on the same; 4. Rain waters falling on said lands, as long as they remain within the boundaries; Page 148 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 5. The beds of flowing waters, continuous or intermittent, formed by rain water, and those of brooks, crossing lands which are not of public dominion. 2. Use of Public Waters Acquisition of Public Waters The use of public waters is acquired: 1) By administrative concession; 2) By prescription for ten years. The extent of the rights and obligations of the use shall be that established, in the first case, by the terms of the concession, and, in the second case, by the manner and form in which the waters have been used. (Art. 504) Use of Public Waters Every concession for the use of waters is understood to be without prejudice to third persons. (Art. 505) The right to make use of public waters is extinguished by the lapse of the Concession and by non-user for five years. (Art. 506) 3. Private Waters/Subterranean Waters Use of Waters of Private Ownership The owner of a piece of land on which a spring or brook rises, be it continuous or intermittent, may use its waters while they run through the same, but after the waters leave the land they shall become public, and their use shall be governed by the Special Law of Waters of August 3, 1866, and by the Irrigation Law. (Art. 507) CIVIL LAW from the owners, except as provided by the Mining Law (Art. 509) The ownership which the proprietor of a piece of land has over the waters rising thereon does not prejudice the rights which the owners of lower estates may have legally acquired to the use thereof. (Art. 510) Every owner of a piece of land has the right to construct within his property, reservoirs for rain waters, provided he causes no damage to the public or to third persons. (Art. 511) Subterranean Waters Only the owner of a piece of land, or another person with his permission, may make explorations thereon for subterranean waters, except as provided by the Mining Law. Explorations for subterranean waters on lands of public dominion may be made only with the permission of the administrative authorities. (Art. 512) Waters artificially brought forth in accordance with the Special Law of Waters of August 3, 1866, belong to the person who brought them up. (Art. 513) When the owner of waters artificially brought to the surface abandons them to their natural course, they shall become of public dominion. (Art. 514) III. MINERALS Mining claims and rights and other matters concerning minerals and mineral lands are governed by special laws. (Art. 519) The private ownership of the beds of rain waters does not give a right to make works or constructions which may change their course to the damage of third persons, or whose destruction, by the force of floods, may cause such damage. (Art. 508) IV. TRADEMARK/TRADENAME A trade-mark or trade-name duly registered in the proper government bureau or office is owned by and pertains to the person, corporation, or firm registering the same, subject to the provisions of special laws. (Art. 520) No one may enter private property to search waters or make use of them without permission Article 521. The goodwill of a business is property, and may be transferred together with Page 149 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 the right to use the name under which the business is conducted. (Art. 521) Trade-marks and trade-names are governed by special laws. (Art. 522) V. SUBDIVISION/CONDOMINIUM BUYER’S PROTECTIVE DECREE National Housing Authority It has the exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of this Decree. (P.D. 957, Section 3) Registration of Projects Owner submits his subdivision plan to the Authority which shall act upon and approve the same, upon a finding that the plan complies with the Subdivision Standards' and Regulations enforceable at the time the plan is submitted. Same for condominiums in addition, said Authority shall act upon and approve the plan with respect to the building or buildings included in the condominium project in accordance with the National Building Code (P.D. 957, Section 4) License to Sell uch owner or dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project. License shall only be issued if Authorities find the owner a person of good refute. (P.D. 957, Section 5) Mortgages No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been CIVIL LAW provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereto. (P.D. 957, Section 18) Advertisements Advertisements that may be made by the owner or developer through newspaper, radio, television, leaflets, circulars or any other form about the subdivision or the condominium or its operations or activities must reflect the real facts and must be presented in such manner that will not tend to mislead or deceive the public. The owner or developer shall answerable and liable for the facilities, improvements, infrastructures or other forms of development represented or promised in brochures, advertisements and other sales propaganda disseminated by the owner or developer or his agents and the same shall form part of the sales warranties enforceable against said owner or developer, jointly and severally. Failure to comply with these warranties shall also be punishable in accordance with the penalties provided for in this Decree. (P.D. 957, Section 19) Time of Completion Every owner or developer shall construct and provide the facilities, improvements, infrastructures and other forms of development, including water supply and lighting facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the issuance of the license for the subdivision or condominium project or such other period of time as may be fixed by the Authority. (P.D. 957, Section 20) Page 150 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Alteration of Plans No owner or developer shall change or alter the roads, open spaces, infrastructures, facilities for public use and/or other form of subdivision development as contained in the approved subdivision plan and/or represented in its advertisements, without the permission of the Authority and the written conformity or consent of the duly organized homeowners association, or in the absence of the latter, by the majority of the lot buyers in the subdivision. (P.D. 957, Section 22) Payments 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. (P.D. 957, Section 23) 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. If the contract was entered prior to enactment of the said law, 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. (P.D. 957, Section 24) 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. (P.D. 957, Section 25) Other Charges: No owner or developer shall levy upon any lot or buyer a fee for an alleged community benefit. Fees to finance services for common comfort, security and sanitation may be collected only by a properly organized homeowners association and only with the consent of a majority of the lot or unit buyers actually residing in the subdivision or condominium project. (P.D. 957, Section 27) Accessibility/Homeowners Public Offices: No owner or developer shall deny any person free access to any government office or public establishment located within the subdivision or which may be reached only by passing through the subdivision. (P.D. 957, Section 28) Right of Way to Public Road: The owner or developer of a subdivision without access to any existing public road or street must secure a right of way to a public road or street and such right of way must be developed and maintained according to the requirement of the government and authorities concerned. (P.D. 957, Section 29) Homeowners Association: The owner or developer of a subdivision project or condominium project shall initiate the organization of a homeowners association among the buyers and residents of the projects for the purpose of promoting and protecting their mutual interest and assist in their community development. (P.D. 957, Section 30) Page 151 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Government Donation of Roads to Local Government: The registered owner or developer of the subdivision or condominium project, upon completion of the development of said project may, at his option, convey by way of donation the roads and open spaces found within the project to the city or municipality wherein the project is located. Upon acceptance of the donation by the city or municipality concerned, no portion of the area donated shall thereafter be converted to any other purpose or purposes unless after hearing, the proposed conversion is approved by the Authority. (P.D. 957, Section 31) Take-over Development: The Authority, may take over or cause the development and completion of the subdivision or condominium project at the expenses of the owner or developer, jointly and severally, in cases where the owner or developer has refused or failed to develop or complete the development of the project as provided for in this Decree. The Authority may, after such take-over, demand, collect and receive from the buyers the installment payments due on the lots, which shall be utilized for the development of the subdivision. (P.D. 957, Section 35) VII. SPECIAL ECONOMIC ZONES – PEZA Purposes, Intents and Objectives 1. To establish the legal framework and mechanisms for the integration, coordination, planning and monitoring of special economic zones, industrial estates / parks, export processing zones and other economic zones; 2. To transform selected areas in the country into highly developed agro industrial, industrial, commercial, tourist, banking, investment, and financial centers, where highly trained workers and efficient services will be available to commercial enterprises; 3. To promote the flow of investors, both foreign and local, into special economic zones which would generate employment opportunities CIVIL LAW and establish backward and forward linkages among industries in and around the economic zones; 4. To stimulate the repatriation of Filipino capital by providing attractive climate and incentives for business activity; 5. To promote financial and industrial cooperation between the Philippines and industrialized countries through technologyintensive industries that will modernize the country’s industrial sector and improve productivity levels by utilizing new technological and managerial know-how; and 6. To vest the special economic zones on certain areas thereof with the status of a separate customs territory within the framework of the Constitution and the national sovereignty and territorial integrity of the Philippines. (The Special Economic Zone Act of 1995, Section 3) Decentralization ECOZONE shall be developed, as much as possible, into a decentralized, self-reliant and self-sustaining industrial, commercial/trading, agro-industrial, tourist, banking, financial and investment center with minimum government intervention. Each ECOZONE shall be provided with transportation, telecommunications, and other facilities needed to generate linkage with industries and employment opportunities for its own inhabitants and those of nearby towns and cities. (The Special Economic Zone Act of 1995, Section 7) The ECOZONE shall be managed and operated by the PEZA as separate customs territory. (The Special Economic Zone Act of 1995, Section 8) Except for privately-owned, managed or operated ECOZONES, each ECOZONE shall be organized, administered, managed and operated by the ECOZONE executive committee. Privately-owned ECOZONES shall retain autonomy and independence but shall be monitored by the PEZA for the implementation of incentives and operations for adherence to the Page 152 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 law. (The Special Economic Zone Act of 1995, Section 15) Functions of PEZA 1. To operate, administer, manage and develop the ECOZONE according to the principles and provisions set forth in this Act; 2. To register, regulate and supervise the enterprises in the ECOZONE in an efficient and decentralized manner; 3. To coordinate with local government units and exercise general supervision over the development, plans, activities and operations of the ECOZONES, industrial estates, export processing zones, free trade zones, and the like; 4. In coordination with local government units concerned and appropriate agencies, to construct, acquire, own, lease, operate and maintain on its own or through contract, franchise, license, bulk purchase from the private sector and build-operate-transfer scheme or joint venture, adequate facilities and infrastructure, such as light and power systems, water supply and distribution systems, telecommunication and transportation, buildings, structures, warehouses, roads, bridges, ports and other facilities for the operation and development of the ECOZONE; 5. To create, operate and/or contract to operate such agencies and functional units or offices of the authority as it may deem necessary; 6. To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise dispose of personal or real property; sue and be sued; and otherwise carry out its duties and functions as provided for in this Act; 7. To coordinate the formulation and preparation of the development plans of the different entities mentioned above; 8. To coordinate with the National Economic Development Authority (NEDA), the Department of Trade and Industry (DTI), the Department of Science and Technology (DOST), and the local government units and appropriate government agencies for policy and program formulation and implementation; and 9. To monitor and evaluate the development and requirements of entities in subsection (a) and recommend to the local government units or other appropriate authorities the location, incentives, basic services, utilities and infrastructure required or to be made available for said entities. (The Special Economic Zone Act of 1995, Section 13) VIII. RECLAMATION – PEA Purposes 1. To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land; 2. To develop, improve, acquire. administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government. 3. To provide for, operate or administer such services as may be necessary for the efficient, economical and beneficial utilization of the above properties. Functions of PEA 1. To prescribe its by-laws. 2. To sue and be sued in its corporate name. 3. To adopt and use a seal and alter it at its pleasure. 4. To purchase, lease, build, alter, construct, erect, enlarge, occupy, manage, sell, mortgage, dispose of or otherwise deal in, buildings of every kind and character whatsoever, whether belonging to, or to be acquired by the Authority. 5. To construct, maintain and operate mains, pipes, machinery, water reservoirs, artesian wells as may be reasonably and necessarily required for the transaction of the lawful business of the Authority. 6. To own or operate railroads, tramways and other kinds of land transportation, vessels and pipelines, power house, Page 153 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 7. 8. 9. 10. hotels, restaurants, terminals, warehouses and to manufacture, produce, purchase, sell, dispose, encumber or otherwise deal in, rolling stock, equipment, tools and other appliances; to construct and operate in connection with its railroad lines toll viaducts, toll bridges and toll tunnels To construct, maintain and operate such systems of sanitary sewers as may be necessary for the proper sanitation of its areas of operation; to charge and collect such sums for construction and rates for this service as may be determined by the Board to be equitable and just; and to process waste materials obtained in the sewers for fertilizing purposes. To construct, maintain and operate such storm drains as may be necessary. To hold lands of the public domain in excess of area permitted to private corporations by statute. To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private or public ownership, as the location of said works may require, provided that said works be constructed in such a manner not to endanger life or property or in a manner not to impair unnecessarily their usefulness. Every person or entity whose property is crossed or intersected by said works shall not obstruct any such crossings or intersections and shall grant the Authority or its representatives, the proper authority for the execution of such work. The Authority is hereby given the right-of way to locate construct and maintain such works over the throughout the lands owned by the Republic of the Philippines or any of its branches and political subdivisions. The Authority or its representatives may also enter upon private property in the lawful performance or prosecution of its business and purposes: provided that the owner of such private property shall be 11. 12. 13. 14. 15. 16. indemnified for any actual damage caused thereby. To issue such regulations as may be necessary for the proper use by private parties of any or all of the highways, roads, utilities, buildings and/or any of its properties and to impose or collect fees or tolls for their use provided that all receipts by the Authority from fees, tolls and other charges are automatically appropriated for its use. To organize subsidiary companies to undertake any of the activities mentioned herein. The capital stock of such subsidiary companies shall be subscribed in whole or in part by the Authority. To enter into, make, perform and carry out contracts of every class and description, including loan agreements, mortgages and other types of security arrangements, necessary or incidental to the realization of its purposes with any person, firm or corporation, private or public, and with any foreign government or entity. To exercise the right of eminent domain in the name of the Republic of the Philippines, and in the acquisition of real estate by condemnation proceedings, the title to such real estate shall be taken in the name of the Republic of the Philippines, and thereupon all such real estate shall be entrusted to the Authority as the agent of the Republic of the Philippines to accomplish the aims and purposes of this decree. To perform such acts and exercise such functions as may be necessary for the attainment of the purposes and objectives herein specified. To promulgate such rules and regulations as may be necessary to carry out its purposes and to provide penalties for the violation thereof, which penalties shall be a fine of not more than five hundred pesos or imprisonment for not more than six months, or both such fine Page 154 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 and imprisonment in the discretion of the court. 17. To perform such other functions as may be provided by law. Additional Powers 1. Provide advice and assistance to the President in the formulation, implementation, and evaluation of plans or policies relative to all reclamation projects as would maximize their contribution to national development; 2. Issue such rules and regulations including the identification of such requirements as may be necessary for the evaluation and sound administration of all reclamation projects; 3. Establish and implement a system of coordination with all concerned government agencies including monitoring of the progress of all reclamation projects; and 4. Perform such other functions as may be directed by the President. (EO 525, Section 2) assets and liabilities to the apropriate agencies of the National Government. (EO 380, Section 3) IX. IPRA LAW Concept of Ancestral Domain Ancestral lands/domains shall include such concepts of territories which cover not only the physical environment but the total environment including the spiritual and cultural bonds to the areas which the ICCs/IPs possess, occupy and use and to which they have claims of ownership. (IPRA Law, Section 4) Indigenous Concept: Ancestral domains and all resources found therein shall serve as the material bases of their cultural integrity. It generally holds that ancestral domains are the ICC's/IP's private but community property which belongs to all generations and therefore cannot be sold, disposed or destroyed. It likewise covers sustainable traditional resource rights. (IPRA Law, Section 5) All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be responsible for its administration, development, utilization or disposition in accordance with the provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the sale, lease or use of reclaimed lands shall be used in accordance with the provisions of Presidential Decree No. 1084. (EO 525, Section 3) Rights to Ancestral Domains 1. Ownership 2. Develop Lands and Natural Resources 3. Stay in the Territories 4. In Case of Displacement 5. Regulate Entry of Migrants 6. Safe and Clean Air and Water 7. Claim Parts of Reservations 8. Resolve Conflict (IPRA Law, Section 7) Transformation of PEA The PEA is hereby transformed into the Philippine Reclamation Authority (PRA). The PRA shall perform all the powers and functions of the PEA relating to reclamation activities. The remaining non-reclamation enterprises, including the management of the PEA-Tollway Corporation (PEA-TC), are hereby transferred to the National Development Company. (EO 380, Section 1) Rights to Ancestral Lands 1. Transfer land/property 2. Redemption (IPRA Law, Section 8) Transfer of Assets/Liabilities With the exception of the assets and liabilities of the PEA on its reclamation functions which shall be retained with the PRA, all its other assets and liabilities are hereby transferred without cost to the DOF. The DOF shall then transfer such Delineation Self-delineation shall be the guiding principle in the identification and delineation of ancestral domains. As such, the ICCs/IPs concerned shall have a decisive role in all the activities pertinent Responsibilities of ICCs/IPs to their Ancestral Domains 1. Maintain Ecological Balance 2. Restore Denuded Areas 3. Observe Laws (IPRA Law, Section 9) Page 155 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW thereto. The Sworn Statement of the Elders as to the scope of the territories and agreements/pacts made with neighboring ICCs/IPs, if any, will be essential to the determination of these traditional territories. The Government shall take the necessary steps to identify lands which the ICCs/IPs concerned traditionally occupy and guarantee effective protection of their rights of ownership and possession thereto. Measures shall be taken in appropriate cases to safeguard the right of the ICCs/IPs concerned to land which may no longer be exclusively occupied by them, but to which they have traditionally had access for their subsistence and traditional activities, particularly of ICCs/IPs who are still nomadic and/or shifting cultivators. (IPRA Law, Section 51) ————- end of topic ————- Page 156 of 474 SUCCESSION Civil Law ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 A. GENERAL PROVISIONS SUCCESSION TOPIC OUTLINE UNDER THE SYLLABUS A. GENERAL PROVISIONS I. Definition II. Succession occurs at the moment of death III. Kinds of Successors B. TESTAMENTARY SUCCESSION I. Wills II. Institution of heirs III. Substitution of heirs IV. Conditional testamentary dispositions and testamentary dispositions with a term V. Legitime C. LEGAL OR INTESTATE SUCCESSION I. General provisions II. Order of intestate succession D. PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION I. Right of accretion II. Capacity to succeed by will or intestacy III. Acceptance and repudiation of the inheritance IV. Collation V. Partition and distribution of estate I. DEFINITION Succession – mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law. (Art. 774) Kinds of succession (a) Compulsory — succession to the legitime (this prevails over all kinds) (b) Testate — succession by will (c) Intestate — succession by operation of law; occurs in the absence of a valid will (d) Mixed — a combination of testate and intestate succession. (Balane, Jottings and Jurisprudence in Civil Law, p. 29, 2016) Elements of Succession Subjective Element (i) Decedent — person whose property is transmitted through succession (Art. 775); also called testator in testate succession. (ii) Successors/Heirs – those who are called to succession to the whole or to an aliquot portion of the inheritance either by will or by operation on law. (Art. 782) II. SUCCESSION OCCURS AT THE MOMENT OF DEATH (a) Causal Element Death of the Person – The rights to the succession are transmitted from the moment of the death of the decedent. (Art. 777) Thus, the capacity of the heir is determined as of the time the decedent died (Art. 1034); the legitime is to be computed as of the same moment (Art. 908), and so is the inofficiousness of the donation inter vivos (Art. 771). Similarly, the legacies of credit and remission are valid only in the amount due and outstanding at the death of Page 158 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 the testator (Art. 935), and the fruits accruing after that are deemed to pertain to the legatee. (Art. 948; Calalang-Parulan v. Calalang-Garcia, G.R. No. 184148, 2014) In addition, the law in force at the time of the decedent’s death will determine who the heirs should be [Uson v. Del Rosario, 92 Phil. 530 (1953)] and ownership passes to the heir at the very moment of death, therefore, from that moment: (a) the heir acquires the right to dispose of his share [De Borja v. Vda. De Borja, 46 SCRA 577 (1972)] and; (b) the heir’s interest in the estate may be attached for purposes of execution of his creditor [Reganon v. Imperial, 22 SCRA 80 (1968)] However, a person may be presumed dead for the purpose of opening his succession. (see rules on presumptive death, Art. 390-391) In this case, succession is only of provisional character because there is always the chance that the absentee may be alive. Future inheritance cannot be the subject of a contract of sale because the seller owns no inheritance while his predecessor lives. (Art. 1347 in relation to Art. 777) (a) Objective Element (Art. 776) Inheritance – is the subject matter of succession and includes all the transmissible property, rights, and obligations of a person, which are not extinguished by his death. NOTE: If the right or obligation is strictly personal, it is not transmissible, hence, it is extinguished by death. (Balane, supra, p.2) Determination of “Non-Transmissibility” of Obligation: Succession Distinguished From Inheritance Succession refers to the legal mode by which inheritance is transmitted to the persons entitled to it; while inheritance refers to the universality or entirety of the property, rights and obligations of a person who died. III. KINDS OF SUCCESSORS 1. Compulsory – those who succeed by force of law and are entitled to a legitime, which is in proportion to the entire disposable estate and is predetermined by law, of which they cannot be deprived by the testator, except through a valid disinheritance 2. Voluntary or Testamentary – those who are instituted by the testator in his/her will to succeed to the free portion (that which the testator can freely dispose) (a) Devisees – persons to whom gifts of real property are given by virtue of a will (Art. 782) (b) Legatees – persons to whom gifts of personal property are respectively given by virtue of a will (Art. 782) 3. Legal or Intestate – those who succeed to the estate of the decedent who dies without a valid will, or one who does not leave a will, or to the portion of such estate not disposed of by will 4. Mixed – is that effected partly by will and partly by operation of law (Art. 780) NOTE: The distinction between heirs and devisees or legatees is important in these cases: (a) Preterition (Art. 854) (b) Imperfect/Ineffective disinheritance (c) After-acquired properties (d) Acceptance or successional rights non-repudiation of ————- end of topic ————- 1. Nature of the Obligation- must be personal obligation (e.g., to sing, dance, or obligations to do) 2. Intransmissibility by stipulation of the parties; 3. Intransmissible by law Page 159 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 B. TESTAMENTARY SUCCESSION I. WILLS Concept of a Will It is an act whereby a person is permitted with the formalities prescribed by law to control to a certain degree the disposition of his estate to take effect after his death. (Art. 783) NOTE: A will disposes only the free portion of the estate. (Art. 886; Balane, supra, p. 38) Characteristics of a Will 1. Unilateral — does not need the approval of any other person (implied in Art. 783) 2. Strictly Personal Act (Arts. 784-785) • • The making of a will is strictly a personal act; it cannot be left to the discretion of a third person, or accomplished through the instrumentality of an agent or attorney (Art. 784) The following acts or stipulations may not be delegated to third persons: a. Designation of heirs, devisees, or legatees; (Balane, supra, p.41) b. Duration or efficacy of the designation of heirs, devisees or legatees; c. Determination of the portions which the heirs, devises, or legatees are to take, when referred to by name; and d. Determination of whether or not the testamentary disposition is to be operative (Arts.785 and 787) NOTE: This is entirely different from the acceptance or renunciation by the heir as beneficiary. The heir has the freedom to accept or renounce the testamentary benefit. • Acts which may be delegated to third persons (Art. 786): a. Distribution of specific property or sums of money that the testator may CIVIL LAW leave in general to specified classes or causes; and b. Designation of the persons, institutions or establishments to which such property or sums are to be given or applied. 3. Free and Voluntary Act — any vice affecting testamentary freedom can cause the disallowance of the will (Art. 839) 4. Formal and Solemn Act — the formalities are essential for validity (Art. 804-814; 820821) and will depend if what is executed is an attested or holographic will. 5. Act Mortis Causa — takes effect only after the death of the testator (Art. 783) 6. Revocable or Ambulatory—Revocable at any time during the testator’s lifetime (Art. 828) 7. Individual Act — two or more persons cannot make a single joint will, either for their reciprocal benefit or for another person. (Art. 818) However, separate or individually executed wills, although containing reciprocal provisions (mutual wills) are not prohibited, subject to the rules on disposicion captatoria. (Art. 875) 8. Executed with animus testandi – testator knowledgeable he wants to dispose of his property to take effect after his death. (Art. 783) 9. Executed with testamentary capacity – see below (Art. 796-803) 10. Dispositive of property (Art. 783) 11. Permitted/Statutory – Purely statutory such that without a law authorizing it, it is not available. Page 160 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Interpretation of Wills If a testamentary disposition admits of different interpretations, in case of doubt that interpretation by which the disposition is to be operative shall be preferred. (Art. 788) The words of a will are to be interpreted in a manner which will give effect to every expression, rather than one which will render any of the expressions inoperative. The interpretation which will prevent intestacy shall be preferred. (Art. 791) Underlying Principle: Testacy is always preferred than intestacy, because the former is the express will of the decedent whereas the latter is only his implied will. (Balane, supra, p. 45) Animus Testandi - The testator’s intent (animus testandi), as well as giving effect to such intent, is primordial. Exception: when the intention of the testator is contrary to law, morals or public policy. In case of doubt, the interpretation by which the disposition is to be operative or will sustain and uphold the will in all its parts shall be adopted, provided that it can be done consistently with the established rules of law. Kinds of Ambiguities In Wills (Art. 789) a. Latent or Intrinsic Ambiguities – those which do not appear on the face of the will – may be resolved through evidence aliunde or those outside of the will, except oral declarations of the testator. b. Patent or Extrinsic Ambiguities – those which appear on the face of the will itself – must be resolved only by provisions contained in the will itself. In resolving ambiguities in wills, any admissible and relevant evidence may be used to determine the intention of the testator, except for patent or extrinsic ambiguities, for which the words of the will are to be resorted to. CIVIL LAW Oral declarations of the testator as to his intention cannot be used in resolving either latent or patent ambiguities. (Balane, supra, p. 46) Why? A dead man cannot refute a tale. Interpretation By General Meaning The words of a will are 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. (Art. 790, par. 1) Technical words in a will are to be taken in their technical sense, unless the context clearly indicates a contrary intention, or unless it satisfactorily appears that the will was drawn solely by the testator, and that he was unacquainted with such technical sense. (Art. 790) Principle of Severability The invalidity of one of several dispositions contained in a will does not result in the invalidity of the other dispositions, unless it is to be presumed that the testator would not have made such other dispositions if the first invalid disposition had not been made. (Art. 792) Property Acquired After the Execution of the Will Property acquired during the period between the execution of the will and the death of the testator is NOT included among the property disposed of. (Art. 793) Exception: When a contrary intention expressly appears on the will. (Art. 793) Interpretation Of Legacy and Devise General Rule: In a legacy or devise, the testator gives exactly the interest he has in the thing. (Art. 794) Exceptions: 1. It is clear in the will that he intended to convey a less interest. (Art. 794) Page 161 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 2. The testator expressly declares that he conveys a part greater than his interest in the thing. (Art. 929) GOVERN ING LAW AS TO PLACE NOTE: In case the testator conveys a part greater than his interest in the thing, and if the person owning such interest in excess of that of the testator does not wish to part with it, the solution in Art. 931 can be applied; the legatee or devisee shall be entitled only to the just value of the interest that should have been acquired. (Balane, supra, p. 49) Requirements for Validity of Wills 1. Extrinsic / Formal Validity – refers to the requirement of form and determined in probate proceedings; it includes: (a) Formalities provided by law (b) Testamentary Capacity 2. Intrinsic / Substantive Validity – refers to the substance of the provisions and generally determined after probate (Balane, supra, p. 50) GOVERN ING LAW AS TO TIME EXTRINSIC VALIDITY For Filipinos and Foreigners: Law at the time of execution (Art. 795) INTRINSIC VALIDITY For Filipinos: Law at the time of death (Art. 16 & 2263) For Foreigners: National law (Art. 16, par.2; Art. 1039) For Filipinos and Foreigners: (Art. 815-817) a. b. c. d. Citizenship Domicile Residence Place of Execution e. Philippine Law Rules of Formal Validity of Wills Every testator, whether Filipino or alien, wherever he may be, has five choices as to what law to follow for the form of his/her will: (a) (b) (c) (d) (e) Law of his citizenship (Art. 15, 816, 817) Law of the place of execution (Art. 17) Law of his domicile (Art. 816) Law of his residence (Art. 816) Philippine law (Art. 15, 816, 817) TESTAMENTARY CAPACITY AND INTENT It is the ability as well as the legal capacity to make a will. It must be present at the time of the execution of the will. (Balane, supra, p. 52) Who are capacitated to make a will (NES) 1. Natural person not expressly prohibited by law to make a will. (Art. 796) 2. Eighteen (18) years old and above (Art. 797). 3. Of Sound mind, at the time of its execution (Art. 798) All of these must be present at the time of the execution of the will. (in relation with Art. 801) Soundness of Mind To be of sound mind, it is 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. (Art. 799) A testator is considered of sound mind if at the time of making of the will he knows the following: Page 162 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 1. Nature of the estate to be disposed of - The testator should have a fairly accurate knowledge of what he owns. (Balane, supra, p. 53) 2. Proper objects of his bounty - The testator should know under ordinary circumstances, who his relatives in the most proximate degrees, are. (Balane, supra, p. 53) 3. Character of the testamentary act (Art. 799) The testator should know the legal nature of a will. He or she must know that he is executing a document that disposes of his properties gratuitously, which would take effect upon his death. (Balane, supra, p. 53-54) Legal Presumption in Favor Of Soundness Of Mind (Art. 800) General Rule: The law presumes that every person is of sound mind, in the absence of proof to the contrary. Forgetfulness, even if proven, is not proof of unsoundness of mind. (Baltazar v. Laxa, G.R. No. 17449, 2012) Exceptions: (a) When the testator, one month or less before the execution of the will, was publicly known to be insane (Art. 800); (b) When the testator executed the will after being placed under guardianship or ordered committed to a mental institution (under Rules 93 and 101, respectively of the Rules of Court), and before said order has been lifted. (Torres and Lopez de Bueno vs. Lopez, G.R. No. 24569, 1926) NOTE: Supervening capacity or incapacity does not invalidate an effective will, nor is the will of an incapable validated by supervening capacity (Art. 801). Mentally aberrant medically does not equate to testamentary incapacity. [Galvez v. Galvez, 26 Phil 243 (1913)] CIVIL LAW Burden of Proof of Soundness of Mind 1. The person who opposes probate of the will has the burden of proof that the testator was not of sound mind. (Art. 800). 2. The person who maintains the validity of the will must prove that the testator executed it during a lucid interval, when the testator was publicly known to be insane, one month or less before making his will. (Art. 800) Kinds of Wills (a) Notarial / Attested – an ordinary will acknowledged before a notary public by the testator and the instrumental witnesses (Art. 805-806) (b) Holographic – a will totally handwritten, dated, and signed by the testator alone. (Art. 810) Formalities Common To Notarial And Holographic Wills: 1. Every will must be in writing (Art. 804); and • Nuncupative (Oral) Wills are not allowed except in the Muslim Personal Laws of the Philippines 2. Executed in a language or dialect known to the testator (Art. 804) In Writing Any form of writing is allowed, provided a. Must be understood by others, and b. Must be capable of being preserved and with permanence. Reason: generally, wills are probated after the death of the testator, so it must have the character of permanence and must be understood by others. In Language or Dialect known to Testator It must be understood by testator, but it is not required that the will specifically state that it is in a language or dialect known to the testator. (Abada v. Abaja, G.R. No. 147145, 2005) This is merely evidentiary and should be proven during probate. Page 163 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Presumption of Compliance with the Language Requirement The presumption that testator knows and understands language or dialect applies only if: 1. The will was executed in a language generally spoken in the place of execution; and 2. The testator is a native or resident of such locality. (Abangan v. Abangan, G.R. No. L13431, 1919) NOTARIAL/ATTESTED WILLS Requirements for Notarial Wills (Art. 805-806) 1. Subscribed by the testator or his agent in his presence and by his express direction at the end thereof, in the presence of the witnesses; 2. Attested and subscribed by at least three credible witnesses in the presence of the testator and of one another; 3. The testator or his agent, must sign every page, except the last, on the left margin in the presence of the witnesses; 4. The witnesses must sign every page, except the last, on the left margin in the presence of the testator and of one another; 5. The witnesses must sign every page, except the last, on the left margin in the presence of the testator and of one another; 6. All pages must be numbered correlatively in letters on the upper part of each page; 7. Attestation clause stating: a. The number of pages of the will; b. The fact that the testator or his agent under his express direction signed the will and every page thereof, in the presence of the witnesses; c. The fact that the witnesses witnessed and signed the will and every page thereof in the presence of the testator and one another; 8. Acknowledgement before a notary public Subscribed by the Testator or his Agent in his Presence and by his Express Direction at the End thereof, in the Presence of the Witnesses The testator’s thumbprint is always a valid and sufficient signature for the purpose of complying CIVIL LAW with the requirement of the law. There is no basis for limiting the validity of thumbprints only to cases of illness or infirmity. (De Gala v. Gonzales G.R. No. L-30289, 1929; Dolar v. Diancin, G.R. No. L-33365, 1930; Lopez v. Liboro, G.R. No. L1787, 1948) However, a sign of the cross does not comply with the statutory requirement of signature, unless it is the testator’s usual manner of signature or one of his usual styles of signing. The cross does not have the trustworthiness of a thumbmark. (Garcia v. Lacuesta, G.R. No. L-4067, 1951) Agent of the Testator Subscribing under his Express Direction The essential thing for validity is that the agent wrote the testator’s name. It would be a good thing, but not required, for the agent to indicate the fact of agency or authority. (Barut v. Cabacungan, G.R. No. L-6285, 1912) Signed at the End Signing before the end invalidates not only the dispositions that come after, but the entire will, because the one of the statutory requirements would not have been complied with. (Azuela v. Court of Appeals, G.R. No. 122880, 2006) Two Kinds of End 1. Physical end – where the writing stops 2. Logical end – where the last testamentary disposition ends. Signing in either end is permissible. (Balane, supra) Signed in the Presence of Witnesses Actual seeing is not required, but the ability to see each other by merely casting their eyes in the proper direction. (Nera v. Rimando, G.R. No. L5971, 1911) Acts of Witnesses • Attesting – act of witnessing • Subscribing – act of signing their names in the proper places of the will (Balane, supra, p. 81 citing Taboada v. Rosa, G.R. No. L- Page 164 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 36033, 1982; Caneda v. CA, G.R. No. 103554, 1993) The witnesses need not sign at the end of the will. It is sufficient that they signed the will even marginally. (Taboada v. Rosal, G.R. No. L-36033, 1982) Signing on Every Page, Except the Last Signing on every page of the will is mandatory, while the place of signing i.e. left margin is merely directory. The signature can be affixed anywhere on the page. (Balane, supra) When No Marginal Signatures are Required If the entire document consists of only two sheets, the first containing the will and the second, the attestation clause, there need not be any marginal signatures at all. (Abangan v. Abangan, G.R. No. L-13431, 1919) Order of Signing The order of signing is immaterial, provided everything is done in a single transaction. However, if the affixation of the signatures is done in several transactions, then it is required that the testator affix his signature ahead of the witnesses. (Balane, supra, p. 86-87) Pagination The pagination by means of a conventional system, a generally accepted or known sequential order, is required, while the pagination in letters on the upper part of each page is merely directory. (Balane, supra) Attestation Clause Need Not be Signed by the Testator The Attestation Clause is the affair of the witnesses, therefore, it need not be signed by the testator. (Fernandez v. Vergel de Dios, G.R. No. L-21151, 1924) Witnesses Must Sign at the End of Attestation Clause The attestation clause is a memorandum of the facts attending the execution of the will required by law to be made by the attesting witnesses, and it must necessarily bear their signatures. An CIVIL LAW unsigned attestation clause cannot be considered an act of the witnesses, since the omission of their signatures at the bottom negatives their participation. If an attestation clause not signed at the bottom be admitted, it would be easy to add such clause to a will on a subsequent occasion and in the absence of the testator and any or all witnesses. (Cagro v. Cagro, G.R. No. L-5826, 1953; Azuela v. Court of Appeals, G.R. No. 122880, 2006) Attestation Clause Separate from Acknowledgement Clause An attestation clause is mandatory for attested wills. It is separate and distinct from an acknowledgement clause. These two cannot be merged. (Echavez v. Dozen Construction, G.R. No. 192916, 2010) Acknowledgment The act of one who has executed a deed in going before some competent officer (i.e., notary public) or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signatory actually declares to the notary public that the same is his or her own free act and deed. (Lee v. Tambago, A.C. No. 5281, 2008) Two-Fold Purpose of the Acknowledgement 1. To safeguard the testator’s wishes long after his demise; and 2. To assure that his estate is administered in the manner that he intends it to be done (Lee v. Tambago, A.C. No. 5281, 2008) Certification Need Not be Signed in the Presence of the Testator and Witnesses Whether or not the notary signed the certification of acknowledgment in the presence of the testator and the witnesses, does not affect the validity of the will. All that must be done is that the testator and the witnesses avow to the certifying officer the authenticity of their signatures and the voluntariness of their actions in executing the testamentary disposition. (Javellana v. Ledesma, G.R. No. L-7179, 1955) Page 165 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Requirements for the Notary Public 1. Must be duly commissioned for the locality where the acknowledgment is made (Guerrero v. Bihis, G.R. No. 174144, 2007) 2. Must not be one of the three attesting witnesses (Cruz v. Villasor, G.R. No. L32213, 1973) three instrumental witnesses and the notary public. The court stated: “So when an interpretation already given assures such ends, any other interpretation whatsoever, that adds nothing but demands more requisites entirely unnecessary, useless and frustrative of the testator's will, must be disregarded.“ NOTE: There is no requirement that an attested will should be dated. Consequently, a variance between the indicated dates of execution and acknowledgement does not in itself invalidate the will. (Ortega v. Valmonte, G.R. No. 157451, 2005) Rule on Substantial Compliance (Art. 809) Article 809 is Applicable Only to the Attestation Clause 1. In the absence of Special Requirements Testators for Handicapped Deaf/Deaf-Mute Testator (Art. 807) 1. If able to read — he must read the will personally 2. If unable to read — he must designate two persons to read the will and communicate to him, in some practicable manner, its contents. Blind Testator (Art. 808) The will shall be read to him twice, once by one of the subscribing witnesses and another by the notary public before whom the will is acknowledged. The rationale behind the requirement of reading the will to the testator if he is blind or incapable of reading the will himself (as when he is illiterate), is to make the provisions of the will known to him, so that he may be able to object if they are not in accordance with his wishes. (Garcia v. Vasquez, G.R. No. L-26615, 1970) The special requirements for handicapped testators are mandatory; non-compliance with Articles 807 or 808 will result in nullity and denial of probate. (Balane, supra) However, in the case of Alvarado v. Gaviola, Jr., 226 SCRA 348 (1993), the Supreme Court stated that substantial compliance is sufficient as when the lawyer who drafted the will read the will aloud before the testator (who was suffering from glaucoma), the a. b. c. d. Bad faith Forgery Fraud Undue and improper pressure and influence 2. Defects and imperfections in the form of attestation or in the language used therein 3. Shall not render the will invalid 4. If it is proved that the will was in fact executed and attested in substantial compliance with all the requirements of Art. 805. However, only omissions in the attestation clause which can be supplied by an examination of the will itself or by intrinsic evidence will not be fatal to the validity of the will. The omissions in the attestation clause which can only be proved by extrinsic evidence would result in the invalidation of the attestation clause and ultimately of the will itself. (Caneda v. CA, G.R. No. L-18076, 1962) However, the attestation clause indisputably omitted to mention the number of pages comprising the will. Nevertheless, the acknowledgment portion of the will supplied the omission by stating that the will has five pages and was therefore deemed substantial compliance by the Supreme Court under Article 809 (Tanchanco v. Santos, G.R. No. 204793) HOLOGRAPHIC WILLS Requirements for Holographic Wills (EHANDDS) A holographic will is valid if it is: 1. Entirely HANDwritten by the testator Page 166 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 2. Dated by him 3. Signed by him (Art. 810; Balane, supra, p. 130) Date The date of the will should include the day, month, and year of its execution. (Roxas v. De Jesus, G.R. No. L-38338, 1985) The law does not specify a particular location where the date should be placed in the will. The only requirements are that the date be in the will itself and executed in the hand of the testator. (Labrador v. Court of Appeals, G.R. Nos. 8384344, 1990) Signed by the Testator The testator must sign at the end of testamentary dispositions. Otherwise, the dispositions written below his signature, which are not subsequently dated and signed by him will be invalidated. (Art. 812) Forms of Holographic Wills A holographic will is subject to no other form, and may be made in or out of the Philippines, and need not be witnessed. (Art. 810) Additional Dispositions in a Holographic Will Additional dispositions in a holographic will must be dated and signed by the testator. (Art. 812) The signature and the date may be done in the following manner: 1. Signature and date after each additional disposition, or 2. Each additional disposition signed and undated, but the last disposition signed and dated. (Art. .813) What if additional dispositions are dated but not signed? Only the last disposition that is dated and signed will be valid. Insertion, Cancellation, Erasure or Alteration in a Holographic Will (Art. 813) General Rule: If made by the testator contemporaneously with the making of the will, CIVIL LAW the full customary signature of the testator should authenticate all alterations, cancellations and erasures. If not, general rule is that the will is valid but the alterations, cancellations and erasures will not be valid. (Velasco v. Lopez, G.R. No. 905, 1903). Exceptions: 1. Where there is only one testamentary disposition and the unauthenticated alteration affects the sole disposition (e.g., one heir substituted by another), then the whole will is void (Kalaw v. Relova, G.R. No. 40207, 1994) 2. Where the alteration or erasure is on the signature and the date, the whole essence is affected making the whole will void. (Spouses Alejo v. CA, G.R. No. 106720, 1994) ALTERATIONS MADE BY A THIRD PERSON Without the The insertion, cancellation, consent of the erasure or alteration is not testator considered as written. With the The will is void for not being consent of the totally in the handwriting of testator the testator (Art. 810) Prohibition on Joint Wills Two or more persons cannot make a will jointly, or in the same instrument, either for their reciprocal benefit or for the benefit of a third person. (Art. 818) Joint Will – One document which constitutes the wills of two or more individuals. These kinds of wills are void. (Balane, supra) If there are several documents, each serving as one independent will, even if they are written on the same sheet, they are not joint wills. (Balane, supra) NOTE: Joint wills executed by Filipinos in a foreign country shall not be valid in the Philippines, even though authorized by the laws of the country where they may have been Page 167 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 executed. (Art. 819) However, reciprocal wills of foreign nationals jointly probated in another jurisdiction, can be admitted for reprobate in the Philippines since the prohibition is in the making of joint wills, and not on the joint probate of wills. (Vda. De Perez v. Tolete, G.R. No. 76714, 1994) Reasons of Public Policy Against Joint Wills 1. Limitation on the modes of revocation. (i.e. one of the testators would not be able to destroy the document without also revoking it as the will of the other testator, or in any event, as to the latter, the problem of unauthorized destruction would come in) (Balane, supra, p. 171) 2. Diminution of testamentary secrecy; (Balane, supra) 3. Danger of undue influence (Dacanay v. Florendo, G.R. No. L-2071, 1950) 4. Danger of one testator killing the other (Dacanay v. Florendo, G.R. No. L-2071, 1950) WITNESSES TO WILLS Qualifications: 1. Of sound mind (Art. 820) 2. At least 18 years of age (Art. 820) 3. Not blind, deaf, or dumb (Art. 820) 4. Able to read and write (Art. 820) 5. Domiciled in the Philippines (Art. 821) 6. Must not have been convicted of falsification of a document, perjury, or false testimony (Art. 821) The above qualifications must be possessed at the time of attesting the will. Their subsequent incompetence shall not prevent the allowance of the will. (Art. 822) Creditors as Witnesses Creditors can be witnesses to his or her debtor’s will. A mere charge on the estate of the testator for the payment of debts due at the time of death does not prevent the creditor from being a competent witness. (Art. 824) CODICILS AND REFERENCE INCORPORATION BY Codicil – A supplement or addition to a will, made after the execution of a will and annexed, to be taken as a part of the will. It explains, adds, or alters, any disposition made in the original will. (Art. 825) Codicils Must be Executed as in Wills In order that a codicil may be effective, it shall be executed as in the case of a will. (Art. 826) However, the codicil does not need to conform to the form of the will to which it refers. An attested will may have a holographic codicil, or vice versa. (Balane, supra) Requirements for Incorporation by Reference If a will refers to a document or paper, such document or paper will be considered a part of the will if the following requisites concur: (EPPS) 1. The document or paper referred to in the will must be in Existence at the time of the execution of the will; 2. The will must clearly describe and identify the same, stating among other things the number of Pages thereof; 3. It must be identified by clear and satisfactory Proof as the document or paper referred to therein; and 4. It must be Signed by the testator and the witnesses on each and every page except in case of voluminous books of account or inventories. (Art. 827) The documents, inventories, books of accounts, documents of titles, and other papers of similar nature should under no circumstances make testamentary dispositions, for then the formal requirements for wills would be circumvented. (Balane, supra) NOTE: Holographic wills cannot incorporate documents by reference unless the incorporated paper is also entirely in the handwriting of the testator. In case of notarial wills, it is sufficient that the signatures of the testator and witnesses on every page of the incorporated document Page 168 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 except in case of voluminous books of account or inventories. (Balane, supra, p. 183) REVOCATION OF WILLS AND TESTAMENTARY DISPOSITIONS A will may be revoked by the testator at any time before his death. Any waiver or restriction of this right is void. (Art. 828) Rules for Revocation (Art. 829) 1. If revocation made in the Philippines – Philippine law 2. If revocation is made outside the Philippines and testator is not domiciled in the Philippines: a. Law of the place where the will was made, or b. Law of the place where the testator was domiciled at the time of revocation 3. If revocation is made outside the Philippines and testator is domiciled in the Philippines a. Philippine law b. Law of the place of revocation c. Law of the place where the will was made (Balane, supra, p. 184) Modes of Revoking a Will (Art. 830) No will shall be revoked except in the following cases: (LSPD) 1. By implication of Law • May be total or partial 2. By Subsequent will – some will, codicil, or other writing executed as provided in case of wills 3. By Physical Destruction – by burning, tearing, cancelling, or obliterating the will with intention of revoking it, by the testator himself, or by some other person in his presence, and by his express direction. Instances of Revocation by Operation of Law: a. Decree of legal separation, nullity or annulment of marriage for dispositions in favor of the guilty spouse (Family Code, Art. 63, par. 4) b. Preterition (Art. 854) c. Legacy or credit against third person or remission of debt was provided in will and CIVIL LAW subsequently, testator brings action against debtor (Art. 936) d. Substantial transformation of specific thing bequeathed, or sale or disposition of property bequeathed or devised before the death of the testator (Art. 957) e. When heir, devisee or legatee commits any of the acts of unworthiness (Art. 1032) f. Annulled or void ab initio marriages revoke testamentary dispositions made by one spouse in favor of the other (Family Code, Art. 50) g. If both spouses of the subsequent marriage acted in bad faith, said marriage shall be void ab initio and testamentary dispositions made by one in favor of the other are revoked by operation of law. (Family Code, Art. 44) Revocation by Some Will, Codicil, or Other Writing Executed as Provided in case of Wills Express – When there is a revocatory clause expressly revoking the previous will or a part thereof. (Balane, supra, p. 193) Implied – When the provisions thereof are partially or entirely inconsistent with those of the previous wills. (Art. 831) NOTE: Subsequent wills which impliedly revoke the previous ones, annul only such dispositions in the prior wills as are inconsistent with or contrary to those contained in the later wills. (Art. 831) Requisites for a Revocation by Subsequent Instrument 1. The subsequent instrument must comply with the formal requirements of a will. (Molo v. Molo, G.R. No. L-2538, 1951) 2. The testator must possess testamentary capacity. (Balane, supra, p. 185) 3. The subsequent instrument must either contain an express revocatory clause or be incompatible with the prior will. (Art. 831) The subsequent will must be probated in order to take effect. (Molo v. Molo, G.R. No. L-2538, 1951) Requisites for a Valid Revocation by Physical Destruction (Art. 830 (3); Balane, supra, p. 186187) Page 169 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Testamentary capacity at the time of performing the act of destruction; 1. Intent to revoke (animus revocandi); 2. Actual physical act of destruction, even partial as long as it is not due to desistance (corpus); 3. Completion of the subjective phase; and 4. Performed by the testator himself or by some other person in his presence and express direction (Art. 830(3)) NOTE: No amount of destruction without animus revocandi, without destruction (even partial, as long as not due to desistance) will revoke a will. (Art. 830 (3); Balane, supra, p. 187) If the will was burned, torn, cancelled, or obliterated by some other person, without the express direction of the testator, the will may still be established, and the estate distributed in accordance therewith, if its contents, and due execution, and the fact of its unauthorized destruction, cancellation, or obliteration are established according to the Rules of Court. (Art. 830) Doctrine of Presumed Revocation Where the will cannot be found following the death of the testator and it is shown that it was in the testator's possession when last seen, the presumption is that he must have destroyed it with animus revocandi. (Gago v. Mamuyac, G.R. No. L-26317, 1927) Revocation by Subsequent Will Effective even if New Will Becomes Inoperative A revocation made in a subsequent will shall take effect, even if the new will should become inoperative by reason of the incapacity of the heirs, devisees or legatees designated therein, or by their renunciation. (Art. 832) CIVIL LAW subsequent will. (Molo v. Molo, G.R. No. L-2538, 1951) In the doctrine of dependent relative revocation, the first will may be admitted to probate and given effect, despite it being torn provided that the testator tore it with the mistaken belief that the second will was perfectly valid. This is because he would have not destroyed the first will had he known that second will is not valid. The revocation is therefore dependent on the validity of the second will. (Molo v. Molo, G.R. No. L-2538, 1951) Revocation Based on a False or Illegal Cause Revocation based on a false or illegal cause is null and void. (Art. 833) Requisites: 1. The cause must be concrete, factual and not purely subjective. 2. It must be false. 3. The testator must not know of its falsity. 