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Civil Law Bar 2011 Notes Roland Glenn T. Tuazon Ateneo de Manila University TABLE OF CONTENTS: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

12. 13. 14. PRELIMINARY TITLE PERSONS AND FAMILY RELATIONS PROPERTY SUCCESSION OBLIGATIONS AND CONTRACTS LAND TITLES PRESCRIPTION CREDIT TRANSACTIONS SALES PARTNERSHIP AGENCY COMPROMISE LEASE TORTS AND DAMAGES

No. The phrase unless otherwise provided only refers to the number of days, not fact of publication. What is required to be published? o The entire text of the law. What is the interpretation of the term law? o It can be executive issuances, regulations, et. al., and not just republic acts, as long as it affects the public in general and it requires public interest. Can a law affect just one person? o Yes, for instance, declarations of citizenship. It still has to be published. Same rule applies, even if only one locality is affected Read Tanada v. Tuvera. o It is not whether you read the publication or not. It not whether you understand the law or not. As long as there is opportunity to read it, there is compliance with publication requirements. Garcillano v. House: o The rules of procedure for legislative inquiries of Senate must be published in accordance to Art. 2 of the Civil Code, as mandated by the constitution (duly published). SEC v. GMA Network: o A memorandum circular regulating filing fees for submission of articles of incorporation or extension of corporate life must be published because it regulates public rights at large. o

PRELIMINARY TITLE Publication When do laws become effective? o 15 days after publication in OG or newspaper of general circulation (EO 200), unless otherwise provided Is 15 days mandatory? o No. It can be some other time period, less or more. What is mandatory is fact of publication. Can the law provide that there is no need for publication?

Mistake of fact v. mistake of law Mistake of fact can be a ground for vitiation of consent. But mistake of law is not a defense for vitiated consent. Specific instances where a mistake of law can have some effect? o 1. Good faith defense must show that it is a difficult provision of law to interpret, and this gave rise to mistake (Art. 526). BUT this only gives rise to mitigation of liability, not complete excuse there from. o 2. Mistake of payment or solutio indebiti

Prospectivity of laws

General rule: laws are prospective in nature. When did the Family Code take effect? o August 3, 1988 When did the Civil Code take effect? o August 30, 1950 Exceptions to non-retroactivity? o Regardless of what kind of law, it MUST have a retroactivity clause. (IMPT) o 1. Procedural laws o 2. Curative laws o 3. Tax laws o 4. Penal laws which benefit the accused (who is not a habitual offender) o 5. Substantive laws that do not impair vested rights o 6. Interpretative laws Liam Law v. Olympic Sawmill: o Ineffectivity of usury law should retroact as to change the Rules of Court as to this matter.

If law number 2 is a case of implied repeal, then law number 1 is revived unless law number 3 is likewise incompatible or law number 3 repeals law 1. (2) When does a law lapse? o When the law itself provides for its own lifespan. There is no need for a further statute to give effect to its lapse. (3) Unconstitutionality declared by courts. How does this differ? o When the court declares that a law is unconstitutional, it is null and void from the beginning. Exception: operative fact, which is based on equity.

Judicial decisions Considered as part of the law of the land. Stare decisis, however, only applies to SC decisions. It does not, however, become a law per se no need to publish. De Roy v. CA: o Judicial decisions need not be published first in the OG before becoming effective and binding jurisprudence. A lawyer must keep abreast with judicial decisions.

Waiver of rights What is the general rule? o Rights may be waived What are the exceptions? o 1. Waiver against public policy, public order, good customs, morals, or law o 2. Prejudicial to third persons with right recognized by law

Computation of period of laws Ordinary contracts: you can define your terms any way you want (example, a year can be 300 days) For laws, however, a year is 365 days. o UNLESS, one specifically names the year First day excluded, last day included. For contracts, it does not matter if the last day falls on a weekend. Contrast with Rules of Court, where it adjusts to the next business day.

Three types of termination of laws Effectivity of laws is a shared legislative and judicial function. (1) Repeal: Requires another law passed by Congress declaring that the law is repealed, or a new law that is irreconcilable with the old law. Implied repeal is not favored. What happens if the repealing law is itself repealed? o It depends on law number 2. If law number 2 is a case of express repeal, then law number 1 is not revived. There must be a specific provision reviving it.

Principle of nationality What are the things covered by the principle of nationality? o Family rights and duties, o status and condition, (ex. legitimacy, whether marriage is valid) o Legal capacity

Wherever a Filipino citizen is, Philippine law governs the three realms above. When there is an alien within our country, we still apply their national laws as regards family rights and duties, status and condition, and legal capacity. Nationality also governs successional rights of the decedent For purposes of legal capacity, when will the principle of nationality not apply? o Marriages lex loci celebrationis but only as to authority of solemnizing officer, marriage license, marriage ceremony General rule: still governed by nationality (IMPT) o Contracts involving real or personal properties lex situs Exception: when reason of acquisition of the thing is succession: nationality of the decedent governs o For the formal validity of wills lex loci celebrationis 3 things to determine: o What law governs legal capacity o What law governs extrinsic validity o What law governs intrinsic validity CONTRACTS o Legal capacity nationality Except: contracts referring to properties, which is governed by lex situs o Extrinsic validity lex loci celebrationis o Intrinsic validity there is freedom to stipulate governing law WILLS o Legal capacity national law of decedent, not successor o Extrinsic validity lex loci celebrationis Aliens choices national law, domicile, Philippine law, lex loci celebrationis NOTE: for aliens wills, these refer to wills presented for probate in the Philippines; we dont care otherwise o Intrinsic validity national law of the decedent PROPERTIES o Lex rei sitae (where found) Ex. so controversy between whether a British decedent spouse can dispose of the entirety of

property in the Philippines, where British law is unclear, it is presumed it is the same as Philippine law. Philippine law governs because the property is found here. Our law says that he can only dispose of his share in the property. o Exceptions: 1) successional rights are governed by the national law of the decedent Order of succession, amount of successional rights, intrinsic validity of testamentary provisions, capacity to succeed 2) property relations between spouses governed by the marriage settlement entered into prior to marriage When does renvoi usually apply? o This usually applies when an alien dies in the Philippines. Basing this on general principle, basing it on the law of nationality of decedent. If based on national law of decedent, it refers back to the law of the domicile (which is the Philippines), then we accept the renvoi and apply Philippine law Llorente v. CA: o A married Filipino man joined the US army and became a US citizen. He divorced his wife after his wife cheated on him. The divorce was valid because under American national laws, he could initiate divorce. What does Article 17 say about prohibitive laws? o Prohibitive laws here concerning persons, acts, property, or laws which have for their object public order, public policy, or good customs are not rendered ineffective by laws, judgments, or conventions abroad. o EXCEPTION? Art. 26(2), where an alien obtains divorce abroad allowing him to remarry, his Filipino spouse gains capacity to remarry as well.

Human relations Pardo de Tavera When do the provisions on human relations apply?

Human relations chapter are just general concepts guiding particular human conduct. In the absence of any specific law or contract, then you use these provisions. You cannot immediately use these provisions, if there is a specific governing law or contract. Chato v. Fortune Tobacco Corp: o In order for Art. 32 to apply, where a private individual can hold a public officer personally liable for an act or omission, there must be a particular injury to that person. Duty to act with justice, observe honesty, and good faith: o Every person in the exercise of his rights and in the performance of his duties must act with justice, give everyone his due, and observe honesty and good faith. o Lorente v. Sandiganbayan: An official who cleared three other terminated employees for unpaid liabilities (which is offset by gratuities later) and then suddenly went legal on another employee for no apparent reason was not acting with justice, honesty, good faith. o Leads to civil liability even if perfectly legal. Requisites for Art. 19? o 1. There is legal right or duty o 2. Exercised in BF o 3. With intent to prejudice another Requisites of Art. 20? o 1. Act contrary to law o 2. Whether done willfully or negligently Requisites of Art. 21? o 1. Legal act o 2. But contrary to morals, GC, PP, PO, or law o 3. With intent to prejudice another What is the difference between Art 20 and 21? o Article 20 has to be contrary to law. Article 21 is legal, but contrary to morals, public policy, or customs. o Article 20, the act is either done willfully or negligently as long as contrary to law. Article 21, intentional.

Ex. of Art. 21: Wife left her husband, went abroad, got a divorce, and remarried. It is against morals, good customs, or public policy. o N.B. Articles 20 and 21 are implementing provisions of Art. 19. So Art. 19 is the general principle, and 20 (general sanction) and 21 (acts contra bonus mores) are the specifics. Article 21 Breach of promise to marry. Is there any law that says you have to comply with the promise to marry? o No. You cannot demand for specific performance that the other marry you. o But you can recover actual damages for expenses, such as down-payment for venue, dress, food, etc. But not moral damages, in general. o Exception: moral damages when there is deceit or fraud. (Baksh) There was breach of promise to marry. The teacher became pregnant, and was dismissed from her job because she got pregnant without a husband. Can she recover from the man loss of income? o Yes (old case). o But now, you cannot be dismissed for this anymore, so its moot. Who is liable for hospital expenses? o Shared expenses, since it takes two to get pregnant. When are moral damages allowed? o Criminal or moral seduction.

Provisions Dean Del just breezed through: 1. Unjust enrichment a. Garcia v. PAL: If a dismissed employee is reinstated, and then the reinstatement is reversed, the employee is not bound to return salaries received. This is a case where social justice outweighs unjust enrichment provisions. b. Accion in rem verso Art. 22. Requisites? i. 1. Defendant enriched ii. 2. Plaintiff suffered loss

2. 3. 4.

iii. 3. Unjust enrichment of defendant without just/legal ground iv. 4. Plaintiff has no other action based on K, quasi-K, crime, or quasi-delict c. What is the difference between Art. 22 and solutio indebiti? i. In solutio, mistake is an essential element. In accion in rem verso, it is not. Less in life = more in law Thoughtless extravagance Violation of privacy

Public officers Articles 19-21 bind even public officers. Take note. Though there are specific provisions. Can a public officer invoke acting in public capacity as a defense? o Aberca v. Ver o No. Your official function does not include acting with injustice and being unfair What actions can you file against public officers? o 1. Action for nonfeasance But this action cannot be brought against those officers exercising ministerial functions, ex. Register of Deeds o 2. Violation of basic rights o 3. Policemen failure to come to the aid of persons in danger

When a civil case is filed ahead, it proceeds independently and need not wait for resolution of the criminal case. o Assuming the criminal case is instituted ahead, the civil case can still be prosecuted separately. Prejudicial questions: o Opposite suspend criminal case, and wait for civil case to be resolved first, which is determinative of guilt or innocence of accused in the criminal case. o Questions on annulment or nullity of marriage are NOT prejudicial questions for bigamy. Before you get married, you need a judicial declaration of nullity for the prior marriage. o Classic case: ownership of property v. crime of theft. o Ching civil case was for annulment of contract, and criminal case is for violation of trust receipts law. HELD: not considered as prejudicial question because the criminal case can still proceed, because the act can be considered as ordinary estafa.

Persons Natural persons Juridical capacity: o Passive subject the ability to be the subject of legal relations o UPON BIRTH o Exceptions: unborn fetus, if: 1. Beneficial to it Ex. donation 2. Subsequent birth So aborted fetus is not counted because it wasnt born alive o When is birth complete? 7 months or more in the womb: just born alive Less than 7 months: survive for 24 hours Capacity to act: o 18 years old, in general o Although you cannot marry without consent of parents End of judicial capacity AND capacity to act = upon death of person

Civil liability in criminal prosecutions Civil liability is always included There is a distinction between being acquitted o For reasonable doubt: there is still civil liability o Because one did not commit the crime: no civil liability General rule: civil case is simultaneously filed along with criminal case. Criminal case suspends separate civil action. Independent civil actions: o NOT suspended upon filing criminal case.

Doubt as to who between two or more persons called to succeed each other, as to who died first: o Presumption: they died at the same time, so no transmission of rights o Whoever alleges the prior death of one must prove it. Contra rule in Remedial Law/Evidence: Survivorship for those who died due to calamity, wreck, battle, or conflagration: o Follow what rule? Strength and age of the sexes o For what purpose can this be used? ANY purpose except succession o Allowed for: Insurance Survivorship agreements

Juridical persons Birth and death: from when created by law or for ordinary corporations, upon registration/dissolution

Restrictions and limitations Mere restrictions, which do not exempt the person from certain obligations: o Minority, o insanity and imbecility, o deaf-mutism, o prodigality, o civil interdiction o [For juridical persons this is the issue of ultra vires acts] Modifications, which affect a person depending on the type of transaction, who one is dealing with: o Age (because it is not minority per se), etc. (See Art. 39) o Ex. foreigners ownership of land

N.B. Very little relevance in civil law now, but usually just for elections, etc. Distinguish domicile from residence: o Domicile Place of habitual residence; based on intention and actual connection One never loses a domicile under a new one is acquired. o Residency Based on actual facts of presence It is possible to be without residence, but one always has a domicile Domicile is acquired from moment of birth: o Legitimate child domicile of parents (correct the reviewer) o Illegitimate of mother o Legitimated of parents o Foundling wherever found Domicile of juridical person: o Provided in charter o If none, place of business or place of legal representation

PERSONS AND FAMILY RELATIONS MARRIAGE Took effect 3 August 1988 o Does not change the regime of property relations of those who got married prior to the FC o But those who selected CPG are affected by the new provisions as to this property relation, post 3 Aug 1988 Definition of marriage (elements) o 1. Special contract Compare and contrast marriage from ordinary contracts:

Domicile

o o

As a general rule, ordinary contracts are subject to parties stipulations, as long as not against law, PP, morals. But marriage contract is governed by law, and is only subject to stipulation for regime of property relations at the moment of marriage. 2. Permanent union Only terminated by death Grounds for voiding or avoiding a marriage: because the marriage was never deemed to have existed 3. Between man and woman Note: P v. Silverio and other spec pro cases on change of sex in registry 4. In accordance with law 5. Purpose: establish conjugal and family rights

provision on legal guardians here, because upon turning 18, then he already has legal capacity. 21 to under 25: need parental advice o Without: issuance of ML is delayed for three months

Effect of lack/defect of essential and formal requirements of marriage: Essential: o Lack/absence void o Defect voidable Formal: o Lack/absence void o Irregularity still valid, but the person responsible is liable

What are the essential and formal requisites of marriage? Essential requirements: o 1. Legal capacity A) Age Under 18: void 18 to under 21: need parental consent o Without: voidable o Whose consent is required? Ideally, both. But one is allowed to decide, if one is absent, has passed away, lost capacity, etc. Ignore the

B) Sex C) Absence of legal impediments: (see full discussion below) 37. Incestuous relationships 38. Relationships against PP 35. Prior existing marriage 36. Psychological incapacity 52, 53. Failed to comply with distribution of properties and presumptive legitimes Is there such a thing as defective legal capacity? No, its either you have it or not. o 2. Consent freely given Before a solemnizing officer, at the time of the celebration of marriage Do you have to speak out your consent? No need to verbally explicate it; as long as you can communicate your consent effectively to the solemnizing officer Is there such a thing as defective consent? Yes, when it is vitiated. Ex. when one is of unsound mind. A person actually said yes, but there was problem in the voluntariness. Is it possible for a party not to give consent at all? No. Ex. mistake in identity there is total absence of consent. Formal requirements: o 1. Authority of solemnizing officer When does the good faith exemption apply, and when does it not? Will NOT apply for mistakes of law, such as if you thought one designation of people (ex. president or senator) can solemnize a marriage,

when in fact it cannot. It applies to mistakes of fact. (ex. you thought the janitor posing as a priest was the parish priest.) Also, even if only one party believed in good faith that the solemnizing officer had authority, the marriage is valid. If the solemnizing officer committed fraud or an irregularity in obtaining authority, it has no validity for the marriage to be solemnized. o 2. Valid marriage license A party thinks that the marriage license is valid, when it is not. Can the rule on good faith apply? No. There is no good faith exemption for marriage license. The exceptions provided by the FC are not based on GF, but on law. Aranes v. Occiano: A ML gotten after a marriage without an ML does not cure the lack thereof. It is still void. Examples of defects in marriage license: 1. Not applied for in the proper place 2. Just signed by the employee of the LCR, although acting with authority of the LCR (if no authority, void ML) 3. 10 day posting of ML not complied with o 3. Marriage ceremony There is no particular requirement for the ceremony, except for: 1. Both must personally appear before the solemnizing officer 2. Must openly declare that they take each other as husband and wife 3. Two witnesses of legal age If there is just one witness, is it an absence or an irregularity? No resolution yet. Other requirements: o 1. Marriage certificate

What is this? The document signed after marriage ceremony. It is the evidence of the celebration of marriage. This is neither a formal or essential requisite. It is merely evidentiary, although the best evidence. What is the difference between a ML and a MC? The absence of a ML results in a void marriage. The absence of a MC will not affect the marriage. o 2. Place of celebration What about article 8? It is merely directory. If the solemnizing officer agrees to marry the couple in another place, then it is perfectly fine. Is there any instance where the place of the celebration of marriage affects the marriage? Yes, for those marriages celebrated by persons with limited jurisdiction. For instance, the ship captain or airplane captain can only solemnize the marriage in the vessel or during a stopover. For instance, for military commanders, it must be within the zone of military operations. What about members of the judiciary? Within their judicial region. If it is SC, CA, or Sandiganbayan, it is nationwide. What is the effect of marriages celebrated by judges outside judicial regions? As of now, it is a mere irregularity, according to the SC. This rule is different as opposed to ship captains, etc. (Navarro v. Domagtoy) Can this decision apply to mayors? For instance, the mayor of Makati solemnized a marriage in QC. According to Dean Del, the SC rule on judges must not extend to mayors they must strictly comply with their territorial jurisdiction. Legal impediments (in depth) o A) Incestuous relationships: 1. Ascendants and descendants, regardless of degree How many degrees does this rule cover? Unlimited.

2. Brothers and sisters, whether full or half blood B) Marriages against public policy By blood: 1. Between collateral blood relative, up to fourth civil degree (whether legitimate or illegitimate) NOTE: no prohibition for collateral relatives by half-blood Created by marriage: 2. Between step-parents and step-children NOTE: no prohibition for step-brother and step-sister 3. Between parent-in-law and children-in-law If your wife dies, can you now marry your parent in law? No. Not even death terminates this relationship. Not unless you terminate your marriage first through court declaration that the marriage was not valid in the first place. Created by adoptive relationship: 4. Adopter and adopted 5. SS of the adopter and adopted 6. Adopter and SS of adopted 7. Legitimate child of adopter and adopted NOTE: the reason is because legitimate children are asked to give their consent to the adoption. Illegitimate children are not asked. Hence the illegitimate children and adopted children may marry. 8. Between adopted children of same adopter Created by criminal intent 9. When one party kills his own spouse or the other partys spouse, with the intention of marrying the other If the killing was to obtain insurance benefits, but there was subsequent

marriage, is the latter valid? Yes, because the killing was not with intent to marry. No need to be convicted Who can marry each other? 1. Brother-in-law and sister-in-law 2. Stepbrother and stepsister 3. Guardian and ward 4. Adopted child and illegitimate child of the same person 5. Parties convicted of adultery or concubinage 6. Adopted child of husband, adopted child of wife C) Prior existing marriage What if the prior marriage has a problem? There must still be a judicial declaration that the prior marriage is a nullity or is annulled. You have to wait for this. Wiegel v. Sempio-Diy: Need to have prior judicial declaration of nullity or annulment first, or else the second marriage is bigamous. If the purpose is some other thing, like succession issues, then there is no need for prior judicial declaration prior to questioning the marriage.

Authority of solemnizing officer: Who can solemnize: o 1) Any member of the judiciary, as long as: Incumbent When does incumbency start? From when one has taken his oath of office. What if the judge was on leave or is on vacation? Still incumbent. Is there a need for further authority or license? None; it is an inherent function of office.

Within territorial jurisdiction Who in particular? RTC, MTC, CA, CTA, SC, Sandiganbayan, etc. Even if their jurisdiction is limited, like the CTA. Contrast this to executive branch, where only the mayor can. 2) Member of religious group, authorized by religious group. Does the religion officer per se possess the authority to solemnize marriage? No. The authority does not come from the office itself. He needs special authority from the group or sect first. What is the requirement for the group or sect? The church, sect or group must be recognized. Either or both of the parties must be part of that religion or church. What if both are not members of that religion? Strictly, invalid. But a lot of people are invoking that this is a gray area, where the good faith defense can apply, or one can treat this as a mere irregularity. 3) Ship captain or airplane chief Who is the captain or chief? The head of the ship, or the chief pilot. When can they solemnize marriages? In articulo mortis, where one or both are at the point of death. A person is diagnosed as terminally ill, and given two weeks to live. Is he in articulo mortis? No, the person is not yet at the point of death. Terminal illness is still uncertain. Who can they solemnize? Members of crew or passenger What about stowaways? Can still marry them, as long as on board the vessel. When and where can they solemnize?

During the voyage, from the point of embarkation, until one reaches the final destination, including a stop-over. The stop-over must be in a continuous flight. This is different from a break where one disembarked and put down all the luggage and went around already. For purposes of marriage, do we adopt transportation laws? No decision yet. 4) Military commander Who is a military commander? Commissioned officer, at least second lieutenant up, must be the head of a battalion There is a person who is preferred, before the military commander is allowed. Who is this? There has to be a chaplain assigned to the battalion in the zone of operations, and he has to be absent. If he is present, then the chaplain must be the one to solemnize. What if there is no chaplain assigned? Dean Del prefers the liberal interpretation: when there is no chaplain assigned, then the military commander can solemnize. What is military operation? Involves State action. This is different from mere police operations for petty crimes. Who? No need to be a member of the military or a combatant. As long as someone is within the zone of military operation. 5) Consuls No need to be dying As long as abroad and both Filipinos 6) Mayors

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Marriage license

Reinstated in the LGC of 1991

Valid marriage license o What is the consequence of lying about ones place of residence? It is a public document, so one can be charged for falsification of a public document. BUT this is a mere irregularity, and should not affect validity o If you lie about your age, and you are not yet 18? VOID marriage, not because of the irregularity in the ML, but because of lack of capacity.

Procedure to obtain a Marriage License 1. What do you need to present when you get married (FIRST MARRIAGE)? o 1. Birth certificate, but just for the purpose of verifying legal capacity based on age. Absent this, you can submit a baptismal certificate. If none, either: Residence certificate Instrument containing sworn declaration of two witnesses of lawful age testifying on this o 2. Additional requirements: 18-21: consent of parents; order Father Mother Surviving parent Legal guardian (but ignore this provision, since when they turn 18, there is no more need for a legal guardian since he is of full capacity.) What is the nature of the consent given by the parents? The consent is with respect to a specific person. If the child

decides to marry someone else, he or she cannot use that same consent. 21-25: parental advice o 3. Certificate of marriage counseling. When does this apply? Parties below 25 years old What if one party is 80 years old, but the other is 23? BOTH must attend, even if the other party is older than 25. Lack thereof results in 3 month suspension of issuance of Marriage License 2. What do you need to present for a SUBSEQUENT MARRIAGE? o Proof of termination of marriage: Death certificate Judicial declaration of nullity Judicial declaration of annulment o If one is previously married but is still 18-21 years old, do you still need parental consent? Not anymore, because the prior marriage has fully emancipated the person. Jurado says otherwise o What about those between 21-25, and this is the second marriage, do you still need parental advice? Yes, because there is no stated exception of emancipation for prior marriage, unlike for parental consent. This is not anymore based on parental authority, but is based on filial love and respect from parents. 3. What about alien applicants? o The diplomatic or consular officials will issue a certificate of legal capacity. This is usually taken by face value. 4. What about Stateless persons? o For these people without citizenship and if they can prove that they are political refugees, all one needs is an affidavit declaring oneself as having legal capacity. Again, this is taken by face value. What is the nature of a marriage license?

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It is a license to marry a specific person. You cannot use it to marry another person. The impediments and capacities of people are different. o There is no good faith exemption for a ML. A fake marriage license is no good. What is the validity of the ML? o For 120 days, then automatically cancelled after o In any part of the Philippines o An expired license is NOT a mere irregularity but an absence of a requirement.

Marriages exempt from requirement of ML What are the marriages exempt from the ML requirement? 1. Marriages in articulo mortis. o Because there is no time. o The only exemption is the ML. There is no exception as to other essential and formal requisites. o The solemnizing authority determines whether there is legal capacity between the parties to be married. o Can the solemnizing officer refuse to solemnize the marriage? Yes, the solemnizing officer has discretion to refuse. There is no law compelling solemnizing officers to marry. o Are marriages in articulo mortis exempt from requirement of ML limited to those in an airplane, military operation, etc? No. It can occur anywhere, and the ML requirement is still waived. o If the person miraculously survives, is the marriage valid? Yes. 2. People who have been living together as husband and wife for at least five years. o Purpose: to save face, because they have already presented themselves as husband and wife. o When must there be an absence of impediment? The entire five-year period of cohabitation. (Ninal v. CA)

Another issue in Ninal: do the children have standing to ask for the nullification of the parents marriage based on lack of ML? The court held that the children have standing. BUT this has been changed when the administrative rules came out. Ninal was decided before these rules came out. o What are the requisites: rd 1. Exclusivity absence of 3 parties 2. Continuity cohabitation as husband and wife 5 years immediately preceding marriage 3. No impediments during the 5 year period 3. Parties who live in a remote place o Ratio: no means of transportation to get to LCR o Not based on distance: it doesnt matter how many kilometers there are. What matters is lack of means of transportation. o Means of transportation need not be public. 4. Muslims and cultural minorities o Look into customs, rites, practices 5. Marriage celebrated abroad and there is no ML requirement in the country where it was celebrated For marriages in articulo mortis and where a party lives in a remote place, the law requires that the solemnizing officer state the circumstances of the marriage in an affidavit. What is the effect of the lack of such? o No effect. It is merely evidentiary. It is not a replacement to the ML requirement.

Marriages celebrated outside the Philippines What is the general rule? o Art 26: Lex loci celebrationis. When the marriage is valid in that country, it is valid in the Philippines. Does this provision apply to marriages of aliens outside the country? o No. It doesnt matter, our law doesnt care. Their own national laws determine whether the marriage is valid. Two Filipinos get married outside the country. Do we apply Art 26? o Yes.

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Art 26 only applies ONLY when at least one of the parties is a Filipino. What are the exceptions to this rule? o Art 35 (1, 4, 5, 6), Art 36, Art 37, Art 38 (1) under 18 (4) bigamous (5) mistaken identity (6) void under Art 53 o All of these exceptions deal with the essential requisites of marriage. But as to the formal requisites, then that is determined by the law of the place where the marriage is celebrated. What if two male people get married abroad? o No settled rule yet. What is the rule on divorces obtained abroad? o If the alien obtained a divorce decree abroad allowing him to subsequently remarry, then the Filipino may remarry as well. o Van Dorn v. Romillo and Pilapil v. Ibay-Somera In Van Dorn, alien husband got a divorce abroad, but sought to administer community property in the Philippines. The basis of the court was estoppel Pilapil: she is married to you but you are not married to her NOTE: both cases were decided before the Family Code Requisites? o 1. Marriage between Alien and Filipino o 2. Alien files for divorce o 3. Divorce decree capacitated the alien to remarry What if the Filipino obtains the divorce? o Not allowed. The article only applies if the alien was the one who obtained the divorce. The requirement that one is an alien and one is Filipino: must it occur during the time of marriage, during the time of divorce, or both? Time of divorce 2 Fil Effect X

2 Fil

1 Alien, 1 Fil

2 Fil

2 Aliens

1 Alien 1 Fil 1 Alien 1 Fil

1 Alien 1 Fil 2 Aliens

Old view: not allowed to circumvent the law through this NOW: the Alien is not anymore under our jurisdiction, so he can obtain divorce. Then Art. 26 applies. Amor-Catalan case: recognize as being a divorce entered into by 2 aliens. Art. 26 does not apply because there is no Filipino to equalize. Art. 26 Valid as well

Difference between void and voidable marriages: VOID Inexistent from the beginning Does not prescribe No ratification No community property. Only coownership. Directly or collaterally attacked [but subject to recent rules: check discussion below] VOIDABLE Valid until annulled Generally, 5 years prescription May be ratified by free cohabitation or prescription ACP unless provided otherwise Must be directly attacked

Time of marriage 2 Fil

The common statement is that void marriages can be collaterally attacked. But what does Art. 40 say? o Art. 40 For purposes of remarriage, one has to obtain a judicial declaration of nullity. o So there has to be a direct proceeding. You cannot do this by collateral attack. RULES ON STANDING re: nullity o SC 02-11-10 only husband and wife have standing in a direct action EXCEPT: a) for those commenced before 15 March 2003, b) marriages under CC

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o o

EXCEPT: for intestate and testate proceedings, allow collateral attack So the rule in Ninal was technically not changed BUT the main determinant is whether the person has standing (as in an heir) In Carlos v. Sandoval, since the one questioning was the brother of the deceased, it doesnt matter if the marriage was valid or not because he only inherits in default of descendants or ascendants.

o o

What are the grounds for nullity? o Arts. 35, 36, 37, 38 o Art. 35: A. party below 18 years old B. solemnized by unauthorized solemnizing officer EXCEPT if either or both parties believed in GF that the officer had authority C. no marriage license EXCEPT when license is not required D. bigamous or polygamous EXCEPT: see below (presumptive death) E. Mistake in identity F. subsequent marriage void under Art. 53 Failure to partition and distribute properties and deliver presumptive legitimes of children, and recorded in the ROP and LCR o Art. 36: Psychological incapacity o Art. 37: Incestuous marriage (see above) o Art. 38: Void due to public policy A. by blood B. by adoptive relationship C. by marriage D. by criminal intent When is a marriage entered into without termination of a previous marriage valid?

o o

When there is a declaration of presumptive death. Article 41 is the only article which provides for a situation where there can be 2 valid subsisting marriages. Four years for ordinary situations Two years for extraordinary situations The declaration is not of DEATH but of PRESUMPTIVE DEATH. This takes the place of the usual requirement of death certificate to allow the other spouse to remarry. The declaration of presumptive death obviously only empowers the present spouse to remarry. For other grounds, any subsequent marriage is automatically null and void. What if both spouses in the subsequent marriage acted in BF? The marriage is void ab initio.

Art. 41 What if the spouse who was declared presumptively dead reappears? o If no one does anything, we have a situation where there are two valid subsisting marriages o Reappearing spouse files an affidavit of reappearance to the LCR But other people may file an objection to the affidavit If there is no objection: then the subsequent marriage is deemed terminated upon filing of the affidavit Who can file reappearing spouse or persons interested (ex. children in first marriage) Legal effect: not void ab initio, just terminated o If there are objections, then a court of law must rule on the objections. The LCR cannot rule upon the objections. o What is the basis for objection or opposition? The only basis: this is an impostor. o Is there a prescriptive period for filing an objection for the affidavit of reappearance? These questions have not been settled yet.

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What is required to be proved in declaration of presumptive death? o Proof that there is reasonable ground to believe that the spouse has died. o Republic v. Nolasco: Not enough to just ask people around and say that the people havent seen her to prove that a person is presumptively dead. Need more than that.

Mistake in identity as ground for nullity Spirit of provision consent to marriage is for a SPECIFIC person. If there is mistaken identity, there is no consent. This is NOT mistake in particulars of a person (ex. you thought he was rich, but he was actually a pauper)

Psychological incapacity One that has a lot of cases. Members of the committee who drafted the FC did not define what psychological incapacity. They wanted jurisprudence to develop the concept. What is the distinction between physical and psychological incapacity? o Psychological incapacity is NOT physical incapacity, which is impotence. The latter is a ground for voidable marriage only. o It is NOT mental incapacity, which is also for voidable marriage. What is psychological incapacity? o He is normal under any other circumstance, but he cannot carry out the essential obligations of marriage o Ex. Narcissistic complex o Inability to perform obligations to the spouse and obligations to the family (220, 221, 225) Santos: It was a cut and paste case from different sources. In the end, it did not say how we should define it in the Philippines. Only value is that it gave the 3 requirements: o 1) gravity o 2) juridical antecedence o 3) incurability

There is no case yet where the court says that psychological incapacity is such that he will never be able to perform marital obligations. So after declaration of nullity, both parties can still marry again. So psychological incapacity is relative. Molina: Eight point test. This is the first case where the court actually set down, point by point, what one should look for to establish Art. 36: o 1) plaintiff has burden of proof to show P.I. o 2) Root cause must be something medically proven and clinically identified and clearly explained in the decision This has received so much flip-flopping from other decisions o 3) it must exist at the time of the celebration of the marriage o 4) the PI is incurable [from Santos case] o 5) it is grave and it prevents him from performing essential marital obligations Molina included obligations to family and children too, not just to the spouse o 6) Essential marital obligations are Arts. 68-71 of FC, and Arts. 220, 221, 225 of FC o 7) Interpretation of the National Marital Tribunal must be given weight But its decision is not public in character; so its effect is really just to the parties, and is not jurisprudence o 8) The trial court must order the public prosecutor and the Sol Gen to act as counsel for the state Paras: This should be the case to read if you want to know what DOES NOT amount to psychological incapacity. In this case the manifestation relied upon is infidelity of the spouse, going out having drinks with friends, falsifying signature all these were struck down by Paras Marcos v. Marcos: You dont need to have a psychiatrist or psychologist to examine the party. Absence of such is not fatal. What you need is the totality of evidence. (Totality of evidence approach) You can use whatever evidence to prove PI. Te v. Te: Courts must be allowed to make a decision on a case-by-case basis without being tied down by the Molina requirements. This came out strong. Molina gave us a straitjacket and we dont want this.

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Suazo v. Suazo: You dont have to be strictly bound by cases (open case policy). We are not throwing away Molina but the court must be open to situational differences. o The SC is not bound to accept with finality the findings of fact by the TC. What is the end result of all this jurisprudence? o It is still case-to-case. There is no set doctrine.

Declaration of nullity Domingo v. CA: o Judicial declaration of nullity only needed for remarriage. o Otherwise, no need for judicial declaration to establish nullity of the marriage. Tamano v. Ortiz: o RTC has jurisdiction over all actions relating to marriage and marital relations. o Jurisdiction based on allegations of the plaintiff in the complaint; not dependent on the defenses set up. The complaint said that the parties were married under the civil code. Ninal v. Bayadog: o There must be no impediment or interruption in the five-year cohabitation period in the marriage license exemption. o Declaration of nullity may be collaterally attacked after the death of either party. (Ex. heirs, in succession.) De Castro v. De Castro o As in Ninal, the nullity of a void marriage may be established even collaterally in an action not for that purpose. (ex. support). Here, the affidavit stating circumstances establishing 5-year cohabitation contained false statements; hence, there was no ground to exempt from ML requirement. No ML = void.

The question of nullity of a previous marriage not judicially declared void is NOT a prejudicial question to a charge of bigamy. The marriage lawfully subsists. Mercado v. Tan o Subsequently getting a declaration of nullity will not invalidate a conviction for bigamy. Morigo v. People o The parties merely signed a marriage contract on their own, without any ceremony there is no semblance of any valid marriage. No need for prior declaration of nullity. Bigamy dismissed. Tenebro v. CA o The subsequent declaration of nullity of the second marriage under Art. 36 does not negate the criminal action for bigamy. (The mere act of contracting a second marriage during the firsts subsistence is punishable.) Article 36 marriages are not completely without effect (ex. legitimacy of children). So this means that there can be prosecution for bigamy.

Voidable marriages Grounds 1. Lack of parental consent o Who has standing? 1. Parent/guardian who did not give consent 2. Party whose parent/guardian did not give consent o What if both parties didnt get parental consent? Both can file, separate or joint Pari delicto doesnt apply o When can the party who didnt get consent file? Upon reaching 21 years old o When can the action be filed? BEFORE reaching 21 parent or guardian who didnt consent UPON reaching 21, until 26 party whose parent or guardian didnt consent o How is marriage ratified?