4. It must appear from the will that the testator is revoking because of the cause, which is false. (Balane, supra, p. 204) NOTE: Even if the revocation is for a false cause but the will is holographic and the revocation is by physical destruction, the revoked will can no longer be probated. The recognition of an illegitimate child does not lose its legal effect, even though the will wherein it was made should be revoked. (Art. 834) REPUBLICATION AND REVIVAL OF WILLS General Rule: Revocation is always effective. Republication If the testator wishes to republish a will that is void as to form, the only way to republish it is to execute a subsequent will and reproduce it. (Art. 835) Exception: Doctrine of Dependent Relative Revocation – when the testator provides in the subsequent will that the revocation of the prior one is dependent on the capacity or acceptance of the heirs, devisees, or legatees instituted in the Revival (Art. 836) The testator needs only to execute a subsequent will or codicil referring to the previous will if the testator wishes to republish a will that is either: (a) Void for reason other than a formal defect Page 170 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (b) Previously revoked REPUBLICATION Takes place by an act of the testator Corrects extrinsic and extrinsic defects REVIVAL Takes place by operation of law Restores a revoked will in certain instances If after making a will, the testator makes a second will expressly revoking the first, the revocation of the second will does not revive the first will, which can be revived only by another will or codicil. (Art. 837) Illustration: In 1985, X executed Will I. In 1987, X executed Will II expressly revoking Will I. In 1990, X executed Will III, revoking Will II. The revocation of Will II by Will III does not revive Will I, unless of course, Will III expressly revives Will I. (Balane, supra, p. 205) PROBATE (ALLOWANCE DISALLOWANCE OF WILLS) cannot enter into compromise agreement different from the terms of the will. If admitted to probate and found valid, the will should be the basis of disposition as the express will of the testator. (Roberts v. Leonidas, G.R. No. L-55509, 1984) Two Kinds of Probate (a) Post-mortem – After the testator’s death (b) Ante-mortem – During his lifetime (Balane, supra, p. 217) The testator himself may, during his lifetime, petition the court having jurisdiction for the allowance of his will. (Art. 838) Finality of a Probate Decree Subject to the right of appeal, the allowance of the will, either during the lifetime of the testator or after his death, shall be conclusive as to its due execution. (Art. 838) Once a decree of probate becomes final in accordance with the rules of procedure, it is res judicata. OR Probate – Judicial process of proving: 1. Compliance with formal requirements of will; and 2. Testamentary capacity of the testator. Irrespective of whether its provisions are valid and enforceable or otherwise. (Fernandez v. Dimagiba, G.R. No. L-23638, 1967) No will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court. (Art. 838 (1)) Mandatory Character of Probate Probate is mandatory in the sense that if there is a will, properties of the estate should pass only in accordance with the will, provided it is admitted for probate. It is mandatory also in the sense that it takes precedence over intestate proceedings. Court ordered consolidation of the intestate proceedings with the testate proceedings, with the testate proceedings taking precedence. Heirs Joint wills are considered to have a defect in form (non-compliance with formalities). However, if allowed and probated and becomes final, it can pass properties. (De la Cerna v. De la Cerna G.R. No. L-28838, 1976) Scope of Probate Proceedings General Rule: Probate proceedings cover the due execution of the will, extrinsic of formal validity and testamentary capacity of the testator only, and no other extraneous matters. Intrinsic validity cannot be ruled upon (i.e. impairment of legitime, unlawful provisions, disqualifications of heirs, legatees, devices, etc.) or other extraneous matters. An extrinsically valid will admitted to probate can still be declared void intrinsically. (Balane, supra, p. 221) Exceptions: Other extraneous matters, which can be raised and decided in probate proceedings (Nepomuceno v. CA, G.R. No. L62952, 1985; Balanay v. Martinez, G.R. No. L39247, 1975. Thus: Page 171 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 1. Provisional ruling on ownership of properties The ruling is only for purposes of inclusion in the inventory of assets of the estate. It not conclusive and is subject to final decision in a separate action to resolve title. In case of community properties of spouses, there must first be liquidation of ACP or CPG because the assets of the estate should be net of the share of surviving spouse. (Pastor v. Pastor G.R. No. L-56340, 1983). However, the rule of provisional character of determination of ownership not being within the proper jurisdiction of the probate court applies only if the dispute is between the estate and third persons claiming ownership, in which case a separate proceeding should be instituted to settle the issue of ownership. A probate court has jurisdiction if the dispute is only among heirs, and the issue is to determine whether the property is part of the ACP/CPG or is a separate property of one of the spouses. (Romero v. CA, G.R. No. 188921, 2012) The approval of the inventory and the concomitant determination of the ownership as basis for inclusion or exclusion from the inventory were provisional and subject to revision at any time during the course of the administration proceedings. (Aranas v. Mercado, G.R. No. 156407, 2014) 2. Apparent intrinsic defect – If the intrinsic defect is apparent on the face of the will, since probate of the will is unnecessary (as in preterition, which annuls the will) (Nuguid v. Nuguid, G.R. No. 23445, 1966) 3. For practical considerations when testamentary provisions are of doubtful validity such as when it is apparent that the disposition is in favor of a person the testator is guilty of concubinage with (Nepomuceno v. CA, G.R. No. L-62952, 1985); and CIVIL LAW 4. All heirs are in agreement that intrinsic validity should be determined first. (Reyes v. CA, G.R. No. 139587, 2000) NOTE: Once the will is admitted to probate, the court may continue to proceed in determining the intrinsic validity of the will. Decree of Probate Conclusive as to the Due Execution or Formal Validity of the Will This means that: 1. The fact that the will is indeed the testator’s last will and testament; 2. Compliance with the required formalities (Balane, supra, p. 221); 3. Testamentary capacity of the testator; (Gallanosa v. Arcangel, G.R. No. L-29300, 1978) 4. Due execution of the will – meaning, that testator was of sound disposing mind, that he freely executed the will, that there is no duress, fraud, undue influence, menace, that the will is genuine (not forged), and that testator was not disqualified from making a will. (Dorotheo v. CA, G.R. No. 108581, 1999). Proof of Extrinsic Validity Attested / Notarial Will 1. Present original will (ideally) 2. Present any attesting witnesses and/or notary public to prove due execution/ testamentary capacity; and 3. If no one is available, present any available evidence to show authenticity or validity of contents of attestation clause. (Rules of Court, Rule 76) Holographic Will 1. Present original will or at least a photo static, scanned or any legible copy; and 2. One person familiar with the handwriting of the testator, unless contested in which case, three witnesses familiar with the handwriting of the testator must be presented to prove that the will was written in the handwriting of the testator. (Rules of Court, Rule 76, Sec. 5) If there are no competent witnesess and the Page 172 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 court deems it necessary, expert testimony may be resorted to. (Art. 811) ATTESTED / NOTARIAL WILLS Uncontested One subscribing witness only, if such witness testify that the will was executed as is required by law (Rule 76, Section 5, Rules of Court) Contested All the subscribing witnesses, and the notary (Rule 76, Section 11, Rules of Court) HOLOGRAPHIC WILLS Uncontested At least one witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator (Art. 811) Contested At least three witnesses who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator (Art. 811) Probate of Lost or Destroyed Will Requirements for the Probate of a Lost or Destroyed Will (Rules of Court, Rule 76, Sec. 5) 1. Establish the execution and validity of the will 2. Establish that the will is in existence at the time of death of the testator, or is shown to have been fraudulently or accidentally destroyed in the lifetime of the testator without his knowledge 3. Its provisions must be clearly and distinctly proved by at least two credible witnesses Lost or Destroyed Holographic Will General Rule: In the probate of a holographic will, the document itself must be produced. A lost holographic will cannot be probated. (Gan v. Yap, G.R. No. L-12190, 1958) The oppositor may present witnesses who know the testator’s handwriting, who after comparing CIVIL LAW the will with other writings or letters of the deceased, have come to the conclusion that such will has not been written by the hand of the testator. And the court in view of such contradictory testimony may use its own its own visual sense, and decide in the face of the document, whether the will submitted to it has indeed been written by the testator. Obviously, when the will itself is not submitted these means of opposition and of assessing the evidence are not available. The only guaranty of authenticity— the testator’s handwriting—has disappeared. (Gan v. Yap, G.R. No. L-12190, 1958) Exception: A photo static copy or Xerox copy of the holographic will may be allowed because comparison can be made with the standard writings of the testator. (Rodelas v. Aranza, G.R. No. L-58509, 1982) Proof of Testamentary Capacity Testamentary capacity including soundness of mind can be proven by the attestation clause and testimony of witnesses and/or notary public. In the absence of any proof, the court may rely on the presumption of soundness of mind. (Art. 800) Exclusive Grounds for Disallowance of Wills (LIF-P-FraM) (Art. 839) 1. Formalities required by Law were not complied with; 2. Testator was Insane or incapable of making a will at the time of execution (lack of testamentary capacity); 3. The will was executed through Force or under duress, or the influence of fear, or threats; 4. The will was procured by undue and improper Pressure and influence, on the part of the beneficiary or of some other person; 5. The testator’s signature was procured through Fraud; and 6. If the testator acted by Mistake or did not intend that the instrument he signed should be his will at the time of affixing his signature. NOTE: Once a will is disallowed because of any of the following grounds, intestate succession will ensue. Page 173 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW II. INSTITUTION OF HEIRS DEVISEES AND LEGATEES Intestacy Follows If Entire Free Portion Not Disposed of by Will An act by virtue of which a testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligations. (Art. 840) If the testator has instituted one or several heirs, and the institution of each is limited to an aliquot part of the inheritance, intestate succession takes place with respect to the remainder of the disposable portion. (Art. 851) NOTE: The declaration of heirship must be made in a special proceeding, not in an independent civil action. However, the Court held that recourse to administration proceedings to determine who the heirs are is sanctioned only if there is a good and compelling reason for such recourse. Hence, the Court had allowed exceptions to the rule requiring administration proceedings as when the parties in the civil case already presented their evidence regarding the issue of heirship, and the RTC had consequently rendered judgment upon the issues it defined during the pre-trial. (Rebusquillo v. Gualvez, G.R. No. 204029, 2014) An Affidavit of Self-Adjudication is only proper when the affiant is the sole heir of the decedent. (Rebusquillo v. Gualvez, G.R. No. 204029, 2014) A will shall be valid even though it does not contain an institution of an heir, or such institution does not comprise the estate, or even though the person so instituted should not accept the inheritance or should be incapacitated to succeed. In such case, the testamentary dispositions made in accordance with law shall be complied with, and the remainder of the estate shall pass to the legal heirs. (Art. 841) DISPOSITIONS BY WILL No compulsory Dispose by will the entire heirs hereditary estate With compulsory Dispose by will the free heirs portion (net hereditary estate minus legitimes) (Balane, supra, p. 239) Rules on Institution of Aliquot Share Less Than or In Excess of the Whole Estate The rules will apply if the following concur: 1. There is more than one instituted heir. 2. The testator intended them to get the whole estate or the whole disposable portion. 3. The testator has designated a definite or aliquot portion for each heir. (Balane, supra, p. 251-252) RULES ON INSTITUTION OF ALIQUOT SHARE LESS THAN OR IN EXCESS OF THE WHOLE ESTATE Art. 852 Art. 853 Total of all the aliquot Total of all the aliquot parts of the instituted parts of the instituted heirs do not cover the heirs exceed the whole inheritance, or whole inheritance, or the whole free portion the whole free portion Remedy: Each part Remedy: Each part shall be increased shall be reduced proportionately proportionately NOTE: In Article 852, the difference between the total of all the portions and the whole of the inheritance or free portion cannot pass by intestacy because the testator’s intention is to give the instituted heirs the entire amount. (Balane, supra, p. 252) Requisites for a Valid Institution of Heir 1. Designation in the will of person/s to succeed (Art. 840) 2. The 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 Page 174 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 6. No preterition results from the effect of such will (Art. 854) Designation in the Will of Person/s to Succeed Directory – Designation of name and surname (Balane, supra, p. 240) Mandatory – Identity of the heir must be established, otherwise void disposition, unless his identity becomes certain. NOTE: If there is ambiguity in the designation, the designation must be resolved by discerning the testator’s intent. If the ambiguity cannot be resolved, intestacy to that portion results. (Art. 844, par. 2) Unknown person – A successor whose identity cannot be determined because the designation in the will is unclear or ambiguous. (Balane, supra, p. 241) NOTE: Unknown persons do not refer to one with whom the testator is not personally acquainted. The testator may institute somebody who is a perfect stranger to him, provided the identity is clear. (Balane, supra, p. 241) Dispositions in Favor of an Unknown Person (Art. 845) General Rule: Every disposition in favor of an unknown person shall be void. Exception: By some event or circumstance his identity becomes certain. Dispositions in Favor of a Definite Class A disposition in favor of a definite class or group of persons shall be valid. (Art. 845) Presumptions in Institution of Heirs In the absence of specific provisions in the will, these presumptions will apply: (E-In-S) (a) Equality – Heirs who are instituted without designation of shares inherit in equal parts. (Art. 846) Shares of Brothers and Sisters in Testamentary Succession CIVIL LAW If the testator should institute his brothers and sisters, and he has some full blood and others of half-blood, the inheritance shall be distributed equally unless a different intention appears. (Art. 848) NOTE: In intestacy, the proportion of 2:1 between full and half-blood siblings and the Iron Curtain Rule between legitimate and illegitimate siblings shall be applied. (b) Individuality – Heirs collectively instituted are deemed individually named unless a contrary intent is prove. (Art. 847) (c) Simultaneity – When several heirs are instituted, they are deemed instituted simultaneously and not successively. (Art. 849) Effect of False Cause for Institution of an Heir General Rule: The falsity of the stated cause does not affect the validity or efficacy of the institution. The false cause is merely considered as not written. (Art. 850) Exceptions: It appears from the will that the testator would not have made such designation if he had known the falsity of such cause. (Art. 850) Requisites for the Exception to Apply: 1. The cause for the institution of heirs must be stated in the will (Austria v. Reyes, G.R. No. L-23079, 1970); 2. The cause must be shown to be false (Austria v. Reyes, G.R. No. L-23079, 1970); 3. It must appear from the face of the will that the testator would not have made such institution if he had known the falsity of the cause. (Austria v. Reyes, G.R. No. L-23079, 1970) PRETERITION The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are not inofficious. (Art. 854) Page 175 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to the right of representation. (Art. 854) Definition of Preterition Preterition is the total omission of a compulsory heir from the inheritance. It consists in the silence of the testator with regard to a compulsory heir, omitting him in his will, either by not mentioning him at all, or by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned in the will in the latter case. (Heirs of Ureta v. Ureta, G.R. No. 165748, 2011) NOTE: Preterition is a concept of testamentary succession and requires a will. (Heirs of Ureta v. Ureta, G.R. No. 165748, 2011) Elements of Preterition (OCLIT) 1. There must be a total Omission of one, some or all of the heir/s in the will, without the heir being expressly disinherited. 2. The omission must be that of a Compulsory heir in the direct line. 3. The omitted compulsory heir must be Living or at least conceived at the time of testator’s death. (Art. 854) 4. The omission must be complete and Total in character. The heir in question must have received nothing from the testator by way of: a. Testamentary succession; b. Legacy or devise; c. Donation inter vivos; d. Intestacy (Balane, supra, p. 266) NOTE: What constitutes preterition is not omission in the will but being completely left out of the inheritance. (Seangio v. Reyes, G.R. No. 140371-72, 2006) Determination of Preterited Heirs The determination of whether or not there are preterited heirs can be made only upon the testator’s death. (JLT Agro v. Balansag, G.R. No. 141882, 2005) Compulsory Heir in the Direct Line This covers children or descendants, or in default of children or descendants, parents or ascendants. Illegitimate descendants and ascendants are also protected, since the law does not distinguish. (Balane, supra) Adopted children are considered compulsory heirs in the direct line, and may be preterited. This is because adoption gives to the adopted child the same rights and duties as if he were a legitimate child of the adopter. (Acain v. Intermediate Appellate Court, G.R. No. 72706, 1987) Effects of Preterition 1. The institution of heir is annulled. The annulment is in toto, unless in the will there are, in addition, testamentary dispositions in the form of devises or legacies. (Nuguid v. Nuguid, G.R. No. L-23445, 1966) Preterition annuls the institution of an heir and annulment throws open to intestate succession the entire inheritance. (Acain v. Intermediate Appellate Court, G.R. No. 72706, 1987) 2. Devises and legacies shall remain valid as long as they are not inofficious. The only provisions which do not result in intestacy are the legacies and devises made in the will for they should stand valid and respected, except insofar as the legitimes are concerned. (Acain v. Intermediate Appellate Court, G.R. No. 72706, 1987) If the devises and legacies impair the legitimes, they are merely reduced. (Balane, supra) 3. If the omitted compulsory heir should die before the testator, the institution shall be effectual, without prejudice to the right of representation. PRETERITION Deprivation of a compulsory heir of his legitime is tacit DISINHERITANCE Deprivation of the compulsory heir of his legitime is express Page 176 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Law presumes that there has been merely an oversight or mistake on the part of the testator It results in the complete nullity of the institution of heir, except the devises and legatees, as long as they are not inofficious. Omitted heir gets not only his legitime but also his share in the free portion not disposed of by way of legacies or devises III. SUBSTITUTION OF HEIRS Done with a legal cause The appointment of another heir so that he may enter into the inheritance in default of the heir originally instituted. (Art. 857) The nullity is limited to the portion of the estate of which the disinherited heir has been legally deprived. If disinheritance is unlawful or ineffective, for absence of one or other of the requisites, the compulsory heir is merely restored to his rightful share. (Nuguid v. Nuguid, G.R. No. L-23445) Successional Rights are Intransmissible An heir, whether compulsory, voluntary, or legal, transmits nothing to his heirs, in case of predecease, incapacity, renunciation, or disinheritance. However, in case of predecease or incapacity of compulsory or legal heirs, as well as disinheritance of compulsory heirs, the rules on representation shall apply. (Balane, supra) There is Right of Representation Compulsory Heirs under the ff: 1. Predecease; 2. Incapacity 3. Disinheritance (Art. 859) for No Right of Represention for Testamentary / Voluntary Heirs There is Right of Representation for Legal / Intestate Heirs under the ff: 1. Predecease; 2. Incapacity NOTE: Only one substitution is allowed. The person substituting cannot be substituted again. Substitute Subject to Same Charges and Conditions Imposed on Original Heir General Rule: The substitute shall be subject to the same charges and conditions imposed upon the instituted heir. (Art. 862) Exception: The testator expressly provided the contrary, or the charges or conditions are personally applicable only to the heir instituted. (Art. 862) Classes of Substitution (a) Vulgar or Simple – The testator may designate one or more persons to substitute the heir or heirs instituted in case such heir or heirs should: i. ii. iii. Die before him (Predecease) Should not wish to be instituted, (Renounce) or Should be incapacitated to accept the inheritance (Incapacitated) (Art. 859) Simple Substitution Simple substitution may be done by the testator: a. By specifying all the three causes, b. By merely providing for simple substitution. (Art. 859) A simple substitution, without a statement of the cases to which it refers, shall comprise the three causes mentioned, unless the testator has otherwise provided. (Art. 859) Restricted Simple Substitution The testator may limit the operation of simple substitution by specifying only one or two of the three causes. Page 177 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (b) Brief (Brevilocua)- Two or more persons may be substituted for one person (Art. 860) (c) Compendious (Compediosa) – one person may be substituted for two or more heirs (Art. 860) (d) Reciprocal (Reciproca) – If heirs instituted in unequal shares should be reciprocally substituted, the substitute shall acquire the share of the heir who dies, renounces, or is incapacitated, unless it clearly appears that the intention of the testator was otherwise. If there are more than one substitute, they shall have the same share in the substitution as in the institution. (Art. 861) NOTE: If one is substituted for two or more original heirs, substitution will only take place if all the original heirs are disqualified. If not all of the original heirs are disqualified, the share left vacant will accrue to the surviving co-heir or coheirs. Transmit it after the lapse of the period to the fideicommissary heir. (Art. 865) 5. Both heirs must be Living and qualified to succeed at the time the testator’s death. 6. The fideicommissary substitution must be Expressly made. (Art. 865) 7. The fideicommissary substitution is imposed on the Free portion of the estate and never on the legitime. (Art. 864) NOTE: Pending the transmission of the property, the fiduciary is entitled to all the rights of a usufructuary having the right to use and enjoy the property, but without the right to dispose the same. Although the fideicommissary heir does not receive the property upon the testator’s death, his right thereto vests at the time and merely becomes subject to a period, and that right passes to his own heirs should he die before the fiduciary’s right expires. (Balane, supra) Tenure of Fiduciary Primary Rule: Period indicated by the testator (e) Fideicommissary Substitution - If the testator institutes an heir with an obligation to deliver to another the property so inherited. The heir instituted to such condition is called the first heir or fiduciary heir, the one to receive the property is the fideicommissary or second heir. (Art. 863) Secondary Rule: If the testator did not indicate a period, then the fiduciary’s lifetime. (Balane, supra, citing Manresa) Requisites for a Fideicommissary Substitution (1st-2nd-1-PT-LEFree) 2. By imposing upon the first heir the absolute obligation to preserve and to transmit to the second heir. (Art. 865) 1. A fiduciary or a FIRST heir who takes the property upon the testator’s death. (Art, 863) 2. A fideicommissary or SECOND heir who takes the property subsequently from the fiduciary. (Art. 863) 3. The second heir must be ONE degree from the first heir. Thus, the fideicommissary can only be a parent or a child of the fiduciary. (Palacios v. Ramirez, G.R. No. 27952, 1982) Two Ways of Making an Express Imposition of Fideicommissary Substitution 1. By the use of the term fideicommissary; or Transmission of Property from First Heir to Second Heir General Rule: The fiduciary should deliver the property without deductions. Exceptions: Deductions which arise from legitimate expenses, credits and improvements. (Art. 865) 4. The dual obligation imposed upon the fiduciary to Preserve the property and to Page 178 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Right to Succession of the Second Heir Period of Inalienability of the Estate The second heir shall acquire the right to the succession from the time of the testator’s death, even though he should die before the fiduciary. The right of the second heir shall pass to his heirs. (Art. 866) General Rule: The dispositions of the testator declaring all or part of the estate inalienable for more than 20 years are void. (Art. 870) The following shall not take effect: (Art. 867) IV. CONDITIONAL TESTAMENTARY DISPOSITIONS AND DISPOSTIONS WITH A TERM The institution of an heir may be made conditionally, or for a certain purpose or cause. (Art. 871) 1. Fideicommissary substitutions which are not made in an express manner, either by giving them this name, or imposing upon the fiduciary the absolute obligation to deliver the property to a second heir; 2. Provisions which contain a perpetual prohibition to alienate, and even a temporary one, beyond the limit fixed in Article 863. 3. Those which impose upon the heir the charge of paying to various persons successively, beyond the limit prescribed in Article 863, a certain income or pension; 4. Those which leave to a person the whole or part of the hereditary property in order that he may apply or invest the same according to secret instructions communicated to him by the testator. Nullity of Fideicommissary Substitution The nullity of the fideicommissary substitution does not prejudice the validity of the institution of heirs first designated; the fideicommissary clause shall simply be considered as not written (Art. 868) such that the institution of the first heir simply becomes pure and unqualified. (Balane, supra) Ownership and Usufructuary Provisions A provision whereby the testator leaves to a person the whole or part of the inheritance, and to another the usufruct, shall be valid. (Art. 869) Successive Usufructuaries If the testator gives the usufruct to various persons, not simultaneously, but successively, the requisites of a fideicommissary substitution must be present. (Art. 869) Exception: In fideicommissary substitution, the period is the lifetime of the first heir. Three Kinds of Testamentary Dispositions (a) Conditional dispositions (b) Dispositions with a term (c) Dispositions with a mode Definitions (a) Condition – Future or uncertain event, or a past event unknown to the parties, upon which the performance of an obligation depends (Art. 1179) (b) Term – The day or time when an obligation either becomes demandable or terminates (Art. 1193) (c) Mode – The statement of the object of the institution or the application of the property left by the testator or the charge imposed on the heir. (Art. 882) It is an obligation imposed upon the heir, without suspending the effectivity of the institution or the rights to the succession. (Rabadilla v. Court of Appeals, G.R. No. 113725, 2000) (d) Disposicion Captatoria/ Scriptura Captatoria – A condition that the heir shall make some provision in his will of the testator or of any other person. This is prohibited because it will make the making of the will a contractual act. (Art. 875) It is not merely the condition that is declared void but the testamentary disposition itself which contains the condition. (Balane, supra) Page 179 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (e) Casual Condition – A condition is casual if it depends upon chance and/or upon the will of a third person (f) Mixed Condition - A condition is mixed if it depends both partly upon the will of the heir himself and upon chance and/or the will of a third person (g) Potestative Condition – One the fulfillment of which depends purely on the heir. (h) Suspensive Term – One that merely suspends the demandability of a right; happening is certain. (i) Caucion Muciana – Bond or security that should be given in favor of those who would get the property if the condition not be complied with. (Art. 879) Conditions Prohibiting Marriage General Rule: An absolute condition not to contract a first or subsequent marriage shall be considered as not written. (Art. 874) Exception: The condition has been imposed on the widow or widower by the deceased spouse, or by the latter’s ascendant’s or descendants. (Art. 874) The right of usufruct, or an allowance or some personal prestation may be devised or bequeathed to any person for the time during which he or she should remain unmarried or in widowhood. (Art. 874) RULES ON POTESTATIVE, CASUAL AND MIXED CONDITIONS Interpretation • When in doubt whether there is a condition or merely a mode, consider the same as mode. • When in doubt as to whether there is a mode or merely a suggestion, consider same only as a suggestion. • A condition suspends but does not obligate, while a mode obligates but does not suspend (for he who inherits with a mode is already an heir; one who inherits conditionally is not yet an heir.) Condition on the Legitimes is Prohibited The testator cannot impose any charge, condition or substitution whatsoever upon the legitimes. Should he do so, the same shall be considered as not imposed. (Art. 872) Positive Potestative Condition (Art. 876) General Rule – It must be fulfilled as soon as the heir learns of the testator’s death. Exception: The condition, already complied with, is of such nature that it cannot be fulfilled again. Negative Potestative Condition (Art. 879) If the potestative condition imposed upon the heir is negative, or consists in not doing or not giving something, the heir shall comply by giving a security (caucion muciana) that he will not do or give that which has been prohibited by the testator, and that in case of contravention he will return whatever he may have received, together with its fruits and interests. Casual or Mixed (Art. 877) Conditions which are Impossible, Contrary to Law or Good Customs These conditions are considered as not imposed, and shall not prejudice the heir, even if the testator provide otherwise. (Art. 873) The testamentary disposition is not annulled; it simply becomes pure. (Balane, supra) It is sufficient if it happens or be fulfilled at any other time before or after the testator’s death, unless testator provides otherwise. If already fulfilled at the time of execution of the will a. If testator is unaware of fact of fulfillmentDeemed fulfilled. b. If testator is aware of the fact of fulfillment Page 180 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 i. If it can no longer be fulfilled again –It is deemed fulfilled ii. If it can be fulfilled again – It must be fulfilled again. (Art. 877) Constructive Compliance (Art. 883, par. 2) If the person interested in the condition should prevent its fulfillment, without the fault of the heir, the condition shall be deemed to have been complied with. RULES ON APPLICABILITY OF CONSTRUCTIVE COMPLIANCE CASUAL MIXED CONDITION CONDITION Not Dependent Dependent on Applicable Partly on Will of Third Chance Party Not Applicable only if Applicable third party is interested in the condition (Art. 883) Effects of Suspensive Condition or Term (Art. 880) The estate shall be placed under administration until: (a) Condition is fulfilled, or (b) Until it becomes certain that condition will never be fulfilled, or (c) Until arrival of the term The same shall be done if the heir does not give the security required as in negative potestative conditions. (Art. 880) IF THE CONDITION HAPPENS The property will be turned over to the instituted heir. IF IT BECOMES CERTAIN THAT CONDITION WILL NOT HAPPEN The property will be turned over to a secondary heir, if there is one, or to the intestate heirs, as the case may be. CIVIL LAW Dispositions with a Term Suspensive Term (Art. 878) A disposition with a 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. NOTE: The heir’s right vests upon the testator’s death. Should the heir die before the arrival of the suspensive term, he merely transmits his right to his own heirs who can demand the property when the term arrives. (Balane, supra) The designation of the day or time when the effects of the institution of an heir shall commence or cease shall be valid. (Art. 885) TERM SUSPENSIVE RESOLUTORY Before the arrival of Before the arrival of the term, the property the term, the property should be delivered to should be delivered to the intestate heirs. the instituted heir. No However, a sufficient security is required of security has to be them. (Art. 885) posted by the intestate heirs. Dispositions with Modes Dispositions with modes may be claimed at once, provided that the instituted heirs give security for compliance with the wishes of the testator and for the return of anything he or they may receive, together with its fruits and interests, if he or they should disregard this obligation. (Art. 882, par. 2) Indicators of a Modal Institution The testator states the following: 1. The object of the institution; 2. The purpose or application of the property left by the testator; 3. The charge imposed by the testator upon the heir. (Rabadilla v. Court of Appeals, G.R. No. 113725, 2000) NOTE: An obligation imposed upon the heir should not be considered a condition unless it clearly appears from the will itself that such was Page 181 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 the intention of the testator. In case of doubt, the institution should be considered as modal and not condition. (Rabadilla v. Court of Appeals, G.R. No. 113725, 2000) Analogous Performance When without fault of the heir, a modal institution cannot take effect in the exact manner stated by the testator, it shall be complied with in a manner most analogous to and in conformity with his wishes. (Art. 883, par. 1) Prohibited or Void Conditions The prohibited or void conditions are: (LIM-Will) 1. Charges, conditions, substitutions, upon the Legitimes. (Art. 872) 2. Impossible conditions and those contrary to law or good customs. (Art. 873) 3. An absolute condition not to contract a first or subsequent Marriage. (Art. 874) 1. However, if the condition not to contract a first or subsequent marriage has been imposed on the widow or widower by the deceased spouse, or by the latter’s ascendants or descendants, such condition is valid. (Art. 874) 4. Disposition Captatoria –Any disposition made upon the condition that the heir shall make some provision in his WILL in favor of the testator or of any other person. (Art. 875) ————- end of topic ————V. LEGITIME The part of the testator’s property which he cannot dispose of because the law has reserved it for his compulsory heirs. (Art. 886) NOTE: When the disposition is for valuable consideration, there is no diminution of the estate by merely a substitution of value, that is the property sold is replaced by the equivalent monetary consideration. (Buenaventura v. Court of Appeals, G.R. No. 126376, 2003; Manongsong v. Estimo, G.R. No. 136773, 2003) Classes of Compulsory Heirs (a) Primary – Those who have precedence over and exclude other compulsory heirs i.Legitimate or adopted children and/or descendants (legitimate), with respect to their legitimate parents and ascendants (Arellano v. Pascual, G.R. No. 189776, 2010, citing Tolentino 1992 ed., p. 252) (b) Secondary – Those who succeed only in the absence of the primary heirs i.Legitimate parents and ascendants (legitimate), with respect to their legitimate children and descendants ii.Parents of illegitimate children – only in default of any kind of descendants (Arellano v. Pascual, G.R. No. 189776, 2010, citing Tolentino 1992 ed., p. 252) (c) Concurring – Those who succeed together with the primary or the secondary compulsory heirs i.Widow or widower (legitimate) – the surviving spouse referred to is the spouse of the decedent. ii.Illegitimate children and/ or descendants (Arellano v. Pascual, G.R. No. 189776, 2010, citing Tolentino 1992 ed., p. 252) Compulsory Heirs (Art. 887) (a) Legitimate or adopted legitimate descendants. children and/or NOTE: The nearer exclude the more remote. Hence, children exclude grandchildren, except when the rule on representation is proper. (b) Legitimate parents and/or ascendants, parents of illegitimate children. NOTE: Legitimate parents or ascendants are excluded only by legitimate children. Parents of illegitimate children are excluded by both legitimate and illegitimate children. The illegitimate ascending line does not go beyond the parents. Page 182 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (c) Surviving spouse NOTE: The marriage between the decedent and the surviving spouse must either be valid or voidable. If voidable, there should have been no final decree of annulment at the time of the decedent’s death. Separation de facto is not a ground for the disqualification of the surviving spouse as heir. Effect of decree of legal separation: a. On the offending spouse – disqualified from inheriting b. On the innocent spouse – no effect c. If after the final decree of separation there was a reconciliation between the spouses, the reciprocal right to succeed is restored. (d) Illegitimate children and/or descendants NOTE: In all cases of illegitimate children, their filiation must be duly proved. (Art. 887) As to illegitimate descendants the rule is also the nearer exclude the more remote, without prejudice to representation when proper. side. After the portions corresponding to the line has been assigned, there will be equal apportionment between or among the recipients within the line, should there be more than one. (Art. 890) (f) There is no right of representation in the direct ascending line. (Art. 972) (g) For a surviving spouse to inherit from the deceased, the marriage between the decedent and the widow/widower must be either valid or voidable. (Balane, supra, p.341) Rules of Surviving Spouse Compulsory Heir (Art. 900) as Sole General Rule: The surviving spouse gets 1/2 of the estate Exception: 1/3 of the estate, if the following circumstances are present: 1. The marriage was in articulo mortis; 2. The testator died within 3 months from the time of the marriage; 3. The parties did not cohabit for more than 5 years; and 4. The spouse who died was the party in articulo mortis at the time of the marriage. General Rules in Ascertaining Legitimes (a) Rule of proximity: The nearer exclude the more remote, except when the rule on representation is proper. (Art. 962) (b) Legitimate parents or ascendants are excluded only by legitimate children. (Arts. 896, 899) (c) Parents of illegitimate children are excluded by both legitimate and illegitimate children. (Art. 903) (d) The illegitimate ascending line does not go beyond the parents. (Art. 903; Balane, supra, p.345) (e) In the direct ascending line, there is the rule of division by line. The legitime is divided equally between the paternal and maternal Page 183 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 DIFFERENT COMBINATIONS OF Shares of Compulsory Heirs (Art. 888-903) HEIR Legitimate Children & Descendants FREE PORTION LEGITIME 1/2 1/2 Legitimate Children – 1/2 Legitimate Children (LC) & Surviving Spouse Spouse – Equal to share of 1 LC One Legitimate Child/Descendant & Surviving Spouse Child/Descendant – 1/2 Spouse – 1/4 Whatever remains 1/4 Legitimate Children -1/2 Legitimate Children (LC) & Illegitimate Children (ILC) Illegitimate Children – 1/2 of share of 1 LC as may be accommodated, otherwise reduce proportionately Whatever remains LC –1/2 Legitimate Children/Descendants, Surviving Spouse & Illegitimate Children Spouse – equal to 1 share of 1 LC ILC – 1/2 of share of 1 LC as may be accommodated, otherwise reduce proportionately Whatever remains LC – 1/2 One Legitimate Child, Illegitimate Children & Surviving Spouse ILC – 1/2 of share of 1 LC as may be accommodated, otherwise reduce proportionately Whatever remains Spouse –1/4 of estate Parents & Ascendants of Legitimate Children Parents/Ascendants of Legitimate Children & Illegitimate Children Parents/Ascendants of Legitimate Children & Surviving Spouse Parents/Ascendants of Legitimate Children, Illegitimate Children & Surviving Spouse, 1/2 1/2 Legitimate Parents/Ascendants – 1/2 Illegitimate Children – 1/4 1/4 Legitimate Parents/Ascendant – 1/2 Spouse – 1/4 Parents/Ascendants –1/2 ILC –1/4 Spouse – 1/8 1/4 1/8 General Rule or If in artiuculo mortis, but cohabited for more than 5 years – 1/2 1/2 1/3 if in articulo mortis 2/3 Surviving Spouse Only ILC – 1/3 Page 184 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Surviving Spouse & Illegitimate Children Surviving Spouse & Parents Of Illegitimate Children Spouse – 1/3 Spouse – 1/4 Parents – 1/4 1/3 1/2 Illegitimate Children Only 1/2 1/2 Parents Of Illegitimate Children 1/2 1/2 Page 185 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Reserva Troncal This is the reservation by virtue of which an ascendant who inherits from his descendant any property which the latter may have acquired by gratuitous title from another ascendant or a brother or sister, is obliged to reserve the property for the benefit of relative within the third degree and who belong from the same line from which the property came from. (Art. 891) NOTE: It constitutes as an exception to both the system of legitimes and the order of intestate succession. Purpose of Reserva Troncal: 1. To reserve certain properties in favor of certain persons 2. To prevent persons outside a family from acquiring, by some chance or accident, property which otherwise would have remained with the said family Requisites of Reserva Troncal (GWOT) 1. The property was acquired by a person (Prepositus) from an ascendant or from a brother or sister (Origin) by Gratuitous title; Acquisition Transfer) by Gratuitous Title (First a. By donation, or b. By any kind of succession 2. The said descendant died Without legitimate issue; NOTE: Only legitimate descendants will prevent the property from being inherited by the legitimate ascending line by operation of law. 3. The property is inherited by another descendant (Reservista) by Operation of law; Transmission by Operation of Law (Second Transfer) a. Compulsory succession, or b. Intestate succession 4. There are relatives within the Third degree (Reservatarios) belonging to the line from which the said property came. (Chua v. Court of First Instance, G.R. No. L-29901, 1977) NOTE: The provisions of Art. 891 only apply to legitimate relatives. (Nieva v. Alcala, G.R. No. L13386, 1920) Three Transmissions Involved in Reserva Troncal: 1. A first transmission by lucrative title (inheritance or donation) from an ascendant or brother or sister to the deceased descendant; (Mendoza v. Delos Santos, G.R. No. 176422, 2013) 2. A posterior transmission, by operation of law (intestate succession or legitime) from the deceased descendant (prepositus) in favor of another ascendant, the reservista, which two transmissions precede the reservation; (Mendoza v. Delos Santos, G.R. No. 176422, 2013) It is this second transfer that creates the reserva. (Solivio v. Court of Appeals, G.R. No. 83484, 1990) 3. A third transmission of the same property (in consequence of the reservation) from the reservistas to the reservatarios or the relatives within the third degree from the deceased descendant belonging to the line of the first ascendant, brother or sister of the deceased descendant. (Gonzalez v. CFI, G.R. No. 34395, 1981) Parties Involved 1. Origin or Mediate Source – The ascendant, brother or sister from whom the prepositus had acquired the property by gratuitous title; (Balane, supra) 2. Prepositus – The descendant/brother/ sister who died and from whose death the reservistas in turn had acquired the property Page 186 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 by operation of law. The so-called “arbiter of the fate of the reserva troncal.” (Balane, supra) While the property is owned by the prepositus, he has all the rights of ownership over it and may exercise such rights in order to prevent a reserva from arising. He can terminate the reserva by substituting or alienating or disposing the property during his lifetime; a. By bequeathing or devising it either to the potential reservista or to other third person (subject to rights of compulsory heirs to the legitime); or b. By partitioning in such a way as to assign the property to parties other than the potential reservista (subject to the constraints of the legitime). 3. Reservista – The ascendant of the prepositus of whatever degree, obliged to reserve the property; (Balane, supra) 4. Reservatarios – The relatives of the prepositus within the third degree and who belong to the line from which the property came and for whose benefit the reservation is constituted. (Balane, supra) NOTE: The reference point from which the third degree requirement should be reckoned is the prepositus – the one at the end of the line from which the property came and upon whom the property last resolved by descent. (Mendoza v. delos Santos, 2013) NOTE: As long as the reservatario is alive at the time of the reservista’s death, he qualifies as such, even if he was conceived and born after the prepositus’ death. (Balane, supra) CIVIL LAW Two Events to be Considered to Determine the Right of the Reservatarios over the Reservable Property 1. Death of Prepositus – All qualified reservatarios merely have an inchoate right. The reservistas own the property subject to the resolutory condition 2. Death of Reservista – surviving reservatarios acquire a perfect right. (Balane, supra) Preference Among Reservatarios Upon the death of the ascendant reservista, the reservable property should pass, not to all the reservatarios as a class, but only to those nearest in degree to the descendant (prepositus), excluding those reservatarios of more remote degree. The reserva troncal merely determines the group of relatives to whom the property should be returned; but within that group the individual right to the property should be decided by the applicable rules of ordinary intestate succession, since Art. 891 does not specify. (Padura v. Baldovino, G.R. No. 11960, 1958) Representation Among the Reservatarios There is a right of representation on the part of reservatarios who are relatives of the prepositus within the third degree. These reservatarios have the right to represent their ascendants. (Florentino v. Florentino, G.R. No. 14856, 1919) Relatives within the 4th and succeeding degrees cannot be considered reservatarios. They cannot claim representation of their predecessors since the right granted in Art. 891 is a personal right. The only recognized exemption is the case of nephews and nieces of the prepositus, who have the right to represent their fathers or mothers who are brothers and sisters of the prepositus. (Mendoza v. De los Santos, G.R. No. 176422, 2013) There will only be one instance of representation among reservatarios, i.e., a case of the prepositus being survived by brothers/sisters and children of a predeceased or incapacitated brother/sister. (Balane, supra) Page 187 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Juridical Nature of Reserva Troncal Nature of Reservista’s Right 1. The reservista’s right over the reserved property is one of ownership; 2. The ownership is subject to a resolutory condition. (The existence of reservatarios at the time of the reservista’s death) 3. The right of ownership is alienable, but subject to the same resolutory condition. 4. The reservista’s right of ownership is registrable. (Edroso v. Sablan, G.R. No. 6878, 1913) The reservista has no power to appoint, by will, which reservatarios are to get the reserved property. (Gonzales v. CFI, G.R. No. L-34395, 1981) Nature of Reservatarios’ Right 1. The reservatarios have a right of expectancy over the property; 2. The right is subject to a suspensive condition. (The expectancy ripens into ownership if the reservatarios survive the reservista). 3. The right is alienable, but subject to the same suspensive condition. 4. The right is registrable. (Sienes v. Esparcia , G.R. No. L-12957, 1961) Property Reserved Any kind of property may be reserved. The very same property must go through the process of the three transmissions, in order for the reserva to arise. (Balane, supra) Reserva Maxima/Minima Theories: Applies only if two circumstances concur: 1. Prepositus makes a will instituting the ascendant-reservista to the whole or a part of the free portion; (Balane, supra) 2. There is left in the prepositus’ estate, upon his death, property reservable. (Balane, supra) RESERVA MAXIMA The whole property is reservable for as long as it can be accommodated in the legitime or intestate share of the reservatarios Maximizes the scope of reserve RESERVA MINIMA Every single property in the Prepositus’ estate must be deemed to pass, partly by will and partly by operation of law, so that in general, only 50% of the property is reservable. Minima finds wider acceptance in the Philippines Rights of the Reservatarios and the Corresponding Obligations of the Reservista (Balane, supra) 1. To Inventory reserved properties; 2. To Annotate the reservable character (if registered immovables) in the Registry of Property within 90 days from acceptance by the reservista; 3. To Appraise the movables; 4. To Secure by means of mortgage: a. The indemnity for any deterioration of or damage to the property occasioned by the reservista’s fault or negligence, and b. The payment of the value of such reserved movables as may have been alienated by the reservista onerously and gratuitously. (Dizon v. Galang, G.R. No. 23144, 1926) Reserva Troncal is Extinguished By 1. The death of the reservista 2. The death of all the reservatarios; 3. Renunciation by all the reservatarios, provided that no other reservatario is born subsequently; 4. Total fortuitous loss of the reserved property; 5. Confusion or merger of rights, as when the reservatarios acquire the reservista’s right by contract inter vivos; (Balane, supra) 6. Prescription or adverse possession. (Balane, supra) Page 188 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Principle of Non-Impairment of Legitimes General Rule: The testator cannot deprive his compulsory heirs of their legitime. (Art. 904) Exception: Valid disinheritance General Rule: The testator cannot impose upon the same any burden, encumbrance, condition, or substitution of any kind whatsoever. (Art. 904) Exceptions: 1. Parent in the interest of his family to keep any manufacturing, agricultural or industrial enterprise intact may order the legitime of the other children be paid in cash. (Art. 1080) 2. Express prohibition of the partition of the estate for a period not exceeding 20 years. (Art. 1083) 3. The family home shall continue despite the death of one or both spouses or of the unmarried head of the family for a period of ten years or for as long as there is a minor beneficiary, and the heirs cannot partition the same, unless the court finds compelling reasons therefor. (Family Code, Art. 159) 4. Reserva Troncal (Art. 891) Renunciation or Compromise of Future Legitime (Art. 905) Every renunciation or compromise as regards future legitime between the person owing it and his compulsory heir is void, and the latter may claim the same upon the death of the former; but they must bring to collation whatever they may have received by virtue of the renunciation or compromise. NOTE: The rights of the heirs are merely inchoate because it is only perfected upon the testator’s death. Hence, there is still nothing to renounce. No contract may be entered into with respect to future inheritance except in cases expressly authorized by law. (Art. 1347, par. 2) Completion of Legitime (actio ad supplendam legitimam) Any compulsory heir to whom the testator has left by any title less than the legitime belonging to him may demand that the same be fully satisfied. (Art. 906) General Rule: Anything a compulsory heir receives by gratuitous title from the predecessor is considered an advance on the legitime and is deducted from it. (Art. 909 & Art. 910) Exceptions: 1. If the predecessor gave the compulsory heir a donation inter vivos and provided that it was not to be charged against the legitime. (Art. 1062) 2. Testamentary dispositions made by the predecessor to the compulsory heir, unless the testator provides that it should be considered part of the legitime. (Art. 1063) The impaired legitime of a compulsory heir shall be filled up in the following manner: (a) It must first be taken from the part of the estate not disposed of by will. (b) If it is not sufficient, it must then be taken from the shares of the testamentary heirs, legatees, and devisees, proportionally. (Art. 855) Testamentary dispositions that impair or diminish the legitime of compulsory heirs shall be reduced on petition of the same insofar as they may be inofficious or excessive. (Art. 907) INCOMPLETE LEGITIME Heir not entirely forgotten Less than the portion of the legitime Remedy is to demand for completion of legitime PRETERITION Total omission of the heir Total deprivation of legitime Effect is the total annulment of the institution of heirs Steps in Determining the Legitime of Compulsory Heirs 1. Determination of the gross value of the estate at the time of the death of the testator; 2. Determination of all debts and charges which are chargeable against the estate; Page 189 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 3. Determination of the net value of the estate by deducting all the debts and charged from the gross value of the estate; 4. Collation or addition of the value of all donations inter vivos to the net value of the estate; 5. Determination of the amount of the legitime from the total thus found; 6. Imputation of all the value of all donations inter vivos made to compulsory heirs against their legitimes and of the value of all donations inter vivos made to strangers against the disposable free portion and restoration to the hereditary estate if the donation is inofficious. If legitime is impaired, the following reductions shall be made: a. First, reduce pro-rata non-preferred legacies and devises, and the testamentary dispositions. b. Second, reduce pro rata the preferred legacies and devises. c. Third, reduce the donations inter vivos according to the inverse order of their dates. (Art. 911) d. Fourth, reduce the legitimes of the illegitimate children. 7. Distribution of the residue of the estate in accordance with the will of the testator. Donations inter vivos to Compulsory Heirs General Rule: Donations inter vivos to a compulsory heir shall be charged to their legitime (Art. 909) Exception: If the predecessor gave the compulsory heir a donation inter vivos and provided that it was not to be charged against the legitime. (Art. 1062) Donations inter vivos to Strangers Donations made to strangers shall be charged to the part of the estate which the testator could disposed of by will. (Art. 909) Stranger – Anyone who does not succeed as a compulsory heir. (Balane, supra) CIVIL LAW Principles on Devises or Legacies of Usufruct or Life Annuities or Pensions 1. If, upon being capitalized according to actuarial standards, the value of the grant exceeds the free portion, it has to be reduced, because the legitime cannot be impaired. (Art. 911) 2. The testator can impose no usufruct or any other encumbrance on the part that passes as legitime. (Art. 911) 3. Subject to the two rules stated above, the compulsory heirs may elect between ceding to the devisee/legatee the free portion, or the proportional part thereof corresponding to the said legacy/devise, and complying with the terms of the usufruct or life annuity or pension. (Art. 911) When Devise Subject to Reduction Consists of Indivisible Real Property IF THE EXTENT OF IF THE EXTENT OF REDUCTION IS REDUCTION IS ½ LESS THAN ½ OF OR MORE OF THE THE VALUE OF THE THING THING It shall be given to the It shall be given to the devisee. compulsory heirs. In either case, there should be pecuniary reimbursement to the party who did not get his physical portion of the thing devised. (Art. 912) The devisee who is entitled to a legitime may retain the entire property, provided its value does not exceed that of the disposable portion and of the share pertaining to him as legitime. (Art. 912) If the heirs or devisees do not choose to avail themselves of the right granted in Art. 912, the thing devised should be disposed of by: 1. Any other heir or devisee, who elects to do so, may acquire the thing and pay the parties their respective shares in money; 2. If no heir or devisee elects to acquire it, it shall be sold at public auction and the net proceeds accordingly divided between the parties concerned. (Art. 913) Page 190 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 DISINHERITANCE Causes of Vacancy in Succession (a) Disinheritance - The testator creates it himself (Art. 916) (b) Repudiation - The heir rejects the inheritance (Art. 1041) (c) Incapacity/Predecease - Something happens to the heir Disinheritance A compulsory heir may, in consequence of disinheritance, be deprived of his legitime, for causes expressly stated by law. (Art. 915) Requisites for Valid Disinheritance (WET2LUP) 1. Effected only through a valid Will (Art. 916) NOTE: Will containing disinheritance must be probated. 2. 3. 4. 5. 6. 7. Disinheritance only occurs in testamentary succession. Its counterpart in intestate succession is unworthiness. For a cause Expressly stated in the will (Art. 916, 918) Cause must be certain and True (Art. 918) Total; It must be for a cause expressly stated by Law (Art. 916, in relation to Art. 919-921) Unconditional; If the truth of the cause is denied, it must be Proved by the proponent. (Art. 917) Effects of Disinheritance • Total exclusion of the compulsory heir from the inheritance, which includes his legitime, his share in the intestate portion, and any testamentary disposition made in a prior will. (Balane, supra at p. 437-438) NOTE: Therefore, the heir loses his legitime. As to the free portion, it passes through Substitution, Accretion, and Intestacy. • The children or descendants of the person disinherited shall take his or her place and shall preserve the rights of compulsory heirs with respect to the legitime. (Art. 923) NOTE: The disinherited heir can be represented in the legitime and also to any intestate portion that he or she would have inherited: • Only in the descending line, never in the ascending • In collateral line, only with respect to nephews and nieces. The disinherited parents shall not have the usufruct or administration of the property which constitutes the legitime. (Art. 923) Ineffective Disinheritance Disinheritance without specification of the cause, or for a cause the truth of which, if contradicted, is not proved, or which is not one of those set forth in this Code, shall annul the institution of heirs insofar as it may prejudice the person disinherited; but the devises and legacies and other testamentary dispositions shall be valid to such extent as will not impair the legitime. (Art. 918) Effects of Ineffective Disinheritance 1. If the testator had made disposition of the entire estate, the testamentary disposition is annulled only insofar as they prejudice the legitime of the person disinherited. It does not affect the dispositions of the testator with respect to the free portion 2. If the testator did not dispose of the free portion, the compulsory heir will be given all that he is entitled to receive as if the disinheritance has not been made, without prejudice to lawful dispositions made by the testator in favor of others. 3. Devisees, legacies and other testamentary dispositions shall be valid to such extent as will not impair the legitime. (Vitug, Civil Law Volume III, 2006 edition, p. 263) INEFFECTIVE DISINHERITANCE Person disinherited may be any compulsory heir Express PRETERITION The person omitted must be a compulsory heir in the direct line Implied Page 191 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Intentional Partial annulment of institution of heirs Either intentional or unintentional Effect: Total annulment of institution of heirs Preterition is total omission from the inheritance, without the heir being expressly disinherited. The implied basis of the rule on preterition is inadvertent omission by the testator. Thus, if the testator explicitly disinherits the heir, Article 854 on preterition will not apply. Should the disinheritance be ineffective, for absence of one or other of the requisites for a valid disinheritance, the heir is simply entitled to demand his rightful share. (Balane, supra) GROUNDS FOR DISINHERITANCE Grounds for Disinheritance of Legitimate or Illegitimate Children and Descendants (Art. 919) 1. When the child or descendant has been found guilty of an attempt against the life of the testator, his or her spouse, descendants, or ascendant; a. Final conviction is required. b. It includes all stages of commission of a crime. (Attempted, frustrated, or consummated) c. This ground also applies to disinheritance of parents, ascendants, and spouse. d. Felony must be intentional (not through negligence) 2. When a child or descendant has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found groundless; a. It includes filing of a complaint before the prosecutor, or presenting incriminating evidence against the testator, or even suppressing exculpatory evidence. b. It may be made by the heir in a proceeding as a complainant or witness in a criminal case. c. The testator must be acquitted. CIVIL LAW d. The accusation must be found to be groundless. The judgment of acquittal must state either no crime was committed or that the accused did not commit the crime. An acquittal on reasonable doubt will not be a ground of disinheritance. e. This ground also applies to disinheritance of parents, ascendants, and spouse. 3. When a child or descendant has been convicted of adultery or concubinage with the spouse of the testator; a. Final conviction is required. b. There must be a valid marriage between the spouse and the testator. c. This ground also applies to disinheritance of parents and ascendants. (Balane, supra) 4. When the child or descendant, by fraud, violence, intimidation, or undue influence, causes the testator to make a will or to change one already made; 5. A refusal without justifiable cause to support the parent or ascendant who disinherits such child or descendant; a. The obligation to support must be proven. b. There must be a need and demand for support. c. The demand must be unjustifiably refused. d. This ground also applies to disinheritance of parents, ascendants, and spouses NOTE: Refusal may be justified, if the obligor does not have enough resources for all whom he is obliged to support. The ascendants are only third in the hierarchy of preference among claimants of support. (Family Code, Art. 200, par. 3) 6. Maltreatment of the testator by word or deed, by the child or descendant; a. The verbal or physical assault must be of a serious nature. b. No conviction is required. It is not even required that a criminal case be filed. Page 192 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 By word – Slander, offensive language, insult, libel. May be spoken or written. By deed – No need for violence. It could be something which caused the testator to be humiliated. 7. When a child or descendant leads a dishonorable or disgraceful life; a. The conduct must be habitual. (Balane, supra) 8. Conviction of a crime which carries with it the penalty of civil interdiction. a. Final conviction is required. b. The accessory penalty of civil interdiction is imposed with the principal penalties of death, reclusion perpetua, and reclusion temporal. (Balane, supra) NOTE: The enumeration is exclusive. Grounds for Disinheritance of Legitimate or Illegitimate Parents or Ascendants (Art. 920) 1. When the parents have abandoned their children or induced their daughters to live a corrupt or immoral life, or attempted against their virtue; a. Includes all conduct constituting a repeated or total refusal or failure to care for a child. b. This applies when the parents willfully left the children to fend for themselves. c. It is not restricted to those instances of abandonment penalized by law. d. Inducement- same as deprivation of parental authority; only applies to female descendants e. Attempt on virtue- no conviction is required 2. When the parent or ascendant has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; 3. When the parent or ascendant has accused the testator of a crime for which the law prescribes imprisonment for six years or more, if the accusation has been found to be false; CIVIL LAW 4. When the parent or ascendant has been convicted of adultery or concubinage with the spouse of the testator; 5. When the parent or ascendant by fraud, violence, intimidation, or undue influence causes the testator to make a will or to change one already made; 6. The loss of parental authority for causes specified in this Code; • It refers to culpable loss of parental authority and excludes attainment of age of majority. (Balane, supra) The causes for cuplable loss of parental authority include: a. judicial deprivation of parental authority on the ground of sexual abuse; b. loss of parental authority as a result of judicial declaration of abandonment of the child c. judicial deprivation of parental authority based on: i. excessively harsh or cruel treatment of child ii. giving the child corrupting orders, counsel or example iii. compelling the child to beg; or iv. subjecting the child or allowing him to be subjected to acts of lasciviousness • No conviction is required. 7. The refusal to support the children or descendants without justifiable cause; 8. An attempt by one of the parents against the life of the other, unless there has been a reconciliation between them. a. Final conviction is not required. b. It includes all stages of commission of a crime. (Attempted, frustrated, or consummated) c. Even if parents are not married, it is still a ground. The parents do not need to be spouses. However, the testator must be a common child. d. Reconciliation between the parents removes the right of a child or descendant to disinherit and rescinds a disinheritance already made. Page 193 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 NOTE: The enumeration is exclusive. Grounds for Disinheritance of a Spouse (Art. 921) 1. When the spouse has been convicted of an attempt against the life of the testator, his or her descendants, or ascendants; 2. When the spouse has accused the testator of a crime for which the law prescribes imprisonment of six years or more, and the accusation has been found to be false; 3. When the spouse by fraud, violence, intimidation, or undue influence cause the testator to make a will or to change one already made; 4. When the spouse has given cause for legal separation; a. A decree of legal separation is not required. b. The grounds for legal separation need not be proven, unless contested by the heir. c. If there is already a decree of legal separation, the ground is conclusive, but there is still a need to disinherit by will. 5. When the spouse has given grounds for the loss of parental authority; o Judicial decree is not required. Giving grounds therefore is sufficient. (Art. 921) 6. Unjustifiable refusal to support the children or the other spouse. actions subsequent to the act of disinheritance. (Vitug, supra, p. 264) Reconciliation may be done by: 1. Concrete and express pardon extended to the offender, who accepts it. A general pardon extended by the testator on his deathbed to all who have offended him will not suffice. 2. Unequivocal conduct toward the offending heir, by which the intent to forgive must be clear. OCCURRED BEFORE DISINHERITANCE IS MADE OCCURRED AFTER DISINHERITANCE IS MADE Right to disinherit is extinguished Disinheritance is set aside. (Art. 922) Effects of Setting Aside the Disinheritance 1. The disinherited heir is restored to his legitime. 2. If the disinheriting will did not dispose of the disposable portion, the disinherited heir is entitled to his proportionate share, if any. 3. If the disinheriting will or any subsequent will disposed of the disposable portion in favor of testamentary heirs, legatees or devisees, such dispositions remain valid. NOTE: The enumeration is exclusive. Revocation of Disinheritance 1. Reconciliation (Art. 922) 2. Subsequent institution of the disinherited heir. 3. Nullity of the will, which contains the disinheritance. Reconciliation This refers to the resumption of genuine cordial relationship between the testator and the disinherited heir, approximating that which prevailed before the testator learned of the cause for disinheritance, reciprocally manifested by their Page 194 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 SUMMARY OF GROUNDS FOR DISINHERITANCE (ARTS. 919, 920 & 921) CHILD/ DESCENDANT √ PARENT/ ASCENDANT √ √ √ √ √ √ √ N/A √ √ √ Support unjustifiably refused √ √ Maltreatment of the testator by word or deed Leading a dishonorable or disgraceful life Conviction of a crime which carries with the penalty of civil interdiction Abandonment of Children, Inducement to live a corrupt or moral life, or attempted against their virtue Loss of parental authority √ N/A Unjustifiable refusal to support the children or the other spouse N/A √ N/A N/A √ N/A N/A N/A √ N/A N/A √ Attempt by one Parent against the Life of the Other Giving Cause for Legal Separation N/A √ It is sufficient that the spouse has given grounds for loss of parental authority N/A N/A N/A √ GROUND Attempt against the life of the testator, spouse, ascendant, descendant Accusation of a crime with penalty of six years Adultery and Concubinage with the spouse of testator Induce testator to make/change the will. SPOUSE Page 195 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW LEGACIES AND DEVISES Where the will is silent as to who shall pay or deliver the legacy/devise: 1. If there is an administration proceeding, there is a presumption that such legacy or devise constitutes a charge against the decedent’s estate (Paras, supra, 2016) 2. If there are no administration proceedings, it is a charge upon the heirs, in the same proportion in which they may inherit. (Art. 926, par. 2) Legacy – Testamentary disposition of personal property by particular title. (Balane, supra) Devise – Testamentary disposition of real property by particular title. (Balane, supra) HEIR One who succeeds to the whole or a fractional part of the inheritance (Balane, supra) LEGATEE / DEVISEE Those who succeed to definite, specific, and individual properties Things And Rights Which May Be Bequeathed of Devised All things and rights which are within the commerce of man may be bequeathed or devised. (Art. 924) NOTE: It is not required that the thing devised or bequeathed belong to the testator. Also, it must not impair the legitimes. Persons Who May Be Charged With Legacies And Devises A testator may charge with legacies and devises not only his compulsory heirs but also the legatees and devisees. (Art. 925) General Rule: Estate is charged with the legacy or devise. Exception: Subsidiary legacy or devise (Paras, Civil Code of the Philippines Annotated, 2016) Subsidiary legacy or devise – When the testator imposes the burden on an heir or a legatee or devisee; the heir, legatee, or devisee charged will be bound to deliver the legacy or devise to the person specified. As far as the heir, legatee, or devisee charged is concerned, it will be a mode. (Balane, supra) EXTENT OF LIABILITY LEGATEE / DEVISEE HEIR If charged with a If charged with a legacy or devise, he or legacy or devise, he she shall be liable only or she shall not be for the extent of the liable beyond the value of the legacy or amount of the free devise received. portion given to him. (Arts. 925-926; Tolentino, supra) NOTE: Since legacies and devises are to be taken from the disposable free portion of the estate, the provisions on institution of heirs are generally applicable to them. When Two Or More Heirs Take Possession Of The Estate If two or more heirs take possession of the estate, they shall be solidarily liable for the loss or destruction of a thing devised or bequeathed, even though only one of them should been negligent. (Art. 927) Liability for Eviction General Rule: The estate is liable for eviction. Exception: In case of a subsidiary legacy or devise, the heir, legatee or devise charged shall be liable in case of eviction, if the thing is indeterminate and is indicated only by its kind. (Art. 928) Thing Owned In Part By Testator General Rule: Conveys only interest or part owned by testator (Art. 929) Exception: If testator otherwise provides Page 196 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 1. He may convey more than what he owns and the estate should try to acquire the part or interest owned by other parties. If other parties are unwilling to alienate, the estate should give the legatee/devise the monetary equivalent. (by analogy with Art. 931) 2. He may convey less than what he owns. (Art. 794) Thing Owned by Another (Arts. 930-931) 1. If the testator orders acquisition of the thing – The order should be complied with. If the owner is unwilling to part with the thing, the legatee/devisee should be given the monetary equivalent. (Art. 931) 2. If the testator erroneously believed that the thing belonged to him –The legacy/devise is void. CIVIL LAW i. If thing was acquired onerously by legatee/devisee – The legatee/devisee is entitled to reimbursement. ii. If thing was acquired gratuitously by legatee/ devisee – Nothing more is due. 3. If thing was owned by testator at time will was made and the legatee/devisee acquired the thing from the testator —The legacy/devise should be deemed revoked Legacy / Devise to Remove an Encumbrance Over a Thing Belonging to the Testator (Art. 932, par. 2) If the testator expressly orders that the thing be freed from such interest or encumbrance, the legacy or devise shall be valid to that extent. Exception: If subsequent to the making of the disposition, the thing is acquired by the testator onerously or gratuitously, the disposition is validated. (Art. 930) NOTE: The legacy/ devise is valid, if the encumbrance can be removed for a consideration. 3. If the testator knew that the thing did not belong to him but did not order its acquisition – The disposition should be considered valid. There is an implied order to acquire the property. (Paras, supra) Legacy / Devise of a Thing Pledged or Mortgaged (Art. 934) If the testator should bequeath or devise something pledged or mortgaged to secure a recoverable debt before the execution of the will, the estate is obliged to pay the debt, unless the contrary intention appears. Thing Already Owned by the Legatee/Devisee (Arts. 932-933) 1. If thing already belonged to legatee/devisee at time of execution of will – The legacy/devise is void even if legatee/devisee alienates the property subsequently unless the acquirer is the testator himself. (Balane, supra citing Manresa) 2. If thing was owned by another person at time of making the will and thereafter it is acquired by legatee/devisee: a. If testator erroneously believed that he owned the thing – The legacy/devise is void. b. If testator knew that he did not own the thing: The same rule applies when the thing is pledged or mortgaged after the execution of the will. (Art. 934, par. 2) Any other charge, perpetual or temporary, with which the thing bequeathed is burdened, passes with it to the legatee or devisee. (Art. 934, par. 3) Legacy / Devise Subject to a Usufruct If the thing bequeathed should be subject to a usufruct, the legatee or devisee shall respect such right until it is legally extinguished. (Art. 946) Legacy of Credit or Remission (Art. 935-937) 1. Applies only to the amount still unpaid at the time of testator’s death. (Art. 935); Page 197 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW 2. Revoked if testator subsequently sues the debtor for collection. (Art. 936); 3. If generic, applies only to those existing at the time of the execution of the will, unless otherwise provided. (Art. 937 and 793) 2. If the choice belongs to an heir, legatee, or devisee – The right is transmitted to his own heirs. Legacy / Devise to a Creditor (Art. 938) A legacy or devise made to a creditor shall not be applied to his credit, unless the testator so expressly declares. Generic Legacies or Devises RULES ON VALIDITY (Art. 941) GENERIC LEGACY GENERIC DEVISE Valid even if no such Valid only if there movable exists in the exists such an estate upon the immovable in the testator’s death. The estate at the time of estate will simply have the testator’s death to acquire what is given by legacy. If the testator provides that the devise or legacy will be imputed to the debt, and if the debt exceeds the legacy or devise, the excess may be demanded as an obligation of the estate. NOTE: The choice is irrevocable. (Art. 940, par. 3) Testamentary Instruction to Pay a Debt (Art. 939) INSTRUCTION INSTRUCTION TO PAY TO PAY A NONMORE THAN WHAT IS EXISTING DEBT DUE The disposition The instruction should should be be effective only as to considered as not what is due, unless the written. contrary intention appears. Right of Choice in Generic Legacies or Devises (Art. 941-943) General Rule: The executor or administrator, acting for the estate. Exception: When the testator expressly leaves the right of choice to the heir, or the legatee or devisee, on whom the obligation to give is imposed. (Subsidiary legacy or devise). Alternative Legacies or Devises – One which provides that among several things mentioned, only one is to be given. Limitation on choice The persons who have the right of choice shall comply with the legacy by the delivery of a thing which is neither of inferior nor of superior quality. (Art. 941) General Rule: The choice is left to the: 1. Direct legacy or devise – Estate, through the executor or administrator; 2. Subsidiary legacy or devise – Heir, legatee, devisee charged (Tolentino, supra) Exception: If the testator provides that the legatee or devisee himself may choose, or that a third party may choose. (Art. 942) If the person who shall make the choice cannot do so: 1. If the choice belonged to the executor or administrator – The right is transmissible to his successor in office; 2. If the choice belongs to an heir, legatee, or devisee – The right is transmitted to his own heirs. If the person who shall make the choice dies before the choice is made: (Art. 940, par. 2) NOTE: The choice is irrevocable. (Art. 940) 1. If the choice belonged to the executor or administrator – The right is transmissible to his successor in office; If the person to whom the testator has expressly given the right to choose does not exercise his right, it shall be understood that he has renounced it and the person obliged to pay the legacy or devise may deliver any of the things Page 198 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 designated, provided it is not of the lowest or of the highest quality. (Tolentino, supra) Legacy for Education (Art. 944) Duration – Age of majority or the completion of a professional, vocation, or general course whichever comes later. In the latter instance, only if the legatee pursues his studies diligently. Amount (Art. 944, par. 3) 1. The amount fixed by the testator; or 2. That which is proper, as determined by: a. The social standing and circumstances of the legatee, and b. The value of the disposable portion of the estate. Legacy for Support (Art. 944) Duration – During the lifetime of the legatee, unless the testator provided otherwise Amount (Art. 944, par. 3-4) 1. The amount fixed by the testator; or 2. That which the testator, during his lifetime, used to give the legatee by way of support, unless markedly disproportionate to the value of the disposable portion. 3. That which is reasonable, as determined by: a. The social standing and circumstances of the legatee, and b. The value of the disposable portion of the estate. Legacy of a Periodical Pension If a periodical pension, or a certain annual, monthly, or weekly amount is bequeathed, the legatee may petition the court for the first installment upon the death of the testator, and for the following ones which shall be due at the beginning of each period; such payment shall not be returned, even though the legatee should die before the expiration of the period which has commenced. (Art. 945) CIVIL LAW DEMANDABILITY, OWNERSHIP, AND FRUITS PURE AND WITH A SUSPENSIVE DETERMINATE TERM OR CONDITION OR GENERIC Upon the Upon the arrival of the testator’s death term or upon the happening of the condition, as the case may be (Art. 947; Paras, supra) When Ownership Vests 1. Pure and determinate property – Upon testator’s death 2. Pure and generic property – a. If the property came from the testator’s estate – Upon testator’s death b. If the property is acquired from a third person – Upon acquisition 3. Devises or legacies with a suspensive term – Upon arrival of the term, but the right to it vests upon the testator’s death 4. Devises or legacies with a suspensive condition – Upon the testator’s death, if the condition is fulfilled. (Art. 948; Paras, supra) Fruits 1. Pure and determinate property – Upon testator’s death 2. Pure and generic property – Upon determination, unless the testator provides otherwise 3. Devises or legacies with a suspensive term – Upon arrival of the term 4. Devises or legacies with a suspensive condition – Upon the happening of the condition, unless the testator provides otherwise (Art. 948; Paras, supra) NOTE: If the legacy or devise is of a specific and determinate thing pertaining to the testator, the legatee or devisee do not acquire the income which was due and unpaid before the testator’s death. (Art. 948) From the moment of the testator’s death, the specific and determinate thing bequeathed shall Page 199 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 be at the risk of the legatee or devisee, who shall bear its loss or deterioration, and shall be benefited by its increase or improvement, without prejudice to the responsibility of the executor or administrator. (Art. 948) Obligation to Deliver the Thing Bequeathed The thing bequeathed shall be delivered with all its accessories and accessories and in the condition in which it may be upon the death of the testator. (Art. 951) The heir, charged with a legacy or devise, or the executor or administrator of the estate, must deliver the very thing bequeathed if he is able to do so and cannot discharge this obligation by paying its value. (Art. 952, par. 1) Legacies of Money Paid in Cash Legacies of money must be paid in cash, even though the heir or the estate may not have any. (Art. 952, par. 2) Necessary Expenses for the Delivery of the Thing Bequeathed The expenses necessary for the delivery of the thing bequeathed shall be for the account of the heir or the estate, but without prejudice to the legitime. (Art. 952 par. 3) Possession of the Thing Bequeathed The legatee or devisee cannot take possession of the thing bequeathed upon his own authority, but shall request its delivery and possession of the heir charged with the legacy or devise, or of the executor or administrator of the estate should he be authorized by the court to deliver it. (Art. 953) Order of Preference in Case Estate is Insufficient to Cover all Legacies and Devices (Art. 950) If the estate should not be sufficient to cover all the legacies or devises, their payment shall be made in the following order: 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 REDUCTION OF LEGACIES AND DEVISES (ART. 911) Non-preferred legacies or devises will be reduced prorata and the preferred legacies or devises will be reduced last. Applies when the legitimes have been impaired ORDER OF PREFERENCE OF DEVISES AND LEGACIES (ART. 950) In the order of preference, the last is to be reduced first and the first is to be reduced last. Applies when the reduction is due to reasons other than impairment of legitimes Rules on Acceptance and Repudiation of Devices or Legacies General Rule: Acceptance may be total or partial. (Art. 954) Exception: If the legacy or devise is partly onerous and partly gratuitous, the recipient cannot accept the gratuitous part and renounce the onerous part. Any other combination is permitted. (Art. 954) Acceptance or Repudiation by Heirs of Legatee or Devisee (Art. 954, par. 2) If the legatee or devisee dies before accepting or renouncing the devise or legacy, his heirs shall exercise such right as to their pro-indiviso share, applying the rules in Article 954. TWO LEGACIES / DEVISES TO THE SAME RECIPIENT (ART. 955) both are one is gratuitous AND gratuitous or the other is onerous onerous The recipient The recipient cannot may accept or accept the gratuitous and renounce either renounce the onerous. or both. Page 200 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Any other combination is permitted. Legacy or Devise to a Compulsory Heir Any compulsory heir who is at the same time a legatee or devisee may waive the inheritance and accept the legacy or devise, or renounce the latter and accept the former, or waive or accept both. (Art. 955 par. 2) NOTE: For acceptance and repudiation of devices or legacies, the testator’s wishes are supreme. All the rules apply in the absence of stipulation providing otherwise. (Balane, supra) Repudiation by or Incapacity of Legatee or Devisee (Art. 956) If the legatee or devisee cannot or is unwilling to accept the legacy or devise, or if the legacy or devise for any reason should become ineffective, the following steps apply: 1. Follow substitution, if any. 2. Then accretion, 3. Lastly, intestacy as it shall be merged to the mass of the estate. When Legacy/Devise can be Revoked by Operation of Law 1. Transformation: If the testator transforms the thing bequeathed or devised in such a manner that it does not retain its form and denomination. (Art. 957) 2. Alienation: If the testator, by any title or for any cause, alienates the thing bequeathed or devised or any part thereof. (Art. 957) NOTE: The alienation revokes the legacy or devise even if for any reason the thing reverts to the testator (e.g. nullity of the contract) (Paras, supra) Exceptions: (a) If the reversion is caused by the annulment of the alienation and the cause for annulment was vitiation of consent on the grantor’s part, either by reason of incapacity or of duress. (Fernandez v. Dimagiba, G.R. No. L-23638, 1967) (b) If the reversion is by virtue of redemption in a sale with pacto de retro. 3. Total Loss: If the thing bequeathed or devised is totally lost during the lifetime of the testator, or after his death without the heir’s fault. (Art. 957) 4. If the legacy is a credit against a third person or the remission of a debt, and the testator, subsequent to the making of the will brings an action against such debtor for payment. (Art. 936) 2. Mistake in the Name of the Thing Bequeathed or Devised A mistake as to the name of the thing bequeathed or devised, is of no consequence, if it is possible to identify the thing which the testator intended to bequeath or devise. (Art. 958) ————- end of topic ————C. LEGAL OR INTESTATE SUCCESSION I. GENERAL PROVISIONS Legal or Intestate Succession – Takes place by operation of law in the absence of a valid will. (Paras, supra) Instances when Legal or Intestate Succession Operates (Art. 960) 1. If a person dies without a will, or with a void will, or one which has subsequently lost its validity; 2. When the will does not institute an heir to, or dispose of all the property belonging to the testator. In such case, legal succession shall take place only with respect to the property of which the testator has not disposed; 3. If the suspensive condition attached to the institution of heir does not happen or is not fulfilled, or if the heir dies before the testator, or repudiates the inheritance, there being no substitution, and no right of accretion takes place; Page 201 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 4. When the heir instituted is incapable of succeeding, except in cases provided in the Civil Code. 2. Other Causes of Intestacy (Tolentino, supra) 1. Happening of a resolutory condition; 2. Expiration of a resolutory term; 3. Preterition (Balane, supra) NOTE: Intestacy operates on the same principles as succession to the legitime. They are both governed by the rules on exclusion and concurrence. Four Basic Rules of Intestacy 1. Rule of Relationship – the heirs must be related to the decedent. Four Kinds of Relationships a) Ascendants and Descendants; b) Collaterals; c) Marriage; d) State of sovereign 2. Rule of Preference of Lines – the descending line excludes the ascending and the collateral, and the ascending excludes the collateral. (Art. 965) Three lines of relationship a) Descending line b) Ascending line c) Collateral line 3. Rule of Proximity of Degree – the nearer exclude the more remote, without prejudice to representation. (Art. 962, par. 1) 4. Rule of Equality Among Relatives of the Same Degree – the nearer exclude the more remote, those of equal degree should inherit in equal shares. (Art. 962, par. 2) Exceptions to the Rule of Equality in the Same Degree 1. The rule of preference of lines; 3. 4. 5. 6. NOTE: The direct line is preferred over the collateral, even if they are of the same degree The distinction between legitimate and illegitimate filiation; The rule of division by line in the ascending line; The distinction between full-blood and halfblood relationship among brothers and sisters, as well as nephews and nieces; Representation; and Concurrence of nephews and nieces and uncles and aunts (Paras, supra) a. Relationship Proximity of relationship is determined by the number of generations. (Art. 963) Degree – One generation Computation of Degrees 1. Direct line – No legal limit to the number of degrees for entitlement to intestate succession. 2. Collateral line – Intestate succession extends only to the fifth degree of collateral relationship (Art. 1010) Line – Series of degrees, which may be direct or collateral (a) Direct line – Constituted by the series of degrees among ascendants and descendants i. Descending line – Unites the head of the family with those who descend from him ii. Ascending line – Binds a person with those from whom he descends In the direct line, ascend is made to the common ancestor. There is no legal limit to the number of degrees for entitlement to intestate succession (b) Collateral line – Constituted by the series of degrees among persons who are not Page 202 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 ascendants and descendants, but who come from a common ancestor In the collateral line, ascent is made to the common ancestor and then descend is made to the person with whom the computation is to be made. Intestate succession extends only to the 5th degree of collateral relationship Full Blood Relationship Full blood relationship is that existing between persons who have the same father and the same mother. (Art. 967, par. 1) Half Blood Relationship Half-blood relationship is that existing between persons who have the same father, but not the same mother, or the same mother, but not the same father. (Art. 967, par. 2) Importance of Distinction Between Full Blood and Half Blood Relationship (Arts. 1006, 1008) Ratio of 2:1 for full-blood and half-blood relationship in Articles 1006 and 1008, for brothers and sisters and nephews and nieces. ACCRETION IN INTESTACY If there are several relatives of the same degree, and one or some of them are unwilling or incapacitated to succeed, his portion shall accrue to the others of the same degree, save the right of representation when it should take place. (Art. 968) Accretion applies among heirs of the same degrees in the following instances: (Arts. 1015, 1016) 1. Predecease; 2. Incapacity; 3. Renunciation HOWEVER, in case of predecease or incapacity, representation, if proper will prevent accretion from occurring. (Balane, supra) CIVIL LAW Relatives must be in the same kind of relationship for accretion to take place. This is because of the principle of preference of lines in intestate succession. (Balane, supra) RENUNCIATION IN INTESTACY If the inheritance should be repudiated by the nearest relative, should there be one only, or by all the nearest relatives called by law to succeed, should there be several, those of the following degree shall inherit in their own right and cannot represent the person or persons repudiating the inheritance. (Art. 969) Effect of Renunciation by All in the Same Degree The right of succession should first be passed on the heirs in succeeding degrees, before the next line can succeed. 1. The descending line inherits first. NOTE: If ALL the descendants of a certain degree renounce, succession passes to the descendants of the next degree, and so on. 2. The ascending line inherits next. NOTE: Should no one be left in the descending line, the heirs in the ascending line acquire the right of succession, in order of degrees of proximity. 3. The collateral line inherits last. NOTE: Only if all the descendants and ascendants renounce will the collateral relatives acquire the right to succeed. The effect of renunciation by all in the same degree applies in cases of predecease or incapacity by all in the same degree, except in cases where representation is proper. b. Right of Representation Representation - a right created by fiction of law, by virtue of which the representative is raised to the place and the degree of the person represented, and acquires the rights which the latter would have if he were living or if he could have inherited. (Art. 970; Tumbokon v. Legaspi, G.R. No. 153736, 2010) Page 203 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 In order that representation may take place, it is necessary that the representative himself be capable of succeeding the decedent. (Art. 973) Representation only applies in compulsory and intestate succession in the direct descending line (Art. 972) and in one instance in the collateral line in the case of nephews and nieces representing brothers and sisters of the deceased (Art. 975) In the collateral line, the right of representation extends no further than the nephews and nieces. Grandnephews and grandnieces are not entitled to inherit by right of representation in the collateral line. (In re: Intestate Estates of Delgado & Rustia v. Heirs of Vda. De Damian, G.R. No. 155733, 2006) NOTE: There is no representation in testamentary succession and in any type of succession in the direct ascending line. (Paras, supra) Instances When Representation Operates (PID) 1. Predecease; 2. Incapacity or unworthiness; 3. Disinheritance (Paras, supra) NOTE: Representation renunciation. (Art. 977) does not apply in Right of Representation of Illegitimate Children (Art. 902) The rights of illegitimate children set forth in the articles on legitimes and intestate succession are transmitted upon their death to their descendants, whether legitimate or illegitimate. Right of representation DECEDENT IS DECEDENT IS AN A LEGITIMATE ILLEGITIMATE CHILD CHILD The right of The right of representation is representation is given only to granted to both legitimate legitimate and descendants. illegitimate descendants. (Art. 992) Representation of and by an Adopted Child An adopted child can neither represent nor be represented. (Balane, supra at p. 484) An adopted child cannot represent his/her adopter in the estate of his/her adopter’s grandparents because the relationship between the adopter and the adopted does not go beyond their relatives of either party. (Teotico v. Del Val, G.R. No. L-18753, 1965) Nonetheless, an adopted child succeeds to the property of the adopting parents in the same manner as a legitimate child. (Art. 979, par. 2) Representation by a Renouncer A renouncer cannot be represented; however, he can represent the person whose inheritance he has renounced. (Art. 976) Operation of Representation Per stirpes – The representative or representatives receive only what the person represented would have received. If there are more than one representative in the same degree, then the portion is divided equally, without prejudice to the distinction between legitimate and illegitimate children, when applicable. (Balane, supra) Rules to Qualify as a Representative 1. The representative must be qualified to succeed the decedent. (Art. 973) 2. The representative need not be qualified to succeed the person represented. (Art. 971) Page 204 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 3. The person represented need not be qualified to succeed the decedent. a. Exclude parents, collaterals, and the State NOTE: The representative does not succeed the person represented but the one whom the person represented would have succeeded. (Art. 971) b. Concur with surviving spouse, and illegitimate children or descendants Representation BY GRANDCHILDREN If all children are disqualified, the grandchildren inherit by representation. (Art. 982) BY NEPHEWS AND NIECES If they survive with their uncles and aunts, they shall inherit from the deceased by representation. If all their uncles and aunts are disqualified from inheriting (predeceased, incapacitated or unworthy, disinherited), they inherit in equal portions. (Art. 975) c. 2. Illegitimate Children or Descendants (Arts. 983, 988-994) a. Exclude parents of illegitimate children, collaterals, and the State; b. Concur with surviving spouse, legitimate children, and legitimate parents; c. b. Concur with illegitimate children and the surviving spouse; c. 3. Legitimate Parents or Ascendants (Art. 986) 4. Parents of Illegitimate Children (Art. 993) 5. Surviving Spouse (Art. 994) 6. Brothers, Sisters, Nephews, Nieces (Arts. 1004-1008) 7. Other Collateral up to the fifth degree (Art. 1009) 8. State (Art. 1011) Rules of Exclusion and Concurrence 1. Legitimate Children or Descendants (Arts. 978-982) Are excluded by legitimate children 4. Parents of illegitimate children (Arts. 993994) a. Exclude collaterals and the State; b. Concur with the surviving spouse; II. ORDER OF INTESTATE SUCCESSION Intestate Heirs (Paras, supra) 2. Illegitimate Children or Descendants (Art. 988, 990, 992) Excluded by no one 3. Legitimate parents (Arts. 985-986) a. Exclude collaterals and the State; c. 1. Legitimate Children or Descendants (Art. 979) Excluded by no one Excluded by legitimate children and illegitimate children 5. Surviving spouse (Arts. 995-1002) a. Excludes collaterals other than brothers, sisters, nephews, nieces, and the State; b. Concur with legitimate children, illegitimate children, legitimate parents, parents of illegitimate children, brothers, sister, nephews and nieces; c. Excluded by no one 6. Brothers and sisters, nephews and nieces (Arts. 1003-1008) a. Exclude all other collaterals and the State; b. Concur with the surviving spouse; Page 205 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 c. Excluded by legitimate children, illegitimate children, legitimate parents, and parents of illegitimate children 7. Other collaterals up to the fifth degree (Arts. 1009-1010) a. Exclude collaterals in more remote degree and the State; b. Concur with collaterals in the same degree; c. Excluded by legitimate children, illegitimate children, legitimate parents, parents of illegitimate children, surviving spouse, brothers and sisters, nephews and nieces; Partial Intestacy (Balane, supra) Where a decedent left a will disposing of a part, but not all, of the disposable portion, the following steps may solve the problem: 1. Trace where the free portion went in total intestacy. 2. The testamentary provision should be carried out first, then what is left of the free portion should then be given to the intended beneficiary in intestacy. (Balane, supra) 8. State (Arts. 1011-1014) a. Excludes no one; b. Concurs with no one; c. Excluded by everyone Iron Curtain Rule / Barrier Principle Principle of Absolute Separation / An illegitimate child has no right to inherit ab intestato from the legitimate children and relatives of his father or mother; nor shall such children or relatives inherit in the same manner from the illegitimate child. (Art. 992) The right of representation is not available to illegitimate descendants of legitimate children in the inheritance of a legitimate grandparent. (Diaz v. Intermediate Appellate Court, G.R. No. L66574, 1990) Person to be Represented ILLEGITIMATE LEGITIMATE CHILD CHILD His or her descendant whether legitimate or illegitimate, may represent him. Only his or her legitimate descendants can represent him, his or her illegitimate descendants cannot represent him. (Vda. De Crisologo v. Cam G.R. No. L-44051, 1985) Page 206 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 COMBINATIONS OF LEGITIMES AND INTESTATE SUCCESSION (Arts. 888-889, 892-901, 903, 983, 986-987, 991, 993-1001, 1004-1008, 1011) HEIRS LEGITIME INTESTACY TOTAL 1/2 divided equally 1/2 divided equally Whole estate divided equally Legitimate Children and Illegitimate Children LC – 1/2 divided equally Residue left shall be divided among them, observing the 2:1 ratio Whole estate divided among them, observing the 2:1 ratio Legitimate Children and Surviving Spouse LC – 1/2 divided equally Residue left shall be divided among them equally Whole estate divided equally One Legitimate Child and Surviving Spouse LC – 1/2 1/4 goes to the spouse LC – 1/2 Legitimate Alone Children Legitimate Children, Surviving Spouse, Illegitimate Children Legitimate Alone Legitimate Ascendants than Parents Parents Spouse – Share of 1 LC Spouse – 1/4 LC – 1/2 Legitimate Parents and Surviving Spouse Legitimate Parents, Surviving Spouse, and Illegitimate Children Spouse – 1/2 Residue left shall be divided among them, observing the 2:1 ratio Whole estate divided among them, observing the 2:1 ratio LP – 1/2 1/2 goes to the parents Whole estate divided equally 1/2 1/2 Whole estate divided among them, observe rules in proximity in degree, and division by line LP – 1/2 1/4 goes to the illegitimate children LP – 1/2 Spouse – share of 1 LC ILC – 1/2 of share of 1 LC Other Legitimate Parents and Illegitimate Children Illegitimate Alone ILC – 1/2 of share of 1 LC ILC – 1/4 LP – 1/2 Spouse – 1/4 LP – 1/2 ILC – 1/4 1/4 goes to the spouse 1/8 goes to the spouse Spouse – 1/8 ILC – 1/4 LP – 1/2 Spouse – 1/2 LP – 1/2 ILC – 1/4 Spouse – 1/4 Children ILC – 1/2 1/2 goes to illegitimate children Whole estate divided equally Illegitimate Children and Surviving Spouse ILC – 1/3 1/6 goes to illegitimate children ILC – 1/2 Spouse – 1/3 1/6 goes to spouse Spouse – 1/2 Page 207 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 continuation HEIRS LEGITIME INTESTACY TOTAL Surviving Spouse Alone 1/2 Residue goes to the spouse Whole estate goes to the spouse Spouse – 1/4 1/ 4 goes to the spouse Spouse 1/2 Parents of Illegitimate Children – 1/4 1/4 goes to the parents of illegitimate children Parents of Illegitimate Children – ¼ Surviving Spouse and Legitimate Brothers and Sisters, Nephews and Nieces Spouse – 1/2 1/2 goes to the legitimate brothers and sisters, nephews and nieces Spouse – 1/2 Surviving Spouse and Illegitimate Brothers and Sisters, Nephews and Nieces Spouse – 1/2 Parents of Illegitimate Children Alone 1/2 1/2 goes to the parents of illegitimate children Whole estate divided equally Parents of Illegitimate Children and Children of Any Kind Any kind of children – 1/2, observe 2:1 ratio 1/2 goes to the any kind of children, observe 2:1 ratio Whole estate goes to the children, observing 2:1 ratio, if applicable Surviving Spouse and Parents of Illegitimate Children 1/3 if marriage is in articulo mortis 1/2 goes to the illegitimate brothers and sisters, nephews and nieces Legitimate brothers and sisters, nephews and nieces – 1/2 Spouse – 1/2 Legitimate brothers and sisters, nephews and nieces – 1/2 Parents of illegitimate children are excluded by all kinds of children Page 208 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 continuation HEIRS LEGITIME INTESTACY TOTAL Legitimate Brothers and Sisters Alone N/A Whole estate divided among them, observing the 2:1 ratio for full-blood and half-blood siblings Legitimate Brothers and Sisters, Nephews and Nieces N/A Whole estate divided among them, observing the 2:1 ratio for full-blood and half-blood siblings Nephews and Nieces with Uncles and Aunts N/A Apply rules on representation when proper Whole estate divided among nephews and nieces, observing the 2:1 ratio for full-blood and half-blood siblings Uncles and aunts of the decedent are excluded. (Bacayo v. Borromeo) Illegitimate Brothers and Sisters Alone N/A Whole estate divided among them, observing the 2:1 ratio for full-blood and half-blood siblings Illegitimate Brothers and Sisters, Nephews and Nieces N/A Whole estate divided among them, observing the 2:1 ratio for full-blood and half-blood siblings Nephews and Nieces Alone N/A Whole estate divided among them, observing the 2:1 ratio for full-blood and half-blood siblings Other Collaterals up to the Fifth Degree N/A Whole estate divided equally, observe rules in proximity in degree State N/A (Resident Decedent) (Non-Resident Decedent) Personal property – Municipality of the last residence Personal property and real property –Municipality where it is situated Real property – Municipality where it is situated Property is to be used for the benefit of public education and charitable institutions in the respective municipalities or cities, or alternatively, at the instance of an interested party, or motu proprio, court may order creation of a permanent trust for the benefit of the institutions concerned. Page 209 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 D. PROVISIONS COMMON TO TESTATE AND INTESTATE SUCCESSION I. RIGHT OF ACCRETION Accretion – 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, codevisees, or co-legatees. (Art. 1015) Elements of Accretion Succession (Art. 1016) in Testamentary 1. That two or more persons be called to the same inheritance, or to the same portion, pro indiviso; and 2. That one of the persons thus called die before the testator, or renounce the inheritance, or be incapacitated to receive it. Accretion Among Devisees, Legatees and Usufructuaries Accretion shall also take place among devisees, legatees and usufructuaries under the same conditions established for heirs. (Art. 1023) Accretion in Intestacy In legal succession the share of the person who repudiates the inheritance shall always accrue to his co-heirs. (Art. 1018) Occasions for the Operation of Accretion in Intestacy (Balane, supra) 1. Repudiation or renunciation; (Art. 1018) 2. Predecease, only if representation does not take place; Meaning of Pro Indiviso (Balane, supra) 3. Incapacity or unworthiness, only representation does not take place • Undivided or in common • Either the co-heirs are instituted without individual designation of shares; or • The co-heirs are instituted with specification that they share equally. • The co-heirs are instituted with unequal fractional shares. Instances when Accretion operates Testamentary Succession (Balane, supra) of the instituted heirs, if no substitute has been designated, shall pass to the legal heirs of the testator, who shall receive it with the same charges and obligations (Art. 1022) the in 1. Renunciation; 2. Predecease; 3. Incapacity NOTE: Provided, only some, not all of the instituted heirs renounce, predecease, or are incapacitated to succeed. (Balane, supra) if NOTE: In intestacy, accretion is subordinate to representation. (Balane, supra) Co-heirs in the Same Category The co-heirs in whose favor accretion occurs must be co-heirs in the same category as the excluded heir. (Balane, supra) Accretion Must be Proportional The heirs to whom the portion goes by the right of accretion take it in the same proportion that they inherit. (Art. 1019) General Rule: The heirs to whom the inheritance accrues shall succeed to all the rights and obligations which the heir who renounced or could not receive it would have had. (Art. 1020) Accretion Subordinate to Substitution in Testamentary Succession In testamentary succession, when the right of accretion does not take place, the vacant portion Page 210 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Exceptions: (Balane, supra) 1. In testamentary succession, if the testator provides otherwise; 2. If the obligation is purely personal, and hence, intransmissible Accretion among Compulsory Heirs Among the compulsory heirs the right of accretion shall take place only when the free portion is left to two or more of them, or to any one of them and to a stranger. (Art. 1021) No Accretion in the Legitime If the part repudiated be the legitime, the other coheirs shall succeed to it in their own right, and not by the right of accretion. (Art. 1021) II. CAPACITY TO SUCCEED BY WILL OR BY INTESTACY Persons not incapacitated by law may succeed by will or ab intestato. The provisions relating to incapacity by will are equally applicable to intestate succession. (Art. 1024) NOTE: Both a natural person and a juridical person may inherit. (Art. 1026) Requisites for Natural Persons In order to be capacitated to inherit, the heir, devisee or legatee must be living at the moment the succession opens, except in case of representation, when it is proper. (Art. 1025, par 1) A child already conceived at the time of the death of the decedent is capable of succeeding provided it be born later under the conditions prescribed in Article 41 of the Civil Code. (Art. 1025, par 2) Requisites for Juridical Persons A testamentary disposition may be made to the State, provinces, municipal corporations, private corporations, organizations, or associations for religious, scientific, cultural, educational, or charitable purposes. All other corporations or entities may succeed under a will, unless there is a provision to the contrary in their charter or the laws of their creation, and always subject to the same. (Art. 1026) Time to Determine Capacity to Succeed General Rule: In order to judge the capacity of the heir, legatee, or devisee, his qualification at the time of the death of the decedent shall be the criterion. (Art. 1034) Exceptions: 1. Those disqualified under Article 1032 (Unworthiness, pars. 2,3,5) wherein it is necessary to wait until final judgment is rendered; 2. Those disqualified under Article 1032 (Unworthiness, par. 4) wherein it is necessary to wait for the expiration for the month allowed for report; 3. If the institution of the heirs, legacy or devise is conditional, the time of compliance with the condition shall be considered. (Art. 1034) NOTE: • The capacity to succeed is governed by the law of the nation of the decedent. (Art. 1039) • Persons not incapacitated by law may succeed by will or ab intestato. (Art. 1024) • A testamentary provision in favor of a disqualified person, even though made under the guise of an onerous contract, or made through an intermediary, shall be void. (Art. 755) IF INSTITUTION IS SUBJECT TO A SUSPENSIVE CONDITION The successor must be living or legally existing both when the decedent dies IF INSTITUTION IS SUBJECT TO A SUSPENSIVE TERM The requirement of being alive or legal existence applies only at the moment of Page 211 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 and when the condition happens. (Balane, supra) the decedent’s death. (Balane, supra) Incapacity to Succeed in Testamentary Succession (Art. 1027) The following are incapable of succeeding: 4. Any attesting witness to the execution of a will, the spouse, parents, or children, or any one claiming under such witness, spouse, parents, or children; • 1. The priest who heard the confession of the testator during his last illness, or the minister of the gospel who extended spiritual aid to him during the same period; Requisites: a. The will must have been executed during the testator’s last illness; b. The spiritual ministration must have been extended during the last illness; c. The will must have been executed during or after the spiritual ministration. o Applies to all religions 2. The relatives of such priest or minister of the gospel within the fourth degree, the church, order, chapter, community, organization, or institution to which such priest or minister may belong; 3. A guardian with respect to testamentary dispositions given by a ward in his favor before the final accounts of the guardianship have been approved, even if the testator should die after the approval thereof; nevertheless, any provision made by the ward in favor of the guardian when the latter is his ascendant, descendant, brother, sister, or spouse, shall be valid; a. The will must have been executed by the ward during the effectivity of the guardianship b. The terms of this provision seem to be limited to guardians over the property. c. A guardian who happens to be an ascendant, descendant, brother, sister, or spouse of the ward-testator is excluded from the prohibition Reiteration of Art. 823 but in more general terms as it annuls all testamentary disposition not only legacies and devises. The rule that if there are three other competent witnesses as an exception should be read into this. 5. Any physician, surgeon, nurse, health officer or druggist who took care of the testator during his last illness; • The physician must have taken care of the testator during his/her final illness. “Taking care” means medical attendance with some regularity or continuity. 6. Individuals, associations and corporations not permitted by law to inherit under any kind of succession. (Art. 1027) Prohibitions in donations applies to testamentary succession (Art. 1028 in rel. to Art. 739) Those who are disqualified from receiving donations under Article 739. Under Article 739, the following are disqualified from receiving testamentary dispositions from the parties specified: 1. Those made between persons who are guilty of adultery, or concubinage at the time of the donation; 2. Those made between persons found guilty of the same criminal offense, in consideration thereof; 3. Those made to a public officer or his wife, descendants and ascendants, by reason of his office; Disposition For Prayers and Pious Works for the Benefit of His Soul Should the testator dispose of the whole or part of his property for prayers and pious works for the Page 212 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 benefit of his soul, in general terms and without specifying its application, the executor, with the court's approval, shall deliver one-half thereof or its proceeds to the church or denomination to which the testator may belong, to be used for such prayers and pious works, and the other half to the State, for the purposes mentioned in Article 1013. (Art. 1029) Requisites: (Balane, supra) 1. Disposition for prayers and pious works for the benefit of the testator’s soul; 2. No specification of the application of the disposition. Apportionment of the disposition or its proceeds: (Balane, supra) 1. 1/2 to the church or denomination to which the testator belonged 2. 1/2 to the State, to be applied as provided in Article 1013. Dispositions in Favor of the Poor in General (Art. 1030) Testamentary provisions in favor of the poor in general, without designation of particular persons or of any community, shall be deemed limited to the poor living in the domicile of the testator at the time of his death, unless it should clearly appear that his intention was otherwise. The designation of the persons who are to be considered as poor and the distribution of the property shall be made by the person appointed by the testator for the purpose; in default of such person, by the executor, and should there be no executor, by the justice of the peace, the mayor, and the municipal treasurer, who shall decide by a majority of votes all questions that may arise. In all these cases, the approval of the Court of First Instance shall be necessary. The preceding paragraph shall apply when the testator has disposed of his property in favor of the poor of a definite locality. Disqualification of a Witness to Succeed to a Legacy or Devise (Art. 823) If a person attests to the execution of a will, to whom or to whose spouse, or parent, or child, a devise or legacy is given by such will, such devise or legacy shall, so far only as concerns such person, or spouse, or parent, or child of such person, or any one claiming under such person or spouse, or parent, or child, be void, unless there are three other competent witnesses to such will. However, the person attesting shall be admitted as a witness if such devise or legacy had not been made or given. Testamentary Provision in Favor of a Disqualified Person is Void (Art. 1031) A testamentary provision in favor of a disqualified person, even though made under the guise of an onerous contract, or made through an intermediary, shall be void. Unworthiness (Art. 1032) The following are incapable of succeeding under all kinds of succession by reason of unworthiness: 1. Parents who have abandoned their children or induced their daughters to lead a corrupt or immoral life, or attempted against their virtue; o o o o Three grounds are provided: (a) abandonment; (b) inducement of a daughter to lead a corrupt or immoral life; and (c) attempt against a daughter’s virtue Abandonment- includes all conduct constituting a repeated or total refusal or failure to care for the child. Inducement- same as deprivation of parental authority; only applies to female descendants Attempt on virtue- no conviction is required 2. Any person who has been convicted of an attempt against the life of the testator, his or her spouse, descendants, or ascendants; o Covers all stages in the commission of the crime Page 213 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 o o Felony must be intentional (so not through negligence) Final conviction required 3. Any person who has accused the testator of a crime for which the law prescribes imprisonment for six years or groundless; o Covers filing of the complaint before the prosecutor, presenting incriminating evidence, suppressing exculpatory evidence o The testator must be acquitted o The accusation must be found to be groundless—must state that no crime was committed or that accused did not commit the crime. 4. Any heir of full age who, having knowledge of the violent death of the testator, should fail to report it to an officer of the law within a month, unless the authorities have already taken action; this prohibition shall not apply to cases wherein, according to law, there is no obligation to make an accusation; o o There is no such obligation existing under our present law Requisites: a. the heir has knowledge of violent death of the decedent; b. the heir is of legal age c. the heir fails to report it to an office of the law within a month (after learning of it) d. there is a legal obligation for the heir to make an accusation 5. Any person convicted of adultery or concubinage with the spouse of the testator; o Final conviction required 6. Any person who by fraud, violence, intimidation, or undue influence should cause the testator to make a will or to change one already made; CIVIL LAW one already made, or who supplants, conceals, or alters the latter's will; 8. Any person who falsifies or forges a supposed will of the decedent. Revocation of Unworthiness The cause of unworthiness shall be without effect if the testator had knowledge thereof at the time he made the will, or if, having known of them subsequently, he should condone them in writing. (Art. 1033) The unworthiness is set aside in the following ways: (Balane, supra) 1. A written condonation, or 2. The execution by the offended party of a will with knowledge of the cause of unworthiness. By Operation of Law – In order to restore the disinherited heir to capacity, subsequent reconciliation is enough under the rules of disinheritance while under those on unworthiness; either a written pardon or a subsequent will is required. These rules on disinheritance and unworthiness would overlap the moment the testator uses one of the acts of unworthiness as a cause to disinherit an heir. Such act submits the situation to the rules on disinheritance; thus, reconciliation renders the disinheritance ineffective. (Balane, supra) Pardon of Acts of Unworthiness (Art. 1033) EXPRESS IMPLIED Made by the Effected when execution of a testator makes a will document or any instituting the writing in which the unworthy heir with descendent knowledge of the condones the cause cause of incapacity of incapacity Cannot be revoked Revoked when the testator revokes the will or the institution 7. Any person who by the same means prevents another from making a will, or from revoking Page 214 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Representation in Unworthiness (Balane, supra) If the person excluded from the inheritance by reason of the incapacity should be the child or descendant of the decedent, and should have children or descendants, the latter shall acquire his right to the legitime. The person excluded shall not enjoy the usufruct and the administration of the property thus inherited by his children. (Art. 1035) NOTE: The extent of representation may be as to the legitime and as to the share of the unworthy heir in the intestate portion. (Balane, supra) If the unworthy heir is a brother or sister, his children (nephews and nieces of the decedent) will represent. (Balane, supra) Alienations Made by an Excluded Heir Alienations of hereditary property, and acts of administration performed by the excluded heir, before the judicial order of exclusion, are valid as to third persons who acted in good faith. (Art. 1036) NOTE: The validity of the alienation is determined by the good faith or bad faith of the transferee, not of the transferor. (Balane, supra) The co-heirs of the excluded heir have the right to recover damages from the disqualified heir. (Art. 1036) Right of an Excluded Heir for Indemnity for Expenses The unworthy heir who is excluded from the succession has the right to demand indemnity for any expenses incurred in the preservation of the hereditary property, and to enforce such credits as he may have against the estate. (Art. 1037) Obligations of the Disqualified Heir in Possession of the Hereditary Property Any person incapable of succession, who, disregarding the prohibition stated in the preceding articles, entered into the possession of CIVIL LAW the hereditary property, shall be obliged to return it together with its accessions. (Art. 1038) Prescriptive Period The action for a declaration of incapacity and recovery of the inheritance, devise or legacy shall be 5 years from the time the disqualified person took possession thereof. (Art. 1040) NOTE: It may be brought by any one who may have an interest in the succession. (Art. 1040) III. ACCEPTANCE AND REPUDIATION OF THE INHERITANCE Characteristics of Acceptance and Repudiation 1. Free and Voluntary (Art. 1041) 2. Irrevocable once made and cannot be impugned, except in cases vitiating consent or when an unknown will appear; (Art. 1056) 3. Retroactive (Art. 777) Requirements to Accept or Repudiate and Inheritance A person may only accept or repudiate an inheritance once he or she is certain of: 1. The death of the person from whom he is to inherit; and 2. His right to the inheritance. (Art. 1043) Time for Acceptance or Repudiation Within 30 days after the court has issued an order for the distribution of the estate the heir, devisee, or legatee shall signify to the court having jurisdiction whether they accept or repudiate the inheritance. If they do not do so within that time, they are deemed to have accepted the inheritance. (Art. 1057) Who May Accept or Repudiate General Rule: Any person having the free disposal of his property may accept or repudiate an inheritance. (Art. 1044) Exceptions: 1. Minors or incapacitated persons Acceptance – By their parents or guardians. Page 215 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 2. 3. 4. 5. Repudiation – By their parents or guardians with judicial authorization (Art. 1044) Inheritance left to the poor – The right to accept the inheritance shall belong to the persons designated by the testator to determine the beneficiaries and distribute the property, or in their default, to those mentioned in Article 1030. (Art. 1044) Corporation, association, institution, or entity as beneficiary (Art. 1045) Acceptance – May be made by the lawful representatives Repudiation – May be made by the lawful representatives with judicial authority Literate Deaf-Mutes Acceptance and Repudiation –Personally or through an agent (Art. 1048) Illiterate Deaf-Mutes (Balane, supra) Acceptance – Guardians Repudiation – Guardians with judicial approval If the Beneficiary is a Married Woman (Art 1047) She may either accept or repudiate the inheritance without her husband’s consent. Manner of Acceptance of Inheritance (Art. 1049) the co-heirs in whose favor it is made are those upon whom the portion renounced should devolve by virtue of accretion, the inheritance shall not be deemed as accepted 3. Implied Acceptance - This is acceptance by inaction. Under Art 1057, to signify acceptance or repudiation within 30 days after an order of distribution by the probate court. Manner of Repudiation (Art. 1051) The repudiation of the inheritance shall be made in: 1. A public document signed before a notary public, or 2. Authentic instrument – equivalent to an indubitable writing or a writing whose authenticity is admitted or proved, or 3. By a petition presented to the court having jurisdiction over the testamentary or intestate proceedings. • • 1. Express Acceptance a. Public Document b. Private Writing 2. Tacit Acceptance – one resulting from acts by which the intention to accept is necessarily implied or which one would have no right to do except in the capacity of an heir. It can be presumed from certain acts of the heir such as: a. If the heir sells, donates, or assigns his right to a stranger, or to his co-heirs, or to any of them b. If the heir renounces the same, even though gratuitously, for the benefit of one or more of his co-heirs c. If he renounces it for a price in favor of all his co-heirs indiscriminately; but if this renunciation should be gratuitous, and • The law considers that the act of repudiation is more solemn that the act of acceptance and that repudiation produces more violent and disturbing consequences. If the heir repudiates the inheritance to the prejudice of his own creditors, the latter may petition the court to authorize them to accept it in the name of the heir. If an heir is both a testate and legal heir, repudiation of the inheritance as a testate heir, he is understood to have repudiated in both capacities. However, should he repudiate as a legal heir, without knowledge of being a testate heir, he may still accept the inheritance as a legal heir. If renounced in favor of other heirs, does it mean acceptance? (Balane, supra) It depends: 1. If specific heir – whether or not renouncing heir receives anything, considered as acceptance on the part of the heir. There are two transfers. 2. If gratuitous – Page 216 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW a. In favor of all his co heirs indiscriminately - there is repudiation because the heir deemed to have not accepted. Hence, accretion takes place. b. In favor of all co-heirs but in proportion different from those they would receive by accretion: considered as tacit acceptance. c. If gratuitous in favor of one or some of his co-heirs – deemed conveyance in favor of the co-heirs specified, hence there is acceptance. 3. If onerously: a. There is no repudiation b. Transfer considered to be with consideration the latter, by way of donation, or any other gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition. (Art. 1061) There are also tax implications because there are two transfers. Properties or Rights Received by Compulsory Heir not Subject to Collation 1. Property left by will (Art. 1063) 2. Property which may have been donated by an ascendant of the compulsory heir (Art. 1065) 3. Property donated to the spouse of the compulsory heir (Art. 1066) 4. Expenses for support, education, medical attendance even in extraordinary illness, apprenticeship, ordinary equipment or customary gifts (Art. 1067) 5. Expenses incurred by parents in giving their children a professional, vocational, or other career (Art. 1068) 6. Wedding gifts consisting of jewelry, clothing and outfit, given by parents or ascendants, so long as they do not exceed 1/10 of the disposable portion (Art. 1070) IV. COLLATION 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. (Mison, Wills and Succession Better Explained, 2011) 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. (Mison, supra) Concept of Collation The act of bringing back to the estate properties acquired inter vivos and gratuitously from decedent (if acquired by will, e.g. legacies and devisees, they are not collatable, but may be reduced for being inofficious) However, donations inter vivos to compulsory heirs shall not be imputed to the legitime: 1. If the donor expressly provided; (Art. 1062) 2. The donee repudiated the inheritance; (Id.) 3. The value of donation exceeds the donee’s legitime NOTE: The donation will be imputed to the legitime to the extent of the legitime’s value, and the excess to the free portion. (Balane, supra at p. 577) Kinds of Collation (Balane, supra) 1. Collation of Values – values only, no physical return 2. Collation in kind – actual return of property received: only required when inofficious, i.e., legitime is impaired Obligation of Every Compulsory Heir Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or right which he may have received from the decedent, during the lifetime of Page 217 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 COLLATION OF VALUES Purposes 1. For computation – Arts. 908, 909 as basis for determining the legitime • Determination: value at the time of donation + fruits & legal interest from date succession opens (if required to return in kind) • Compulsory heirs and strangers must collate for computation. For strangers, there is no effect unless found to be inofficious. If donation to strangers is not included, compulsory heirs will be prejudiced because basis for the legitime will be smaller. (Balane, supra) 2. For equalization on account of partition • Only required for compulsory heirs; 2nd collation; when actually charged either to legitime or free portion. • Reason: donation to compulsory heirs are considered advance of legitime, otherwise, it will prejudice other compulsory heirs. For strangers, no equalization is required, are always charged to free portion. (Paras, supra) Not subject to collation (i.e., charged to free portion) if: 1. Testator provides otherwise (but still collated for computation) (Art. 1062) 2. If compulsory heir repudiates, in which case he is considered a stranger – for computation only, charged to free portion (Art. 1062) COLLATION FOR EQUALIZATION Requisites (Art. 1069) 1. Two or more compulsory heirs. If only one, no equalization is needed. 2. Liberality – must be acquired gratuitously from the decedent (inter vivos). In donation, gratuitous act may be direct or indirect, as when parent pays for debt of child or pays for purchase price of the car placed in name of the child – not a demandable debt as when CIVIL LAW there is no intention to be reimbursed, otherwise placed on asset side as receivables from the heir (not collation). • If there is no liberality, such as arising from obligation to support (e.g. education) –other compulsory heirs cannot ask for collation. • Exception: When liberality is present, but no collation is required: Wedding gift of parent/ascendants consisting of jewelry, clothing, outfit (Art. 1070) not more than 1/10 of the sum disposable by will –considered customary gift, not collatable, while excess required to be collated. 3. Identity of heir and donee which may be: a. Actual: e.g. F donates to son; Son collates for computation and equalization; If he donates to grandson, son is not required to collate, but grandson collates for computation as a stranger. If son predeceases, grandson collates for computation and equalization (now a compulsory heir) b. Constructive: F donates to son, son predeceases and GS succeeds by representation. GS must collate donation to son even if he does not actually receive it. If there is no identity: no collation for equalization is required. E.g. Father donates to spouse of son: Son has no obligation to collate, but spouse must collate for computation as a stranger. If he donates to both spouses: ½ each, son collates for computation and equalization, spouse collates only for computation. (Paras, supra) If collation required for equalization, may be quantitative: same amount, or qualitative: same kind. If immovable -equivalent, if not available, sell other properties to generate cash, and if movable, equivalent properties (Paras, supra) Page 218 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 COLLATION IN KIND Actual return - Only if inofficious, i.e. legitime impaired. Operates as resolutory condition: donation terminated and must return only to the extent inofficious: not necessarily a case of total return. A donee who is required to collate in kind is a possessor in good faith, and not required to account for fruits and interests except from the date succession opens. (Art. 1075) Operations Related to Collation (Paras, supra) 1. Collation – adding to the mass of the hereditary estate the value of the donation or gratuitous disposition 2. Imputing or Charging – crediting the donation as an advance on the legitime (if the donee is a compulsory heir) or on the free portion (if the donee is a stranger) 3. Reduction – determining to what extent the donation will remain and to what extent it is excessive or inofficious 4. Restitution – return or payment of the excess to the mass of hereditary estate. ————- end of topic ————V. PARTITION AND DISTRIBUTION PARTITION (Art. 1079, 1082) The separation, division and assignment of a thing held in common among those to whom it may belong. It includes every act which is intended to put an end to indivision among coheirs, and legatees or devisees, although it should purport to be a sale, exchange, compromise, or any other transaction. It is not subject to any form. Who May Effect Partition 1. Decedent himself during his lifetime by an act inter vivos or by will (Art. 1080) 2. Heir themselves (Art. 1083) 3. Competent court (Art. 1083) 4. Third person designated by the decedent (Art. 1081) CIVIL LAW 2. Voluntary heir; 3. Legatee or devisee; 4. Any person who has acquired interest in the estate When Partition Cannot be Demanded (PAPU) 1. When expressly Prohibited by the testator himself for a period not exceeding 20 years; (Art. 1083) 2. When the co-heirs Agreed that the estate shall not be divided for a period not exceeding 10 years, renewable for another 10 years; 3. When Prohibited by law; 4. When to partition the estate would render it Unserviceable for the use for which it is intended. NOTE: • Partition Inter Vivos (Art. 1080) – it is one that merely allocates specific items or pieces of property on the basis of the pro indiviso shares fixed by law or given under the will to heirs or successors. • Partition is not itself a mode of acquiring ownership, nor a title, but being predicated on succession, necessitates relationship to the decedent (in case of intestacy) or a will duly probated (in case of testacy). Prohibition to Partition (Art. 1083) 1. The prohibition to partition for a period not exceeding 20 years can be imposed on the legitime. 2. If the prohibition to partition is for more than 20 years, the excess is void. 3. Even if a prohibition is imposed, the heir’s mutual agreement can still make the partition. Legal Redemption In Favor Of Co-Heirs (Art. 1623) The right of legal redemption predicated upon the fact that the sale made by the co-heir is effected before the partition of the estate but after the death of the decedent. Who Can Demand Partition (Art. 1083) 1. Compulsory heir; Page 219 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Requisites: (Aguilar v. Aguilar, G.R. No. 141613, December 16, 2005) 1. There must be several co-heirs 2. That one of them sells his right to a stranger 3. That the sale is made before the partition 4. That the right of redemption must be exercised by one or more of the co-heirs within 1 month from the time they were notified in writing by the co-heir vendor 5. The vendee is reimbursed for the price of the sale. CIVIL LAW but the latter shall be proportionately obliged to pay the true heir of his share NOTE: Partition with respect to the mistaken heir is VOID. (Art. 1105) A Void Will may be a Valid Partition (Paras, supra) 1. If the will was in fact a partition; and 2. If the beneficiaries in the void will were legal heirs RESCISSION AND NULLITY OF PARTITION Effects of Partition • • • Confers upon each heir the exclusive ownership of the property adjudicated. (Art. 1091) After the partition, the co-heirs shall be reciprocally bound to warrant the title to (warranty against eviction) and the quality of (warranty against hidden defects), each property adjudicated. (Art. 1092) The obligation of warranty shall cease in the following cases: (Art. 1096) 1. When the testator himself has made the partition unless his intention was otherwise, but the legitime shall always remain unimpaired. 2. When it has been expressly stipulated in the agreement of partition, unless there has been bad faith. 3. When the eviction was due to a cause subsequent to the partition, or has been caused by the fault of the distributee of the property. Effects of Inclusion of Intruder in Partition (Art. 1105) 1. Between a true heir and several mistaken heirs – Partition is VOID 2. Between several true heirs and a mistaken heir – transmission to mistaken heir is VOID 3. Through error or mistake; share of true heir is allotted to mistaken heir – partition shall not be rescinded unless there is bad faith or fraud on the part of the other persons interested, A partition, judicial or extra-judicial, may also be rescinded on account of lesion, when any one of the co-heirs received things whose value is less, by at least one-fourth, than the share to which he is entitled, considering the value of the things at the time they were adjudicated. (Art. 1098) Partition Made By the Testator (Art. 1099) General Rule: A partition made by the testator cannot be impugned on the grounds of lesion. Exceptions: 1. When the legitime of the compulsory heirs is prejudiced; or 2. When it appears or may reasonably be presumed, that the intention of the testators was otherwise. Options Available to Obligor-Heir (Art. 1101) The heir who is sued shall have the option of: 1. Indemnifying the plaintiff for the loss, by payment in cash or by delivery of a thing of the same kind and quality as that awarded to the plaintiff; or 2. Consenting to a new partition NOTE: If a new partition is made, it shall affect neither those who have not been prejudiced nor those who have not received more than their just share. (Art. 1101) Page 220 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Remedy of an Heir Who has Alienated the Property Adjudicated to Him An heir who has alienated the whole or a considerable part of the real property adjudicated to him cannot maintain an action for rescission on the ground of lesion, but he shall have a right to be indemnified in cash. (Art. 1102) Incompleteness of Partition Not a Ground for Rescission The omission of one or more objects or securities of the inheritance shall not cause the rescission of the partition on the ground of lesion, but the partition shall be completed by the distribution of the objects or securities which have been omitted. (Art. 1103) Omission of a Compulsory Heir in the Partition General Rule: A partition made with preterition of any of the compulsory heirs shall not be rescinded. (Art. 1104) NOTE: This is not preterition under Article 854. This is simply an omission of a compulsory heir in the partition, the assumption being that something is left for him in the form of an undisposed portion of the estate. The omitted heir simply gets his rightful share. (Non v. CA, G.R. No. 137287, 2000) Exception: Bad faith or fraud on the part of the other persons interested. (Art. 1104) Remedy: The other persons interested shall be proportionately obliged to pay to the person omitted the share which belongs to him. (Art. 1104) Page 221 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 PERIODS TO REMEMBER ON PARTITION 20 years (Art. 1083) Maximum period testator can prohibit alienation of dispositions 5 years from delivery to the State (Art. 1014) To claim property escheated to the State 5 years from the time disqualified person took possession (Art. 1040) Action for declaration of incapacity & for recovery of the inheritance, devise or legacy 30 days from issuance of order of distribution (Art. 1057) Must signify acceptance/repudiation otherwise, deemed accepted 1 month form written notice of sale (Art. 1088) Right to repurchase hereditary rights sold to a stranger by a co-heir 10 years (Art. 1094) To enforce warranty of title/quality of property adjudicated to co-heir from the time right of action accrues 5 years from partition (Art. 1095) To enforce warranty of solvency of debtor of the estate at the time partition is made 4 years from partition (Art. 1100) Action for rescission of partition on account of lesion Page 222 of 474 OBLIGATIONS AND CONTRACTS Civil Law ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 A. GENERAL PROVISIONS OBLIGATIONS TOPIC OUTLINE UNDER THE SYLLABUS Q. GENERAL PROVISIONS I. Definition II. Elements of an Obligation III. Sources of Obligations R. NATURE AND EFFECTS OF OBLIGATIONS I. Obligation to Give II. Obligation to Do or Not to Do III. Transmissibility of Obligations IV. Performance of Obligations V. Breaches of Obligations VI. Remedies Available to Creditor in Cases of Breach S. KINDS OF OBLIGATIONS I. Pure II. Conditional III. Obligations with a Period or a Term IV. Alternative or Facultative Obligations V. Joint and Solidary Obligations VI. Obligations with a Penal Clause T. EXTINGUISHMENT OF OBLIGATIONS I. Payment or Performance II. Loss of Determinate Thing Due or Impossibility or Difficulty of Performance III. Condonation or remission of debt IV. Confusion V. Compensation VI. Novation I. DEFINITION Obligation: A juridical necessity to give, to do or not to do. (An Act to Ordain and Institute the Civil Code of the Philippines [CIVIL CODE], Republic Act No. 386, art. 1156 (1950)) II. ELEMENTS OF AN OBLIGATION Essential Elements an Obligation (Arts. 1156 – 1162) (PAVO) 1. Passive Subject (obligor/debtor): the person who has the duty of giving, doing or not doing; person bound to the fulfillment 2. Active Subject (obligee/creditor): the person in whose favor the obligation is constituted; person entitled to make a demand 3. Vinculum Juris/ Legal Tie: the efficient cause or the juridical tie between two subjects by reason of which the debtor is bound in favor of the creditor to perform the obligation. It can be established by various sources of obligations (law, contract, quasi-contracts, delicts, and quasi-delicts) and may arise either from bilateral or unilateral acts of persons. 