Declaration of nullity v. bigamy Marbella-Bobis v. Bobis

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Free cohabitation by the parties upon reaching 21. Specific rules on form of consent: Mere attendance in wedding is not automatically consent. Must be in ML application. Consent must be before wedding. 2. Insanity o When should insanity exist? Time of marriage o When is there a presumption of insanity? If the party was insane right before and after the precise moment of giving consent. o Who may file? 1. Sane spouse if no knowledge of insanity 2. Relative, guardian, etc. even with knowledge of insanity 3. Insane spouse o What are the periods? Sane spouse 5 years from discovery of insanity of the other spouse [because no period was provided] N.B. Sempio-Dy pegs the period at anytime before death of either party Relative, guardian, etc. Anytime before death of either party Insane spouse 5 years from regaining sanity [because no period was provided] o How is the marriage ratified? Free cohabitation by the parties upon regaining of sanity by the insane spouse 3. Fraud o Grounds: 1. Non-disclosure of a previous conviction by FJ of the other party for crime involving moral turpitude If the conviction is pending appeal, is the non-disclosure fraudulent? o No. It must be by FINAL judgment. What if the crime was alleged in the same annulment case? o

Cant apply because there must be previous conviction by final judgment. 2. Concealment by wife that at the time of marriage, she was pregnant with another man 3. Concealment of STD, regardless of nature, at time of marriage 4. Concealment of drug addiction, habitual alcoholism, homosexuality, lesbianism at time of marriage o N.B. No other misrepresentation is ground for fraud. o Ratification? Free cohabitation upon knowledge of fraud 5. Force, intimidation, undue influence o Intimidation must be evil and imminent and based on a wellgrounded fear o What if intimidation has a legal basis? It does not count. Ex. I will prosecute you for rape if you dont marry my daughter, and the guy really committed rape anyway. o Prescriptive period? 5 years from cessation of cause o Standing? Injured party o Ratification? Free cohabitation after cause ceases. 6. Impotency o Potency must be at the point of marriage. Becoming impotent after is not a ground for annulment. o What if both are impotent? Sempio-Diy: there is no injured party Dean Del: both are injured parties and can file o Period? 5 years after marriage o Cannot be ratified by cohabitation. o NOTE: the other party must not have known it at the time of marriage o What is the doctrine of triennial cohabitation? o

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If the wife is still a virgin after three years of living together, it is presumed the husband is impotent o What is relative impotency? You are only impotent as to one person but not another. It is still voidable. 7. Serious and incurable STD o Differentiate: Here, it is serious and incurable. If it is a ground for fraud, it was concealed but no need to be serious and incurable. o Who can file? Injured party o Cannot be ratified by cohabitation

Procedure and effects of termination of marriage Procedure For all cases of nullity or annulment: o Court orders prosecutor or fiscal to appear on behalf of the State o Take steps to: 1. Prevent collusion between parties 2. Make sure evidence is not fabricated or suppressed No judgment based on stipulation of facts or confession of judgment Pendency of action: o Follow written agreement between spouses o 1. Court provides for support of spouses o 2. Custody and support of common children Consider mutual written agreement first Consider best interest of children And Tender Years Doctrine And choice of parent Visitation rights for other parent

Ground Lack of parental consent Who can file Underaged party When Within 5 years upon turning 21 Until child or ward turns 21 Within 5 years of discovery of insanity Within 5 years of lucid interval Before death of either party Ratification Yes, but only upon reaching 21 No ratification by subsequent consent

Insanity

Parent, guardian who did not consent Sane party

Insane party Parent or guardian, relative of insane party Injured party

Yes, but only in a lucid interval

Effects What are the effects of nullity/annulment of marriage? o 1) share of party in BF over net profits forfeited in favor of: Common children If none, children of guilty spouse in previous marriage If none, innocent spouse o 2) donations propter nuptias: valid, except: Donations in favor of guilty spouse revoked by operation of law o 3) designation of guilty spouse as beneficiary in life insurance: may be revoked Even if deemed irrevocable

Fraud

Force, intimidation, undue influence Impotence Serious and incurable STD

Injured party

Potent party Healthy party

5 years from cessation of cause 5 years from cessation of cause 5 years from marriage 5 years from marriage

Yes

Yes

No No

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4) spouse in BF cannot inherit from innocent spouse by testate or intestate succession o 5) if both spouses guilty, revoke by operation of law: Donations propter nuptias to each other Testamentary dispositions to each other [N.B. these two provisions were just included because Art. 43 mentions an innocent and guilty spouse; in Art. 44, both are guilty] What does final judgment provide? o 1) liquidation, partition, distribution of properties of spouses Includes adjudication of common lot o 2) custody and support of common children o 3) delivery of presumptive legitime Computed as of date of final judgment Delivered through cash, property, or sound securities Unless there was a judicially approved mutual agreement Who may ask for enforcement of judgment: 1. Children 2. Guardian 3. Trustee of property Will not prejudice ultimate successional rights delivered presumptive legitimes are deemed advances What must be done with judgment, partition and distribution of properties, and delivery of presumptive legitime? o This must be recorded in the appropriate civil registry and registry of properties in places where the properties are located. What is the effect of non-recording? o It will not affect third persons What is the effect of non-compliance with partition, distribution, delivery of presumptive legitime? o Any subsequent marriage is null and void Which children are legitimate? o 1. Born before annulment o 2. Born before Art. 36 nullity

3. Born of subsequent marriage which didnt comply with Article 53 (registration) o 4. Born before reappearance of presumptively dead spouse When do you not have to deliver presumptive legitime? o 1. Legal separation (because marriage not dissolved) o 2. Death (failure to liquidate, etc., will only make dispositions post-one-year void and mandate separation of properties for marriage #2) o 3. Presumptive death (which has the same effects of death) o

LEGAL SEPARATION Grounds: Violent stuff o 1. Repeated physical violence or grossly abusive behavior v. spouse, common child, or child of spouse o 2. Physical violence or moral pressure to change religious/political affiliation o 3. Attempt to corrupt or induce to engage in prostitution: spouse, common child, child of spouse Or connivance in such o 4. Attempt against the life of spouse Character stuff o 5. Final judgment of more than 6 years in prison Even if pardoned o 6. Drug addiction or habitual alcoholism o 7. Abandonment of spouse without justified cause for more than a year N.B.: after 3 months from initial abandonment, there can already be judicial separation of property (JSP). When a year passes, there is a ground for LS. Sex stuff o 8. Lesbianism or homosexuality o 9. Contracting bigamous marriage o 10. Sexual infidelity or perversion

Defenses:

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1. Collusion o Agreement between the spouses o Covered by proscription of legal separation based on stipulation of facts 2. Connivance o Luring (not entrapment) 3. Consent o Express or implied o Prior to the act o Agreement between spouses against law and morals may be null and void, but it may be considered consent that would bar litigation. 4. Condonation o Forgiveness/pardon o May be express or implied o Sexual intercourse is implied condonation But not when it was just to save the marriage, and it was unsuccessful o Each sexual intercourse with another person is a separate act of adultery. Forgiveness for the first does not extend to subsequent acts 5. Mutual guilt o May be on different grounds o Even when one party has pardoned the other and the other has not 6. Prescription o Even if not alleged, court can take judicial notice o If there are multiple acts, count from the last separate act o From knowledge of the ground, not just from mere hearsay Prescription for all: within 5 years of occurrence of cause

Court must take steps towards reconciliation of the spouses, and satisfy itself that despite such efforts, reconciliation is highly improbable No decree of LS based on: o Stipulation of facts o Confession of judgment Prosecutor or fiscal assigned to take steps to prevent collusion between parties and ensure evidence is not fabricated or suppressed

Effects pendente lite, of death, and after finality What are the effects of pendency after filing of petition? o 1. Spouses entitled to live separately from each other o 2. Administration of properties: Based on written agreement If none, court designates either or a third person Same powers and duties as those of a guardian o 3. Support of spouses Lerma v. CA: The court may make a preliminary ruling of the case during its pendency, to determine whether support is justified. In this case, where one spouse was adulterous, the court deemed it proper to deny him support pendente lite. Sabalones v. CA: A decree of LS was issued, where the husband was denied share in the profits and denying him support from the wife. The husband appealed. Pendente lite of the appeal, the wife filed a petition for preliminary injunction against the husband alienating conjugal properties. The court said this was valid to preserve the wifes rights in the pendency of the appeal o 4. Support and custody of children What is the effect of death of a party? o The action is dismissed, since it is purely personal between the spouses o Macadangdang v. CA: Spouse died after the decree of LS was issued but before liquidation. The LS was deemed final

Procedure What is the mandatory Cooling off period after filing of the petition? o Only try an action for LS after 6 months have elapsed since filing of petition

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However, now Rules say that if this happens, the decision in the LS case, where there has been entry of judgment is final and binding, will be accorded such finality in the settlement of the estate proceedings. Dean Dels interpretation: Because the finding in LS case is final, even in the settlement of estate, one may invoke forfeiture provisions. o You dont do liquidation and partition in the same LS case anymore when one party dies after entry of judgment. But the decision of the LS case is already final and binding in the settlement of estate proceedings of the deceased person. (IMPT!!) What are the effects after issuance of the decree? o 1. Spouses entitled to live separately o 2. Dissolve ACP or CPG Offending spouse not entitled to net profits Siochi v. Gozon: what is forfeited are net profits and not the undivided share in the community property o 3. Custody of minor children to innocent spouse o 4. Disqualify offending spouse from inheriting by intestate succession AND revoke testamentary provisions by operation of law But if the spouse makes another will with testamentary provisions in favor of the guilty spouse, then the latter can inherit, obviously What are the optional effects? o 1. Innocent spouse may revoke his or her donations to offending spouse FIVE YEAR period Record revocations in the registries of property where located Alienations, liens, encumbrances prior to recording the revocation are respected o 2. May also revoke designation of spouse as beneficiary in life insurance policy No prescription, as long as the policy exists Takes effect upon written notification to the insured o [N.B. so while life insurances are still optionally revocable (the rule didnt change from Art. 43/44, the difference between Art. 43/44 and this provision donations are just revocable here]

Reconciliation What is the procedure for reconciliation? o Execute joint manifestation under oath o Signed by both o Filed with court in same proceeding What are the effects of reconciliation? o 1. If proceedings pending, terminate in whatever stage o 2. If final, set aside final decree o 3. What shall persist: Separation of property Forfeiture of shares UNLESS spouses agree to revive former property regime What do the spouses revive former property regime? o Execute joint manifestation under oath o Filed in the same proceeding for legal separation Copies furnished to creditors Creditors protected by court o What must be specified? 1. Properties contributed anew to restored regime 2. What are retained as separate properties of each spouse 3. Names of all known creditors (addresses, amounts) o How does the order bind third persons? Record order in registries of property. It will not prejudice a creditor not listed or notified. Unless debtor-spouse has sufficient separate properties to satisfy debtors claim

RIGHTS AND OBLIGATIONS BETWEEN HUSBAND AND WIFE Became important due to Molina doctrine (if you cannot perform these, it can indicate psychological incapacity) What are the obligations? o 1. Live together o 2. Mutual love, respect, fidelity o 3. Render mutual help and support

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Who fixes the family residence? o Jointly fixed by husband and wife o Otherwise, court decides If you dont want to live in the same dwelling, what is the consequence? o General rule: they must live together. o If they cannot, they go to court, and ask for an exemption only for valid and compelling reasons. o What are the consequences of refusal to live in the same dwelling without valid and compelling reasons? 1. Not entitled to support 2. Charged with abandonment. 3. Transfer of administration to the other spouse What does Respect imply? o Lack thereof can lead to criminal and civil consequences o Includes the woman being allowed to work and exercise her profession o When can a spouse object to profession? Valid, serious, moral grounds What happens when you incur liability pursuant to this profession objected to? Who bears the liability and charges? o General rule: no prior consent necessary to exercise profession o This should be the rule: Before any objection absolute community After objection liabilities towards separate property o BUT this is what was erroneously printed: Before any objection separate property After objection absolute community o Nancy Go: obligation was charged against separate property. Principle: because this is a separate endeavor by the liable spouse and the contract cannot bind both spouses. (This is the fall back analysis) Support of the family comes from: o 1. Community or conjugal property o 2. Income from separate property o 3. Separate property

Administration of community properties Who administers the community properties? o Spouses, jointly (whether ACP or CPG) When it is possible for one spouse to have administration of the community property? o A. Before the marriage Place in the marriage settlement that the H or W alone will administer the property. o B. During the marriage In case of disagreement, decision of H prevails. No need to go to court for this. What is the relief the wife can ask for in court? Must establish in court that it amounts to mismanagement and it prejudices the community property Can ask for receivership, transfer of admin, or in extreme cases, separation of property NOTE: NOT to overturn the husband, but to get certain reliefs (stated above) o C. Need approval of court When the other spouse became incapable to jointly administer (ex. one spouse became guardian of the other) N.B. only ground where there is no need for court approval What is the rule for acts of ownership? o Both spouses MUST give consent before it becomes valid. o Either: 1. The other spouse must give written consent, or 2. There must be court order o What are examples of acts of ownership? Ex. selling the house. Ex. making donation, except for small donations o What is the effect if one of the spouses does not give consent to these acts? 1. Its void, but

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2. It is a continuing offer from the spouse who gave consent and the third party. It can be validated by the objecting spouses consent. o How much time does the non-consenting spouse have? The law does not provide. But the parties (consenting spouse or third party) may withdraw the offer any time. What are the rules on donations? o A. To each other General rule: void o B. To third party Must be a joint act Except: moderate donations for charity or family rejoicing o C. To the children Valid as long as it is for education, etc. But it would need consent of the other spouse, because its still an act of ownership. Otherwise, still valid, but charged to the separate property of the other spouse. Who manages the household? o It is a joint role between both spouses.

PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE What governs the property relations between the spouses? o 1. Marriage settlement (MS) executed before the marriage o 2. FC provisions o 3. Local customs When can you enter into marriage settlement? o Anytime before you celebrate marriage. o What are the additional requirements? Legal capacity to enter into contracts The marriage must take place after Can the parents enter into a marriage settlement on behalf of minor children?

No, it must be the parties themselves who enter into the contract. o If a party is 18 to below 21 years old, the parents must be part of the marriage settlement. When can there be a change of property regime? o 1, Separation of property o 2. Legal separation o 3. Ordinary dissolution What are the formal requisites for MS? o 1. In writing What kind of document is needed? Private/public document, but it must be public document for it to be registered What if its not in writing? Unenforceable Can compel to be reduced to writing o 2. Signed by the parties N.B. General rule is ONLY the future spouses are parties to the MS o 3. Executed before the marriage o 4. Those who need parental consent must make parents party to the MS Otherwise, MS is void (for lack of consent) o 5. If under civil interdiction or disability, must make guardian party to the MS Otherwise, MS is void o Is there need for judicial approval for a marriage settlement? No. Only need to register with the civil registrar to bind third persons How can a MS affect third parties? o 1. All above requirements o 2. MS registered in LCR where marriage contract is recorded and in the property registries of property o N.B. or else, as to these third persons, ACP will be presumed to govern Rule if marriage does not take place:

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Everything stipulated in MS in consideration of future marriage is void Including donations between respective spouses contained therein Does NOT invalidate stipulations that do not depend on celebration of the marriage.

What are the Choices for property regime? o 1. ACP o 2. CPG o 3. CSP o 4. Other regime When does ACP govern? o 1. When it is expressly chosen o 2. When none is chosen o 3. When regime chosen is void. o Examples of void provisions: Prohibited one party from marrying another, or a second marriage for surviving spouse Spouses live separately Imposing fine on infidelity Depriving parties from asking for LS when there is sufficient ground to do so Third person will manage conjugal properties All properties of the wife belong to the husband N.B. Invalidity of some provisions will not nullify valid ones. What properties are covered by the regime? o When a regime is chosen, all properties are governed by that regime. Cannot exclude particular properties from the regime. What if the parties expressly rejected ACP but did not agree on any system to govern? o Determine intent of the parties. If it cannot be ascertained, then apply local custom. When there is no local custom, apply co-ownership. When can modifications in MS be done?

Any modification in marriage settlements must be made before the celebration of marriage. o Exception: judicial separation of property In any case, the only change is from ACP/CPG CSP, with court approval There can be no situation where CSP changes to ACP or CPG because what is only allowed is revival of the old property regime o What is the status of an extrajudicial agreement between spouses to separate their properties? Void What governs property relations between the spouses? o Philippine laws, regardless of place of celebration of marriage and regardless of residence o In absence of contrary stipulation in MS o Exceptions: 1. Both spouses are aliens 2. Extrinsic validity of contracts affecting property located abroad, executed there 3. Extrinsic validity of contracts affecting property located abroad, executed here

Donations by reason of marriage Requisites of a valid donation propter nuptias? o 1. Made before marriage o 2. In consideration of the marriage o 3. To one or both of future spouses Ordinary donations Requires express acceptance Cannot be made by minors Just present property

Donations propter nuptias (DPN) Does not require express acceptance May be made by minors May include future property (if done by either of the spouses); if done by other persons, just present property If present property donated by a spouse and regime is not ACP, limited to 1/5. If future property

Only limit: non-impairment of legitimes

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donated by a spouse, limit is on nonimpairment of legitimes. Grounds for revocation in FC

Grounds for revocation in CC

What is the limit on donations made by a spouse to the other in an MS? o If future spouses agree upon regime other than ACP, cannot donate to each other in MS more than 1/5 of present property. Excess: considered void o Why other than ACP? In ACP, their properties will become part of AC anyway (except for some) What governs donations of future property in the MS? o Governed by law on wills o Therefore, these are revocable, unlike donation of present properties in MS What is the rule on property subject to encumbrances? o Property subject to encumbrances can be donated. o If foreclosed to secure an obligation: In case of deficiency, donee not liable for difference In case of excess, donee entitled to difference When will a DPN be revoked by operation of law (Arts. 43, 81) and when will it be by option (Art. 86)? Article 43 N/A Article 81 DPN made in an MS: void if there is no resulting marriage N/A Article 86 DPN not in an SM: revocable

What are the grounds for which a donor may revoke a DPN? o 1. Marriage not celebrated, or declaration of nullity o 2. No consent of parents or guardians to the marriage o 3. Marriage annulled and donee is in bad faith o 4. Legal separation and donee is guilty o 5. Resolutory condition o 6. Acts of ingratitude Prescriptive periods to revoke: Period DPN in MS, no marriage takes place: operation of law Nullity, donor is spouse, donee in BF: operation of law Written donation: 10 years Oral donation: 6 years 4 years Donor is other spouse: operation of law Otherwise: 4 years 5 years Remarks The written and oral donations that arent revoked by operation of law just follow the general civil code rules on prescription (because theres no marriage under law) Expressly provided period Expressly provided period Almost everything related to legal separation has a 5year period Contract law

Ground Marriage not celebrated; declaration of nullity

No consent of parents or guardians Annulment, donee in BF Legal separation, donee is guilty

Marriage not celebrated

Marriage celebrated, but terminated after

Revoked by operation of law if donee is in bad faith, and donor is the other spouse

Revocable; everything else is covered here. Even if youre the spouse in GF, some donations are revocable under Art. 86 (ex. void ab initio marriage)

Resolutory condition

Acts of ingratitude

Written donation: 10 years Oral donation: 6 years 1 year from knowledge of the fact

What are the acts of ingratitude covered? o 1. Offense against person, honor, or property of donor, spouse, children under parental authority

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2. Donee imputes to donor criminal offense or any act involving moral turpitude, even if proven Except if act is against donee, spouse, children under authority o 3. Donee unduly refuses to support donor when legally or morally bound to do so What is the status of donations during marriage between the spouses? o Void. o Except: moderate gifts on family rejoicing Determined by social position of the family, and customs o What about those who are merely living together as husband and wife without valid marriage? Same prohibition Examples: Common law marriage Adulterous relationship o What does the prohibition cover? Grants of gratuitous advantage, direct or indirect Ex. donation to a child of the other spouse by another marriage (since if the child dies, the other spouse inherits) Who has standing to question the validity of the donation between spouses? o ONLY persons prejudiced, like the donor or his heirs Case: Husband donated a car to his wife. The wife insured it. It was destroyed and the wife sought to collect insurance. The insurance company challenged the validity of the donation. HELD: The insurance company has no standing to question, since it has no rights or interests over the car in question. o Donor has standing since there can be a case where a stronger spouse takes advantage of the weaker one

When does ACP commence? o Precise moment of celebration of marriage o Any stipulation which makes the commencement at any other time is VOID Basic concept: o Upon marriage, all properties brought into marriage and acquired during marriage are included in ACP o Upon dissolution, the entire common mass is divided between the spouses Contra: in CPG, only the net profits are divided between them Waiver of rights, interests, shares, and effects of ACP: o Disallowed by law. o Except during: 1. Judicial separation of property 2. Dissolution of marriage (ex. death) or annulment thereof o How is this done? 1. In a public instrument 2. Recorded in LCR o What is the recourse of prejudiced creditors of the waiving spouse? May petition to the court to rescind the waiver to extent of amount sufficient to cover credits What is included in the AC? o All properties belonging to spouses before marriage and during marriage o Cannot exclude specific properties from the community What are excluded? o 1. Property acquired during marriage by gratuitous title (donation, succession) As well as its fruits and income Except: if the donor expressly provides that the property is included in the AC o 2. Property for personal and exclusive use by either spouse Except jewelry

Absolute Community of Property (ACP)

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3. Property acquired before marriage of spouse with legitimate descendants from prior marriage Exclude fruits and income as well What is the presumption? o Property acquired during marriage are presumed to be included in the AC, unless proven otherwise o There must be strong, clear, and convincing evidence Apply rules on co-ownership, suppletorily

Conjugal Property of Gains (CPG) When does CPG apply? o 1. Chosen by the spouses in the MS o 2. Marriages under NCC by default What is included in COMMON FUND? o 1. Fruits, income, proceeds, products of separate property o 2. Acquired through their efforts o 3. Acquired through chance What is the rule upon dissolution of CPG? o Divide net gains equally, unless they agreed to a different division in the MS What is the nature of the spouses right over conjugal property? o Each spouse has a mere inchoate right over conjugal property: Cannot alienate of the interest. Cannot be attached by creditors. o Only ripens into actual title upon dissolution and liquidation of partnership. Apply same rules on: o 1. Commencement: upon precise moment of marriage o 2. No waiver of rights, shares, interest unless in JSP or dissolution, and only in public instrument recorded in LCR Apply rules on contract of partnership, suppletorily o If the CP is not enough, use separate properties o But unlike ordinary partnership (pro rata), liability is solidary What are exclusive properties in CPG? o Property by direct acquisition as exclusive: 1. Brought into marriage as his or her own

Includes installment-basis property, if ownership vested before marriage (but reimburse CP for payments on installments) Includes property alienated before marriage but reacquired through rescission, annulment, or revocation of contract 2. Acquired during marriage through gratuitous title Includes unearned increments Includes moral damages (but not hospitalization expenses, medical assistance, or loss of salary) o Property by substitution: 3. Acquired by right of redemption, barter, or exchange of exclusive property If money used for redemption was CP, just reimburse CP 4. Purchased with exclusive money of wife or husband What about exclusive property that is alienated under pacto de retro and then subsequently repurchased? o Still exclusive. If the other spouse paid for the redemption, he can be reimbursed. Who manages exclusive or separate properties? o 1. The spouses retain ownership, possession, administration, enjoyment of exclusive properties o 2. May mortgage, encumber, alienate, or dispose separate property without consent of other spouse. o 3. May appear in court alone to litigate it. o What is the exception? May transfer administration to other spouse (or even another person) by public instrument recorded in ROP, where located Alienation of the property terminates administration by the other spouse. Obviously, proceeds go to the owner-spouse For joint donations of property to the spouses, who owns the property?

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If shares therein are designated, those shares are their exclusive property N.B. Because the disposition is gratuitous o If no designation of shares, it is 50-50 o When does right of accretion exist? 1. when one spouse refuses to accept 2. incapacity to accept 3. predecease or death before perfection of donation What about onerous donations? o Still exclusive property of donee-spouse o But reimburse CP for advances made What is the presumption? o All property acquired during marriage is presumed to be conjugal. o Regardless of registration. Specific enumeration of conjugal property: o Acquired by efforts 1. Those acquired by onerous title through common fund, even if placed in the name of one spouse 2. Obtained from labor, industry, work of either spouse 3. Acquired through occupation such as hunting or fishing o Fruits of property 1. Fruits (natural, industrial, civil) of common property 2. Net fruits of exclusive property of each spouse Net fruits only because use the income first to pay for administration, preservation, etc. 3. Livestock in excess of number of each kind brought into the marriage of each spouse Only matters upon dissolution o Chance 1. Share of either spouse in hidden treasure Even if it belongs to the exclusive property of either spouse, because effort was involved 2. Acquired by chance

But losses borne exclusively by the loser spouse

By presumption 1. All property acquired during the marriage is presumed to be conjugal unless contrary is proved Rules on life insurance: o General rule: The right to annuity itself is considered the exclusive property of the purchasing spouse. The monthly pensions are conjugal. o If the beneficiary is the insured himself or his estate: If paid out of conjugal funds, proceeds are conjugal If paid out of separate funds, proceeds are separate If part conjugal, part separate, proceeds are part conjugal and part separate o If the beneficiary is the other spouse Proceeds belong to the beneficiary spouse, even if paid out of conjugal funds Deemed a donee of the premiums paid. (Must return of premiums to conjugal partnership) If both spouses are jointly insured in a single policy, proceeds belong to the surviving spouse (obviously), even if paid from conjugal funds No obligation to return of the premiums, because it is deemed a reciprocal donation If the insured is a third person, then the beneficiary spouse owns it as separate property (deemed a donation) On benefits, pensions, annuities, usufructs, etc.: o General rule applies. Gratuitous = exclusive; Onerous = conjugal. o Annuities: The annuity itself (ex. purchased for P100K) is exclusive property

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Pensions from that annuity (ex. P5K a month) is conjugal o Usufruct: The harvests or fruits of the land given as usufruct is conjugal o What is the determining factor? If it was given out of pure liberality, then consider it gratuitous (exclusive) If it is a pension, which is given for services rendered, then it is onerous (conjugal) Special cases: o For SSS, the beneficiary is the exclusive owner of the proceeds o Intellectual property like copyright and patent is the exclusive property of the creator-spouse (since it is part of ones person and is just external manifestation of his genius) For loans and credit: o Principal is exclusive property of lending spouse, if from own money o Interests falling during marriage is conjugal property On tips received by waiters, etc.: o Service charge entitled to it, so conjugal (onerous) o Beyond the service charge it is separate (gratuitous) On damages: o If actual damages conjugal But can be separate if losses are based on losses from separate/exclusive funds o If moral, etc. separate because these are paid for suffering, etc. and not actual loss Rule on fruits? o Fruits from conjugal property gross fruits belong to conjugal property o Fruits from separate property net fruits (total fruits minus expenses incurred) are conjugal Compare with ACP? There, fruits from separate properties are always separate Rule on improvements?

o o

o o

Goes against usual rules on accession (accessory follows the principal), which doesnt care about value If the land is separate property, in CPG, whichever is more valuable becomes the principal So if the conjugal house is more valuable than the separate land, then the land becomes conjugal upon reimbursement during dissolution When should reimbursement be made? Not required UNTIL there is liquidation of the CP property. But there is no prohibition against early reimbursement. BUT change in ownership only vests upon respective reimbursements, which only happens during liquidation of the partnership Determine whether there is a change in ownership upon the time the improvement was made If the land is conjugal, the usual rule on property applies (the land is always the principal) What if the house gets destroyed prior to liquidation of the partnership? There is no conversion because conversion only happens upon reimbursement during liquidation.

Charges upon the ACP/CPG ACP Support of: a) spouses, b) common children, c) LC of either spouse Debts and obligations: a) contracted by both spouses, or b) by one spouse for benefit of community Expenses, taxes, repairs: a) major or minor upon CP; b) for mere preservation during marriage of separate property used by the family Expenses for: a) either spouses self-improvement b) what both CPG Same Same

Same, except for: b) for mere preservation during marriage of separate property (no qualification because the family already benefits from the fruits of these) Same

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spouses donated or promised to common LCs self-improvement Ante-nuptial debts of either spouse that redounded to the benefit of the family Expenses of litigation between spouses, unless found to be groundless If exclusive property is insufficient, but subject to deduction of share of debtor-spouse upon liquidation: 1) ante-nuptial debts not redounding to benefit of family; 2) support for illegitimate children; 3) liabilities due to crime or quasi-delict No need to prove first that the other obligations of the AC have been covered (unlike in CPG where the other charges must first be covered), because usually there are no separate properties in ACP

o Same

It is deemed as not redounding to the benefit of the AC/CP because while there can be incidental benefits (e.g. increase in goodwill) the benefit is not directly redounding to the AC/CP.

Same

Administration of property CONJUGAL PROPERTY

N/A

What is the rule when community property is insufficient to cover for expenses (except for the last one, which has a special rule)? o The spouses are solidarily liable with separate properties for unpaid portion o Reimbursement from AC due upon liquidation. What is the difference in rules for debts not redounding to the benefit of the family, support of IC, and liabilities for quasi-delicts and delicts? o For ACP: No need to prove first that the other obligations of the AC have been covered o For CPG: Will only be covered by CP after covering other charges What is the nature of one spouse acting as surety or guarantor to another obligation?

Who administers conjugal property? o The spouses, jointly What if there is disagreement? o Husbands decision prevails o But wife may file for proper remedy within 5 years of contract implementing the decision What is one spouse is unable to participate or is incapacitated? o The other spouse may assume sole powers of administration (with no need for judicial declaration) What is not within the scope of powers of the sole-administratorspouse? o Does not automatically include power to encumber or dispose, unless: 1. With consent of other spouse in writing 2. With judicial authorization o Without this, deemed void. But it is a continuing offer on the part of the offering spouse and the third person. Perfected by other spouses consent or judicial authorization. What is the nature of the other spouses consent that is needed? It must be written consent because mere participation or awareness in the negotiation is not enough. o What if the other spouse is not incapacitated or is not unable to participate in administration, can the other spouse obtain judicial authorization to dispose? No. The judicial recourse is available only when the other spouse is incapacitated or cannot participate. Can a spouse make donations alone?

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No. He or she cannot make donations from community/conjugal property unless with other spouses consent o Exception: MODERATE donations for charity or family rejoicing/distress What may be disposed by will? o Interest in community property, but not specific properties therein

EXCLUSIVE PROPERTY OF SPOUSES What is the general rule? o Spouses administer their exclusive properties When can the courts transfer administration of exclusive property of one spouse to the other? o 1. One becomes the others guardian o 2. Spouse judicially declared an absentee o 3. Spouse sentenced to penalty carrying with it civil interdiction o 4. Spouse becomes fugitive from justice or in hiding as accused in criminal case o N.B. Distinguish this from administration of conjugal property where there is no need for court approval to assume administration What if the other spouse is incompetent, has conflict of interest, or there is similar other just cause? o The court can appoint some other person as administrator N.B. Administrating spouse cannot dispose of other spouses separate properties

Dissolution of ACP/CPG same rules What are the grounds to dissolve the regime? o Where marriage is dissolved: 1. Death of one party 2. Nullity 3. Annulment o Where marriage is not dissolved:

4. LS 5. Judicial separation of property What is Voluntary dissolution of regime? o May be jointly filed in a verified petition by the parties o What is specially required for a voluntary dissolution? Notify all creditors. Court takes measures to protect them. Compare abandonment to separation in fact? o Separation in fact is physical separation. It can be with or without just cause (if without just cause, no right to be supported). It doesnt follow that when there is de facto separation that the spouse is not complying with marital obligations. Abandonment implies failure to comply with familial obligations too. o What is abandonment? Left conjugal dwelling without intention of returning Prima facie assumed if one left conjugal dwelling for 3 months or failed to give any information about his whereabouts for same period How does separation in fact affect the property regime? o 1. Spouse who leaves conjugal home without just cause loses right to demand support o 2. When consent is needed from that spouse by law, judicial authorization is in summary procedure o 3. In absence of sufficient community property, separate properties of spouses are solidarily liable for support. The present spouse, in summary proceedings, may be given judicial authority to administer or encumber specific separate property of the other spouse and use fruits/proceeds to cover absent spouses share. Contra: Abandonment by one spouse, or failure to comply with familial obligations (marital, parental, property) o Aggrieved spouse may petition court for: 1. Receivership 2. Judicial separation of property 3. Sole administration of the AC/CP

Liquidation of ACP/CPG and liabilities

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1 2 3

ACP Inventory of assets (community, exclusive)

4 5 6

Pay community debts from assets Deliver remaining exclusive property

8 9

Deliver net assets of community, considering, if present: 1. Agreement (equal by default) 2. Waiver of share 3. Forfeiture by spouse in BF Deliver presumptive legitimes Deliver conjugal dwelling and lot to spouse with majority of children

CPG Inventory of assets (community, exclusive) Credit CP with amounts advanced to spouses personal obligations Reimburse spouses for: 1. Exclusive funds used for acquiring conjugal property 2. Value of exclusive property converted to conjugal property Pay community debts from assets Deliver remaining exclusive property CP pays spouse for deteriorated movables that benefited family (unless indemnified elsewhere) Deliver net assets of community, considering, if present: 1. Agreement (equal by default) 2. Waiver of share 3. Forfeiture by spouse in BF Deliver presumptive legitimes Deliver conjugal dwelling and lot to spouse with majority of children

Simultaneous liquidation of two marriages contracted before Family Code of 1988: o Default: divide property depending on agreement o If none: Determine the capital, fruits, income of each community prove by evidence o If there is doubt: Divide between two communities in proportion to capital and duration of each o When does this apply? In a situation as in where H and W got married, W died, but H did not liquidate. H gets married to W2, and then their marriage is dissolved. Liquidation would be simultaneous. NOTE, however, that this will not happen under the FC because if there is no liquidation of the first marriage, the second marriage is under mandatory regime of CSP. For CPG support during liquidation: o Taken from fruits and income pertaining to their shares in properties under liquidation o If the support exceeds fruits and income pertaining to them excess is considered advances on shares o If the liabilities of the CP exceed the assets, SS is not entitled to any support during liquidation

Separation of properties during marriage What is the general rule? o Separation of property can only take place by judicial order (even voluntary separation) o Either: voluntary or for sufficient cause 1. List of sufficient causes (see below) 2. Voluntary dissolution 3. Mandatory regime of CSP Grounds for judicial separation of property: o [Judicially declared grounds] o 1. Civil interdiction o 2. Judicially declared an absentee o 3. Judicial declaration of loss of parental authority

Rule on dissolution by death (ACP and CPG): o Liquidate in judicial estate settlement proceedings What if there is no judicial estate settlement proceeding? o Within one year, must: 1. Judicially liquidate AC/CP, or 2. Extra-judicially liquidate AC/CP o What if there is no liquidation within the one year period? Any disposition or encumbrance of the community/conjugal property is VOID o What if there is subsequent marriage without liquidation? Mandatory regime of CSP for the subsequent marriage

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[Those that have to be proved] 4. Abandonment by spouse or failure to comply with familial obligations o 5. Administrator-spouse has abused privilege o 6. At time of petition, spouses are sep-in-fact for at least 1 year and reconciliation is highly improbable o N.B. For grounds 1, 2, and 3 enough to present judicial declaration Procedure for voluntary separation: o 1. Spouses file verified joint petition to court o 2. Petition lists all creditors o 3. Creditors personally notified No need for publication o 4. Pendency: AC or CP supports spouses or children o 5. Court enters decree to convert regime to CSP o 6. Record in LCRs and registries of property What are the effects of separation of property? o 1. Liquidate old property regime and apply CSP o 2. Creditors not prejudiced Spouses still solidarily liable with separate properties to creditors o 3. Mutual obligation to support still continues unless there was legal separation How can there be revival of prior property regime? o File motion in court for decree of revival o When can there be a revival: 1. Civil interdiction terminates 2. Absentee returns 3. Court satisfied that abusive admin will not abuse again 4. Parental authority restored 5. Abandoner returns 6. Separated-in-fact spouses resume common life 7. Agreement, after voluntarily dissolving regime NO voluntary separation may be granted again

o o

When does CSP apply? o Chosen through MS What are the kinds of separation of property? o Extent: 1. Total 2. Partial: those not agreed upon as separate shall be AC property o As to kinds of property: 1. Present property 2. Future property 3. Both What are the rules in administration and ownership? o Each spouse administers and owns, disposes, encumbers, etc. own property without others consent o Each spouse gets his earnings from profession, business, and all fruits from property How are family expenses borne? o Borne by both spouses, in proportion to income o In case of insufficiency or default: in proportion to market value of separate properties What is the rule on liability to creditors? o Liability is solidary [note!]

PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE Parties capacitated to marry and living together exclusively (147) Requisites for 147? o 1. Man and woman capacitated to marry each other o 2. Live exclusively with each other as husband and wife o 3. Without marriage or under void marriage o 4. Both have no existing valid marriage with someone else Who owns wages and salaries? o Owned in equal shares Who owns property acquired jointly through work or industry? o Governed by co-ownership (proportionate ownership) Thus, according to shares actually put in o What is the presumption?

CSP Regime

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Party who did not participate in acquisition of property contributed jointly, through care and maintenance of family and household o Where does this rule not apply? 1. Gratuitous title 2. Acquired in exchange for exclusive properties When can there be disposition of properties owned in common? o Cannot dispose unless with consent of the other (this is different from normal co-ownership) o Until termination of cohabitation What is the rule on termination of cohabitation if marriage is void, and only one party is in GF? o Share of party in BF in co-ownership forfeited in favor of: 1. Common children 2. In case of predecease of common child, to descendants of that child Repudiation leads to representation for descendants 3. If none, to innocent party o Forfeiture upon termination of cohabitation

o o

Share in co-owned properties accrue to AC or CP of prior marriage If party in BF, forfeit shares to: 1. Common children 2. Descendants of that child in case of predecease 3. Innocent party If both are in BF rules on forfeiture still apply. [Dean Del: so magpapalitan lang sila ng property.]

THE FAMILY AND FAMILY HOME Which relations fall under the family? o 1. H and W o 2. Parents and children o 3. Ascendants and descendants o 4. Brothers and sisters, whether full or half-blood What is the special pre-requisite for suits between family members? o Prior earnest efforts to compromise What are exceptional cases, because they cannot be compromised? o 1. Civil status of persons o 2. Validity of marriage/LS o 3. Ground for LS o 4. Future support o 5. Future legitime o 6. Jurisdiction of courts Who may constitute a FH? o Jointly by spouses o Unmarried head of family Can FH be on rented land? o No. The implication is a FH must be permanent, and hence must include the land. What is the exemption of a FH? o It is exempt from execution, forced sale, or attachment to the value allowed by law o Except: 1. Non-payment of taxes

Parties not capacitated to marry or not living together exclusively (148) To which does this apply to? o 1. Bigamous marriages o 2. Adultery or concubinage o 3. Both man and woman are married to other persons o 4. Multiple alliances of same married man What properties are owned in common? o ONLY properties actually acquired by joint contribution are owned in common, proportionate to contributions. So: Wages and salaries are EXCLUSIVE Care by other party to home, children, etc. or moral inspiration is not included o What is the presumption for actual contributions? Actual contributions deemed to be equal If one party is married to another:

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2. Debts prior to constitution of FH 3. Debts secured by mortgage on the premises before or after construction 4. Debts due to laborers who constructed or rendered materials for the building How is a FH constituted? o Automatic, by operation of law But this provision of the FC does not retroact to FHs constructed prior to 3 August 1988 o Only one FH allowed o Value must be: 300K for urban areas 200K for rural areas Who are the beneficiaries of a FH? o 1. H and W or the unmarried head of family o 2. Ascendants, descendants, brother and sisters (whether legitimate or illegitimate) who are actually living in the FH and dependent on the head for support How is a FH sold? o By the owner, with written consent of person constituting it, the latters spouse, and majority of beneficiaries of legal age What if one of the spouses (or both) or the unmarried head die? o The FH continues for 10 years or as long as there is still a minor beneficiary o Heirs cannot partition it unless there is compelling reason for it What if the FH increases in value beyond that allowed by law? o If it is due to voluntary improvements introduced by the owners or beneficiaries, then the FH can be executed.

Children by nature A. Legitimate: o 1. Conceived OR born during marriage of parents: o 2. Children conceived through artificial insemination of wife Either with sperm of husband, of a donor, or both o What is the special requirement for artificially inseminated children? Husband and wife must both authorize or ratify procedure in a written instrument Record it in the civil registry, with birth certificate before the birth of the child B. Illegitimate: o Those conceived AND born outside valid marriage o Exceptions? 1. Void marriages where solemnizing officer had no authority, but at least one spouse in GF 2. Art. 36 nullity 3. Art. 53 nullity C. Legitimated o Who can be legitimated? Children conceived and born outside of wedlock of parents NOT disqualified by any impediment to marry each other 2009 amendment: if the only impediment is age, then the child can be legitimated o How are they legitimated? Through subsequent valid marriage between the parents N.B. Annulment of voidable marriage does not affect o What is the effect? 1. Effects retroact to time of childs birth 2. Legitimation of children who died before the marriage benefits descendants So it can benefit a dead child with his own descendants o Who can file an action to impugn legitimation? Only by those prejudiced in their rights

PATERNITY AND FILIATION Kinds of filiation 1. By nature o Legitimate o illegitimate 2. Adoption

35

Ex. testamentary and intestate heirs Creditors excluded because they only step into the picture when there is repudiation of inheritance by heirs From five years from time their cause of action arises Cause of action accrues from death of putative parent (From minutes of committee meeting) B and G are college sweethearts in Manila. When they graduated, G was 7 months pregnant. Unknown to G, B promised to marry his childhood friend C in Cebu after graduation. 2 months before B and C married, G gave birth to W. During B and Cs marriage, C gave birth to X. Unbeknownst to C, whenever B has a business trip in Manila, he still sees G and because of this, G gave birth to Y. Unbeknownst to B, when hes away, C has relations with the plumber, P. C gave birth to Z. C died. Afterwards, B and G got married. What is the status of the children? o 1. W is legitimated, because W was born when B and C were not yet married, so there was no impediment. The subsequent marriage of B and G legitimated W. o 2. X is the legitimate child of B and C. G is Xs step mother. o 3. Y is the illegitimate child of B and G because Y was conceived and born outside of valid marriage. o 4. Z is the legitimate child of B and C. Even if P was the real father, Z was conceived and born within a valid marriage and will remain that way until or unless B impugns his legitimacy. NOTE: the rule is different from Y, because in Ys case, its obvious that C was not the mother. Its more difficult in the case of fathers.