4. Object/ Subject Matter: the prestation or conduct which has to be observed by the debtor/obligor; to be valid, it must be: (LiPoDeM): (a) Licit (b) Real or Possible (c) Determinate/ Determinable (d) Must be within the commerce of men (i.e. susceptible of appropriation and transmissible from one person to another) (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 457 (2010)) In certain kinds of obligations, the following may constitute additional requirements: 5. Form: in formal contracts where form is necessary for validity, e.g., donation Page 224 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 6. Delivery or Tradition: real contracts where delivery is necessary for perfection of the obligation, e.g., Pledge (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 412 (2009)) III. SOURCES OF OBLIGATIONS Neither party may unilaterally evade his obligation in the contract, unless the contract authorizes it or the other party assents. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 385 (2009)) Obligations arise from: (L-CQAQ) 1. 2. 3. 4. 5. Law; Contracts; Quasi-contracts; Acts or omissions punished by law; and Quasi-delicts (CIVIL CODE, art. 1157) Note: The list is exclusive. (Sagrado Orden v. Nacoco, G.R. No. L-37756, June 30, 1952) A. LAW (OBLIGATION EX LEGE) The law cannot exist as a source of obliga;.lptions, unless the acts to which its principles may be applied exist. Once the acts or facts exist, the obligations arising therefrom by virtue of the express provisions of the law are entirely independent of the agreement of the parties. (Manila Trading & Supply Co. v. Saez, G.R. No. 43861, Sept. 26, 1938) It must be expressly or impliedly set forth and cannot be presumed. (Martinez v. Martinez, G.R. No. 858, Jan. 23, 1903) B. CONTRACTS CONTRACTU) (OBLIGATION The terms of the contracts determine the respective obligations of the parties. If the terms of the contract are clear and leave no doubt upon the contracting parties’ intention, such terms should be applied in their literal meaning. (CIVIL CODE, art. 1370) EX Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (CIVIL CODE, art. 1159) Parties may freely enter into any stipulations provided they are not contrary to law, morals, good customs, public order or public policy. (CIVIL CODE, art. 1306) C. QUASI-CONTRACTS (OBLIGATION QUASI-CONTRACTU) EX Juridical relations resulting from lawful, voluntary and unilateral acts, 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. (CIVIL CODE, art. 2142) Distinguished from other Sources (LUV) 1. The act giving rise to a quasi-contract must be Lawful distinguishing it from delict; 2. The act must be Voluntary distinguishing it from a quasi-delict which is based on fault or negligence; and 3. The act must be Unilateral distinguishing it from contract which is based on agreement. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 15 (2009)) Kinds of quasi-contract a) Negotiorum Gestio - is the voluntary management of the property or affairs of another in times of emergency without the owner’s authority. (CIVIL CODE, art. 2144) Obligation created: Return of the property by the officious manager to the owner once the emergency ceases, and for the owner to reimburse expenses incurred by the officious manager. (CIVIL CODE, art. 2150) b) Solutio Indebiti - is the juridical relation, which is created when something is received when there is no right to demand it and it was Page 225 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 unduly delivered through mistake. (CIVIL CODE, art. 2154) Obligation created: Recipient to return the property delivered through mistake. c) Other cases of quasi-contracts (CIVIL CODE, art. 2164-2175) Note: The Civil Code provides [the abovementioned] enumeration of quasi-contracts, but the list is not exhaustive and merely provides examples. (Metrobank v. AMC, G.R. No. 170498, Jan. 9, 2013) Solutio indebiti vs. Natural obligations In natural obligations, the person making the payment or delivery knows that he has no legal obligation to pay or to deliver but still voluntarily makes such payment or delivery. For this reason, once payment or delivery has been made, there is no right to ask for the return. (CIVIL CODE, art. 1423) In solutio indebiti, the payment or delivery is made on the basis of a mistake, hence the recipient has the legal obligation to return. (CIVIL CODE, art. 2154) D. DELICTS (OBLIGATION EX MALEFICIO OR EX DELICTO) Every person criminally liable for a felony is also civilly liable. (An Act Revising the Penal Code and Other Penal Laws [REVISED PENAL CODE], Act No. 3815, art. 100 (1932)) Such civil liability is a necessary consequence of criminal responsibility, and is to be declared and generally enforced in the criminal proceeding EXCEPT where: (a) the injured party reserves his right to avail himself of it in a distinct civil action or (b) in cases where an independent civil action is allowed by law. (CIVIL CODE, art. 33; 2000 REVISED RULES OF CRIMINAL PROCEDURE, rule 110, § 1) CIVIL LAW Scope of civil liability 1. Restitution 2. Reparation for damage caused 3. Indemnity for consequential (REVISED PENAL CODE, art. 104) damages Effect of acquittal in criminal case General Rule: The acquittal of the accused in the criminal case due to the prosecution’s failure to prove guilt beyond reasonable doubt does not prejudice the civil action, in which the offended party may still be able to recover damages by a mere preponderance of evidence. (CIVIL CODE, art. 29) Exception: Where the judgment of acquittal contained a declaration that no negligence can be attributed to the accused and that the fact from which the civil action might arise did not exist. (Castillo v. CA, G.R. No. 48541, Aug. 21, 1989) Extinguishment of liability The civil liability for crimes is extinguished by the same causes provided by the Civil Code for the extinguishment of other obligations. (RULES OF CIVIL PROCEDURE, rule 4, § 4) Note: Death of the accused during the pendency of the case can extinguish the civil liability if the same arose directly from the crime committed. However, this does not apply if civil liability can be based on another source of obligation (i.e., law on human relations). (Asilo, Jr. v. People, G.R. Nos. 159017-18 & 159059, Mar. 9, 2011) E. QUASI-DELICT/TORTS (OBLIGATION EX QUASI-DELICTO OR EX QUASI MALEFICIO) It is an act or omission arising from fault or negligence, which causes damage to another, there being no pre-existing contractual relations between the parties. (CIVIL CODE, art. 2176) Page 226 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Elements: (ADD) 1. That there exists a wrongful Act or omission imputable to the defendant by reason of his fault or negligence; 2. That there exists a Damage or injury, which must be proved by the person claiming recovery; 3. That there must be a Direct causal connection or a relation of cause and effect between the fault or negligence and the damage or injury; or that the fault or negligence be the cause of the damage or injury. (CIVIL CODE, art. 2176; Taylor v. Manila Electric Co., G.R. No. L4977, Mar. 22, 1910) Negligence: Failure to observe for the protection of the interests of another person, that degree of care, precaution and vigilance, which the circumstances justly demand, whereby such other person suffers injury. (US v. Barias, G.R. No. L-7567, Nov. 12, 1912) Test of Negligence: “Would a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the person injured as a reasonable consequence of the course about to be pursued?” (Picart v. Smith, G.R. No. L-12219, Mar. 15, 1918) Quasi-delict as a cause of action despite a pre-existing contractual relation General Rule: Actions based on breach of contract and actions based on quasi-delicts differ in terms of conditions, defenses, and proof. They cannot co-exist. (Orient Freight v. Keihin, G.R. No. 191937, Aug. 9, 2017) Exceptions: 1. When such a contractual relation exists, the obligor may break the contract that the same act which constitutes a breach of the contract would have constituted the source of an extra-contractual obligation, had no contract existed between the parties (Cangco v. Manila Railroad Co., G.R. No. L-12191, Oct. 14, 1918); CIVIL LAW 2. If the act that breaks the contract may also be a tort (Air France v. Carrascoso, G.R. No. L-21438, Sept. 28, 1966). Note: When the obligation is based on a contract, without which the obligation does not exist, the cause of action must be founded on the breach of contract and cannot be based on quasi-delict (PSBA v. Court of Appeals, G.R. No. 84698, Feb. 4, 1992). In Air France, what was punished was the company’s racist policy which emboldened the manager to expel the Filipino from first class because a white man had a better right to the seat. Air France would apply if the act which breaches a contract was done in bad faith and amounts to a violation of Article 21 of the Civil Code. ————- end of topic ————B. NATURE AND EFFECTS OF OBLIGATIONS I. DUTIES OF A DEBTOR IN AN OBLIGATION TO GIVE 1. To give a determinate thing (CIVIL CODE, arts. 1163, 1164 & 1166) (a) To deliver the thing itself; (CIVIL CODE, art. 1163) (b) To preserve or take care of the thing due with the diligence of a good father of a family (i.e., that standard of care which an owner would give to his own property), unless the law requires or the parties agree otherwise; (CIVIL CODE, art. 1163) • The law or contractual stipulation may require a different degree of diligence: greater or extraordinary diligence (diligentia exactissima), or less or slight diligence (diligentia levissima). (RUBEN F. BALANE, JOTTINGS AND JURISPRUDENCE IN CIVIL LAW (OBLIGATIONS AND CONTRACTS) 63 (2020)) Page 227 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (c) To deliver fruits, whether civil, industrial, or natural fruits (obligor is liable for fruits only from the time the obligation to deliver arises); and (d) To deliver accessions and accessories (CIVIL CODE, art. 1166) • Accessions – incorporated or attached to the object to form part of the principal. • Accessories – added for completion, use perfection or embellishment. 2. To give a generic thing (CIVIL CODE, arts. 1246 & 1170) (a) To deliver the thing of the quality intended by the parties, taking into consideration the purpose of the obligation, intent of the parties, and other circumstances. (CIVIL CODE, art. 1246) (b) To pay damages in case of breach of the obligation. (CIVIL CODE, art. 1170) II. RIGHTS OF A CREDITOR IN AN OBLIGATION TO DO OR NOT TO DO 1. To do (Positive Personal) (a) The obligee is entitled to have the thing done in a proper manner, by himself or by a third person, at the expense of the obligor; (b) To demand what has been poorly done be undone; (c) To recover damages because of breach of the obligation. (CIVIL CODE, art. 1167) 4. 2. Not to do (Negative Personal) (a) To have the thing undone at the expense of the obligor; and/or (b) To ask for damages. (CIVIL CODE, art. 1168) PERSONAL RIGHT Jus ad rem, a right enforceable only against a definite person or group of persons REAL RIGHT Jus in re, a right enforceable against the whole world CIVIL LAW Right pertaining to a Right pertaining to a person to demand person over a from another, as a specific thing, without definite passive a definite passive subject, the fulfillment subject against whom of the prestation to the right may be give, to do or not to personally enforced do. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 15 (2009)) III. TRANSMISSIBILITY OF OBLIGATIONS General Rule: All rights acquired in virtue of an obligation are generally transmissible (CIVIL CODE, art. 1178) Exception: Rights acquired in virtue of an obligation are NOT transmissible when: 1. Prohibited by law Examples: (a) Contract of partnership (CIVIL CODE, art. 1767) (b) Contract of agency (CIVIL CODE, art. 1868) (c) Contract of commodatum (CIVIL CODE, art. 1933) 2. Prohibited by stipulation of the parties, as long as it is not contrary to public policy. 3. The obligation is purely personal in nature— when the obligor’s personal qualifications and skill was the motive behind the contract. IV. PERFORMANCE OF OBLIGATIONS The obligation arises: 1. Pure obligation: Upon demand (CIVIL CODE, art. 1179) 2. Obligations with Suspensive Condition: General Rule: Only from the time the condition is fulfilled, but the obligation retroacts to the day of its constitution. (CIVIL CODE, art. 1187) Exception: Regarding fruits and interests in reciprocal obligations (even if the two reciprocal obligations are not of the same Page 228 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 value), the parties are deemed as mutually compensated during the pendency of the condition. Thus, there is no liability to account for fruits and interests in reciprocal obligations. For unilateral obligations, the debtor shall appropriate the fruits and interests received, unless it was intended otherwise. 3. Obligations subject to a Suspensive Period: There is no similar provision as Article 1187, hence there are 2 schools of thought: (1) from perfection, since there is already an obligation from the date the obligation is perfected, and only the performance or delivery is suspended until the arrival of the period, and (2) same as a suspensive condition, from date the period arrives. 4. Obligations subject to a Resolutory Condition/Period: No obligation to deliver fruits since performance or delivery is immediate, subject to its resolution upon the happening of the condition/period. (CIVIL CODE, art. 1187) V. BREACHES OF OBLIGATIONS Causes of Breach 1. 2. 3. 4. Incidental Fraud (Dolo incidente) Negligence (Culpa) Default / Delay (Mora) Contravention of Terms (CIVIL CODE, art. 1170) There is breach when the obligor fails without legal excuse (such as fortuitous events) to perform any promise, which forms the whole or part of an obligation. (Guanio v. Makati ShangriLa and Resort, Inc., G.R. No. 190601, Feb. 7, 2011; R.S. Tomas Inc. v. Rizal Cement Co. Inc., G.R. No.173155, Mar. 21, 2012) Scope of liability Basis of liability BREACH ARISING FROM DOLO Liable for all consequen -ces of act, whether foreseen or unforeseen (e.g., loss of profits) (CIVIL CODE, art. 2201) Actual knowledge or awareness of the cause (CIVIL CODE, art. 2201; Legaspi Oil Co., Inc. v. CA, G.R. No. 96595, Jul. 1, 1993) BREACH ARISING FROM CULPA FORTUITO US EVENT Liable only for those foreseen, or could have foreseen (CIVIL CODE, art. 2201) No liability – unforeseen or even if foreseen, is unavoidabl e (CIVIL CODE, art. 1174) Possibility of knowledg e or awareness (ought or could have foreseen) (CIVIL CODE, art. 2201) Absence of possibility of knowledge (could not be foreseen or if foreseen, could not be avoided) (CIVIL CODE, art. 1174) 1. Incidental fraud (Dolo incidente) Fraud is the deliberate or intentional evasion of the normal fulfillment of an obligation. (8 Manresa, 5th Ed., Book, 1, 72) Types of Fraud INCIDENTAL (Dolo incidente) (ART. 1170) Present during the performance of a preexisting obligation CAUSAL (Dolo causante) (ART. 1338) Present before or simultaneously with the perfection of a contract Page 229 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Purpose is to evade the normal fulfillment of the obligation Results in the breach of an obligation Purpose is to secure the consent of another to enter into the contract Results in vitiation of consent; voidable contract Gives rise to a right of an innocent party to annul the contract Gives rise to a right in favor of the obligee to sue for breach (see remedies for breach) (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 63 (2010)) Note: Future fraud CANNOT be waived. However, the law does NOT prohibit renunciation of the action for damages on the ground of past fraud. (CIVIL CODE, art. 1171) 2. Negligence (Culpa) Any voluntary act or omission, there being no malice which prevents the normal fulfillment of an obligation. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 58 (2014)) Consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place (CIVIL CODE, art. 1173) FRAUD There is deliberate intention to cause damage Liability cannot be mitigated Must be clearly proved Waiver for future fraud is void (CIVIL CODE, art. 1171) NEGLIGENCE There is no deliberate intention to cause damage Liability may be mitigated (CIVIL CODE, art. 1173) Presumed from the breach of a contractual obligation Waiver for future negligence may be allowed in certain cases (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 62 (2014)) NEGLIGENCE CRIME Any act with fault or Acts punishable by negligence (CIVIL law (REVISED PENAL CODE, art. 1173) CODE, art. 3) Criminal intent Criminal intent unnecessary necessary Damages may be Some crimes do NOT awarded to injured give rise to civil liability party Violation of private Violation of public rights rights Preponderance of Proof beyond evidence reasonable doubt Can be Criminal liability compromised as any cannot be other civil liability compromised Presumption of Presumption of negligence innocence (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 27 (2014)) Kinds of Negligence 1. Quasi-Delict (Culpa aquiliana/culpa extra contractual) – source of obligation; wrong or negligence committed independent of contract and without criminal intent 2. Contractual Negligence (Culpa Contractual) – wrong or negligence in the performance of an obligation or contract 3. Criminal Negligence (Culpa Criminal) – wrong or negligence in the commission of a crime (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 65-66 (2014)) CULPA AQUILIANA Negligence is substantive and independent CULPA CONTRACTUAL Negligence merely an incident of performance of an obligation Page 230 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 There may or may NOT be a preexisting contractual obligation Source of the obligation is the negligence itself (CIVIL CODE, art. 2176) There is a preexisting contractual relation Source of the obligation is the breach of the contractual obligation (CIVIL CODE, arts. 1170-1174; 2201) Negligence must be Proof of existence of proved the contract and its breach is prima facie sufficient to warrant recovery For the negligence of For the negligence of an employee, an employee, diligence in the diligence in the selection and selection and supervision of the supervision of the employees is a employees is NOT defense of the available as a employer defense of the employer (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 144-145 (2016)) Standard of care of disabled person A disabled person is required to use the same degree of care that a reasonably careful person having the same disability would use. Physical handicaps are treated as part of the circumstances under which a reasonable person must act. Thus, the standard of conduct for a blind person becomes that of a reasonable person who is blind. (Francisco v. Chemical Bulk Carriers, Incorporated, G.R. No. 193577, Sept. 7, 2011) Instances where the law requires a higher standard of care • Banks – as a business affected with public interest, and because of the nature of its functions, banks are under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. (Simex v. CA, G.R. No. 88013, Mar. 19, 1990) Exception: Extraordinary diligence does not cover transactions outside bank deposits, i.e. commercial transactions. (Reyes v. CA, G.R. No. 94214, Dec. 1, 1992) • Realty Corporations – A corporation engaged in the buying and selling of real estate is expected to exercise a higher standard of care and diligence in ascertaining the status and condition of the property subject of its business transaction. Similar to investment and financing corporations, it cannot simply rely on an examination of a Torrens certificate to determine what the subject property looks like, as its condition is not apparent in the document. (Eagle Realty Corp. v. Republic, G.R. No. 151424, Jul. 31, 2009) • Common Carriers – from the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. (CIVIL CODE, art. 1733) Rule on Standard of Care 1. That which the law requires; or 2. That stipulated by the parties; or 3. In the absence of the above, diligence of a good father of a family (CIVIL CODE, art. 1163) However, parties cannot stipulate that there would be absolute exemption from liability for any fault or negligence, since it is against public policy. (Heacock vs. Macondray, G.R. No. L-16598, Oct. 3, 1921; CIVIL CODE, arts. 1306, 1744, 1745) Diligence of a good father of a family: ordinary care or that diligence which an average or reasonably prudent person would exercise over his own property (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 34 (2014)) Page 231 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Effects of contributory negligence of the obligee • General rule: Reduces or mitigates the damages which he can recover. • Exception: If the negligent act or omission of the creditor is the proximate cause of the event, which led to the damage or injury complained of, he cannot recover. (CIVIL CODE, art. 2179) that since both parties exercised their right to resolve under Art. 1191, judicial rescission is not necessary because the power to resolve is implied in reciprocal obligations. (Lam v. Kodak, G.R. No. 167615, Jan. 11, 2016; see discussion on Nissan Car Lease v. Lica Management, Jan. 13, 2016 under “Void or Inexistent Contracts”) 3. Default or Delay (Mora) General rule: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. (CIVIL CODE, art. 1169) The use of a credit card to pay for a purchase is only an offer to the credit card company to enter a loan agreement with the credit card holder. Before the credit card issuer accepts this offer, no obligation relating to the loan agreement exists between them. A demand presupposes the existence of an obligation between the parties. (Pantaleon v. American Express International, Inc., G.R. No. 174269, Aug. 25, 2010) Exception: Demand by the creditor NOT necessary when: (LTU) 1. Law or obligation expressly declares so 2. Time is of the essence 3. Demand would be Useless (CIVIL CODE, art. 1169) If the contract stipulates that “the project is estimated to be completed in 6 years,” failure to finish the project in 6 years does not put the obligor in delay. Mere estimate cannot be considered a period or a day certain. (Salonte v. COA, et al., G.R. No. 207348, Aug. 19, 2014) Requisites to be in delay: (CIVIL CODE, art. 1169) Kinds of delay 1. Obligation is Demandable 2. Debtor Delays performance 3. Creditor Demands performance judicially or extrajudicially Note: In reciprocal obligations, a party does not incur in delay if the other party is not ready or willing to assume and perform the obligation imposed upon him/her (CIVIL CODE, art. 1169) But see: In reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand by the obligee is still necessary before the obligor can be considered in default and before a cause of action for rescission will accrue. (Solar Harvest v. Davao Corrugated Carton Corporation, G.R. No. 176868, Jul. 26, 2010) 1. Mora solvendi – delay or default committed by obligor 2. Mora accipiendi – delay or default committed by obligee 3. Compensatio Morae – default of both obligor and obligee (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 457 (2010)) 4. Contravention of the tenor of the obligation This refers to failure to comply with the terms of the obligation, and will require dolo, culpa or delay as the cause of the failure to comply, in order to constitute a breach. (CIVIL CODE, art. 1170; DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS, 74 (2010)) Defense against breach: FORTUITOUS EVENTS Note: The power to rescind is implied in reciprocal obligations. In Lam v. Kodak (2016), although there was no stipulation, the court ruled Requisites of Fortuitous Events (NIIU) 1. Event must be Independent of obligor’s will; Page 232 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 2. Event is Unforeseeable or unavoidable 3. Such event renders it Impossible for the debtor to perform (not only makes it difficult, but impossible) 4. No contributory negligence (Lasam v. Smith, G.R. No. L-19495, Feb. 2, 1924) General rule: Loss due to fortuitous events shall extinguish the obligation (CIVIL CODE, art. 1174) Exceptions: (SALTD) 1. If by Law the obligor is liable even for fortuitous event 2. If by Stipulation the obligor is liable even for fortuitous event 3. If the nature of the obligation requires the Assumption of the risk (CIVIL CODE, art. 1174) 4. If the loss of the thing occurs after the obligor incurred in Delay; and 5. If the obligor promised to deliver the same thing to Two or more persons who do not have the same interest (CIVIL CODE, art. 1165) Declaration of martial law, per se, is not a fortuitous event. While a lot of businesses suffered financial reverses during this period, it could not be used as a defense when sued for collection of debts validly incurred. (Philippine Free Press v. CA, G.R. No. 132864, Oct. 24, 2005) The Asian Debt Crisis in 1997 is not a fortuitous event. A real estate company engaged in preselling of condominium units should have been able to assess foreign exchange risks. The fluctuating movement of the Philippine Peso in the FX market is a daily occurrence, so Megaworld cannot claim fortuitous events as an excuse for non-delivery of units. (Megaworld Globus Asia Inc. v. Tanseco, G.R. No. 181206, Oct. 9, 2009) The Christmas season cannot be cited as an act of God that would excuse a delay in the processing of claims by a government entity that is subject to routine accounting and auditing rules. (MIAA v. ALA Industries Corp, G.R. No. 147349, Feb. 13, 2004) CIVIL LAW The sudden act of a passenger who stabbed another passenger in the bus is within the context of force majeure. But before common carrier may be absolved, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing injuries. (Bachelor Express, Inc. v. CA, G.R. No. 85691, Jul. 31, 1990) If obligation is to deliver materials for a fixed period such as 30 years, fortuitous events occurring within the period, such as the outbreak of war which took 6 years out of the 30-year period and destroyed plants, machinery and equipment and prevented the obligor from making deliveries, the occurrence of such a fortuitous event will not extend the period of the contract beyond its fixed period. This is because the obligor was excused from performance during the period when the fortuitous events prevented it from performing its obligations. (Victorias Planters Association v. Victorias Milling, G.R. No. 6648, Jul. 25, 1955) A person obliged to perform an obligation is NOT excused from a fortuitous event when the nature of the obligation requires the assumption of risk. In other words, it is NOT enough that the event should not be foreseen or anticipated, but it must be one that is impossible to foresee or to avoid. (Republic v. Luzon Stevedoring, G.R. No. L21749, Sept. 29, 1967) VI. REMEDIES AVAILABLE TO CREDITOR IN CASES OF BREACH 1. Specific Performance - requiring delivery or performance of the obligation. • Can be combined with damages, but inconsistent with the remedy of resolution or cancellation. (Magdalena Estate, Inc. v. Myrick, G.R. No. L-47774, Mar. 14, 1941) • Can be pursued successively (but not simultaneously) with resolution or cancellation; if initial action is for specific performance and obligor does not or Page 233 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 • cannot deliver, courts have allowed obligee to pursue resolution or cancellation. (CIVIL CODE, art. 1191) This is NOT a remedy in an obligation “Not to do” that has been breached since the prohibited act has been done. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 44 (2014)) 2. Damages - can be combined with any remedy or pursued independently – also available in breach of any prestation. (CIVIL CODE, art. 1191) 3. Substitute performance - ask others to perform and charge the cost to the obligor (CIVIL CODE, arts. 1165-1168) • Not available in: a. Obligation to give specific things (already set apart from class or genus to which it belongs); (CIVIL CODE, art. 1165) b. Obligations not to do; (CIVIL CODE, art. 1168) and c. Obligations to do which are purely personal in character. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 99-100 (1991)) 4. Resolution/Cancellation - implied in reciprocal obligations, but not available if the breach is slight, unless time is of the essence. (Biando v. Embestro, G.R. No. L11919, Jul. 27, 1959) If breach is only slight, generally courts will grant additional time for the obligor to pay or perform and after this additional time, if obligor still does not perform, courts will allow resolution or cancellation. (CIVIL CODE, art. 1191; Kapisanan Banahaw v. Dejarme, G.R. No. L32908, Nov. 28, 1930) The principle is that resolution will not be permitted for a slight or casual breach of a contract, but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in entering into the agreement. (Multinational v. Ara Security, 441 SCRA 126 (2004)) Remedy Specific only to Obligations Not to Do: to compel that the act in violation of the obligation to be undone if possible and if not, only damages may be pursued. (CIVIL CODE, art. 1168) ————- end of topic ————C. KINDS OF OBLIGATIONS I. PURE Pure Obligations - It is an unqualified obligation, which is demandable immediately. Its performance does NOT depend upon a future and uncertain event, or past event unknown to the parties. (CIVIL CODE, art. 1179) II. CONDITIONAL OBLIGATION Conditional Obligations - The performance in conditional obligations depends upon a (1) future AND uncertain event, (2) or upon a past event unknown to the parties. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 106 (2014)) Note: For the first kind, Article 1179 uses the phrase “future ‘or’ uncertain” -- it must be construed as “and”. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 144 (1991)) Conditional Obligations classified into: may be further 5. Suspensive or resolutory 6. Potestative (based on the will of one of the parties), Casual (based upon chance or will of 3rd parties), and Mixed (combination of will of one of the parties + chance and/or will of 3rd persons) 7. Possible or impossible 8. Positive or negative 9. Divisible or indivisible 10. Conjunctive or alternative 11. Express or implied Page 234 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 110 (2010)) Note: All combinations are valid, EXCEPT only those conditional obligations which are suspensive and dependent solely on the will of the debtor. Thus: suspensive condition + purely potestative on debtor = both condition and obligation void. Hence, there is no obligation. A provision in a Conditional Deed of Sale stating that the vendee shall pay the balance of the purchase price when he has successfully negotiated and secured a right of way is not a purely potestative condition on the perfection of the contract nor on the validity of the entire contract or its compliance as contemplated by Art. 1308. Such a condition is likewise dependent on chance as there is no guarantee that the vendee and the third-party landowners would come to an agreement regarding the road right of way, a type of mixed condition expressly allowed under Art. 1182. Where the so-called potestative condition is imposed not on the birth of the obligation but on its fulfillment, only the condition is avoided, leaving unaffected the obligation itself. (Catungal v. Rodriguez, GR No. 146839, Mar. 23, 2011) 1. Suspensive condition • The happening of the condition creates the obligation. • Not demandable at once. • Gives rise to the existence of an obligation. For example, in a Contract to Sell, the fulfillment of the suspensive condition, which is the full payment of the purchase price, gives rise to the obligation of the seller to convey the title to the prospective buyer. If the condition was not fulfilled, it only prevents the obligation of the seller to convey title to arise. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 102 (2014)) • Also known as “condition precedent” CIVIL LAW • Gives birth to obligations (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 106-107 & 111-112 (2014)) Rule on fruits in suspensive condition: (a) In suspensive conditions, the effect of a conditional obligation “to give” retroacts to the day of the constitution of the obligation. (b) Nevertheless, when the obligation imposes reciprocal prestations, the fruits and interests during the pendency of the suspensive condition shall be deemed to have been mutually compensated. (c) If the obligation is unilateral, the debtor or obligor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same is different. (CIVIL CODE, art. 1187) Note: Doctrine of constructive fulfillment Condition shall be deemed fulfilled when the obligor voluntarily prevents fulfillment. (CIVIL CODE, art. 1186) • REQUISITES: (a) Condition is suspensive (b) Obligor prevents fulfillment of condition (c) Obligor acts voluntarily 2. Resolutory condition • Demandable at once • Once the condition is established or acknowledged, the right to demand performance immediately exists and therefore the obligation can be demanded at once. • It is also known as “condition subsequent” • The happening of the condition has the effect of extinguishing an obligation. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 109 & 111-112 (2014)) Note: In case of reciprocal obligations, the obligation of one is a resolutory condition of the Page 235 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 obligation of the other, the non-fulfillment of which entitles the other party to resolve or cancel the contract. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 53 (2014)) 3. Potestative condition The fulfillment of the condition entirely depends upon the sole will of a party – may be purely potestative on the part of the obligee (valid), or the obligor/ debtor (void if suspensive). (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 201 (2016)) Effect of illegal, immoral or impossible condition TO GIVE / TO DO NOT TO GIVE / NOT SOMETHING TO DO SOMETHING Both condition and Condition considered not written, hence, obligation are void, the obligation is hence, there is no valid – the condition obligation. is merely superfluous. Exception: In gratuitous (ERNESTO L. PINEDA, obligations, iIIegal OBLIGATIONS AND conditions are CONTRACTS 92 considered as not (2009)) written, hence condition is deemed not written and the obligation is valid (becomes a pure obligation). (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 135 (2014)) Condition coupled with a Term: The condition that some event will not happen at a determinate time, shall render the obligation effective from the moment (1) the time indicated has elapsed, or (2) if it has become evident that the event cannot occur. (CIVIL CODE, art. 1185) Otherwise, generally, a party must wait for the condition to be fulfilled, until it becomes certain that condition (1) cannot be fulfilled (parties are released), or (2) may be deemed fulfilled at such time as the parties contemplated, bearing in mind the nature of the obligation. (CIVIL CODE, art. 1185) POSITIVE SUSPENSIVE Rule Effect if Condition is fulfilled before arrival of the term Effect if Condition is not fulfilled before the arrival of the term Condition must be fulfilled before stipulated term Obligation arises from fulfillment NEGATIVE SUSPENSIVE Condition should NOT happen before stipulated term The parties are released as of the date of the happening of the condition Parties are released as of arrival of the term But Parties may be released even before arrival if it becomes indubitable that the condition will not happen The obligation arises from the time the term arrives. ————- end of topic ————III. OBLIGATIONS WITH A PERIOD OR A TERM Obligations which are demandable on a “day certain”. Page 236 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 “Day certain” refers to either: (a) A future AND certain event; or (b) Payable when able, or when debtor promises to pay when “his means permit him to do so” – period is to be fixed by the court, taking into account intention of the parties (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 129 (2009)) May also be further classified into: (a) Suspensive - obligation is suspended until arrival of the period; or (b) Resolutory - obligation is immediate but terminates upon arrival of the period. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 194 (2014)) Difference between suspensive or resolutory condition and term CONDITION TERM Suspensive It may or may It is certain not happen, that it will hence happen; just uncertain uncertain as whether there to when it will is an happen. obligation. Resolutory It is not It is certain certain if the that it will obligation will terminate at a terminate at future time. all Retroactivit y Once fulfilled, it will retroact to date the obligation was entered into (Note: if it is an obligation to do or not to do, courts will determine retroactivity) There is no retroactivity because there is already an obligation from the time the parties enter in the obligation, except only in prescription (where prescriptive period is counted from arrival of the term – i.e., when the action could have been brought). EXCEPT: (i) fruits (Art. 1187- when the obligation to deliver arises), (ii) prescription (from fulfillment of condition – when action could have been brought) (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 191 (2014)) Effects before the happening/ arrival of condition/ term Obligee: May file Protective Action only, such as asking for security or requiring escrow of the object since there is no right or obligation yet at this time. Obligor: No obligation to deliver or perform yet at this time. Note: In an obligation to give specific things, these are the effect of loss, impairment or improvement of the specific thing which is the object of the obligation: Page 237 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 CAUSE LOSS Obligor ’s Fault Obligor to pay damage s Obligee ’s Fault Obligor release d Nature/ Fortuito us Events Obligor release d IMPAIR MENT Obligee may choose resolutio n or fulfillme nt, with damage s Deliver in its impaire d state IMPROVEM ENT Obligor has usufructuary rights only – i.e., can use it but is not entitled to payment, and can remove it only if it will not cause damage Obligor without right to payment of improvement Inures to the benefit of the obligee Borne by the obligee; cannot ask for damage s or refuse to accept impaire d object (CIVIL CODE, art. 1189; HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 135-137 (2014)) The same effect applies if the resolutory condition happens and the party obliged cannot return the object or is improved for the same above reasons. Benefit of the period Significance of Period: (a) Obligor cannot be compelled to pay or perform before the arrival of the period (b) Obligee cannot compel payment or performance Both are subject to the right of each party to waive – even if the obligor is willing to pay interest for the remainder of the period. (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 152-153 (2010)) Presumption: for the benefit of both parties (CIVIL CODE, art. 1196; HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 197 (2014)) It can be given to either party: (a) To the Debtor or Obligor: By law or by stipulation (e.g., payable on or before) (b) To the Creditor or Obligee: Only by Stipulation (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 152-153 (2010)) Debtor/obligor may lose the benefit of the period (therefore may be compelled to pay immediately) in the following cases (FAt-VISA): (a) Debtor becomes Insolvent (when his assets are less than his liabilities) Exception: When he gives security for the obligation (b) Failure to create or establish the security promised; (c) When Security established but is later impaired (through fault of debtor) or totally lost (due to fault of debtor or fortuitous events). Unless: Debtor provides another security of equal value; (d) Violation of any undertaking on the basis of which, period is granted; (e) Debtor Attempts to abscond (mere attempt sufficient, because if actual abscondment is to be awaited, creditor can no longer collect; and (f) With an Acceleration clause stipulation • Applies to obligations payable in installments or based on amortization schedule, where stipulation says that failure to pay one or some installments or amortizations will entitle creditor to accelerate payment – i.e., to call for the payment on the entire remaining unpaid obligation. (CIVIL CODE, art. 1198) Page 238 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 When courts may fix period (ID-JBL) (a) If the obligation does NOT fix a period, but from its nature and circumstances it can be Inferred that a period was intended by the parties (CIVIL CODE, art. 1197) (b) If the duration of the period Depends upon the will of the debtor (CIVIL CODE, art. 1197) (c) In case of reciprocal obligations, when there is a Just cause for fixing a period (CIVIL CODE, art. 1191) (d) If the debtor Binds himself when his means permit him to do so (CIVIL CODE, art. 1180) (e) If no period for the Lease has been set, applicable in specific cases depending on the length of the lessee’s stay in the premises (CIVIL CODE, art. 1687) Note: Art. 1197 is only applicable when there is absence of any period fixed by the parties. It requires that period cannot be set arbitrarily by the courts. • 2-step process to determine if the Court may fix the period (a) Determine that the obligation does not fix a period (or that period is made to depend upon will of debtor) but from the nature and circumstances, it can be inferred that a period was intended (b) Decide what period was probably contemplated by the parties. (Gregorio Araneta, Inc. v. The Philippine Sugar Estates Dev. Co., G.R. No. L-22558, May 31, 1967) CIVIL LAW General Rule: The right to make a choice is with the debtor/obligor, subject to the rule that he cannot choose the impossible, unlawful or could not have been the object of the obligation. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 218 (2014)) Exception: By contrary stipulation, the right to make a choice may be given to the creditor/obligee or to a 3rd person, subject also to the rule that he CANNOT choose the: • Impossible • Unlawful • Could not have been the object of the obligation. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 218 (2014)) When Choice is Effective – from notification. (a) Debtor’s Choice: upon notice to creditor (b) Creditor’s Choice: upon notice to debtor (c) 3rd Person’s Choice: upon notice to both debtor and creditor (CIVIL CODE, art. 1200; HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 218 (2014)) IV. ALTERNATIVE OR FACULTATIVE OBLIGATIONS Note: There is no form required for the notice. It may be oral or written, express or implied (as when debtor delivers one of the choices and creditor accepts). Mere notice is required, not consent. Once choice is made and communicated, it becomes irrevocable, and converted to a simple obligation. (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 169 (2010)) Alternative obligations Initially, the obligation is indeterminate and becomes determinate upon making of choice and notification. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 217 (2014)) If the party who has the right to make the choice does not make it or delays, the right does not pass to the other party – action is specific performance to compel delivery of ANY prestation. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 146-147 (2009)) Page 239 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Note: When only one object or prestation is left, it becomes a tacit choice. The obligation becomes a simple obligation. (CIVIL CODE, art. 1202) Effect of loss / impossibility of one, some or all prestations (a) If debtor has right of choice CAUSE ONE/SOME ALL Debtor’s Exercise of the Creditor is right of choice, entitled to Act debtor may damages choose from based on remaining value of the last one lost Creditor’s Debtor can Debtor is Act choose (a) entitled to deliver object resolution or from remaining cancellation or (b) plus damages resolution or cancellation with damages Fortuitous Debtor may Obligation is Event choose from extinguished remaining objects; and if only 1 left – it becomes a simple obligation (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 172-173 (2010)) Note: As long as one choice is left, it becomes a simple obligation and if the last object is lost due to fortuitous events, the obligation is extinguished. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 221-222 (2014)) CIVIL LAW (b) If creditor has right of choice CAUSE ONE/SOME ALL Debtor’s Act Creditor may Creditor choose from entitled to remaining, or choose the the price of value of any any object of the objects destroyed by lost, with the debtor, damages with damages Creditor’s Exercise of Obligation is Act the right of extinguished choicecreditor may choose the from remaining objects Fortuitous Creditor to Obligation is Event choose from extinguished remaining; if only 1 left – becomes a simple obligation (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 168 (2010)) In alternative obligations, various things are due but the delivery or performance of one will extinguish the obligation. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 217 (2014)) If one of the prestations is illegal, others may be valid but obligations remains. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 147 (2009)) If it is impossible to give all except one, the last one must still be given. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 209 (1991)) The right to choose may be given either to the debtor or creditor. (DESIDERIO P. JURADO, Page 240 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 168 (2010)) V. JOINT AND SOLIDARY OBLIGATIONS Involves multiple parties (more than one debtor or more than one creditor or more than 1 debtors and creditors). The liability or rights of parties may be joint or solidary. It is presumed joint. Solidary obligation requires either stipulation or law to create the solidary liability/right. (CIVIL CODE, art. 1207) In a joint obligation/credit, just divide the obligation/credit into as many numbers of debtors and creditors to get the sharing, unless sharing was stipulated (sharing is presumed equal). (CIVIL CODE, art. 1208) In a joint obligation, each of the joint debtors is only responsible for his/her own share and each cannot be made to pay for the share of others, even those who are insolvent or who have died; joint creditors cannot collect the share of the others. (CIVIL CODE, arts. 1207 & 1209) In a solidary obligation, the solidary debtors can be made to pay the full amount of the obligation (subject to presentation of available defenses); solidary creditors can collect the full amount of the obligation. (CIVIL CODE, art. 1216) Among solidary debtors and creditors, one who pays or receives the full amount of the obligation can recover from or deliver the share of others. (CIVIL CODE, art. 1214 &1217) A. JOINT (DIVISIBLE) OBLIGATION Joint obligation (Obligacion Mancomunada) – The whole obligation is to be paid or fulfilled proportionately by different debtors or demanded proportionately by the different creditors. General rule: The presumption is that an obligation is always joint. (CIVIL CODE, art. 1207) CIVIL LAW Exceptions: (FLENT) 1. When the obligation Expressly stipulates solidarity; 2. When the Law requires solidarity; 3. When the Nature of the obligation requires solidarity; 4. When a charge or condition is imposed upon heirs or legatees and the Testament expressly makes the charge or condition in solidum (Manresa); and 5. When a solidary responsibility is imputed by a Final judgment upon several defendants. (Gutierrez v. Gutierrez, G.R. No. 34840, Sept. 23, 1931) Effects of joint liability 1. Demand on one produces delay only with respect to the debt of the debtor against whom a demand is made. 2. Interruption in payment by one does not benefit or prejudice the other. 3. Each debtor can be held liable only for the payment of his proportionate share of the debt. 4. A joint debtor cannot be compelled to answer for the acts or liability of the other debtors. 5. Vice of one debtor to creditor has no effect on the others. 6. Insolvency or death of one debtor does NOT affect other debtors. Effects of joint credit 1. Each creditor can demand for the payment only of his proportionate share of the credit. 2. A joint creditor cannot act in representation of the other creditors. NOTE: Unless there is no specification as to their proportionate share in the credit or in the debt, the creditors and debtors in a joint obligation shall be entitled or shall make payment in equal proportion. B. JOINT (INDIVISIBLE) OBLIGATIONS If there are 2 or more debtors, the fulfillment of or compliance with the obligation requires the concurrence of all the debtors, although each for his own share. (CIVIL CODE, art. 1209) The Page 241 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 obligation can be enforced only proceeding against all of the debtors. by If there are 2 or more creditors, the concurrence or collective act of all the creditors, although each for his own share, is also necessary for the enforcement of the obligation (CIVIL CODE, art. 1209) The Court pointed out that there’s a loan partnership, which means that there should be an inclined sharing of losses. However in the JVA, there was an agreement that all cash should be paid by X; SC held that you should apply the rules on partnership rather than the JV contract. (Marsman v. Philippine Geonalytics, G.R. No. 183374, Jun. 29, 2010) Effect of breach If one of the joint debtors fails to comply with his undertaking, the obligation can no longer be fulfilled or performed. Consequently, it is converted into one of indemnity for damages. Innocent joint debtor shall not contribute to the indemnity beyond their corresponding share of the obligation. (CIVIL CODE, art.1224) INDIVISIBILITY Refers to the prestation which constitutes the object of the obligation SOLIDARITY Refers to the legal tie and consequently to the subjects or parties of the obligation Plurality of subjects is Plurality of subjects is NOT required indispensable (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 225 (2014)) C. SOLIDARY OBLIGATIONS Solidary obligation (Obligacion Solidaria) – must be expressed in stipulation or provided by law or by nature of obligation. Otherwise, it will be considered a joint obligation/credit. (CIVIL CODE, art.1207) Words denoting solidarity include “jointly and severally” (most common); “individually and collectively”; “severally”; “individually”; “collectively”; “separately”; “distinctively”, “individually liable” and “individually and jointly”. (Ronquillo v. Court of Appeals, G.R. No. L-55138, Sept. 28, 1984) Also, use of pronoun “I” in a promissory note where several debtors sign denotes solidarity. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 163-164 (2009); Republic Planters Bank v. CA, 216 SCRA 738 (1992)) If a solidary debtor pays the obligation in part and is issued a quitclaim, he can recover reimbursement from the co-debtor only insofar as his payment exceeded his share in the total obligation. If the debtor pays less than his share, he cannot demand reimbursement because his payment is less than his actual debt. (Republic Glass Corp. v. Qua, G.R. No. 144413, Jul. 30, 2004) Kinds of solidary obligations 1. Active Solidarity 2. Passive Solidarity 3. Mixed Solidarity 4. Conventional Solidarity 5. Legal Solidarity (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 217219 (2014)) 1. Active Solidarity – solidarity on the part of creditor or obligee (a) Each creditor represents the other in the act of recovery of payment. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 218 (2014)) (b) Credit is divided equally between creditors as among themselves. (c) Debtor may pay any of the solidary creditors. (CIVIL CODE, art. 1214) Page 242 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (d) Any creditor can collect full amount of obligation. Unless there is an agreement as to which creditor can collect. Debtor must pay to the creditor who first makes a demand. There is a case of improper payment if the debtor pays to another creditor who did not make a demand; he can be made to pay again to the creditor who made the demand. (CIVIL CODE, art. 1214) (e) After a solidary creditor collects the full amount, all debtors are released from the obligation. The creditor who received payment must then deliver the shares of the other solidary creditors (presumed equal unless amount indicated). (CIVIL CODE, art. 1215; 4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 228 (1991)) Effect if one of solidary creditor dies: Share is transmitted to heirs (but collectively) 2. Passive Solidarity – solidarity on the part of debtors or obligors (a) Any debtor can be made to pay the full amount of the obligation with the right to recover from co-debtors. (CIVIL CODE, art. 1216) (b) The right to make a choice of who among the debtors the creditor will proceed against, lies on the creditor. An accommodation party under the law is solidarily liable based on the Negotiable Instruments Law. (Gonzales v. PCIB, G.R. No. 180257, Feb. 23, 2011) Effect of demand on one solidary debtor: It will not stop the creditor from going against another debtor as long as the debt has not yet been paid in full. (CIVIL CODE, art. 1216) Effect if one of solidary debtor dies: creditor is not bound to make a claim on the estate of the deceased debtor within 2-year period under the Rules of Court since creditor may choose any of CIVIL LAW the living debtors, in which case the 2-year period does not apply. Although the Rules of Court mandate that in case of death of a respondent, the claims should be filed in the settlement of estate, the court said that’s a procedural rule and the rule of the Civil Code on solidary liability should prevail — in which case, creditor can choose who to sue. (Boston v. CA, G.R. No. 173946, June. 19, 2013) Effect if several solidary debtors offer to pay: creditor can choose from anyone or all of them, as long as he does not collect more than the full amount of the obligation. Effect of Prescription: interruption of prescription to one creditor affects all creditors. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 229 (1991)) Effect of Delay: interests from delay on one debtor is borne by all debtors. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 229 (1991)) Defenses – a solidary debtor when sued can raise the ff. defenses: (a) From the nature of obligation – e.g. the obligation is void, has prescribed, or has already been paid – the defense is complete: debtor sued is not liable, and no one is liable; (b) Personal to him – may be: (i) complete (debtor sued is not liable, but others may be sued and the amount that may be collected should be less than the share of the debtor with a personal defense) e.g., minority, vitiated consent; or (ii) partial e.g., non arrival of term or condition – possible even if solidary-debtor sued is liable for share of others, less his own share) (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 250-251 (1991)) (c) Those which pertains to the share of his co-debtors – with respect to the share which Page 243 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 personally belong to others, the debtor may avail himself thereof only as regards that part of the debt for which the others are responsible. (CIVIL CODE, art. 1222) Once creditor is paid in full, the obligation is extinguished, and the debtor who pays is entitled to reimbursement from others, as if joint (based on agreed sharing or if not, equal). (CIVIL CODE, art. 1217) When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. (CIVIL CODE, art. 1217) Difference from joint obligation: The share of the insolvent debtor is assumed proportionately by others, in the meantime. Reimbursement includes interest from date of payment until actual reimbursement, except if solidary debtor pays before maturity – in which case interest runs only from maturity. 3. Mixed Solidarity – on the part of the obligors and obligees, or the part of the debtors and the creditors (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 219 (2014)) 4. Conventional Solidarity – agreed upon by the parties (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 219 (2014)) 5. Legal Solidarity – imposed by law; instances: (a) Obligations arising from tort (b) Obligations arising from quasi-contracts (c) Legal provisions regarding obligation of devisees and legatees (d) Liability of principals, accomplices, and accessories of a felony (e) Bailees in commodatum (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 219220 (2014)) Effects: No reimbursement if payment is made after prescription or became illegal. Payment made before debt is due: no interest can be charged except from maturity, otherwise, interest can be charged from date of payment Insolvency of one: others are liable for share pro-rata If different terms and conditions: collect only what is due, later on collect as and when they become due or the conditions are fulfilled Remission made after payment is made: codebtor still entitled to reimbursement HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 238239 (2014)) Effect of insolvency or death of co-debtor: still liable for whole amount Fault of any debtor: everyone is responsible to the creditor – price, damage and interest, but the debtor at fault should reimburse those who paid the creditor (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 240-241 (2014)) Complete/personal defense: total or partial (up to amount of share only) if NOT personal to him (Braganza v. Villa Abrille, G.R. No. L-12471, Apr. 3, 1959) SOLIDARY DEBTOR With principal liability Pays for full amount and can seek reimbursement from other solidary debtors SURETY With subsidiary liability: can be made to pay only when principal debtor does not pay If he pays the full amount, he may recover the FULL amount from principal debtors Page 244 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Extension of time granted to other solidary debtors w/o his consent does not release him Extension of time granted to principal debtor w/o his consent releases him Can be made to pay the full amount Can bind himself for less than the full amount of the obligation (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 222-223 (2014)) Effect of loss or impossibility of the prestation: (a) If without fault – no liability (b) If with fault – there is liability (also for damage and interest) (c) Loss due to fortuitous event after default – there is liability (because of default) (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 189 (2009)) As a rule, corporations are solely liable for their obligations. The directors or trustees and officers are not liable with the corporation even if it is through their acts that the corporation incurred the obligation. As an exception, directors or trustees and corporate officers may be solidarily liable with the corporation for corporate obligations if they acted “in bad faith or with gross negligence in directing the corporate affairs.” (Oliveras v. Castillo, G.R. No. 196251, Jul. 9, 2014) Note: The law clearly provides that the creditor who may have executed any acts mentioned in Art. 1215 (Novation, Compensation, Merger or Confusion), as well as he or she who collects the debts, shall be liable to the others for the share in the obligation corresponding to them. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 231 (2014)) CIVIL LAW VI. OBLIGATIONS WITH A PENAL CLAUSE One to which an accessory undertaking is attached for the purpose of insuring its performance by virtue of which the obligor is bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 252 (2014)) Penal cause vs. Condition PENAL CLAUSE CONDITION Serves as accessory NOT a separate obligation obligation; part of principal Demandable in Never demandable default Obligation exists No obligation until suspensive condition happens Depends on the non- Principal itself is performance of the dependent on an principal obligation uncertain event (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 203 (2009)) Obligation with a penal clause vs. Alternative obligation PENAL CLAUSE ALTERNATIVE OBLIGATION Only 1 prestation Several prestations Impossibility of Impossibility of 1 principal prestation does extinguishes penalty NOT extinguish the obligation Debtor may not Debtor may choose choose between among the different principal and prestations penalty (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 203 (2009)) Page 245 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Obligation with a penal clause vs. Facultative obligation PENAL CLAUSE FACULTATIVE OBLIGATION Penalty of payment Power to choose in lieu of the prestation is principal must be absolute expressly granted Creditor may Creditor may not demand both if demand both expressly granted principal and substitute (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 203 (2009)) Purpose 1. Funcion coercitiva o de garantia – to insure the performance of the obligation 2. Funcion liquidatoria – to liquidate the amount of damages to be awarded to the injured party in case of breach of the principal obligation (compensatory); and 3. Funcione strictamente penal – in certain exceptional cases, to punish the obligor in case of breach of the principal obligation (punitive). (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 253 (2014)) Characteristics 1. Subsidiary – As a general rule, only penalty can be demanded, principal cannot be demanded, Except: Penalty is joint or cumulative (Art. 1227), and in monetary obligations where both principal and interest as a form of penalty may be collected. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACT 259-260 (2014)) 2. Exclusive – generally takes place of all damages and interests. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACT 254 (2014)) CIVIL LAW Penalty as substitute for damages General rule: the penalty fixed by the parties takes the place of all damages and interests in case of breach. (CIVIL CODE, art. 1226) Exceptions: (StiRF) 1. When by Stipulation of the parties, penalty, IN ADDITION to interest, may be collected; 2. When the debtor is sued for Refusal to pay the agreed penalty; and 3. When debtor is guilty of Fraud. (CIVIL CODE, art. 1226) Double functions of penalty: 1. To provide for liquidated damages 2. To strengthen the coercive force of the obligation by the threat of greater responsibility in the event of breach (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 258; 261-262 (2014)) Kinds of penalties: (a) Legal – constituted by law (b) Conventional – constituted by agreement of the parties (c) Compensatory – established for the purpose of indemnifying the damages suffered by the obligee or creditor in case of breach of the obligation (d) Punitive – established for the purpose of punishing the obligor or debtor in case of breach of the obligation (e) Subsidiary or alternative- in case of nonperformance only the penalty is demandable (f) Joint or cumulative – both the principal undertaking and the penalty may be demanded (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 256 (2014)) Causes for reduction of penalty (a) Partial/irregular performance (b) Penalty provided is iniquitous/ unconscionable (CIVIL CODE, art. 1229) Although parties may voluntarily agree on any amount of interest, voluntariness does not make the stipulation on interest valid. A 5% per month, Page 246 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 or 60% per annum, rate of interest is iniquitous, and must be struck down. (Menchavez v. Bermudez, G.R. No. 185368, Oct. 11, 2012) 6. Arrival of Resolutory Period (CIVIL CODE, art. 1193) I. PAYMENT OR PERFORMANCE Parties have wide latitude to stipulate any rate of interest in view of BSP Circular 905, which suspended the ceiling on interest effective Jan. 1, 1983. However, whenever interest is unconscionable, the courts may declare it illegal. Compounded interest of 5% monthly, being iniquitous and unconscionable, is void and inexistent from the very beginning. Thus, the legal rate of 6% per annum must be imposed in lieu of the excessive interest agreed upon by the parties. (Benavidez v. Salvador, G.R. No. 173331, Dec. 11, 2013) The delivery of money or thing, or performance, in any manner of the obligation. (CIVIL CODE, art. 1232) 1. Principles applicable for valid payment or performance (a) Identity (b) Integrity or completeness (c) Indivisibility (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 300-301 (2014)) ————- end of topic ————(a) Principle of identity D. EXTINGUISHMENT OF OBLIGATIONS Principal Modes of Extinguishment (PaLCoCoCo-No) (a) Payment or performance (b) Loss of the thing due (c) Condonation or remission of debt (d) Confusionor merger of rights (e) Compensation (f) Novation (CIVIL CODE, art. 1231) Other modes of extinguishment (a) Annulment (b) Rescission (c) Fulfillment of resolutory condition (d) Prescription (CIVIL CODE, art. 1231) Not stated in the Civil Code: 1. Death of a party in personal obligations (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 271 (1991)) 2. Mutual Desistance (Saura Import & Export Co. v. DBP, GR No. L-24968, Apr. 27, 1972) 3. Compromise (CIVIL CODE, art. 2028) 4. Impossibility of Fulfillment (CIVIL CODE, art. 1184) 5. Happening of Fortuitous Event (CIVIL CODE, art. 1165) With respect to the prestation or the object – the same thing or the same prestation, in the manner agreed upon, must be delivered or performed in order to extinguish the obligation. The obligor cannot compel the obligee to accept a different thing or prestation, even if the one offered is more valuable than the one agreed upon. (CIVIL CODE, art. 1244) With respect to parties – must be made by proper party to proper party i. Payor - the one who delivers or performs must be the debtor or anyone interested in the fulfillment of the obligation. Any other person requires the creditor’s consent (CIVIL CODE, art. 1236) When there is a 3rd person interested in the fulfillment of the obligation – creditor must accept the payment and debtor need not give consent. When a 3rd person not interested in the fulfillment of the obligation pays/performs – creditor can refuse to accept, but once accepted, the obligation to the creditor is extinguished. Note: There is full subrogation if the debtor consented to the payment by the Page 247 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 3rd person (unless he intended it to be a donation). In the absence of consent by the debtor, the 3rd person is entitled only to reimbursement of the payment made, to the extent that the debtor has been benefitted o W/O DEBTOR’S CONSENT – Only the cost which the third person paid to creditor will be the extent of third person’s right to collect. o W/ CONSENT – third person gets all rights including right against securities, collateral guarantees, etc. (CIVIL CODE, arts. 1236-1238) ii. Payee - creditor or obligee at the time payment is due (includes successor in interest of transferee since credit is generally assignable) (CIVIL CODE, art. 1240) If paid to a 3rd person – Payment is valid only in any of the ff. cases: (a) Payment which redounded to the benefit of the obligee Instances when the presumption that the payment redounded to the benefit of the obligee: After payment, 3rd person acquires the creditor’s rights (subrogation) (1) Creditor ratifies payment to 3rd person (2) By creditor’s conduct, debtor has been led to believe that 3rd person is authorized to receive payment make the payment (estoppel) (CIVIL CODE, art. 1241) (b) Payment to the possessor of the credit, when made in good faith (CIVIL CODE, art. 1242) Requisites: (GP) o Payment by debtor must be made in Good faith. o Creditor must be in Possession of the credit and NOT merely the evidence of indebtedness. CIVIL LAW Payment to an incapacitated person, valid if: (KB) 1. Incapacitated person Kept the thing delivered, or 2. Insofar as the payment has been Beneficial to him. (CIVIL CODE, art. 1241) Where payment should be made (a) In the place designated in the obligation (b) 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 (c) In other case – in the place of the domicile of the debtor (CIVIL CODE, art. 1251) When to pay: Generally, upon demand. (See previous discussions when demand is not necessary) (b) Principle of integrity (CIVIL CODE, art. 1233) General rule: A debt shall not be deemed paid UNLESS the thing or service of which the obligation consists of has been completely delivered or rendered, as the case maybe. (CIVIL CODE, art. 1233) Exceptions: 1. When the obligation has been substantially performed in good faith CIVIL CODE, art. 1234); 2. When the obligee accepts performance despite its incompleteness or irregularity and without expressing any protest or correction. (CIVIL CODE, art. 1235); 3. In cases involving divisible obligations capable of partial performance. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 192193 (2009)). Substantial performance If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. This is the basis of the rule that if the breach is only slight, the obligee cannot resolve or cancel the obligation. Generally, the courts will Page 248 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 grant the obligor a certain time to make up for the slight breach. The “damages suffered by the obligee” refers to the deficiency which the obligee is still entitled to collect. (CIVIL CODE, art. 1234; 4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 277 (1991)) Substantial performance is applied only when the obligor admits breaching the contract after honestly and faithfully performing all the material elements thereof except for some technical aspects or deficiency that cause no serious harm to the obligee. (International Hotel Corporation v. Joaquin Jr., G.R. No. 158361, Apr. 10, 2013) Requisites (GoSTeM): of 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. (International Hotel Corporation v. Joaquin Jr., G.R. No. 158361, Apr. 10, 2013) Acceptance by the obligee as full • When the obligee accepts the performance, knowing its incompleteness or irregularity, and WITHOUT expressing any protest or objection, the obligation is deemed fully complied with. This is because the obligee is deemed to have waived his right to collect the deficiency. (CIVIL CODE, art. 1235) • Unlike Art. 1234 where the obligee does not give up his right to collect the balance, in Art. 1235, the obligee waives his right to collect such balance. Divisible obligations An obligation that is capable of partial performance. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 192-193 (2009)) (a) Execution of certain number of days’ work (b) Expressed by metrical units (c) Nature of obligation – susceptible of partial fulfillment (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 250 (2014)) (c) Indivisibility or Indivisible Obligations 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 (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 249, 2014)) Notes: • Divisibility or indivisibility of the obligation refers to the performance of the prestation and not to the thing which is the object thereof (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 249, 2014)) • Intention of parties should be taken into account to determine whether obligation is divisible or not (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 244, 2014)) 2. Special rules on monetary obligations (Loans and Forbearance of Money, Goods and Credits) Forbearance of money, goods and is defined as “arrangements other than loan agreements where a person acquiesces to the temporary use of his money, goods or credits pending the happening of certain events or fulfillment of certain conditions.” (Estores v. Supangan, G.R. No. 175139, Apr. 18, 2012) (a) Payment must be in legal tender (CIVIL CODE, art. 1249) Personal checks, Cashier’s or Managers checks are NOT legal tender, so creditor cannot be compelled to accept them (unless such is Page 249 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 stipulated as the mode of payment). Creditor, however, has the option to accept payment in checks of any kind. If the creditor accepts the check or no prompt objection to the form of payment is made, there is valid tender of payment and creditor can no longer claim later that payment is not in legal tender. (Pabugais v. Sahijwani, G.R. No. 156846, Feb. 23, 2004) When payment in check is accepted, it produces the effect of payment only when the check is cleared (retroacts to the date the check was deposited) and the funds are transferred to the account of the creditor. Stale checks (those not presented for payment within 6 months from date of check) do not produce the effect of payment and debtor can be required to issue a new check or pay in cash since the obligation is not yet deemed paid. Debtor cannot however be liable for interest or penalty and cannot be declared in default since creditor could have immediately presented it for payment. It is only in cases where the value is impaired through creditor’s fault (i.e., creditor misplaced the check and someone else encashed it), that the debtor is deemed to have paid his obligation without having to issue a new check or paying in cash. (Evangelista v. Screenex, Inc., G.R. No. 211564, Nov. 20, 2017) Payment in coins is legal tender only up to a certain amount: for P1, 5 and 10 coins, only up to P1,000; for P.01, .05, .10, and .25 coins, only up to P 100. (BSP Circular No. 537, Series of 2006, July 18, 2006)) Payment in foreign currency is allowed, if stipulated. The Uniform Currency Act (1950) was expressly repealed by R.A. No. 8183 (effective July 5, 1996). Art. 1249 allowing stipulation of payment in foreign currency has been restored. Agreements with stipulation to pay foreign currency may be discharged in Philippine Pesos at rate of exchange at the time of payment. (Union Bank v. Tui, G.R. No. 173090, Sept. 7, 2011) (b) Extraordinary Inflation or Deflation CIVIL LAW In cases of extraordinary inflation or deflation, the value of the currency at the time the obligation was incurred should be the basis of payment, unless there is stipulation to the contrary. (CIVIL CODE, art. 1250) Inflation (or deflation) rates are determined by economic managers (BSP specifically), but whether extraordinary, this will require judicial determination. The Court has ruled that whoever alleges extraordinary inflation must prove it – indicating that the courts will determine based on evidence presented. (Citibank v. Sabeniano, G.R. No. 156132, Feb. 6, 2007) Requisites for the application of Art. 1250 on extraordinary inflation/deflation: 1. There is an official declaration of extraordinary inflation or deflation from the BSP 2. The obligation is contractual in nature 3. The parties expressly agreed to consider the effects of the extraordinary inflation or deflation. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 311 (2014)); see Equitable PCI Bank v. Sheung Ngor, G.R. No. 171545, Dec. 19, 2007) Note: Inflation or deflation is based on increase or decrease of purchasing power and not based on Peso-US Dollar exchange rate. (Singson v. Caltex, G.R. No. 137798, Oct. 4, 2000). The rate of inflation/deflation is measured by determining rate of increase or decrease of purchasing power from a prior period. It is determined by the amount of basic goods (within a basket) that money can buy, as compared to a prior period. If money can buy P100 of basic goods at a certain prior period, determine how much of the same goods can be purchased at a later period – this represents the rate of inflation or deflation. (Citibank v. Sabeniano, G.R. No. 156132, Feb. 6, 2006) Example: A loan of P100 was obtained in 2013, and payable after one year. At the time the Page 250 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 obligation was incurred, the P100 proceeds of the loan could purchase P100 worth of goods. In 2014 when the loan is due, P100 can purchase only ½ of the goods it could purchase in 2013. Inflation rate is therefore 100%. annum but will now be six percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable. (Nacar v. Gallery Frames, G.R. No. 189871, Aug. 13, 2013; See also Lim v. HMRPI, G.R. No. 201483, Aug. 4, 2014) If there is no declaration of extraordinary inflation – Debtor must pay P100 in 2014. If courts declare extraordinary inflation – Debtor must pay P200 in 2014 so that creditor will get the same value of his money in 2013 when he lent the money. iii. With stipulation in writing, and the rate has been stipulated – collect the stipulated rate of interest, subject to the right of the courts to reduce the rate if unconscionable or iniquitous. (State Investment House, Inc. v. Court of Appeals, G.R. No. 112590, Jul. 12, 2001) (c) Payment of Interest Note: In loan, ownership is transferred to the borrower. Creditor merely has the right to an equal amount of the same kind and quality. (CIVIL CODE, art. 1953) • Rules on payment of interest • For use of money, no default i. Stipulation in writing is required – if none, no interest is collectible (CIVIL CODE, art. 1956) By way of penalty (debtor in default) i. With penalty clause – substitutes payment of interest, except if it is clearly stipulated that penalty is in addition to interest. (CIVIL CODE, art. 1226) ii. ii. With stipulation in writing, but the interest rate is not stipulated – interest is legal rate of 6% for loans and forbearance of money (decrease from 12% to 6% based on BSP Circular 799, effective July 1, 2013). The legal rate of interest now is the same for all obligations, including judgment obligations not arising from loans, forbearance of money, goods or credits, including those based on torts. (BSP Circular No. 799, Series of 2013, June 21, 2013) Note: In the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per Without penalty clause (even if no interest is stipulated) – collect legal rate of interest by way of penalty for default (no more distinction, see above). Liability arises only from default (unless demand not necessary, from extrajudicial or judicial demand). (Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, Jul. 12, 1994) Note: No penalty is collectible during grace period because debtor is not in default if he is given time to pay. iii. Compounded interest (interest over interest) – applies only if stipulated, or in case of judicial demand. (CIVIL CODE, art. 1959 & 2212) • Judgment Debt (Not arising from loans or forbearance of money, such as torts) Page 251 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Except in cases where the amount can be determined with reasonable certainty, the amount of obligation may still be unliquidated and not yet determined upon filing of the case. The liquidation or the determination of the amount of the obligation takes place only from the time judgment is rendered in the first instance. Thus: i. If the amount of the obligation can be established with reasonable certainty, the interest runs from extrajudicial or judicial demand (default) – [at the discretion of the court] at the rate of 6% p/a, up to time decision becomes final and until fully paid. (Republic v. de Guzman, G.R. No. 175021, June 15, 2011) ii. If the amount of the obligation cannot be established with reasonable certainty, interest will run only from the time judgment is rendered in the first instance at the rate 6% up to time of payment. (Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, Jul. 12, 1994) CIVIL LAW How application is made: (a) Debtor makes the designation (b) If not, creditor proposes to make the application by advising the debtor or through certain acts such as issuing a receipt with an application of payment. Since this is a mere proposal (since only a debtor can make an application of payments), the debtor must accept it either expressly or impliedly by not objecting to the creditor’s proposal, as when the debtor accepts without objection the receipt issued by the creditor with an application of payment. (c) If the debtor makes no application and the creditor has not made a proposal, or if the application is not valid, then application is made by operation of law: i. It is to be applied to the most onerous debt (e.g., to an interest bearing debt over debts without interest; or ii. If all debts are equally onerous or of the same burden, or it cannot be determined which debt is the most onerous, then the payment should be applied pro rata to all the obligations due. (CIVIL CODE, art. 1252-1254) 3. Special rules/forms of payment (a) Application of payments The designation of the debt which payment shall be made, out of 2 or more debts owing the same creditor. (CIVIL CODE, art. 1252) Requisites (OTD) 1. There must be only One debtor and only one creditor; 2. Two or more debts of the same kind; and 3. All debts must be Due. (CIVIL CODE, art. 1252) Exception on 3rd requisite: There may be application of payment even if all debts are not yet due if: i. Parties so stipulate ii. When application of payment is made by the party for whose benefit the term has been constituted (CIVIL CODE, art. 1252) Q: Article 1176 provides that: “The receipt of the principal by the creditor, without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid.” Article 1253 states that: “If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.” How are these two rebuttable presumptions reconciled? A: Article 1176 should be treated as a general presumption subject to the more specific presumption under Article 1253. Article 1176 applies when there is doubt as to whether interest is waived because the creditor accepts the payment for the principal without reservation with respect to the interest. Here, the creditor is presumed to have waived the right to collect interest. Article 1254 has no issue on waiver of interest because it is a given under this Article that the debt produces interest. The doubt is on Page 252 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 whether the amount received by the creditor is payment for the principal or the interest. Article 1253 resolves this doubt by providing a hierarchy: payments shall first be applied to the interest; payment shall then be applied to the principal only after the interest has been fully paid. (Marquez v. Elisan Credit Corporation, G.R. No. 194642, Apr. 6, 2015) (b) Dation in payment (Dacion en pago) (CIVIL CODE, art. 1245) Definition A mode of extinguishing an obligation whereby the debtor pays a monetary obligation with property. It is a special form of payment because one element of payment is missing: Identity. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 380 (2016)) Dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement – express or implied, or by their silence – consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished. (Tan Shuy v. Maulawin, , G.R. No. 190375, Feb. 8, 2012) The contractual intention determines whether the property subject of the dation will be considered as the full equivalent of the debt and will therefore serve as full satisfaction for the debt. (Luzon Dev Bank v. Enriquez, G.R. No. 168646, Jan. 12, 2011) Law on Sales Apply The law on sales will apply in case of dacion en pago since it partakes of the nature of sale – with the creditor purchasing the thing or property of the debtor, the payment of which is charged to the debtor’s obligation. It extinguishes the obligation to the extent of the value of the thing delivered. (Tan Shuy v. Maulawin, , G.R. No. 190375, Feb. 8, 2012) As in a contract of sale, valuation should be agreed upon by the creditor as buyer, and the debtor as seller. It is also subject to the usual warranties of sale. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 294 (1991)) Requisites: (PAD) 1. There must be the Performance of the prestation in lieu of payment (animo solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against the third person 2. There must be some Difference between the prestation due and that which is given in substitution (aliud pro alio) 3. There must be an Agreement between the creditor and debtor that the obligation is immediately extinguished (to the extent of agreed valuation) by reason of the performance of a prestation different from that due. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 321 (2014)) Intent is Controlling Like in all contracts, the intention of the parties to the dation in payment is paramount and controlling. The contractual intention determines whether the property subject of the dation will be considered as the full equivalent of the debt and will therefore serve as full satisfaction for the debt. “The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished.” (Luzon Development Bank v. Enriquez, G.R. No. 168646, Jan. 12, 2011) (c) Cession or Assignment (in favor of creditors) (CIVIL CODE, art. 1255) The process by which a debtor transfers ALL his assets which are not subject to execution in favor of creditors, so that the latter may sell them and Page 253 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 apply the proceeds to his outstanding obligations. Except if there is contrary agreement, or as may be provided by law, the obligations are extinguished only up to the net amount of the proceeds of the sale. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 417 (2016)) Kinds of Assignment 1. Legal – governed by the insolvency law 2. Voluntary – agreement of creditors (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 417 (2016)) Requisites of Voluntary Assignment: (DACCI) 1. 2. 3. 4. More than one Debt More than one Creditor Complete or partial Insolvency of debtor Abandonment of all debtor’s property not exempt from execution 5. Acceptance or Consent on the part of the creditors (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 417 (2016)) Effects of Assignment (a) Creditors do not become the owner; they are merely assignees with authority to sell (hence, the legal contract involved is one of Agency and not Sale); (b) Debtor is released up to the amount of the net proceeds of the sale, UNLESS there is a stipulation to the contrary (c) Creditors will collect credits in the order of preference agreed upon, or in default of agreement, in the order ordinarily established by law (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 417-418 (2016)) CIVIL LAW Dation in Payment v. Cession in Payment DATION IN CESSION IN PAYMENT PAYMENT (Art. 1245) (Art. 1255) One creditor Plurality of creditors NOT necessarily in Debtor must be state of financial partially or relatively difficulty insolvent Thing delivered is Universality of considered as property of debtor is equivalent of what is ceded performance Payment Merely releases extinguishes debtor up to the net obligation to the proceeds of things extent of the value of ceded or assigned, the thing delivered as unless there is a agreed upon contrary intention (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 356-357 (2014)) (d) Tender of payment and Consignation (CIVIL CODE, art. 1256) Tender – the act of offering to the creditor what is due him together with a demand that the creditor accepts the same. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 419 (2016)) If the creditor refuses w/o just cause to accept payment, he becomes in mora accipiendi and tender alone will not extinguish the obligation; consignation is needed. (Co v. PNB, G.R. No. L51767, June 29, 1982) Consignation – the act of depositing the thing due with the court or judicial authorities whenever the creditor refuses to accept payment, and generally requires prior tender of payment. (RUBEN E. AGPALO, OBLIGATIONS AND CONTRACTS 185 (2008)) Requisites of Valid Consignation (VUPAS) 1. Existence of Valid debt; 2. Creditor has Unjustifiably refused to accept payment, i.e., previous valid tender; Page 254 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 3. Prior notice of Consignation had been given to the person interested in performance of obligation (1st notice) (CIVIL CODE, art. 1257) 4. Actual deposit/consignation with proper judicial authorities 5. Subsequent notice of Consignation (2nd notice) (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 359-360 (2014)) Exception on 2nd requirement, i.e., where consignation w/o prior tender allowed (CIVIL CODE, art. 1256): i. Creditor absent or unknown/ does not appear at the place of payment ii. Incapacitated to receive payment at the time it is due iii. Refuses to issue receipt w/o just cause iv. 2 or more creditors claiming the same right to collect v. Title of obligation has been lost vi. Debtor had previously been notified by the creditor that the latter would not accept any payment (Kapisanan Banahaw, Inc. v. Dejarme, G.R. No. L-32908, Nov. 28, 1930) Effects of Consignation (a) Debtor may ask judge to order cancellation of obligation (b) Running of interest is suspended (c) Before creditor accepts or before judge declares consignation has been properly made, obligation remains (debtor bears risk of loss at the meantime, and after acceptance by creditor or after judge declares that consignation has been properly made – risk of loss is shifted to creditor) (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 433 (2016)) When Consignation Extinguishes Obligation Consignation is completed at the time the creditor accepts the same without objections, OR, if he objects, at the time the court declares that it has been validly made in accordance with law. CIVIL LAW (Dalton v. FGR Realty and Development Corporation, G.R. No. 172577, Jan. 19, 2011) Tender of payment vs. Consignation TENDER OF CONSIGNATION PAYMENT Antecedent act; Principal act; preparatory produces the effects of payment Extrajudicial Judicial (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 419-420 (2016)) II. LOSS OF DETERMINATE THING OR IMPOSSIBILITY OR DIFFICULTY OF PERFORMANCE Includes partial or total loss of thing (CIVIL CODE, arts. 1262 & 1264) 1. Loss of the thing due (a) When the object perishes (physically) (b) When it goes out of commerce (c) When it disappears in such a way that: its existence is unknown or it cannot be recovered (CIVIL CODE, art. 1189) Effect of Loss in Obligation to Deliver a Specific Thing If loss was due to fortuitous events, obligation is extinguished; no damages. If the loss is due to the fault of the debtor or any person, that person should be held liable for damages. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 438 (2016)) Effect of Loss in Obligation to Deliver a Generic Thing General rule: Loss does NOT extinguish obligation. Genus numguam perit: “Genus never perishes.” Exceptions: i. Loss of entire genus (e.g., when sale of a certain class of things become illegal) Page 255 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 ii. Loss of entire group of limited generic obligation (e.g., I will deliver “one of my cars” and all cars are no lost through force majeure. (See RUBEN F. BALANE, JOTTINGS AND JURISPRUDENCE IN CIVIL LAW (OBLIGATIONS AND CONTRACTS) 400 (2020) Effect of Partial Loss 1. When loss is significant – may be enough to extinguish obligation 2. When loss insignificant – NOT enough to extinguish obligation (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 377 (2014)) NOTE: When thing is lost in the possession of the debtor, it is presumed to be due to debtor’s fault; Exceptions: natural calamity, earthquake, flood, storm. (CIVIL CODE, art. 1265) 2. Impossibility of performance (a) Physical impossibility – it is not within man’s capability (b) Legal impossibility – when the prestation is prohibited by law (c) Moral impossibility – when the service has become so burdensome that it could not have been the intention of the parties (CIVIL CODE, art. 1267) Effect of Impossibility of Performance in Obligation to Do Debtor is released when the prestation becomes legally or physically impossible without fault on the part of the debtor. (CIVIL CODE, art. 1266) NOTE: • Judicial determination of extent is necessary • Doctrine of Unforeseen Events: The court is authorized to release the obligor, in whole or in part, when the service has become so difficult as to be manifestly beyond the contemplation of the parties. (CIVIL CODE, art. 1267; HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 389 (2014)) • Doctrine of Subjective Impossibility: The obligation undoubtedly becomes impossible if there is no physical or legal loss but the object obligation belongs to another person; the obligor must indemnify the obligee for the damages suffered by the latter. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 336 (1991)) • Rebus Sic Stantibus: The agreement is valid only if the same conditions prevailing at time of contracting continue to exist at the time of performance. Obligor may be released in whole or in part if the conditions have changed so that it becomes manifestly beyond the intention of the parties. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 336 (1991)) Requisites of Rebus Sic Stantibus: (FoDAF) 1. The event or change could not have been Foreseen at the time of the execution of the contract 2. The performance is extremely Difficult, but NOT impossible (because if it is impossible, it is extinguished by impossibility) 3. The event was not due to the Act of any of the parties 4. The contract is for a Future prestation (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 347 (1991)) The difficulty of performance contemplated should be such that one party would be placed at a disadvantage by the unforeseen event. Mere inconvenience, or unexpected impediments, or increased expenses did not suffice to relieve the debtor from a bad bargain. (Tagaytay Realty v. Gacutan G.R. No. 160033, Jul. 1, 2015) III. CONDONATION OR REMISSION OF DEBT Page 256 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Condonation – An act of liberality by which the creditor renounces the enforcement of the obligation contracted in his favor. To condone is to forgive or to remit a debt. (Bañez v. Young, L4635, Oct. 27, 1952) Remission – An act of liberality by virtue of which the obligee, without receiving any price or equivalent, renounces the enforcement of the obligation, as a result of which it is extinguished in its entirety or in that part or aspect of the same to which the remission refers (Manresa). In brief, “it is the gratuitous abandonment by the creditor of his right” (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 353 (1991)) Requisites (CapRe-FLAgS) 1. There must be an Agreement 2. There must be a Subject matter (object of the remission, otherwise there would be nothing to condone) 3. Cause of consideration must be Liberality (Essentially gratuitous, an act of liberality) 4. Parties must be Capacitated and must consent; requires acceptance by obligor; implied in mortis causa and express in inter vivos condonations. 5. Formalities of a donation are required in the case of an express remission or condonation 6. Revocable – subject to rule on inofficious donations. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 448 (2016)) Examples of Implied Condonation, Waiver of Right to Collect i. Voluntary delivery of evidence of indebtedness – when evidence of indebtedness is found in the possession of the debtor – there is a rebuttable presumption of voluntary delivery (CIVIL CODE, art. 1272), which if not rebutted, will create the presumption of waiver condonation (remission) which in effect extinguishes the debt. (CIVIL CODE, art. 1271 (1)) EXCEPTION: when the waiver is inofficious. (CIVIL CODE, art. 1271 (2)) Defense to the claim of inofficiousness: the delivery of the document was made in virtue of payment of the debt. (CIVIL CODE, art. 1271 (2)) ii. If there if actual proof, or the presumption above is not rebutted, that the evidence of indebtedness was returned by the creditor to the debtor, there is a presumption of waiver (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. (CIVIL CODE, art. 1271) Note: In a pledge, when after the constitution of the debt, the pledged property is found in the possession of the pledgor or a third person who owns it, only the accessory obligation under the pledge is deemed remitted, but the principal obligation remains as an unsecured obligation. (CIVIL CODE, art. 1274) IV. CONFUSION The character of debtor and creditor is merged in same person with respect to same obligation. (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 306 (2010)) Requisites of Merger of Rights: (COP) 1. It must take place between Principal debtor and principal creditor only. 2. Merger must be Clear and definite. 3. Only One obligation is involved. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 456 (2016)) Confusion does not extinguish a joint obligation, except as regards the share corresponding to the Page 257 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW creditor or debtor in whom the 2 characters concur. (CIVIL CODE, art. 1277) obligations even in the absence of some of the requirements. V. COMPENSATION A mode of extinguishment up to the concurrent amount of the obligation of persons who, in their own right, have become mutual debtors or creditors of one another. (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 309 (2010)) (b) Conventional – based on agreement of parties, even if the other requirements are not complied with. • Conventional compensation takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites. (Mondragon Personal Sales Inc. v. Sola Jr., G.R. No. 174882, Jan. 21, 2013) Requisites (LM-STD): 1. Both parties must be Mutual creditors and debtors - in their own right and as principals. 2. Both debts must consist in Sum of money or if consumable, of the same kind or quality. 3. Both debts are Due. 4. Both debts are Liquidated and demandable (determined). 5. Neither debt must be retained in a controversy commenced by Third person and communicated w/ debtor (neither debt is garnished). (CIVIL CODE, art. 1279) A claim is liquidated when the amount and time of payment is fixed. If acknowledged by the debtor, although not in writing, the claim must be treated as liquidated. When the defendant, who has an unliquidated claim, sets it up by way of counterclaim, and a judgment is rendered liquidating such claim, it can be compensated against the plaintiff’s claim from the moment it is liquidated by judgment. Compensation takes place only if both obligations are liquidated. (Lao v. Special Plans, Inc., G.R. No. 164791, June 29, 2010) Kinds of Compensation (a) Legal – by operation of law; as long as 5 requisites concur – even if unknown to parties; if not equal debts, only up to concurring amount. • Legal compensation takes place by operation of law when all the requisites are present, as opposed to conventional subrogation which takes place when the parties agree to compensate their mutual (c) Facultative – only one party may invoke the compensation, such as the person who has the benefit of the period who can invoke it even before the period has arrived. (d) Judicial – set off takes place upon order of the court; needs pleading and proof; all requirements must concur, EXCEPT liquidation. (e) Total – when 2 debts are of the same amount. (f) Partial –when 2 debts are not of the same amount. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 461 (2016)) Effect of Assignment of Credit to Third Person: Can There Still be Compensation? 1. If made after legal compensation has set in – no effect; compensation has already extinguished the obligation, so there is nothing to assign. 2. If made before legal compensation has set in: (a) With consent of debtor – debtor is estopped UNLESS he reserves his right to compensate and gave notice to assignee (b) With knowledge but w/o consent of debtor – compensation may be set up as to debts maturing prior to assignment (c) W/o knowledge – compensation may be set-up on all debts prior to his knowledge (CIVIL CODE, art. 1285) Page 258 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Compensation vs. Confusion COMPENSATION CONFUSION Different persons are Only 1 person who is involved; each is a creditor and debtor of debtor and creditor of himself each other Two obligations One obligation Indirect payment No need to pay oneself (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 416-417 (2014)) Obligations not allowed to be Compensated (Co-PGT) (a) When one of the debts arises from a depositum or from the obligations of a depositary or of a bailee in Commodatum. (CIVIL CODE, art. 1287) (b) Against a creditor who has a claim for support due by Gratuitous title, without prejudice to Article 301 par. 2 (CIVIL CODE, art. 1287) (c) If one of the debts consists in civil liability arising from a Penal offense. (CIVIL CODE, art. 1288) (d) Obligation to pay Taxes is not compensable with the government’s obligations to the taxpayer. (Francia v. IAC, G.R. No. L-67649, June 28, 1988). Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. (United Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No. 178788, Sept. 29, 2010) VI. NOVATION Novation - Extinguishment of obligation by creating/ substituting a new one in its place (a) Changing object or principal conditions (b) Substituting person of debtor (c) Subrogating 3rd person to the rights of the creditor (CIVIL CODE, art. 1291) Requisites of novation: (VICN) 1. There must be a previous Valid obligation; 2. Intent to extinguish the old and substitute it with the new obligation, whether expressed, or implied as when the two obligations are inconsistent and cannot stand together. 3. Capacity and consent of the parties to the new obligation; and 4. Valid New obligation. (Garcia, Jr. v. CA, G.R. No. 80201, Nov. 20, 1990) Novation is never presumed, there must be an express intention to novate. The creditor’s acceptance of another check, which replaced an earlier dishonored check, does not result in novation where there was no express agreement to establish that the debtor was already discharged from his liability. (Salazar v. J.Y. Brothers Marketing Corporation, G.R. No. 171998, Oct. 20, 2010) Novation can be done without the knowledge or even against the will of the original debtor, but not without the consent of the creditor (Interport Resources Corporation v. Securities Specialist, In. G.R. No. 154069, June 6, 2016) Effects of Novation GR: It extinguishes the old obligation and a new one is created in its place. Exception: (a) Modificatory novation only, in which case the old obligation remains, as amended by the new (Swagman Hotels and Travels, Inc. v. CA, G.R. No. 161135, Apr. 8, 2005) (b) Old obligation is void Conversely, the old obligation subsists if the new obligation is void or is voidable and later annulled. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 397 (1991)) Page 259 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Novation, in its broad concept, may either be extinctive or modificatory. • It is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent that it remains compatible with the amendatory agreement. • An extinctive novation results either by changing the object or principal conditions (objective or real), or by substituting the person of the debtor or subrogating a third person in the rights of the creditor (subjective or personal). (Banate v. Philippine Countryside Rural Bank (Liloan, Cebu), Inc., G.R. No. 163825, Jul 13, 2010) old obligation remains subsisting. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 397 (1991)) Kinds of Novation: (a) Real / objective – When there is a change in the object, cause/consideration or principal condition. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 332 (2009)) (b) Personal / subjective Substituting person of debtor (passive). (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 332 (2009)) i. Expromision: initiative is from a 3rd person or new debtor who agrees to assume the obligation of the old debtor, with the consent of the creditor. The old debtor’s consent is not required and upon assumption by the new debtor of the debt, the old debtor is released from liability. Since the old debtor does not consent, his liability cannot be revived even if the new debtor becomes insolvent or cannot pay the obligation. It is however important that the creditor and the new debtor agree to release the old debtor, otherwise the “new” debtor only becomes a co-debtor and no novation takes place. ii. Delegacion: initiative of old debtor who “delegates” his obligation to a new debtor; In this case all the parties must consent. The old debtor’s liability is generally not revived in case of the insolvency of the old debtor UNLESS: the new debtor’s insolvency already existed at the time of the delegacion AND (1) it was of public knowledge, or (2) the old debtor knew of the insolvency of the new debtor at the time of delegacion. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 341 (2009)) There is novation when there is an irreconcilable incompatibility between the old and new obligations. There is no novation in case of only slight modifications, in which case, the old obligation still subsists. (Heirs of Franco v. Spouses Gonzales, G.R. No. 159709, June 27, 2012) Novation does not extinguish criminal liability (Philippine National Bank v. Soriano, G.R. 164051, Oct. 3, 2012) Effect of Conditions in Either Old or New Obligation: (a) If old obligation is conditional i. If resolutory and it occurred – old obligation already extinguished; no new obligation is created since there is nothing to novate ii. If suspensive – the condition must happen, otherwise there is no old obligation to novate. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 399 (1991)) (b) If the new obligation is conditional: i. If resolutory – valid ii. If suspensive – the condition must happen, otherwise there is no new obligation to replace the old, so that the Parties: (a) Delegante – old debtor (b) Delegatario – creditor Page 260 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (c) Delegado – new debtor. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 508 (2016)) Expromision vs. Delegacion EXPROMISION DELEGACION Intention: old debtor be released from the obligation Consent of creditor required on both Consent of creditor and Consent of debtor third person (initiates), creditor and third person; need NOT be given simultaneously Governed by the rules Same applies in the of payment by third absence of an persons agreement If w/o knowledge of Subrogation debtor, beneficial reimbursement, no subrogation New debtor's Same UNLESS the insolvency does NOT new debtor’s make old debtor liable insolvency already existed at the time of the delegacion AND (i) it was of public knowledge, or (ii) the old debtor knew of the insolvency of the new debtor at the time of delegacion. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 341-343 (2009)) (c) Subrogating 3rd person to rights of creditor (active) i. Conventional – agreement and consent of all parties; clearly established (CIVIL CODE, arts. 1300-1301) ii. Legal – takes place by operation of law; no need for consent; NOT presumed except as provided for in law: (CIVIL CODE, arts. 1300 & 1302) CIVIL LAW When Subrogation is Presumed 1. Creditor pays another preferred creditor even w/o debtor’s knowledge 2. 3rd person not interested in obligation pays w/ approval of debtor 3. Person interested in fulfillment of obligation pays debt even w/o knowledge of debtor (CIVIL CODE, art. 1302) Payment by 3rd Person v. Change of Debtor DIFFERENCE CHANGE OF DEBTOR FROM PAYMENT BY 3RD PERSON Debtor is NOT Old debtor is released necessarily released from debt Creditor is not Needs consent of bound to accept creditor: express or payment, unless implied there is stipulation to the contrary (CIVIL CODE, art. 1236) 3rd person can New debtor is obliged to make payments pay the full remaining less than the amount of the obligation amount of the obligation and cannot be held liable for the deficiency Conventional Subrogation Vs. Assignment CONVENTIONAL ASSIGNMENT OF SUBROGATION RIGHTS Governed by Arts. Governed by Arts. 1300-1304 1624 to 1627 Debtor’s consent is Debtor’s consent is required NOT required, but must be notified in order to be bound Extinguishes the Transmission of right obligation and gives of the creditor to third rise to a new one person without modifying or extinguishing the obligation Page 261 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Defects and vices in Defects and vices in the old obligation the old obligation are are cured NOT cured (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 354-355 (2009)) ————- end of topic ————CONTRACTS TOPIC OUTLINE UNDER THE SYLLABUS: VI. CONTRACTS A. GENERAL PROVISIONS I. Stages of Contracts II. Classifications III. Essential Requisites B. FORMALITY C. REFORMATION OF INSTRUMENTS D. INTERPRETATION OF CONTRACTS E. DEFECTIVE CONTRACTS I. Rescissible Contracts II. Voidable Contracts III. Unenforceable Contracts IV. Void or Inexistent Contracts V. Distinguish: resolution and rescission of contracts A. GENERAL PROVISIONS I. STAGES OF CONTRACTS 1. Preparation/Negotiation - period from the time the prospective contracting parties indicate their interest in the contract to the time the contract is perfected 2. Perfection/Birth (a) Consensual contracts As a general rule, contracts are perfected by mere consent of the parties regarding the subject matter and the cause of the contract. (CIVIL CODE, arts. 1315, 1319) They are obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. (CIVIL CODE, art. 1356) (b) Real contracts The exceptions are real contracts, which are perfected not merely by consent but by the actual or constructive delivery of the object of the obligation. (CIVIL CODE, art. 1316) (c) Formal/Solemn contracts When the law requires that a contract be in some form to be valid (CIVIL CODE, art. 1356), this special form is necessary for its perfection 3. Consummation - period when the parties perform their respective undertaking under the contract, culminating in the extinguishment thereof (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 542 (2014)) Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. The perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. The last stage is the consummation of the contract where the Page 262 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 parties fulfill or perform the terms they agreed on, culminating in its extinguishment. (International Freeport Traders, Inc. v. Danzas Intercontinental, Inc., 640 SCRA 621, Jan. 26, 2011) II. CLASSIFICATIONS Auto Contracts - only one person represents two opposite parties, but in different capacities. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 367 (2009)) Example: An agent representing his principal sells a specific car to himself, as a buyer Collective Contracts - will of the majority binds the minority to an agreement notwithstanding the opposition of the latter. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 437 (1991)) Example: Collective bargaining contracts by labor organizations under R.A. No. 875. Contracts of Adhesion - One party imposes a ready-made form of contract which the other party may accept or reject but cannot modify; one party prepares the stipulation in the contract, while the other party merely affixes his signature or his “adhesion” thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing (Polotan, Sr. v. CA, G.R. No. 119379, Sept. 25, 1998); construed strictly against the one who drafted the same (Geraldez v. CA, G.R. No. 108253, Feb. 23, 1994). 1. As to perfection or formation (a) Consensual – perfected by mere consent of the parties on the subject matter and cause (CIVIL CODE, art. 1315) (e.g., contract of sale) (b) Real – perfected by delivery (CIVIL CODE, art. 1316) (e.g. commodatum, pledge, deposit) (c) Formal/Solemn – require a certain specified form, in addition to consent, CIVIL LAW subject matter and cause (CIVIL CODE, art. 1356) (e.g., donation of real property) 2. As to cause (a) Onerous – The cause is, for each contracting party, the prestation or promise of a thing or service by the other (e.g., contract of sale) (CIVIL CODE, art. 1350) (b) Remuneratory– The cause is some past service or benefit which by itself is a recoverable debt (CIVIL CODE, art. 1350) Note: In a remuneratory donation, the past service or debt is not by itself a recoverable debt. (CIVIL CODE, art. 726) (c) Gratuitous (or contracts of pure beneficence) – founded on the mere liberality of the benefactor (e.g., pure donation) (CIVIL CODE, art. 1350) 3. As to importance or dependence of one upon another (a) Principal – when the contract does not depend for its existence and validity upon another contract (e.g. sale, lease) (b) Accessory – depends on another contract for its existence and validity (e.g., mortgage, guaranty) (c) Preparatory – the contract is entered into as a means through which future contracts may be made (e.g. agency, partnership) (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 36 (2009)) 4. As to parties obliged (a) Unilateral – only one of the parties has an obligation (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 366 (2009)) (b) Bilateral – both parties are required to render reciprocal prestations (CIVIL CODE, art. 1191) 5. As to form (a) Common or informal – require no particular form (CIVIL CODE, art. 1356) Page 263 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (b) Special or formal – require some particular form (CIVIL CODE, art. 1356) 6. As to their purpose (a) Transfer of ownership (b) Conveyance of use (c) Rendition of service (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 410-411 (1991)) 7. As to their subject matter (a) Things (b) Services (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 410411 (1991)) 8. As to the risk involved (a) Commutative – when the undertaking of one party is considered the equivalent of that of the other (e.g. sale, lease) (b) Aleatory – when it depends upon an uncertain event or contingency both as to benefit or loss (e.g. insurance, sale of hope) (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 361 (2010)) 9. As to name or designation (a) Nominate – those which have a specific name or designation in law (e.g., lease, sale, agency, etc.) (b) Innominate – those which have no specific designation or name in law (CIVIL CODE, art. 1307) Do ut des – I give that you may give Do ut facias – I give that you may do Facio ut des – I do that you may give Facio ut facias – I do that you may do (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 380 (2009)) Note: Do ut des is, however, no longer an innominate contract. It has already been given a name of its own, i.e., barter or exchange. (CIVIL CODE, art. 1638) III. ESSENTIAL REQUISITES 1. Consent 2. Subject Matter 3. Consideration 1. CONSENT Definition Meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract; concurrence of a certain offer and an absolute acceptance (CIVIL CODE, art. 1319) Requisites (C3): 1. Must be manifested by the Concurrence of the offer and acceptance upon the thing and cause; 2. Parties are legally Capacitated to enter into contracts 3. Consent must be intelligent, free, spontaneous, and real (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 415 (2009)) Offer – A proposal made by one party to another to enter into a contract; must be certain or definite, complete and intentional. (CIVIL CODE, art. 1319) Acceptance – Manifestation by the offeree of his assent to the terms of the offer; must be absolute (i.e. must not qualify the terms of the offer) (Oesmer v. Paraiso Development Corporation, G.R. No. 157493, Feb. 5, 2007) Note: A qualified acceptance constitutes counteroffer. (CIVIL CODE, art. 1319) Elements of a valid offer 1. Definite 2. Complete 3. Intentional (Palattao v. CA, G.R. No. 131726, May 7, 2002) Elements of a valid acceptance 1. Unequivocal 2. Unconditional (Palattao v. CA, G.R. No. 131726, May 7, 2002) Page 264 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 When offer becomes ineffective (QR-DRIP) i. Death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed (CIVIL CODE, art. 1323); ii. Express or implied Rejection of the offer by the offeree; (NHA v. Grace Baptist Church, G.R. No. 156437, Mar. 1, 2004) iii. Qualified or conditional acceptance of the offer, which becomes a counter-offer; (CIVIL CODE, art. 1319) iv. Subject matter becomes Illegal or impossible before acceptance is communicated; (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 612 (2016)) v. Lapse of Period given to the offeree within which to signify acceptance; (CIVIL CODE, art. 1324) or vi. Revocation of the offer in due time (i.e. before the offeror has learned of its acceptance by the offeree) (CIVIL CODE, art. 1324) Period for acceptance 1. Stated fixed period in the offer – The offeree may accept at any time until such period expires (Young v. Court of Appeals, G.R. No. 83271, May 8, 1991). 2. No stated fixed period (a) Offer is made to a person present – Acceptance must be made immediately (Malbarosa v. Court of Appeals, G.R No. 125761, Apr. 30, 2003). (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. (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 425 (2009)) Note: For a contract to arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. (Oesmer v. Paraiso Development Corporation, G.R. No. 157493, Feb. 5, 2007) Note: We follow the theory of cognition (CIVIL CODE, art. 1319) and not the theory of CIVIL LAW manifestation. Under our Civil Law, the offer and acceptance concur only when the offeror comes to know of, and not when the offeree merely manifests his acceptance. Rule on complex offers 1. Offers are interrelated – Contract is perfected if all the offers are accepted. 2. Offers are not interrelated – Single acceptance of each offer results in a perfected contract unless the offeror has made it clear that one is dependent upon the other and acceptance of both is necessary. (CIVIL CODE, art. 1319) 3. Offer interpraesentes must be accepted immediately. If the parties intended that there should be an express acceptance, the contract will be perfected only upon knowledge by the offeror of the express acceptance by the offeree of the offer. An acceptance which is not made in the manner prescribe by the offeror is not effective, but a counter-offer which the offeror may accept or reject. (Malbarosa v. Court of Appeals, G.R No. 125761, Apr. 30, 2003) Rule on advertisements as offers 1. Business advertisements – Not a definite offer, but mere invitation to make an offer, unless it appears otherwise (CIVIL CODE, art. 1325) 2. Advertisements for bidders – They are simply invitations to make proposals and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears (CIVIL CODE, art. 1326) Article 1326 of the Civil Code, which specifically tackles offer and acceptance of bids, provides that advertisements for bidders are simply invitations to make proposals, and that an advertiser is not bound to accept the highest bidder unless the contrary appears. (PMO v. STRADEC, G.R. No. 200402, June 13, 2013) Four (4) theories on acceptance of offer by telegram or letter (a) Manifestation – perfected from the moment the acceptance is declared or made. Page 265 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (b) Expedition – perfected from the moment the offeree transmits the notification of acceptance. (c) Reception – perfected from the moment the offeror receives the letter. (d) Cognition – perfected from the moment the acceptance comes to the knowledge of the offeror. (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 402 (2010)) Note: Contracts under the Civil Code generally adhere to the Cognition Theory while transactions under the Code of Commerce adhere to the Manifestation Theory. (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 402 (2010)) When the offeror refuses to open the letter or telegram he is held to have a constructive notice of the contents thereof and will be bound by the acceptance of the offeree. (DESIDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 403-404 (2010)) Options General rule: If the offeror has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal. (CIVIL CODE, art. 1324) Exception: When the option is founded upon a consideration as something paid or promised. (CIVIL CODE, art. 1324) An option, sometimes called an “unaccepted offer,” is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property but a sale of the right to purchase. (Adelfa Properties, Inc. v. CA, G.R. No. 111238, Jan. 25, 1995) Effects of option: 1. Not supported by an independent consideration (i.e., distinct from the purchase CIVIL LAW price) – offeror can withdraw the offer at any time before acceptance by communicating such withdrawal 2. Supported by independent consideration – offeror cannot withdraw his offer (CIVIL CODE, art. 1324) Persons incapacitated to give consent (DDMI): i. Minors (CIVIL CODE, art. 1327). ii. Insane or demented persons (CIVIL CODE, art. 1327), unless the contract was entered into during a lucid interval (CIVIL CODE, art. 1328) iii. Deaf-mutes who do not know how to write (CIVIL CODE, art. 1327). iv. In a state of Drunkenness or under a hypnotic spell (CIVIL CODE, art. 1328) Contracts entered into by the persons above are in generally valid until annulled; however, annulment cannot prosper when they have been ratified. (CIVIL CODE, art. 1390). Rule on contracts entered into by minors General rule: Voidable (CIVIL CODE, art. 1391) Exceptions (MENGS) (These contracts are valid): 1. If upon reaching age of Majority, they ratify the same. (Ibanez v. Rodriguez, G.R. No. 23153, Mar. 7, 1925) 2. They were entered unto by a Guardian and the court having jurisdiction had approved the same. (Roa v. Roa, G.R. No. 28532, Mar. 4, 1929) 3. They were in the form of Savings account in the Postal Savings Bank, provided furthermore that the minor was at least 7 years old. (Rev. Adm. Code, Sec. 2007) 4. They were contracts for Necessaries such as food, but here the persons who are bound to give them support should pay therefor (CIVIL CODE, arts. 1489 & 2164; FAMILY CODE, E.O. 209, art. 194 (1987)) 5. Contracts where the minor misrepresented his age and pretended to be one of major age and is thus in Estoppel. (Hermosa v. Zobel, G.R. No. L-11835, Oct. 30, 1958). It is, however, essential here that the other party Page 266 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 must have been MISLED (Bambalan v. Maramba, G.R. No. L-27710, Jan. 30, 1928). HOWEVER, minors can set up the defense of minority to resist the claim when there is only passive misrepresentation, as when they did not disclose their minority because they had no juridical duty to disclose their inability. (Braganza v. De Villa Abrille, G.R. No. L12471, Apr. 13, 1959) Note: If both parties to a contract are minors, the contract is unenforceable. (CIVIL CODE, art. 1403(3)). Examples of persons specially disqualified to enter into contracts (Contracts entered into are VOID): 1. Husband and wife selling to one another (CIVIL CODE, art. 1490) or donating to one another (CIVIL CODE, art. 134) 2. Insolvents before they are discharged cannot, for example, make payments. Exception: Payment of administrative expenses shall be allowed. (An Act Providing For The Rehabilitation Or Liquidation Of Financially Distressed Enterprises And Individuals [Financial Rehabilitation and Insolvency Act of 2010], Republic Act No. 10142, § 57 (2010)) 3. Persons disqualified because of fiduciary relationship (CIVIL CODE, art. 1491) INCAPACITY Restrains the exercise of the right to contract May still enter into contract through parent, guardian or legal representative Based upon subjective circumstance of certain person Contracts entered into are merely voidable DISQUALIFICATION Restrains the very right itself Absolutely disqualified Based upon public policy and morality Contracts entered into are void (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 440 (2009)) Causes which vitiate consent A contract where consent is given through Mistake, Violence, Intimidation, Undue Influence, or Fraud is voidable (VIMFU). (CIVIL CODE, art. 1330) i. Mistake Must include both ignorance, which is the absence of knowledge with respect to a thing, and mistake properly speaking, which is a wrong conception about said thing, or a belief in the existence of some circumstance, fact, or event, which in reality does not exist. (Theis v. Court of Appeals, G.R. No. 126013, Feb. 12, 1997) Requisites (FES): 1. The error must be Substantial regarding: i. The object of the contract, or ii. The conditions which principally moved or induced one of the parties (error in quality or in quantity), or iii. Identity of qualifications, but only if such was the principal cause of the contract (CIVIL CODE, art. 1331) 2. The error must be Excusable (not caused by negligence). There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. (CIVIL CODE, art. 1333) 3. The error must be mistake of Fact, and not of law. (Luna v. Linatoc, G.R. No. L-48403, Oct. 28, 1942) Two (2) General Kinds of Mistake (a) Mistake of Fact – When one or both of the contracting parties believe that a fact exists when in reality it does not, or that such fact does not exist when in reality it does (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 443 (2009)) (b) Mistake of Law • General Rule: Mistake does not vitiate consent (CIVIL CODE, art. 1331) Page 267 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Reason: Ignorance of the law does not excuse anyone from compliance therewith (CIVIL CODE, art. 3) • Exception: Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated (CIVIL CODE, art. 1334). “Legal effect” here refers to the rights of the parties as stated in the legal provisions. ii. Violence Requisites (PFR): 1. Serious or irresistible Physical Force 2. Such force is the Reason why the contract was entered into. (CIVIL CODE, art. 1335) Note: Violence refers to physical coercion, while intimidation refers to moral coercion. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 632 (2016)) iii. Intimidation Requisites (FReT): 1. Reasonable and well-grounded Fear of an imminent and grave evil upon his person, property, or upon the person or property of his spouse, descendants, or ascendants 2. It is the Reason why the contract was entered into 3. The Threat must be of an unjust act, an actionable wrong (A threat to enforce a just or legal claim through competent authority does not vitiate consent.) (CIVIL CODE, art. 1335) Example: What the respondent did was merely inform them of petitioner Edna’s conviction in the criminal cases for estafa. It might have evoked a sense of fear or dread on the petitioners’ part, but certainly there is nothing unjust, unlawful or evil in the respondent's act. ... The petitioners must remember that petitioner Edna's conviction was a result of a valid judicial process and even without the respondent allegedly “ramming it into petitioner Victor's throat,” petitioner Edna's imprisonment would be a legal consequence of such conviction. (Spouses Binua v. Ong, G.R. No. 207176, June 18, 2014) Reluctant Consent – It is necessary to distinguish between real duress and the motive which is present when one gives his consent reluctantly. A contract is valid even though one of the parties entered into it against his wishes or even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit. (Martinez v. Hongkong and Shanghai Bank, G.R. No. L-5496, Feb. 19, 1910) Note: Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract. (CIVIL CODE, art. 1336) iv. Undue Influence Requisites (DIP): 1. Improper advantage 2. Power over the will of another 3. Deprivation of the latter of a reasonable freedom of choice. (CIVIL CODE, art. 1337) Circumstances to be considered (FIRM) (a) Confidential, family, spiritual, and other Relations between the parties (b) Mental weakness (c) Ignorance (d) Financial distress (CIVIL CODE, art. 1337). Fraud Fraud in Obtaining Consent In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract. (Ponce de Leon v. Rehabilitation Finance Corporation, G.R. No. L24571, Dec. 18, 1970) (a) Causal Fraud (Dolo Causante) This is the use of insidious words or machinations by one of the contracting parties to induce the Page 268 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 other party to enter into a contract, which, without them, he would not have agreed to. (CIVIL CODE, art. 1338) Determines or is the essential cause of consent. It is the deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other (Metropolitan Fabrics, Inc. v. Prosperity Credit Resources, Inc., G.R. No. 154390, Mar. 17, 2014) Effects: Voidability of the contract and the indemnification for damages (Geraldez v. CA, G.R. No. 108253, Feb. 23, 1994) Requisites (PS-SOBIA) 1. There must be misrepresentation or concealment (CIVIL CODE, arts. 1338 & 1339) by a party Prior to or Simultaneous to the consent or creation of the contract. 2. Must be Serious. (CIVIL CODE, art. 1344) 3. Must have been employed by only One of the contracting parties. (CIVIL CODE, art.1342) 4. Must be made in Bad faith or with intent to deceive. (CIVIL CODE, art. 1343) 5. Must have Induced the consent of the other contracting party. (CIVIL CODE, art. 1338) 6. Must be Alleged and proved by clear and convincing evidence, and not merely by a preponderance thereof. (Tan Sua Sia v. Sontua, 56 Phil. 711, 1932) (b) Incidental Fraud (Dolo Incidente) Deceptions or misrepresentations which are not serious and without which the other party would still have entered into the contract. It is not the cause which induced the party to enter into a contract and refers only to some particular or accident of the obligations. (Geraldez v. CA, G.R. No. 108253, Feb. 23, 1994) Effect: Only renders the person employing it liable for damages. (CIVIL CODE, art. 1344) Simulated Contracts (a) Absolute – the parties have no intention to be bound at all (CIVIL CODE, art. 1345); void from beginning (CIVIL CODE, art. 1346). (b) Relative – the parties conceal their true agreement (CIVIL CODE, art. 1345): the real agreement binds the parties when: i. There is no prejudice to 3rd persons; and ii. It is not contrary to law, moral, good customs, public order or public policy (CIVIL CODE, art. 1346) (c) Dealer’s Talk (Dolo bonus) This oxymoron (literally, good fraud) refers to dealer’s talk, the kind of exaggerations in advertisement the public is familiar with. The ancient principle still governs in this regard: Caveat emptor -- Buyer beware. But once the dealer’s talk goes beyond innocent conventional exaggeration and later the realm of bad faith, then deceit (either causante or incidental) may set in. (RUBEN F. BALANE, JOTTINGS AND JURISPRUDENCE IN CIVIL LAW (OBLIGATIONS AND CONTRACTS) 63536 (2020)) NOTE: In absolute simulation, there is a colorable contract but the parties have no intention to be bound by it. However, if the parties state a false cause in the contract to conceal their real agreement, the contract is relatively simulated and the parties are still bound by their real agreement. (CIVIL CODE, art. 1345; Valerio v. Refresca, G.R. No. 163687, Mar. 28, 2006) 2. SUBJECT MATTER (SM) Requisites of things as SM (W-PLDT): 1. Within the commerce of man (CIVIL CODE, art. 1347) – either existing or in potency 2. Licit or not contrary to law, morals, good customs, public order or public policy (CIVIL CODE, art. 1347) 3. Possible, legally or physically (CIVIL CODE, art. 1348). 4. Determinate as to its kind or determinable without need to enter into a new contract (CIVIL CODE, art. 1349) 5. Transmissible (CIVIL CODE, art. 1347) Page 269 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Requisites of services as SM (PWD): Requisites (LET) 1. Within the commerce of man (CIVIL CODE, art. 1347) 2. Possible, physically or legally (CIVIL CODE, art. 1348) 3. Determinate or capable of being made determinate (CIVIL CODE, arts. 1318[2] & 1349) 12. Things which cannot be the subject matter of a contract (I-COFID): 1. Things which are Outside the commerce of men (CIVIL CODE, art. 1347) 2. Intransmissible rights (CIVIL CODE, art. 1347) 3. Future inheritance, except in cases expressly authorized by law (CIVIL CODE, art. 1347) 4. Services Contrary to law, morals, good customs, public order or public policy (CIVIL CODE, art. 1347) 5. Impossible things or services (CIVIL CODE, art. 1348). 