Actions regarding filiation A. To claim filiation o What are the methods to claim legitimate filiation? Primary methods: 1. Record of birth in civil registrar 2. Admission of legitimate filiation in: o A. Public document or

B. Private handwritten instrument and signed by parent concerned Secondary methods: 1. Open and continuous possession of status of legitimate child 2. Other means in ROC and special laws o When must action to claim legitimate filiation be filed? 1. By child, during his or her lifetime 2. Transmitted to heirs (for up to 5 years), if: Child dies during minority Or in state of insanity N.B. Action filed by child survives even if either party dies o What are the methods to claim illegitimate filiation? Same way, and with the same evidence as legitimate filiation o When must action to claim illegitimate filiation be filed? 1. PRIMARY methods: up to childs lifetime 2. SECONDARY methods: up to alleged parents lifetime o H and W were married and during their marriage, children A and B were born. X, in a notarized instrument, acknowledged A and B as his illegitimate children. X died. On the strength of this declaration, A and B sought to participate in the settlement of Xs estate, which the heirs of X contested. Does the acknowledgement of illegitimacy hold water? No. Both A and B were conceived/born under a valid marriage and are thus legitimate. Recognition of illegitimacy, even through proper means, cannot defeat presumption of legitimacy of children, which was not impugned by H in this case. B. To impugn filiation o How may the legitimacy of a child be attacked? ONLY in a direct action or proceeding. (Sayson v. CA) o Who may impugn a childs legitimacy? 1. Husband ONLY, by default

36

2. Heirs of husband, if: A. Husband dies before expiration of period fixed to bring action B. Husband dies after filing complaint, and did not desist C. Child born after death of husband What are the only grounds to impugn a childs legitimacy? 1. Physically impossible for H to have sexual intercourse with W within first 120 days of 300 days (first 4 months of the 10 months) which immediately preceded birth of the child; due to: Physical incapacity of H to have sexual intercourse with W H and W living separately, and sexual intercourse not possible Serious illness of H preventing sexual intercourse with W 2. Proved through biological or scientific reasons, that the child could not have been that of the H Human Leukocyte Antigen (HLA) test conclusive determination Blood tests can disestablish paternity DNA tests A.M. No. 06-11-5-SC o CONCLUSIVE of non-paternity o If probability of paternity value is less than 99.9% = corroborative o If probability of paternity value = 99.9% or higher, then it creates a disputable presumption of paternity 3. Artificial insemination with no written authorization or ratification Or gotten through mistake, fraud, violence, intimidation, undue influence What is the period to impugn? A. Within 1 year from knowledge of birth or recording in civil register: if husband (or heirs) resides in city where birth took place or was recorded

B. 2 years, if residing in Philippines but not in place of birth or recording C. 3 years, if abroad If birth concealed or unknown, when do you start counting the period? From knowledge of birth or recording, whichever came first o Considered legitimate even if: Mother declared against its legitimacy Or mother has been sentenced as adulteress Mother contracting a second marriage within 300 days (10 months) after termination of first marriage: o Child belongs to the first marriage if: Child born within first 180 days (6 months) after second marriage is solemnized AND MUST BE within 300 days after first marriage terminated o Child belongs to the second marriage if: Child born after 180 days after second marriage solemnized (Even if within 300 days after first marriage terminated) So the rule is: BOTH periods must concur for the first marriage to have the child. Else, second marriage wins. o N.B. these are mere presumptions. And regardless, the child will be legitimate o What about children born after 300 days (10 months) of termination of the first marriage? No default status. Up to the one alleging legitimacy or illegitimacy.

ADOPTION RA 8552 Who may adopt:

37

Filipino adopter 18+ years old At least 16 years older than adoptee (subject to exceptions) Full civil capacity

Alien 27+ years old At least 16 years older than adoptee (subject to exceptions) Legal capacity to adopt certified by diplomatic or consular office Country has diplomatic relations with the Philippines GMC, not convicted of crime involving moral turpitude

GMC, not convicted of crime involving moral turpitude

Emotional and psychological capability

Emotional and psychological capability

Can give care/support

Can give care/support 3 year residence before adoption and until decree has been entered (subject to exceptions)

Alien under Intercountry adoption act 27+ years old At least 16 years older than adoptee (subject to exceptions) Legal capacity to adopt certified by diplomatic or consular office Country has diplomatic relations with the Philippines GMC, not convicted of crime involving moral turpitude Agrees to uphold relevant UNCRC, Philippine law, R&R of inter-country adoption Emotional and psychological capability (has undergone counseling) Can give care/support

When can a Filipino adopt: (capacity, character, age) o 1. Legal age o 2. Full civil capacity and legal rights o 3. GMC, and not convicted of crime involving moral turpitude o 4. Emotionally and psychologically capable of caring for children o 5. Can provide care/support o 6. At least 16 years older than adoptee, except if: Adopter is biological parent Spouse of adoptees parent

Alien: (same, capacity, residence, age, no abuse) o 1. SAME as above o 2. Certified by diplomatic/consular office that he has legal capacity to adopt under his laws and that the country allows the adoptee to become his son/daughter o 3. Country has diplomatic relations with Philippines o 4. Living in Philippines at least 3 years before adoption application, and maintains residence until adoption decree entered, except: 1. Former Filipino who seeks to adopt relative by th consanguinity within 4 degree 2. Adopting legitimate son/daughter of Filipino spouse 3. Married to Filipino spouse and seeks to jointly th adopt a relative by consanguinity within 4 degree of Filipino spouse o 5. At least 27 years old and 16 years older than adoptee at time of application Guardians, with respect to their wards: o 1. After termination of guardianship o 2. Clearance of liabilities Who must adopt? o By default, the husband and wife must jointly adopt o Exceptions to this? 1. Spouse adopted legitimate child of the other 2. Spouse seeking to adopt own child Other spouse must consent 3. Spouses legally separated o N.B.: This rule is important. BOTH the H and W must jointly adopt. If one spouse is qualified but the other is not, then there can be no adoption. Ex., a former Filipina who became American wanted to adopt her younger minor brother. This is fine. But if her American husband is not qualified (ex. there is no residency requirement yet), then he cannot adopt. The petition will fail.

38

Note: in the case above, the waiver of residency period does not apply to the alien husband because the brother is not the legitimate child of the wife yet. Who may be adopted? o 1. Person below 18 judicially or administratively declared available for adoption o 2. Legitimate child of one spouse by the other spouse o 3. Illegitimate child of adopter, to improve status o 4. Person of legal age, if prior to adoption and since minority, consistently treated and considered as own child by adopter o 5. Child whose adoption has been previously rescinded o 6. Child whose biological/adoptive parents died But not within 6 months of death of parents Whose consent is needed for the adoption? o 1. Adoptee, if 10 years old or above o 2. Biological parents of child if known or government instrumentality caring for the child o 3. Legitimate and adopted children of adopter and adoptee, if over 10 years old o 4. Illegitimate children, if over 10 years old and living with adopter and spouse o 5. Spouse of adopter or adopted, if any What are the effects of adoption? o 1. All legal ties between the biological parents and the adoptee are severed Except when it is the biological parent that is the adopter o 2. The adoptee becomes the LC of the adopter o 3. Adopter and adoptee obtain reciprocal successional rights (just them) What is the effect on succession rights under FC, Articles 189-90? N.B. There is controversy whether these still apply, but these were included in the Bar syllabus, so take note. o 1. The adoptee remains an intestate heir of his biological parents and blood relatives

2. If adopters concur with parents/legitimate ascendants of the adoptee, they divide the estate to the parents, to the adopters o 3. If adopters concur with SS or ICs of the adoptee, then divide the estate to adopters and SS or ICs o 4. If adopters concur with SS and ICs of the adoptee, then divide the estate 1/3 to adopters, 1/3 to SS, 1/3 to ICs o 5. If only adopters, they get everything o 6. If only biological relatives, follow ordinary succession rules o N.B. if the adoptee has legitimate children/descendants, then just like ordinary succession, the adopters are excluded. Who can rescind adoption? o JUST the adopted child. Never the adopter. Grounds to rescind? o 1. Repeated physical or verbal abuse by adopter o 2. Attempt on life of adoptee o 3. Sexual assault or violence o 4. Abandonment/failure to comply with obligations Effects of rescission: o 1. Restores parental authority of biological parents, if adoptee is still a minor/incapacitated o 2. The amended birth certificate is cancelled o 3. Rights to succession are restored, but not as far as there are already vested rights Who may adopt under the Inter-country Adoption Act (RA 8043)? o 1. At least 27 years old and at least 16 years older than the prospective adoptee Except: 1. Adopter is biological parent 2. Adopter is spouse of biological parent o 2. If married, the spouse must jointly file for adoption o 3. Has capacity to act under national laws and undergone counseling in his country o 4. Not convicted for crime involving moral turpitude o 5. Eligible to adopt under national law o 6. Can give proper care and support to the child

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7. Agrees to uphold UNCRC, Philippine Law, and the R&R of the Inter-country adoption act o 8. Country has diplomatic relations with the Philippines o 9. Possesses all qualifications and none of the disqualifications under Philippine law Where is a petition under RA 8043 filed? o 1. RTC with jurisdiction over the child o 2. With the Inter-country Adoption Board through a governmental or accredited private intermediate agency in the country of the prospective adopters What supporting documents must be filed? o 1. Birth certificate of parents o 2. Marriage contract if married or divorce decree o 3. Written consent of their biological children above 10 years of age (sworn statement) o 4. Physical, medical, and psychological evaluation by licensed physician and psychologist o 5. ITRs or other documents showing financial capability o 6. Police clearance o 7. Character reference of local church or minister, employer, and member of immediate community knowing the applicant for at least 5 years o 8. Recent postcard-size pictures of applicant and immediate family What applies for judicial proceedings? o Rules of Court

SUPPORT What is covered by support? o Everything necessary for sustenance o Food, clothing, medicine, education, transportation How long does support last? o Support doesnt end at age of majority o It is still the parents obligation What is the order of support? o There is a system of priority in support

This is valuable if there is not much resources to provide support with o System of priority found in FC Who are the persons required to support each other? o 1. Ascendants and descendants No matter how far removed In the case of illegitimate ascendants or descendants in the direct line: Seems to stop at parents, and their children, whether legitimate or illegitimate, and their descendants, whether legitimate or illegitimate But the effect is really just the same. The code just wants to make it clear that there are no illegitimate parents or illegitimate ascendants. But basically it is the same. So illegitimate children can claim from their illegitimate grandparents. o 2. Collateral relatives: limited to brothers and sisters No other collateral relatives Half-brothers and sisters are considered legitimate and are entitled to support If the illegitimate brother or sister is a minor, you are required to support him or her If he or she is no longer a minor, you ask for the reason why he needs support E.g. he is indolent, then you are not required E.g. he is a paraplegic, sick, and has no job opportunities, then you are required to o 3. Spouses The only thing that binds them together is the marriage contract. If you remove the validity of the marriage, then there is no obligation to give support. This is why the guilty spouse may still be required to provide support to the innocent spouse. Can you refuse to give support to a philandering spouse?

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No. Unless there is actual LS, there is no legal defense to deny support. However, an unjustifiable refusal to live with ones spouse is a ground to refuse to give support.

PARENTAL AUTHORITY How does the rule on parental authority differ from support? o Parental Authority is time-bound: it only lasts until the children reach age of majority o Thus, the only freak situation is the giving of consent for marriage, even until 21 years old. This is the outlier. What does Parental authority cover? o 1. Custody o 2. Discipline (proportionate to offense) What are the concomitant obligations? o Support o Moral and spiritual guidance o Provide good environment, etc. (PD 603) Two types of PA: o 1. Parental authority over the person Parents ARE ALWAYS FIRST Parents only lose if shown to be unfit Having more resources has never been the criteria Take note of tender years doctrine (in custody cases, a child under 7 goes to the mothers custody unless there are compelling reasons otherwise) If parents are gone, substitute parental authority (BOTH parents must be gone) 1. Grandparents no preference, whether parental or maternal line. If there is clash, they go to court 2. Eldest B/S over 21 3. Anyone with custody over the child And concomitantly, special parental authority Teacher, in the classroom or outside the classroom, for recognized school activity

Priority of support: o 1. Spouse Different from succession, where spouse is only #4 o 2. Nearest descendant o 3. Nearest ascendant o 4. Brothers/sisters o Order: Spouse Children Parents Grandchildren Grandparents Etc. N.B. Thus the rule is you do not exhaust going down before going up. It alternates Rule on plurality: o When you have enough, you do not have to worry about the priority of support. Just give enough to everyone. o It will be prorated based on the ability of the provider to give. So a child who earns more must support the parent more than the child who earns less. o The court can demand one person to advance, and then the person demands from the rest. Can the right to receive support be levied upon by attachment or execution? o No. Legal support is exempt from attachment and execution. But contractual and testamentary support is NOT exempt from attachment and execution. o The latter are in excess of what one is required to give Can judgment for support be considered final and res judicata? o No. Its always subject to modification, depending on need and capacity to support.

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Implication: responsible for injury or death over child o Defense: due diligence The teacher exercising special parental authority is SOLIDARILY AND PRIMARILY liable. The parents and those with substitute parental authority: subsidiarily liable 2. Parental authority over property of the children Legal guardianship Automatic if value of childs assets are less than P50,000 If more than P50,000: required to file a bond and must be appointed by the court in a summary proceeding Even if you are granted authority by the court, legal guardianship authorizes only acts of administration; NOT acts of ownership There is separate approval if you want to sell the childs properties Rules on property of minor children: 1. Properties of children (regardless of how acquired) o OWNED by the children. Even minors can own property. o Parents only have legal guardianship. They can administer it, and must account in a fiduciary capacity. o If LC joint admin by father and mother; if disagreement, father wins, but mother can seek court redress 2. Fruits and income of the property o Can be used by the parents o Not for their own; ONLY to support the child

If there is excess, it can be used for collective needs of the family 3. Properties owned by parents o There can be minor children tasked to administer certain parents properties o OWNED by parents o Fruits and income go to: Parents (but parents must pay the children, which should be the same amount they wouldve paid rd a 3 person administrator) Children (as earnings, not treated as advance on legitime) When is parental authority terminated? o 1. Death of parents or death of child o 2. Emancipation of child o 3. Adoption of child o 4. Appointment of general guardian o 5. Judicial declaration of abandonment o 6. Final judgment by court divesting parental authority o 7. Judicial declaration of absence or incapacity Grounds for suspension and deprivation of parental authority? o 1. Conviction of parent that has civil interdiction Automatically reinstated upon service of penalty, pardon, or amenesty o 2. Court, in action, finds that the parent: A. compels child to beg B. Treats child with excessive harshness or cruelty C. Gives child corrupting orders, counsel, example D. subjects child or allows him to be subjected to acts of lasciviousness o 3. Subjected child or allowed him to be subjected to sexual abuse. What is the special rule under this ground?

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Funerals

Deprivation of PA is permanent

o What appears in the birth certificate To change: Rule 103 of ROC

What can you use as surname? Who has the duty and right to make funeral arrangements? o 1. Spouse o 2. Descendants of nearest degree o 3. Ascendants of nearest degree o 4. Brothers and sisters o What if there are descendants of same degree or several siblings? Older is preferred o Who has preference for ascendants? Paternal side Against what property are funeral expenses chargeable? o Property of deceased o If married, charge to conjugal property Legitimate and legitimated children: o MUST use fathers surname Illegitimate children: o Only mothers surname o Revilla law: allows use of fathers surname even if illegitimate, if recognized in a private handwritten instrument or public document This is not mandatory Adopted children: o If adopted by both H and W, use husbands surname o If solely adopted, use sole adopters surname o If solely adopted by married woman, use married womans surname Married women: o Not required to use surname of the husband. Can retain maiden name If you change your surname to your husbands, theres no turning back o Options: 1. Keep maiden name Ms. Gloria Macapagal 2. Use maiden name plus husbands surname Ms. Gloria Macapagal-Arroyo 3. Use Mrs., then husbands surname Mrs. Jose Miguel Arroyo Remo v. DFA o Woman adopted legally her husbands surname. Her passport was under that name. In renewal, she asked the DFA if she can return to her maiden surname. But there is no annulment, or whatever ground to revert. She claimed that she had the option. o HELD: Cannot do this. Rules:

Emancipation When is someone emancipated? o Just by reaching 18 Still pegged at 21: o 1. Parental consent for marriage o 2. Art. 2180 of NCC (respondeat superior)

Retroactivity of the FC Does the FC retroact? o Yes, as long as it does not affect vested rights (ex. Illegitimate children)

SURNAMES Purpose: o 1. Interest of the State: because it seeks to prevent confusion of identity o 2. To prevent escaping from criminal liability What is the legal name of a person?

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ANNULMENT If guilty spouse, MANDATED to return to maiden surname If innocent spouse, may retain husbands surname or revert, unless she or the husband has remarried o NULLITY same o LEGAL SEPARATION Whether guilty or not, retain since they are still married o DEATH of husband Can still use the husbands surname May revert to maiden name Or add Vda. de Surname What is the rule on junior? o You can only give junior to the son. o There is no rule on giving daughters junior What entries in the Civil Registry may be changed or corrected without judicial order? o ONLY clerical or typographical errors and first/nicknames may be changed under the Clerical Error Law (RA 9408) o Cannot change: Nationality Sex Age Status o NOTE: name can only be changed once When can there be change of name under Rule 103? o N.B. you can change surnames through Rule 103 o 1. Name is ridiculous, tainted with dishonor, extremely difficult to write or pronounce o 2. Consequence of change of status, such as when child is legitimated o 3. Change is necessary to avoid confusion o 4. To improve social standing, as long as in doing so, there is no injury to the State or third persons (Caledron v. Republic) o

Stages: 1. Provisional absence o An ad hoc stage, since there are certain things that have to be done (ex. Signing contracts, withdrawing from bank) o Legal representation: spouse is preferred Only exception: when there is legal separation But court can appoint someone else if there is reasonable ground 2. Declaration of absence o Two years from time of disappearance, unless administration of power of attorney was left with someone else, then five years o Procedure; prove that he has been missing/absent for a certain period of time Administrator of absentee is appointed o If he reappears, he takes back his properties 3. Presumptive death o Here, transfer to administrator of presumptively dead person o If proven to be dead, then transfer to administrator or executor of estate Then proceed to settlement of estate o Periods? 7 years of absence presume dead 10 years for purposes of succession If over 75 years of age down to 5 years o Periods for purposes of declaration of presumptive death for remarriage? 4 years for ordinary absence 2 years for extraordinary absence What is the difference? 4 years there is no danger of death 2 years there is danger of death o If the person reappears, return his assets to him If the spouse remarried, then follow Arts. 42 and 43 of FC

ABSENCE

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PROPERTY

CLASSIFICATION OF PROPERTY How does the code define property? o Those subject to appropriation by man. o Things would thus be a broader concept since it covers even those not subject to appropriation. o The code weirdly interchanges the use of these two words. What are the classifications? o Real/immovable or personal/movable properties o Public dominion or private ownership What are real properties? o 1. Immovable by nature Land o 2. Immovable by incorporation Buildings, constructions adhered to the soil Trees, plants and growing fruits, while attached to the land Those that cannot be separated without damage o 3. Immovable by destination Ornaments Machines Animal houses Loading docks Fertilizer actually used o 4. Immovable by analogy Contracts for public works Servitudes and other real rights over immovable property What is the only real property which is immovable by nature? o Land Why do we consider buildings immovable? o Because they are incorporated/adhered to the soil. o If the bahay kubo can easily be moved and transported, then it is personal property, not real property.

Does incorporation always have to be to the soil? No. Incorporation can be to another immovable; need not be to the soil per se. Another consideration is if it cannot be separated without breaking the material or the obect (this refers to the attached object, obviously, because even if land breaks, it still has value.) o X constructs a building on a piece of land he is merely leasing from Y. Is it real or personal? Real. It doesnt matter that who owns the land if by incorporation. It only matters if by destination. o If a painting is embedded into the cement wall of a house, thus becoming part of the wall, what happens to it? The painting becomes immovable by incorporation. Because the painting will be destroyed when you try to remove it. It doesnt matter what the intent is; the fact of incorporation is the controlling factor. Does ownership of the painting and the wall matter? No. The fact of incorporation is what matters What is the controlling factor for immovable by destination? o Intention of the owner of the property in question. o Give examples of immovable properties by destination. Statues, etc, used for embellishment. o If I hang the painting on the wall of Justitia (and I dont own Justitia)? It does not become immovable by destination because it has to be placed by the owner of the place where the painting is found, and he intends that it be an embellishment. o Ateneo owns a St. Thomas More painting and hangs it in the walls of Justitia. What happens? It is immovable property by destination, because there is intent to make it an ornament and to keep it there indefinitely. When do machines or equipment become immovable by destination?

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If they are placed in building or tenement where work or industry is done, they are immobilized by intent of the owner. o Ex. Computers used in a computer shop, and owned by the owner of the building. N.B. Does not apply to rented spaces in malls, because you do not own the place; it is just for lease. o Ex. Sewing machines in a clothing manufacturing warehouse, if the machines and the warehouse are both owned by the person. o Animal houses: If you intend to keep it there forever, then it and the animals become immovable property. Ex. Dog house in ones house and the dog itself becomes immovable property. o Loading docks: This covers, for instance, a floating platform made of wood and metal where machinery of a petroleum corporation are attached. The platform was tethered to a ship, which was anchored on the seabed. Real or personal? If intended to remain at a fixed place, real. If it can be moved around and towed to other vessels, personal. o Fertilizers: Also immovable by destination What are those by analogy? o Contracts for public works, and real rights over immovable properties. o Is a mortgage on land movable or immovable? Immovable if registered in ROP Movable if just between parties o What about shares of stock for real estate property? PERSONAL property. Shares of stock are always personal property. Machines placed in a chocolate-making factory were subjected to a writ of seizure, which can only apply to personal property. The

lease agreement stated that they are considered personal property. What are they? o Personal property, based on stipulation between the two parties. o As to third persons in GF, they are real property, consistent with the code. But if X and Y enter into a contract that deems the building as chattel, can it be treated as such? o Yes (Navarro v. Pineda). So while constructing the building on leased property does not per se affect the buildings status, coupled with the declaration, it can. (Tumalad v. Vicencio) o But as to third persons, its considered real property. So if its publicly sold, one must compl with conditions precedent for the sale of real property. Else, it is void. (Manarang v. Ofilada) o When there is a chattel mortgage between two persons over a building and a real estate mortgage over the same property towards another, the latter wins out because the CM is void as regards third persons. (Associated Insurance v. Isabel Iya) What about a CM over machinery? o It can be valid even as to third persons, since the machine is only real property by destination if it directly meets the needs of the business. If its just stored in the factory, then its personal property. What are the tests to determine personal property? o 1. Exclusion test If not included in the list of immovable property, it is personal property o 2. Description test Can move from one place to another without impairment to the real property to which they are fixed o 3. Considered movable properties by law Ex. Growing fruits and plants because under Chattel Mortgage Law, they are movables Even if they are listed as immovable property in 415. How to resolve: only considered as chattels under Chattel Mortgage Law. Otherwise, immovable under 415 o 4. Considered as personal property by analogy

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Contracts, choses of action (right to sue or be sued) Radio frequencies Shares of stock of ANY corporation, even if the corporation owns immovable property Classification in fungible or non-fungible/consumable or nonconsumable: o Only applies to personal or movable properties o Fungible/non-fungible: based on intent of the parties Fungible: can be substituted by others of same kind or quality o Consumable/non-consumable: based on nature Cannot be used in manner appropriate to their nature without being consumed o Money is ALWAYS fungible Although Arrovo bills are not fungible Other classifications? o Constitution: Public domain Private land o Civil Code: - for purposes of ownership A. Properties of public dominion 1. Properties intended for public use 2. Properties intended for public service o Being used by the government to render some service to the people, but not open to everybody o Ex. Police car 3. Patrimonial property o Private property of the State; used for entering into some business or utility o Also includes those from first two classifications that are not anymore for public use/service B. Privately-owned property What are the characteristics of property of public dominion? o 1. Cannot be appropriated

o o o o

2. Cannot be subject matter of contracts (no alienation or encumbrance) 3. Cannot be acquired by prescription 4. Cannot be subject to attachment or execution 5. Cannot be burdened by voluntary easement

OWNERSHIP What are the rights of the owner? o 1. Right to enjoy the property Jus possidendi Jus fruendi Jus utendi Jus abutendi o 2. Right to dispose of the property (Jus disponendi) Sell, encumber, dispose, etc. o 3. Right of action to recover (Jus vindicandi ) Note: there is no such thing as absolute ownership. What are these restrictions? o 1. Those in the Constitution Eminent domain Police power National economy/patrimony powers o 2. Contractual restrictions o 3. Provisions in the NCC Nuisance Right of way Art 431: use property the way you want it, but not in manner injurious to others Art 432: doctrine of incomplete privilege the greater right of more people can prevail Ex. Destroying ones fence to prevent flooding What are means to protect ones rights? o Doctrine of self-help Art 429: can use reasonable force to repel actual or imminent aggression Elements?

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1. Force employed by owner or lawful possessor 2. Actual or threatened physical invasion 3. Invasion/usurpation is unlawful 4. Force employed is necessary to repel When does this not apply? When the property has already been stolen. The provision only applies to repel the aggressor. o What are your actions when you lose your property? Accion publiciana Accion reivindicatoria Physical boundaries of property o Horizontal aspect o Vertical aspect Until Rules of Aerial Navigation Ex. If your property is near an airport, you have special requirements to comply with What are the rules on hidden treasure? o If you own the building, it is yours o Unless it is deemed to have been part of national treasure o If of interest to the science or arts, the State may acquire it at their just price divided 50-50 as well o Ownership must not be indicated Ex. Golden spoon engraved: Imelda Marcos o Only manufactured products Because if it is gold in raw state belongs to State To whom does the property belong to, and what are the rules on finders fee? o Finder owns property 100% o Finder and owner split 50/50 As long as the finder is NOT a trespasser X owned a piece of land where treasure was believed to have been buried. He knew Y had a metal detector that could be used to find treasure. Y agreed and he found treasure. To whom does it belong? o To X.

For there to be 50-50 split, the other person must have found the treasure by mere chance. Here, X already knew there was treasure buried in his land. N.B. some commentator believe by mere chance can cover even mere tips, because there is no reason to distinguish between one who finds treasure by pure stroke of luck and one with an unsure tip. Remember, the requisites are: 1. Treasure is money, jewelry, precious objects 2. Hidden and unknown 3. Lawful ownership does not appear 4. Discovery is by chance 5. Discover is not a trespasser If the thing is of interest to science or the arts, the State may acquire it by paying just price.

Accession Its an incident of ownership. Not a means of acquiring originally. Two things: o 1. Those produced from property (fruits) whether real or personal (Accession discreta) internally generated accession Natural fruits Industrial fruits Civil fruits o 2. Those attached or incorporated into ones property and cannot be separated without damage (Accession continua) External forces or additions to the property Accessory follows the principal

Accession discreta What are the kinds of fruits (accession discreta)? o 1. Natural o 2. Industrial

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o 3. Civil What are civil fruits? o Income from use of property, ex. Lease, rent of buildings o These are synthetic because it is based on income of property. o Who gets dividends? For corporate law whoever is the registered owner as far as dividends are concerned, For civil law if you only bought the shares the day before, you dont get all the dividends. You have to split it proportionately. What is the difference between natural and industrial fruits? o Natural fruits spontaneous products of the soil; products and the young of animals Spontaneous they just grow, without planting, effort, cultivation Spontaneous only qualifies soil products. No need to qualify animal products and young. For young of animals, what is the rule? If one person owns both father and mother, then it doesnt matter. If there are different owners, the owner of the mother gets the young. o Industrial fruits products of the land through cultivation or labor These are mostly products of the soil. Does not cover animals. One must cultivate, process, plant, etc. But the difference between natural and industrial fruits is mostly academic, unlike planting and sowing. What is the difference between planting and sowing? o Planting produces something relatively long-term or permanent, like trees o Sowing a one-crop harvest like rice, corn, etc. o N.B. the rules that apply to planting differ from rules applicable to sowing. How does the rule differ?

When someone plants something in ones property, there is a situation where you can compel the person to buy your property. o In contrast, there is NEVER a situation where a sower can be compelled to buy the property. You can only require him to pay rents. What is the rule as to expenses for planting and sowing? Who pays for cost of the seeds, labor, gathering, preservation, etc.? o In general, these are charged to the person who receives the fruits. o And as a general rule, it is the owner who gets these. But there are instances when the law gives these fruits away to some other person apart from the owner. o What is the exception? Antichretic creditor (antichresis) the fruits are given to the creditor, and the creditor deducts it from the amount of the obligation, first to interest then the principal 1 2 Know difference of Art. 443 and 449 o If fruits have not yet been harvested: Apply Art. 449. BPS in BF doesnt get indemnified. o If fruits have already been harvested: Apply Art. 443. Even a BPS in BF will get compensated for necessary expenses o Contra: What if the BPS is in GF? He gets compensated for what was built, planted, or sown, regardless of whether fruits have been harvested or not o

Art. 443. He who receives the fruits has the obligation to pay the expenses made by a third person in their production, gathering, and preservation. 2 Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.

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Accession continua General rules in accession continua: o 1. Owner receives the extension/increase o 2. Accessory follows the principal o 3. The things must be so united that they cannot be separated without injuring or destroying the property o 4. Punitive liability attaches to the party in BF; party in GF is not punished Accession continua those external in character, forming one single object o Apply the accessory follows the principal rule o There are different accessions for movable and immovable o Immovable property: Accession industrial BPS rules (involves industry) Accession natural brought about by forces of nature; no industry involved Alluvium Avulsion Change in river course Formation of islands o Movable property: -ions (discussed below) Accession industrial o Building, planting, or sowing o What is building? Constructions, improvements using unnatural materials o Does it matter whether the building construction is permanent or transient (ex. Slums, kubo)? For purposes of accession, yes. Because for there to be accession, the joining together must have some degree of permanence. o How many persons are involved in the B/P/S problems? 2 or 3 There is always a land owner (LO) Second personality is B/P/S (BPS)

Third person is the owner of the materials (OM)

LO/BPS/OM scenarios 1. The ideal scenario is the LO, BPS, and OM is just one person. There is no problem here. Accessory follows the principal. The presumption is that the LO is also the BPS and OM. 2. LO and BPS is the same person; OM is a second person o When is the LO in GF here? When he does not know the materials do not belong to him. o When is the OM in GF here? When he does not know someone else is using it, or he thinks the materials used by the LO+BPS belongs to the LO+BPS. o FIRST THING TO DO: determine whether accession exists. If the materials can be removed, then there is no problem. (Ex. Light bulbs take them out and return them) o Note the basic rule: when two persons are involved and both are in GF, give preference to the LO. o If both are in GF, what are the rights of the LO? Can acquire materials by paying indemnity to the owner of the materials. Measure of expenses: cost of the materials at the time of payment. o If the LO was in GF and the OM was in BF, what happens? Anyone who is in BF loses everything. He loses the value of the materials and the owner can acquire the materials without need for payment. o If the LO was in BF and the OM was in GF, what happens? 1. OM can remove the materials (whether or not this causes damage) + damages Measure: cost of materials. 2. If OM doesnt want to remove the materials, the LO has to pay the OM cost of materials + damages. o If both are in BF, what happens? Both are deemed in GF. 3. LO is one person; BPS+OM is another person o When is the LO in GF here?

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He is not aware that someone has B/P/S in his property. When is the BPS in GF here? He doesnt know he is not the owner of the land. (So he has to own land in the same area also, to think the LOs land was his.) This is why most cases involving this involves only portions or property and boundary disputes. In all likelihood, there is going to be accession here, unlike in scenario 2 since here, he builds, plants, or sows. But if it can be removed without damage, just allow removal. If both are in GF, what happens? 1. LO can acquire what was built, planted, or sown, but pay indemnity. This option is always present. Building o If necessary improvement Measure of indemnity: actual costs. o If useful improvement Measure of indemnity: actual costs or plus value (amount of increase of value in land). o If luxurious improvement Measure of indemnity: value at the time you enter into possession. (Strange rule because it gives the LO option to acquire the property or not. But it would have to stay in the property regardless, because there is accession.) 2. LO can compel the BPS to purchase the land. NOTE: you can only exercise this option when the value of the land is not

considerably [key word] higher than what is planted or built. (Depra v. Dumlao) 3. Alternative: Can ask for rentals instead. Value agree on a lease contract, or if they cannot, court decides. When the lease period is done, cannot compel to renew. If he cannot pay the rentals, then you can eject him. BPSs rights: 1. Receive indemnity 2. If there has been no indemnity given yet, there is right of retention and no need to pay rents. o N.B. there is right of retention if there is GF When is there right of removal by the LO against a BPS, if both are in GF? Note that this is NOT a principal remedy. It is subsidiary: you have to choose option #2, and then the BPS is unable to pay the purchase value of the land. If the LO is in GF, and the BPS is in BF? NOTE: EVEN IF what was built, planted, or sown can be removed without damage, BPS cannot remove what he built, planed, or sown. 1. LO can acquire what was built, planted, or sown, BUT with different rules. The only time he must pay indemnity is for NECESSARY improvements. MWSS case: for USEFUL expense can acquire without indemnity. LUXURIOUS improvements LO will pay, if he wants it. If LO doesnt want it, he doesnt have to take it. Problem is, of course, its going to be attached so LO really gets it free of charge.

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2. LO can always compel the BPS to purchase the land, regardless of valuation. For sower in BF cannot be compelled to purchase the land, whether in GF or in BF. Sower only pays rent. If in GF, just rentals. If in BF, rentals and payment of damages. 3. LO can demolish/remove what was built or planted. This is now a principal remedy in this case. Recall: this is just subsidiary if both are in GF, after BPS cannot pay purchase price of land. BPS: If LO takes first option: o Is entitled to indemnification ONLY for necessary expenses. o BPS also has no right of retention, even if not paid. If LO takes second option: o BPS must purchase it. If he doesnt pay, LO may sue. Sulo ng Nayon v. Nayong Filipino: rights of parties in this case not governed by these NCC rules. Instead, the rights are governed by the lease agreement existing between the two entities. The lease is an acknowledgement of the rights of the parties; thus, a lessee neither a builder in GF or BF. He is just a lessee, governed by the laws on lease. If the LO is in BF, and the BPS is in GF? First, ask the BPS in GF what he wants to do. He has first dibs. BPS can: 1. Ask for removal. It doesnt matter whether it causes damage or not. 2. If he doesnt want to remove it, the ball passes to the LO, who has the following choice [just one valid] LOs choice:

1. LO must acquire it, with indemnity plus damages. 2. N/A. NOTE: cannot compel the BPS to purchase the land 3. N/A. NOTE: cannot compel the BPS to remove what was built or planted. BPS here cannot compel the LO to sell him the land. It is just an option available to the LO. o If they are both BF? Then both are in GF. 4. Three persons: LO, BPS, and OM o When is the LO in GF? If he did not know that some BPSed in his land. o When is the BPS in GF? He thought he owned the land. o When is the OM in GF? He did not know someone used his materials. o As a general rule, the claims are: OM, as against the BPS BPS, as against the LO o First thing to consider: Is there accession? The BPS can remove if there is no damage to materials AND the LO did not choose to buy what was built, planted, or sown. o What if they are all in GF? Primary option belongs to the LO. 1. LO can acquire was has been built, planted, or sown with payment of indemnity including for materials (to the OM). 2. LO can sell the land, as long as not considerably more valuable. Etc. NOTE: These are the same rules as scenario 3. BPS: IF LO chooses to acquire the thing, BPS has no right to remove the thing. OM LO chooses OPTION #1:

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Principal remedy is against the BPS, since he took your materials. o Subsidiary remedy is against the LO if the BPS is insolvent. (Basis: material rent lien because in this case, the LO received what was built or planted) LO chooses OPTION #2: o OM can choose to remove the thing if there is no damage suffered. o If there is damage suffered Remedy is against the BPS. There is no subsidiary remedy against LO. For the scenarios in BF, Just apply the rules in scenarios #2 and #3.

Can sell land (if not considerably more expensive)

BPS pays for land. Becomes new owner of the land and what was built or planted

No right of retention in case of non-payment Right of removal comes in (if it wouldnt cause any damage only, since both in GF). No subsidiary liability of LO.

Illustration of LO, BPS, OM; OM in BF: LO Can acquire BPS (pay indemnity for materials + labor) BPS Until payment, has right of retention; Pays OM for cost of materials OM (in BF) Loses everything. Not even subsidiary action against LO.

Illustration of LO, BPS, OM all in GF: LO Can acquire BPS (pay indemnity for materials + labor) BPS Until payment, has right of retention; Pays OM for cost of materials OM Cannot remove what was built/planted, regardless of whether there would be damage of not. Right to receive payment from BPS. If BPS is insolvent, can subsidiarily go after LO. [In latter scenario, LO in effect pays twice for the same materials] Can sell land (if not considerably more expensive)

BPS pays for land. Becomes new owner of the land and what was built or planted

Loses everything

Illustration of LO, BPS, OM; BPS and OM both in BF: LO Can acquire BPS. No indemnity, except for necessary improvements. BPS (in BF) Receive payment only for necessary improvements. No right of retention. OM (in BF) Entitled to receive indemnity from BPS, who used his materials. [Since both in BF becomes in GF as

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regards BPS] But no right to subsidiarily go against LO [since LO in GF] Can sell land regardless. Pays for land. Can exercise right of removal only when it does not cause damage. [Since both OM and BPS in BF becomes in GF]

There is LO-gf, and BPS-gf. LO-gf filed an action to recover the lot, including the portion upon which the BPS-gf built his house. The Trial Court ordered the BPS-gf to vacate and pay monthly rental until the time they vacate. Correct? o NO. First since, both are in GF, look at the options of the LO. Since the LO doesnt want to buy the house, it looks as if the LO chose option 2. o The TC mistakenly ordered the BPS to pay monthly rental, because being in GF, he has the right of retention until the LO pays for the value of the expenses incurred by the BPS.