6. Objects which are not possible of Determination as to their kind (CIVIL CODE, art. 1349) 1. It must Exist at the time the contract is entered into. (CIVIL CODE, art. 1352 & 1409[3]) 2. It must be True. (CIVIL CODE, art 1353) 3. It must be Licit. (CIVIL CODE, art. 1352) NOTE: Contracts upon future inheritance are void when: • The succession has not yet been opened; • The object of the contract forms part of the inheritance; and • The promissor has, with respect to the object, an expectancy of a right, which is purely hereditary in nature. (De Belen Vda. De Cabalu v. Tabu, G.R. No. 188417, Sept. 24, 2012) 3. CAUSE OR CONSIDERATION Definition Refers to the immediate, direct and most proximate reason which justifies the creation of an obligation through the will of the contracting parties and is the essential reason for the contract. (Uy v. CA, G.R. No. 120465, Sept. 9, 1999) Motive – refers to the particular reason of one party for entering into the contract which does not affect the other party nor the validity of the contract; however, when the motive predetermines the cause or when the realization of such motive has been made a condition upon which the contract is made to depend, the motive may be regarded as the cause (Uy v. CA, G.R. No. 120465, Sept. 9, 1999). Cause distinguished from Motive CAUSE MOTIVE Immediate or direct Remote or indirect reason of a contract reason Objective and Psychological or juridical reason of purely personal contract; always reason; may be known to both parties unknown to the other party Remains the same May vary although a regardless of a party enters into the party’s motive for same kind of contract entering into a contract Legality or illegality of Legality or illegality of cause affects the motive does not existence or validity affect the existence of the contract or validity of contract (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 673-674 (2014)) Causes in some contracts: 1. Onerous contracts – The prestation of promise of a thing or service by the other. (CIVIL CODE, art. 1350) 2. Remuneratory contracts – The service or benefit remunerated. (CIVIL CODE, art. 1350) Page 270 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 3. Contracts of Pure Beneficence – Mere liberality of the donor or benefactor. (CIVIL CODE, art. 1350) 4. Accessory Contracts Like Mortgage and Pledge – The cause is generally the same as the cause for the principal contract of loan. (China Bank v. Lichauco, G.R. No. L-22001, Nov. 4, 1924) 5. Accessory Contracts of Personal Guaranty – Generally pure liberality but sometimes material consideration may be given. (Standard Oil Co. v. Arenas, G.R. No. L-5921, Jul. 25, 1911) EFFECT IN CAUSE Absence of causa – Total lack or absence of cause Illegality of causa – The cause is contrary to law, morals, good customs, public order and public policy Falsity of causa – A cause is stated but it is not true Causa not stated in the contract Inadequacy of causa or lesion (CIVIL CODE, art. 1355) EFFECT Void – Contract produces no legal effect (CIVIL CODE, art. 1352) Void – Contract produces no legal effect (CIVIL CODE, art. 1352) Void IF it should not be proved that the contract was founded upon another cause which is true and lawful (CIVIL CODE, art. 1353) Presumed to Exist – Burden of proof is on the person assailing its existence (CIVIL CODE, art. 1354) General Rule: Does not invalidate contract Exceptions: 1. When, together with lesion, there has been: fraud, mistake or undue influence CIVIL LAW 2. In cases specified by law (the ff. contracts may be rescinded) • Those entered into by guardians when the wards suffer lesion by more than ¼ of the value of the things which are the object thereof (CIVIL CODE, art. 1381, par. 1) • Those agreed upon in representation of absentee, if the latter suffer lesion stated in par. 1 (CIVIL CODE, art. 1381, par. 2) • Partition among co-heirs, when any one of them received things with a value less by at least ¼ than the share to which he is entitled (CIVIL CODE, art. 1098) Moral Obligation as Cause Where the moral obligation arises wholly from ethical considerations, unconnected with any civil obligations, it cannot constitute a sufficient cause or consideration to support an onerous contract. (Fisher v. Robb, G.R. No. 46274, Nov. 2, 1939) Where such moral obligation is based upon a previous civil obligation which has already been barred by the statute of limitations at the time when the contract is entered into, it constitutes a sufficient cause or consideration to support a contract. (Villaroel v. Estrada, G.R. No. L-47362, Dec. 19, 1940) Page 271 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 B. FORMALITY FORM refers to the manner in which a contract is executed or manifested (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 697 (2014)). In general, form does not matter for the validity of a contract. It is enough that there be consent, object, and cause. (CIVIL CODE, art. 1356) (a) Informal Contracts – may be entered into whatever form as long as there is consent, object and cause (b) Formal Contracts – 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 property in excess of 5,000. (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 699, 701 (2014)) Formal / Solemn Contracts 1. Donation The donation of a movable may be made orally or in writing. (CIVIL CODE, art. 748) An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated. (CIVIL CODE, art. 748) If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void. (CIVIL CODE, art. 748) In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. (CIVIL CODE, art. 749) The acceptance may be made in the same deed of donation or in a separate public document, but CIVIL LAW it shall not take effect unless it is done during the lifetime of the donor. (CIVIL CODE, art. 749) If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. (CIVIL CODE, art. 749) 2. Partnership A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. (CIVIL CODE, art. 1771) A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument. (CIVIL CODE, art. 1773) 3. Antichresis The amount of the principal and of the interest shall be specified in writing; otherwise, the contract of antichresis shall be void. (CIVIL CODE, art. 2134) 4. Agency to Sell Real Property When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (CIVIL CODE, art. 1874) 5. Interest No interest shall be due unless it has been expressly stipulated in writing. (CIVIL CODE, art. 1956) 6. Ordinary Diligence A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be: (a) In writing, signed by the shipper or owner; (b) Supported by a valuable consideration other than the service rendered by the common carrier; and Page 272 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (c) Reasonable, just and not contrary to public policy (CIVIL CODE, art. 1744) 7. Chattel Mortgage By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage. (CIVIL CODE, art. 2140) 8. Sale of Large Cattle The form sale of large cattle shall be governed by special laws. (CIVIL CODE, art. 1581) General rule: A contract is valid and binding in whatever form provided that the 3 essential requisites of a contract (consent, object, and cause) concur. (CIVIL CODE, art. 1356) Exceptions: i. Law requires the contract to be in some form for validity (e.g., donation and acceptance of real property) (CIVIL CODE, art. 749). ii. Law requires the contract to be in some form to be enforceable – Contracts enumerated in Art. 1403(2) are valid but cannot be enforced in court or sued upon unless they are cured or ratified. The following agreements shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent: (CYS-DLM) (a) An agreement that by its terms is not to be performed within a Year from the making thereof; (b) A special promise to answer for the Debt, default, or miscarriage of another; (c) An agreement made in consideration of Marriage, other than a mutual promise to marry; (d) An agreement for the Sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or CIVIL LAW some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum (e) An agreement for the Leasing for a longer period than one year, or for the sale of real property or of an interest therein; (f) A representation as to the Credit of a third person. (CIVIL CODE, art. 1403) NOTE: Article 1443 requires an express trust over an immovable or an interest therein to be in writing for purposes of proof. iii. Law requires the contract to be in some form for convenience - Contracts enumerated in Art. 1358 are valid. Formal requirements are only for the benefit of third parties. Noncompliance therewith does not adversely affect the validity of neither the contract nor the contractual rights and obligations of the parties thereunder. (Fule v. CA, G.R. No. 112212, Mar. 2, 1998) The following must appear in a public document: (a) Contracts whose object is the creation, transmission, modification or extinguishment of real rights over immovables (b) Cession, repudiation, renunciation of hereditary rights or those of the conjugal partnership of gains (c) Power to administer property for another, 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; (d) Cession of action of rights proceeding from an act appearing in a public document. Page 273 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (e) All other contracts where the amount involved exceeds P500 must appear in writing, even a private one. (CIVIL CODE, art. 1358) NOTE: Electronic documents shall have the legal effect, validity or enforceability as any other document or legal writing, and where the law requires a document to be in writing, that requirement is met by an electronic document if the said electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent reference. (Act Providing for the Recognition and Use of Electronic Commercial and Non-commercial Transactions and Documents, Penalties for Unlawful Use Thereof and For Other Purposes [eCommerce Act of 2000], Republic Act No. 8792, § 7 (2000)) ————- end of topic ————C. REFORMATION OF INSTRUMENTS As distinguished from annulment where there is no meeting of the minds, in reformation, there is meeting of the minds but attended by mistake, fraud, inequitable conduct, or accident. (CIVIL CODE, art. 1359) CIVIL LAW (a) Mutual mistake fails to disclose the real agreement (but it must be a mistake of Fact) (CIVIL CODE, art. 1361) (b) Unilateral mistake or the other party acted Fraudulently (CIVIL CODE, art. 1362) (c) Unilateral mistake and the other party is guilty of Concealment (CIVIL CODE, art. 1363) (d) Person drafting the instrument or clerk or typist through ignorance, lack of skill, negligence or bad faith, does not show the True Intention (CIVIL CODE, art. 1364) (e) Parties agree on Mortgage, pledge of real or personal property but instrument says that it is sold absolutely or involves a right to repurchase (CIVIL CODE, art. 1365) No reformation is allowed in: (SD-WV) (a) Simple Donation (b) Wills (c) Real agreement is Void (CIVIL CODE, art. 1366) Who may ask for reformation: (NOT-FE-MM) (a) The party who is NOT at Fault (i.e., injured party, heirs or assigns) (CIVIL CODE, art. 1367) (b) Party who is NOT asked to Enforce the instrument (CIVIL CODE, art. 1368) (c) If there is a Mutual Mistake, reformation may be had by either party or successor in interest (CIVIL CODE, art. 1368) Requisites for action for reformation (VP-PIM) 1. Meeting of the minds (CIVIL CODE, art. 1359) 2. True Intention is not expressed (CIVIL CODE, art. 1359) 3. Clear and convincing Proof (HECTOR S. DE LEON & HECTOR M. DE LEON, JR., COMMENTS AND CASES ON OBLIGATIONS AND CONTRACTS 713 (2014)) 4. Within proper prescriptive Period 5. Not simple unconditional donation inter vivos or contract where real agreement is Void (CIVIL CODE, art. 1366) NOTE: In reformation, no new contract is made. Contracts that may be reformed: (CM-TIFF) Procedure for reformation shall be governed by the Rules of Court as promulgated by the Supreme Court. (CIVIL CODE, art. 1369) ————- end of topic ————D. INTERPRETATION OF CONTRACTS If the terms of the agreement are clear and unequivocal, their plain and literal meanings should be followed. (CIVIL CODE, art. 1370) In the construction or interpretation of an instrument, the intention of the parties is primordial and is to be pursued. (Valdez v. CA, G.R. No. 140715, Sept. 24, 2004) Page 274 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. (CIVIL CODE, art. 1371) opportunity to bargain on equal footing. (Dio v. St. Ferdinand Memorial Park, Inc., G.R. No. 169578, Nov. 30, 2006) ————- end of topic ————- In case of doubt concerning the surrounding circumstances in the execution of a contract, the least transmission of rights and interest shall prevail if the contract is gratuitous, and if onerous, the doubt is to be settled in favor of greatest reciprocity. (CIVIL CODE, art. 1378) The terms of an agreement or writing are presumed to be have been used in their primary and general acceptation. However, evidence may be admitted to show that they have a local, technical, or otherwise peculiar signification and were used and understood in that particular instance, in which case, the agreement or writing must be construed accordingly. (REVISED RULES ON EVIDENCE, rule 130, § 15) Only laws existing at the time of the execution of a contract are applicable to it and not the later statutes unless the latter are specifically intended to have retroactive effect. (Vive Eagle Land, Inc. v. CA, G.R. No. 150308, Nov. 26, 2004) When there are several provisions in a contract, the construction to be adopted should be that one which will give effect to all provisions. A contract must be read in its entirety. (Rigor v. Consolidated Orix Leasing Finance Corporation, G.R. No. 136423, Aug. 20, 2002) The ambiguity in a contract should be construed against the party who caused the same. (CIVIL CODE, art. 1377) CONTRACT OF ADHESION: Its terms are prepared by only one party while the other party merely affixes his signature signifying his admission thereto. It is binding as ordinary contracts the reason being that the party who adheres to it is free to reject its entirety. It is stricken down as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the E. DEFECTIVE CONTRACTS I. RESCISSIBLE CONTRACTS Definition Those which have caused economic damage either to one of the parties or to a third person and which may be set aside even if valid. They may be set aside in whole or in part, to the extent of the damage caused. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 574 (1991)) Rescissible Contracts under Art. 1381: (ALLGF) (a) Entered into by Guardian whenever ward suffers damage by more than 1/4 of value of object; (b) Agreed upon in representation of Absentees, if absentee suffers lesion by more than ¼ of value of property; (c) Contracts where rescission is based on Fraud committed on creditors (accion pauliana); (d) Objects of Litigation; contract entered into by defendant without knowledge or approval of litigants or judicial authority; and Contracts involving things under litigation are rescissible. Art. 1381 (4) requires the concurrence of the following: (1) the defendant, during the pendency of the case, enters into a contract which refers to the subject of litigation; and (2) said contract was entered into without the knowledge and approval of the litigants or of a competent judicial authority. The court then has the duty to order the rescission of the contract upon the concurrence of such requisites. (Ada v. Baylon, G.R. No. 182435, Aug. 13, 2012) (e) Provided for by Law – e.g. Arts. 1526, 1534, 1539, 1542, 1556, 1560, 1567 and 1659 Page 275 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 i. ii. iii. iv. v. vi. vii. viii. Art. 1526 – Unpaid seller of goods, notwithstanding that the ownership in the goods may have passed to the buyer, subject to other provisions on Sales Art. 1534 – Unpaid seller having the right of lien or having stopped the goods in transit, where he expressly reserved his right to do so in case the buyer should make default, or the buyer has been in default in the payment of the price for an unreasonable time Art. 1539 – In the sale of real estate at a rate of a certain price for a unit of measure or number, at the will of the vendee, when the inferior value of the thing sold exceeds one-tenth of the price agreed upon, or if the vendee would not have bought the immovable had he known of its smaller area or inferior quality Art. 1542 – In the sale of real estate, made for a lump sum, where the boundaries are mentioned and the area or number within the boundaries exceed that specified in the contract, when the vendee does not accede to the failure to deliver what has been stipulated Art. 1556 – Should the vendee lose, by reason of eviction, a part of the thing sold of such importance, in relation to the whole, that he would not have bought it without said part Art. 1560 – Vendee may ask for recession if the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned in the agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been aware thereof Art. 1567 – In cases of breach of warranty against hidden defects of or encumbrances upon the thing sold Art. 1659 – If the lessor or lessee should not comply with their obligations, the aggrieved party may ask for rescission Accion pauliana refers to the action to rescind contracts in fraud of creditors under Art. 1381. Requisites: (NR-CAFS) 1. The plaintiff asking for rescission has a Credit prior to the alienation, although demandable later; 2. The debtor has made a Subsequent contract conveying a patrimonial benefit to a third person; 3. The creditor has No other legal Remedy to satisfy his claim; 4. The act being impugned is Fraudulent; 5. The third person who received the property conveyed, if it is by onerous title, has been an Accomplice in the fraud. (Anchor Savings Bank v. Furigay, G.R. No. 191178, Mar. 13, 2013; Lee v. Bangkok Bank Public Company, Limited, G.R. No. 173349, Feb. 9, 2011) Under Art. 1382, payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected are also rescissible. Requisites: 1. The debtor-payer must have been insolvent (the insolvency need not be a judicially declared one). 2. The debt was not yet due and demandable (CIVIL CODE, art. 1382) Obligation created by the rescission of the contract Mutual Restitution 1. Things which are the objects of the contract and their fruits 2. Price with interest (CIVIL CODE, art. 1385) NOTE: The obligation of restitution obviously does not apply to creditors who seek to impugn fraudulent transactions of their debtors. The obligation of mutual restitution applies to OTHERS so that that status quo may be restored. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS (2016)) Page 276 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 2. VOIDABLE CONTRACTS Requisites: (4-TRR) 1. Plaintiff must be able to Return what has been received by virtue of the rescissible contract (CIVIL CODE, art. 1385) 2. Object of the contract is not in the legal possession of Third persons in good faith. (CIVIL CODE, art. 1385) 3. Plaintiff has no other legal Remedy. (CIVIL CODE, art. 1383) 4. Action must be brought within the proper prescriptive period of 4 years. (CIVIL CODE, art. 1389) Badges of fraud are circumstances indicating that certain alienation has been made in fraud of creditors. Some examples are: i. Consideration of the conveyance is inadequate or fictitious; ii. Transfer was made by a debtor after a suit has been begun and while it is pending against him; iii. Sale upon credit by an insolvent debtor; iv. Evidence of indebtedness or complete insolvency; v. Transfer of all his property by a debtor when he is financially embarrassed or insolvent; vi. Transfer made between father and son where this fact is considered together with the preceding circumstances; and vii. Failure of the vendee to take exclusive possession of the property (Caltex Philippines, Inc. v. PNOC Shipping and Transport Corporation, G.R. No. 150711, Aug. 10, 2006) The presumption of fraud in case of alienations by onerous title of a person against whom a judgment has been rendered or attachment issued does not apply to registered lands if the judgment or attachment made is not also registered. (Lee v. Bangkok Bank, G.R. No. 173349, Feb. 9, 2011) Definition Intrinsic defect; valid until annulled; defect is due to vice of consent or legal incapacity (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 601-602 (2009)) Characteristics (ACED) (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: Contracts entered into: (SIM-D3) (a) By Minors (CIVIL CODE, art. 1327) (b) By Insane unless he/she acted during a lucid interval (CIVIL CODE, art. 1327 & 1328) (c) By Deaf mute who can’t read or write (CIVIL CODE, art. 1327) (d) By Persons specially Disqualified: civil interdiction (CIVIL CODE, art. 1329 & 38) (e) In state of Drunkenness (CIVIL CODE, art. 1328) (f) In state of hypnotic Spell (CIVIL CODE, art. 1328) Mistake False belief of something which is contrary to the real intention of the parties (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 443 (2009)) Requisites: (CP-SEN) 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 (ERNESTO L. PINEDA, OBLIGATIONS AND CONTRACTS 443 (2009)) 4. Error as to Person – When it is the principal consideration of the contract Page 277 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 5. Error as to legal Effect – When mistake is mutual and frustrates the real purpose of parties (CIVIL CODE, art. 1334) Violence Serious or irresistible force is employed to wrest consent (CIVIL CODE, art. 1335) Intimidation One party is compelled by a reasonable and wellgrounded fear of an imminent and grave danger upon person and property of himself, spouse, ascendants or descendants (moral coercion) (CIVIL CODE, art. 1335) Undue Influence Person takes improper advantage of his power over will of another depriving latter of reasonable freedom of choice (CIVIL CODE, art. 1337) The doctrine on reluctant consent provides that a contract is still valid even if one of the parties entered it against his wishes or even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit. (Martinez v. HSBC, G.R. No. L-5496, Feb. 19, 1910) Fraud Thru insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract without which he will not enter it (dolo causante). (Samson v. CA, G.R. No. 108245, Nov. 25, 1994) Kinds of Fraud in the Performance of Obligations or Contracts (a) Causal Fraud (dolo causante) (b) Incidental Fraud (dolo incidente) (c) Tolerated Fraud – includes minimizing the defects of the thing, exaggeration of its good qualities and giving it qualities it does not have; lawful misrepresentation (CIVIL CODE, art. 1340) Note: Expression of an opinion – not fraud unless made by expert and other party relied on the former’s special knowledge (CIVIL CODE, art. 1341) Fraud by third person – does not vitiate consent; only action for damages except if there is collusion between one party and the third person, or resulted to substantial mistake, mutual between parties. (CIVIL CODE, art. 1342) Causes of Extinction of the Action to Annul 1. Prescription - Period to bring an action for Annulment (a) Intimidation, violence, undue influence – 4 years from time defect of consent ceases (b) Mistake, fraud – 4 years from time of discovery (c) Incapacity - From time guardianship ceases (CIVIL CODE, art. 1391) Discovery of fraud must be reckoned to have taken place from the time the document was registered in the office of the register of deeds. Registration constitutes constructive notice to the whole world (Carantes v. CA, G.R. No. L-33360, Apr. 25, 1977). 2. Ratification Requisites: (Wack) (a) Knowledge of reason rendering contract voidable (CIVIL CODE, art. 1393) (b) Such reason must have Ceased (CIVIL CODE, art. 1393). Except in case of ratification effected by the guardian to contracts entered into by an incapacitated (CIVIL CODE, art. 1394) (c) The injured party must have executed an act which expressly or impliedly conveys an intention to Waive his right (CIVIL CODE, art. 1393) Even assuming that petitioner’s misrepresentation consists of fraud which could be a ground for annulling their Contract to Sell, respondent’s act of affixing her Page 278 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 signature to the said Contract, after having acquired knowledge of the property's actual location, can be construed as an implied ratification thereof. Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. (ECE Realty v. Mandap, G.R. No. 196182, Sept. 1, 2014) 3. Loss of the Thing which is the object of the contract through fraud or fault of the person who is entitled to annul the contract. (CIVIL CODE, art. 1401) Note: If the object is lost through a fortuitous event, the contract can still be annulled, but the person obliged to return the same can be held liable only for the value of the thing at the time of the loss, but without interest thereon. (4 ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 614 (1991)) Ratification cleanses the contract of its defects from the moment it was constituted. (CIVIL CODE, art. 1396) III. UNENFORCEABLE CONTRACTS Definition They are valid but the execution cannot be compelled unless ratified; extrinsic defect; produce legal effects only after ratified. Kinds: (URA) (a) Unauthorized or no sufficient authority – Entered into in the name of another when: (CIVIL CODE, art. 1404) i. No authority conferred (CIVIL CODE, art. 1317) ii. In excess of authority conferred (ultra vires) (CIVIL CODE, art. 1317) (b) Curable by Ratification – Both parties incapable of giving consent (2 minor or 2 insane persons) (CIVIL CODE, art. 1407) CIVIL LAW (c) Curable by Acknowledgment – Failure to comply with Statute of Frauds. (CIVIL CODE, art. 1405) Statute of Frauds (a) Agreement to be performed within a year after making contract (b) Special promise to answer for debt, default or miscarriage of another (c) Agreement made in consideration of promise to marry (d) Agreement for sale of goods, chattels or things in action at price not less than 500; exception: auction when recorded sale in sales book (e) Agreement for lease of property for more than one year and sale of real property regardless of price (f) Representation as to credit of another (CIVIL CODE, art. 1403 (2)) Two Ways of Curing Unenforceable Contracts (a) Failure of defendant to object in time, to the presentation of parole evidence in court, the defect of unenforceability is cured (b) 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. (CIVIL CODE, art. 1405) Note: The contracts/agreements under the Statute of Frauds require that the same be evidenced by some note or memorandum or writing, subscribed by the party charged or by his agent, otherwise, the said contracts shall be unenforceable. (CIVIL CODE, art. 1403) The Statute of Frauds applies only to executory contracts, not to those that are partially or completely fulfilled. (Carbonnel v. Poncio, G.R. No. L-11231, May 12, 1958) Page 279 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 IV. VOID OR INEXISTENT CONTRACTS Definition These contracts have no legal effect (Modina v. CA, G.R. No. 109355, Oct. 29, 1999) (b) Characteristics: 1. It produces no effect whatsoever either against or in favor of anyone; (Modina v. CA, G.R. No. 109355, Oct. 29, 1999) 2. There is no action for annulment necessary as such is ipso jure. A judicial declaration to that effect is merely a declaration; 3. It cannot be confirmed, ratified or cured; NOTE: Assuming that the nullified ... resolutions may be deemed as contracts, we declared in our [previous ruling] that the infirmity in the nullified ... resolutions did not stem from the absence of consent or authority, which would have made them unenforceable contracts under Article 1401 (1) of the Civil Code. The infirmity comes from the failure of the NPC to comply with the requirements set forth in the EPIRA. 4. 5. 6. 7. On this basis, they cannot be classified as an unenforceable contract under Article 1403 (1) of the Civil Code, but as void contracts under Article 1409 (7) of the Civil Code for being "expressly prohibited or declared void by law." The last paragraph of Article 1409 of the Civil Code expressly provides that void contracts cannot be ratified. (NPC DAMA v. NPC, G.R. No. 156208, June 30, 2014) If performed, restoration is in order, except if pari delicto will apply; (CIVIL CODE, art. 1411 & 1412) The right to set up the defense of nullity cannot be waived; (CIVIL CODE, art. 1409) Imprescriptible (CIVIL CODE, art. 1410); and Anyone may invoke the nullity of the contract whenever its juridical effects are asserted against him (CIVIL CODE, art. 1421) Kinds of void contract: (CIVIL CODE, art. 1409) (a) Those lacking in essential elements: No consent, no object, no cause (inexistent (c) (d) (e) (f) (g) (h) ones) – essential formalities are not complied with. Example: Donation propter nuptias – Should conform to formalities of a donation to be valid) Those which are absolutely simulated or fictitious – no cause. An absolutely simulated or fictitious contract is void, and the parties may recover from each other what they may have given under the contract. In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. (Heirs of Dr. Mario S. Intac and Angelina Mendoza-Intac v. CA, G.R. 173211, Oct. 11, 2012). Those which cause or object did not exist at the time of the transaction – no cause/object. This refers to a contract whose cause or object could not have existed or could not come into existence at the time of the transaction. (RUBEN F. BALANE, JOTTINGS AND JURISPRUDENCE IN CIVIL LAW (OBLIGATIONS AND CONTRACTS) 778 (2020)) Those whose object is outside the commerce of man – no object Those which contemplate an impossible service – no object Those which intention of parties relative to principal object of the contract cannot be ascertained Those expressly prohibited or declared void by law – Contracts w/c violate any legal provision, whether it amounts to a crime or not Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy. Example: Contract to sell marijuana Other void contracts: (a) Pactum Commissorium (CIVIL CODE, art. 2088, 2130, 1390) Elements: (MAp) i. There should be a property Mortgaged by way of security for the payment of the principal obligation. ii. There should be a stipulation for automatic Appropriation by the creditor Page 280 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 of the thing mortgaged in case of nonpayment of the principal obligation within the stipulated period. (Development Bank of the Philippines v. CA, G.R. No. 118342, Jan. 5, 1998) (b) Pactum De Non Alienando (CIVIL CODE, art. 2130) • A stipulation forbidding the owner from alienating the immovable mortgaged shall be void. • It is a clause in a mortgage giving the mortgagee the right to foreclose by executory process directed solely against the mortgagor and giving him or her the right to seize and sell the mortgaged property, regardless of any subsequent alienations. (c) Pactum Leonina (CIVIL CODE, art. 1799) • A stipulation which excludes one or more partners from any share in profit or loss is void. Illegal Contracts Pari Delicto Doctrine General Rule: • Both parties are guilty, no action against each other; (CIVIL CODE, art. 1412) • Those who come in equity must come with clean hands; (Department of Public Works and Highways v. Quiwa, G.R. No. 183444, Feb. 8, 2012) • Applies only to illegal contracts and not to inexistent contracts; • Does not apply when a superior public policy intervenes. The Clean Hands Doctrine states that “a litigant may be denied relief by a court of equity on the ground that his conduct has been inequitable, unfair and dishonest, or fraudulent, or deceitful as to the controversy in issue.” Bad faith and fraud are allegations of fact that demand clear and convincing proof. (Department of Public Works and Highways v. Quiwa, G.R. No.183444, Feb. 8, 2012) Exception: If purpose has not yet been accomplished and if damage has not been caused to any 3rd person. Other exceptions: i. Payment of usurious interest. (CIVIL CODE, art. 1413) ii. Payment of money or delivery of property for an illegal purpose, where the party who paid or delivered repudiates the contract before the purpose has been accomplished, or before any damage has been caused to a third person. (CIVIL CODE, art. 1414) iii. Payment of money or delivery of property made by an incapacitated person. (CIVIL CODE, art. 1415) iv. Agreement or contract which is not illegal per se and the prohibition is designed for the protection of the plaintiff. (CIVIL CODE, art. 1416) v. Payment of any amount in excess of the maximum price of any article or commodity fixed by law or regulation by competent authority. (CIVIL CODE, art. 1417) vi. Contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law (CIVIL CODE, art. 1418 & 1419) vii. One who lost in gambling because of fraudulent schemes practiced on him is allowed to recover his losses (REVISED PENAL CODE, art. 313) even if gambling is prohibited. Requisites of Illegal Contracts: 1. Contract is for an illegal purpose; 2. Contract must be repudiated by any of the parties before purpose is accomplished or damage is caused to third parties; and 3. 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 which is remorseful prevents it. Page 281 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Where laws are issued to protect certain sectors: consumer protection, labor, and 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. (CIVIL CODE, art. 1417) (b) Labor – If the law sets the minimum wage for laborers, any laborer who agreed to receive less may still be entitled to recover the deficiency; if the law sets max working hours and laborer who undertakes to work longer may demand additional compensation. (CIVIL CODE, art. 1418 & 1419) (c) Interest paid in excess of the interest allowed by the usury law may be recovered by debtor with interest from date of payment. (CIVIL CODE, art. 1413) Effects of illegal contracts 1. If one party is incapacitated, courts may allow recovery of money, property delivered by incapacitated person in the interest of justice. (CIVIL CODE, art. 1415) • Pari delicto doctrine cannot apply because an incapacitated person does not know what he is entering into and is unable to understand the consequences of his own action. 2. If agreement is not illegal per se but merely prohibited and prohibition is designated for the protection of the plaintiff – may recover what he has paid or delivered by virtue of public policy. (CIVIL CODE, art. 1416) 3. If a subsequent contract results directly because of a previous illegal contract, the subsequent contract is also void and inexistent. “The illegality of the Sub-Contract Agreement necessarily affects the [resulting] Deed of Assignment because the rule is that an illegal agreement cannot give birth to a valid contract. To rule otherwise is to sanction the act of entering into transaction the object of which is expressly prohibited by law and thereafter execute an apparently valid CIVIL LAW contract to subterfuge the illegality. The legal proscription in such an instance will be easily rendered nugatory and meaningless to the prejudice of the general public.” (Gonzalo v. Tarnate, G.R. No. 160600, Jan. 15, 2014) Mutual restitution in void contracts General rule: Parties should return to each other what they have given by virtue of the void contract in case Where nullity arose from defect in essential elements 1. Return object of contract and 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. (CIVIL CODE, art. 1412) Exceptions to the exception: 1. When incapacitated – Not obliged to return what he gave but may recover what he has given 2. Other party is less guilty or not guilty. (CIVIL CODE, art. 1412) V. DISTINGUISH: RESOLUTION AND RESCISSION OF CONTRACTS Similarity and distinction between resolution or cancellation in Art. 1191; and rescission in Art. 1383-84 Similarity: Both apply to valid contracts (Cannot cancel/rescind invalid contracts because there is nothing to cancel or rescind). Both also require mutual restitution. (EDGARDO L. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED: PRESCRIPTION; OBLIGATIONS AND CONTRACTS 735 (2016)) Mutual restitution is required in cases of resolution/cancellation under Art. 1191 so as to bring the parties back to their original situation, prior to the inception of the contract. Page 282 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (Forest Hills Golf & Country Club v. Vertex Sales and Trading Inc., G.R. No. 202205, Mar. 6, 2013) Distinction: (Suria v. IAC, G.R. No. 73893, June 30, 1987) (a) Art. 1191 applies only to reciprocal obligations, i.e., those that arise from the same cause, and which each party is a debtor and creditor of each other. Performance by one is a condition to performance by the other party. If one party is unable to perform his obligation, the other can ask for resolution as a remedy for the breach. Since this is based on breach of contract, it is a principal action. On the other hand, Art. 1383 is a subsidiary action which is based on lesion or fraud of creditors (Wellex Group v. U-Land Airlines, Jan. 14, 2015). (b) Resolution or cancellation in Art. 1191 is predicated on breach, and not on injury to economic interests of a party, that violates the reciprocity between the parties. (c) The operation of Arts.1383 and 1384 is limited to the cases of rescission for lesion enumerated in Article 1381 of the Civil Code of the Philippines and does not apply to cases under Article 1191. Art. 1191 does not apply to a Contract to Sell where the condition is breached. Payment is the condition in a Contract to Sell and if full payment is not made, it is breach of the condition. Art. 1191 refers to an existing obligation and what is breached is the obligation, not the condition. (Rivera v. Del Rosario, G.R. No. 144934, Jan. 15, 2004) A party may not extrajudicially rescind a contract without a specific stipulation in the contract authorizing extrajudicial rescission. The party needs to file an action for rescission under Art. 1191. (Eds Manufacturing, v. Healthcheck International, Inc., Oct. 9, 2013) But see: Art. 1191 provides that the power to rescind is implied in reciprocal obligations, in CIVIL LAW cases where one of the obligors should fail to comply with what is incumbent upon him. Otherwise stated, an aggrieved party is not prevented from extrajudicially rescinding a contract to protect its interests, even in the absence of any provision expressly providing for such right. (Nissan Car Lease v. Lica Management, Jan. 13, 2016) The law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages. (U.P. v. delos Angeles, Sept. 29, 1970 Whether a contract provides for it or not, the remedy of rescission is always available as a remedy against a defaulting party. When done without prior judicial imprimatur, however, it may still be subject to a possible court review. (Nissan Car Lease v. Lica Management, Jan. 13, 2016) ————- end of topic ————- NATURAL OBIGATIONS Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. (CIVIL CODE, art. 1423) Examples of natural obligations enumerated under the Civil Code: i. Performance after the civil obligation has prescribed ii. Reimbursement of a third person for a debt that has prescribed Page 283 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 iii. Restitution by minor after annulment of contract iv. Delivery by minor of money or fungible thing in fulfillment of obligation v. Performance after action to enforce civil obligation has failed vi. Payment by heir of debt exceeding value of property inherited vii. Payment of legacy after will has been declared void. (CIVIL CODE, art. 1423-1430) ————- end of topic ————- ESTOPPEL Estoppel – a condition or state by virtue of which an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. (CIVIL CODE, art. 1431) Estoppel is effective only between the parties thereto or their successors in interest. (CIVIL CODE, art. 1439) Kinds: 1. Estoppel in pais (by conduct) (a) Estoppel by silence (b) Estoppel by acceptance of benefits 2. Technical estoppel (a) Estoppel by deed (b) Estoppel by record (c) Estoppel by judgment (d) Estoppel by laches Requisites of estoppel in pais A. As related to the party to be estopped (CIK) 1. Conduct which amounts to a false representation or concealment of material facts, or at least which is calculated to convey the impression that the facts are otherwise than, and inconsistent with those which the party subsequently attempts to assert; CIVIL LAW 2. Intention or at least the expectation, that such conduct shall be acted upon, or influence, the other party or other persons; 3. Knowledge, actual or constructive, of the real facts B. As related to the party claiming the estoppel (IRA) 1. Ignorance or lack of knowledge and of the means of knowledge of the truth as to the facts in question 2. Reliance in good faith, upon the conduct or statement of the party to be estopped; and 3. Action or inaction based thereon of such a character as to change the position or status of the party claiming the estoppel, to his injury, detriment, or prejudice. (Manila International Airport Authority v. Ding Velayo Sports Center, Inc., G.R. No. 161718, Dec. 14, 2011) Requisites of estoppel by laches (CLID) 1. Conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made; 2. Delay in asserting the complainant’s right, the complainant having had knowledge or notice of the defendant’s conduct and having been afforded an opportunity to sue; actual knowledge of the commission of the adverse act is not necessary, it being enough that such knowledge may be imputed to the complainant because of circumstances of which he was cognizant; 3. Lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and 4. Injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred. (Cimafranca v. IAC, G.R. No. L-68687, Jan. 31, 1987) ————- end of topic ————- Page 284 of 474 SPECIAL CONTRACTS Civil Law ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 A. SALES SPECIAL CONTRACTS TOPIC OUTLINE UNDER THE SYLLABUS: A. SALES I. General provisions II. Parties III. Obligations of the vendor IV. Obligations of the vendee V. Transfer of ownership VI. Risk of loss VII. Documents of title VIII. Warranties IX. Breach of contract X. Performance of contract XI. Extinguishment B. TRUSTS C. AGENCY D. COMPROMISE E. LOAN I. II. III. IV. Loan Commodatum Simple loan Interests on loan a. Conventional interest b. Interest on interest c. Compensatory, penalty or indemnity interest d. Finance charges e. Usury F. DEPOSIT G. LEASE I. GENERAL PROVISIONS Contract of Sale It is a contract where one of the contracting parties (Seller) obligates himself to transfer the ownership and to deliver a determinate thing, and the other party (Buyer) to pay a price certain in money or its equivalent. A contract of sale may be absolute or conditional. (Art. 1458) Elements of a Contract of Sale: (CSP) 1. Consent 2. Determinate or Determinable Subject Matter 3. Price certain in money or its equivalent (Coronel v. CA, G.R. No. 103577, 1996) The absence of any essential elements negates the existence of a perfected contract of sale. (Dizon v. CA, G.R. 122544, 1999) Characteristics of Contract of Sale: (NOCPCBR) 1. Nominate 2. Onerous 3. Consensual 4. Principal 5. Commutative 6. Bilateral 7. Reciprocal FORMALITIES OF CONTRACT Form not important in validity of sale GR: Sale being consensual, may be oral or written, perfected by mere consent as to price and subject matter (Art. 1475) Non-compliance with the formal requirements does not affect the validity of contract (Fule v. CA, G.R. No. L-40502 & L-42607, 1976) When Form is Important for Validity; Exception by Specific Provision of Law; 1. Donations and wills (Arts. 749, 804) 2. Power to sell a piece of land granted to an agent must be in writing– otherwise sale is VOID (Art. 1874) 3. Sale of large cattle; must also be registered with Municipal treasurer – otherwise VOID (Art. 1581; Revised Administrative Code, Sec. 529) Page 286 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW 4. Sale of land by non-Christian if not approved by Governor – VOID (Tac-an v. CA, G.R. No. L-38736, 1984) 4. E-commerce: When sales are effected through electronic commerce (R.A. 8792, Sec. 12) Article 1358, which requires the embodiment of certain contracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, therefore, for the benefit of third parties; and non-compliance therewith does not adversely affect the validity of the contract and the rights and obligations of the parties thereunder. (Dalion v. CA, 182 SCRA 872,1990) While a sale of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons if not embodied in a public instrument and recorded in the Registry of Deeds. (Secuya v. Vda. De Selma, G.R. No. 136021, 2000) Statute of Frauds Note that if particular form is required under the statute of frauds and the same is not followed: • While the sale is valid, it is UNENFORCEABLE even as to the parties to the contract of sale. When Form (should be in writing and not merely verbal) is Important for Enforceability [Statute of Frauds](Art. 1403 [2]) 1. A contract not to be performed in 1 year: A sale agreement which by its terms is not to be performed within a year from the making thereof; 2. Php 500 and Above: An agreement for the sale of goods, chattels or things in action, at a price not less than PhP500 3. Sale of Land: A sale of real property or of an interest therein. Exceptions to Coverage of Statute in Sales Contracts: 1. Written: When there is a note or memorandum in writing and subscribed to by party or his agent (contains essential terms of the contract) (Art. 1403) 2. Partial Execution: When there has been partial performance/execution (seller delivers with intent to transfer title/receives price; or when buyer partially pays the price) (Art. 1405) 3. Failure to object: When there has been failure to object to presentation of evidence (oral) (Art. 1405) Page 287 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CONTRACT OF SALE Title passes to the buyer upon delivery of the thing sold (Art. 1477) The seller has lost and cannot recover ownership of the thing sold and delivered (Arts. 1477, 1496) until and unless the contract of sale itself is resolved and set aside. CIVIL LAW CONTRACT TO SELL TRANSFER OF TITLE Ownership is reserved in the seller and shall not pass to the purchaser until fulfillment of certain conditions, such as full payment of the purchase price. (Art. 1478) OWNERSHIP OF THE SELLER Title remains in the seller if the buyer does not comply with the condition precedent, which payment of the price at the time specified in the contract. (Tuazon v. Garilao, G.R. No. 143673, 2001) NOTE: It must be stipulated that ownership in the thing shall not pass to the buyer until full payment of the price. (Art. 1478) PAYMENT OF THE PRICE Full payment of the price is a positive suspensive condition, the failure of which is not a breach of contract but simply an event that prevents the Non-payment of the price is obligation of the seller to convey title to the buyer. (Uy& Sons, Inc. v. a negative resolutory Valbueco Inc., G.R. No. 179594, 2013) condition. (Art. 1179) The non-payment of the purchase price renders the contract to sell without force and effect. (Tumibay v. Lopez, G.R. No. 171692, 2013) REMEDIES Specific performance cannot be availed of when the contract to sell has been cancelled due to the non-payment of the purchase price. The buyer cannot demand the seller to convey title when such buyer did not pay the price, and the seller cannot demand the buyer to pay the price, since failure to pay resulted in the cancellation of the contract to sell. (Pilipino Telephone Specific performance or Corporation v. Radiomarine Network Phils. Inc., G.R. No. 160322, 2011) rescission under Articles 1191, 1592, and 1593. Remedy of rescission is not available because the breach contemplated in rescission of contracts is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. A non-existent obligation cannot be subject of rescission. (Diego v. Diego, G.R. No. 179965, 2013) (De Leon, Comments and Cases on Sales and Lease, 21-23, 2014) Page 288 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 FORMATION OF THE CONTRACT Three Stages in Life of a Contract of Sale 1. Policitacion/Negotiation Stage – offer floated, acceptance is floated but they do not meet; covers the period when parties indicate their interest but no concurrence of offer and acceptance. 2. Perfection – the “birth” of the contract, concurrence of all requisites; meeting of the minds upon the object and price. 3. Consummation – the “death” of the contract, parties perform their respective undertakings (Arts. 1475, 1479, 1493-1506; Villanueva & Tiansay, Law on Sales, 118-119, 2016) Rules: 1. Offer is floated 2. Offer floated with a period 3. Offer floated w/ condition 4. Offer floated without period/ without condition 5. Offer is floated and there is counteroffer 6. Offer is floated 7. Offer accepted absolutely Prior to acceptance, may be withdrawn at will by offeror Without acceptance, extinguished when period has ended and may be withdrawn at will by offeror; right to withdraw must not be arbitrary otherwise, liable to damage under Art. 19, 20, 21 of Civil Code Extinguished by happening/non-happening of condition Continue to be valid depending upon circumstances of time, place and person Original offer is destroyed, there is a new offer; cannot go back to original offer No authority of offeror to modify offer Proceed to perfected stage Option Contract - a contract granting an exclusive right in one person, for which he has paid a separate consideration, to buy a certain object within an agreed period of time. (Art. 1479) CIVIL LAW NOTE: There is no presumption of consideration, it needs to be proven (Sanchez v. Rigos, G.R. No. L-25494, 1972) Option-an unaccepted or unexercised contractual offer (Adelfa Properties v. CA, G.R. No. 111238, 1995) Elements of Valid Option Contract: 1. Consent – meeting of the minds 2. Subject matter – an option right to an “unaccepted unilateral offer to buy or sell”, or an “accepted promise to sell, or to buy”: (a) A determinate or determinable object (b) For a price certain (including manner of payment) 3. Prestation – a consideration separate from purchase price for option given, i.e., Option (Villanueva & Tiansay, Law on Sales, 126, 2016) Characteristics of Option Contract: (SPNOCUUP) 1. Not the contract of sale by itself, Separate and distinct 2. Nominate 3. Principal - but can be attached to other principal contracts 4. Onerous 5. Commutative 6. Unilateral – versus contract of sale which is bilateral 7. Preparatory 8. Unaccepted or unexercised contractual offer Consideration in an option contract may be anything of value, unlike in sale where it must be price certain in money. (San Miguel Philippines v. Huang, G.R. No. 137290, 2000) However, when the consideration is not monetary, the consideration must be clearly specified as such in the option contract or clause. When the written agreement itself does not state the consideration for the option contract, the offeree bears the burden of proving the existence of a separate consideration for the option. (PNOC v. Keppel Phils. Holdings, Inc., G.R. No. 202050, 2016) Page 289 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 How Exercised: Notice of acceptance should be communicated to offeror even without actual payment of the option money as long as there is delivery of payment in consummation stage. (Nietes v. CA, G.R. No. L-32873, 1972) Situations in an Option Contract: 1. With separate consideration • Option contract is valid • Offeror cannot withdraw offer until after expiry period • Subject to damages for breach of option contract if offeror withdraws during the time stipulated but not to specific performance because an option contract does not create an obligation to give (Tuazon v. Del Rosario-Suares, G.R. No. 168325, 2010) 2. Without separate consideration Even if the option without separate consideration constitute a certain offer, still it must still be exercised within the option period and the acceptance must still be absolute. (Tuazon v. Del Rosario-Suares, G.R. No. 168325, 2010) Rules on Option Contract: 1. If the period is not supported by a separate consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror’s coming to know of such fact, by communicating that withdrawal to the offeree. 2. The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 (Abuse of Rights). 3. If the period has a separate consideration, a contract of “option” is deemed perfected, and it would be a breach of contract to withdraw the offer during the agreed period. 4. The option is an independent contract in itself, and it is to be distinguished from the proposed sales contract. If the optionerofferor withdraws the offer before its acceptance by the optionee-offeree, the optionee-offeree may not sue for specific performance on the proposed contract since it has not been perfected; however, the optioner-offeror is liable for damages for breach of the option. 5. In these cases, if the consideration is intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an “earnest money” in sale that can evidence its perfection. (Ang Yu Asuncion v. CA, G.R. No. 109125, 1994) Right of First Refusal A right of first refusal (“RFR”) covers a situation wherein a promise on the part of the owner of a property is made that if he decides to sell the property in the future, he will first negotiate its sale to the promisee. It creates a promise to enter into a contract of sale in the event the seller decides to sell his/her property and it has no separate consideration. It is not subject to specific performance because there is no contractual relationship here and it is not an obligation to give (not a real contract). New doctrine: May be subject to specific performance in a specific instance. The RFR is only subject to specific performance insofar as it is attached to a valid written principal contract (e.g. lease). RFR becomes one of the considerations in the contract. If RFR is violated, and property sold to another buyer in bad faith, the sale to the 3rd party buyer is rescissible. The price for the 3rd party buyer is to be the basis for the price of the sale back to the one with the RFR. Lessee can exercise the right of first refusal once the sale to the third party is set aside or rescinded. (Equatorial Dev’t v. Mayfair Theater, G.R. No. 106063, 2006) 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 Page 290 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 even have a separate consideration, may be subject to specific performance. It recognizes recovery of damage based on abuse of rights doctrine. Only after the optionee fails to exercise his right of first priority under the same terms and within the period contemplated, could the owner validly offer to sell the property to a third person under the same terms as offered to the optionee. (Parañaque Kings v. CA, G.R. No. 111538, 1997) Option Contract Distinguished from Right of First Refusal OPTION CONTRACT RIGHT OF FIRST REFUSAL Principal contract; Accessory; cannot stands on its own stand on its own Needs separate Does not need consideration separate consideration Subject matter and There must be price must be valid subject matter but price not important Not conditional Conditional Not subject to specific Subject to specific performance performance Mutual promise to buy and sell (Art. 1479) 1. Promise to buy and sell a determinate thing for a price certain: reciprocally demandable; 2. Accepted unilateral promise to buy or to sell: binding upon the promissor if promise supported by a consideration distinct from the price. Q: Spouses X & Y entered into a lease contract with Z over a property in Tacloban. It appears that the Lease Contract lapsed in 2006, with no express renewal. However, the Spouses X & Y continued using the premises and paying the rentals, without any objections from Z. However, in 2008, Z sold several parcels of land including the land being leased to Spouses X & Y. Spouses X&Y contend that the right of first refusal was violated; however, Z claims that since the contract was only impliedly renewed, first refusal does not attach to it. Who is correct? A: Z is correct. Implied renewals do not include the option to buy, as it is not germane to the lessee's continued use of the property. Based on Article 1643, the lessee's main obligation is to allow the lessee to enjoy the use of the thing leased. Other contract stipulations unrelated to this — for instance, the right of ﬁrst refusal — cannot be presumed included in the implied contract renewal. The law itself limits the terms that are included in implied renewals. One cannot simply presume that all conditions in the original contract are also revived; after all, a contract is based on the meeting of the minds between parties. (Spouses Manas v Nicolasora, G.R. No. 208845, February 3, 2020). PERFECTION OF SALES General Rule: A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price; consensual contract (Art. 1475) Exception: When the sale is subject to a suspensive condition. (People’s Homesite v. CA, G.R. No. L-61623, 1984) Requirements: 1. When parties are face to face – when there is absolute acceptance of an offer that is certain 2. When thru correspondence or telegram – when the offeror receives or had knowledge of the acceptance (Art. 1319) 3. When the sale is subject to a suspensive condition – from the moment the condition is fulfilled (People’s Homesite v. CA, G.R. No. L-61623, 1984) NOTE: Qualified acceptance is a mere counteroffer which needs to be absolutely accepted to give rise to perfected contract of sale. (Art. 1319; Manila Metal Container v. PNB, G.R. No. 166862, 2006) Business ads are mere invitations to make an offer except when it appears to be otherwise. (Art. 1325) Page 291 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 EMPTIO REI SPERATAE “The purchase of what we hope” Sale of an expected thing/ future thing Rules Governing Auction Sales • Sale is perfected by the fall of the hammer • Seller has the right to bid at the auction provided such right was reserved and notice was given to that effect. (Art. 1476) In bidding contracts, the award of the contract to the bidder is an acceptance of the bidder's offer. Its effect is to perfect a contract between the bidder and the contractor upon notice of the award to the bidder. Failure to sign the physical contract does not affect the contract's existence or the obligations arising. (Metro Rail Transit Development Corp v. Gammon Phil, G.R. No. 200401, 2018.) SUBJECT MATTER OF SALE Requisites of a valid subject matter (Arts. 1459-1465) 1. Possible 2. Licit 3. Determinate or Determinable If requisite not present, resulting contract is VOID. 1. Possible Existing, having potential of existence, future, or contingent (Arts. 1347, 1348, 1462) (a) Existing goods – goods owned or possessed by the seller at the time of perfection (b) Future goods – goods to be manufactured, raise, or acquired by the seller after the perfection of the contract (forward contracts) Whether the subject matter is of a type and nature that exists or could be made to exist to allow the seller reasonable certainty of being able to comply with his obligations. Minimum requirement of potential existence: taking into consideration the state of science and technology at the time of perfection of the contract. Sale is subject to a suspensive condition—that the thing will exist; if it does not, there is no contract EMPTIO SPEI “Purchase of hope” Sale of a hope or expectancy that the thing will come to existence; sale of the hope itself Sale is effective even if the thing does not come into existence, unless it is a vain hope (Art. 1461 Sale of a vain hope or expectancy is void) Uncertainty is with regard to the existence of the thing Uncertainty is with regard to the quantity and quality of the thing and not the existence of the thing Object is a future Object is a present thing, which must be thing which is the determinate or hope or expectancy specific (not generic) E.g. growing crops E.g., lottery ticket (Villanueva & Tiansay, Law on Sales, 67-68, 2016) 2. • • • Licit Not outside the commerce of man (Art. 1459) If illicit, contract is void Sale declared illegal by law (i.e., narcotics, wild birds and mammals, rare wild plants, etc.) Prohibited: (a) Narcotics (RA 6425); (b) Wild Birds or mammals (R.A. No. 2590); rare wild plants (R.A. No. 3983); poisonous plants or fruits (R.A. No. 1288); dynamited fish (R.A. 428); (c) Gunpowder and explosives (Act No. 2255); and firearms and ammunitions (P.D. No, 9); (d) Sale of land by non-Christians (Sec. 145, Administrative Code of 1987) (e) Animals with contagious diseases (Art. 1575) Page 292 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 (f) Sale of animals unfit for the use or service for which they were acquired (Art. 1575) (g) Sale of future inheritance and other rights that are not transmissible (Art. 1347) CIVIL LAW (Inchausti & Co. v. Cromwell, G.R. No. L-6584, 1991) NOTE: Sale is valid when consideration is partly in money and partly in another thing. (Art. 1468). 3. Determinate or Determinable Determinate: always specific • particularly designated or physically segregated from all others of the same class; (Art. 1460) Determinable: always generic • Thing is capable of being made determinate (Capacity to Segregate Test) • Without the necessity of a new or further contract between the parties (No Further Agreement Test). (Art. 1460) NOTE: Subject matter CANNOT be DETERMINED BY a 3rd PARTY. (Villanueva & Tiansay, Law on Sales, 102, 2016) When Subject Matter is a Right: It must be transmissible. (Art. 1311) • Future inheritance cannot be sold (Art. 1347) • Service cannot be sold (Art. 1348) Quantity of subject matter is not essential for perfection, but quantity is essential if it goes into the determinability of the subject matter and the price or consideration in the contract; Determine the nature and quality of subject matter (National Grains Authority v. IAC, G.R. No. 74470, 1989) Generic things may be the object of a sale, but the obligation to deliver the subject matter can only be complied with when the subject matter has been made determinate (either by physical segregation or particular designation) (Yu Tek & Co. v. Gonzales, G.R. No. L-9935, 1915) PRICE Price The sum stipulated as the equivalent of the thing sold and also every incident taken into consideration for the fixing of the price, put to the debit of the vendee and agreed to by him. REQUISITES FOR A VALID PRICE (ReM-C) 1. Real 2. In Money or its equivalent 3. Certain or ascertainable (Francisco v. Desierto, G.R. No. 154117, 2009) 1. Real, not simulated When at the perfection of the contract of sale, there is every intention on the buyer to pay the price, and every expectation on the part of the seller to receive such price as the value of the subject matter he obligates himself to deliver. (Test of intention) (Rongavilla v. CA, G.R No. 83974, 1998) Effect Where Price is Simulated i. The act may be shown to have been in reality a donation, or some other act or contract. (Art. 1471) ii. If not, and neither party had any intention whatsoever that the amount will be paid (absolutely simulated): the sale is void (Rongavilla v. CA, G.R. No. 83974, 1998) iii. If there is a real price but what is stated in the contract is not the one intended to be paid (only relatively simulated or what is called a “False Price”): the ostensible contract of sale is valid but subject to reformation. (Macapagal v. Remorin, G.R. No. 158380, 2005) 2. In money or its equivalent Consideration for a valid contract of sale can be the price and other valuable consideration; at the very least, a true contract of sale must have price, which consist of valuable consideration (i.e., something that can be quantifiable by pesos and centavos) as part of its consideration (Test of value consideration). (Republic v. Phil. Resources Dev., G.R. No. L-10141, 1958) Page 293 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 3. Certain or ascertainable Certain: expressed and agreed in terms of specific pesos and/or centavos (Art. 1469) Ascertainable: i. Set by third persons (Art. 1469) ii. Set by the courts – only in cases where the third person designated to fix the price, fixes the same in bad faith or by mistake (Art. 1469) iii. Set by reference to a definite day, particular exchange or market (Art. 1472) iv. Set by reference to another thing certain (Art. 1472) v. But never by only one party to the contract of sale as it amounts to a potestative condition (unless the price is accepted by the other party) (Art. 1473) 3rd NOTE: When the party is unwilling to set price, the parties may not ask the court to fix price because the condition imposed on contract has not happened yet and thus, enforceable contract has arisen. (Art. 1474) the the the no IF PRICE IS NEITHER CERTAIN NOR ASCERTAINABLE: The contract of sale is inefficacious. Effect of Non-Payment of Price Non-payment of price does not cancel or avoid the sale, as the sale is still considered perfected. But it is a cause for either: (a) Specific performance or (b) Rescission. (Heirs of Escanlar v. CA, G.R. No. 119777, 1997) HOW PRICE IS DETERMINED Price is determined by the contracting parties. (Art. 1473) Exceptions: 1. When there is fraud, mistake, or undue influence indicative of a defect in consent thereby making the contract voidable. (Art. 1470) NOTE: Art. 1456 of the CIVIL CODE provides that a person acquiring a property through fraud becomes an implied trustee of the property’s true and lawful owner. This case involved constructive trust. The action for reconveyance of the title to the rightful owner prescribes in 10 years from the issuance of the title. This ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust, which repudiation takes place when the adverse party registers the land. (Spouses Aboitiz v. Spouses Po, G.R. Nos. 208450 & 208497, 2017) 2. When it shows that the parties really intended a donation or some other act or contract thereby making the contract of sale void but may be valid as a contract of donation or some other contract. (Art. 1470) 3. In Judicial Sale, where the inadequacy is shocking to the conscience of man (Pascua v. Heirs of Simeon, G.R. No. L-47717, 1988) and there is showing that, in the event of resale, a better price can be obtained, the contract of sale is void. (Bie v. CA, G.R. No. L-17294, 1965) NOTE: If there was a failure of the contract to set a price but the buyer has already appropriated it, then the buyer must pay a reasonable price. (Art. 1474) MANNER OF PAYMENT MUST BE AGREED UPON The manner of payment must be agreed upon. (Marnelego v. Banco Filipino Savings and Mortgage Bank, G.R. No. 161524, 2006) INADEQUACY OF PRICE Effect of Gross Inadequacy of Price General Rule: Mere inadequacy of the price does not affect the validity of the sale. (Bautista v. CA, G.R. No. 158015, 2004) It is an essential ingredient before a valid and binding contract of sale can be said to exist, because it is part of the prestation of the contract. (Sps. Navarra v. Planters Development Bank, G.R. No. 172674, 2007) Page 294 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 EARNEST v. OPTION MONEY Earnest Money (Art. 1482) • Money given as part of purchase price • Acceptance is the proof that contract of sale exists • Nothing in law prevents parties from treating earnest money differently Absent proof of a clear agreement to the contrary, it is intended to be forfeited if the sale does not happen without the seller's fault. The potential buyer bears the burden of proving that the earnest money was intended other than as part of the purchase price and to be forfeited if the sale does not occur without the fault of the seller. (Racelis v. Spouses Javier, G.R. No. 189609, January 29, 2018). 