Alluvium Alluvium is gradual deposit. Four things to remember: o 1. Gradual deposit of SOIL o 2. Must deposit in banks of rivers (and maybe lakes and creeks, since they empty into a larger body of water too) Not applicable to seas, etc. since these are public property For banks of inland waters (like lagoons), do not apply alluvium o 3. Deposit must be done on basis of natural current of the river Meaning, not man-made o 4. Right of ownership belongs to the riparian owner No need to report, ask permission, etc. By provision of law, the gradual deposit becomes yours, automatically. Does this mean you are protected in this additional area? o No. Any land in the additional area is unprotected. o So better if you subject it to the Torrens system, or else you can lose it through acquisitive prescription. o Even if the land receiving the alluvion is registered, the new land is not yet. So it can be acquired by prescription by other people. (Grande v. CA)

When does subsidiary liability of LO occur? o Three requisites: 1) LO chose to acquire what was built or planted 2) BPS is insolvent [not mere refusal to pay] 3) OM is in good faith What is the basic rule on BPS liability in favor of LO? o BPS is always liable in favor of the LO, if the LO is in GF. o [Or both BPS and LO are in BF becomes GF] When is there right of removal? o Only enforceable against BPS, by the OM. So the LO has to always choose option 1. o The only modification: whether BPS is in GF or BF If in GF must not cause damage If in BF regardless What are the remedies of the LO-gf if the chooses to compel the BPS-gf to buy the land, and the BPS-gf fails to pay? o 1. Leave things as they are and assume lessor-lessee relation (Miranda v. Fadullan) o 2. LO entitled to have improvement removed when the BPS-gf fails to pay (Ignacio v. Hilario) o 3. Sale of land and improvement in public auction, applying proceeds to payment of value of land first to LO-gf, and the excess delivered to BPS-gf

Avulsion

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This is abrupt. The transfer of a perceptible piece of land caused by the current of the river, but involving a VIOLENT and SUDDEN action of the water. Prescription: two years to remove o Or for uprooted trees carried by the current to another land: six months to remove What happens if you dont take it out after two years? o Dean Del thinks if you dont remove it after two years, its gone. Its not yours anymore. o It belongs to the person to whom that property is incorporated into o BUT some commentators dont think it will belong to the person What about trees? o If trees were uprooted and transferred to the other side, they do not become trees. They are just logs. o Six months to remove

If the new area is smaller or bigger than the land lost, it doesnt make a difference. The law doesnt qualify.

Formation of islands How are islands formed? o When the water goes to a lower level What is the rule? o If in the seas or navigable rivers, they become part of public property. o If not in seas or navigable rivers, then the island belongs to the nearest riparian owner near the island. Ex. A and B on opposite river banks, are riparian owners. If the island appears on the left side, it goes to A. If on the right, to B. If in the middle, split equidistantly

Accession in movable properties N.B. Just one set of rules

Change of river course Anything beneath the river is public property. So by default, when a river bed dries up, its public land. The change in river course provision is an exception. Example, a river goes through As property. But it changed course to Bs and Cs properties. What happens? o B and C, the ones who lost property, own the new dry land due to the change of course. o In proportion to the land lost (ex. 2 meters of water for B, 4 meters for C, so 1:2 ratio for B and C on the new dry land) What is As right? o He can choose to acquire the new dry land. Pay B and C what is due, in proper proportion. The government may choose to redirect the water. Under the Water Code: the owners of the affected lands may undertake to return the river/stream to its old bed at their own expense; but they have to secure a permit from DPWH, and they must commence works within 2 years of the change in course

1. Adjunction Ex. The table and the varnish Form one single object cannot distinguish one from the other. The two objects must belong to different owners Who owns the single object? o If you can separate them without injury (close to impossible) then just return o If it cannot be separated without damage the accessory follows the principal How do you know why is the principal, which is the accessory? o First test: What property is attached to what? o Second test: What is more valuable? Only apply this if you cannot determine which is attached to what o Third test: Based on volume

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Only apply this if values are the same or you cannot determine what is more valuable. In a diamond ring, which is the accessory and which is the principal? o The band is the principal, the diamond is the accessory. This is notwithstanding relative values. But if the accessory is worth much more than the principal, owner of the accessory can ask for separation, but he has to pay for the value of the principal since there would be damage caused. o Ex. Diamond ring For art, and similar materials which employ skill: o DIFFERENT rule. o The work of art or intellect is the principal. The canvass or medium is the accessory. If one of the parties is in bad faith, how do the rules change? o If the owner of the accessory is in BF, the owner of the accessory simply loses his accessory without remuneration, and he is liable for damages. o If the owner of the principal is in BF, the owner of the A has two choices: 1. Demand return of the accessory whether there is damage or not 2. Demand value of accessory, plus damages Measure of indemnity: o Of same kind and quality, or give cash equivalent based on valuation. Mixture The two properties must lose their respective identities, so you cannot determine which is which. Ex. Two piles of rice get mixed together. You cannot determine who owns which grain. Two types of mixture: o 1. Commixtion If solids are mixed o 2. Confusion if liquids are mixed What is the rule on mixture? o 1. If the mixture occurred with the will of each owner:

There is a co-ownership on the basis of the agreement. They agree on the sharing. If there is none, determine by proportion of contribution. 2. If not by the will of parties, but by chance: Pro-rata sharing by both Determine proportionate share based on VALUE, and not anything else 3. If only one owner was the cause of the mixture determine if in GF or BF: In GF (thought other sack of rice was his): apply same rule on co-ownership by chance In BF: he loses whatever is his share in the mixture, and he can be required to pay damages

3.

2.

Specification There is a thing, and it is turned into a finished product through the labor of another (Labor of one + material of another) The labor is ALWAYS the principal, and the material, the accessory regardless of value What is the rule? o Determine whether the worker is in GF or BF. o If in GF, he gets the appropriate the thing, but indemnify the other guy for the cost of the materials o If the worker is in BF, the owner of the materials can simply get his stuff, and charge the worker with damages Exception: work of art or scientific work the worker can appropriate the whole thing: But if with BF pay damages + value of materials But if with GF no damages

Quieting of title Requisites for quieting? o 1. Plaintiff has legal or equitable title, or interest in the real property

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2. There is cloud on such title 3. Cloud is due some instrument, record, claim, encumbrance, or proceeding which is apparently valid or effective but is actually invalid, ineffective, voidable, unenforceable, and prejudicial to plaintiffs title o 4. Plaintiff must return to defendant all benefits he received from latter or reimburse defendant for expenses that benefited plaintiff Are tax declarations conclusive evidence of ownership? o No. Its just an indicia of possession in concept of an owner at best, but its not considered as title to property per se. What is the prescriptive period? o If one possesses the property, there is no prescription. Can it be filed against physical intruders? o No. It must be against an instrument, record, claim, encumbrance, proceeding

o o

Co-ownership What are the elements of co-ownership? o 1. Two or more owners o 2. Unity of object o 3. Recognition that there is a co-ownership If I say this part is yours, this part is mine, etc. is it a coownership? o No. Because there has to be undivided, aliquot shares. How is co-ownership created? o 1. By law Ex. Party walls, etc. o 2. By succession Ex. Co-heirs before there is actual partition o 3. By agreement of the parties o 4. By chance Ex. Mixture by chance o 5. By occupation Ex. Getting a wild pig together Distinguish partnership from co-ownership.

You cannot register a co-ownership as having separate juridical personality. o Co-ownership can be created by various ways (above), while partnership must be based on agreement (since it is based on fiduciary relationship, trust, confidence) What is the right of a co-owner over the entire property? o A co-owner has borderless rights; one can use the entire thing. So an owner of one third of a table can use the whole table. What are the limitations on the right to use the thing owned in common? o 1. It must be according to the purpose for which it was intended o 2. It must not injure the interest of the co-ownership o 3. It must not prevent other co-owners from using it according to their rights Does he have right to possession? o Yes, over the whole thing. o You cannot prevent other co-owners from using the thing. o One co-owner can file for a suit for ejectment, no need to bring in the others. If he wins the ejectment suit, it will benefit the other co-owners. If he loses the ejectment suit, what happens? This is a point of contention among authors. Can a co-owner sell the entire property? o No, not without the consent of other co-owners. o But if one does, the sale is only over the undivided share of the co-owner What is ones right over ones aliquot share? o As far as ones share is concerned, this is aliquot so there is no specific possession. One talks about RIGHTS. You are an absolute owner of that right; you can sell or transfer it without the others consent. o The buyer will stand in the same shoes as you did before the disposition. Do the co-owners have a right of first refusal?

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No. They do not have right of first refusal or preemptive right to purchase ones share, under law. o N.B. Of course if there is an agreement otherwise, respect that. What is the right of redemption? o Co-owners have right to redeem. o Upon receipt of notice of sale. o Ratio: the law does not like co-ownership. As long as there is a means to constrict co-ownership, the law favors that. Redemption brings the thing back to the original co-owners; thus there will be fewer co-owners. How do you exercise this right? o Provided the buyer is a third person (not one of the original coowners) o Within 30 days from notice of sale o Can repurchase the thing from the buyer pay amount that was paid by the purchaser o But if one paid a value grossly excessive, pay reasonable price as determined by courts Is there any preference among the remaining co-owners as to who can exercise of redemption? o Ex. There are 5 of us, 1 sold his 1/5 share. How do you divide this? o Take the proportion among the remaining co-owners. So if the other four have equal shares, each can purchase 1/20 of the th 1/5 share. o If one does not exercise example, only 3 want to exercise his right, what happens the other 1/20? The 1/20 is divided into 3. It becomes 1/60. What if one of the co-owners advances the share of the others to the purchaser does he gain interest over the whole redeemed thing? o No. He acquires only his own share, and he has right to get reimbursement from the others. o If the others dont pay their share, the shares still do not go to the one person he can attach over their properties: Properties And even the pro rata share over the co-ownership

Cabales case was a minor at time of sale. He became of age, the court told him he had 30 days to exercise right of redemption. How do you determine ones pro rata share in the co-ownership? o Respective interest in the property how much the person actually contributed o Can you agree over the proportionate interest of each? Or should you fix it to the amount of contribution? Yes, you can agree over the proportionate interest; it need not correspond to amount of contribution. Ex. A gave 1M, B gave 2M, C gave 3M. They can all own the thing by 1/3. If there is no agreement, it is pro rata (1/6, 1/3, 1/2) o But with respect to income and expenses, can the parties stipulate? Nope. The law renders it void. o So you can agree on the proportionate interest, but you cannot stipulate on the share on income and expenses, which must follow the proportionate interest. Property must be used for the purpose that it is intended for. For an act of alteration, what is the rule? o To change the purpose of the thing, there must be unanimous consent of the co-owners. o Same with sale, mortgage, or another act tantamount to alteration o What is the rule on lease? If it is either recorded in the ROP or is more than one year: it is an act of ownership and requires unanimous consent. If neither: it is an act of administration and just requires a majority. A, B, C co-own a house and lot in equal shares. What is the status of the following acts? o A repaired the foundation of the house, which was tilting to one side Binding upon B and C. They must contribute 2/3 of the expense, since it is for preservation.

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B and C mortgaged the house and lot to secure a loan Will only bind Bs and Cs interest, so As 1/3 is not covered by the mortgage. o A built a concrete fence around the lot Not binding upon B and C since expenses to improve the thing must be decided by majority of the controlling interest. o C built a grotto in the garden Does not bind A and B, since it is for mere embellishment, and it was not decided by majority of the controlling interest. o A and C sold the land to X The sale does not bind Bs 1/3 share of the property. B can redeem the 2/3 share sold by A and C to X, since X is a third person. Distinguish: o Preservation: may be at the will of any one co-owner; but he must notify other co-owners first as far as practicable o Administration: only with concurrence of majority of coowners But they may designate one co-owner as administrator; the latter becomes an agent o Alteration: only with unanimous concurrence of the other coowners If you perform an act of ownership or administration, and you do not get the required number of votes, what happens? o Your act is considered not authorized, and the other co-owners can require you to undo what you have done. o The other co-owners can ask you to destroy what you have built, and you have to restore it in its original condition. What if a co-owner wants to make an improvement on the property but he cannot secure the majoritys consent, or if the majority resolution is seriously prejudicial? o At the instance of an interested co-owner, may petition the court to order measures it deems proper ex. Appointing an administrator If you want to get out of the co-ownership, what is the remedy? o 1. Sell your undivided share. o 2. Partition absolute right of any co-owner No need to give a reason o

It is a RIGHT by any co-owner The other co-owners can remain to be co-owners as to the remaining shares, after there was distribution to the outing co-owner of his share. Is there a way to prevent a co-owner from asking for partition? o A provision preventing partition until a certain time is valid. o Any prohibition for division including transfer good only for TEN YEARS o Can extend again, but for another 10 year period. In the intervals, those who want out can get out again. o N.B. For testators can stipulate a longer period (20 years) but this is not extendable o What is the exception provided in the FC? For family homes, there can be no partition of FH as long as there are still minor beneficiaries. What is the rule on party walls? o You cannot partition party-walls, and it will continue forever. Partitioning it would injure the building. So as long as someone is using it, it will persist. If partition would render the thing chop-chopped, what should one do? o Sell the entire thing, and then divide the proceeds among the co-owners. How does a co-ownership terminate? o 1. Consolidation of ownership in one co-owner o 2. Destruction of the thing o 3. Prescription in favor of a third person or a co-owner o 4. Partition How do you terminate the co-ownership? o Main way: by partition. As to the process of partition, see the ROC. There is judicial and extra-judicial partition. No need for a reason. You can ask anytime. o What happens about total partition? There is obligation of mutual accounting for the coowners. This is for the benefits and profits earned by the co-ownership.

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E.g. If one lot is divided into three equal parts (30 sqm. Each) A, B, and C, then A loses his part to a real owner with title, because it wasnt actually part of the co-ownership, he can receive 10 sqm. each from B and C. Same if A ends up with a ravine, as opposed to Bs and Cs flatlands. Same rule for proceeds (150K for B, 150K for C, 0K for A, but they agreed to equal sharing 50K each from the proceeds of Bs and Cs lands.) o Another way: prescription Requisites: 1. Repudiates the rights of other co-owners 2. Repudiation is brought to the knowledge of the other co-owners 3. Evidence is clear and conclusive that he may acquire exclusive ownership 4. After lapse of period fixed by law One co-owner sets up prescription against the other co-owners, claiming the property to be entirely his. You must have an act considered adverse to the coowners; you repudiate the co-ownership through overt acts or express communication to the other coowners. From the time of repudiation, count the period necessary provided for by law for acquisitive prescription. If completed without protest by the others, a co-owner can acquire the entire property. If you expressly start in co-ownership and you repudiate it after, then you are surely in BF, so you have to follow the 30 year period. Spouses H and W mortgaged their house to a bank. They failed to pay, so the bank foreclosed the property. They died and left behind 3 heirs. One of the heirs redeemed the property within the one year period for redemption. Is she the sole owner or a coowner? o Co-owner with her co-heirs. Redemption by one would benefit the others.

What should the heir do to receive sole ownership? o Wait for redemption period to expire, and then wait for the mortgagee/purchaser to consolidate his title, and a new title is issued in the mortgagee/purchasers name. Then the heir can offer to purchase the property from the mortgagee.

Condominium Act There is an aspect of co-ownership in the Condo Act. Art. 490 is the predecessor of the Condo Act: o Building with several stories, and with different owners. There are common areas, too. o You only share on the expenses of the stairs that you actually nd use. So GF person spends nothing on stairs. 2 F person and up spend on the first floor stairs. And so on. Two things in condominium system: o 1. Interest in separate and independent unit (inside inner wall) you get a CCT (Condominium Certificate of Title) o 2. Interest in the common areas (elevator, lobby, gym, etc.) N.B. there is constitutional restriction on ownership of land (not the building). But the land is always part of the common area, since it is constructed on the land. Two options in so far as ownership of common areas: o 1. Direct ownership unit owners own the common area in common (1 unit, and there are 20, you own 1/20 of the common areas, including the lot) o 2. Indirect ownership Condominium corporation, and the unit owner owns shares in proportion to the number of units owned (see below) How do you get around the restriction on land? o Condominium Corporation: it is a corporate entity. As long as 60% of the ownership is for Filipinos, then the condominium corporation can own land. o Transfer of this land to the Condominium Corporation is not subject to transfer taxes (tax incentive) Can you build a condominium on leased land? o Not many are built on leased land, but actually, in this case, there are no ownership restrictions unlike if the land is owned.

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But this is not marketable; some people think that when the lease expires, there would be no security. How do you register a condominium project? o 1. Master deed Indicates how many units, how big each is, etc. Because in the Condo Act, 1 unit = 1 share/vote regardless of the size of unit The master deed changes this, usually: a studio gets 1 vote, two bedroom condominiums get 2 votes, penthouses get 3 votes, etc. o 2. Deed of restrictions o Most of these documents are drawn up by the developers before the building has been constructed. Its hard to physical partition for common areas. So the only way you can partition is to sell the entire project (the whole building, including your units), because there is no one who will just buy the common areas. How do you partition if there is direct co-ownership? o If DIRECT co-ownership: It is not like ordinary co-ownership where a partition can be for no reason. There has to be a ground under Sec. 8 of the Condominium Act. (ex. Destruction or damage for period of three years; 50% damage or injury and more than 30% are opposed to repairing the building, etc.) o If owned by a CONDOMINIUM CORP: Unlike Corp. Code where 2/3 vote would lead to dissolution regardless. But here, you need any of the grounds in Sec. 13 (similar to grounds in Sec. 8). So its vote + reason for partition. Another difference with other corporations, where there is a 50 year maximum life span; condominium corporations have no life span and will exist as long as the project exists What are these grounds under Sec. 8? o 1. 3 years after damage or destruction to projects which makes a material part unfit for use, and not repaired o 2. Damage to at least 50% of units and more than 30% interest ownership of common areas are opposed to repair

3. Existing more than 50 years, or obsolete/uneconomic and more than 50% interest in the common areas are opposed to renovation 4. Material part of the condominium was expropriated and the project is no longer viable Or more than 70% of the interest are opposed to continuation of the project after expropriation 5. Conditions for partition by sale in the deed of restrictions have been met

Water Code Waters are owned by the State (waters in their natural state not commodity water) Right to appropriate water based on beneficial use o You have to ask for a water permit before you can draw water from these natural sources of water (if commercial), not small drawings of water For those who want to bathe/swim in the waters

POSSESSION Requisites of possession: o 1) modes of possession o 2) intention to possess o 3) own rights How do you determine GF/BF? o GF: 1. Possessor acquired thing through title or mode of acquisition 2. There is a flaw or defect in the title or mode, 3. He is not aware of it o BF: 1. Same 2. Same 3. He is aware of it

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When does possession cease to be in GF? When facts exist which show that the possessor is aware that he possesses the thing wrongly Else, from the moment possessor receives judicial summons to appear in trial What are the modes of possession? o 1) Actual possession o 2) Symbolic delivery Ex. Giving someone a key to a car its symbolic possession of the thing the key pertains to Ex. Pointing to a property and saying that is yours o 3) Constructive delivery On the basis of execution of legal formalities What does intention to possess mean? o Subjective element What does own rights mean? o Excludes those who possess something on behalf of other people (so the principal is actually the one in possession of the thing possessed). Example: Agent Guardian Attorney-in-fact Etc. o An agents possession could never ripen into ownership, unless ratified by the principal What are the kinds of possession? o 1) Possession with no title Has no legal right at all. Ex. Squatter Ex. Your phone was stolen by a thief. You took efforts to get it back. After a week you gave up. Does the thief gain legal possession of the property? The property becomes res nullius, because it has been abandoned. Thus, occupation is the mode of acquiring ownership.

Contrast: this cannot ripen into ownership through acquisitive prescription because he is not considered to be in legal possession of a property, because the law does not consider him as such. Possession acquired through violence can never ripen into ownership. o 2) Possession with juridical title You recognize that ownership belongs to another person, but has turned over possession to you Ex. A lessee Generally, this does not and cannot ripen into ownership. Exception: repudiation of juridical title may lead into acquisition of the property Can fall under #3 under extraordinary acquisitive prescription (always BF) o 3) Possession with a just title Titulo colorado Possession acquired through just title but there a flaw in the title Ex. The transferor has no right to transfer Basis of just title: there is a mode of acquisition Ex. Tradition (through sale), donation, succession Can ripen into full ownership through acquisitive prescription o 4) possession with just title and there is no flaw Titulo verdadero y valido In the concept of an owner, just like #3, but in this case, he really is the owner In case of conflict between 2 persons regarding possession of a certain property, who shall be preferred? o As a general rule, there can be no simultaneous possession of more than 2 distinct personalities, except for co-possession (see below) o Rules:

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1. Present possessor prevails 2. If both are present, longer possession 3. If same length, one with a title 4. If all are equal, place the thing in judicial deposit pending determination by court What kind of possession can serve as title for acquiring dominion? o ONLY possession acquired and enjoyed in the concept of an owner. Must be Titulo verdadero y valido. o BUT its possible that one acquires possession by some recognized mode, but from a person who could not transfer right of ownership Tet he can still become an absolute owner, if he proves acquisitive prescription, whether ordinary or extraordinary. The title here can be Titulo Colorado. Acquisitive prescription must it be only your own possession that could lead to this? o No. There is principle of tacking. Those that came before the person claiming possession. o You have to trace your title directly to those preceding you. There must be someone before you and you can point at the relationship of the predecessor with you (there must be privity of title) o If all the possessors are in possession of such character (ex. BF), just add all of the years together to figure out how many years are left Ex. A = 3 years, B = 3 years, C = 3 years 21 years left o Once the line is broken, you have to start counting again. o On issue of ratio: you cannot take credit for BF possession preceding yours. No credit, no tacking, no ratio. While Paras says you can use ratio (ex. Credit 1 year of possession for 3 years of BF possession), Dean Del Castillo disagrees. If the preceding possession is in BF, your possession is already tainted.

Transfer of possession, once accepted, is seamless. You are deemed to have possessed it since death of decedent.

Rights of Legal Possessor: Peaceful and uninterrupted possession Is there such a thing as co-possession? o Yes. But in co-possession, you dont have rights of ownership. Can be no valid transfer of title, since there is a flaw. The difference with co-ownership is that in there, there is right of ownership. Can co-possession ripen to co-ownership? o YES. Same rules on acquisitive prescription will apply. How is co-possession credited? o If there is partition, before ownership is acquired, the copossessors can take credit for the years of possession before partition, in counting acquisitive prescription, o It is possible that one co-possessor is possessor in BF, and one co-possessor is possessor in GF. Each of you will have to take your own character of possession. If you have 3 years of co-possession, and you are in BF, and other is GF, then the BF doesnt affect period or number of years of GF copossessors. When is there interruption of possession? o Two kinds: natural interruption and legal interruption o How long should natural interruption be before you say that acquisitive prescription is lost? 1 year. If gone for 6 months, but you came back and redeemed possession, you are deemed never to have lost possession. 6 months will be counted in favor of acquisitive period. o In legal interruption, there are judicial summons against you. How do you lose possession of property, aside from interruption? o 1. Absolute loss or destruction o 2. Assignment o 3. Abandonment o 4. Possession by another Actions in case of deprivation of possession of immovable property: o 1. Forcible entry/unlawful detainer within 1 year from cause of action

Inheritance If repudiated, deemed to have never possessed it in the first place.

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Within 10 days from filing this complaint, may secure preliminary mandatory injunction to restore possession o 2. Accion publiciana within 10 years after possession was lost Plenary action to recover possession of property o 3. Accion reivindicatoria within 10 or 30 years, as the case may be Action to recover possession based on ownership of the property Action in case of deprivation of possession of movable property: o Action for replevin

Right of a dispossessed possessor over fruits A. Civil fruits o What are civil fruits? Rents, profits, and other forms of compensation for use of property during time when you were in possession o When can you keep the civil fruits of the property you possess? As long as you are in good faith, you can keep the fruits and there is no need to pay rentals for possession o What happens when GF is lost? Once good faith is lost, you have to give the fruits after that to the owner, and you have to pay rent. o What is the effect of a legal interruption? If legal interruption, you have to allocate time when you received summons and were still in GF. After summons, you have to turn over fruits and pay rent. B. Natural and Industrial Fruits o A. Pending fruits What about pending fruits? Pending fruits are those that have not been gathered, and are still standing in the property. What if the possessor is in good faith? Either: o 1. Allow prior possessor to cultivate the fruits. If the prior possessor

refuses this concession, he loses all indemnity o 2. Share the fruits based on period of possession (possession of cultivator is not from the time he actually took possession, but from time of pending fruits). What if the possessor is in bad faith? Only entitled to be reimbursed for necessary expenses. B. Gathered fruits What if the possessor is in good faith? Entitled to gathered fruits during possession. What if the possessor is in bad faith? Either: o 1. Deliver gathered fruits from time he lost good faith o 2. Reimburse the true owner for their value + interest He shall also reimburse the true owner for fruits the true owner could have received with exercise of due diligence. But he can deduct expenses he incurred in production, gathering, harvesting (necessary expenses)

Indemnity for expenses of a dispossessed possessor from the new possessor A. Necessary improvements o Rights of possessor in GF: 1. Right of reimbursement 2. Right of retention o Rights of possessor in BF: 1. Right of reimbursement only B. Useful improvements o Rights of possessor in GF: 1. Right of reimbursement Either actual amount of expenses, or Increase in value of the property 2. Right of retention 3. Limited right of removal There must be no damage caused

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And the new possessor must not have chosen to reimburse the prior possessor o Rights of the possessor in BF: None. C. Luxurious improvements o Rights of possessor in GF: Limited right of removal. o Rights of possessor in BF: Limited right of removal as well. D. For deterioration or loss o Rights of possessor in GF: No liability Unless due to fault or negligence after he had become a possessor in BF. o Rights of possessor in BF: Always liable, even if due to his fault or negligence, or fortuitous event

Special Rule re: movables Rules on acquisitive prescription: o Period for movable property is shorter What is the legal interruption for possession of movables? o Replevin suit What is the rule in natural interruption? o Even if you lose actual physical possession over it, you still possess it as long as it remains under your control. o As long as you havent abandoned the property, it is still subject to your control. What if it was misplaced? o You still have possession What if you were unlawfully deprived of the movable? o You still have possession but you have to recover the property o As long as you havent abandoned the property What is the rule on recovery of movables? o A. Possessor is in BF: The owner can recover it from him without any obligation whatsoever o B. Possessor is in GF: The owner cannot recover it because possession in GF is equivalent to title. Exceptions (where the true owner can still recover without obligation):

1. True owner lost the movable 2. True owner unlawfully deprived thereof Exception to the exceptions: When the present possessor acquired the movable in GF in a public sale. What is the remedy of the true owner in this situation? o Reimburse the possessor for the price paid for it What if the good was sold in a merchants store? Then the buyer acquires better rights than the true owner G lost his ring. After a few days, he found it in the possession of H who had loaned money to Z and received the ring as security, in GF. What are the relative rights of G and H? o Default rule: possession of movable in GF is already equivalent to title. o BUT in this case, G lost the ring. So he can still recover from H without obligation (first exception). o The exception to the exception does not apply because H received it as pledge, and not from purchase in a public sale. Besides, only the lawful owner can pledge a movable, so the pledge is void. A agreed to sell his car to B, and they registered it in the name of B. While waiting to get paid money in Bs sala, A never saw B or the papers again. B sold the car to C, who sold it to D, both in GF. Can A recover the car from D? o Yes, since A was unjustly deprived of his car. The usual common law rule that where two people (A and D here) would suffer from a fraud, the one whose acts enabled the fraud to be committed should suffer does not apply by mandate of Art. 559. o What if the car was bought in a public sale? The possessor is entitled to reimbursement o What if the car was bought from a merchants store? The possessor wins. As between a purchaser at a mechants store and a legitimate owner of the thing who lost it, the former wins (Art. 1505, NCC) When can the owner of a movable who has lost it or who has been unlawfully deprived thereof no longer recover the property? o 1. Prescription o 2. Possessor acquired thing from a person whose authority the owner is estopped from denying

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3. Possessor acquired the thing from a merchants store, fairs, markets, etc. o 4. Thing is a negotiable instrument and possessor is purchaser in GF and for value o 5. Possessor is owner of thing in accordance with finderskeepers principle (Art 719) What is the finders-keepers principle? o Where one finds a lost item, he must turn it over to the mayor. o After publication for 2 weeks of announcement of finding, and lapse of 6 months thereafter, the finder becomes the owner. N.B. If the real owner comes forward, the finder gets a reward of 1/10 the value of the thing o

Usufruct What is the nature of usufruct? o A person was given the right to use the property owned by another. o It is a real right. What is the most important aspect of usufruct? o The right of possession over property held in usufruct is not matter of legal necessity. What will make it usufruct, where you are entitled to, is the right to receive fruits. How is usufruct created? o 1. Voluntary act of owner not possessor. Possessor can lease, but not usufruct. o 2. Legal usufruct. But this is no more. If children, mere act of administration by parents. Husband now no longer owns properties of wife. What is the right of the one enjoying usufruct? o Usufruct has ABSOLUTE right over fruits of property. o Preservation of substance and form of thing: only if you have been granted possession of property in the first place. If not, you only really get the fruits. o Owner cannot control how usufruct uses the fruits. What can be the subject of usufruct? o There can be usufruct over movable, immovable properties, or even rights, but not personal rights o Differentiate usufruct and easement: Easement is only for immovable properties. What is the usufructuarys obligation? o Preserve the form and substance of the thing lent in usufruct.

Substance: no operation, except with consent of owner, that would prejudice the thing given Cannot appropriate the thing subject of usufruct o But can appropriate the fruits What are the exceptions? o 1. Can appropriate the thing Abnormal usufruct o 2. Can alter the form of the thing, leading to a slightly deteriorated form Quasi usufruct What is a abnormal usufruct? o For consumable things. So when returned, there is some or all of it consumed. o Instead, you have to pay the propertys value based on appraisal (for movable properties) If there was appraisal at the beginning, pay that. If there was no appraisal, replace with another object of same quality and quantity What is quasi usufruct? o For properties that easily depreciate Ex. Cars o You cannot really return the thing in the same form and substance. o Instead, you return the object itself. As long as its normal wear and tear, you have no other obligation to the owner. If a property has been encumbered, can it still be subject to usufruct? o Yes. The usufructuary does not compete with the mortgagee as far as fruits. There is no inconsistency. o If the mortgagor defaults in the principal obligation, what happens? The mortgagee can foreclose the property. This is his right. o If you are the usufructuary, how do you stop the foreclosure? Should you pay the obligation? No need; there is no legal obligation to pay for the principal obligation.

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His right to usufruct continues. It is a real right and can be enforced against any mortgagee. Can there be usufruct over pledged properties? o No. There is a conflict. o The pledgee is entitled to the fruits of a pledged property. The fruits stand as security as well for the obligation. o So you cannot give the fruits to a usufructuary. o N.B. I assume, same goes with antichresis What about a leased property? Can it be given in usufruct? (Ex. A leased to B, A gave usufructuary rights to C) o Yes. o Use and possession goes to the lessee. o The usufructuary need not have use and possession; all he needs to get are fruits. The usufructuary gets the rentals from that property. Requirements for usufruct? o Form is not a matter of validity, just a matter of convenience. o It is valid between the parties. o You want it to be in a public instrument, so that you can register it. o NOTE: a usufruct is always a real right, and will follow the property. A lease is only a real right if registered. Modes of extinguishing a usufruct? o 1. Death of usufructuary, unless contrary intent appears o 2. Expiration of period or fulfillment of resolutory condition o 3. Merger of usufruct and ownership in one person o 4. Renunciation of usufruct o 5. Total loss of the thing o 6. Termination of the right of the person constituting usufruct o 7. Prescription A sold a parcel of land to B. There were two buildings on the land. There was a condition that 1/3 of the rents of the two buildings should go to A. Subsequently, without Bs fault, the buildings were totally destroyed. Did this extinguish the obligation? o No. What was constituted was a usufruct. Rentals are not only due from buildings, but also the land. There can be no

building without land. So the loss was not a total loss that would extinguish the usufruct. o A is thus entitled to 1/3 of the land + materials thereon, as a temporary measure until the buildings are reconstituted. A owned a parcel of land and gave B usufructuary rights. The land was still empty then. After, A constructed commercial buildings on the lot. Is B entitled to the fruits from rentals of the buildings? o No. The usufruct was constituted on the land, not the buildings. o But since the construction diminished the rights of the usufruct over the land, he must be indemnified for the loss. In a case (Gaboya v. Cui), the owner was made to pay monthly rentals to the usufructuary.

Default provisions of usufruct The other provisions in the Code: are those that apply by default, in the absence of specific stipulations of the parties. If the property has pending fruits, when the contract of usufruct was entered into, to whom do these belong? o Growing fruits at the time usufructuary enters into the property: belong to the usufructuary o No indemnification At the time the usufruct terminates, what happens to the pending fruits? o Belongs to the owner o Owner pays indemnification for expenses to plant, cultivate, and other expenses for the fruits Gathered fruits? o Belong to the usufructuary. What is the nature of the usufructuarys possession? o Possession with juridical title Can the usufructuary grant possession to another person (ex. Lease)? o Yes. Here, it is mere possession that is transferred, the right of which the usufructuary possesses o What is the exception to this right?

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Caution juratoria - Giving possession to a person who has nothing What happens if the period of the lease is longer than the period of the usufruct? o Rentals after termination of the usufruct belong to the owner. o If the lease has become a real right, then the owner must respect 1. Leases longer than 1 year 2. Leases of property registered in the ROD Obligations of the usufructuary? o 1. Make an inventory of the property o 2. Give necessary security Exceptions to bond requirement? 1. No one will be injured by lack thereof 2. Donor has reserved usufruct of the property donated 3. Parents, who are usufructuaries of unemancipated childrens property, except when the parents contract a second marriage 4. Caucion juratoria Obligations of the usufructary during the usufruct? o 1. Take care of the property as a GFF o 2. Make ordinary repairs o 3. Inform owner for extraordinary repairs o 4. Pay annual charges, taxes, and liens over fruits N.B. if the taxes, charges, or liens are over the property itself, the owner is liable o 5. Notify owner of any act of a third person that may be prejudicial to right of ownership o 6. Pay expenses, costs, liabilities in suits with regard to usufruct Obligations upon termination of the usufruct? o 1. Deliver the thing to the owner o 2. Right to retention for taxes over property and extraordinary expenses, which must be reimbursed Rights over necessary, useful, and luxurious expenses?

o o

Necessary expenses: right to demand reimbursement Useful and luxurious: No reimbursement But may remove these if there is no damage to property caused N.B. TAKE NOTE! For BPS and for dispossessed possessor, useful expenses are usually reimbursed. Here they are not. May set-off these improvements against damage on the property

Easements What is the nature of an easement? o Also a real right. The right attaches to a specific property until the right is extinguished. Only difference from usufruct: it is something that attaches to personal property, while easement only applies to real property Further qualify: easement is applicable to land, buildings, tenements, and not other kinds of immovables o No easement over another easement, for instance, even if the easement is also a real property. Likewise, those by analogy: cannot receive easements. What is an easement? o It is an encumbrance over an immovable property, for the benefit of: o Another immovable property belonging to someone else (Real easement) o Or a person or community (Personal easement) Dominant estate is the one benefited. Is there any difference between easement and servitudes? o For purposes of the NCC, these are used interchangeably o Servitude used in common law (personal and real easements), and they only use easement only for real properties

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Distinguish between positive and negative easements: o Positive the servient estate is either obliged to allow someone to do something on his property, or to do it himself o Negative the servient estate is prohibited from doing something on his property which he could otherwise do o Give examples of positive easement. Right of way, because the servient estate is required to let other people pass through his property Tree with branch hanging out over neighbors property required to cut o Give examples of negative easement. Easement of light and view cannot block neighbors view Distinguish from continuous and discontinuous. o Discontinuous only used in intervals, and with intervention of man o Continuous constant, no need for intervention of man Apparent from non-apparent. o Non-apparent no external signs o Apparent made known and with external signs Why is the classification needed? o Positive/negative determines rights o Continuous/discontinuous and apparent/non-apparent determines how to acquire Prescription only applies to apparent continuous How to acquire easement? o Title Juridical act (there is a mode of acquiring ownership ex. Donation, succession, etc.) Or law o Prescription 10 years of use of servient estate Only covers apparent continuous easements E.g. Easement of right of way can never be acquired by prescription, because it is apparent, but discontinuous

Ex. On another note, easement over aqueducts can never be acquired by prescription even if it is A + C, by express provision of the Water Code. How to count prescription of A+C? 1. Positive: Count period from actual use 2. Negative: from notarial act will contain the prohibition. Not just sending a letter to a neighbor. You have to have a basis; that you are a dominant estate. X owned a piece of property, where there was a house on the southern portion overlooking the northern portion through doors and windows. X subdivided the property into two: the empty northern portion and the southern portion with the house. He sold it to Y and Z respectively. Y wanted to build a house on the northern property. Z said that it should be not less than 3 m from their boundary. Who wins? o Z wins. Under the NCC, when there is an apparent sign of easement between two properties maintained by the same owner and these are subsequently alienated to different owners and there is no intent to the contrary the new owners must respect the easement. o Apparent easement here is of light and view: demonstrated by the windows and doors overlooking the northern portion. o What are the requisites for this rule to apply? 1. Apparent sign of easement in two estates originally owned by one owner 2. The sign was established by the owner 3. One or both are alienated 4. The contrary was not provided in the deed of conveyance Title is there a specific form? o Under Statute of Frauds, any transaction over real right over immovable property must be put into writing E.g. if you acquire it through tradition, you have to put it into writing If not put into writing, it is unenforceable

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If granted on basis of donation: it must be a public writing (both donation and acceptance) and in writing Otherwise, it is void o If through succession, it must be through a will What is the meaning of permanence as a characteristic of easement? o General use: non-use will not extinguish easement o Although, non-user for ten years will also extinguish the right E.g. drainage you are required to have neighbors water pass by you. You see the water and block it. It is an act contrary to the easement. Non-use kicks in upon the blocking. Inseparability? o You cannot separate the easement from the immovable. When you sell property, and you do not inform the buyer about the registered encumbrance? o The encumbrance exists o But you are guilty for breach of warranty, and the buyer can sue you for not telling him about the encumbrance o When does registration of an estate without mention of the easement extinguish the voluntary easement? If the dominant estate is registered without annotation of the voluntary easement in its favor, it still exists If the servient estate is registered without annotation of the voluntary easement, the easement is extinguished Indivisibility o Increase in number of owners does not increase the burden on the servient estate. There is just one easement. o If servient estate partitioned or alienated, it still doesnt change anything. Rights of the Dominant Estate o To make all works necessary for the use and preservation of the servitude Obligations of the Dominant Estaete o 1. Cant alter the easement (only for the benefit of the movable originally contemplated)

N.B. Check the intent. If a railroad company was given right of way over several lots to transport sugar canes, check whether it is only sugar canes that can be transported, or if he can transport other goods or transport for other persons, etc. o 2. Cant make the easement more burdensome Villanueva v. Velasco it is the need of the dominant estate that determines the width of the easement Rights of the Servient Estate o To register the easement, even without permission from dominant estate If servient estate registers land without mentioning easement, the voluntary easement is extinguished. If dominant estate registers his land without mention of the easement, the easement still subsists. o Retains ownership of the portion where the easement is established and may use it in a manner not affecting exercise of the easement Obligations of the Servient Estate o Cannot impair in any manner the easement o But if the easement becomes very inconvenient to the owner of the servient estate, or prevents him to make important works, repairs, or improvements thereon, it may be changed at his expense He must provide another place or manner equally convenient How does an easement terminate? o 1. Merger in the same person of ownership of both dominant and servient estates o 2. Non-use for 10 years For discontinuous easements: count from last use For continuous easements: count from contrary act o 3. When either or both of the estates fall into condition that the easement cannot be used But it shall revive if the condition of either or both should again permit its use Except if prescription has set in o 4. Expiration of term or fulfillment of condition

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o o

5. Renunciation of owner of dominant estate 6. Redemption agreed upon both owners

Legal easements Not an exclusive list. There are other kinds. o Ex. Easements for aerial navigation 1. Easements relating to waters o What is the legal easement of drainage of waters? Lower estates are obliged to receive waters which naturally and without intervention of man descend from higher estates, as well as the stones/earth carried along The lower estate cannot construct works that impede the flow. The higher estate cannot construct works the increase the burden Water code governs To extent not covered by Water code, use Civil Code So lower estates still obliged to receive waters from higher estates; and higher estates cannot construct something to hasten down-flow of water Addition by Water Code: servient estate can block this flow, but must provide an alternative method of drainage o What is the legal easement of aqueduct? Any person who may wish to use upon his own estate any water which he can dispose has the right to make it flow through intervening estates He must indemnify the owners of those estates AND the owners of the estates where the waters may filter or descend What is the nature of this easement? Continuous and apparent Requisites?

1. Owner of dominant estate must prove he can dispose of the water and it is sufficient for the use for which it is intended 2. Show that the proposed right of way is the most convenient and lease onerous to others 3. Indemnify the owners of the servient estates 4. Secure a water right from the National Water Resource Council o IMPLICATION: cannot acquire aqueduct by prescription o Banks of rivers, etc. 3 m, etc. covered by Water code 2. Right of way o Most common right of way: road right of way o Requisites: 1. Dominant estate surrounded by other immovables and there is no adequate outlet to a public highway There must be NO outlet, not merely inconvenient 2. Payment of proper indemnity 3. Isolation not due to acts of dominant estate 4. Right of way claimed is at the point least prejudicial to the servient estate 5. Shortest distance to public highway o Generic rule: you have to pay indemnity to get road right of way You are not paying rentals, because you have a right of way It is a one-time indemnity o Exception: Isolation on account of sale/transfer or donation [N.B. the rules on sale and donation are inverse] If you are the buyer of the property and you property is in the middle, and is isolated. You are entitled to ask the vendor to give you a right of way. You do not have to pay for that.

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If the one that is isolated is the sellers property, he is also entitled to demand right of way. But he has to pay Donation: if you receive property through donation, you can demand for right of way, but you have to pay, because its too much to ask if you get it for free na nga, you burden the donor more pa. If its the donees property that surrounds the property of the donor, the donor can demand right of way and he doesnt have to pay indemnity. Can the width of the easement of right of way be changed? Yes, from time to time, to suit the sufficient needs of the dominant estate. For instance, when the dominant estate used to use a tricycle to pass through the road but changed to a jeep to suit the flourishing plant nursery business, it can acquire from the servient estate a bigger width. What is the measure of indemnity? 1. If easement is permanent and general value of land and damage caused Because here, youre practically taking it 2. If easement is limited and merely temporary just damage caused 3. No indemnity for the two above situations: Sale of land surrounded by other estates of vendor Donation of land surrounding other estates of the donor When can the servient estate demand that the right of way be extinguished? When the dominant estate joins with another, which has a right of way abutting a public road. In this case, the servient estate returns what he may have received by way of indemnity. The interest on the indemnity is deemed payment of rent for use of the easement.

3. Party walls o Rules on co-ownership can apply o The party wall itself is the servient estate, and the estates are dominant o You cannot open a window on a party-wall If someone does and the other does not object, you can acquire it after 10 years by prescription o Maam did not choose to discuss the dimensions, heights, etc. of windows in detail. 4. Light and view o How do you count prescription for acquisition of easement of light and view 1. From opening of a window, if through a party wall 2. From time of formal prohibition upon the adjoining estate, if window is through a wall of the dominant estate Through a notarial instrument o When is it positive? When negative? Positive open window through party wall or wall of adjoining tenement Negative open window through wall of dominant estate o What is the implication of failure to follow minimum distances? Cannot acquire by prescription Distances: 2 meters from other lot if direct view 60 cm from oblique view When the easement already exists, any other construction must be at least 3 meters away as to not block the view o X built a house adjoining the lot owned by Y. It had several windows overlooking Ys half a meter away from the boundary line. After 15 years, Y brought an action to close the window. Has X acquired the easement by prescription?

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No. There was no notarial prohibition, so no prescription can vest. Will the action of Y prosper? No. Because the action has prescribed after 10 years. Doesnt this mean X acquired the easement of light and view by prescription? No. Because Y can validly build something or raise a wall that block Xs view. 5. Drainage of buildings o What is the rule? Roof must be constructed in a way that the rainwater falls on his own land or street/public place NOT on the land of his neighbor o What is an easement on drainage of buildings? When rainwater cannot be collected in the required areas stated above, it can be made to pass through contiguous lands or tenements where egress may be easiest and it causes least damage to the servient estate 6. Trees extending over anothers property o Who owns the fruit on the trees? Still the owner of the tree But if the naturally fall on the other owners land, the other owner gets them o What is the right of the adjacent lots owner? Demand that branches extending over his property be cut off by the trees owner. CANNOT cut them off himself But for roots, he may

Nuisance What is a nuisance? o Any act, omission, establishment, business, condition of property, or anything which: o 1. Injures or endangers health/safety of others o 2. Annoys or offends the senses

3. Shocks, defies, or disregards decency or morality 4. Obstructs or interferes with free passage of any public highway or street, or body of water o 5. Hinders or impairs the use of property Classify nuisances: o Nuisance per se always a nuisance o Nuisance per accidens nuisance by circumstance o Public nuisance affects a considerable number of persons, even if the extent may be different 1. Criminal prosecution 2. Civil action 3. Extrajudicial abatement o Private nuisance only a person or small number of persons 1. Civil action 2. Extrajudicial abatement X has a small house where he sells shabu and other drugs. X was caught by the police. The police demolished the house for being a nuisance per se. Are they right? o No. It is not a nuisance per se because it is not a nuisance in itself and at all times it was just the venue for the illegal act. What are the requisites before there can be summary abatement of nuisance by a private person? o 1. Specially injurious to him o 2. Demand must first be made to owner/possessor, but was rejected o 3. Abatement approved by district health officer and executed with assistance of local police o 4. No breach of the peace or unnecessary injury is done o 5. Value of destruction not exceeding P3000 What is the doctrine of attractive nuisance? o A person who maintains in his premises a dangerous instrumentality of any character which is attractive to children of tender years at play and fails to exercise due diligence to prevent them from playing therewith o Even if the child is technically trespassing

o o

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Ex. a swimming pool per se is not an attractive nuisance but if there is an artificial condition or feature that will add another danger to children, it is an attractive nuisance

Modes of acquiring ownership How do you acquire property? o Occupation o Law o Donation o Tradition o Intellectual Creation o Prescription o Succession Sale is not a mode, it is tradition Mode: o Process of acquiring ownership o Mode does not need a corresponding title Title: o Juridical justification for a mode o Title needs a corresponding mode Original Mode not dependent on former owner o Occupation Seizing of the property physically Not owned by anyone or because there is a previous owner and has abandoned it You do not occupy land; you occupy corporeal things. Land is never without an owner the State owns it by default. Except if land was previously owned and it has been abandoned: this does not revert to the State. If intangible acquired by (1) intellectual creation, or (2) tradition Occupation of animals If the animal is wild a person becomes the owner upon capture. Occupation over domesticated animals, after 20 days, unless claim has been made.

Domesticated animals are those taken from the wild and then tamed. Occupation over domestic animals cannot be acquired by occupation unless they had been abandoned. Domestic means that they are never wild to begin with. o Intellectual creation o Acquisitive Prescription Possession + just title (acquired through mode of acquiring ownership) + 30 years So valid only if acquired through res nullius (in this case, its really occupation) Derivative Mode dependent on former owner or title of another person o Succession from whom you inherit o Donation from donor o Law o Tradition

Donation Requisites of donation: o 1. Decrease or reduction in the patrimony of the donor o 2. Increase of patrimony of the donee o 3. Animus donandi or intent to make a donation Classes of donation: o 1. Donations inter vivos Simple pure liberality Remunerative On account of services rendered by the donee, but not a demandable debt Conditional Imposes a charge or burden on the donee less than the thing given Onerous Given in consideration of demandable debt Actually governed by rules on contract

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2. Donations mortis causa Actually governed by rules on wills Distinguish between illegal and impossible conditions in a simple donation from illegal and impossible conditions in an onerous donation: o In simple donation, considered not written o In onerous donation, annul the donation (since governed by rules of contract) Distinguish between inter vivos and mortis causa donations: Mortis causa Takes effect upon death of donor Title or ownership conveyed only upon death of the transferor Void if transferor survives transferee Always revocable Comply with formalities on wills

Inter vivos Takes effect independently of donors death Title or ownership conveyed before death of transferor Valid if transferor survives transferee Generally irrevocable Comply with formalities on donations

A donation provides that it will take effect after the death of the donor, that the donor will not dispose of it or take it away from the donee, that he had beneficial ownership while he lived. Is it inter vivos or mortis causa? o Inter vivos, since the donor intended to part with ownership during his lifetime. Providing that the donor will not dispose of it or take it away means that the donation is irrevocable; thus, inter vivos. It is also clear that he parted with naked title, while maintaining beneficial ownership. What does a habendum clause and a reddendum clause signify? o Inter vivos. Habendum cause indicates a grant of the property before death of the donor, while the reddendum, in so far as it imposes a condition on how the donees should spend some of the income of the property and limits on how to dispose it

indicates that the donor parted with ownership of the land prior to his death. Property is donated in a deed named donation inter vivos. It said that the land donated shall be delivered immediately to X upon the perfection of the donation, with all the fruits thereof, but title shall only pass to the donee upon the donors death. What is this? o Mortis causa: the fact that no title or ownership is conveyed until the death of the transferor controls. Capacity of donor and donee: o Donor: 1. Must have capacity to enter into contracts 2. Must be able to dispose of property 3. Must not be prohibited or disqualified by law from making the donation o Donee: 1. Must not be prohibited or disqualified by law from accepting the donation A, from Manila, offered B, who lived in Cebu, in writing to donate his car. Two days after , Bs letter of acceptance reached A, but before it reached A, A has been confined in the psychiatric/mental ward. Is the donation binding? o No. The donors capacity is determined from the perfection of donation. A donation is perfected the moment the donor knows of the acceptance. Here, before he found out, he already lost capacity. Prohibited donations: o By reason of relationship 1. Between husband and wife, except moderate gifts in family rejoicing or distress 2. And those with amorous relationships, living together as husband and wife [here, there is no criminal act, unlike adultery/concubinage] o By reason of public policy 1. Parties guilty of adultery/concubinage at the time the donation is made Do they have to be convicted? No.

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If they have already parted, then it is valid. 2. Guilty of committing the same crime AND in consideration thereof You dont have to be both principals When must it be given? o It can be given before committing a crime (donation as the inducement) o It can be during or after (reward) Distinguish: for adultery/concubinage it cannot be after, and it must be in consideration of the relationship. Here, it can be after, but it must be in consideration of the crime. 3. Made to public officers, spouses, etc. by reason of his office 4. Those disqualified under wills apply as well: A. Priest who heard confession or minister who extended spiritual aid during last illness th B. The relatives within 4 degree of abovementioned person, or his church/sect C. Ward to guardian, before final accounting o Except if guardian is ascendant, descendant, or sibling D. Physician, or other health officer who took care of donor during last illness 5. Made by individuals, associations, corporations not permitted by law to do so Formalities of a donation: o A. MOVABLE Oral: Must have simultaneous delivery of thing Or simultaneous delivery of document representing the right Writing: If the propertys value exceeds P5K Acceptance must be in writing too o B. IMMOVABLE

Public document specifying the property + charges Acceptance must be: In same deed Or separate public document. Here, the donor must be notified in an authentic form, and the step noted in both instruments. o C. Special rules on form: Onerous donation ordinary contract Mortis causa donation formality of wills What is the effect of non-registration? Registration? Actual knowledge? o Non-registration, although the donation of immovable is in a public document only binds the parties thereto o Registration binds the whole world o Third party with actual knowledge bound by the donation between the parties, even if unregistered X wrote Y, donating in the letter a piece of land. Y accepted by means of public instrument. X died. His surviving son, B, wanted to cure the defect of the donation by executing a public instrument of ratification. Effect? o No effect. A void contract cannot be ratified. The contract is void because it was not in a public instrument. X donated land to Y in a public instrument. Y accepted in a separate public instrument. X died before the acceptance could be communicated to him. Valid? o No. The constancia autentica (notification of the donor in authentic form) is an essential formal requisite not complied with. The donation has no effect. X donated land to Y. Y accepted in a separate instrument, but did not communicate it formally to the donor. Y paid taxes over the land, since it was in the black list for non-payment of taxes. Was it an onerous donation? Was the donation valid? o It was a gratuitous donation, because payment of the taxes was not a condition/burden imposed upon Y. It was just a consequence of the donation. o Thus, since it was NOT an onerous donation, it must follow the formal requisites of a contract. The formal requisite of

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constancia autentica was not complied with; thus, the donation was invalid until communicated formally. Incapacity that would prevent a person from succeeding: o Testamentary Art. 1027 Applicable to testamentary succession, but not to donation: Witnesses to the will, because there are no witnesses required to a donation o Intestate unworthiness (Art. 1032) Limitations on donations: o 1. Donor must reserve sufficient means to support himself and all relatives, who at the time of the acceptance of the donation, are entitled to support Reduce upon petition of such persons o 2. Donations cannot comprehend future property Exception: donations propter nuptias in a marriage settlement o 3. No more than he may give or receive by will Reduce what is inofficious A donated all his property to a foundation bearing his name, ignoring claims of wife and children, except for a provision for their maintenance and education during their lifetime. Effects of this donation during As lifetime and after As death? o Valid during lifetime of A. The donee can appropriate all the fruits. o Once A dies, it is inofficious. It must be reduced to avoid impairing the heirs legitimes, upon petition. Is there a right of accretion in donation? o None, by default. o Exception: H and W jointly. When may a donation inter vivos be revoked? o 1. Supervening BAR o 2. Non-fulfillment of condition o 3. Acts of ingratitude o 4. Inofficious donations When may a donation inter vivos be reduced? o 1. Donor did not reserve sufficient means to support himself and relatives entitled to support

o 2. Supervening BAR o 3. Inofficious donations Revocation of donations: o As a general rule, these are irrevocable. These cover donations inter vivos. Donations mortis causa are really based on succession, so they are revocable. o 1. BAR for those with no descendants A. Birth B. Adoption C. Reappearance of child These apply to those who have made donations thinking they will not have successors, and these would affect their legitime. Subject to reduction or revocation. This ground does not consider the donation per se as revoked. It is only reduced to the extent that it is inofficious Determine the legitimate at that point in time (this is where presumptive legitime is first introduced in the NCC), then determine if what was given exceeded. What is the prescriptive period? Period of four years from birth, adoption, or filiation, or receipt of information re: missing child Cannot be renounced Transmissible to LCs, ICs, or descendants upon death of donor o 2. Ingratitude: 1. Donee commits an offense against person or property of donor, spouse, or children under parental authority 2. Imputation of a crime involving moral turpitude Is veracity of the claim a defense? No. The only time it is a defense, is if the crime is committed to the donee, his spouse, or children under parental authority. 3. When donee unduly refuses to support the donor when there is a legal or moral obligation

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Prescriptive period? One year from knowledge of the donor. It is purely personal and thus intransmissible to ones heirs. What are the exceptions to intransmissibility? o 1. Donor already brought action but died o 2. Donor prevented from filing action due to sickness, fortuitous event, etc. o 3. Donee killed the donor o 4. Donor died without knowing act of ingratitude o 5. Donor already instituted criminal proceedings but died before filing civil case for revocation 3. Inofficiousness of the donation When does this action accrue? This action ONLY arises when the donor dies Unlike supervening BAR which can be filed while donor is alive Only compulsory heirs and heirs/successors in interest may bring action The creditors may only bring about rescission if it was in fraud of them Prescription of four years is counted from the death of the donor. So even if he donated the inofficious donation in 1960, and he died in 1984, the heirs have up until 1988 to challenge the donation. 4. Non-compliance with a condition imposed This is a modal issue The donor has discretion Prescription? 4 years from non-compliance Also transmissible to heirs

X donated property to Y, with a condition. Y failed to comply. X sold the property to Z. Valid? No. He has to file a judicial action first within 4 years to revoke, unless there is an automatic revocation clause in the donation. Rule on fruits for these revoked donations? o Based on BAR donee entitled to fruits until filing of complaint o Based on non-fulfillment of condition donee must return the fruits which he may received after failing to fulfill the condition, along with the property o Based on inofficiousness donee entitled to fruits while the donor lives

SUCCESSION General provisions (774) A mode of acquiring ownership o It is not delivery (tradition) that vests ownership. Succession itself is the mode. You do not need delivery of the thing to the successors. o In due time, the successor acquires a right to possession of the thing, which may be in the hands of someone else. But this is an action of assertion/vindication of possession based on ownership. What is transferred? o The inheritance. o Inheritance is defined in 776 as the transmissible rights and obligations of a person o Are there intransmissible rights and obligations? Yes. 1. Purely personal; 2. Intransmissible by stipulation 3. Intransmissible by operation of law Are these conveyed by succession?

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No. What are examples? A purely personal obligation or right Ex. Right to receive support from ones parents Give an example of a transmissible obligation. X entered into a perfect contract to sell his car to Y, but it has not been consummated. X died. This transfers to his heirs. o Is a money debt a transmissible obligation? Yes. But is it transmitted directly to the heirs? No. It is paid by the estate, upon claim by the creditor. (Unionbank v. Santibanez) Does this not violate Article 774? No. Although the creditors do not claim directly from the heirs, the effect is the same what the heirs would have otherwise gotten is diminished, so they are indirectly and ultimately paying the debt. Does this provision on money claims affect other claims? No. They are still transmitted to the heirs. When does transmission take place? o (777) Transmission takes place from the moment of death o This is legal fiction, because you dont really physically get the inheritance at the moment of death. o Why is it proper to say the rights to succession vest instead of get transmitted? Because you already have that right, albeit inchoate. It only vests upon death of the predecessor. What are the consequences of Art. 777? o 1. Determination of who the heirs will be is determined at the moment of death; also, what law is in effect; what portions they will get, etc. Uson v. Del Rosario: Decedent died during effectivity of the old Civil Code, so the spurious

children are excluded (unlike in the NCC, where they would get something) o 2. Even before the actual partition of the estate, the heir can dispose can dispose of his/her interest over the inheritance. De Borja v. De Borja the heir was allowed to onerously dispose of her share even if she did not know how much exactly she would get. Could she have disposed of it gratuitously? Yes. o 3. Heirs have a right to substitute their predecessor in an action that survives. Bonilla v. Barcena Patrimonial right right to prosecute an action Updates on the abovementioned jurisprudence: o Lee v. RTC (423 SCRA 497) An heir can sell his right/interest in property under administration. However, an heir can only alienate such portion of the estate allotted to him in the division of estate. So he can only sell his ideal or undivided share in the estate, and not specific properties. o Liu v. Loi (405 SCRA 316) An heir can sell his interest in the decedents estate, but always subject to the rights of the creditors and the result of the partition. So if you end up having no share in the estate, then what you sold is subject to the creditors claim. o Heirs of Conti v. CA (300 SCRA 345) Reiterated Bonilla case: prior settlement of estate not necessary for heirs to commence action or continue action pertaining to the estate. o Heirs of Pinchay [?] v. Del Rosario Prevented from filing action because the plaintiffs have not established proof that they are the decedents heirs. How to resolve: you can continue an action if you are indisputably an heir. What are the three kinds of succession?

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1. Compulsory 2. Testamentary 3. Intestate In absence or default of valid will (781) is a WRONG provision. The heirs acquire rights to the inheritance upon death. Any fruits/accruals after will indeed belong to the heirs, but not through succession, but through accession discrete or continua. What is the importance of distinguishing between heirs and legatees/devisees? o This is an important distinction because of the rules on preterition. o Heirs succeeds to an aliquot part of the estate, whether through testate or intestate

o o o

COMPULSORY SUCCESSION Legitimes (886) Legitime o A part of the testators property An aliquot or fractional part o Which he cannot dispose of gratuitously Why is gratuitously underlined? Because he can dispose of it onerously. He cannot donate to an extent that will eat into the value of the legitime. But he can sell his properties. Onerous dispositions do not impair the legitime. (Joaquin v. CA) So he can gratuitously dispose? YES. But, he cannot eat into the legitime. Manongsong v. Estimo: Sale does not affect the value of the decedents estate. There is an exchange of value. Who are the compulsory heirs? (887) o 1. LC and descendants o 2. LPs and ascendants (in default of #1)

o 3. SS o 4. ICs Which are primary and which are secondary? o Primary those who are never excluded Legitimate children/descendants o Secondary those who receive only in default of the primary Legitimate parents/ascendants Illegitimate parents N.B. does not go beyond parents o Concurring compulsory heirs Surviving spouse Illegitimate children/descendants What are the two principles? o A) Exclusion and B) concurrence o These two principles simultaneously operate to establish combinations of compulsory heirs Legitimary combinations [recit] LC = ; IC = LC = LP = each; 3 IC = 1/12 each; SS = 1/8 IP = 1/8 each; SS = LC = 1/6 each; IC = 1/12 LC = ; SS = ; IC = 1/4 each, but reduced to 1/8 LC = 1/12; IC = 1/24 SS = 1/3; IC = 1/15 AC = ; SS =1/4; LP = 0 1 LGP (one line) = ; 2 LGP (other line) = 1/8; SS = IC = 1/3; SS =1/3 AC = each LC = 1/6 each; IC = 1/12 each; SS = 1/6 AC = each; SS =

1 LC, 1 IC 1 LC, 2 IP 3 IC, 2 LP, SS 2 IP; SS 2 AC; 1 LC; 1 IC 1 LC; 2 IC; SS 6 LC; 3 IC 5 IC; SS 1 AC; 2 LP; SS 3 LGP; SS 1 IC; SS 2 AC; 2 LP 3 LC; 2 IC; SS 2 AC; 1 LP; SS

Legitimate children or descendants

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Get a constant Note: There are only three cases where nobody gets : SS 1/3; IC 1/3 SS, exceptional circumstance of in articulo mortis 1/3 SS 1/4; IP 1/4 o They are the primary compulsory heir o The nearer exclude the more remote. So children exclude grandchildren. o BUT the grandchildren can inherit if representation is proper Predecease Disinheritance Incapacity/Unworthiness o N.B. If all the children renounce, then the grandchildren will all inherit equally (per capita) But if only a few renounce and not all, the remaining child/children will get what is left to the exclusion of the grandchildren o The adopted child is, for purposes of succession, in the exact position as a LC Must be legally, not de facto adopted o Does the adopted child retain the right to succeed his biological parents? This is still an open question. There is an obiter in the Stephanie Garcia case that the adopted child does, but it is a mere obiter, and it cites a Family Code provision that might have been repealed by the Domestic Adoption Act. Legitimate parents or ascendants o Nearer exclude more remote. Parents exclude grandparents. o Equal division by line. So paternal and maternal lines split by half then divide between the parents. Surviving spouse o Before, in the Spanish Code, she cannot concur with LC; she would only get usufructuary right over the property of the LC.

Now, she can concur, and is in fact always an heir. But her share is variable. o What kind of marriage is needed to become a SS? Valid or voidable o What is the effect of legal separation? Final decree will disqualify the guilty spouse from inheriting through compulsory, testamentary, or intestate succession. Unless there is reconciliation. Lapuz v. Eufemio: If pending a case for legal separation, one of the spouses dies, the action is automatically extinguished and there will be no LS. o What are the prerequisites to have the SS inherit only 1/3? 1. SS inherits alone 2. The marriage was in articulo mortis 3. Decedent dies within 3 months of the marriage 4. Couple did not live together for at least 5 years 5. The decedent was the one at the point of death upon marriage Illegitimate Children or descendants o No more distinction between natural and spurious children. o What if they concur with legitimate children? Always get of one LCs share Their share can be reduced pro rata if the shares exceed 1 whole. They are less preferred than SS and LC. o What if they do not concur with legitimate children? Variable shares. If with SS, then 1/3. If with IP, then . Alone, collectively. If with LP and SS, then . o What is the rule on representation? The illegitimate children of an illegitimate child can represent the latter. The illegitimate children of a legitimate child cannot represent the latter. Illegitimate Parents o Excluded by BOTH legitimate and illegitimate children. o No succession for illegitimate ascendants beyond IPs

Preterition (854)

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What is preterition? o Total omission of a compulsory heir in the direct line from the inheritance. o What is the mistake of the judge in Seangio? He said that it is total omission from the will. It must be total omission from the inheritance. When is a compulsory heir completely omitted? o When he gets nothing in the way of: 1. testamentary (institution of heir) disposition 2. legacy or devise 3. intestate succession 4. donation inter vivos Dont forget donation inter vivos! and he was not disinherited. Why does it mention compulsory heirs in the direct line? Who is a compulsory heir not in the direct line? o The surviving spouse. o So who is covered? It can be LC, IC, and as circumstances apply, LP or IP o How do you determine who are the compulsory heirs? Determine only at the time of death because that is only when the rights to succession vest. What if there is something is given but is insufficient? o Remedy is completion of legitime (906) What is the effect of preterition? o Annulment of the institution of heir. But legacies and devises are valid in so far as they are not inofficious. o If there are no legacies or devises, the entire estate is thrown open to intestacy. Does the fact that an heir is not mentioned in the will mean that he is preterited? o No, if the will does not dispose of the entire estate. (Seangio) If someone dies intestate, can there be preterition? o No. Does the fact that an heir is mentioned in the will mean he is not preterited?

o Not always! [ex. there was no disposition in his favor] X has two children, A and B. X made a will giving B of his estate, and the other half to Ateneo. X did not give A anything by way of donation inter vivos either. But A predeceased X. Is there preterition? o No. A predeceased. You only determine fact of preterition upon death of testator. (JLT Agro) [Same facts] A, however, had a son A1. A predeceased X still. Is there preterition? o Yes. But not of A, but of A1. o Does it matter than A1 was born after the will was made? It does not matter. The reckoning point is still time of death of the testator, not time of making the will. o What is the effect? The entire estate is thrown open to intestacy because there are no legacies or devises. X said I will disinherit my son B because he took up law, not medicine. Is this a valid disinheritance? o No. It is not one of the grounds. It is rendered ineffective, and therefore, there is no preterition. [Same facts] But the second sentence now says, in addition, so I give of my estate to Ateneo, and the other 1/2 to my brother Z. What happens here? o There was no preterition. So X will get his legitime because the disinheritance is ineffective. The dispositions in favor of Ateneo and Z are valid but inofficious, so these will just be reduced but not rendered invalid. [Take note of this scenario] o Why does it become like this? Because preterition will only apply when there is inadvertent omission from the will (without the heir being expressly disinherited). An ineffective disinheritance, thus only results into the heir being able to demand his rightful share. Preterition does not vest.

Disinheritance (915-923) What is the effect of disinheritance? o Primary effect exclusion from the legitime

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Actual effect TOTAL exclusion of the heir from all manner of succession: exclusion of the heir from the legitime and the intestate portion, if any, and also from testamentary succession is instituted in an earlier will. Requisites? o 1. Made in a will Can you disinherit in a medium other than a will? No. ONLY through a will. o 2. Done for a cause specified by law. o 3. Specify the cause o 4. Must be unconditional o 5. Must be total o 6. Cause must true o 7. If the truth of the cause is challenged, the truth of the cause must be proved by the proponent What is the policy of the law? It is reluctant to grant disinheritance. This is why the burden of proof is automatically with the proponent of the will. The rebutting heir is not tasked to prove the denial. Take note of the following: o 1. Some of the requisites require conviction by final judgment. Example: Number 1. Mere attempt to take the life is not enough; there must be conviction. But some do not need final conviction, like Maltreatment by word or deed Living a dishonorable life o 2. The grounds are exclusive. o [The grounds are discussed in a table below] Which grounds require conviction by final judgment? o 1. Attempt against life of testator, spouse, descendant, ascendant o 2. Adultery/concubinage with spouse of testator o 3. Conviction of crime which carries with it penalty of civil interdiction What is the special requirement for the ground of refusal to give support? o

There must have been a prior demand, and the demand must have been unjustifiably refused. What is maltreatment by word or deed? o It covers a wide range of misdeeds, but it must be verbal or physical assault of a serious nature o No need for conviction What is abandonment as a ground to disinherit a parent? o Complete withholding of presence, love, care, and opportunity to display maternal affection; total denial of support and maintenance o See discussion below in unworthiness Must there be conviction in Attempt against virtue? o No. What is giving cause for legal separation as ground to disinherit a spouse imply? o No need for decree of legal separation, because merely giving ground is enough o Contrast this with loss of parental authority as a ground to disinherit a parent: Need actual loss of parental authority for this ground Is there representation in disinheritance? o Yes, if the disinherited heir is a descendant. Also for brothers/sisters being represented by nephews/nieces but only in intestacy and not compulsory (because brothers/sisters are not compulsory heirs) o No, if the disinherited heir is an ascendant. o N.B. representation does not apply to testamentary succession (obviously). o What does representation cover? Compulsory and intestate succession See rules on representation for further distinction Does the disinherited parent have right to usufruct or administration of the property constituting the legitime? o No. The usual rule in the FC that the parents are legal guardians of the childs property does not apply to a disinherited parent.

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How can disinheritance be lifted? o Reconciliation between the parties. o It may be oral, in writing, or by conduct (implied). o What must be the form of express pardon? It must be a pardon expressly and concretely extended to the offender, and not a mere general pardon extended to all who have offended him o What is the nature of pardon through conduct? The intent to forgive must be clear. This is a question of fact. What is the effect of reconciliation? o It removes the disinheritance. o Does he recover legitime? Definitely. The heir recovers his right to the legitime. o Does he receive anything by intestate succession? He recovers the right to the intestate portion, if there is any left. o Does it revive testamentary dispositions in a prior will? Yes, unless it was revoked. o What if there is reconciliation before disinheritance is made? The right to disinherit is extinguished

Unworthiness (1032-1040) 1032 enumerates causes for incapacity to succeed/unworthiness and there is a close parallel with disinheritance. As with disinheritance, there is need for final conviction for some, not for others, and one requires exoneration. First ground (actually three): o 1. Abandonment of child This article refers to unworthiness of compulsory heirs. Parents who have abandoned their children. But what if the child is under the authority of grandparents, will this apply? RFB thinks so. It should probably be ascendants who abandon descendants.

Abandonment has no precise meaning. How do we understand it here? When the parent/ascendant culpably neglects the support of the child. Culpably means without justification. What about giving consent to adoption, is it abandonment? No. It is not a culpable act. It is encouraged by law. o 2. Inducement by parent for daughters to live a corrupt or immoral life Re: inducement. What about grandchildren/granddaughters? What about grandsons? A liberal interpretation would include all these. o 3. Attempt against virtue of daughter Attempt against virtue? This should include grandparents Does this need conviction? No. What does attempt cover? All stages of commission. Also not limited to rape: it should cover other offenses against chastity. Are the grounds exclusive? o Yes. Do you need actual disinheritance? o No. The law itself excludes the heir. What is the extent of the disqualification? o Total, like in disinheritance no compulsory, testamentary, intestate Is there representation here? o Yes, in the same way as disinheritance. How does one set aside unworthiness? o 1. Written condonation

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2. Execution by offended party of a will with knowledge of the cause of unworthiness o Viz: in disinheritance, there can be implied reconciliation Why is the code stricter in unworthiness than disinheritance? o This is an inconsistency, because there are many grounds common between both unworthiness and disinheritance. This happens when if the offended party avails himself of that ground and actually disinherits. o Ex. X is the son of Y. X attempts to take Ys life. A case for frustrated parricide was filed, and he was convicted with final judgment. It is a common ground in unworthiness and disinheritance. So in this case, he is automatically unworthy. But Y still disinherits X, which he can do. There is no problem here; he is just double dead. But what if X and Y reconcile? Y admitted X back into his house, and forgave him orally. Under the rules on disinheritance, reconciliation is enough to set aside the disinheritance. But because there is no written pardon, the unworthiness persists. o How do we resolve this? Commentators like Tolentino say that it is the rules on disinheritance that prevail, because disinheritance is the express will of the aggrieved party. It should prevail over unworthiness. If the facts are the same but Y did not disinherit X, unworthiness will apply. So there has to be a written pardon. When is capacity or incapacity determined? o 1. In general, upon time of death of decedent o 2. If institution is subject to a suspensive condition: Time of decedents death AND Happening of the condition o 3. If judgment is a requisite of unworthiness, time of final judgment What if the disqualified heir makes alienations of hereditary property and acts of administration? o 1. As to third persons in GF, these are valid

In good faith if he acquired the thing for value (cant be a donation) and without knowledge of the defect of the transferors title o 2. But the co-heirs can recover damages regardless from the disqualified heir o 3. But for necessary expenses, regardless of GF or BF, there must be indemnification of the disqualified heir What is the nature of the possession of the disqualified heir? o Possession in BF. Thus, must return the thing, with all its accessions, and all the fruits he actually and could have received What is the prescriptive period to declare incapacity and recover property from the disqualified heir? o Five years from time of possession

Grounds for disinheritance and unworthiness: D of child/des Attempt against 3 life Accusation of 4 crime 5 Adultery/conc. Force to change will Refuse to support Maltreatment by word/deed Dishonorable life Crime with civil interdiction D of parent/as Attempt against life Accusation of crime Adultery/conc. Force to change will Refuse to support D of spouse Attempt against life Accusation of crime Force to change will Refuse to support Unworthiness Attempt against life Accusation of crime Adultery/conc. Force to change will

Abandoned, induced to corrupt life, attempt v. virtue


3 4

Abandoned, induced to corrupt life, attempt v. virtue

Of testator, spouse, ascendants, or descendants need conviction Crime must be 6 years or more and found groundless 5 With testators spouse; Needs conviction

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Loss of P.A. Attempt by one parent against life of other

Loss of P.A.

Prevent from making will or revoking one Falsification or forgery of will Representation

Cause for LS

1. Abandonment, corrupting influence, attempt at virtue 2. Prevent making or revocation of will 3. Falsification or forgery of will

Tips to remember the grounds: o A. Common five grounds: 1. Attempt against life 2. Accusation of crime 3. Forced to change will 4. Adultery/concubinage with testators spouse Except D of spouse, because obviously he/she cannot screw him or herself 5. Refusal to support Except U; its not automatic o B. Grounds for children: involve being a disappointment to their ascendants: 1. Maltreatment 2. Dishonorable life 3. Civil interdiction o C. Grounds for ascendants: being bad parents/examples 1. Abandonment, corrupting influence, attempt at virtue 2. Loss of PA 3. Attempt against life by one against the other o D. Grounds for spouse: just loss of PA and cause for legal separation 1. Loss of PA 2. Cause for legal separation o E. Grounds for unworthiness: two grounds involving fraud in making of the will + triple-ground

Definition of representation? o The representative is raised to the place and degree of the person represented and acquires the rights which the latter would have if her were living or if he could have inherited When does representation apply? o 1. Predecease, o 2. Disinheritance, o 3. Unworthiness/incapacity o There is no representation in renunciation In what kinds of succession does representation operate? o 1. Compulsory o 2. Intestate In what lines does representation obtain? o For compulsory succession ONLY in the descending direct line. N.B. NEVER in ascending. o For intestate succession 1. Direct descending line 2. One instance in collateral line: nephews and nieces representing brothers and sisters of the deceased What is the rule on adopted children? o Cannot represent nor be represented, because the legal relationship in adoption is strictly between adopter and adopted. What is the rule on representation by illegitimate children? (iron curtain) o Illegitimate child of a legitimate child cannot represent the latter. o Illegitimate child of an illegitimate child can represent the latter. o If the child is legitimate, he can always represent his parents. What is the rule on shares of the succeeding representatives?

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Since they are only stepping into the shoes of the person represented, they could get unequal shares (per stirpes). Ex. A had 2 children, B had 3. Both A and B predecease their father, X. The 2 children of A split As share by each and the 3 children of B split Bs share by 1/3 each. o When does the rule change from per stirpes to per capita? The rule changes when ALL, and not just some, of the children renounce. The grandchildren will inherit per capita. o What if all children predecease? The grandchildren still inherit by representation, and not per capita. o How does the rule change for the sole case of representation in the collateral line? A, B, and C are brothers and sisters of X. If A and B predecease X, then the children of A and B inherit per representation. But if ALL of A, B, and C predecease (or are disqualified) the nieces and nephews of X will inherit per capita. NOTE that this is different because in the descending line, it will be still succession by representation. What if there is renunciation by all collateral heirs? Same rule as direct line heirs: the nephews and nieces will inherit per capita. N.B. there is no distinction among the kinds of disqualifications in collateral representation, so as long as all brothers/sisters die or renounce (no such thing as disinheritance or unworthiness for brothers and sisters), the nephews/nieces inherit per capita o Is it even relevant to talk about disinheritance or unworthiness for collateral heirs? Its not. You cannot disinherit a brother or sister because hes not a compulsory heir. What are the 3 rules on qualification? o 1. Representative must be qualified to succeed the decedent (e.g. C must be qualified to represent A)

2. Representative need not be qualified to succeed the person represented (e.g. C need not be qualified to succeed B) o 3. The person represented need not be qualified to succeed the representative (e.g. B need not be qualified to succeed C) What is the difference between representation OF and BY a renouncer? o Representation OF renouncer does not happen o Representation BY renouncer can happen. Illustrate this rule. ABC. C renounced Bs inheritance. But C can represent B if B predeceases A, because C is inheriting from A, not B.