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 Option Money Distinguished from Earnest Money OPTION MONEY EARNEST MONEY Given as distinct Given as part of the consideration for an purchase price option contract Applies to a sale that Applies when there is is not perfected already a sale When given, buyer is When given, buyer is not required to buy bound to pay the balance (Oesmer v. Paraiso Development Corporation, G.R. No. 157493, 2007) ————- end of topic————II. PARTIES CAPACITY OF PARTIES General rule: All persons who are authorized in this Code to obligate themselves may enter into a contract of sale (Art. 1489); as long as these persons are with civil capacity. When one of the parties is incapable of giving consent, the contract of sale is voidable (Art. 1390), subject to annulment or ratification. (Art. 1393) ABSOLUTE INCAPACITY Parties Disqualified to Enter into Sale Contract: 1. Minors (Art. 1327) 2. Insane and Demented Persons (Art. 1327) 3. Deaf-Mutes who do not know how to write (Art. 1327) Also includes state of drunkenness and hypnotic spell (Art. 1328) GR: Status of Contract: Voidable, BUT it is subject to annulment or ratification. Exception: Where necessaries are sold and delivered to minors or other persons without capacity to act, he must still pay a reasonable price therefore, thus, the resulting contract is valid and not voidable. (Art. 1489) RELATIVE INCAPACITY 1. Spouses - A spouse may, without the consent of the other spouse, enter into sales transactions in the regular pursuit of their profession, vocation, or trade. (Family Code, Arts. 73, 96, 124) General Rule: The husband and the wife cannot sell property to each other. The contract is void. There is no transfer of ownership, thus the creditors may go after the property. (Modina v. CA, G.R. No. 109355, 1999) Exceptions: (a) When a separation of property was agreed upon in the marriage settlement (Art. 1490) (b) When there has been a judicial separation of property under Art. 191 (Art. 1490) NOTE: Prohibition likewise applies to commonlaw spouses (Matabuena v. Cervantes, G.R. No. L-28771, 1971) The sale of conjugal property by a spouse without the other's consent is void. All subsequent transferees of the conjugal property acquire no rights whatsoever from the conjugal property's Page 295 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW unauthorized sale. (Malabanan v. Malabanan, Jr., G.R. No. 187225, 2019) Any others specially disqualified by law (Art. 1491 [6]) 2. Others - Trust Relationships NOTE: These contracts are void for public policy. They cannot be ratified neither can the right to set up the defense of illegality be waived. (Rubias v. Batiller, G.R. No. L-35702, 1973) Two groups of parties prohibited from acquiring by purchase certain properties: (GAAE - PEJJOL) (Art. 1491) ————- end of topic————1. Guardian/Agent/Executors and Administrators • Direct or indirect • May be “ratified” since only private wrong is involved, i.e., really in the form of entering into a new contract 2. Public Officers and Employees/ Justices and Judges/ Officers of Court/ Lawyers • Cannot be ratified since public wrong is involved Requisites for the prohibition to apply to attorneys and their clients’ properties: 1. Existence of attorney client relationship; 2. Property is the subject matter in litigation; 3. While in litigation (from filing of complaint to final judgment) NOTE: Exception to the prohibition against attorneys: contingent fee arrangement where the amount of legal fees is based on a value of property involved in litigation (rationale: the transfer or assignment of the property takes effect only after the finality of a favorable judgment and is always subject to supervision by the court) (Fabillo v. IAC, G.R. No. L-68838, 1991) Legal Status of Contract Void (case law) – guardian/executor/public officers/officers of the court. (Rubias v. Batiller, G.R. No. L-35702, 1973) Unenforceable (civil code) – agent; VALID if with consent (Art. 1491) SPECIAL DISQUALIFICATIONS III. OBLIGATION OF THE VENDOR Obligation of the Vendor The vendor (seller) is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. (Art. 1495) Objects that the vendor has to deliver: (Thi-FA) 1. The thing sold (Art. 1495) 2. Fruits, belong to the buyer from the day the contract of sale is perfected (Art. 1537) 3. Accessions and accessories, in the condition in which they were upon the perfection of the sale (Art. 1537) Obligations of the Vendor 1. Preserve the subject matter – proper diligence of a good father of a family unless law or parties stipulate another standard (Art. 1163) 2. Deliver – transfer ownership and deliver object (Art. 1495) 3. Deliver fruits and accessories existing from the time of perfection (Arts. 1164, 1166, 1537) 4. Warrant subject matter against eviction and hidden defects (Arts. 1546-1581) General Rule: Seller need not be the owner of the subject matter at the time of perfection: sufficient that he is the owner at the time of delivery. (Art. 1459) Exception: Foreclosure sale (mortgagor must be absolute owner) (Art. 2085) NOTE: A perfected contract of sale cannot be challenged on the ground of the seller’s nonPage 296 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 ownership of the thing sold at the time of the perfection of the contract. It is at delivery that the law requires the seller to have right to transfer ownership of the thing sold. (Cavite Development Bank v. Sps. Lim, G.R. No. 131679, 2000) 1. Rules on Legal Effects of Sale by a Nonowner DELIVERY OF SUBJECT MATTER Exceptions: 1. Owner by his conduct is precluded from denying seller’s authority (Estoppel) (Art. 1434) 2. Contrary is provided for in recording laws (Art. 1505; P.D. 1529) 3. Sale is made under statutory power of sale or under order of a court of competent jurisdiction (Art. 1505) 4. Sale is made in a merchant’s store in accordance with code of commerce and special laws. (Art. 1505) Delivery- “the absolute giving-up of the control and custody of the property on the part of the vendor, and the assumption of the same by the vendee” (Equatorial Realty Dev. v. Mayfair Theater, G.R. No. 133879, 2001) Two Types of Delivery: 1. Actual- physical delivery 2. Constructive a. Execution of Public Instrument (Art. 1498) only produces the effect of delivery when: i. The thing sold is subject to control of seller at the time of execution of instrument. (Addison v. Felix, G.R. No. L-12342, 1918); and ii. Such control should remain for a reasonable period after execution of the Instrument. (Power Commercial and Industrial Corp. v. CA, G.R. No. 119745, 1997) b. Constitutum Possessorium (Art. 1500) – the seller held possession of the subject matter (real property) in the concept of owner, and pursuant to the sale, the seller continues to hold physical possession but no longer in the concept of the owner (owner to lessee) c. Traditio Brevi Manu – the would-be buyer was already in the possession (i.e., as lessee) of the subject matter (real property) and pursuant to the sale, he would now hold possession as owner d. Traditio Longa Manu – delivery by mere consent or agreement. SALE BY A PERSON NOT THE OWNER AT THE TIME OF DELIVERY (Arts. 1462, 1505, 1459) General Rule: If sale is by a non-owner, buyer acquires no better title than seller had. (Art. 1505) 2. Title as to Movable Properties General Rule: Possession is equivalent to title (Art. 559) Requisites:(PG) 1. Possession of movable 2. Made in Good faith (Art. 559) Exceptions: 1. Owner lost movable – owner can recover by reimbursing price, including those acquired in public sale or auction, provided in good faith (not a fencer) (Art. 559) 2. Owner is unlawfully deprived (stolen or delivered without intention of transferring title) – owner can recover w/o reimbursing price (Art. 559) 3. Bought in a merchant store – owner cannot recover even if unlawfully deprived (Art. 1505) Exceptions to the Exceptions: 1. Movable is bought at public sale – owner can only recover after reimbursing price 2. Acquired in good faith and for value from auction Page 297 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE TITLE 1. Perfection Stage • Sale by owner – VALID • Sale by non-owner – VALID (Arts. 1459, 1475) Reason why both sales are valid: ownership is necessary only at time of delivery; at perfection stage, no obligation on part of seller to transfer ownership (Villanueva, Law on Sales, 294, 2016) 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 (Art. 1434) Since valid, action to annul is improper; there is already a perfected contract. 2. Consummation Stage Contract of sale is valid because it has passed perfected stage, despite seller not being the owner or 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 (Art. 1505) • Legal effect: CAVEAT EMPTOR – BUYER BEWARE but Buyer always has cause of action against the Seller SALE OF CO-OWNER OF WHOLE PROPERTY OR DEFINITE PORTION General Rule: 1. Co-owner sells whole property prior to partition – sale of property itself is void but valid as to his spiritual share (Panganiban v. Oamil, G.R. No. 149313, 2008) 2. Co-owner sells definite portion prior 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 he would not acquire the definite portion sold. (Lopez v. Cuaycong, G.R. No. L-46079, 1944) CIVIL LAW Exceptions to the rule on the effect of sale of a definite portion by a co-owner 1. Subject matter is indivisible in nature or by intent, hence, entire sale is void; (Mindanao Academy, Inc. v. Yap, G.R. No. L-17681, 1965) 2. Sale of a particular portion of a property is with consent of other co-owners, sale of entire property is valid; (Pamplona v. Moreto, G.R. No. L-33187, 1980) 3. Co-owner sells 1 of 2 commonly owned lands and does not turn over ½ of the proceeds, other co-owner, by law and equity, has exclusive claim over remaining land. (Imperial v. CA, G.R. No. 102037, 1996) E. SALE BY SELLER WITH VOIDABLE TITLE IN GOOD FAITH and WITHOUT NOTICE OF THE DEFECT 1. Perfection stage Valid sale – buyer acquires title of goods 2. Consummation stage Valid sale – if title has not yet been avoided, buyer becomes owner of the goods under the condition that the sale: 1. was made in good faith 2. is for value 3. is without notice of seller’s defect of title (Art. 1506) ————- end of topic————IV. OBLIGATION OF THE VENDEE There is real or actual delivery of the thing sold when it is placed in the control and possession of the vendee. (Art. 1497) Obligations of Vendee (Buyer) 1. Pay the price Buyer is obligated to pay the price according to the terms agreed upon regarding time, place and amount (Art. 1582) i. If payment of interest is stipulated – must pay; if amount of interest not mentioned – apply legal rate ii. When buyer defaults – constitutes breach; subject to specific Page 298 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 performance/rescission and damages; interest to be paid also from default 2. Accept delivery of thing sold Where to accept: (a) at time and place stipulated in the contract (b) if none specified – at the time and place of delivery goods (Art. 1582) There is acceptance when: (a) He intimates to seller that he has accepted (b) When delivered and buyer does any act inconsistent with ownership of seller (c) Retains without intimating to seller that he has rejected (Art. 1585) 3. Sale of Goods on installment Goods must be delivered in full, except when stipulated (Art. 1583) When not examined by buyer – not accepted until examined or at least had reasonable time to examine (Art. 1584) 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) (Art. 1586) When buyer has a right to refuse goods, no need to return; shall be considered as depositary; unless there is stipulation to the contrary (Art. 1587) ————- end of topic————V. TRANSFER OF OWNERSHIP Transfer of ownership 1. By tradition or delivery and not by perfection; 2. By execution of public instrument because intangibles cannot be physically transferred; 3. Without necessity of delivering the document evidencing the credit. NOTE: This rule does not apply to negotiable documents and documents of title which are governed by special laws. CIVIL LAW Assignment The owner of a credit transfers to another his rights and actions in consideration of a price certain in money or its equivalent 1. Transfers the right to collect the full value of the credit, even if he paid a price less than such value; 2. Transfers all the accessory rights (e.g. guaranty, mortgage, pledge, preference) (Art. 1427); 3. Debtor can set up against the assignee all the defenses he could have set up against the assignor. Difference from sale • Technical term but basically a sale • Sale of credits and other incorporeal things (Villanueva, Law on Sales, 524-526, 2016) Effects of assignment Lack of knowledge or consent of debtor not essential for validity but has legal effects (“meeting of minds” in assignment contemplates that between assignor of the credit and his assignee) (Rodriguez v. CA, G.R. No. 84220, 1992) Assignment of rights made w/o knowledge of debtor: Debtor may set up against assignee the compensation which would pertain to him against assignor of all credits prior to assignment and of later ones until he had knowledge of the assignment. Debtor has consented to assignment: Cannot set up against assignee the compensation which would pertain to him against assignor of all credits prior to assignment and of later ones until he had knowledge of the assignment • Compensation unless assignor was notified by debtor that he reserved his right to the compensation Debtor has knowledge but no consent: may still set up compensation of debts previous to assignment but not the subsequent ones. (Art. 1285) Page 299 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Effect of payment of debtor after assignment of credits 1. Before Notice of the Assignment – Payment to the original creditor is valid and debtor shall be released from his obligation 2. After Notice – Payment to the original creditor is not valid as against the assignee. He may be made to pay again by the assignee (Art. 1626) Warranties of the assignor 1. NO warranty against hidden defect - N/A because intangibles have no physical existence (Villanueva & Tiansay, Law on Sales, 532, 2016) 2. He warrants the existence and legality of credit – there is warranty except when expressly sold as a doubtful account 3. NO warranty as to the solvency of debtor unless it is expressly stipulated OR unless the insolvency was already existing and of public knowledge at the time of the assignment (Art. 1628) NOTES: Warranty shall last for 1 year only (Art. 1629) One who assigns inheritance right w/o enumerating rights shall be answerable for his character as an heir (Art. 1630) 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 (Art. 1631) Breach of warranty: liabilities of the assignor of credit for violation of his warranties Assignor in good faith – Liability is limited to price received, expenses of the contract and other legitimate payments made by reason of the assessment Assignor in bad faith – Liable ALSO for (expenses of contract and other legitimate payments plus useful and necessary expenses) damages (Art. 1628) CIVIL LAW ASSIGNMENT OF CREDIT OR INCORPOREAL RIGHT IN LITIGATION Requisites (SPA) 1. There must be a Sale or assignment of credit 2. There must be a Pending litigation 3. The debtor must pay the Assignee: i. Price paid by him AND ii. Judicial costs incurred by him AND iii. Interest on the price from the date of payment (Art. 1634) The right must be exercised by the debtor within 30 days from the date the assignee demands (judicially or extra-judicially) payment from him. (Art. 1634) NOTES: Presumption: buyer’s purpose is speculation and law would rather benefit the debtor of such credits rather than the one who merely speculates for profit. (Villanueva, Law on Sales, 533, 2016) 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 (Art. 1634) Right to redeem by debtor not available in the following instances (not considered speculative (Art. 1635) 1. Assignment of credit/incorporeal right to coheir or co-owner; the law does not favor coownership 2. Assignment to creditor in payment for his credit o Presumption is that the assignment is above suspicion; assignment is in the form of dacion en pago, thus perfectly legal 3. Assignment to possessor of tenement or piece of land which is subject to the right in litigation assigned o Purpose is to presumably preserve the tenement ————- end of topic ————- Page 300 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 VI. RISK OF LOSS VII. DOCUMENT OF TITLE GENERAL RULE 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. Definition "Document of title to goods" includes any bill of lading, dock warrant, "quedan," or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by indorsement or by delivery, goods represented by such document. If the subject matter is generic, simply replace item. (Art. 1263) WHO BEARS RISK OF LOSS/ DETERIORATION/ FRUITS BEFORE PERFECTION • Res perit domino • The seller is the owner, so he bears risk of loss. (Art. 1504) WHO BEARS RISK OF LOSS/ DETERIORATION/FRUITS AT PERFECTION • Res perit domino • Contract is merely inefficacious because loss of the subject matter does not affect the validity of the sale • Seller cannot anymore comply with obligation so buyer cannot anymore be compelled to pay the price. (Arts. 1493, 1494) WHO BEARS RISK OF LOSS/ DETERIORATION/ FRUITS AFTER PERFECTION BUT BEFORE DELIVERY • Loss – confused state o Paras: BUYER o Tolentino: SELLER • Deterioration and fruits - Buyer bears loss and claims the fruits. (Art. 1538, 1189) AFTER DELIVERY • Res perit domino • Delivery extinguishes ownership of the seller and creates a new one in favor of the buyer and, therefore, buyer bears risk of loss. (Art. 1504) ————- end of topic ————- "Goods" includes all chattels personal but not things in action or money of legal tender in the Philippines. The term includes growing fruits or crops. "Order" relating to documents of title means an order by indorsement on the documents. "Quality of goods" includes their state or condition. "Specific goods" means goods identified and agreed upon at the time a contract of sale is made. “Value” – An antecedent or pre-existing claim, whether for money or not, constitutes "value" where goods or documents of title are taken either in satisfaction thereof or as security therefor. (Art. 1636) Purpose Through a document of title, seller is allowed by fiction of law to deal with the goods described therein as though he had physically delivered them to the buyer; and buyer may take the document as though he had actually taken possession and control over the goods described therein. (Philippine Trust Co. v. National Bank, G.R. No. 16483, 1921) The warehouse receipt represents the goods, but the intrustion of the receipt, as stated, is more than the mere delivery of the goods; it is a representation that the one to whom the Page 301 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 possession of the receipt has been so intrusted has the title to the goods. (Siy Cong Bieng v. HSBC, G.R. No. L-34655, 1932) NEGOTIABLE DOCUMENTS OF TITLE a. How Negotiated (Arts. 1508-1509). A negotiable document of title may be negotiated by delivery: (1) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the bearer; or (2) Where by the terms of the document the carrier, warehouseman or other bailee issuing the same undertakes to deliver the goods to the order of a specified person, and such person or a subsequent indorsee of the document has indorsed it in blank or to the bearer. Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the same to himself or to any specified person, and in such case the document shall thereafter be negotiated only by the indorsement of such indorsee A negotiable document of title may be negotiated by the indorsement of the person to whose order the goods are by the terms of the document deliverable. Such indorsement may be in blank, to bearer or to a specified person. If indorsed to a specified person, it may be again negotiated by the indorsement of such person in blank, to bearer or to another specified person. Subsequent negotiations may be made in like manner. b. Who Can Negotiate (Art. 1512) A negotiable document of title may be negotiated: (1) By the owner thereof; or (2) By any person to whom the possession or custody of the document has been entrusted by the owner, if, by the terms of the document the bailee issuing the document undertakes to deliver the goods to the order of the person to whom the possession or custody of the document has been entrusted, or if at the time of such entrusting the document is in such form that it may be negotiated by delivery. c. Effects Of Negotiation (Art. 1513) A person to whom a negotiable document of title has been duly negotiated acquires: 1) Such title to the goods as the person negotiating the document to him had or had ability to convey to a purchaser in good faith for value and also such title to the goods as the person to whose order the goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in good faith for value; and 2) The direct obligation of the bailee issuing the document to hold possession of the goods for him according to the terms of the document as fully as if such bailee had contracted directly with him. (Art. 1513) Endorsement and delivery of a negotiable quedan operates as the transfer of possession and ownership of the property referred to therein and had the effect of divorcing the property covered therein from the estate of the insolvent prior to the filing of the petition for insolvency. (Philippine Trust Co. v. National Bank, G.R. No. 16483, 1921). d. Unauthorized Negotiation (Art. 1518) – When valid: Page 302 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 The validity of the negotiation of a negotiable document of title is not impaired by the fact that the negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the document was deprived of the possession of the same by loss, theft, fraud, accident, mistake, duress, or conversion, if the person to whom the document was negotiated or a person to whom the document was subsequently negotiated paid value therefor in good faith without notice of the breach of duty, or loss, theft, fraud, accident, mistake, duress or conversion. (Art. 1518) As between the owner of a negotiable document of title who endorsed it in blank and entrusted it to a friend, and the holder of such negotiable document of title to whom it was negotiated and who received it in good faith and for value, the latter is preferred, under the principle that as between two innocent persons, he who made the loss possible should bear the loss. (Siy Cong Bieng v. HSBC, G.R. No. L-34655, 1932) NON-NEGOTIABLE DOCUMENTS OF TITLE a. How Transferred or Assigned (Art. 1514) Transferred but not negotiated: A person to whom a document of title has been transferred, but not negotiated, acquires thereby, as against the transferor, the title to the goods, subject to the terms of any agreement with the transferor. Document is non-negotiable: If the document is non-negotiable, such person also acquires the right to notify the bailee who issued the document of the transfer thereof, and thereby to acquire the direct obligation of such bailee to hold possession of the goods for him according to the terms of the document. How title of transferee defeated: Prior to the notification to such bailee by the transferor or transferee of a nonnegotiable document of title, the title of the transferee to the goods and the right to acquire the obligation of such bailee may be defeated by the levy of an attachment of execution upon the goods by a creditor of the transferor, or by a notification to such bailee by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor. WARRANTIES OF SELLER THROUGH A DOCUMENTS OF TITLE (ART. 1516) Persons covered: 1. A person who for value negotiates or transfers a document of title by indorsement or delivery, unless a contrary intention appears 2. One who assigns for value a claim secured by a document of title, unless a contrary intention appears Warranties: 1. GENUINE. That the document is genuine; 2. LEGAL RIGHT. That he has a legal right to negotiate or transfer it; 3. NO KNOWLEDGE. That he has knowledge of no fact which would impair the validity or worth of the document; 4. RIGHT TO TRANSFER. That he has a right to transfer the title to the goods; 5. GOODS ARE FIT. That the goods are merchantable or fit for a particular purpose, whenever such warranties would have been implied if the contract of the parties had been to transfer without a document of title the goods represented thereby. ————- end of topic————VIII. WARRANTIES Warranty Defined A warranty is a statement or representation made by the seller of goods, contemporaneously and as part of the contract of sale, having reference to the character, quality or title of the goods, and by which he promises or undertakes to insure that Page 303 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 certain facts are or shall be as he then represents them. (Ang v. CA, G.R. No. 177874, 2008) Two kinds: a. Express b. Implied Requisites for Express Warranty 1. There must be an affirmation of fact or any promise by the seller; 2. The affirmation of fact or any promise must be in relation to the thing; 3. The natural tendency of such affirmation or promise is to induce the buyer to purchase the same; and 4. The buyer purchases the thing relying thereon. (Art. 1546) Rule on Seller’s Opinion No affirmation of the value of the thing, nor any statement purporting to be a statement of the seller's opinion only, shall be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer. (Art. 1546) “Seller’s/Dealer’s Talk” The law allows considerable latitude to seller’s statements, or dealer’s talk; and experience teaches that it is exceedingly risky to accept it at its face value. The refusal of the seller to warrant his estimate should have admonished the purchaser that the estimate was put forth as a mere opinion; and we will not now hold the seller to a liability equal to that which would have been created by a warranty, if one had been given. (Songco v. Sellner, G.R. No. L-11513, 1917) Caveat Emptor in relation to Dealer’s Talk The caveat emptor rule only requires the purchaser to exercise such care and attention as is usually exercised by ordinarily prudent men in like business affairs, and only applies to defects which are open and patent to the service of one exercising such care. (Guinhawa v. People of the Philippines, G.R. No. 162822, 2005) Implied Warranty – those which by law constitute part of every contract of sale, whether or not the parties were aware of them. Implied Warranties (Art. 1547) (SESH-RFC) 1. Seller has the right to Sell; 2. Warranty against Eviction; Requisites for warranty to apply: a) Purchaser has been deprived of, or evicted from the whole or part of the thing sold; b) Eviction is by final judgment; c) Basis is by virtue of a right existing prior to the sale; d) Seller has been summoned and made co-defendant in the suit for eviction at the instance of the buyer. Remedies in case warranty violated: a) return of the value of thing sold; b) return of income or fruits; c) reimbursement for cost of suit which caused the eviction; d) reimbursement for expenses of contract; e) damages (if violation in bad faith). 3. Warranty against Non-Apparent Servitude Requisites for warranty to apply: a) Existence of non-apparent servitude; b) Servitude is such that buyer would not have bought it had it known it existed Warranty not applicable when: a) Servitude is mentioned in the agreement; b) Servitude is recorded in the Registry of Deeds, unless there is an express warranty that the thing is free from encumbrances. Remedies available: If brought within 1 year from execution of deed: rescission and damages If brought after 1 year from execution: only damages 4. Warranty against Hidden Defects Page 304 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Requisites: a) Defect is hidden; b) Defect exists at time of perfection; c) Defect must ordinarily be excluded from contract; d) Defect must be important (render the thing unfit or decrease fitness); e) Action must be instituted within six months from delivery. General Remedies available a) Withdraw from the sale with damages b) Demand proportionate reduction of the price with damages Remedies of thing is lost: a) If lost due to hidden defect: • If seller aware – seller bears loss and obliged to return price and refund expenses of contract and pay damages • If seller unaware – seller must return the price and interest, reimburse for expenses of the contract but not liable for damages b) If lost due fortuitous event or through fault of buyer 5. Warranty against Redhibitory Defects on Animals (Read Arts. 1573-1578) 6. Warranty as to Fitness or Quality of Goods In order to enforce the implied warranty that the goods are reasonably fit and suitable to be used for the purpose which both parties contemplated, the following must be established: (a) that the buyer sustained injury because of the product; (b) that the injury occurred because the product was defective or unreasonably unsafe; and finally (c) the defect existed when the product left the hands of the petitioner. (Nutrimix Feeds Corp. v. CA, G.R. No. 152219, 2004) 7. Warranties under the Consumer Protection Act (R.A. 7394) IX. BREACH OF CONTRACT A. REMEDIES OF SELLER IN CASE OF MOVABLES General Remedies: 1. Specific Performance with damages; OR 2. Rescission with damages (a) When ownership is transferred to the buyer – the seller may maintain an action against him for the price of the goods, i.e., specific performance (Art. 1595) (b) When there is no transfer of ownership to the buyer i. If the goods can be resold for a reasonable price – seller may resell ii. If the goods cannot be resold – the seller can deliver the goods and if buyer refuses, then the seller may notify the buyer that the same is being held by the seller as bailee for the buyer then maintain an action for the price, i.e., specific performance.(Art. 1595) (c) When price is Payable on Certain Day and Buyer Fails to Pay on the Day Set – the seller can maintain action for the price, i.e., specific performance (Art. 1595) NOTE: Read Articles 1595-1596 of the Civil Code UNPAID SELLER A seller of the goods is deemed to be an unpaid seller either: (a) When the whole of the price has not been paid or tendered; or (b) When the seller received bill of exchange or negotiable instrument as a condition for payment and the condition has been broken by reason of the dishonor of instrument, the insolvency of the buyer, or otherwise. (Art. 1592) ————- end of topic————Requisites of Unpaid Seller: (PUG) 1. Physical possession is with seller Page 305 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW 2. Seller is Unpaid 3. Subject matter – Goods 1. From the time goods are Delivered to carrier for purpose of transmission to buyer 2. Goods Rejected by buyer and carrier continues to possess them (Art. 1531) Special remedies of unpaid seller: (PSRR) 1. Possessory lien 2. Stoppage in Transitu 3. Special right of Re-sale 4. Special right to Rescind (Art. 1526) NOTE: Hierarchical Application – only when unpaid seller has exercised possessory lien or stoppage in transitu can the seller proceed with his other special rights of resale or to rescind. (Villanueva & Tiansay, Law on Sales, 335, 2016) 1. Possessory lien Seller is not bound to deliver if buyer has not paid him the price. (Art. 1524) Right to retain cannot be availed when seller does not have custody (Art. 1526) • Exercisable only in following circumstances:(CCI) (a) Goods sold without stipulation as to Credit (b) Goods sold on Credit but term of credit has expired (c) Buyer becomes Insolvent (Art. 1527) • When part of goods delivered, may still exercise right on goods undelivered When goods no longer in transit (a) Reached point of destination; (b) Before reaching destination, buyer or his agent obtains delivery of the goods; (c) Goods are supposed to have been delivered to buyer but carrier refused; (d) Bailee or carrier acknowledges that he is holding the goods for the buyer or his agent. (Art. 1531) How is right exercised 1. Obtain actual possession of goods 2. Give notice of claim to carrier/bailee in possession thereof NOTE: Notice by seller to buyer is not required; notice to carrier is what is essential (Art. 1532) 3. Special Right to Resell the Goods Can be exercised under the following instances: (a) Goods are perishable; (b) Stipulated the right of resale in case buyer defaults in payment; (c) Buyer in default on payment of price for unreasonable time. (Art. 1533) Instances when possessory lien is lost: 1. Seller delivers goods to carrier for transmission to buyer without reserving ownership in goods or right to possess them 2. Buyer or his agent lawfully obtains possession of goods 3. Waiver (Art. 1529) 4. When he parts with goods (still has stoppage in transitu) NOTE: Notice by seller to buyer not essential NOTE: Notice by seller to buyer not essential NOTE: In ordinary sale, need to go to court to destroy transfer of ownership. 2. Stoppage in transitu • Goods are in transit • Remedy is available only when buyer is insolvent (Art. 1526) Requisites when goods are in transit (DR) 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 (Villanueva & Tiansay, Law on Sales, 342, 2016) 4. Special Right to Rescind Can be exercised under instances: 1. Expressly stipulated the following Page 306 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 2. Buyer is in default for unreasonable time (Art. 1534) NOTE: Notice needed to be given by seller to buyer. B. RECTO LAW: SALE OF MOVABLES ON INSTALLMENT (ARTS. 1484-1486) Coverage: Sale on installment (two or more installments required) and financing transaction (Equitable Savings Bank v. Palces, G.R. No. 214752, 2016) on movable property and contracts of lease of movable property with option to purchase (PCI Leasing and Finance v. GiraffeX Creative Imaging, G.R. No. 142618, 2007) Contract to sell is not covered. (Visayan Sawmill Co. v. CA, G.R. No. 83851, 1993). Rule on Forfeiture of Partial Payments in a Contract to Sell In a contract to sell, the forfeiture of partial payments may only be valid if there is a stipulation to that effect, subject to payments of reasonable rents. In a contract to sell, failure to fully pay the purchase price results in the cancellation of the contract, and the parties shall stand as if the obligation to sell never existed." (Spouses Godinez v. Spouses Norman, GR No. 225449, February 26, 2020, citing Olivarez Realty Corporation v. Castillo) Remedies available under the Recto Law: In a sale of personal property, the price of which is payable in installments, the seller may exercise the following remedies: (REF) 1. Exact fulfillment of the obligation, should the buyer fail to pay any installment; 2. Rescind the sale, should the buyer’s failure to pay cover two or more installments; 3. Foreclose the chattel mortgage, if one is constituted, should the buyer’s failure to pay cover two or more installments (Art. 1484) NOTE: This also applies to contracts purporting to be leases of personal property with option to CIVIL LAW buy, when the lessor has deprived the lessee of the possession or enjoyment. (Art. 1485) Sale on installment: Payment by several partial payments (two or more) in small amount (Levy Hermanos, Inc. v. Gervacio, G.R. No. L-46306, 1939) Rationale of the law: Buyer is lulled into thinking that he could afford because of small amounts per installment and at the same time to remedy abuse of commercial houses. (Manila Trading and Supply Co. v. Reyes, G.R. No. L-43263, 1935) Nature of remedies: Alternative, not cumulative (Nonato v. IAC, G.R. No. L-67181, 1985) The fact that the seller did not foreclose the chattel mortgage constituted on the movable purchased on credit, but opted specific performance, with a plea for a writ of replevin, does not amount to a foreclosure of the chattel mortgage to be covered by Art. 1484. (Tajanglangit v. Southern Motors, G.R. No. L10789, 1957) REMEDIES are NOT CUMULATIVE but are ALTERNATIVE and EXCLUSIVE 1. Specific Performance General Rule: Once chosen, can no longer rescind nor foreclose mortgage. Exception: After choosing specific performance but the same becomes impossible, rescission may be pursued subsequently. (Villanueva & Tiansay, Law on Sales, 352-353, 2016 2. Rescission When chosen, there is a correlative obligation to restitute. Stipulations that installments paid are forfeited are valid if not unconscionable. Deemed chosen when: 1. Notice of rescission is sent; 2. Takes possession of subject matter of sale; 3. Files action for rescission; Page 307 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 4. Barring effect on recovery of balance. (Villanueva & Tiansay, Law on Sales, 353356, 2016) 3. Foreclosure Once there has been foreclosure sale, the seller can no longer claim for remaining balance on the purchase price. (Northern Motors v. Sapinoso, G.R. No. L-28074, 1970) GR: When foreclosure is chosen, seller can no longer claim all amounts due from the sale, including damages and attorney’s fees. (Macondray & Co. v. Eustaquio, G.R. No. 43683, 1937) E: In case of Perverse Buyer-Mortgagor, if mortgagor refuses to deliver property to effect foreclosure, expenses incurred in recovering the property may also be recovered, i.e., attorney’s fees, etc. (Filipinas Investment & Finance Corp. v. Ridad, G.R. No. L-27645, 1969) C. REMEDIES OF SELLER IN CASE OF SALE OF IMMOVABLES General Remedies 1. Specific Performance with damages; or 2. Rescission with damages Anticipatory Breach 1. Seller has reasonable grounds to fear loss of immovable sold and its price, sue for Rescission 2. Non–payment of price, sue for Rescission (Art. 1591) D. MACEDA LAW (R.A. 6552) Rationale of the Law Public policy to protect buyers of real estate on installment payments against onerous and oppressive conditions. Covered transactions Applies to all sale of residential real estate on installments including Contracts to Sell and those financed through banking institutions (R.A. 6552, Sec. 3) CIVIL LAW Excluded: 1. Industrial real estate 2. Commercial real estate 3. Sale to tenants under agrarian laws (R.A. 6552, Sec. 3) Requisites of Sec. 3 of Maceda Law: (FReT) 1. Failure to pay installments was due to reasons, other than failure of the developer to develop the subdivision or condominium according to the approved plan and to comply with such within the time limit; 2. Only covers Residential lots including condominium units, excluding, sales to tenants; 3. The buyer has paid at least Two years of installments. (R.A. 6552, Sec. 3) Rights of the Buyer under Maceda Law with at least two (2) years of Installment: (R.A. 6552, Sec. 3) 1. To pay, without additional interest, the unpaid installments due within the total grace period earned by him. Said grace period is fixed at the rate of one-month grace period for every one year of installments payments made. Thus, here the buyer has at least two months grace period for he should have paid at least two years of installments to avail of the rights under this section. NOTE: This right can be exercised only once in every five (5) years of the life of the contract and its extensions, if any. 2. To be refunded the cash surrender value of his payments equal to 50% of his total payments if the contract is cancelled. But if he has paid five years or more, he is entitled to an increase of 5% every year and so on but the cash surrender value shall not exceed 90% of his total payments. (McLaughlin v. CA, G.R. No. L-57552, 1986) The actual cancellation of the contract referred to above shall take place only: 1. After 30 days from receipt by the buyer of the notarial notice of cancellation or demand for rescission, AND Page 308 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 2. Upon full payment to the buyer of the cash surrender value (R.A. 6552, Sec. 3) NOTE: Buyer may update payment during the 30 day waiting period which will render the cancellation ineffective. In the computation of the total number of installment payments the following are included: 1. Down payment and 2. Deposit or option money (R.A. 6552, Sec. 3) E. REMEDIES OF THE BUYER Rights of the Buyer under Maceda Law with less than two (2) years of installments: (R.A. 6552, Sec. 4) 1. Still has the right to pay within a grace period of not less than sixty (60) days from the date the installment became due. 2. If the buyer fails to pay the installment due at the expiration of the grace period, i.e. 60 days, the seller may cancel the contract after 30 days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act. NOTE: Here, the buyer is not entitled to any refund Exception: No right to suspension of payment if the seller gives security for the return of the price. (Art. 1590) Other rights granted under the Maceda Law: (R.A. 6552, Sec. 5 & 6) 1. Sell rights to another; 2. Assign the same to another person; 3. Reinstate contract by updating during grace period and before actual cancellation; 4. Deed of Sale to be done by notarial act; 5. To pay in advance any installment or the full balance of price anytime without interest and have such full payment annotated in certificate of title. Purpose of the law: Protect buyers in installments against oppressive conditions. Applies to contracts even before the law was enacted. (R.A. 6552, Sec. 2; Siska Dev. Corp. v. Office of the President, G.R. No. 93176, 1994) When general rule does not apply: when not all requisites embodied in Art. 1544 concur. NOTE: Stipulations contrary to the provisions of Sections 3, 4, 5 and 6 are null and void. (R.A. 6552, Sec. 7) Waiver of the required notice is oppressive. If not all the elements are present for Art. 1544 to apply, the principle of prior tempore, potior jure or simply “he who is first in time is preferred in right” should apply. Indisputably, he is a purchaser in good faith because at the time he bought the real property, there was still no sale to as a second Suspension of Payment General Rule: Buyer may suspend payment in case: 1. He is disturbed in the possession or ownership of the thing acquired; 2. He has reasonable grounds to fear such disturbance. (Art. 1590) In case of subdivision or condominium projects, the buyer may rescind the contract or suspend payment if real estate developer fails to comply with obligation according to approved plan. (P.D. 957, Sec. 23) F. REMEDIES IN DOUBLE SALES General Rule: FIRST IN TIME, PRIORITY IN RIGHT (Art. 1544) Requisites for Double Sales to Exist (VOCS) 1. That two (or more) sales transactions in the issue must pertain to exactly the same subject matter, and must be valid sales transactions. 2. That two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and 3. That two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very same seller. (Spouses German v. Spouses Santuyo, G.R. No. 210845, January 22, 2020) Page 309 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 vendee. (Consolidated Rural Bank v. CA, G.R. No. 132161, 2005) NOTE: If the two contracts involved are not both contracts of sale, as when one is a contract to sell, and the other one a contract of sale, Art. 1544 does not apply. This follows the principle that in a contract to sell, the seller has no obligation to deliver title until there is full payment of the purchase price. Thus, for as long as the condition of full payment has not been fulfilled, a subsequent sale of the same property will be valid since the seller still has title to the property. With more reason, if the seller in a contract to sell has defaulted, the breach in the condition entitles the seller to sell the same property for full consideration. Even if the buyer in the contract to sell annotates his right in the title, the buyer in the contract of sale is not in bad faith. (Sps. Domingo v. Sps. Manzano, G.R. No. 201883, 2016) Note that the Court applied this in this case even if the buyer in the contract to sell was not in default since the seller accepted payment after due date. Seller however must reimburse payments made to the buyer even if he has only paid less than 2 years of installments because he was not in default. Court distinguished this from earlier case of Abarquez v. CA even if in that case, one also involved a contract to sell – because in Abarquez, the seller already delivered to the buyer who accepted and took possession, and even constructed a house on the land under installment sale. (Sps. Domingo v. Sps. Manzano, G.R. No. 201883, 2016) Double Sales Rules according to Art. 1544: 1. Movable First to possess in good faith shall prevail (Art. 1544) 2. Immovable (a) First to register in good faith shall prevail; (b) In case no registration is made, then first to possess in good faith shall prevail; (c) No registration and no possession in good faith, then the person who presents oldest title in good faith, shall prevail. (Art. 1544) CIVIL LAW NOTE: The FIRST BUYER is always in good faith and will always prevail if he registers his sale first. His good faith is not destroyed by the subsequent knowledge of the second sale. The reason behind this is that at the time of perfection of his contract of sale, he was the only buyer. (Carbonell v. CA, G.R. No. L-29972, 1976) But the knowledge gained by the 2nd buyer of the first sale defeats his rights even if he is first to register, since such knowledge taints his registration with bad faith. (Ordua v. Fuentebella, G.R. No. 176841, 2010) Buyer in Good Faith – one who purchases and pays a fair price for a property without notice that another has an interest or right to it. (Amoguis v. Ballado, G.R. No. 189626, 2018.) If a land is registered and is covered by a certificate of title, any person may rely on the correctness of the certificate of title. However, this does not apply where the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. It is incumbent upon a buyer to prove good faith should he or she assert this status. (Amoguis v. Ballado, G.R. No. 189626, 2018.) Lis pendens – notice that subject matter is in litigation (Sps. Lim v. Vera Cruz, G.R. No. 143646, 2001) is a form of registration accorded priority right. A buyer cannot be considered a transferee in good faith if it was aware of the title’s notices of lis pendens. (Register of Deeds of Negros Occidental v. Anglo, Sr., G.R. No. 171804, 2015) Adverse claim – notice that somebody is claiming better right (Gardner v. CA, G.R. No. L59952, 1984) is a form of registration accorded priority right. Page 310 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Possession – both actual and constructive (Roman Catholic Church v. Pante, G.R. No. 174118, 2012) Registration – any entry made in the books of the registry, including both registration in its ordinary and strict sense, and cancellation, annotation, and even marginal notes. It is the entry made in the registry which records solemnly and permanently the right of ownership and other real rights.. (Cheng v. Genato, G.R. No. 129760, 1998) • Registered under Torrens system – 1544 applies • Not registered under the Torrens system – 1544 still applies 2nd If sale is a judicial sale (made 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. If sale 1 occurs when land is not yet registered and sale 2 is done when land is already registered – apply first in time, priority in right. Good faith must concur with registration. To be entitled to priority, the second purchaser must not only establish prior recording of his deed, but must have acted in good faith. (Gabriel v. Mabanta, G.R. No. 142403, 2003) Under the Torrens system, a sale of property that is not registered under the Torrens system is binding only between the buyer and the seller and does not affect innocent third persons. (Evy Construction and Development Corp. v. Valiant Roll Forming Sales Corp., G.R. No. 207938, 2017) As an exception, “knowledge of an unregistered sale is equivalent to registration.” (Evy Construction and Development Corp. v. Valiant Roll Forming Sales Corp., G.R. No. 207938, 2017) RATIONALE FOR THE ADOPTION OF THE TORRENS SYSTEM CIVIL LAW The Torrens system was adopted so that one need not inquire beyond the certificate of title when dealing with registered property. P.D. 1529 or the Property Registration Decree recognizes innocent purchasers in good faith for value and their right to rely on a clean title. An innocent purchaser for value is someone who “buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another person’s claim.” One claiming to be an innocent purchaser for value has the burden of proving such status. (Leong v. See, G.R. No. 204700, 2014) Requisite Diligence for Buyer in Good Faith: 1. Diligence in verifying the validity of the title of the property; 2. Diligence in inquiring into the authority of the transacting spouse to sell conjugal property in behalf of the other spouse. (Aggabao v. Parulan, G.R. No. 165803, 2010). G. REMEDY OF RESCISSION IN CONTRACTS COVERING IMMOVABLES (ARTS. 1191 & 1592) General Rule: Judicial Rescission (Art. 1191) Exception: Extrajudicial Rescission allowed but SUBJECT to COURT Confirmation. • Allowed if stipulated; burden to sue shifts to party who does not like rescission • Court still has final say as to propriety of rescission (Iriñgan v. CA, G.R. No. 129107, 2001) • Forfeiture of amounts valid being in nature of penal clause NOTE: Article 1191 of the CIVIL CODE provides that in case of breach of reciprocal obligations, such as in a contract of sale, the injured party may choose between rescission and specific performance ‘with the payment of damages in either case’. Mutual restitution under Article 1191 is no license for the negation of contractually stipulated liquidated damages. The very same breach or delay in performance that triggers rescission is what makes damages due. Further, Page 311 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW when the contracting parties, by their own free acts of will, agreed on what these damages ought to be, they established the law between themselves. Thus, in order to uphold both Article 1191 of the CIVIL CODE and the parties’ will, contractually stipulated liquidated damages must, as a rule, be maintained. (PEZA v. Pilhino Sales Corp, G.R. No. 185765, 2016). The indivisibility of an obligation is tested against whether it can be the subject of partial performance: an obligation is indivisible when it cannot be validly performed in parts, whatever may be the nature of the thing which is the object thereof. The indivisibility refers to the prestation and not to the object thereof. (Spouses Lam v. Kodak Phils., Ltd., G.R. No. 167615, 2016) Contract of Sale – Rescission is applicable Contract to Sell – Rescission not applicable (Roque v. Lapuz, G.R. No. L-32811, 1980) PLACE OF DELIVERY (Art. 1521) General Rule: Whether it is for the buyer to take possession of the goods or of the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Nonpayment of purchase price would automatically cancel even without further action for rescission. Exception: If subject matter is residential lots, the law on rescission applies when there is substantial breach as Maceda law applies. ————- end of topic————X. PERFORMANCE OF OBLIGATION Q: X and Corp A. entered into an agreement for the sale of 3 units of minilab equipment. Corp A delivered 1 out of 3 minilab equipment. X issued a postdated check as payment for the delivered unit. X requested not to negotiate the first 2 check due to insufficiency of funds. However, Corp A still negotiated the said checks and were honored by the depository bank. X canceled the sale and demanded the return of unit. X ignored the demand but also rescinded the contract for failure to deliver the 2 remaining minilab equipment. Is the contract of X and Corp A severable, divisible, and susceptible of partial performance under Art. 1225? The intention of the parties is for there to be a single transaction covering 3 units of the minilab equipment. Corp A’s obligation was to deliver all products purchased under a package and in turn X’s obligation was to pay for the total purchase price, payable in installments. If the contract is silent, and no usage of trade to the contrary: Apart from any such contract, express or implied, or usage of trade to the contrary, the place of delivery is the seller's place of business if he has one, and if not, his residence. Rule on Contract of Sale of Specific Goods In case of a contract of sale of specific goods, which to the knowledge of the parties when the contract or the sale was made were in some other place, then that place is the place of delivery. TIME OF DELIVERY (Art. 1521) General Rule: Follow the contract, express or implied. If the contract is silent: Where by a contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. If with third person: Where the goods at the time of sale are in the possession of a third person, the seller has not fulfilled his obligation to deliver to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on the buyer's behalf. NOTES: • Demand or tender of delivery may be treated as ineffectual unless made at a reasonable Page 312 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 hour. What is a reasonable hour is a question of fact. EXPENSES OF PUTTING GOODS INTO DELIVERABLE STATE (Art. 1521) General Rule: Follow the contract If the contract is silent: Borne by the seller. EXPENSES OF EXECUTION REGISTRATION (Art. 1487) AND General Rule: Follow the contract If the contract is silent: Borne by the seller. ————- end of topic————XI. EXTINGUISHMENT A. CAUSES Grounds (same grounds by which obligations in general are extinguished) (PLCCC - PNARF) 1. Payment or performance 2. Loss of the subject matter 3. Condonation or remission 4. Confusion or merger of rights of creditor and debtor 5. Compensation 6. Novation 7. Annulment 8. Rescission 9. Fulfillment of a resolutory condition 10. Prescription 11. Conventional Redemption 12. Legal Redemption (Art. 1231) B. CONVENTIONAL REDEMPTION (SALE WITH RIGHT TO REPURCHASE) There is conventional redemption when the seller reserved for himself the right to repurchase the thing sold, with the obligation to return: 1. The price of the sale; 2. The expenses of contract, 3. Other legitimate payments, 4. The necessary and useful expenses made on the thing sold (Art. 1601) NOTE: This only extinguishes obligations pertaining to contract of sale. It does not extinguish contract itself. The right is exercised only by the seller in whom right is recognized in the contract or by any person to whom right was transferred; It must be in the same contract. (Villanueva & Tiansay, Law on Sales, 474-475, 2016) Period to redeem: (a) No period agreed upon – 4 years from date of contract (b) Period agreed upon – should not exceed 10 years; if it exceeded, valid only for the first 10 years. (c) When period to redeem has expired and 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. (Art. 1606) Rationale: No redemption due to erroneous belief that it is equitable mortgage which can be extinguished by paying the loan. This refers to cases involving a transaction where one of the parties contests or denies that the true agreement is one of sale with the right to repurchase; not to cases where the transaction is conclusively a pacto de retro sale. (Villanueva & Tiansay, Law on Sales, 486, 2016) Example: Where a buyer a retro honestly believed that he entered merely into an equitable mortgage, not a pacto de retro transaction, and because of such belief he had not redeemed within the proper period. (Leonardo v. CA, G.R. No. 82457, 1993) NOTE: When period has expired, and seller has allowed the period of redemption to expire – seller is at fault for not having exercised his rights so he should not be granted a new period. Tender of payment is SUFFICIENT to compel redemption but is not in itself a payment that relieves the vendor from his liability to pay the redemption price. (Paez v. Magno, G.R. No. L793, 1949) Page 313 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Effect When There is No Redemption Made • Jurisprudence before the NCC: buyer a retro automatically acquires full ownership • Under present Art. 1607: there must be judicial order before ownership of real property is consolidated in the buyer a retro The seller who is given the right to repurchase may exercise his right of redemption by paying the buyer: 1) the price of the sale; 2) the expenses of the contract; 3) legitimate payments made by reason of the sale; and 4) the necessary and useful expenses made on the thing sold. The repurchase was exercised because from the P10M purchase price directly paid to B, he deducted the P2M purchase price, his expenses, interest, and the price of the loan paid to DBP. He returned the remaining amount and one of the tractors. This is a tacit acknowledgment of the A’s exercise of his right to repurchase. (David v. David, G.R. No. 162365, 2014) How is Redemption Effected Seller a retro must first pay the following: (PENT) 1. The Price of the thing sold 2. Expenses of the contract and other legitimate payments made by reason of the sale 3. Necessary and useful expenses made on the thing sold (Art. 1616) 4. Valid Tender of payment is sufficient (Legaspi v. CA, G.R. No. L-45510, 1986) • Mere sending of notice without valid tender is insufficient. • Failure to pay useful and unnecessary expenses entitles vendee to retain land unless actual reimbursement is made In Case of Multi-Parties (a) When an undivided thing is sold because coowners cannot agree that it be allotted to one of them – vendee a retro may compel the vendor to redeem the whole thing (Art. 1611) (b) When an undivided thing is sold by coowners/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 (Art. 1612) CIVIL LAW (c) 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 (d) 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 coowners/co-heirs. (De Guzman v. CA, G.R. No. L-47378, 1987) NOTE: A Seller can only sell what he or she owns, or that which he or she does not own but has authority to transfer, and a buyer can only acquire what the seller can legally transfer. Before the property is partitioned, the heirs are co-owners of the property. The heirs cannot alienate the shares that do not belong to them. Any sale by one heir of the rest of the property will not affect the rights of the other heirs who did not consent to the sale. Such sale is void with respect to the shares of the other heirs. Issuance of a certificate of title is not a grant of title over petitioners' undivided portions of the property. Nevertheless, a buyer could acquire valid title over the whole property if the buyer were an innocent purchaser for value. (Heirs of Gregorio Lopez v. Development Bank of the Phils., G.R. No. 193551, 2014.) NOTE: A co-owner has “no right to sell or alienate a concrete, specific or determinate part of the thing owned in common, because his right over the thing is represented by quota or ideal portion without any physical adjudication.” (Cabrera v. Ysaac, G.R. No. 166790, 2014) Fruits What controls is the stipulation between parties as regards the fruits. If none: 1. 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. 2. 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 and Page 314 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 vendee a retro giving the vendee a retro a part corresponding to the time he possessed the land. (Art. 1617) PRE-EMPTION Arises before sale No rescission because no sale exists yet Action is directed against prospective seller REDEMPTION Arises after sale There can be rescission of the original sale Action is directed against buyer C. EQUITABLE MORTGAGE One which lacks the proper formalities, form of words, or other requisites prescribed by law for a mortgage, but shows the intention of the parties to make the property subject of the contract as security for a debt and contains nothing impossible contrary to law. (Cachola v. CA, G.R. No. 97822, 1992) Any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest and is subject to usury laws. The essential requisites of an equitable mortgage are: 1. The parties entered into a contract denominated as a contract of sale; and 2. Their intention was to secure an existing debt by way of a mortgage. (Molina vs. CA, G.R. No. 125755, 2003) A contract with right to repurchase may be deemed to be an equitable mortgage under the following conditions (IPERTI): 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. Any other case where the real Intention of parties is to secure the payment of a debt or performance of other obligation (Art. 1602) NOTE: In case of doubt – in determining whether it is an equitable mortgage or a sale a retro, the sale shall be construed as an equitable mortgage. (Art. 1603) What to Look for in Determining Nature of Contract 1. Language of the contract 2. Conduct of parties – to reveal real intent Remedies available to the vendor: 1. Reformation of contract (Art. 1359) 2. Action for declaration of nullity of deed of sale 3. Action for specific performance (Tolentino v. CA, G.R. No. 128759, 2002); or 4. Foreclosure of the mortgage in equity (Briones-Vasquez v. CA, G.R. No. 144882, 2005) 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. The real intention of parties is that the pretended purchase price is money loaned and to secure payment of the loan, sale with pacto de retro is drawn up. (Heirs of Reyes, Jr. v. Reyes, G.R. No. 158377, 2010) D. LEGAL REDEMPTION The right to be subrogated upon the same terms and conditions stipulated in the contract, in the place of one who acquires the thing by (1) purchase OR (2) by dation in payment OR (3) by other transaction whereby ownership is transmitted by onerous title. (Art. 1619) NOTE: Only applies to contracts of sale. Page 315 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 Types of Legal Redemption: 1. Among co-heirs Any of the heirs sells his hereditary rights to a stranger before partition: • Any of the co-heirs may be subrogated to the rights of the purchaser by redeeming said hereditary right: reimburse the buyer of the price of the sale • Co-heirs have 1 month from receipt of notice in writing (Art. 1088) 2. Among co-owners Any or all of co-owners sell their shares to 3rd person: • Any co-owner may exercise the 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 (Art. 1620) 3. Among adjoining owners Rural land (a) 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 (b) If two or more adjacent lot owners desire to exercise right to redeem, owner of adjoining lot with smaller area shall be preferred (c) If two or more adjacent lot owners desire to exercise right to redeem and both have same lot area, one who first requested shall be granted (Art. 1621) Urban land (a) When piece of land is small and cannot be used for any practical purpose and bought merely for speculation, owner of adjoining land can redeem (b) When 2 or more owners of adjoining lot desire to exercise right to redeem, owner whose intended use is best justified shall be preferred. (Art. 1622) 4. Sale of credit in litigation When a credit or other incorporeal right in litigation is sold, debtor shall have a right to CIVIL LAW extinguish it by reimbursing the assignee for the price the latter paid therefor plus judicial costs, interest; except when the assignment or sale is made: (a) to a co-heir or co-owner of the right assigned; (b) to a creditor in payment of his credit; or (c) to the possessor of a tenement or piece of land which is subject to the right in litigation assigned. (Arts. 1634, 1635) Debtor may exercise right within 30 days from the date assignee demands payment from him (Art. 1634) Other Instances When Right of Legal Redemption is Granted: 1. Redemption of homesteads 2. Public Land Act 3. 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 Redemption in tax sales In case of tax delinquency/failure to pay tax assessments, property shall be foreclosed. Delinquent payer has 1 year from date of sale to redeem by paying to the revenue District Officer the amount of tax delinquencies, and interest or purchase price. (National Internal Revenue Code, Sec. 214) Redemption by judgment debtor: 1 year from date of registration of certificate of sale to redeem by paying purchaser at public auction with interest (Rules of Court, Rule 39, Secs. 27, 28) Redemption in extrajudicial foreclosure: 1 year from date of sale and registration (Act No. 3135, Sec. 6) Redemption in judicial foreclosure of mortgage: right to redeem is granted to debtor mortgagor except when mortgagee is bank of a banking institution 90 days after finality of judgment. (GSIS v. CFI, G.R. No. 45322, 1989) When Period of Redemption Begins to Run: Right of legal pre-emption of redemption shall be Page 316 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 exercised within 30 days from notice by the seller. (Art. 1623) How exercised: Tender of payment is not necessary; offer to redeem is enough. (Vda. de Panaligan v. CA, G.R. No. 112611, 1996) NOTE: Written notice under Art. 1623 is mandatory for the right of redemption to commence. (PSC vs. Sps. Valencia, G.R. No. 150060, 2003) General Rule: Actual knowledge notwithstanding, written notice is still required. (Verdad v. CA, G.R. No. 109972, 1996) Exception: When actual knowledge is acquired by co-heirs living in same land with purchaser (Alonzo v. IAC, G.R. No. L-72873, 1987) or coowner was middleman in sale to 3rd party (Disitro v. CA, G.R. No. 95256, 1991) Art. 1623 does not prescribe any distinctive method for notifying the redemptioner. (Etcuban v. CA, G.R. No. L-45164, 1987) ————- end of topic————B. TRUST I. DEFINITION Trust – A fiduciary relationship between a person who establishes a trust (trustor), one in whom confidence is reposed as regards property for the benefit of another person (trustee), and a person for whose benefit the trust has been created (beneficiary). (CIVIL CODE, Art. 1440) It is a legal relationship between one person who has equitable ownership of the property and another who owns the legal title to the property. (Oco v. Limbaring, G.R. No. 161298, Jan. 31, 2006.) Characteristics of a Trust 1. 2. 3. 4. It is a relationship; Fiduciary; Created by law or agreement Involves property, not merely personal duties; 5. Where the legal title is held by one, the equitable title or beneficial title is held by another 6. Involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another; and 7. Arises as a result of a manifestation of intention to create the relationship. (Morales v. CA, G.R. No. 117228, June 19, 1997.) Parties to a Trust 1. Trustor – The person who establishes the trust. 2. Trustee – The person in whom confidence is reposed as regards property for the benefit of another. 3. Beneficiary – The person for whose benefit the trust has been created. (Penalber v. Ramos, G.R. No. 178645, Jan. 30, 2009.) TRUST (CIVIL CODE, Art. 1441) Arises either by virtue of a contract or by operation of law Either express or implied Continues to exist unless repudiated STIPULATION POUR AUTRUI (Mamaril v. BSP, G.R. No. 179382, Jan. 14, 2013.) Arises only by virtue of a contract Always express Third person must have communicated his acceptance to the obligor before its revocation by the obligee or the original parties Trustees Cannot Donate Property in Trust Trustees cannot donate the property entrusted to them. (CIVIL CODE, Art. 736) NOTE: The principles of the general law of trusts, insofar as they are not in conflict with the Civil Code, the Code of Commerce, the Rules of Court and special laws applies. (CIVIL CODE, Art. 1442) Page 317 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 II. KINDS OF TRUST On Declining Trustees 1. Express Trust - created by express agreement of the parties, or by intention of trustor. (CIVIL CODE, Art. 1441) Requisites in Creating an Express Trust 1. Clear intent to establish trust; (Art. 1444) 2. Direct and positive acts of the parties evidence the intention to create trust by means of: a. Writing; b. Deed; c. Will; d. Words. (Canezo v. Rojas, G.R. No. 148788, Nov. 23, 2007.) NOTE: No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. (CIVIL CODE, Art. 1444) Proof Required for Concerning Immovables Express NOTE: In case of refusal to accept an express trust, the court will appoint a trustee. Exception: When the contrary appears in the instrument constituting the trust. (CIVIL CODE, Art. 1445) Acceptance by Beneficiary Acceptance by the beneficiary is necessary. If he repudiates or declines, the trust does not become effective. (CIVIL CODE, Art. 1446) NOTE: The beneficiary’s acceptance shall be presumed if the trust imposes no onerous condition upon the beneficiary and if there is no proof to the contrary. (CIVIL CODE, Art. 1446) Trusts No express trust concerning an immovable or any interest therein may be proved by parol evidence. (CIVIL CODE, Art. 1443) However, when oppositors failed to timely object when the petitioner tried to prove by parol evidence the existence of an express trust over immovable, there is deemed to be a waiver since Art. 1443 ―is in the nature of a statute of frauds. (Penalber v. Ramos, G.R. No. 178645, Jan. 30, 2009.). NOTE: To prove an express trust over an immovable or any interest therein, there must always be a showing of some documents proving the same. (Pascual v. Meneses, G.R. No. L-18838, May 25, 1967.) Requisites for Creating a Testamentary Trust 1. 2. 3. General Rule: No trust shall fail because the trustee appointed declines the designation. (CIVIL CODE, Art. 1445) Sufficient words to raise a trust; Definite subject; Certain or ascertained object. (Lorenzo v. Posadas, Jr., G.R. No. L-43082, June 18, 1937.) On Acquisitive Prescription General Rule: A trustee cannot acquire ownership of property entrusted to him through prescription, as possession of a trustee is not adverse. (Canezo v. Rojas, G.R. No. 148788, Nov. 23, 2007.) Exception: (REKA) 1. 2. 3. 4. Trustee performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; Positive acts of repudiation have been made known to the cestui que trust; Evidence is clear and conclusive; and Adverse possession of the trustee must be at least 10 years in the concept of an owner. (Canezo v. Rojas, G.R. No. 148788, Nov. 23, 2007.) NOTE: Above elements must concur. Extinguishment of an Express Trust a) Accomplishment of the aims of the trust; b) Expiration of the agreed term; c) Mutual agreement of all parties; d) Happening of a resolutory condition; e) Total loss of the object of the trust; Page 318 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 f) g) h) i) j) Annulment or rescission of the trust; Decision of the court declaring termination; Merger of the rights of the trustor and the trustee; Prescription; and Upon the trustee's death (Canezo v. Rojas, G.R. No. 148788, Nov. 23, 2007.) 