Reserva troncal What is Reserva Troncal? o See Article 891 Whats the purpose of reserva troncal? o To keep property or return property to the line of origin. (Sanchez Roman view) What are the requisites of RT? o 1. Person acquires property from ascendant or brother/sister through gratuitous title o 2. Dies without legitimate issue o 3. Inherited by another ascendant through operation of law rd o 4. There are relatives within the 3 degree of consanguinity from the prepositus belonging to the line from where the property came Why is the reserva troncal included in compulsory succession? o The RT can limit the operation of the legitime o If that part which is reservable passes as legitime, the law says that it should pass with no burden. But if it passes as RT, it will be under the burden of RT because the law says so. o Its better to take it up as part of compulsory succession because it can become an encumbrance on the legitime. What are the two transmissions that have to take place? o 1. By gratuitous title, from the origin to the prepositus This can include donation or any kind of succession o 2. By operation of law, from the prepositus to the reservista

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ONLY compulsory or intestate succession What if there is only one transmission? o There is no RT. There have to be two transmissions for there to be RT. o Solivio: there was just one transmission from the mother to the son, by donation. When the son died, he had no ascendants at all or descendants either. Because there was no other ascendant, the second transmission could not happen. The closest relatives are two aunts, who are not ascendants. Who are the parties in RT? o But first, two basic rules: 1. All of these parties must be legitimate. If any of the relationships is illegitimate, there can be no RT. 2. No further inquiry beyond the origin is required o 1. The origin Ascendant of prepositus, of any degree, of either line Or brother/sister of prepositus, either full or half blood If full blood, Manresa says yes. JBL says no, because there is no possibility of the property leaving the line. The ascendant 6 lines are common. o 2. Prepositus o 3. Reservista Has to be a different ascendant from the origin Must he be another ascendant from another line or can it be same line? If another line, no question he can be a reservista. (Ex. F S M) If same line (Ex. GF grandson F [same line as grandfather, since he is the son of the grandfather]), according to JBL, there is no

RT. According to Manresa and Sanchez7 Roman, there is an RT. o 4. Reservatarios They must be related within the third degree, in relation to the prepositus, and of the line where the property originally came from N.B. Of course exclude legitimate descendants, since if the prepositus had decendants, there would have been no RT Who are these possible reservatarios? Parent, grandparent, great grandparent, Brother, sister, nephew, nieces, uncles, aunts Note: in the situation that JBL seeks to exclude (but Manresa favors), there is no need to make a distinction since there is no change in lines. When do you determine who the reservatarios? When the reservista dies. They do not have to exist when the prepositus dies. If there are several, but of different degrees, how do you determine who gets what? Tolentino: Selection is made on preferential basis, not integral and indiscriminate, as Scaevola believed. Apply the rules on intestate succession (direct over collateral). Another rule of intestacy that applies is representation of nephews or nieces of brothers/sisters [so the brothers/sisters do not exclude nieces/nephews]. What is the consequence? Gonzales: The reservista cannot choose, by will who the reservatarios will be. The law chooses for her.

The difference is explained by different theories. JBLs view is that RT is curative or remedial; if it does not leave the line, no need for RT. Manresa says that it is preventive, too the RT seeks to prevent the property from leaving the line as well.

Again, the source of disagreement is a different in theories on nature and purpose of RT. RFB leans towards Manresas and Sanchez Romans view.

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Should the reservatario be related to the origin? A1 and A2 have a child, B1. B1 is married to B2, and have a child C. A1 donates property to C. B1 died, when C dies, it goes to B2. Thus, there is an RT here. When B2 dies, A2 survives and claims the property as nd reservataria (since she is related by 2 degree to C, the prepositus). MANRESA she is a reservataria, she meets the purpose and requirements SANCHEZ ROMAN she is not, because you didnt return it to A1s line and A1s relatives. A2 is not related . So what is the majority view? The reservatarios must be related by blood to the origin. This is not yet established by jurisprudence, but this is a good view point. What is the nature of the right of the reservista? (Edroso) o 1. Right of ownership o 2. Subject to the resolutory condition that there will be reservatarios present upon the reservistas death o 3. The right is alienable, subject to the same resolutory condition 4. The right of ownership is registrable What is the right of the reservatarios? (Sienes) o 1. Right of expectancy o 2. Subject to a suspensive condition, that there will be reservatarios present upon the reservistas death o 3. The right is alienable, subject to the same suspensive condition o 4. The right of expectancy is registrable o Dont these two rights of registration conflict with each other? No. Theres only one title. The right of the reservista is annotated as ownership; the right of the reservatario is annotated as an encumbrance.

What kind of property can be reserved? o Any type o What is the effect of substitution (e.g. the prepositus sells the property)? No RT because it must be the very same property that goes through the two transmissions for RT to arise What is the nature of the reserved property when the reservista dies? o Its not part of his estate upon death. It passes by strict operation of law to the reservatarios. What are the rights and obligations of the reservatarios and reservistas? o Reservista prepares inventory o Right of reservatarios to annotate in case the reservista alienates (within 90 days from acceptance by the reservista) o Appraise the movables o Secure by means of mortgage o Registration is demandable Sumaya What are the causes for extinguishment of RT? o 1. Death of reservista (causes it to transfer) o 2. Death of all the reservatarios o 3. Renunciation by all the reservatarios, and none is born subsequently o 4. Total fortuitous loss of the property o 5. Merger or confusion of rights o 6. Prescription or adverse possession

TESTAMENTARY SUCCESSION In general What is the nature of making of a will? o It is a strictly personal act. It cannot be delegated. o The mechanical aspect is delegable but not the disposing power. o What cannot be delegated? 1. Designation of heirs, legatees, devisees

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2. Duration or efficacy of the designation 3. Determination of the portions they get o What is the exception to non-delegation? The testator must determine: a) property or amount of money given, and b) the class or cause to be benefited. And then he may delegate to a third person: a) the designation of persons, institutions, establishments within the class or cause, or b) manner of distribution Testamentary succession can never impair the legitime What is a will? o An act instrument 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 What are the two kinds of wills? o Holographic and attested/notarial What are the three common requisites for both attested and holographic wills (first two, textual; one is non-textual)? o 1. It must be in writing o 2. Executed in a language or dialect understood by the testator Is this rule mandatory? Definitely. So can the will be translated to the testator? No. It must be written in a language known to him. Do not confuse this with the attestation clause, which can be translated. Must the will state it was written in a language known to the testator? No. It can be shown by extraneous evidence/evidence aliunde. o 3. Testamentary capacity Who can make a will? Natural person (juridical person cannot make a will) Who are the two classes of disqualified persons? Those below 18 years old Those of unsound mind

Putting it positively, one must be a natural person 18 years old or above and of sound mind. What must you know to establish a sound mind? 1. Character of estate 2. Proper objects of your bounty 3. Nature of the testamentary act Is there a presumption? Yes, a rebuttable presumption of testamentary capacity When is there no presumption? o 1. If the testator, 1 month or less before the making of the will, was publicly known to be of unsound mind o 2. When the testator has been placed under guardianship for insanity What is the presumption then? o There is a presumption of insanity, not just a presumption of sanity. Again, this is rebuttable Where must the testator sign? o 1. He must sign the will o 2. Also every page at the left hand margin, except the last. o How can the testator usually sign? He writes his name o What are the other recognized ways? Affixing thumbmark (Matias v. Salud) Is the thumbmark for the testator always a valid way to sign the will? Yes. Under all circumstances, even if not infirm or ill. Is a cross allowed (Garcia v. Lacuesta)? No, in general. THE EXCEPTION: If that is his usual way of signing.

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There are two ways of interpreting the word the end, where the testators signature should be. What are these? 1. The physical end, where the writing stops 2. The logical end, if there are non-dispositive portions written in the will o Must the signing always be at the left margin? No. It can be any margin. Why is there no requirement for marginal signing on the last page? Because it would be superfluous. He also signs at the end. The testator must sign in the presence of the witnesses. The witnesses must also sign in the presence of the testator and of one another. What does the law mean by in the presence? o Nera: The requirement of presence does not mandate that the person must actually see the other party signing; what is required is that he could have seen, by casting his eyes in the proper direction (without changing his physical position). One of the options given to the testator is that he/she may ask someone else to sign for him, provided some conditions are present (1. Express direction; 2. In his presence). o Should the testator be physically prevented from signing or have any particular reason to get an agent? No. o What should the agent write? He must write the testators name It must be in the agents own handwriting o Must the agent write his own name? It is not required. Must the attestation clause be signed? o Yes. o By whom? The witnesses. o What about the testator? No. The attestation clause is purely an affair of the witnesses. o Where should the witnesses sign the attestation? o

At the end of the attestation clause. Can they sign at the margin or elsewhere (beside)? No. The attestation clause is deemed unsigned. o What must the attestation clause state? 1. Number of pages of the will 2. Fact that the testator signed the will and all the pages thereof, or caused some other person to write his name under his express direction, and in the presence of the instrumental witnesses 3. That the witnesses signed the will and all the pages thereof in the presence of the testator and of one another Must the attested will bear a date? o No. o Why? The certification in the acknowledgement will be dated anyway. o Who certifies? The notary public as required by the notarial law. o Viz: should a holographic will be dated? Yes. What if the notary public acted outside his notarial jurisdiction? o It is void and tantamount to not being notarized. If the will was notarized by one of the witnesses, who was also a notary public, will this make the will void? o No, if there are three other witnesses apart from the notary. o If there are less than three witnesses including him? The will is void. There is a failure to meet the required number of witnesses. o But can a notary public be a witness? Definitely. But the notary public cannot be counted as a witness, and the witness cannot be the notary public too. For the latter, you are undermining the notary publics impartiality. What is the requirement if the testator is blind?

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Two readings by the notary public and by one of the attesting witnesses. o Is this mandatory? Yes. Non compliance makes the will void. Should this mandatory nature extend to illiterate deaf mutes? Yes. Of course, the two persons need not be the notary and one witness; it can be whoever can practicably communicate the wills contents to him o Must the will or attestation clause mention compliance with this mandatory requirement? No. It can be established by extrinsic evidence. o Garcia: The lawyer who assisted the testator read the will. It was read only once. The lawyer, however, read it aloud in the presence of the attesting witnesses and the notary public, who had their own copies of the will. The testator was also listening. Art. 808 was hence not complied with. But is this valid? This is valid, because there was substantial compliance. The intent of the law was achieved to prevent fraud upon the testator. o Alvarado: Invalid because it was done by the lawyer who drafted the will who read it aloud, so it wasnt even one of the two parties enumerated. And he read it out loud only once. Art 809 is the provision on substantial compliance with respect to the attestation clause, which needs three things (# of pages, fact that the testator signed at the end in the presence of the witnesses, and that the witnesses did the same in the presence of the testator and of one another). How strict must this be in light of Art. 809? o In the code itself, there is no clear rule about how liberal interpretation could be. o Caneda: defect was failure to state that the witnesses signed in the presence of the testator and of one another. HELD: This was a fatal defect. Adopting JBL Reyess suggested standard, it could not be remedied by visually examining the will. o

Azuela: Deficiency was failure of the clause to state the number of pages, which was left blank. HELD: valid omission, because it can be supplied by a visual examination of the will. Requirements of a Holographic will? o Completely written, dated, and signed by the testator o Roxas v. de Jesus: Feb/61 was held as a sufficient date this is a problematic decision. Fortunately, there was no other will also made in Feb/61, which could have possibly repealed it. In a very liberal decision, it was upheld. o Where should the date be? There was no mention where it should be. It could be in the body. o Can you sign by a thumbmark, as in an attested will? Seems unlikely. It must be written by the hand not a thumbmark. Though there is no jurisprudence on this. 813-4 dispositions after the signature o Some commentators say that this implies that the signature must be at the bottom of the holographic will. o If there is only one additional disposition, it must be written and signed by the testator. o If there are several, what is the rule? 1. Dated and signed 2. Or each additional disposition may be signed, provided the last one is dated and signed What is required for insertions, cancellations, erasures, or alterations in holographic wills? o It must be authenticated by the testator through his signature o Kalaw v. Relova: Cancellation of the name of the original heir and writing above it of the name of another heir invalid because it was not validated, because it was not signed. o But the court weirdly held that the cancellation was valid! But it was not signed. This is an odd decision, because it had an internal contradiction. Are joint wills allowed? o No.

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But for aliens, if they execute their will abroad and their national law allows it, then its valid. o If aliens execute it locally, there are two views: its either valid because national law allows it, or it is void due to public policy. o If a Filipino and alien execute a joint will, its always void as to the Filipino. What are the requisites to become a witness to a will executed in 805? o 1. Of sound mind o 2. At least 18 years old o 3. Not blind, deaf, dumb o 4. Able to read and write o 5. Domiciled in the Philippines o 6. Not convicted for falsification of document, perjury, or false testimony o What do these qualifications establish? Competence only, but not credibility per se o When is competence of the witnesses needed? During attestation only. If they become incompetent after, it has no effect. When is a witness to a will disqualified to succeed? o When he is a witness to a will where something is given to him, his spouse, parent, or child o What is the effect? The will is valid but the witness cant succeed to the will o How many witnesses are needed for this provision to apply? Only three witnesses. If there are at least three other competent witnesses, there is no disqualification o What kind of succession is affected? Only the testamentary dispositions, but not legitime or intestate share because this is not affected by the witnessing (i.e. if the witness is a son of the testator) Codicils and incorporation by reference (825 and 827) o Article 825 defines a codicil. This is exam material. It assumes the existence of a prior will. You cannot have a codicil without a prior will. It can explain or alter the prior will.

Sometimes its hard to determine whether it is a codicil or a second will. If it makes an independent disposition, it is a second will. If it alters, modifies, changes, it is a codicil. o But honestly, this distinction is academic, because the requirements of a codicil and a will are just the same. o 827 An incorporated document. It is attached to a will and is intended to explain. It cannot make a testamentary disposition because otherwise, it has to comply with the requisites and form of a will. Requisites? 1. It must predate the will 2. It must be signed on every page by the testator and witnesses, except if it is voluminous 3. It must be clearly referred to in the will 4. It must be referred to in probate as that document So since it requires witnesses, can you not have an incorporated document with holographic wills? Some say you cannot because there are no witnesses. RFB says that you must interpret it liberally, and since there are no witnesses, then it just means its just the testator that signs. Two modes of testamentary succession: o 1. Institution of an heir o 2. Institution of devisee or legatee What is the permissible form of instituting a successor, whether heir, devisee, or legatee? o Only thing required is that the identity of the successor is adequately determined in the will. No need to mention by name, as long as the successors identity is determinable. I institute my brothers and sisters to of the share of my estate. What does this mean? o

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Siblings, whether legitimate, illegitimate, or half, inherit in equal shares. o This is different from intestacy, where whole, half, and illegitimate siblings inherit in 2:1:0 ratio. (You cannot inherit from your illegitimate sibiling) What is the rule on statement of false causes on a will? o In general, it is deemed not written. o Exception requisites: 1. Cause must be false 2. It must be shown to be false 3. It must appear on the face of the will that the testator would not have made the institution had he known of the falsity of the cause If heirs are given different fractions each, and the total is less than the free portion, what happens? (852/3) o The rest of the free portion goes into intestacy. o But what if it is shown that the testator intended to dispose the entire free portion? If the disposition is less than the portion, you increase proportionately. If more, you decrease proportionately.

TYPE OF
DISPOSITION

CIRCUMSTANCES Giving a thing in legacy or devise He gives more than he owns

EFFECT Decedent just gives what his interest covers The estate will attempt to acquire it. Failing to do so, it gives the monetary equivalent. He gives just that The estate will attempt to acquire it. Failing to do so, it gives the monetary equivalent. Void disposition, except if subsequent to the disposition, the testator acquired the thing gratuitously or onerously Implied order to acquire

General rule

Legacy or devise of something belonging to another

He gives less than he owns He can give an order to acquire it

Testator thought he owned the thing

924-959 Legacies and devises Some provisions are inaccurate. It is the estate that is liable for legacies and devises, not compulsory heirs as 925 says. You cannot charge the compulsory heir for the legacies and devises. Exception: indirect legacy What is the liability of two or more heirs who take possession of the estate? o Solidarily liable for loss or destruction of the thing devised or bequeathed, even if only one is negligent Who is liable for eviction? o In general, the estate o For subsidiary legacy or devise the heir, legatee, or devisee charged

Thing already belongs to the devisee/legatee (D/L)

He knew he did not own it, but did not give an order to acquire If it already belongs to the devisee/legatee

929-937 outline:

D/L directing

Testator thought he owned the thing, and then the D/L acquired the thing Testator knew it did not belong to him, and then the D/L acquired it onerously Testator knew it did not belong to him, and then the D/L acquired it onerously Testator owned it when he made the will, but the D/L acquired the thing from him after In general

Void disposition. Subsequent alienation by the D/L does not validate it, unless it was in favor of the testator. Void disposition; the testator was still in error

The estate pays the value

There is nothing left to be done

Void disposition (because any subsequent disposition, even to the D/L himself nullifies the disposition) The estate pays for it

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the estate to remove encumbrance from anothers property Pledge/mortgage Any other kind of encumbrance like easement Giving to the legatee the debt owed to the testator by another person If the testator sues that other person The estate pays for it first Passes with the things

Legacy of credit or remission

Effective as to the remaining debt owned upon the testator when he dies Ipso facto revokes the legacy. Mere filing in court already revokes the disposition; however, extrajudicial demand does not revoke the disposition. Covers debts existing when the disposition was made. Ex. X owed Y 2 debts in 1999. Y, in his will, gave Z the debts X owed Y. X owed Y 3 more debts in 2001. Y died. What debts transfer? Just the 2 existing when the will was made.

Generic disposition of debts

What is the treatment of a legacy/devise to a creditor? o It will be treated like any other legacy or devise and will not be imputed to the debt. o What is the exception? Imputed to the debt if the testator provides so. If the debt exceeds the legacy/devise, the remainder may be demanded as an obligation of the estate When are there alternative legacies or devises?

It exists if one provides that among several things mentioned only one is given. o Who has right of choice? 1. In general, the estate, acting through the E/A 2. In a subsidiary legacy or devise, the heir, legatee, or devise charged If he dies, his heirs choose 3. If so provided, the legatee or devisee o What is the nature of the choice? Irrevocable What is the rule on validity of generic legacies/devises? o 1. Generic legacy valid even if no such movables exist in the testators estate upon his death (estate just acquires it) o 2. Generic devise valid only if there exists such an immovable in his estate upon death o Who chooses? The executor or administrator Except if the choice is expressly given to someone else o What is the limitation? Neither superior nor inferior in quality o What is the nature of the choice? Irrevocable Legacy of education, support, or periodical pension: o A. Education Lasts until age of majority or completion of the course, whichever comes later Amount as fixed by the testator; secondarily, that which is proper, depending on social standing or value of disposable portion of the estate o B. Support Lasts until the legatees lifetime, unless the testator provides otherwise Amount as fixed by the testator; secondarily, that which the testator used to give when he was alive unless disproportionate to the estate value; tertiarily, social standing or value of the disposable portion of the estate

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C. Legacy of a periodical pension Demandable upon the testators death, and succeeding ones at the beginning of the period without duty to reimburse should the legatee die before the lapse of the period What is the order in 950 for reduction? (i.e. what is the order of payment of legacies/devises if there is not enough) o 1. Remuneratory o 2. Preferred o 3. Legacy for support o 4. Education o 5. Specific thing o 6. All other, pro rata What is the rule in 911? o 1. Reduce pro rata non-preferred legacies and devises o 2. Reduce pro rata preferred legacies and devises When do you use which? o If the reason for reduction is impairment of legitimes, use Rule in 911 (non-preferred, then preferred). o If the reason for reduction is something else, use Rule 950. o What other reasons could exist? A testator has no compulsory heirs, but he gave away too many legacies and devises, by sheer mathematical necessity. Rule 950 is followed. Or maybe the testator already covered for the compulsory heirs legitimes through donations inter vivos, so the remaining parts are all free portion. What is the rule on acceptance and repudiation of legacies and devises? o Acceptance may be total or partial o Except: if the legacy/devise is partly onerous and partly gratuitous, the recipient cannot accept the gratuitous part and renounce the onerous part Other combinations are allowed In case of repudiation or incapacity of the legatee/devisee, what are the applicable rules (in order)? o 1. Substitution

o 2. Accretion o 3. Intestacy When is a legacy or devise without effect? o 1. Transformation Converted the thing o 2. Alienation Either onerous or gratuitous, and even if the thing reverts to the testator Exceptions? 1. Reversion was caused by annulment of alienation because there was vitiated consent 2. Reversion due to redemption in a pacto de retro sale o 3. Total loss before the testators death

Rules common to heirs, legatees, and devisees Capacity to succeed: o In fact, the basic rules are common to all kinds of succession (Alive + qualified to succeed at the time succession opens. There is no exception here.) Art 1025 The heir, legatee, or devisee must be living when the testator dies. There is NO exception, contrary to what this provision suggests. o Representation is not an exception because the representative must at least be conceived already. o For juridical persons, it must exist juridically when the testator dies. 1027 First 5 paragraphs are important because they enumerate instances where one is incapacitated to succeed in testamentary succession. It does not apply to other kinds of succession. o 1. Priest who heard confession of testator during last illness or minister of gospel extending spiritual aid in this period. Requisites: A. Will executed during last illness B. Spiritual ministration extended during last illness

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C. Will executed during or after the spiritual ministration th o 2. Relatives of priest/minister within 4 degree or his institution o 3. Guardian, from ward before final accounts of guardianship approved Except if guardian is A/D/sibling/spouse o 4. Attesting witness to the execution of a will, spouse, parents, children, or anyone claiming under that witness, spouse, parent, or children Put in the exception, where there are three other competent witnesses to the will, under here too o 5. Physician or health officer who took care of the testator during last illness 1028 only applies to testamentary succession: extend to prohibited donations in 739 What if the disposition is for prayers and pious works for the benefit of his soul and no specifications are given? o to the church/denomination of testator o to the State 1032 disqualifications (unworthiness) these are general; these bar the DQ heir from compulsory, testamentary, or intestate succession

Predecease, incapacity, renouncement How do you make it? Enumerate all the three causes o Can you restrict vulgar to 1 or 2 grounds? Yes. Just specify. What are the requisites for fideicomissary? o 1. First heir takes the inheritance o 2. Second heir takes the thing after tenure of the first heir o 3. The second heir must be one degree from the first heir What does first degree mean? It refers to relationship. o 4. The first heir must have absolute obligation to preserve and transmit o 5. Both heirs are alive and capacitated at the death of the testator What is the tenure of the first heir? o What is specified by the testator o If not specified, it is the lifetime of the testator Does the first heir have a right to alienate? o NO. This rule is unlike the reserva troncal. o

Conditions, terms, modes Substitutions (857-870) For what kind of succession does this apply? o Only testamentary succession. You cannot have substitution in compulsory and intestate succession. What are the two kinds of substitutions? o 1. Vulgar o 2. Fideicomissary o The code seems to enumerate two more: 1. Reciprocal 2. Compendious (Several heirs one substitute) but these actually are just variations. They go into mode. What is substitution vulgar? o Instituting an heir in default of the one instituted These all burdens in succession, especially since the testator has free disposal of his property. What are the types of conditions? o Suspensive o Resolutory What are the special rules on suspensive conditions? o An impossible condition (873) considered not imposed. The disposition is valid and becomes pure. o What about condition not to contract first marriage? ALWAYS considered not written o What about subsequent marriages? Generally void, unless imposed by the deceased spouse or the latters ascendants/descendants

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BUT what is allowed is to impose a usufruct or some personal prestation as long as one remains unmarried or a widow is valid. o A disposition on condition that the heir/legatee/devisee must also in turn make a disposition in favor of the testator or another person? The entire disposition is void. Take note of this. The purpose is to prevent the whole system from being corrupt. This is also called the disposition captatoria When does a suspensive condition take effect? o If both conditions exist: 1) the heir is alive when the testator dies, 2) the heir is alive when the condition happens What happens while waiting for the suspensive condition to happen? o Place the property under administration of executor/administrator What is the difference between a term and condition? o A term is certain, a condition is not. What are the two types of terms? o Suspensive term o Resolutory term When does an institution based on a term vest? o A disposition with a term vests upon the death of the testator, unlike a conditional disposition (esp. suspensive) which only vests upon the happening of the condition. Since a term is certain to happen, it follows the general rule in 777 that it vests upon death. So must the heir be alive when the term arrives? No. Just when the testator dies. So he can transfer his vested right upon his own successors. What do you do as you wait for a suspensive term to arrive? o Governed by 885. While you wait for the term to arrive, you give it to the legal heirs (intestate heirs). For resolutory terms?

After the testators death, you give it to the instituted heirs, and when the term arrives, they turn it over to the legal heirs. A condition suspends, but not obligates. A term obligates, but does not suspend. A term does not delay the efficacy of the disposition, but it places an obligation upon the instituted heir (even suspensive, since the instituted heirs have an obligation to turn the property over to the instituted heir when the term arrives). What is a mode? o You have to do something alongside the disposition. What if the heir fails or refuses to perform the act required? o The beneficiary can ask for the performance of the obligation. o The legal heirs can ask for the forfeiture of the disposition. How must a mode be stated? o It must be a clear command, not just a request. When is a caucion muciana needed? o 1. In a potestative suspensive condition (879) It is under the sole control of the heir (ex. I give X my house and lot, as long as he doesnt use it as a drug den. In order to guarantee that the legal heirs, who will then be entitled to the property upon violation of the condition, then X has to put up a bond the caucion muciana). o 2. Resolutory term, before the term arrives The legal heirs have the right to enjoin disposition of the property, but they have to put up a caucion muciana o 3. In case of a mode (882) As security for compliance with the testators wishes o

Accretion (1015-23) To which kinds of succession does it apply? o Applies only to testamentary and intestate succession. Requisites? o 1. Two or more heirs, legatees, devisees, called to the same inheritance or portion thereof pro indiviso What does pro indiviso here mean?

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Some commentators say they must have equal shares (like Tolentino), but this is wrong. Theres no requirement of equality, just as long as they have aliquot shares. This means even the shares can be unequal. There is no accretion is the shares are earmarked. o 2. One or more must predecease the testator, become incapacitated, or renounce the inheritance. X gives his BPI account to A, Citibank account to B, PNB to C. C predeceases. Is there accretion? o No. The shares are earmarked. X gives of his estate to A, 1/3 to B, 1/6 to C. C predeceases. Is there accretion? o Yes, because they got aliquot shares. A and B receive Cs shares according to the proportion they received their shares. In testamentary disposition, what wins out, accretion or substitution? o Substitution In intestate disposition, what wins out, accretion or representation? o Representation, when proper o So if the intestate decedent has three brothers (X, Y, and Z) and X has X1 and X2, if X dies, representation applies. If X has no children and X dies, accretion applies.

2. Subsequent will/codicil 1. The will must comply with the requirements of wills 2. Testamentary capacity 3. Either an express revocatory clause or incompatibility in the dispositions 4. The will must be admitted to probate o 3. Physical destruction Either by the testator personally or in the case of attested wills, it can be done by his agent acting under his express direction and in his presence Molo: There must be both a) corpus (actual destruction), and b) animus (intent) What if a will is revoked based on a false cause? o The revocation is null and void. o What are the requisites for this situation to apply? 1. 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 in the will that the testator is revoking because of the cause which is false What if the revocation was unauthorized? o If it is an attested will, it can be proved, if there are people available who can attest to the contents of the will o If it is a holographic will, too bad if no copies survive . Theres no way of probating it.

Revocation of wills (828-834) Republication and revival There is no such thing as an irrevocable will. It only becomes irrevocable when the testator dies. What are the three ways of revoking a will, whether total or partial? o 1. By operation of law Legal separation (offending party is instituted as a beneficiary in a will) Preterition Where the testator disposes property that is given as legacy or devise in a will (the legacy/devise is revoked) 835 and 836 are inconsistent with each other. Republication/revival is giving efficacy to a will which somehow lost its efficacy o Ex. it has been revoked, and now you want to revive it. If it is defective as to form? o You have to reproduce it in the form of a valid will or codicil. o You cannot revive it by reference. What if it is inoperative by some other reason other than form? o You can merely revive it by reference.

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Executors and administrators (1058-1060) What if the decedent dies with a will? With no will? o It has to be probated, and if the will has appointed someone to take care of the estate, then he becomes the executor. o If there is none appointed or no will, then the court appoints an administrator. o

Probate Two aspects of validity of a will? o Formal (Extrinsic validity) including capacity of witnesses o Substantive (intrinsic validity) Ex. impairment of legitimes, preterition, capacity of heirs, legality or possibility of conditions What is probate? o Mandatory proceeding to determine only the formal validity of the will o There is no substitute for probate. o Guevarra v. Guevarra, Seangio v. Reyes, Heirs of Lasam: All lay down the rule that probate is mandatory. Probate is determinative or conclusive of the validity and due execution of the will. How does it become final? o Just like any decision of court. o Once it becomes final, it becomes res judicata it becomes unassailable as to matters of form of the will. o Even if the decision is wrong. What cannot be assailed after finality of probate decree? o 1. Testamentary capacity o 2. That he acted freely o 3. Followed all the requirements of the will, as to witnesses, etc. o 4. It is genuine and not forged For probate of holographic wills, what must one remember? o 1. You have to present the will itself (Gan v. Yap)

Except there is a photocopy that survives (Rodella v. Aranza) 2. If the holographic will is contested as probate, three witnesses who can identify the will and attest to its validity must be presented. Is this mandatory? The leading case of Azaola says that it is only directory Godoy: Says that it is mandatory, although it is criticized When is it deemed contested? If it is challenged as a forgery. If it is admitted as genuine but admitted on other grounds such as mistake, fraud, or duress, it is not a contest under 811 and you do not need three witnesses.

Conflicts rules Substantive validity? o Time law as of time of death o Place law of citizenship of decedent Formal validity? o There are always five choices: o 1. Law of citizenship o 2. Philippine law o 3. Law of residence o 4. Law of place of execution o 5. Law of domicile

INTESTATE SUCCESSION In general What is intestate succession? o Takes place by operation of law in default of a valid will Look at the instances in 960 where total or partial intestacy occur: o 1. No will, void will, or ineffectual will

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2. Does not dispose of all property (partial intestacy) 3. Suspensive condition did not occur, predecease, repudiation And there is no substitution (testate) And there is no accretion (testate/intestate) o 4. Heir is incapacitated/unworthy o 5. Resolutory condition happens o 6. Resolutory term expires o 7. Preterition What are the principles of intestacy? o Exclusion and concurrence, just like compulsory succession What is the rule of relationship? o The intestate heir must be related to the decedent o Jus familiae (ascendant/descendant) o Jus sanguinis (collaterals up to fifth degree) o Jus xxx (husband and wife) o Jus imperii (decedent and State) Jus familiae and sanguinis requires blood relationship. What is the exception? o Legally adopted children and legally adoptive parent What are the limits? o Going down, there is no limit o Going up, there is no limit o Collateral line, the limit is up to the fifth degree How do you count degrees? o For direct line, count degrees o For collaterals, count up to the nearest ancestor nd 2 brothers, sisters rd 3 nephews, nieces, uncles, aunts And so on Rule of preference of lines? o Direct excludes collaterals o As a general rule, descending excludes ascending Except: legitimate ascendants not excluded by illegitimate descendants o Is there representation in the direct line? Yes, only in the descending o Collateral nearer excludes more remote

o o

Is there representation if the collateral line? Nephews and nieces exclude predeceased or unworthy brothers/sisters of decedent What is the nature of the spouse? o Concurs with both direct and collateral (up to third degree) What is the rule of proximity of degree? o Nearer exclude the more remote o What is the exception? Representation (see above direct descending and nephews/nieces only for collateral) What is rule of equality of relatives of the same degree? o Relatives of equal degree inherit equally o Exceptions? 1. Preference of lines ex. legitimate direct descendant of 1 degree excludes legitimate direct ascendant of 1 degree 2. In collateral relationships, full blood and half-blood distinction Siblings Nephews and nieces 3. Representation See the combinations in the book. Can the adopted succeed to his biological parents? o This is the same problem as in compulsory succession so see the discussion above. o But for the purposes of the Bar, the answer is yes, because the provision in the FC pertaining to succession by adoptee from biological parents is within the coverage. Combinations 2 and 4 in the book are dangerous, so take note that here (children and illegitimate children) each legitimate child gets double what the illegitimate children will get. What is the usual pitfall? o If you observe the 2:1 ratio intestacy, remember that you still have the legitimes. You might end up impairing the legitime of the legitimate children, which cannot be impaired. The

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illegitimate children can suffer impairment if there are a lot of them, but never the legitimate children. o This problem doesnt apply in any other instance apart from these two cases. What is the successional bar? o Art. 992. 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. o Compare: In representation, an IC cannot represent his legitimate parent, IC can represent IP, and LC can represent either LP or IP. Here, in inheritance, an IC cannot inherit per se from the legitimate relatives of his parents and vice versa. Situations to take note of: o In case of the concurrence of the SS and 1 LC, the SS will get , and the LC gets . o SS, brothers, sisters, nephews, nieces SS gets , brothers sisters nephews nieces get . According to the rules of division. o Nephews and nieces concurring with aunts/uncles of the decedent nephews and nieces exclude the aunts/uncles even if they are in the same degree. What is the difference in rules for brothers/sisters in testate and intestate succession? o TESTACY: Difference in the rule of brothers and sisters if they are instituted indiscriminately, they receive equal shares whether full or half blood. o INTESTACY: Take note of the 2:1 ratio [for full and half blood] and the successional bar. Is partial intestacy possible? o Yes, there is a will but it doesnt dispose of the entire free portion. Give an example of the difference between total and partial intestacy. o Full intestacy:

Legitimes to LC, to SS Thus, to LC, to SS (entire free portion went to the SS) Partial intestacy: Ex. I gave 1/8 of my estate to Ateneo. Note that the legitimes are to LC, to SS. to legitimate children, 1/8 to Ateneo, 3/8 to spouse Note: the entire remaining free portion of 1/8 went to the SS.

Acceptance and repudiation of the inheritance (1041-57) Acceptance and repudiation are always free acts. A person may always accept or reject, whether compulsory, testatamentary, intestate. Exception: accion pauliana o If there are creditors and the decedent does not have enough property to pay the creditors, the creditors can compel the heir to accept to the extent of the credit What is the difference in form? o Laxer rules in acceptance, and stricter rules in renunciation, because it is prejudicial There is need for judicial approval for renunciation of incapacitated person. For acceptance, no need. o Acceptance there can be express acceptance in writing, oral, or there can be tacit acceptance (by doing nothing). o Renunciation you have to do it in writing or by judicial approval. What is the retroactivity rule? o Acceptance as if the property passed at the moment of death (Art 777) o Renunciation as if the renouncer never owned or possessed the property (the substitute, co-heir, or intestate heir receives it at the moment of death) o Conditional institutions retroactivity still applies even if the condition happens later What is the rule for public official establishments? o Can neither accept nor repudiate an inheritance without the approval of the government When is there deemed acceptance?

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1. Heir disposes onerously or gratuitously his right to one or more co-heirs or stranger o 2. Heir renounces it gratuitously to one or more co-heirs o 3. Heir renounces it onerously to all co-heirs indiscriminately What about a gratuitous disposition to all co-heirs indiscriminately? This is a true renunciation and thus there is no acceptance What about a gratuitous disposition to all co-heirs but in different portions? Still a conveyance and is thus tacit acceptance What if an heir dies without have accepted or repudiated the inheritance? o The right passes on to his heirs What if a renouncing person is both a testamentary and interstate heir? o A. If he renounces the testamentary disposition he impliedly renounces the intestate share too o B. If he renounces as intestate heir without knowledge of being a testamentary heir, he can still accept the disposition o N.B. this doesnt affect compulsory succession What is the nature of acceptance/renunciation? o Final, except: 1. Vitiated consent 2. Appearance of an unknown will

Collation and partition What is the effect upon death of the decedent? o The immediate effect of death is the vesting of successional rights. But at this point, nobody knows what part of the estate goes to whom. o The heirs co-own the mass of properties. What are the three ways by which collation is understood? o 1. Computation simple accounting process where value of donation inter vivos is added to the available assets

2. Imputation donations inter vivos by decedent are charged either to the donees legitime or against the disposable portion o 3. Return donations inter vivos is found to be inofficious and the inofficious value is actually returned to the estate to satisfy legitimes N.B. if property is to be returned, following Art. 777, the fruits will pertain to the proper person (ex. entirely inofficious donation fruits go to compulsory heir; partially inofficious donation some to compulsory heir and some to donee) For return, what expenses must be reimbursed by the final recipient? Necessary expenses full extent Useful expenses full extent as long as improvement still exists You have to collate: o 1. Inventory What results are his gross assets o 2. Deduct debts This is where the Santibanez and Hemady doctrines come in. The estate, after all pays money debts, prior to the heirs receiving their shares. What results: available assets o 3. Add the value of donations inter vivos Net hereditary estate results. What are not included? Support, education, medical attendance, customary gifts, etc. (since these are impractical to calculate) What about expenses for professional, vocational, or other career expenses of the child, as given by the parents? o Charged against the free portion, unless: 1. Provided otherwise 2. Inofficious o

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If imputable (the two above), deduct what the parents would have spent on the child had he stayed home and loafed What is the measure of the value of the property donated? Value when the donation was made, since this was when it was perfected. Any subsequent increase inures to the benefit of the donee. What if the recipients of the donations are the compulsory heirs? You impute against their legitimes what they have received as donations inter vivos. Exceptions? o 1. Donor provides otherwise o 2. The donee renounces the inheritance, because he gives up the status as compulsory heir What if the donation to the compulsory heir exceeds his legitime? o The excess is taken out of the free portion What if the recipients of the donations are strangers? You impute it against the free portion. What if the free portion can accommodate all those donations? You take it all out from there What is the special rule for grandchildren inheriting by representation, concurrently with their uncles/aunts and other grandchildren? Compute both: a) what their parents would have been obliged to collate and b) whatever they themselves are obliged to collate. Does collation mean you have to physically obtain the assets? o No. Collating means a purely mathematical computation.

If he died with a will and the free portion cannot accommodate all the dispositions? o Reduce testamentary dispositions o First to be reduced are the non preferred testamentary dispositions After reducing them to zero, what if the legitimes are still impaired? o Reduce the donations to strangers or donations to compulsory heirs considered strangers o How do you reduce? NOT pro rata but in reverse order. The latest donation gets reduced first. o N.B. contrast this with legacies and devises, which are reduced pro rata (non-preferred, then preferred) Afterwards, the heirs can agree on a partition or go to settlement proceedings. Partition here is the physical division of the estate. How is partition done? o 1. Extrajudicial agreement by the heirs or o 2. Judicial order in settlement proceedings What are the kinds of partition? o 1. Actual physical division of the thing o 2. Constructive any act other than physical division that terminates the co-ownership (e.g. sale to third person) What are the characteristics of partition made by the decedent himself? o 1. It only takes effect upon death o 2. It is revocable as long as he is still alive o How can the decedent/causante make partition? 1. Will 2. Act inter vivos Must be in writing and in public document It must be accompanied by a prior will because disposal of property mortis causa can only be done through a will N.B. unless the partition through act inter vivos conforms strictly to intestate

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succession portions, so it does not make a disposition o What is partition to keep an enterprise intact? A parent can keep an enterprise intact by covering for his compulsory heirs legitimes through cash or other property Who can the decedent designate as a mandatary? o One who is not a co-heir can be chosen. He is designated to make the partition after death. What is the nature of the right to demand partition? o Generally, it is a mater of right, so any co-heir may demand partition at any time. o Exception: A. Partition forbidden by testator for period not exceeding 20 years Exceptions to this exception: o 1. Any of the causes for dissolution of partnership o 2. Court finds compelling reasons for partition B. Co-heirs agree on indivision for period not exceeding 10 years, renewable for like periods o What about heirs upon whom some suspensive condition has been imposed? Cannot demand partition since he has no rights yet. But the other co-heirs can demand partition but must issue a security to protect the inchoate right of the conditional heir. What if an heir sells his undivided share prior to partition to a stranger? o The other heirs may exercise right to redemption within one month from written notice of the sale and prior to partition. o N.B. some decisions say written notice is mandatory, while some say that it can be replaced by actual knowledge. Effects of partition: o 1. Absolute ownership over share o 2. Each co-heir warrants the share of the others

Period: within 10 years from date of right to action What is the liability for co-warranty? Proportional liability of co-heirs If one of the obligors is insolvent, his portion are borne proportionally by all, including the one entitled to the warranty o 3. Co-heirs warrant solvency of debtor of the estate whose credit is assigned to a co-heir But they only warrant against insolvency during partition and not subsequent insolvency Period: 5 years from partition o When is there no mutual warranty? 1. Partition by the testator himself, except when the legitime has been impaired 2. Agreement among co-heirs to suppress the warranty 3. Supervening events causing loss or diminution in value 4. Fault of the co-heir 5. Waiver What are the causes to annul or rescind a partition? o Same as causes for voidable and rescissible contracts o N.B. the special provision on lesion in partition, however, provides that it must be at least rather than the usual more than value. o When is the partition not subject to rescission due to lesion? When it was the testator who made the partition himself, except: 1. Impairment of the legitime (even if the lesion was less than ) 2. Mistake by the testator or vitiation of his intent o What are the options of the co-heir who is sued for rescission? 1. Have a re-partition 2. Indemnify the co-heir the amount of lesion suffered

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OBLIGATIONS Trends in Obligations and Contracts: 1. Obligations have been progressively spiritualized o There is very little requirement as to form. Upon meeting of the minds, in general, there is a K. 2. The principle of autonomy of will, which is still the general rule in K law, has been restricted. o There are prohibited obligations from being entered into o Art. 1306 Contracting parties may establish clauses and terms as they may deem convenient Provided they are not contrary to law, morals, public order, good customs, or public policy There are five categories of restrictions. They restrict freedom but promote the greater good. Ex. labor contract with consideration less than the minimum wage. Ex. Those that violate environmental considerations, social justice, gender issues, etc. 3. Mitigation of the principle that the debtor must answer with all his property o Before: you enter into a K and the creditor can pursue all your properties to exact fulfillment of the obligation o Now: In the interest of social justice, there are many things that the creditor cannot levy upon, although the principle is still good the creditor csan pursue the property of the debtor to exact fulfillment of the obligation o In the Rules of Court, there is a list of properties exempt from attachment, for instance: 1. The Family Home 2. What you receive from support Etc. 4. Weakening of the principle that liability results from responsibility o In general, under the law, you are only liable if you are responsible. Ex. if you are guilty of driving recklessly.

Ex. employer can be responsible for employees wages if not paid 5. Unity in modern legislation o This is especially important in global commerce o Ex. Bills of Lading, Trust Receipts, Intellectual Property, etc. o

Essential requisites of obligations What are the requisites of obligations? o Four generally accepted requisites: o 1. Active subject A.K.A. Creditor (to give) or obligee (to do) Has right to demand that the obligation be performed o 2. Passive subject A.K.A. Debtor or obligor Has to perform the obligation (reciprocal obligations) Note: In a sale of a thing, both parties are debtors and creditors of each other, with correlative obligations (as to the thing; and as to the money) o 3. Object o 4. Vinculum juris For both the active and passive subject, what is required? o They must be determined or determinable. What are the types of determined/determinable subjects? o 1. Obligations where subjects are completely and absolutely determined at the birth of the obligation Most common type o 2. One of the parties is determined, but one is determinable with a previously-established criterion Ex. Negotiable instrument: I promise to pay X or order the amount of P5000, on November 15, 2011. One of the parties (i.e., me) is determined. The other is determinable, because X can negotiate it. The instrument lays down the criterion. o 3. Subject/s is/are determined in accordance with their relation to a thing. (Real contracts)

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The subject/s may change at the thing passes from one person to another. Ex. X borrowed 3M from Y, and placed his house and lot as security. There is a K of loan and a K of mortgage, which is registered. X sold his house and lot to Z, who registered the property in her name. The mortgage in favor of Y is still annotated. X doesnt pay by the due date. Y sought to foreclose the mortgage, and Z cannot deny the mortgage, because Z is the mortgagor now. What is the object of the obligation? o Its the prestation. It consists of conduct or an activity to be performed by the debtor or obligor. o Its not the physical thing to be delivered in an obligation to give. That is merely the object of the prestation. o Ex. Y has to deliver a car to X on Feb 15, 2011. The object of the obligation of sale is the act of delivering to X the ownership the car (tradition). The car is the object of the prestation. o This distinction is, not, however always observed even by the NCC. o What are the requisites for the prestation? 1. Licit Cannot enter into contract of sale for shabu, because the object of the prestation is illicit. 2. Possible Cannot deliver Mount Apo 3. Determinate or determinable Cannot enter into a K with no defined prestation 4. With pecuniary value What is the vinculum juris? o The compulsive element; the obligatory element in an obligation. It makes an obligation an obligation. o This is why an obligation dependent solely on one s will is void. o Ex. X tells Y, I will sell my car to you when I feel like it. Here, there is no obligatory force. Yu v. Asuncion: Enumerated requisites of an obligation.

1. Vinculum juris, the efficient cause of the obligation 2. The object (prestation/conduct to be observed) 3. Subject persons, the active and passive subject Combined #s 1 and 2 into one. What is the fifth element, according to Castan? o The causa. It is the why of the contract. o Ex. Why is Y bound to deliver the car to X? Because X will deliver P400000 to Y. Why is X bound to give P400000 to X? Because Y will deliver the car to X. o What is the causa for a gratuitous contract? Liberality. o What is the causa for a quasi-delict? Causing an injury to the other. What is the sixth requisite? o The form. But it does not refer to a specific form, like putting it in writing. It refers to the outward or external manifestation of the obligation. o o o

Sources of obligations Art 1157 Obligations arise from: o 1. Law o 2. Contracts o 3. Quasi-contracts o 4. Crimes o 5. Quasi-delicts Arts. 1158-62 regulate these five sources Is this list exclusive? o Sagrada Orden v. NACOCO: The Japanese during the war seized the Sagrada Ordens property during the war. Upon liberation, the US seized enemy property, which included Sagradas property. The US entered into a custodianship agreement with NACOCO. Sagrada Orden wanted to collect rentals from NACOCO. Issue: is there an obligation to pay rentals to Sagrada? HELD: No obligation to pay rentals. The court, to arrive at this answer, the court looked at the five sources of obligations there was no contract, quasi-delict, no provision of law that requires payment of rental, crime, or

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quasi-contract. The implication the court forwarded is that this is a closed list. But is it, really? Or should it, really? o Many commentators believe it is not exclusive. What are the other obligations? o Public offer is a sixth source of obligation, for instance (auslobung in the German code or the unaccepted offer). A person who by public notice advertises an award in exchange for a particular result is bound to grant this award. Ex. Proctor and Gamble announces on TV: For 30 wrappers of Tide, you get a glass imported from Switzerland. Offer good until Feb 28, 2011 only! X saw this advertisement, and on Feb 27, 2011, presents 30 wrappers to the P&G office. Issue: is there an obligation here? Held: yes. There is a public offer here. Ex. X left his important papers inside a cab. X advertised that whoever returns his papers will get a P20000 reward. There is a public offer here. Some commentators say there are only two sources: law and contract. Some say: laws and acts of persons (whether voluntary or involuntary). What is the nature of a contract as a source of obligation? o What the contracting parties establish has the force of law between them, and must be complied with in GF. They are free to enter into any contract, provided the stipulations do not violate Art. 1306. In general, there is no specific form needed. o How must compliance be done? 1. It must be complied with according to its terms ( ius civile pacta sunt servanda) 2. And according to good faith (ius gentium bona fide). What is the general rule for obligations arising from delicts (crimes)? o If you commit a crime, you are liable both criminally and civilly, except if there is no private offended party. Distinguish a quasi-delict from a contractual obligation:

Quasi-delict only arises when there is a violation. The breach itself gives rise to the obligation. o In contractual obligations, the obligation precedes breach and is not dependent on one in order to exist. Are quasi-delicts and contracts mutually exclusive? o No. o They can co-exist separately. Ex. a bus and car collided, and a bus passenger suffered injuries. The cars driver was a minor and incompetent driver. The passenger sued them all. The liability of the owner of the bus and bus driver rests on contract. The fathers responsibility for his childs act is based on quasi-delict. o They can also overlap. Ex. A bus driver drives recklessly and the bus hits a tree. A passenger is injured and sues. The bus driver is liable based on quasi-delict or crime (criminal negligence). The bus company is liable based on contract of carriage or quasi-delict (negligence is selection and supervision of driver). You are driving a car. Your car gets into an accident with a bus. Who do you sue? What are your options? o 1. Bus driver o 2. Bus company o 3. Sue both because theyre joint tortfeasors, and thus solidarily liable Do you have to prove negligence when you sue under quasidelict? o Yes, you have to prove negligence of the bus driver. It is not presumed. Do you also have to prove the negligence of the bus company? o Yes, in the selection and supervision of the bus driver. (Culpa in eligiendo, culpa in vigilando) o This is a rebuttable/disputable presumption. As opposed to conclusive and quasi-conclusive presumptions

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In a situation where damage or injury is caused to a party, and there is a contract between him and the person who caused the damage, there is no question he can sue under contract. But can he also sue under quasi-delict? o There is an old line of SC decisions in this country which says that you cannot sue under quasi-delict if there is a contract. There is some basis for this, because Art. 2176 says that the act or omission must occur when there is no pre-existing contractual relation between the parties. o There is, however, the theory of concentric circles (the smaller circle of contract is always within the bigger circle of quasidelict). So if you sue under quasi-delict, you are disregarding the contract between the parties. This is valid. o You can sue under quasi-delict if it is the tort breaches the contract. If an act that constitutes breach of contract would in itself constitute the source of a quasi-delictual liability had there been no contract, then there is breach of contract through tort. o So you can choose to sue under quasi-delict or contract. Theory of vicarious liability: o If you sue under quasi-delict and you choose to sue the company and not the employee, you are really suing under Art. 2180. o This is actually a wrong term because vicarious means you are answering for the liability of someone else. o But the theory under 2180 is that the company/employer itself is negligent as well.

Nature and effect of obligations What are the kinds of prestations? o 1. To give To give a determinate thing To give a generic thing o 2. To do o 3. To not do What is the primary obligation in giving a determinate thing? The accessory obligations? o Primary obligations give what must be given

Accessory obligations: 1. After constitution of obligation and before delivery: take care of the thing with diligence of GFF Except when law or stipulation requires another standard If the thing is damaged, debtor is liable for damages 2. Account and deliver to creditor the fruits of the thing from the time of obligation to deliver What is the nature of the right of the creditor? o Before delivery, merely personal o Upon delivery, real o A sold B a mango orchard to be delivered Jan 1. A did not deliver on Jan 1, and instead sold fruits to C, a buyer in GF. B sued for specific performance and won. Can B recover the fruits? As against A, yes. But as against C, no because Bs right is merely personal, not real. He can sue A for the fruits value. 3. To deliver accessories What are the creditors remedies for an obligation to give a determinate thing? o 1. Specific performance o 2. Equivalent performance damages Either exclusively or in addition to specific performance Rules on improvement, deterioration, and loss o When do these rules apply requisites? 1. Obligation has suspensive condition (1189), resolutory condition (1190), or a term (1194) 2. Obligor is obligated to deliver a determinate thing

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3. There is improvement, loss, or deterioration before the fulfillment of the condition or arrival of the period 4. The condition is fulfilled or period arrives o What are the rules on loss? Without fault of debtor: Extinguish obligation With fault of debtor: Pay damages o What are the rules on deterioration? Without fault of debtor: Creditor must accept the thing (bear loss) With fault of debtor, either: 1. Resolution and damages 2. Fulfill obligation and damages o What are the rules on improvement? Improved by time or nature: Creditor benefits Improved by debtors expense: Same rights as a usufructuary o (579) he can remove improvements if no damage is caused to the property o (580) he may set-off the improvements he made against any damage to the same What are the creditors remedies if the obligation is to give a generic thing? o 1. Specific performance o 2. Substitute performance Done by someone else at the debtors expense o 3. Equivalent performance Damages, by itself Damages in addition to #1 and #2 What are the creditors remedies if the obligation is to do? o Something only the obligor can do (personal): Equivalent performance (damages) o Anyone else can do it:

1. Substitute performance 2. Equivalent performance What are the creditors remedies if the obligation is not to do? o 1. Substitute performance o 2. Equivalent performance Exclusive or in addition SPECIFIC PERFORMANCE EQUIVALENT PERFORMANCE Yes Yes SUBSTITUTE PERFORMANCE No Yes

To give Determinate thing Determinable thing To do Very personal Not very personal Not to do

Yes Yes

No No No

Yes Yes Yes

No Yes Yes

Irregularity in performance What are the types of irregularity of performance? o I. Culpable (1170) 1. Malice (fraud) 2. Negligence 3. Delay o II. Non-culpable Fortuitous event/force majeure MALICE (FRAUD): o Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. o What about waiver of malice already committed? This can be waived. o What is another word for fraud? Malice (This means it is intentional or deliberate evasion of the normal fulfillment of an obligation.)

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Differentiate this from the other kind of fraud mentioned in Obligations and Contracts (1338). Deceit. This refers to vitiation of consent by a party (through insidious words or machinations without which the other party would not be induced to enter into the contract). o Is there a difference in effect? Yes. Deceit makes the obligation annullable, because it preceded the obligation. Malice only succeeds the obligation. The creditor may insist on performance (specific or substitute), resolution, and in either case, damages. o What are the effects of malice? 1. Creditor may insist on specific/substitute performance, whichever applies 2. Resolution [for reciprocal obligations] 3. Damages, either way NEGLIGENCE: o Always refers to the omission of something that should be there required degree of diligence. This differs depending on attendant circumstances. o What are the kinds of negligence? Simple Gross/wanton if it is so reckless, that it practically amounts to malice, and is treated as such o What is the default standard of diligence required? The fictional standard of a good father of a family. (In common law, they refer to it as diligence of a prudent businessman.) o Is waiver of future negligence allowed? Accepted view: waiver of future gross negligence is not allowed, because its tantamount to malice Waiver of future simple negligence is allowed o Effects of negligence? 1. Creditor may insist on specific/substitute performance, whichever applies 2. Resolution [for reciprocal obligations]

3. Damages, either way DELAY/DEFAULT (MORA) o What are the three kinds of mora? 1. Solvendi Delay in performance This applies here, in this provision 2. Accipiendi Delay of creditor in accepting performance. This applies in payment/performance (particularly, consignation). 3. Compensatio morae Reciprocal delay. (Taken alongside mora solvendi) o What is mora solvendi? Non-performance with respect to time, whereas malice and negligence are with respect to quality. o What are the requisites? 1. Obligation is liquidated and demandable 2. Debtor delays in the performance due to dolo or culpa (thus, w/o justifiable reason) 3. The creditor requires performance, judicially or extra-judicially (demand) General rule: demand is required prior to mora solvendi applying (this requirement is called mora solvendi ex persona. If demand is not required mora solvendi ex re). o N.B. Jurado defines these differently his ex persona is delay in obligation to do, and his ex re is delay is obligation to give When is demand not required? o 1. The obligation/law expressly so declares. It is not enough that the contract states specific dates. Mere setting of

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date is not enough. Need to demand still. o 2. Time is of the essence. Look at intent of the parties and attendant circumstances. o 3. Demand is useless N.B. under the law on partnership, a promise to make contributions on a particular date, and then failing to do so, would make the person a debtor of the partnership and is liable for interest and damages o Can you have mora solvendi in negative obligations? You cannot have mora in negative obligations o What are the effects of mora solvendi? Obligations to deliver a determinate thing: place the risk on the debtor Liable for damages Basic remedy: performance or resolution The provision also mentions contravene the tenor of the obligation. What is this? o Just as all-around term that encapsulates all the culpable violations. But actually nothing will get through the three above. What is compensatio morae? o If both sides are in delay, these cancel out. o But when one party complies or is ready to comply with his obligation, delay by the other begins FORCE MAJEURE o What are the requisites of casa fortuito? 1. The cause was unforeseen and unexpected and was independent of human will 2. Impossible to foresee, or if foreseen, impossible to avoid 3. Impossible for the debtor to fulfill his obligation in the normal manner

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4. Obligor must be free from participation in the aggravation of the injury to the creditor If any of the four is not present, there is no fortuitous event If there is a fortuitous event, what is the effect? As a general rule, the debtor is free from liability What are the exceptions? 1. If the parties agree 2. If the law so declares (ex. in delay) 3. Nature of the obligation requires assumption of risk o Ex. insurance Are defective brakes, blown tires, and other similar problems fortuitous events? Our SC is consistent in denying such claim.

Other provisions What are the presumptions re: interest and debt? o 1. If principal has been received without reservation re: interest presume the interest has been paid o 2. If later installment has been received without reservation re: prior installments presume the prior installments have been paid o N.B. these are rebuttable presumptions What are the four types by which creditors can satisfy their claims? o 1. Levy and execution on debtors non-exempt property o 2. Accion subrogatoria Creditor sues on behalf of his debtor, against his debtors debtor Requisites? 1. Creditor has credit against the debtor 2. Credit is due and demandable 3. Failure of debtor to collect his own credit from a third person (through malice or negligence) 4. Insufficiency of assets of debtor to satisfy creditors credit

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5. Right is not intuit personae 3. Accion pauliana Right of creditors to rescind alienations by their debtors to defraud them Requisites? 1. There is credit in favor of plaintiff 2. Debtor performed an act subsequent to the contract giving advantage to other persons 3. Creditor is prejudiced by the debtors act 4. Creditor has no other legal remedy 5. Debtors acts are fraudulent 4. Accion directa Direct action by the creditor against his debtors debtor the creditor acts in his own name Exception to relativity of contracts Give examples: 1. Lessor against sublessee (skip lessee) 2. Laborer against principal (skip independent contractor) 3. Principal against subagent (skip agent) 4. Vendor-a-retro against transferee of vendee (skip vendee)

Types of obligations Classes of obligations? o Pure o Conditional Happening gives birth/death to the obligation o With a term Happening makes it demandable What is a potestative condition? o Something that depends solely on one of the parties What is casual? o Depends solely on chance or a third partys will. What condition will make obligation void?

Suspensive, potestative, and is dependent on the sole will of the debtor the obligation is void. o Ex. I will sell you my car when I feel like it. o Because there is no juridical tie here. What if its a suspensive, potestative condition dependent on the sole will of the creditor? o Ex. I will sell you my car when you feel like it. o Its VALID. In fact, it becomes pure. Obligation that depends on an impossible or illegal suspensive condition o What is contemplated by this provision, original or supervening impossibility? ORIGINAL impossibility. The supervening impossibility does not annul the obligation; it just extinguishes it. o A positive obligation to do an impossible thing: Both the condition and obligation are void. o Negative obligation not to do an impossible thing: Condition is disregarded. The obligation is valid. Ex. X sells Y his house and lot on condition that Y does not transfer the house and lot to California. o Negative condition not to do an illegal thing: Both the condition and obligation are valid. Ex. X sells Y his house and lot on condition that Y does not turn the house into a shabu den. Obligations with supensive conditions: o That X will happen by a certain time Extinguished when time passes Or indubitable that it will happen o That X will not happen by a certain time Take effect when time passes Or indubitable that it will not happen What are the requisites of constructive compliance/fulfillment of conditions? o 1. Intent of the obligor to prevent fulfillment of the obligation o 2. Actual prevention o What is the effect? The condition is deemed complied with.

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To which does constructive compliance apply? Only to potestative conditions or mixed conditions with potestative conditions. Ex. X sells Y a lot, if Y builds a road from the lot to the highway. The only road Y can build must go through Xs property, but X refuses to allow. X sells Y a piece of land in year 2000, subject to the condition that Y pass the Bar examinations. Y passes the Bar in 2005. What is the effect? o The condition is deemed to have arisen in year 2000. o But not fruits. X sold the land to Z in 2001, when the condition had not yet happened. Y sold the land to W in 2002. Ys sale wins out because the sale of X to Y retroacted to 2000. o What is the right of the creditor in the mean time? The creditor can take any action that protects his rights. Ex. He can put an adverse annotation on the title. When can the debtor recover due to payment by mistake? o 1. Performance by mistake o 2. Action for recovery is brought before condition happened or its apparent the condition will not happen What are the rules re: deterioration and improvement and loss before the happening of the suspensive condition? o 1. Fortuitous loss obligation is extinguished o 2. Culpable loss debtor liable for damages o 3. Fortuitous deterioration borne by creditor o 4. Culpable deterioration creditor chooses: A) rescission with damages B) fulfillment with damages o 5. Fortuitous improvement benefit to the creditor o 6. Intentional improvement governed by Art. 579 of the usufruct Can take it out if it does not lead to damage If it would cause damage, no compensation Rule on fruits:

Those produced from the constitution of the obligation to the happening of the condition: not covered by the rule on retroactivity Resolution in 1191 what is the effect? o Mutual restitution. They are returned to status quo ante. 1191 o Compare rescission and resolution: Resolution primary remedy Rescission subsidiary There must be no other remedy It has to be a last recourse o Compare the basis: Resolution non-fulfillment of obligation Rescission based on economic prejudice (lesion) o Resolution can be extrajudicial or judicial. Either is valid, but extrajudicial resolution is always subject to court checks and balance, so its at the risk of the party who resolves. o Is an express provision allowing extra-judicial resolution mandatory? No. Parties can resolve even without an express provision allowing so. Outline of 1191 (resolution): o 1. Only applies to reciprocal obligations Elements: 1. 2 prestations arising from same source 2. Each prestation designed to be the counterpart or equivalent of the other Ex. Contract of sale o 2. There is a tacit resolutory condition: breach o 3. The party seeking to rescind must be ready to comply with the obligation, otherwise he is in BF o 4. The injured party can elect resolution even without court action o 5. Effect: mutual restitution What if the other party does not want to return what you have given him, after resolution?

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Go to the court to recover. The action is not for resolution, but recovery, because resolution does not need court action. Obligations with a term/period what is the difference from a condition? o Term is certain, condition is uncertain. They are alike in the sense that theyre both future. o Only demandable when the day arrives. In case of loss, deterioration, or improvement before the day certain, what do you follow? o Follow the same rules as in suspensive conditions. Anything paid before the day arrives o If made consciously, what is the implication? Nothing can be recovered, because the term was effectively waived. o What if it was made out of mistake? Old code: only fruits and interests can be recovered Now: The thing and the fruits and interests can be recovered. Who is entitled to the fruits received from the constitution of the obligation until the arrival of the term? o One view: fruits belong to the debtor o Other view: fruits belong to the creditor, even if they should not be delivered til the term arrives o RFBs view: The debtor keeps the fruits in the interim. What are the instances when the fruits cannot be recovered notwithstanding premature delivery? o 1. When the obligation is reciprocal and there is pre-payment on both sides (so both things are fruit producing) o 2. The obligation is a loan where the debtor is bound to pay interest o 3. When the period is exclusively for the benefit of the creditor o 4. When the debtor, aware that the period has not yet arrived, pays anyway When is a term for the benefit of the debtor? For the creditor? o Presumption: a term is beneficial for both o What is the consequence of this?

The creditor cannot demand, and the debtor cannot insist on pre-payment o If it is for the benefit of the debtor: I promise to pay you on or before March 2011 this is for the benefit of the debtor. This is an example of a term benefit for the debtor When can the court fix the duration of the period? o 1. If it does not fix a period but a term is assumed to have been intended o 2. If the period entirely depends upon the will of the debtor o Two requisites for the application of this article? 1. Parties did not fix the period but from the nature of the circumstances, it can be inferred that the period was intended by them OR there was a period, but it was made dependent on the will of the debtor 2. The court must decide what period the parties probably intended. The court cannot decide for itself, it must infer the parties intent o Action for 1197 can only be for the fixing of the period. It cannot be for fixing of the period and specific performance at the same time, because the period is presumed not to have arrived yet. o Exception: if a separate action for performance would be only dilatory (i.e. whatever the period was, it already has passed) When can the court fix the period for an obligation? o 1. 1197, par. 1 (above): Parties did not fix the period but from the nature of the circumstances, it can be inferred they intended a period Exceptions: A. 1682, 1687 these are leases payable monthly or yearly; these terminate at the end of the month/year (the K fixed the period) B. Pacto de retro under 1606 the law fixes the period of redemption for four years C. Contracts of service for indefinite period (involuntary servitude)

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2. 1197, par. 2 (above): Period entirely depends on the will of the debtor o 3. 1191, par. 3 This is resolution instead of decreeing the resolution, the court decides to fix a period instead o 4. 1687 nd th Contracts of lease falling under the 2 -4 sentences o 5. 1180 If the debtor binds himself to pay when his means allow him to do so Deemed to be one with a term Supposing the court fixes a period, can the parties agree to extend it further? o Yes, it is contractual freedom. It is a novation there has to be an agreement between the parties, however. When does the debtor lose right to avail of the period? these obligations become pure o 1. After the obligation have been contracted, he becomes insolvent, unless he gives security/guarantee for the debt This is not limited to judicial insolvency o 2. He does not furnish to the creditor the guarantees/securities promised o 3. By his own acts, he impaired said guarantees/securities, and by fortuitous event, they are lost. UNLESS he replaces them with securities just as good. o 4. He violates undertaking in consideration of which the creditor agreed to a period. o 5. He attempts to abscond. o 6. Article 2109 Creditor is deceived as to the substance or quality of the thing Classification according to number of prestations. o Conjunctions 2 or more prestations, all of which must be performed. No special rules apply here. o Alternative 1199-1205 o Facultative 1206 What is an alternative obligation?

Two or more obligations are agreed upon but one, some, or not all have to be performed. o Who has the choice? Depending on whom the parties name as having to make that choice. If there is no choice, the debtor chooses. o How must a choice be made? Any form writing, oral, or implied/passive o Why must a choice be communicated? If it depends on the creditor, duh, because the debtor is not a mind reader. Ong: But even if it depends on the debtor, it gives the creditor the chance to consent to or impugn the choice. RFB does not agree with this, because the creditor has no right to impugn because the debtor is acting within his right. What is the real reason? 1. To give the creditor the chance to prepare for acceptance. 2. Because once the choice is communicated, it is irrevocable and the obligation ceases to be alternative Implications when debtor has right of choice? o 1. Limitation of choice What if there is one choice left due to the fortuitous event? The debtor has no choice but to perform it What if is limitation of choice left due to the creditors acts? Right to resolution, with damages. o 2. Own fault If all of the things are lost due to the debtors fault? Creditor entitled to damages If some of the things are lost due to the debtors fault? Can perform what remains

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3. All lost If all are lost due to fortuitous event? Obligation is extinguished If all but one are lost due to fortuitous event, and the last one lost due to debtors fault? Creditor can demand damages. If all but one are lost due to debtors fault, and the last one lost due to fortuitous event? Obligation is extinguished Implications when creditor has right of choice? o 1. Some lost If some lost due to fortuitous event? Perform what remains If some are lost due to debtors fault? Creditor can ask for performance of any of them or value of one of them + damages If some are lost due to creditors fault? Creditor can choose from remainder o 2. All lost If all are lost due to debtors fault? Creditor can choose value of any of them + damages If all lost due to fortuitous event? Obligation extinguished If all lost due to creditors fault? Obligation extinguished What is a facultative obligation? o There is only one obligation agreed upon, but the debtor has the right to substitution. o What is the difference from alternative obligation? If one or some of the obligations are impossible or illegal, then there can still be performance of the others. In facultative, if the principal obligation is impossible or illegal, then the obligation is extinguished o Who has the right to substitution? Always the debtor.

What if through the debtors fault, the principal prestation is lost? Can you compel him to perform the substitute obligation? No. You cannot compel substitution it always belongs to the debtor as a choice. But you can ask for damages. What if the substitute prestation is lost due to the debtors fault, and then before the due date, the main prestation is lost due to fortuitous event? You cannot compel performance, unless there is abuse of right. Because even if the substitute prestation has not been lost, loss of the main prostation due to fortuitous event will extinguish the obligation anyway.

What is a joint obligation? (or mancomunada or pro rata) o The debtors are liable only for a proportionate part of the debt o Or the creditors are entitled only for a proportionate part of the debt What is a solitary obligation? (or joint and several, in solidum, or solidaria) o Debtors can be held liable for the entire part of the debt o Or the creditors can demand the entire part of the debt o What does individually and jointly mean? Solidary o Where there are several debtors and the obligation mentions a singular (I or notice to me) and then signed by several people, what does this mean? Solidary What is the essential nature of jointness? o Active joint (many creditors, one debtor) You have as many obligations as creditors multiplied by debtors o Passive joint (many debtors, one creditor) o Mixed joint (many debtors, many creditors) What is the essential nature of solidarity? o Active There is mutual agency, up to a certain point (because if there are multiple creditors, and one collects, he must deliver

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what is not his. So its not complete agency because he keeps some for himself) o Passive There is mutual guarantee among the multiple debtors, as to the single creditor o Mixed solidary What is the presumption? o In favor of joint obligations. When is there soldarity? o 1. When the law so states (ex. joint tortfeasors) o 2. When parties stipulate o 3. When the nature of the obligation demands solidarity What is the effect of demand by any of the solidary creditors? o The debtor may pay any of the creditors, but if any demand, judicial or extrajudicial, is made on him, he must pay only the one demanding payment o What is the problem here? If one of the creditors demands, but fails to follow up on it, the rest cannot demand anymore. The debtor will get off scot-free. o What if the debtor paid the wrong creditor (non-demanding creditor)? Can the demanding creditor still demand? He can only recover the amount the whole obligation minus the share of the creditor whom he paid. In effect, the debtor pays a little less than twice the amount o Commentary: if the debtor paid the share of the wrong creditor, this is fine. The demanding creditor can still recover the whole amount minus the share of the creditor whom he had paid. o What if there are multiple creditors (A B C) and debtors (X Y Z), and A demanded Z. Can B demand X? Yes, and X can pay B. As demand on Z is moot and academic. What is the conflict between 1212 and 1215? o According to 1212, in the case of active solidarity, the solidary creditors can do what is beneficial but not prejudicial

Whereas in 1215, the creditor can perform acts like remission, novation, compensation, or confusion and this extinguishes the debt o Ex. (A B and C) are soldiary creditors, X is the debtor. Can B remit Xs debt? 1212 disallows this because Bs remission is prejudicial to A and C. 1215 seems to allow it. o How do you reconcile these? The remission was a true remission. The debt is extinguished. But B will be liable for A and C for their shares. A remits one of the solidary debtors shares. o Can A go against one of the other debtors for the remaining amount? Yes. o Can A go against the debtor whose share he remitted for the remaining amount? Yes, because that debtor can recover from the rest anyway. o One of the other solidary debtors becomes insolvent. Will the debtor whose share was remitted share in covering for the insolvent debtors share? Yes. The remission only extended to that debtors original shares, and not to that insolvent debtors shares which has to be covered for now. What defenses are available to a solidary co-debtor? o 1. From nature of obligation o 2. Personal to him o 3. Personal to a co-debtor What is the effect of each of these defenses? o Nature of the obligation total defense (ex. the obligation is void because the prestation is illegal) o Person to him partial (ex. there is a special term or condition as to him) o Person as to a co-debtor partial (ex. when the co-debtor entered into the obligation, he was insane)

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What is a divisible obligation? o One susceptible of partial performance o It does not follow that because the object of the prestation is divisible that the obligation is also divisible What is the general rule? o Obligations are indivisible, as a general rule because the law says so When are obligations divisible? o 1. Parties provide so o 2. Nature of the obligation necessarily entails performance in parts (Ex. 1225, par. 2 first clause) o 3. The law provides otherwise See these in payment or performance under the topic of indivisibility of payment Obligations with a penal clause: o This is especially common in construction projects o Sometimes there is an incentive too o What is the nature of the punishment? Civil punishment. Usually a penalty or a fine. o Purposes? 1. To provide for liquidated damages, saving him the trouble of having to prove damages 2. To strengthen the coercive force of the obligation o What is the safeguard? The courts can reduce it if unconscionable o Characteristics? 1. Subsidiary Only upon non-performance can the penalty be demanded, nothing else Debtor cannot save himself from performing the obligation by paying the clause Exception: cumulative, when both the principal obligation and the penalty can be demanded 2. Exclusive It takes the place of liquidated damages.

When are the cases when both the penalty and actual damages can be demanded? o 1. Express stipulation o 2. Debtor refuses to pay the penalty o 3. Debtor is guilty of fraud in the fulfillment of the obligation (fraud as malice) Pamintuan: There was an obligation with a penalty clause. It called for liquidated damages or penalty in the form of 100K. There was fraud in the fulfillment of the obligation. The aggrieved party was able to prove actual damages in the amount of 190K. HELD: Since the amount of actual damages is bigger (190K), it absorbs the 100K. So if greater, it absorbs the penalty. BUT this is wrong. Country Bankers: interpreted the rule correctly. The aggrieved party can collect BOTH, without absorption.

Extinguishment of obligations What are enumerated? o 1. Payment o 2. Loss o 3. Condonation/remission o 4. Confusion/merger o 5. Compensation/set-off o 6. Novation Is this an exclusive enumeration? o Its not. What else are there? o 1. Death, for certain obligations (purely personal) o 2. Renunciation by the creditor o 3. Compromise o 4. Arrival of resolutory term o 5. Mutual desistance/dissent Ex. Landlord and lessee agree to cut short the lease o 6. Unilateral withdrawal Ex. partnership

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o o o o PAYMENT

7. Change of civil status 8. Rebus sic stantibus 9. [spaced out] 10. Judicial insolvency

Payment or performance: (1232-1251) o This is the normal way of extinguishing an obligation o Distinguish payment from performance. Payment is the proper term for obligations to give Performance is the proper term for obligations to do o Outline this provision: I. As to prestation Identity Integrity Indivisibility II. As to parties Payer Payee III. As to time/place o Special forms of payment: A. Dacion en pago B. Imputacion C. Cession D. Consignation Requisites of payment? o For the prestation: 1. Identity 2. Integrity 3. Indivisibility What does identity mean? o The very thing itself must be done or delivered o If its a specific thing? Cannot compel the creditor to receive some other thing, even if its the same value Cathay Pacific: Business class has been fully booked, so X was being upgraded to first class, but X

refused. Cathay bumped them off. X sued for damages. HELD: Won, because you can demand the very thing to be done or delivered even if the alternative was superior. o If its a generic obligation? Cannot demand what is superior and cannot be given what is inferior. What is the special rule on money debts? o Made in the currency stipulated N.B. There was a time when you cannot stipulate currency other than peso, but now you can. o If not possible, whatever is legal tender in the Philippines What about payment in negotiable paper? o General rule: payment of money debt must be in legal tender o Seneris: Managers check same as legal tender Corrected in subsequent cases which said that managers, cashiers, or certified check is not legal tender and can be rejected by the creditor o BUT the creditor can accept, and if he does, this payment is only provisional. o X issued a check to Y or order. Y endorsed it to Z. Z lets it go stale and he goes to the depositary bank and gets refused. This is the case where due to the creditors fault, there was prejudice. Namarco: Impairment has to be by someone else, because if it was Y who impaired, X can just issue again. Rule on inflation or deflation? o It must be extraordinary there must be a declaration from the Bangko Sentral. What are the exceptions to the requirement of identity? o 1. Dacion en pago o 2. Novation What does integrity mean? o One must deliver the whole prestation o Exceptions to integrity? 1. Substantial performance in good faith

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2. Waiver by the debtor/obligee 3. Application of payments/imputacion (several debts are equally onerous) What does indivisibility mean? o Performance must be in one act o Exceptions to indivisibility? 1. Waiver/agreement between the parties 2. Prestations that necessarily entail partial performance 3. Cases when the law itself provides for divisibility: A. Debt is liquidated in part and unliquidated in part (1248) B. Joint divisible obligation (you have as many obligations as creditors divided by debtors) C. Solidary obligation where the debtors are bound under different terms and conditions D. Compensation, where there is a balance left E. Work is to be delivered partially F. Where there are several guarantors that demand division (2065) G. Impossibility or difficulty of single performance o This is an equity measure The payor (1236-8) o Who can the payor be (and the payee cannot refuse)? The debtor/obligor himself Debtors heir or assignee Debtors agent (provided there is proof of agency) Anyone interested in the fulfillment of the obligation (ex. guarantor) o Who can the payor be with the payees consent? Anyone. o What is effect of payment by a third person, if accepted?