2. Implied Trust Basis of implied trust is equity Implied trusts are remedies against unjust enrichment. Under the general principles on trust, equity converts the holder of property right as trustee for the benefit of another if the circumstances of its acquisition makes the holder ineligible in good conscience to hold and enjoy it. (Juan v. Yap, Sr., G.R. No. 182177, March 30, 2011.) Chapter on Implied Trusts is not an exclusive list The chapter on implied trust does not exclude others established by the general law of trust which do not violate our rules and laws. (CIVIL CODE, Art. 1447) When there is no trust A trust will not be created when for the purpose of evading the law prohibiting one from taking or holding real property, one takes conveyance thereof in the name of a third person. (Kiel v. Estate of Sabert, G.R. No. 21639, Sept. 25, 1924.) If there is an express intention to create a trust, the trust is express and not implied, even if the situations falls under any of the provisions in this chapter. (Cuaycong v. Cuaycong, G.R. No. L21616, Dec. 1, 1967.) There can be no implied trust created over land in favor of a foreigner that would amount to a violation of the constitution. (Encarnacion v. Johnson, G.R. No. 192285, July 11, 2018.) Resulting Trust vs. Constructive Trust (O’Laco v. Co Cho Chit, G.R. No. 58010, March 31, 1993.) RESULTING CONSTRUCTIVE TRUSTS TRUSTS Based on the Created by the equitable doctrine construction of equity that valuable in order to satisfy the consideration & not demands of justice & legal title prevent unjust determines enrichment equitable title or interest; presumed to always have been contemplated by the parties Arise from the Arise contrary to nature or intention against one circumstances of who, by fraud, duress the consideration or abuse of confidence, involved in a obtains or hold the transaction whereby legal right to property, one person thereby which he ought not, in becomes invested equity, & good with legal title but is conscience, to hold obligated in equity to hold his legal title for the benefit of another Constructive Trust Article 1450 is an illustration of an implied trust which is constructive. It presupposes a situation where a person, using his own funds, purchases a certain piece of land in behalf of another who, in the meantime, may not have sufficient funds to purchase the land. The property is then transferred in the name of the trustee, the person who paid for the land, until he is reimbursed by the beneficiary, the person for whom the land is purchased. It is only after the beneficiary reimburses the trustee of the purchase price that the former can compel conveyance of the purchased property from the latter. (Nakpil v. IAC, G.R. No. 74449, Aug. 20, 1993.) A constructive trust does not arise on every moral wrong in acquiring or holding property or on every abuse of confidence in business or other affairs; such a trust arises & will be declared only on wrongful acquisitions or retentions of property of which equity takes cognizance. It has been Page 319 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 broadly ruled that a breach of confidence although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust. (Policarpio v. CA, G.R. No. 116211, March 7, 1997.) Resulting Trust Resulting trusts are species of implied trusts that are presumed always to have been intended by the parties (Ossorio Pension Foundation v. Court of Appeals, G.R. No. 162175, June 28, 2010.) 1. Implied Trust When Property is Granted to One/Trustee But Price is Paid by Another for the Interest of Beneficiary There is an implied trust when property is sold, & the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child. (CIVIL CODE, Art. 1448) Elements of purchase money resulting trust 1. 2. Actual payment of money, property, or service, or an equivalent valuable consideration; and Such consideration must be furnished by the alleged beneficiary of a resulting trust. (Trinidad v. Imson, G.R. No. 197728, Sept. 16, 2015.) Burden of proof The burden of proving the existence of a trust is on the party asserting existence of trust, and such proof must be clearly and satisfactorily show the existence of the trust and its elements. (Jarantilla, Jr. v. Jarantilla, G.R. No. 154486, Sept. 16, 2010.) NOTE: Presumption is that he who pays for a thing intends a beneficial interest for himself. (e.g. where the club share was bought and paid for by A and placed in the name of its officer B, a resulting trust is presumed as a matter of law in favor of A. The burden shifts to show otherwise) (Sime Darby Pilipinas v. Mendoza, G.R. No. 20227, June 19, 2013.) 2. Implied Trust in Donation There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof. (CIVIL CODE, Art. 1449) 3. Implied Trust in Sale of Property If the price of a sale of property is loaned or paid by one person for the benefit of another & the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property & compel a conveyance thereof to him. (CIVIL CODE, Art. 1450) 4. Implied Trust in Co-Ownership If two or more persons agree to purchase property & by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. (CIVIL CODE, Art. 1452) A resulting trust arises in the situation, because of the intention to create one. Purchasers are coowners of the property. In the absence of any specific agreement to the contrary, their shares are presumed equal. 5. Implied Trust in Succession When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner. (CIVIL CODE, Art. 1451) This article provides for a resulting trust there being a clear intention to establish a trust. The refers to inherited land. There is no good reason why the principle cannot apply to personal properties. Page 320 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 6. Implied Trust in Co-Ownership If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. (CIVIL CODE, Art. 1452) A resulting trust arises in the situation, because of the intention to create one. Purchasers are coowners of the property. In the absence of any specific agreement to the contrary, their shares are presumed equal. 7. Property Conveyed in Reliance upon His Declared Intention to Hold it For Another When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated. (CIVIL CODE, Art. 1453) An implied resulting trust is created because of the declared intention of the grantee to hold or transfer the property to the grantor or to another person. 8. An Absolute Conveyance to Performance of Obligation Secure If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. (CIVIL CODE, Art. 1454) A resulting trust is one that arises by implication of law and presumed always to have been contemplated by the parties, the intention as to which can be found in the nature of their transaction although not expressed in a deed or instrument of conveyance. (Heirs of Yap v. CA, G.R. No. 133047, Aug. 17, 1999.) There is an intention to create trust, although it was not reflected in the deed of reconveyance, therefore, an implied resulting trust is created. 9. Trustee’s Use of Funds Held in Trust When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property & causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong. (CIVIL CODE, Art. 1455) In order to prevent unjust enrichment on the part of the fiduciary, an implied constructive trust is created in this circumstance. Persons covered Any person holding a fiduciary position such as a trustee, guardian, agent, partner, or a confidential employee, among others Rationale of rule To prevent fiduciary from temptation of putting his own self-interest above that of his principal whom he is supposed to protect. It also is intended to keep and encourage the fiduciary to remain honest and loyal to his principal 10. Property Acquired Through Mistake or Fraud If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. (CIVIL CODE, Art. 1456) This trust is created by law to prevent unjust enrichment on the part of the acquirer to the prejudice of the true owner. The mistake must be committed by a third person. If made by a party, there is no trust. E.g. Conveyance made by seller of a property acquired through pactum commisorium is void, and thus not vest title to the buyer. Such a situation falls squarely under Art. 1456, where the buyer is deemed to have acquired the property by mistake or through ineffectual transfer (Home Guaranty Corp. v. La Savoie Dev. Corp G.R. No. 168616, Jan. 28, 2015.). Violation of a condition in donation No trust is created if a condition in a valid donation has been breached by the donee. The property remains in ownership of the donee subject to proper action for revocation. If the Page 321 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 action has prescribed however, the donee will remain as the rightful owner. consent or authority of the latter. (CIVIL CODE, Art. 1868) Oral Evidence Characteristics: An implied trust may be proved by oral evidence. (CIVIL CODE, Art. 1457) i. It is deducible from the nature of the transactions as matters of intent or which are super-induced on the transaction by operation of law, independently of the particular intention of the parties. When an immovable or an interest therein is involved in an express trust, parol evidence is not allowed. But, when trust is implied, parol evidence is allowed to prove its existence. Consequently, if property involved in express trust is movable, parol evidence is allowed. ii. iii. Proof needed to prove trust by parol evidence It must be trustworthy and received by the courts with caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated. (Herbon v. Palad, G.R. No. 149542, July 20, 2006.). Further, it must be clear, satisfactory, and convincing, as intent to establish trust cannot rest on vague, uncertain evidence, or on loose, equivocal, or indefinite declaration. (Heirs of Narvasa Sr. v. Imbornal, G.R. 182908, Aug. 6, 2014.) Q: What is the applicable prescriptive period for actions for the reconveyance of real property based on implied trust? A: 10 years, reckoned from the time the cause of action accrues. (CIVIL CODE, Art. 1144; Sps. Dico v. Vizcaya Management Corporation , G.R. No. 161211, July 17, 2013.) -------- end of topic -------C. 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 iv. v. Consensual: perfected by mere consent; (CIVIL CODE, Art. 1869, Art. 1870) The basis for agency is representation; on principal’s part, there must be an intention to appoint, or such intention is naturally inferable from words or actions; on part of the agent, there must be an intent to accept the appointment and act on it; in the absence of either, there is no agency. (Dominion Insurance Corp. v. CA, 376 SCRA 239 [2002]) Nominate: it has its own name; It will be an agency whether or not parties understood the exact nature of the relation. (Doles v. Angeles, G.R. No. 149353, June 6, 2006.) Preparatory: The object of agency is for the agent to enter on behalf of the principal and within the scope of his authority into juridical acts with third parties (Rallos v. Felix Go Chan & Sons Realty Corp., G.R. No. L24332, Jan. 1,1978.) Principal: it does not depend on another contract for its existence and validity; (Doles v. Angeles, G.R. No. 149353, June 6, 2006.) Unilateral/Bilateral and Primarily Onerous: a. Unilateral: if contract is gratuitous or it creates obligations for only one party (i.e. the agent) (Urban Bank, Inc. v. Peña, G.R. No. 145817, 145822, 162562, Oct. 19, 2011.) b. Bilateral: if contract is for compensation or gives rise to reciprocal rights and obligations (Urban Bank, Inc. v. Peña, G.R. No. 145817, 145822, 162562, Oct. 19, 2011.) NOTE: Agency is presumed to be for compensation, unless there is proof to the contrary. (CIVIL CODE, Art. 1875) 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. (Litonjua, Jr. v. Eternit Corp., G.R. No. 144805, June 6, 2006.) The distinguishing features of agency are its Page 322 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 representative character & its derivative authority. (Rallos v. Felix Go Chan & Sons Realty Corp., Gr. No. L-24332, Jan. 1,1978.) Exception to Contractual Nature Purpose Extend the personality of the principal through the facility of the agent (Litonjua, Jr. v. Eternit Corp., G.R. No. 144805, June 6, 2006.) NOTE: An illegal termination of agency does not justify reinstatement of the agent. The agency cannot be compelled by the courts to be reinstated because such relationship can only be given effect with the consent of the principal. (Orient Air Services v. CA, G.R. No. 76931, May 29, 1991.) Parties to the Contract of Agency 1. Principal i. ii. May be a natural or a juridical person Must be capacitated. (CIVIL CODE, Art. 1327) General rule: If a person is capacitated to act in his own right, he can act through an agent. iii. The agent is not liable where he was ignorant of the principal’s incapacity. 2. Agent i. Like the principal, the agent may be either a natural or juridical person, and must be capacitated. ii. One who is absolutely incapacitated (ex. insane persons) cannot be an agent. NOTE: From the time the agent acts or transacts the business for which he has been employed in representation of another, a third party is added to the agency relationship – the party with whom the business is transacted (De Leon, 2010). Essential Elements (CROW) 1. Consent of the parties to establish the relationship; 2. Object or subject matter 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. (Rallos v. Felix Go Chan & Sons Realty Corp., Gr. No. L-24332, Jan. 1, 1978.) II. NATURE, FORMS AND KINDS OF AGENCY Nature Since it is a contract, there must be a meeting of the minds as to consent, object, and cause. (CIVIL CODE, Art. 1868) When the agency is created by operation of law (See Part VIII on “Agency by Operation of Law”) Acts that cannot be done through an agent i. Personal Acts (making of a will; exercise of right of suffrage; statements required to be made under oath; attending meetings of board of directors/trustees of a corporation; agents prohibited from appointing a substitute) ii. Criminal Acts or Acts Not Allowed by Law (ownership of private agricultural lands by aliens through an agent; persons prohibited to acquire a property by reason of position or relation to the person cannot do the same through the mediation of another; participation in the commission of a crime – a person cannot escape punishment on the ground that he was merely an agent) Nature of Relationship between Principal and Agent Fiduciary – based on trust & confidence i. Agent is estopped from asserting an interest adverse to his principal’s, whether his own or that of an adverse party (Severino v. Severino, G.R. No. 18058, Jan. 16, 1923.) ii. Agent must not use or disclose secret information (CIVIL CODE, Art. 1889) iii. Agent must give notice of material facts (CIVIL CODE, Art. 1889) NOTE: Theory of Imputed Knowledge General Rule: Knowledge of the agent is imputed to the principal even though the agent never communicated it to his principal (Sunace International Management Services, Inc. v. NLRC, G.R. No. 161757, Jan. 25, 2006.) Exceptions: i. Where the interests of the agent are adverse to those of the principal; Page 323 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 ii. iii. The agent’s duty is not to disclose the information, as where he is informed by way of confidential information. Agent acts in bad faith or where the person claiming the benefit of the rule colludes with the agent to defraud the principal (CIVIL CODE, Art. 1898) Distinction Guardianship between AGENCY Agent represents a capacitated person Agent is appointed by the principal and can be removed by the latter. Agent is subject to the directions of the principal. Agent can make the principal personally liable. Agency and GUARDIANSHIP A guardian represents an incapacitated person. Guardian is appointed by the court and stands in loco parentis. Guardian is not subject to the directions of the ward but must act for the benefit of the latter Guardian has no power to impose personal liability on the ward. Distinction between Agency and Judicial Administration AGENCY Agent is appointed by the principal. Agent represents the principal. Agent does not file a bond. Agent is controlled by the principal through the arrangement. JUDICIAL ADMINISTRATION Judicial administrator is appointed by the court. Judicial administrator not only represents the court but also the heirs and creditors of the estate. Judicial administrator files a bond. Judicial administrator’s acts are subject to specific orders from the court. Distinction between Agency and Lease AGENCY Agent is controlled by the principal. Agency may involve things other than property. Agent can bind the principal. LEASE OF PROPERTY Lessee is not controlled by the lessor. Lease of property involves property. Lessee cannot bind the lessor. Distinction between Agency to Sell and Sale (Quiroga v. Parsons, G.R. No. 11491, Aug. 23, 1918; Spouses Viloria v. Continental Airlines, G.R. No. 188288, Jan. 16, 2012.) AGENCY TO SELL Agent receives the goods as the principal’s goods Agent delivers the proceeds of the sale Agent can return the object in case he is unable to sell the same to a third person Agent in dealing with the thing received is bound to act according to the instructions of his principal SALE Buyer receives the goods as owner Buyer pays the price Buyer, as a general rule, cannot return the object sold Buyer can deal with the thing as he pleases, being the owner Distinction between Agency and Contractor (Shell v. Firemen’s Ins. Co., G.R. No. L-8169, Jan. 29, 1957.) AGENT Represents his principal Acts under the principal’s control and instruction Principal is liable for torts committed by the agent within the scope of his authority INDEPENDENT CONTRACTOR Employed by the employer Acts according to his own method Employer not liable for torts committed by the independent contractor. (Rule VIII, Sec. 9(b), Omnibus Page 324 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (Civil Code, Art. 1897, Art. 1899) Implementing Rules of the Labor Code of the Philippines) ii. Special – agency comprises one or more specific transactions (CIVIL CODE, Art. 1876) As to Authority Conferred Distinction between Agency and Partnership AGENCY An agent must submit to the principal’s right to control The agent assumes no personal liability where he acts within the scope of his authority (CIVIL CODE, Art. 1897) The agent takes his agreed share of profits not as owner but as an agreed measure of compensation for his services PARTNERSHIP A co-partner is not subject to co-partner’s right to control, unless there is an agreement to that effect The partner binds not only the firm members but himself as well ii. The profits belong to all the partners as common proprietors in agreed proportions Express – agent has been explicitly authorized by the principal, either orally or in writing. (CIVIL CODE, Art. 1869) 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. (CIVIL CODE, Art. 1869) Other Classifications of Agency As to Character i. ii. Gratuitous – agent receives no compensation for his services (CIVIL CODE, Art. 1875) Onerous – agent receives compensation for his services (CIVIL CODE, Art. 1875) As to Extent of Business of the Principal i. ii. General – agency comprises all the business of the principal (CIVIL CODE, Art. 1876) Couched in general terms – only acts of administration (CIVIL CODE, Art. 1878) Couched in specific terms – only the performance of a specific act/s (CIVIL CODE, Art. 1876) As to Nature and Effects i. ii. As to Manner of Creation i. i. Ostensible or Representative – agent acts in the name and representation of the principal Simple or Commission – agent acts in his own name but for the account of the principal. Forms of Agency General rule: Appointment of an agent may be oral or written; no formal requirement (CIVIL CODE, Art. 1869) Exception: When the law requires a specific form (e.g., sale of a piece of land or any interest therein through an agent – the agent’s authority must be in writing, otherwise the sale is void) (CIVIL CODE, Art. 1874) How Agency May be Constituted from Side of Third Parties: i. Agency is not presumed to exist – persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of his authority – he must require the presentation of the power of attorney, or the instructions as regards the agency. (Salvador v. Rabaja , G.R. No. 199990, Feb. 2, 2015.) ii. Agency by Estoppel with Respect to Third Parties – one who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the following pre-assumptions or deductions, which the law expressly directs to be made from particular facts, are deemed conclusive. Page 325 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 (Macke v. Camps, G.R. No. 2962, Feb. 27, 1907.) Compensation General rule: Agency is presumed to be for compensation, unless there is proof to the contrary. (CIVIL CODE, Art. 1875) The agent does not have to prove that the agency is for compensation. Exception: The presumption that the agency is for compensation is prima facie, meaning it may be disproved by contrary evidence (CIVIL CODE, Art.1875) 9184, Feb. 2, 1916.) 2. A broker is not entitled to commission for unsuccessful efforts. (Guardex Enterprises v. NLRC, G.R. No. 66541, Nov. 20, 1990.) 3. The broker should be paid his commission where he is the efficient procuring cause in bringing the sale. (Prats v. CA, G.R. No. L39822, Jan. 31, 1978; Manotok Brothers v. CA, G.R. No. 94753, Apr. 4, 1993.) Efficient Procuring Cause When there is a close proximate and causal connection between the efforts and labor of the agent and the principal’s sale of property. (Manotok Brothers v. CA, G.R. No. 94753, Apr. 7, 1993.) Broker Negotiates contracts relative to property in behalf of others and for a compensation/fee (Litonjua v. Eternit Corp., G.R. No. 144805, June 8, 2006.) Difference from a Broker A broker brings parties together and parties agree to enter into a contract. A broker is not necessarily an agent of either party, and negotiate contracts relative to property in behalf of others and for a compensation/fee. He is described merely as a “go-between” between the parties in Litonjua v. Eternit Corp. (G.R. No. 144805, June 8, 2006.), and does not have authority to bind the parties. Thus, in Litonjua, the Court said that a real estate broker (not an agent) is one who negotiates the sale of real properties – his authority is to find a buyer (or seller) who wishes to purchase (or sell) a property on terms agreed upon by the parties. He has no authority to bind the parties in the contract of sale. His authority is to find a buyer (or seller) and not to sell the property. Thus, there is no need of a special power of attorney under Art 1878. When Broker Entitled to Compensation 1. 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 (Macondray & Co., Inc. v. Sellner, G.R. No. Q: Will a broker be paid if the transaction was effected after the expiration of his authority? A: The broker should be paid his commission where he is the efficient procuring cause in bringing the sale. He is the efficient procuring cause when there is a close proximate and causal connection between the efforts and labor of the agent and the principal’s sale of property (Manotok Brothers v. CA, G.R. No. 94753, Apr. 4, 1993.) NOTE: “Procuring cause” refers to a cause originating a series of events which, without break in their continuity, resulting in the accomplishment of the prime objective of the broker’s employment, i.e. to produce a purchaser ready, willing, and able to buy on the owner’s terms. To be regarded as the “procuring cause” to be entitled to a commission, a broker’s efforts must have been the foundation on which the negotiations resulting in a sale began. (Medrano v. CA, G.R. No. 150678, Feb. 18, 2005.) Law on Double Agency 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 (CIVIL CODE, Art. 1915). Requisites for Principal to be bound by act of Agent (CIVIL CODE, Art. 1897) 1. The agent must act on behalf of the principal 2. The agent must act within the scope of his Page 326 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 authority When Principal is not bound by act of Agent General Rule: The agent acts without or beyond the scope of his authority in the principal’s name (CIVIL CODE, Art. 1897, 1910, Art. 1403 (1) Exceptions: So far as third persons are concerned, an act is deemed to be within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and the agent; (CIVIL CODE, Art. 1900) i. Where the principal has ratified the acts of the agent, expressly or impliedly (CIVIL CODE, Art. 1910) If an agent acts in his own name, he (and not the principal) is the one bound to the third person. The principal would not have a right of action in such case, unless the transaction involves things belonging to him (CIVIL CODE, Art. 1883) NOTE: The agent is not deemed to have exceeded his authority should he perform the agency in a manner more advantageous to the principal than that indicated by him, since he is authorized to do such acts as may be conducive to the accomplishment of the purpose of the agency. (CIVIL CODE, Art. 1882) In the absence of an agreement to the contrary, a managing agent (i.e. one entrusted with the care and management of a business) may enter into contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management. (Eurotech v. Cuizon, G.R. No. 167552, Apr. 23, 2007.) Forms of Acceptance by Agent i. ii. Express - when it is oral or written (CIVIL CODE, Art. 1870) Implied - when it can be inferred from the acts of the agent which carry out the agency, or from his silence or inaction according to the circumstances (CIVIL CODE, Art. 1870) Between persons who are present – there is implied acceptance if the principal delivers his power of attorney to the agent and the latter receives it without any objection (CIVIL CODE, Art. 1871) Between persons who are absent General rule: Acceptance not deemed implied from the silence of the agent. (CIVIL CODE, Art.1872) Exceptions: i. ii. When the principal transmits his power of attorney to the agent who receives it without any objection 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 (CIVIL CODE, Art.1872) “Present” Generally, “face to face”, but includes people conversing directly through technology (e.g. over the telephone or through a videoconference). Q: How is implied acceptance manifested as between persons who are present and those who are absent? A: As between persons who are present, the acceptance of the agency may be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. (CIVIL CODE, Art. 1871). Meanwhile, as to those who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except when the principal delivers his power of attorney to the agent, who receives it without any objection; or when the principal entrusts to him by letter or telegram a power of attorney in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. (CIVIL CODE, Art. 1872) Kinds of Agency i. Based on business or transactions encompassed - General vs Special Agency GENERAL SPECIAL BASIS AGENT AGENT Scope of All acts Specific acts Authority connected in pursuance with the of particular Page 327 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 business or employment in which he is engaged (CIVIL CODE,, Art. 1876) Nature of Service Authorized Extent to Which Agent May Bind the Principal Construction of Principal’s Instructions Involves continuity of service May bind his principal by an act within the scope of his authority, although it may not have been the subject of any specific instruction Generally considered as advisory in nature instructions or with restrictions necessarily implied from the act to be done (CIVIL CODE, Art. 1876) No continuity of service His authority is provided in a special power of attorney or general power of attorney or letter of attorney. An attorney-in-fact is not necessarily a lawyer.” (Pineda, Legal Ethics, p. 8) iii. Whether it covers acts of administration or acts of dominion – General Power vs. Special Power of Attorney Power of Attorney Cannot bind his principal in a manner beyond or outside the specific acts which he is authorized to perform Strictly construed as they limit the agent’s authority NOTE: Universal Agent – one employed to do all acts which the principal may personally do, and which he can lawfully delegate to another the power of doing. (Siasat v. IAC, G. R. No. L-67889, Oct. 20,1985.) ii. Legal Encyclopedia, p. 66) Whether it covers legal matters – Attorney at Law vs. Attorney-in-Fact Attorney-at-Law “A practitioner in a court of law who is legally qualified to prosecute and defend actions in such court.” Attorney-in-Fact “An attorney-in-fact is simply an agent whose authority is strictly limited by the instrument appointing him, though he may do things not mentioned in his appointment necessary to the performance of the duties specifically required of him by the power of attorney appointing him, such authority necessarily being implied (Philippine Instrument in writing by which the principal appoints his agent and confers authority to do specific acts on behalf of the principal. Its primary purpose is to evidence the agent’s authority to third parties with whom the agent deals (Wee v. De Castro, G.R. No. 176405, 2008.) Construction of Power of Attorney (Olaguer v. Purugganan, Jr., G.R. No. 158907, Feb. 12, 2007.) General rule: Strictly construed to grant only those specified powers. Exception: When strict construction will defeat the very purpose of the power Ways of Giving Notice of Agency and its Effect i. ii. By special information - the person appointed as agent is considered as such with respect to the person to whom it was given. (CIVIL CODE, Art. 1873) By public advertisement - the agent is considered as such with regard to any person. (CIVIL CODE, Art. 1873) Agency Couched in General Terms Covers only mere acts of administration (not acts of dominion) even if: i. The principal should state that he withholds no power ii. The agent may execute such acts as he may consider appropriate iii. The agency should authorize a general and unlimited management (CIVIL CODE, Art.1877) Page 328 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 How to Construe Contracts of Agency Contracts of agency, as well as general powers of attorney, must be interpreted in accordance with the language used by the parties. • The real intention of the parties is primarily determined from the language used and gathered from the whole instrument. • In case of doubt, resort must be had to the situation, context, and relations of the parties. The intention of the parties must be sustained, not defeated. • If the contract is open to two (2) constructions, one of which would uphold the intention while the other would overthrow it, the former is to be chosen. (Liñan v. Puno, G.R. No. L-9608, Aug. 7, 1915.) Cases Where Special Power of Attorney is Necessary (PECWAM-LLB-BOCARO) 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; CIVIL LAW 13. To Accept or repudiate an inheritance; 14. To Ratify or recognize obligations contracted before the agency; 15. Any Other act of strict dominion. (CIVIL CODE, Art. 1878) NOTE: A Special Power of Attorney is not required to execute a Deed of Partition because partition is a conveyance of real property. (Heirs of Ureta v. Heirs of Ureta, G.R. No. 165748, Sept. 14, 2011.) NOTE: A Special Power of Attorney is strictly construed. Hence, the act under Article 1878 sought to be authorized must be clearly stated. Accordingly, the power of administration does not include acts of disposition or encumbrance, which are acts of strict ownership. Similarly, an authority to sell or dispose does not include the authority to administer. (Aggabao v. Parulan, G.R. No. 165803, Sept. 1, 2010.) NOTE: A Special Power of Attorney must express the powers of the agent in clear and unmistakable language for the principal to confer the right upon an agent (Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, July 31, 2013.). However, Article 1878 does not state that the authority be in writing. As long as the mandate is express, such authority may either be oral or written. The requirement under Article 1878 refers to the nature of authorization and not to its form (Patrimonio v. Gutierrez, G.R. No. 187769, June 4, 2014.). The special power of attorney can be included in the general power when it specifies therein the act or transaction for which the special power is required. Q: A borrowed money from C on behalf of B without B’s knowledge. C sought to recover from A, but to no avail. He thereafter sent several demand letters to B asking for the payment. B now contends that he should not be held liable because there was no loan between him and C since he did not give a special power of attorney for the borrowing of money. Is B correct? Page 329 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 A: Yes. Art. 1878 of the NCC provides that a special power of attorney is necessary in order to loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration. Such authorization, however, need not be in writing. As long as the mandate is express, such authority may be either oral or written. (Patrimonio v. Gutierrez, G.R. No. 187769, June 4, 2014.) Powers not included in the power to mortgage i. ii. iii. To sell (CIVIL CODE, Art. 1879) To execute a second mortgage To mortgage for the agent’s or any 3rd persons’ benefit, unless clearly indicated Powers not compromise included in the power to Submission to arbitration (CIVIL CODE, Art. 1880) Rationale: i. ii. iii. A principal may authorize his agent to compromise because of his confidence in the latter’s discretion to protect his rights and obtain for him the best deal. If the transaction were left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (CIVIL CODE, Art. 1881) • the latter case with regard to any person (CIVIL CODE, Art.1873). Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers (CIVIL CODE, Art. 1911) Requisites of Agency by Estoppel 1. The principal manifested a representation of the agent’s authority or knowingly allowed the agent to assume such authority; 2. The third person, in good faith, relied upon such representation; and 3. Relying upon such representation, such third person has changed his position to his detriment (Country Bankers Insurance Corporation v. Keppel Cebu Shipyard, et. al., G.R. No. 166044, June 18, 2012.) Distinction between Agency by Estoppel and Implied Agency BASIS Existence of actual agency Reliance by 3rd persons Agency by Estoppel There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although not real, authority to represent another. (Country Bankers Insurance Corporation v. Keppel Cebu Shipyard, et. al., G.R. No. 166044, July 18, 2012.) NOTE: • If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in Nature of Authority AGENCY BY ESTOPPEL No agency at all IMPLIED AGENCY There is an actual agency Can be invoked only by a 3rd person who in good faith relied on the conduct of the principal in holding the agent out as being authorized An agent by estoppel has none of the rights of an agent, except where the principal’s conduct are such that the agent reasonably believed that Such reliance is not needed, since the agent is a real agent An agent by implied appointment has all the rights and liabilities of an agent, i.e. has actual authority to act on behalf of the principal Page 330 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 the principal intended him to act as an agent NOTE: An authority embodied in a letter is sufficient. (Jimenez v. Rabot, G.R. No. 12579, July 7, 1918.) Instances creating an Agency by Operation of Law 1. The agent must finish the business already begun on the death of the principal, should delay entail any danger (CIVIL CODE Art. 1884, par. 2) 2. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent (CIVIL CODE, Art. 1885) 3. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation (CIVIL CODE, Art. 1929). 4. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith (CIVIL CODE, Art. 1931). 5. If the agent dies, the heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter (CIVIL CODE, Art. 1932) How Agency is revoked 1. Principal may revoke the agency (express or implied) at will and compel agent to return the document evidencing the agency. (CIVIL CODE, Art. 1920) CIVIL LAW in good faith and without knowledge of the revocation. Notice of revocation in a newspaper of general circulation is a sufficient warning. (CIVIL CODE, Art. 1922) 4. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice was given to the former agent. (CIVIL CODE, Art. 1923) 5. Agency is revoked if principal directly manages the business entrusted to the agent, dealing directly with third persons (CIVIL CODE, Art. 1924) 6. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others. (CIVIL CODE, Art. 1925) 7. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. (CIVIL CODE, Art. 1926) 8. The power shall continue to be in full force until the notice is rescinded in the same manner as it was constituted. (Civil Code, Art. 1873). However, constitution by Special Information may be revoked by notice in a daily newspaper, provided it can be proven that 3rd persons in question read the revocation (CIVIL CODE, Art. 1922) III. OBLIGATIONS OF THE AGENT General Obligations of the Agent to the Principal (GOC) 1. Act with utmost Good faith & loyalty for the furtherance of principal’s interests 2. Obey principal’s instructions 3. Exercise reasonable Care General Obligation of Agent who accepts the Agency 2. Agency has been entrusted for purpose of contracting with specified persons – revocation will not prejudice specified persons if they were not notified. (CIVIL CODE, Art. 1921) NOTE: The agent is bound by his acceptance to carry out the agency and is liable for the damages which, through his non-performance, the principal may suffer. 3. If the agent had general powers – revocation does not prejudice third persons who acted He must also finish the business already begun on the death of the principal, should delay entail Page 331 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 any danger. (CIVIL CODE, Art. 1884) Specific Obligations of the Agent (FADI – CALAMARI) 1. Carry out the agency (CIVIL CODE, Art. 1884); 2. Answer for damages which through his nonperformance 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) (CIVIL CODE, Art. 1884); 4. Observe the Diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed (CIVIL CODE, Art. 1885); 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 (CIVIL CODE, Art. 1887); Exceptions (to the rule that the agent must not depart from the instructions of principal) (SAI): i. There’s a Sudden emergency ii. If the instructions are Ambiguous iii. If the Departure is so Insubstantial that it does not affect the result and the principal suffers no damage thereby 7. Not to carry out the agency if it would Manifestly result in loss or damage to the principal (CIVIL CODE, Art. 1888); 8. Answer for damages if there being a conflict between his & his principal’s interests, he prefers his own (CIVIL CODE, Art. 1889); 9. Not to Loan to himself if he has been authorized to loan money at interest (CIVIL CODE, Art. 1890) 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.) (CIVIL CODE, Art. 1891) 11. Be Responsible in certain cases for the act of the substitute appointed by him (CIVIL CODE, Art. 1892) 12. Pay Interest on funds he has applied to his own use (CIVIL CODE, Art. 1896) Obligation of Agent who declines Agency In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent. The owner shall as soon as practicable either appoint an agent or take charge of the goods. (CIVIL CODE, Art. 1885) Effects of Agent’s Acts to Principal’s Liability ACT OF AGENT Mismanagement of the business by the agent Tort committed by the agent Agent in good faith but prejudices 3rdparties Agent in bad faith and prejudices 3rd persons LIABILITY OF PRINCIPAL Principal still responsible for the acts contracted by the agent with respect to 3rd persons; Principal, however, may seek recourse from the agent Principal civilly liable so long as the tort is committed by the agent while performing his duties in furtherance of the principal’s business Principal is liable for damages Only the agent is liable for damages When Agent has a right to disobey the Principal’s instructions 1. When the instruction calls for the performance of illegal acts 2. Where he is privileged to do so to protect his security in the subject matter of the agency When obligation to account not applicable i. ii. If the agent acted only as a middleman with the task of merely bringing together the vendor and the vendees. If the agent had informed the principal of the gift/bonus/profit he received from the purchaser and his principal did not object. Page 332 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 iii. Where a right of lien exists in favor of the agent. When Agent may incur Personal Liability i. ii. iii. iv. v. When the agent expressly binds himself (CIVIL CODE, Art. 1897) When the agent exceeds his authority (CIVIL CODE, Art. 1897, 1898) When an agent by his act prevents performance on the part of the principal When a person acts as an agent without authority or without a principal A person who purports to act as agent of an incapacitated principal Appointment of Sub-Agent i. ii. iii. iv. v. If the principal has not prohibited the agent from appointing a substitute, the Principal will be liable to 3rd persons for the acts of the sub-agent within the scope of his authority If there is a prohibition but nevertheless the agent appoints a sub-agent, all the subagent’s acts are void as to the principal and the agent will be personally liable as to third parties. If there is authority to appoint and sub-agent is not designated by the principal, the agent will be liable for all the acts of the sub-agent if the sub-agent is notoriously incompetent or insolvent. If there is authority to appoint and sub-agent is designated by the principal, the agent is released from any liability from the acts of the sub-agent and the principal shall be liable. If the appointment of a sub-agent is not prohibited, it shall be valid if it is beneficial to the principal. But, should the principal incur damage due to such appointment, the agent shall be primarily responsible for the acts of the sub-agent. (CIVIL CODE, Art. 1892) Q: A constituted B as his agent. Can B appoint a substitute? A: Yes. The agent may appoint a substitute or sub-agent if the principal has not prohibited him from doing so, but he shall be responsible for the acts of the substitute: a. When he was not given the power to appoint one; b. When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. (CIVIL CODE, Art. 1892) If there is a prohibition, B cannot do so, unless he seeks the consent of the principal. Responsibility of Two (2) or More Agents Appointed Simultaneously General rule: Joint liability Exception: When solidarity has been expressly stipulated, in which case, each of the agents becomes solidarily liable for (1) the non-fulfillment of the agency; and for (2) the fault or negligence of his fellow agent(s) (CIVIL CODE, Art.1894) Exception to the Exception: when one of the other agent/s acts beyond the scope of his authority – innocent agent is not liable. (CIVIL CODE, Art. 1895) Doctrine of Agency by Necessity An agency can never be created by necessity; what is actually created is additional authority in an agent appointed and authorized before the emergency arose. The existence of emergency or other unusual conditions may operate to invest in an agent authority to meet the emergency, provided (PURE): 1. The agent’s enlarged authority is exercised for the principal’s Protection 2. The agent is Unable to communicate with principal; 3. The means adopted are Reasonable under the circumstances; 4. The emergency really Exists; Effect where 3rd Person aware of limits of agent’s power If the agent exceeds his authority, it shall be void unless the principal ratifies it. (Cervantes v. CA, G.R. No. 125128, March 2, 1999.) Page 333 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 When third persons can repudiate the contract Before actual ratification by the principal, or before the principal has signified his willingness to ratify the agent’s acts. Effect of the principal receiving the benefits of the transaction CIVIL LAW assert a gain. (Robinson v. Borse) NOTE: The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for compensation. (CIVIL CODE, Art. 1909) He is deemed to have ratified it. A principal may not accept the benefits of a transaction and at the same time repudiate its burdens 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 on behalf of the principal 6. 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 i. ii. iii. 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 With respect to principal - assumes responsibility for the unauthorized act, as if the agent had acted under original authority but not liable for acts outside the authority approved by his ratification With respect to 3rd persons - bound by ratification to the same extent as if the ratified act had been authorized; cannot raise the question of the agent’s authority to do the ratified act NOTE: There is ratification when the principal sues to enforce the contract entered into by the unauthorized agent. However, there is no such ratification if the principal’s action is brought to avert a greater loss rather than to Page 334 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 ACTS OF THE AGENT On behalf of the principal, within the scope of authority Without or beyond scope of authority Within the scope of authority but in the agent’s name Within the scope of the written power of attorney but agent has actually exceeded his authority according to an understanding between him & the principal With improper motives EFFECT EXCEPTION(S) Binds the principal Agent not personally liable (CIVIL CODE, Art. 1881) Agent liable if he: i. Expressly makes himself liable ii. Exceeds the limits of his authority without giving the parties sufficient notice of his powers Binding on the principal when: i. Ratified or ii. The principal allowed the agent to act as though he had full powers When the transaction involves things belonging to the principal: • Remedy of the principal - damages for agent’s failure to comply with the agency. Remedies of the third person i. If the case falls under the general rule, he can sue the agent. ii. But when the contract involves things belonging to the principal, he can sue the principal. iii. But if it cannot be determined without litigation who is liable, he can sue both. Contract is unenforceable as against the principal but binds the agent to the third person (CIVIL CODE, Arts. 1317, 1403 and 1898) Not binding on the principal. Principal has no cause of action against the 3rd parties and vice versa Insofar as 3rd persons are concerned, not required to inquire further than the terms of the written power, agent acted within scope of his authority; Principal is estopped Motive is immaterial; as long as within the scope of authority, valid Third person knew agent was acting for his own benefit: principal is not liable to 3rd person Owner is seeking recovery of personal property of which he has been unlawfully deprived Page 335 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW Authorized - principal still liable Beyond the scope of the agent’s authority General Rule: Principal not liable Exception: principal takes advantage of a contract or receives benefits made under false representation of his agent For the agent’s own benefit – principal still liable; agent’s motive immaterial Page 336 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Obligation Rules for Commission Agents Commission Agent - one whose business is to receive and sell goods for a commission and who is entrusted by the principal with the possession of goods to be sold, and usually selling in his own name. Distinction between Commission Agent and Broker COMMISSION AGENT Engaged in the purchase and sale for a principal of personal property which has to be placed in his possession and disposal Has a relation with principal, buyer or seller, and property which is the object of the transaction Distinction between Commission Agent ORDINARY AGENT Acts for and in behalf of his principal Need not have possession of the principal’s goods BROKER No custody or possession of the thing he disposes; merely a go-between, an intermediary between the seller and the buyer Maintains no relation with the thing which he purchases or sells agent entitled to any interest/benefit which may result from such sale (CIVIL CODE, Art.1905) 4. If an agent receives guarantee commission (a del credere agent), he shall Bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. The agent shall be liable for damages if he does not collect the credits of his principal at the time when they become due and demandable, unless he proves, that he exercised due diligence for that purpose. (CIVIL CODE, Art. 1907) IV. OBLIGATIONS OF THE PRINCIPAL Obligations of the Principal to the Agent (CARIP) 1. 2. Ordinary Agent and COMMISSION AGENT May act in his own name or in that of the principal Must be in possession of the thing he disposes 3. 4. 5. Obligations of a Commission Agent (RMCB) 1. Responsible for the goods received by him, as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same (CIVIL CODE, Art. 1903) 2. If goods are of the same kind and mark but belonging to different owners, make a distinction by counter Marks and designate the merchandise respectively belonging to each principal (CIVIL CODE, Art. 1904) 3. He cannot, without consent of the principal, sell on Credit; should he do, principal may demand payment in cash, but the commission Comply with all the obligations agent contracted in representation of the principal (CIVIL CODE, Art. 1910) Advance sums necessary for the execution of the agency, when agent so requests; liable for reimbursement regardless of the undertaking’s success whenever agent had advanced & has no fault; includes interest (CIVIL CODE, Art. 1912) Reimburse the agent for all advances made by him provided the agent is free from fault (CIVIL CODE, Art. 1912) 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 (CIVIL CODE, Art. 1913) Pay the agent the compensation agreed upon or the reasonable value of the latter’s services (CIVIL CODE, Art. 1875) Liability of 3rd Persons to the Principal 1. 2. In Contract – a 3rd person is liable to the principal upon contracts entered into by his agent, as if the contract has been entered into by the principal. (CIVIL CODE, Art. 1897) In Tort – the 3rd person’s tort liability to the principal, insofar as the agent is involved in the tort, arises in 3 situations: i. Where the 3rd person damages or injures property or interest of the principal in the possession of the agent Page 337 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 ii. Where the 3rd person colludes with the agent to injure/defraud the principal iii. Where the 3rd person induces the agent to violate his contract with the principal to betray the trust reposed upon him by the principal. Rules on Liability of Two (2) or more Principals Requisites for Solidary Liability of Principals 1. There are two (2) or more principals 2. The principals have all concurred in the appointment of the same agent 3. The agent is appointed for a common transaction or undertaking (CIVIL CODE, Art. 1915) NOTE: The rule in Art. 1915 applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction. The solidarity arises from the common interest of the principals and not from the act of constituting the agency. The principal is not bound by the acts of the authorized agent where the latter failed to indicate in the mortgage that she was acting for and in behalf of her principal, and the REM explicitly shows on its face that it was signed by agent in her own name and personal capacity. The third-party bank has no one to blame but itself. Not only did it act with undue haste when it granted and released the loan, but it also acted negligently in preparing the REM as it failed to indicate that the agent was signing it for and on behalf of the principal. (Bucton v. Rural Bank of El Salvador, Inc., G.R. No. 179625, Feb. 24, 2014.) Rule where two persons contract separately with Agent and Principal Two persons may contract separately with the agent and the principal with regard to the same thing. If the two contracts are incompatible with each other, the one of prior date shall be preferred. This is subject, however, to the rules on Double Sales under Art. 1544 of the Civil Code (i.e. for movables: first in possession, first in right; for immovables: first to register in good faith, first in right; absent any inscription: first in possession or party who presents oldest title acquires ownership). (CIVIL CODE, Art. 1916) Agent’s Right of Retention 1. Specific (only for those goods connected with the agency); and 2. Until the principal effects the reimbursement and pays the indemnity (CIVIL CODE, Art. 1914) Principal’s Liabilities for Expenses General rule: Principal is liable for the expenses incurred by the agent. Exceptions (AFUS): i. If the agent Acted in contravention of the principal's instructions, unless the latter should wish to avail himself of the benefits derived from the contract. ii. When the expenses were due to the Fault of the agent. iii. When the agent incurred them with knowledge that an Unfavorable result would ensue, if the principal was not aware thereof. iv. When it was Stipulated that the expenses would be borne by the agent, or that the latter would be allowed only a certain sum. (CIVIL CODE, Art.1918) Who can be estopped to deny Agency? 1. Estoppel of Agent - one professing to act as agent is 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 i. As to agent – one knowing another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other ii. As to sub-agent – for the principal to be estopped 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 iii. 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 Page 338 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 prudence, is estopped to deny the agency (Litonjua, Jr. v. Eternit Corp., G.R. No 144805, June 8, 2006.) 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. Distinction between Ratification and Estoppel RATIFICATION Rests on intention Affects the entire transaction from the beginning Substance of ratification is confirmation of an authorized act or conduct after it has been done ESTOPPEL Rests on prejudice Affects only relevant parts of the transaction Substance of estoppel is the principal’s inducement to another to act to his prejudice Distinction between Apparent Authority and Authority by Estoppel APPARENT AUTHORITY Though not actually granted, principal knowingly permits/holds out the agent as possessing the necessary powers to act in a certain way AUTHORITY BY ESTOPPEL Where the principal, by his negligence, permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the conduct of the agent A principal may be held liable under the Doctrine of Apparent Authority when the principal’s liability arises from: (a) his manifestations of the existence of the agency which need not be expressed, but may be general and implied, or acts of the agent which suggest the existence of a principal-agency relationship which are known to the principal and which the principal does not deny; and (b) the reliance of third persons upon the conduct of the principal or agent. (Professional Services, Inc. v. CA, G.R. No. 126297, Feb 2, 2010.) Agency by Estoppel General Rule: Principal may revoke the agency at will (CIVIL CODE, Art. 1920) Exception: Agency coupled with interest i. When a bilateral contract depends upon the agency. ii. When the agency is the means of fulfilling an obligation already contracted iii. When a partner is appointed as manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. (CIVIL CODE, Art. 1927) Exception to the Exception: When the agent acts to defraud the principal – Implied Revocation of Agency 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 good faith without knowledge of the revocation (CIVIL CODE, Art. 1923) Principal directly manages the business entrusted to the agent, or deals directly with 3rd persons (CIVIL CODE, Art. 1924) Effect of Issuance of a Special Power of Attorney The general power is impliedly revoked as to matters covered by the special power because a special power naturally prevails over a general power (CIVIL CODE, Art. 1926) Principal’s 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, Page 339 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 the principal can be held liable for damages (Villanueva supra at 209-210 (citing Diolosa v. CA, 130 SCRA 350, July 16, 1984 & Valenzuela v. CA, 191 SCRA 1, Oct. 19, 1990.)). NOTE: The list is not exclusive; causes are 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. Necessity of Notice of Revocation 1. As to the agent – notice is 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 or suspended; revocation without notice to the agent will not render invalid an act done in pursuance of the authority 2. As to 3rd persons – notice necessary 3. As to former customers - notice must be given to them because they always assume the continuance of the agency relationship 4. As to other persons - notice by publication is enough (CIVIL CODE, Art. 1922) Effect of Extinguishment without Notice Act of agent deemed valid insofar as third parties acting in good faith and without knowledge of revocation. (CIVIL CODE, Art. 1922; Bitte v. Jones, G.R. No. 212256, Dec. 9, 2015.) Presumption of Continuance of Agency 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. Modes of Extinguishing an Agency, Generally (ASO) a) Agreement b) Subsequent acts of the parties which may be either: a. By the act of both parties or by mutual consent b. By the unilateral act of one of them c) By Operation of Law V. MODES OF EXTINGUISHMENT How Agency is Extinguished (EDWARD) a) b) c) d) e) f) By the Expiration of the period for which the agency was constituted. By the Death, civil interdiction, insanity or insolvency of the principal or of the agent; By the Withdrawal of the agent; By the Accomplishment of the object or purpose of the agency; By its Revocation; By the Dissolution of the firm or corporation which entrusted or accepted the agency (CIVIL CODE, Art. 1919) Other Modes a) Mutual withdrawal from the relationship by the principal and agent; b) By the happening of a supervening event that makes illegal or impossible the objective or purpose for which the agency was constituted, like the destruction of the subject matter which is the object of the agency. NOTE: Even if the reason for extinguishing the agency is not true, the agent cannot insist on reinstatement. The agent can only demand damages. (Orient Air Services v. Court of Appeals, G.R. No. 76931, May 29, 1991.) What happens if the subject matter of the agency is lost or destroyed? General rule: In the absence of any agreement by the parties to the contrary, the loss or destruction of the subject matter of the agency terminates the agent‘s authority to deal with reference to it. Exceptions: i. ii. iii. If it is possible to substitute other material for that which was destroyed without substantial detriment to either party If the destroyed subject matter was not in fact essential to the contract A partial loss or destruction (agency may continue in existence as to other property not affected). Page 340 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 May the agency be extinguished at will? If the loss is due to a breach or wrongful act of the principal, he liable for damages. Form of Renunciation It is not always necessary for the agent to renounce the agency expressly. He can do so impliedly, such as: i. Where he has conducted himself in a manner incompatible with his duties as agent ii. When he abandons the object of his agency and acts for himself in committing a fraud upon his principals iii. When he files a complaint against the principal and adopts an antagonistic attitude towards him Exceptions to Extinguishment by Death (KIDC) i. ii. iii. iv. If the agency is coupled with an Interest; 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. (Rallos v. Go Chan, G.R. No. L-24332, Jan. 31, 1978.) To avoid Damage 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 are not transmissible Exceptions: i. ii. Agency by operation of law, or a presumed or tacit agency Agency is coupled with an interest in the subject matter of the agency (e.g. power of sale in a mortgage). 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 Agent may do so but subject to the contractual obligations owing to the principal (i.e. fixed period of time for the agency or purpose not yet accomplished). Expressly or Impliedly i. ii. iii. iv. Conducted himself in a manner incompatible with his duties; Abandons the object of agency and acts for himself in committing a fraud upon his principal; He files a complaint against the principal and adopts an antagonistic attitude towards him The mere fact that the agent violates the principal’s instructions does not amount to renunciation, but that may render him liable for damages. -------- end of topic -------D. COMPROMISE Compromise – a contract by which the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. (Art. 2028) • It is a consensual contract, perfected upon the meeting of the minds. (Paraiso International Properties, Inc. v. CA, G.R. No. 153420, April 16, 2008). • As such, neither courts nor quasi-judicial bodies cannot impose a compromise different from the agreement between the parties. (Philippine Bank of Communications v. Echiverri, G.R. No. L41795, Aug. 29, 1980, citing Municipal Board of Cabanatuan City v. Samahang Magsasaka, G.R. No. L-25818, Feb. 25, 1975, 62 SCRA 435). Compromise requires: (CARE) 1. Contract 2. With Reciprocal concessions 3. Seeking to Avoid or End litigation Two kinds of compromise agreements: 1. Judicial – which puts an end to a pending litigation; and Page 341 of 474 ATENEO CENTRAL BAR OPERATIONS 2020/21 CIVIL LAW 2. Extrajudicial – which is to avoid litigation. (Spouses Lana v. CA, G.R. No. 104133, April 18, 1995, citing Caguioa, VI Commentaries and Cases on Civil Law). exclusively in Congress, per Sec. 20(1), Chap. IV, Subtitle B, Title I, Book V of EO No. 292. (Binga Hydroelectric Plant, Inc. v. COA, G.R. No. 218721, July 10, 2018). The courts shall endeavor to persuade the litigants in a civil case to compromise. (Art. 2029) • Procedurally, this is done through mandatory court-annexed mediation, judicial disputed resolution. (see A.M. No. 11-1-6-SC-PHILJA, Jan. 11, 2011), and also during pre-trial (Rule 18). • Note that what can be compromised is a civil case; “there may be a compromise upon the civil liability arising from an offense; but such compromise shall not extinguish the public action for the imposition of the legal penalty.” (Art. 2034); “it is settled that criminal liability cannot be the subject of a compromise.” (Team Image Entertainment, Inc. v. Solar Team Entertainment, Inc., G.R. No. 191652, Sept. 13, 2017). • If either or both parties express a willingness to compromise, or one party offers to compromise (even if the other party refused the offer), the civil action/proceeding shall be suspended. (Art. 2030) • If a losing party showed a sincere desire to compromise, the courts may mitigate the damages to be paid. (Art. 2031) The following CANNOT be compromised (Art. 2035): 1. Civil status of persons 2. Validity of marriage or of legal separation 3. Any ground for legal separation 4. Future support 5. Jurisdiction of courts 6. Future legitime Court approval is necessary for compromises entered into by (GRAPE) (Art. 2032): 1. Guardians 2. Representatives of absentees 3. Administrators or Executors of a decedent’s estate 4. Parents Compromises in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents are voidable. • However, if one party, by virtue of the compromise, already withdrew from a litigation that had commenced, the other party cannot set up mistake of fact. (Art. 2038) For a juridical person to compromise, it must comply with the form and requirements that are needed for alienation of property. (Art. 2033). • Generally, only a Board Resolution is required; however, for GOCCs and government agencies, the authority to compromise a settled claim or liability exceeding P100,000.00 is vested A compromise covers only those matters definitely stated therein, or those included by necessary implication. (Art. 2036) A compromise is res judicata upon the parties, but there shall be no execution except in compliance with a judicial compromise. (Art. 2037) • Note: even if the compromise is not judicially approved, it is res judicata. (Jose Cochingyan, Jr. v. Cloribel, G.R. No. L27070-71, April 22, 1977, 76 SCRA 361). • However, only if the compromise is approved by the court can it be enforced by mandamus. (Spouses Lana v. CA, G.R. No. 104133, Apr. 18, 1995, citing Maceda, Jr. v. Moreman Builders, G.R. No. 100239, Oct. 28, 1991, 203 SCRA 293). General Rule for newly-discovered documents: If there are newly-discovered documents referring to part of a compromise that was already entered into, the discovery of such by itself is not cause of annulment/rescission of the compromise, unless the documents were concealed by one of the parties. Page 342 of 474 ATENEO CENTRAL CIVIL LAW BAR OPERATIONS 2020/21 Exception for newly-discovered documents: If the compromise refers to only one thing, and the newly-discovered documents show that one party had no right to said thing (Art. 2039) If the parties entered into compromise, and either or both parties were unaware that there was already a final judgment entered into at the time they entered the compromise, the compromise may be rescinded (Art. 2040) If one party fails or refuses to abide by the compromise, the other party has the option of either enforcing the compromise, or consider the compromise rescinded and insist on the original demand (Art. 2041) The doctrine on immutability of judgments applies to compromise agreements approved by courts in the same manner as it applies to judgments that have been rendered on the basis of a full-blown trial. Thus, a judgment on compromise that has attained finality cannot be “modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or the Highest Court of the land.” (Chiquita Brands v. Omelio, G.R. No. 189102, 2017). A judgment upon a compromise is rendered based on the parties’ reciprocal concessions. All the more reason should a judgment upon a compromise be complied with in good faith considering that the parties themselves crafted its terms. However, notwithstanding provisions in a compromise agreement stating that the parties should “immediately provisionally dismiss all actions, whether civil or criminal, they may have filed against each other”, a party that fails to cause the dismissal of the criminal cases filed cannot be deemed to have violated the compromise agreement, since criminal liability cannot be the subject of a compromise. (Team Image Entertainment v. Solar Team Entertainment, G.R. No. 191652, 2017). ARBITRATIONS The same persons who may enter into compromise may also submit their arbitrators for decision. (Art. 2042) All provisions relating to compromise are also applicable to arbitrations. (Art. 2043) Any stipulation that the arbitrators’ award or decision shall be final is valid, without prejudice to Articles 2038-40. (on voidable compromises; Art. 2044) Any clause giving one party the power to choose more arbitrators than the other is void. (Art. 2045) The appointment of arbitrators and the procedure for arbitration shall be governed by such rules of court as the SC may provide. (Art. 2046). Arbitration is a preferred method of settling disputes in our jurisdiction. RA 9285 (Alternative Dispute Resolution Act of 2004) provides that: 1. The RTC must refer the case to arbitration if there is an arbitration clause; it does not have jurisdiction; 2. Foreign arbitral awards, however, must be confirmed by the RTC to be enforced; 3. The RTC does have jurisdiction to review

2021-Blue-Notes-Civil-Law

Related documents

Add this document to collection(s)

Add this document to saved

Suggest us how to improve StudyLib