If it is done with the debtors consent, then there is subrogation. The one who pays becomes the creditor and he can go after the debtor. Exception: if the third person intended it as a donation. What if it is without the debtors consent? Payment, but only to the extent of the benefit. Ex. X has a debt to Y for P70K. Y reduced the debt to P50K. Z did not know about this, so Z paid Y P70K on Xs behalf. How much can Z demand from X? o Only P50K. o [Beyond topic: Z can demand as the P20K from Y as solutio indebiti] Who can you pay? 1. Creditor/obligee 2. His successor or transferee 3. Agent 4. Third person, as long as: o It redounded to the creditors benefit, and the payment is good only to the extent of the benefit o When is the benefit deemed to be total? 1. After payment, the third person acquires the creditors rights 2. Creditor ratifies payment to the third person 3. By creditors conduct, debtor was led to believe third person had authority to receive payment 5. Anyone in possession of the credit o Ex. NIL

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What if the debt has been garnished? The payment is no good, provided that the notice of garnishment has been served on the payee. This is because the funds are held in escrow on behalf of another person. When is time/place of payment? o Time when it is due Generally, when there is judicial or extra-judicial demand Except the three exceptions on mora solvendi ex re o Place Primary rule: stipulated place Secondary rule: place where the thing was located at the time of constitution of obligation (only if the obligation is to deliver a determinate thing) Tertiary rule: (for instance, if it is a generic thing, or an obligation to do) debtors domicile 1. Dacion en pago (dation in payment) o Filinvest: The delivery and transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an obligation. o Go: A special form of payment by virtue of which the debtor offers another thing to the creditor who accepts it as the equivalent of payment for an outstanding debt. o Note: There is no requirement that it must be to satisfy a money debt. It can be for some other obligation. o What is the legal effect, as stated before? The debtor becomes the seller, the creditor becomes the buyer, and the debt becomes the purchase price Since it is governed by the law of sales, there are implications: warranty against eviction, etc. This has been criticized precisely because of this. o What is the other point of view? Dacion en pago is a novation. This has also been criticized because in a novation, the original obligation is extinguished and a new one takes its place. Here, there is no new obligation that takes the place of the old one.

So what is it, really (Castan)? Its a special form of payment. Because it departs from the rule on identity o To what extent is the obligation extinguished? To the extent of the value of the thing given Unless the parties agree on total extinguishment generally the parties do o What is the essential requirement? Both parties must consent o What are the requisites of dacion en pago? 1. Performance of a prestation in lieu of payment 2. Some difference between the prestation due and that which is given 3. Agreement between the debtor and creditor that the debt is extinguished by the performance of the substitute prestation 2. Imputacion (application of payment) o What is it? Designation of debt which is being paid by the debtor who has several debts of the same kind to the creditor who is paid o Give an example. X owes Y four debts: 10k, 20k, 30k, 40k. They are all due. X remits 100k to Y. No need to apply the rules on imputacion. X remits 90k to Y. In this case, this is less than what he owes in total. How is the payment applied? See rules below o What are needed? 1. Debtor 2. Creditor 3. Several debts which are due 4. Remittance of a payment which is less than the total o How do you apply the amount paid to the several debts? Primary rule apply according to the agreement of the parties (1)

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Next the debtor may apply if there is no agreement, subject to rules on indivisibility of performance (2) What if the debtor does not apply? The creditor may apply (3) What if neither the debtor nor creditor applies? Apply to the most onerous first. (4) Ex. interest-bearing debt > non-interest bearing debt Ex. secure debt > non-secure debt Ex. debt with penal clause > without one What if there are equally onerous? Apply proportionally to all (5) o What makes imputacion a special form of payment? It departs from the rule on indivisibility and integrity 3. Payment by cession o When does it apply? When there is one debtor and many creditors. o What happens? The debtor turns over all his assets to the creditors, allows them to sell the assets, and then the creditors divide the proceeds proportionally o Does cession require creditors acceptance? Yes. o Does ownership over the thing pass to the creditors? No, they just receive authority to sell. As opposed to dacion en pago, where ownership transfers. o What is the extent of extinguishment of the debts? Only to the extent of the proceeds. Unless there is an agreement that the entire debt is extinguished. o Why is it a special form of payment? Departs from integrity and indivisibility o Does this contemplate voluntary or legal cession? Voluntary. It is extra-judicial.

It is legal if the debtor goes to court and applies for public auction and receives an acquittal (under Insolvency Law)

4. Consignation o N.B. Tender of payment on consignation is not the correct term o What is this? Act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment It generally presupposes or requires prior tender of payment o Requisites? 1. There must be a debt due 2. Consignation was made due to some legal cause There was a prior tender which was unjustly refused Or there exist circumstances that make a prior tender unnecessary or impossible 3. First notice of consignation given to interested parties 4. Actual deposit with court 5. Second notice given after consignation o What is a tender? Manifestation made by debtor of his desire/willingness and ability to make immediate payment o When is prior tender dispensed with? 1. Creditor is absent or unknown or does not appear in place of payment 2. Creditor incapacitated during time of payment 3. When without just cause, he refuses to give a receipt Odd: this still presupposes tender of payment 4. When two or more persons claim the same right to collect 5. Title of the obligation has been lost

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o o

Why is consignation a special form of payment? Departs from requisite of parties What if it is a case of mora accipiendi, where the creditor unjustifiably refuses payment? Go to court and consign it there. (The French and German Codes just provide that the obligation is extinguished. This is probably better and easier.)

LOSS/IMPOSSIBILITY (fortuitous event) When is it loss, when is it impossibility? o Loss, if to give o Impossibility, if to do What happens when loss occurs in an obligation to give a determinate thing (1262)? o The obligation is extinguished Does it apply to an obligation to give a generic thing? (1263) o No. o Genus nunquam perit- the genus never perishes Except: if the thing is deemed contraband before delivery, so the genus perished o Ex. X had an obligation to deliver a sack of rice, and the stocks perished. X just has to buy rice. What about a limited generic thing? o The obligation can be extinguished. o Ex. X entered into an agreement to sell Y one of his cars. If he lost all of them in a fortuitous event, the obligation perishes. What about obligations to do? (1266) o Released from the obligation is the prestation becomes impossible. What do all of these presuppose? o That when the obligation was entered into, the obligation was possible. The loss or impossibility simply supervened. o If the obligation was initially impossible, there is no obligation to begin with. In a reciprocal obligation, one of the prestations is lost under fortuitous event. Does it affect the other obligation? (Ex. X

promised to sell Y his Innova for P1M. It was then lost. Does Y still have the obligation to give the money?) o One view (Germanic view) the entire obligation is extinguished Res perit domino the debtor in effect bears the burden N.B. we generally follow this o Other view (Romanic view) Y still has to pay the money Res perit creditori the creditor in effect bears the burden Exceptions: o 1504 sales of goods: res perit domino applies o 1655 destruction of the thing leased through fortuitous event If total: extinguish lease If partial: lessee chooses between rescission or proportional reduction of lease payment o 1717 contract for a piece of work, where the contractor furnishes the material Contractor bears the loss of the materials if prior to delivery Unless the creditor delayed in receiving the thing to be delivered What is another mode of extinguishment hidden in the folds of this provision? o Rebus sic stantibus When the services become so difficult as to be manifestly beyond the contemplation of the parties, the obligor is excused o Contracts which have stipulations on successive performances (several prestations) or dependent on the future o Must interpreted in accordance with the situation that existed when the obligation was entered into o Requisites? 1. The event of change could not have been foreseen at the time of the agreement 2. Makes the performance extremely difficult, but not impossible What if it makes it impossible?

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You can invoke impossibility of performance o You do not need to invoke rebus sic stantibus 3. The event was not due to the act of any of the parties 4. The K of the obligation was a future prestation To what kind of obligation does it apply? Only to do, but not to give But in the Philippines, it has evolved into including even obligations to give, see Naga Telephone Because it just says obligations in general

What if there is delivery by mistake? The creditor can claim this and rebut the presumption What is the debtors defense in this case? He can claim that he actually paid the debt What is the presumption that gives rise to this presumption above? If the debtor has the instrument in his possession, it is presumed the creditor delivered it to him

MERGER/CONFUSION What is this? o When the debtor and the creditor in the obligation is the same person Requisites? o 1. Takes place between the creditor and the principal debtor o 2. The very same obligation is involved What is the most common cause of merger? o Intestate succession, where you inherit your own debt/credit. Ex. X owes his brother Y a sum of money. Y dies intestate and X receives the credit, so there is confusion. Y has a debt to X. The debt is guaranteed by Z. X assigns the debt to Z. Did remission happen? o No. Z is not the principal debtor, he was just a guarantor. o The guaranty is extinguished, and Z can go after Y.

CONDONATION/REMISSION What is this? o Act of liberality wherein without receiving any equivalent, the creditor renounces the debt o Extinguishes the debt in whole or in part Requisites? o 1. Debt existing at the time the remission is made No need for the debt to be due, as long as it exists o 2. The remission or the waiver must be gratuitous o 3. Acceptance by the debtor o 4. Capacity between the parties to enter into a contract of donation What is the form? o If it is express remission, it must follow the rules on donations as to form o If it is an implied remission, and thus not governed by any form. (Here, the creditor just does not collect) In case there is a debt evidenced by a private document and then later on, it is voluntarily surrendered by the creditor to the debtor, what is the implication? o The creditor is impliedly remitting the obligation Because he will lose his proof to collect o It does not apply to a public document because there will be a copy of the document in the notarial archives

COMPENSATION/SET-OFF What is this? o Concurrent amount of two persons who in their own right are reciprocal debtors and creditors of each other How similar is this to merger? o There are at least two debts in both, but in merger, it is concentrated in one person. In compensation, in two persons. What are the kinds of compensation? o 1. Legal compensation (1279) Automatically when all requisites are present o 2. Facultative compensation

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Can only be claimed by one party, but not the other (READ 1287-8) o 3. Conventional/contractual compensation Parties agree to compensate, even if the requisites are not complete (1282) o 4. Judicial compensation By means of court order/decree What is legal compensation? o 1. Parties are mutually debtors and creditors of each other as principals and in their own right X owed Y 10,000. X lent Ys son 5,000 which the son used for nightclubbing. When the debt was due, X only gave 5,000 claiming compensation. Correct? No. Compensation must be between two parties who are mutually creditors and debtors of each other. Regardless of how the son spent the money, hes not part of the K. o 2. Both debts consist of sum of money, or fungible goods of the same kind/quality Note: it must be fungible the code wrongly says consumable o 3. The two debts are due o 4. They be liquidated and demandable Liquidated the amount is determined already o 5. Neither of the debts must be garnished o 6. Must not be prohibited by law Conventional requisites? o 1. Each of the parties o 2. The parties agree to mutually extinguish the credit (See 1285) Assignment of credits confusing wording in the provision, so heres the explanation o Y owes a debt to X (credit 1). X owes a debt to Y (credit 2). In any other case, when both debts fall due, there is automatic compensation. This is not the concern of 1285.

But now, before legal compensation takes place, X assigns to A credit 1. So for credit 1, A becomes the new creditor. There are three possibilities: 1. The assignment was with Ys consent A goes against Y when the assigned credit becomes due. Can Y set up against A credit 2 (what X owes Y)? o No, because Y consented to the assignment. 2. The assignment was with Ys knowledge, but without his consent A goes against Y. Can Y set up against A credit 2? o Yes, as long as credit 2 existed by the time credit 1 was assigned. Does not cover subsequent debts. 3. The assignment was without Ys knowledge A goes against Y. Can Y set up against A credit 2? o Yes, as long as it arose before he learned of the assignment Facultative compensation o 1287 when legal compensation does not automatically take place 1. Deposit X deposited 1000kg rice with Y (depositary). In another unrelated transaction, Y owes X 1000kg rice. There is no legal compensation here because one of the contracts is a contract of deposit. But the depositor can claim in his favor compensation. (Facultative in his favor) 2. Commodatum 3. Support o 1288 one of the debts arises from civil liability from a crime The victim of the crime from which the liability arises can invoke this

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N.B. usually the creditor is the one entitled to this option (bailor, depositor, recipient of support, victim of crime) When do the modes of compensation take place? o 1. Legal when all the requisites concur o 2. Conventional upon agreement of the parties o 3. Facultative when the creditor entitled to the option communicates his decision o 4. Judicial final judgment Not covered by compensation: o 1. From deposit K o 2. From commodatum K o 3. From support due by gratuitous title o 4. Obligations from criminal offense o 5. Taxes, fees, duties due to government o N.B. what is common is that these are not debts per se

NOVATION When does it arise? o 1. Changing object or principal conditions o 2. Changing the debtor o 3. Subrogating third person to rights of the creditor Types? o 1. Subjective/personal novation Change in one or more parties Active subjective change in person of creditor Passive subjective change in person of debtor Expromission Delegacion o 2. Objective/real novation Change in the object or in the principal conditions o 3. Mixed novation Requisites of novation? o 1. Previous valid obligation Includes voidable o 2. Agreement by the parties to the new obligation o 3. Extinguishment of the old obligation This is actually a consequence

o 4. Validity of new Two types of novation? o 1. Express o 2. Implied The two obligations must be incompatible What is expromission? o The consent of the creditor and the new debtor are required, but the consent of the old debtor is not required o X owes Y 50000. Z approaches Y and tells him that he will pay the debt. Is this valid? Yes. o Consequence? The release of the old debtor is absolute, even if the new debtor becomes insolvent. What is delegacion? (conventional subrogation) o The consent of all three creditor, original debtor, new debtor are all required. The initiative comes from the old debtor. Delegante old debtor Delegatario creditor Delegado new debtor o X owes Y 50000. X approaches Z to ask him to pay for his debt. Y agreed. Is this valid? Yes. o Consequence? The old debtor is absolved, in general. Exceptions: 1. If the new debtor was already insolvent at the time of the novation AND 2. Such insolvency was known to the old debtor or public knowledge o What about assignment of credit, do you need the consent of all three parties too? No. Just the old creditor and the new creditor. The consent of the debtor is not required. He must just be notified. When the principal obligation is extinguished, are the accessory oligations extinguished too? o As a general rule, yes. (Art. 1296)

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So pledge, mortgage, antichresis, guaranty, etc. are extinguished. o Exception? When there is benefit for a third person (stipulations pour autrui) o What is problem, as to subrogation? In subrogation, Art. 1303, the guarantors, sureties, mortgagors, etc. continue to be bound. How to resolve the conflict Art. 1303 is the exception to 1296. It only refers to one kind of novation: active subjective novation. (When the change is just from one creditor to another.) Distinguish conventional subrogation from legal subrogation: o Conventional with consent of original creditor, new creditor, and debtor Distinguish from assignment of rights: In assignment, no need for consent of the debtor Assignment doesnt extinguish the old obligation and create a new one; it is just a transmission of rights. Any vice in the obligation carries over o Legal by operation of law due to acts of the new creditor When is legal subrogation presumed? 1. Creditor pays another creditor who is preferred even without debtors consent 2. Third person not interested in the fulfillment of the obligation pays the debt with the debtors express or tacit approval 3. Even without knowledge of the debtor, person interested in the fulfillment of the obligation pays without prejudice to confusion as to the latters share

CONTRACTS

Definition of contract? o Meeting of the minds between two or more parties o Can one contract with oneself? Yes, an auto-contract one person acting as two parties. (Ex. an agency to borrow money: he can also act as the lender) This is why party is the proper term. Characteristics of obligations? o 1. Obligatory force o 2. Mutuality Performance cannot be left to the will of one of the parties o 3. Relativity o 4. Autonomy of parties Elements of contract? o A. Essential 1. Consent 2. Subject matter 3. Cause o B. Natural Those incorporated by law into the contract automatically Ex. Warranties in sales (against eviction, of fitness, etc.) Ex. Right to resolve in reciprocal contracts o C. Accidental Need to be stipulated by the parties Ex. Purchase price in sales Ex. Conditions for performance of the contract Classification of contracts? o A. Degree of dependence 1. Preparatory One intended to lead into another K (ex. K of agency) 2. Principal Complete in themselves

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3. Accessory Cannot exist alone (ex. mortgage) B. According to perfection 1. Consensual Most Ks are consensual o Ex. Sales 2. Real Perfected by consent + delivery of the property o Ex. deposit, pledge, commodatum 3. Formal Need form for validity o Ex. donation of property C. According to purpose [just theoretical] 1. Transfer of ownership 2. Conveyance of use 3. Rendition of service D. According to subject matter 1. Involving things 2. To render service E. According to the nature of the obligation produced 1. Bilateral 2. Unilateral Ex. commodatum F. According to cause 1. Onerous 2. Gratuitous/lucrative Implication? Can determine degree of diligence required. For instance a gratuitous deposit requires less diligence G. According to risk 1. Commutative Exchange of value, so there is no risk 2. Aleatory Contract of risk/chance/hazard o Ex. buying a lotto ticket

H. According to name 1. Nominate Ex. sales, lease, etc. 2. Innominate Do ut des I give, you give Do ut facias I give, you do Facio ut des I do, you give Facio ut facias I do, you do What is autonomy of will? o Generally, you can enter into contracts depending on what you want o This principle, however yields to various restrictions: 1. Law 2. Public policy 3. Public order 4. Morals 5. Good customs What is the rule on usury? o Its now not a crime anymore. o The only limit is that it is not unconscionable o When is it unconscionable? It changes from decision to decision. Some decisions say that 5.5%/month is invalid, while some say 7%/month is valid Latest Macalinaw v. BPI: Interest rate of the credit card is 3%/month (36%/annum). HELD: Any interest of 3%/month and above is invalid, and will be reduced to 1%. What is mutuality of contracts? o The K must bind both contracting parties. The legal tie must be mutual. o What about contracts with escalation clause (adjustment of interest)? It is valid as long as it is tied to a factor not entirely dependent on the will of the creditor (purely potestative) What is relativity of contracts?

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Acts between two persons cannot affect, positively or negatively, a third person o Third persons neither can sue or be sued for the benefits of the contract o What if the contract is transmissible? If the contract is transmissible, it can pass on to heirs, assignees, or successors-in-interest o When do contracts affect third parties? 1. Stipulation pour autrui 2. Accion pauliana 3. Accion directa 4. Contracts involving real rights Ex. mortgages, etc. What is a stipulation pour autrui requisites? o 1. Contracting parties clearly and deliberately conferred a favor/benefit to a third person Not merely incidental o 2. The stipulation in favor of a third person is a part, not the whole of the entire contract o 3. It must not be compensated by any obligation whatsoever o 4. Neither of the contracting parties must bear the legal representation of the third party o 5. The third party communicated his acceptance to the obligor before the revocation by the original parties Give examples showing/not showing stipulations pour autrui. o There were squatters living in Krus na Ligas, near UP. For humanitarian considerations, UP entered into a contract with the QC government to develop the area. The contracting parties are QC and UP. The informal settlers were third parties. Later on, there were snags in the arrangements, so the squatters filed a suit under the contract to carry out the project. HELD: it is a stipulation pour autrui N.B. the most important element is the clear and deliberate benefit conferred o There was a sale of two parcels of property which was on a precipice. The sale was eventually rescinded because the land was unsuitable. The commission agents protested, saying that their commissions must be paid nonetheless, suing under

the contract. HELD: not a stipulation pour autrui because there was no deliberate benefit intended for the agents. When can you sue a third party for damages due to tortuous interference? o 1. There is a valid contract o 2. Knowledge by the third party of the existence of that contract o 3. Interference by that third person on the contractual relationship without legal justification Is it required that third person act maliciously? No. As long as it was deliberate. For instance, in an old case, the Augustinian fathers thought an old lady was being cheated in a contract so they induced her to break it. N.B. So good faith/bad faith is not a measure it is legality/illegality of justification that prevails What if one enters into a contract in the name of another without authority or beyond the scope of his authority? o The contract is unenforceable

Consent What are the elements of consent? o 1. Plurality of subjects o 2. Capacity o 3. Intelligent and free will o 4. Express/tacit manifestation of the will o 5. Conformity of the internal will and its manifestation What are the requisites of a valid offer? o 1. Definite o 2. Complete o 3. Intentional What are the requisites of acceptance? o 1. Unequivocal o 2. Unconditional If it is qualified, it is a counter-offer What about an amplified acceptance?

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It may or may not be an acceptance. It depends on the circumstances o Is silence acceptance? Depends on the circumstances. For instance, X delivers rice to A and B, who own rice stalls. X delivers rice to A every Sunday, and when A is not there, his employee takes the rice. There is no such prior arrangement with B. If both As and Bs employees were silent when X delivered rice to them, A is deemed to have accepted, and B not. What is the cognition theory of acceptance? o Offer and acceptance take effect only from the time knowledge is acquired by the other person. If during the intervening time, the party dies or becomes insane, the acceptance (or offer) has no effect. o X made an offer in Davao on Feb 1, through mail to Y, who received it Feb 5. Y accepted the offer Feb 5 through mail to X. On Feb 8 Y becomes insane. The mail reaches X on Feb 13. Is the offer accepted? No, under the cognition theory. o X made an offer in Davao on Mar 1, through mail to Y, who received in Mar 3. On Mar 4, Y sent his acceptance to X. On Mar 5, X countermanded the offer. Both the acceptance and countermand are in the mail. Which prevails? Whichever reaches the other party first. Can an offeror withdraw his offer even if he gave the offeree a certain time to accept? o In general, yes. What is the exception? o When there is an option contract, which is supported by a separate consideration. o Give an example. S is offering to sell B a car. B asked for 30 days to think about it and paid S P5000 for this period. This is a distinct contract an option contract.

What if S sells the car to someone before the period is done? S is guilty of contractual breach. What if there is no consideration given? S can withdraw the offer anytime. Does S still have to communicate the withdrawal? o No. There is no separate option contract that requires him to do so. Original facts (B gave consideration). Within the 30 day period, B told S that he wanted to buy the car. S refused. What is Bs remedy? Specific performance, because upon communication of the option, there is an acceptance of the offer already. (Carceller v. CA) What if S had withdrawn the offer contrary to the period or has already sold the car to X when B communicated his acceptance what is Bs remedy? o Recover damages from S. o He cannot sue for specific performance because X is an innocent purchaser. Differentiate an option contract from the Right of First Refusal (RFR): o RFR is the right to have first opportunity to purchase, or the right to meet any other offer. o An option contract limits the offerors power to revoke the offer. o What is determined in an RFR? What is undetermined? The object is determined. The terms are not. Does RFR need separate consideration? o Equatorial v. Mayfair says no. RFB disagrees with this. o Lintonjua v. CA says that the consideration for the loan or mortgage is already the consideration for the RFR. Does RFR allow actions for specific performance?

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Yes. The actual vendee may be required to sell the property to the holder of the RFR at the price which he bought it for. (See Equatorial and Paranaque Kings as examples where there was specific performance to enforce a RFR. This can be differentiated from Ang Yu which didnt allow specific performance of the RFR because in Equatorial and Paranaque Kings, the right was integrated into contract in these cases, for lease. Ang Yu didnt stipulate RFR into contract) o Contrast: not allowed for option contracts. What if the one with the RFR refuses to exercise his option? o If the one with the RFR refuses to exercise his option, the seller cannot sell the property to another person on better terms. It has to be equal or more onerous. Who cannot give consent to a contract? o 1. Minors Only the minor can sue to annul the contract. What about a minor who actively misrepresents himself as a non-minor? Can the minor still sue to annul the contract? He still can. If he is too young to enter into a contract, he is also too young to be held in estoppel. o 2. Insane or demented persons, and illiterate deaf-mutes N.B. Different from insanity of in testamentary law Being a deaf-mute is not enough; you have to be illiterate too. What is the exception to the insanity rule? When he entered into the contract during a lucid interval What are the situations where there is vitiation of consent? o 1. Mistake When is mistake as to legal effect a vitiation of consent? If the mistake is mutual and it frustrates the real intent of the parties To which must the mistake of fact refer to?

1. Substance of the thing which is the object of the contract 2. Conditions which principally moved either or both parties to enter into the contract What if mistake is as to identity? Generally, not a ground to annul a contract. EXCEPT if the identity or qualifications is the principal cause of the contract What about mistake as to accounting? It only gives rise to correction

2. Fraud Different from fraud in 1170 It must be dolo causante, or one that has a decisive effect on the giving of consent Requisites: 1. Employed by one party against the other 2. Induced the other to enter into the contract 3. It must have been serious What if both parties employ fraud? No annulment. Compare with dolo incidente? Does not annul the contract because it did not induce the giving of consent The consequence of incidental fraud is merely damages What about dolus bonus? This is tolerable fraud and does not lead to damages (Usual exaggerations in trade, when the other party had an opportunity to know the facts) Art.1340 3. Violence Requisites of violence? 1. Physical force is irresistible 2. It is the determining factor to give consent 4. Intimidation Requisites?

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1. Threat is determining factor to give consent 2. Threat is unjust and unlawful o What if the threatened act is lawful, for instance, You, Mr. X from Surigao Institute of Law, got my daughter pregnant. You better marry her, or I will report to the SC that you got her pregnant? This is a lawful threat, so it does not vitiate consent. o When will there be intimidation even if the threatened act is lawful? When there is no connection between the threatened act and the situation behind it (ex. sell me your house or else I will report the crime I saw you did). 3. Threat is real and serious 4. Threat produces a well-grounded fear that the person making it can and will inflict harm 5. Undue influence What do you consider for undue influence? Consider both the person invoking influence and one being influenced Consider: o Confidentiality, family, relations If the person was mentally weak, ignorant, or financially distressed It must be influence that deprives one of freedom. So it cant be lawful or due influence (ex. parental guidance).

What is the effect of violence if perpetrated by a third person (Art. 1336)? o It still makes it voidable. The contract is still voidable even if employed by a third person who did not take part in the contract. o What about undue influence by a third person? By analogy, same rule. o What about fraud by a third person (Art. 1342)? Does not vitiate consent Unless it led to substantial mistake and it is mutual What are the two kinds of simulation of contract? o 1. Absolute There is no underlying contract, and no intent to be bound What is the effect? It is void, because there is no consent o 2. Relative They intend to be bound, but concealing the real agreement Ex. making a donation to a son seem like a sale as to not make siblings jealous What is the effect? It will be treated in accordance with the rules of the concealed contract

Object Requisites of object of contract? o 1. It must be within the commerce of man, whether existing or in potency o 2. It must be licit o 3. It must be possible At the time of perfection of the contract What if it is impossible from the very start? The contract does not exist because the prestation does not exist What if it becomes impossible in the middle of the contract?

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Extinguishes the obligation 4. It must be determinate as to its kind and determinable as to quantity

Causa What is the causa in onerous reciprocal obligations, like a contract of sale? o For the seller, the payment of the money to him o For the buyer, the delivery of the thing bought What about a remuneratory obligation? o The service performed For donations? o Gratuity or liberality Distinguish object form causa: o Object is what is owed? o Causa the proximate why of the contract. Not the ultimate why, which is motive Requisites? o 1. It must exist o 2. It must be real o 3. It must be licit Is there any instance when failure of the motive will lead the contract to fail? o Yes. o 1. When the motive is stipulated to be a suspensive condition o 2. The realization of the motive is the cause of the contract and there is an intervening serious mistake of fact

Form General rule: no specific form required When is it required? o 1. Donation of property o 2. Sale of large cattle o 3. Antichresis Requires statement of the principal and interest in writing

4. Partnership where real property is contributed 5. Interests in mutuum Must be expressly stipulated o 6. Sale of land by an agent Power of agent must be in writing, else, sale is void o 7. Chattel mortgage o 8. Stipulation limiting common carriers duty of extraordinary diligence to ordinary diligence o Can one party require the other to follow the correct form? No, because that would presuppose a valid contract. There is none here for failure of form. There are cases when form is required but not for validity but for registration. What are these? o Those in Art. 1358 1. Acts and contracts for real rights over immovable property, EXCEPT sales of real property or interest therein, which is governed by the SOF 2. Cession, repudiation, renunciation or hereditary rights or those in CPG 3. Power to administer property or any other power which: Should appear in a public document Or should prejudice a third person 4. Cession of actions or rights from a public document o Failure to follow form makes it valid and enforceable but cannot be registered o Can one party require the other to follow the correct form? Yes. One party can require the other party to follow the correct form needed (since they are valid)

o o

Defective contracts What are the types of defective contracts? o 1. Rescissible o 2. Voidable o 3. Unenforceable o 4. Void/inexistent

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When is it rescissible? o When there is particular economic damage to one of the parties or a third person How does the law treat the contract? o It is intrinsically valid but external factors allow it to be rescinded When is it voidable? o Defect in consent in one of the parties How does the law see it? o Valid until annulled When is it unenforceable? o For lack of authority, or writing, or incompetence of parties How does the law see it? o Cannot be given effect unless ratified When is it void? o Lack of requisites Which can be cured? o Voidable and unenforceable

Rescissible What is rescission? o A process or remedy designated to render inefficacious a contract validly entered into and normally binding by reason of external conditions creating an economic prejudice, either to a party or to his creditors What are the requisites for rescission? o 1. The contract must be rescissible under 1381-2 o 2. Last resort for plaintiff o 3. Plaintiff must be able to return what he would be obliged to return if rescission takes effect Sometimes, there is nothing to return, like a creditor in action pauliana o 4. The object of the contract must not have passed to an innocent third person What are the rescissible contracts?

1. Entered into by guardians when wards suffer lesion by more than of the value of the thing Ex. the guardian of a ward who owns harvest with value of P100K sells it for P80K. Is there lesion? o Yes. Is there rescissible lesion? o No, because P20K is less than of the harvests property. A guardian is judicially appointed. If the sale is made with court consent, what is the effect? There can be no rescission. Sale of fruits and personalties are acts of administration. These do not need judicial approval, so lesion can result. But for sale of real property, for instance, where there must be court approval, there can be no rescission. N.B. its more than not at least o 2. Same, but for representatives of absentees o 3. Disposition in favor of third person in fraud of creditors What is the extent of rescission? Only to the extent of creditor prejudice o 4. Refer to things under litigation if entered into without knowledge of litigants or consent of judicial authority Rescissible at plaintiffs instance o 5. By special provision of law o (1382) 6. Payments made under state of insolvency for obligations to whose fulfillment the debtor would not be compelled at the time they were effected Does this require judicial insolvency? No, just actual insolvency What is the effect? o Return what he may be obliged to return o When does it apply? Only instances #3 and 4 since for the rest there is nothing to return

Voidable

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What are the characteristics of voidable contracts? o 1. Effective unless set aside o 2. It may be assailed only for an action specifically for that purpose Cannot attack it collaterally o 3. It can be confirmed N.B. the law uses ratify confirm is a better term Ratification is for 1403 par. 1 Acknowledgement is for 1403 par. 2 Confirmation may be express or tacit (implied waiver) May the guardian effect the ratification? Yes. o 4. May be assailed only by the party with vitiated consent, his heirs, or subsidiaries What are the requisites of confirmation? o 1. Contract is voidable o 2. Confirmation made with knowledge of voidability o 3. The cause for voidabilty has been removed o 4. The one who is doing so if the one whose consent is defective When will action for annulment not prosper? o 1. If it has been confirmed o 2. Prescription What is the period to file the action? 4 years from the disappearance of the cause for intimidation, violence, or undue influence 4 years from discovery, for mistake or fraud 4 years from cessation of guardianship, in case of minor or incapacitated persons o 3. Loss of the thing due to fraud or fault of person with right to institute proceedings o 4. Estoppel 1400 and 1401 In a voidable contract, upon annulment, there must be mutual restitution (just like resolution and rescission). Are there any instances when the duty of mutual restitution is not present? o The thing is lost due to defendants fault or fraud:

return the fruits, value of the thing at the time of the loss, interest What if it is lost fortuitously? Return fruits and value of the thing at the time of the loss, but no interest What if the thing the plaintiff must return is lost through fault or fraud? Action is extinguished Even if the party was incapacitated. If the party was incapacitated, he has to prove there was no fault or fraud, if he wants the action to prosper. What if it is lost fortuitously? Tolentino: action is extinguished unless the plaintiff offers to pay the value of the thing Caguioa: plaintiff can still recover What is the rule for restitution if one of the parties is incapacitated? The incapacitated person is not obliged to make restitution except insofar as he has been benefited by the thing or price or received by him

Unenforceable What are the kinds? o 1. Entered into in the name of another by one with no authority or legal representation, or acting beyond powers o 2. Both parties are incapable of giving consent What if one becomes capacitated and confirms it? It becomes voidable And if the other does so too? Becomes valid o 3. Falling under the Statute of frauds A. Agreement whereby its terms, cannot be begun within one year from the agreement Refers to commencement, not completion B. Special promise to answer for debt, default, or miscarriage of others Contract of guaranty or suretyship

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C. Agreement made in consideration of marriage except mutual promise to marry D. Sale of chattel/goods/things in action for price P500 or more Unless there is payment of price or delivery of goods E. Agreement for leasing for period longer than 1 year or sale of real property/interest therein Amount is immaterial for real property F. Representation as to the credit of a third person G. (Art. 1443) no express trust concerning an immovable or any interest therein may be proved by parol evidence How does the contract get out of the SOF? o 1. There is a note or memorandum in writing o 2. Subscribed to by the party charged or his agent What are the rules re: Statute of frauds? o 1. Only applies to actions which are for specific performance or breach o 2. Does not make void the contracts falling under the enumeration if not in writing. It just bars action for specific performance or breach o 3. Applies only to executory, and not executed contracts in whole or in part Executory one where there is no performance in either side If either side has performed, then it gets out of SOF (1405 acceptance of benefit) o 4. Cannot be proved by parol evidence. How do you resist a claim on an unenforceable contract? o File a motion to dismiss o Or use SOF as affirmative defense o Or object to presentation of parol evidence during trial Failure to object: waiver Can a third person assail the enforceability of an unenforceable contract? o No, only the parties.

Void What is it? o No force and effect, as if never entered into o Never validated, either by time or ratification Enumeration in 1409: o 1. Cause, object, or purpose is against law, morals, GC, PP, PO o 2. Absolutely simulated o 3. Cause or object could not exist at the time of the transaction This says those whose cause or object did not exist at the time of the transaction. This is wrong, because there can be a contract over a future thing. It must be cause or object could not exist original impossibility. o 4. Object is outside commerce of men o 5. Contemplates an impossible service o 6. Intent of the parties relative to the principal object of the contract cannot be ascertained o 7. Expressly prohibited or declared void by law Characteristics? o 1. No effect whatsoever o 2. No action for annulment necessary because the nullity exists ipso jure Judgment of nullity is merely declaratory o 3. It cannot be confirmed, ratified, or acknowledged o 4. If performed, the restoration of what has been given is in order o 5. Right to set-up defense of nullity cannot be waived What are the special instances of void contracts? o 1490, 1491 ex. contract between husband and wife What is the pari delicto rule (1411-2)? o It literally means in equal fault. What if the act constitutes a criminal offense? o 1. Its a void contract which happens to constitute a criminal offense o 2. If they are in pari delicto: no action for specific performance or restitution for either side both are prosecuted

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3. What if only one party is guilty? For the guilty party, no action for restitution For the innocent party, there can be What if the object/cause is unlawful but not criminal? o 1. If both are guilty, there can be no specific performance or restitution o 2. What if only one party is guilty? For the guilty party, no action for restitution For the innocent party, there can be N.B. So whether criminal offense or not, no action for specific performance. Restitution depends on guilt/innocence. Article 1412-19: exceptions to pari delicto rule o N.B. The parties are in pari delicto, but despite that, due to social considerations, allows one of the parties recovery: o 1. Interest paid in excess of allowable by usury laws o 2. Money paid for illegal purpose, but before it was accomplished or damage has been caused to third persons o 3. One of the parties to the illegal contract was incapacitated o 4. Agreement is not illegal per se but merely prohibited, and prohibition is to protect the party seeking recovery of the money paid o 5. Payment of price beyond maximum price allowed by law for a commodity o 6. Employer and employee voluntarily agreeing on wages below the minimum wage or more hours than allowable working hours (can ask for OT pay) What is pactum commissorium? o The creditor cannot appropriate the things given by way pledge or mortgage, or dispose of them. Contrary stipulation is null and void. What is pactum de non alienado? o There can be no stipulation prohibiting the mortgagor from alienating his own property. What is pactum leonina? o A stipulation which excludes one or more partners from any share in the profits or losses of the partnership is void.

LAND TITLES What are the purpose and advantages of the Torrens system? o 1. Make a title indefeasible o 2. Make it imprescriptible o 3. Make it immune to collateral attacks When is an attack direct? When the object is to annul or set aside the decree of title Can a counter-claim be considered a direct attack on the title? Yes. (Erman v. Erman) o 4. Conclusive (after lapse of period for remedies) o 5. Declares the titled property free from liens and encumbrances not annotated, except: A. Those not required to be annotated B. Unpaid real estate taxes within 2 years prior to purchase (the taxes pre-2 years are paid by the delinquent taxpayer alone) C. Existing: public highways, government irrigation canal; legal right of way under private law; and the like D. Limitations on disposition or use, under law But is registration a mode of acquiring title? o No, its not. There has to underlying basis for title before registration. o Such as? 1. Possession 2. Succession 3. Donation 4. Accretion 5. Sale 6. Acquisitive prescription (10/30 years) Can land registered under the Torrens system and for which a certificate of title has been issued be taken? o No.

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What is the exception? If taken by the Dept. of Agrarian Reform (CARL) Police Power, Eminent Domain, Taxation Who can register under PD 1529? o 1. Those with open, continuous, exclusive, and notorious (OCEAN) possession and occupation Of what? Alienable and disposable lands of public domain What if the land is not alienable (ex. forest or park reservation)? o It cannot be registered. The certificate of title is void. Since when? June 12, 1945 or earlier Possession by whom? The registrant or his predecessors-in-interest o 2. Acquired ownership of private lands by prescription o 3. Accretion What can be acquired? Private lands Or abandoned river beds When is there accretion (requisites)? 1. The deposit is gradual and imperceptible 2. Made through effects of water current 3. Land is adjacent to river banks What does registration do? To confirm and make the title imprescriptible o 4. Acquired ownership of land in any other manner provided by law Who can register under RA 8371 (IPRA)? o Individual members of IP communities, as to ancestral lands (not domain), which they continuously possessed and occupied in the concept of an owner since time immemorial or at least 30 years before 29 Oct 1997 (approval of IPRA) What else is required?

It must not be contested by fellow IPs in the community Which lands are treated as alienable and disposable agricultural lands? Those ancestral lands which are agricultural in character and actually used for agricultural, residential, pasture, and tree farming purposes Including those with a slope 18% or more Until when can this right be exercised? Unless extended, until 29 Oct 2017 o What is the rule on Ancestral Domains? It is communally owned. Registration is with the Ancestral Domains Office of the NCIP, which shall cause notice through publication and subsequent survey. Is this communal ownership the same as coownership under the NCC? No. o What is the relationship of A.D. registration with existing property rights? Existing property rights prevail. o What is the priority as re: natural resources in these Ancestral Domains? The IP groups possess priority rights in using such. Non members of the IP group may develop and use these resources for agreements not exceeding 25 years, renewable for not more than 25 years What is specially required? There must be a formal and written agreement Extractions must be used to facilitate development and improvement of ancestral domains Can a corporation register public land? o No. It can only lease public lands. o But can a corporation acquire private land?

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Yes, as long as it is a Philippine corporation (60% rule). N.B. If land is held by an individual from June 12, 1945 or ealier, it ipso jure becomes private land (akin to #1 in the enumeration) o THUS, if a corporation has personally possessed or is claiming under a predecessor-in-interest who has possessed the property since June 12, 1945, the land is ipso facto converted to private land, which it can own. o Is forest land registrable? No, it cannot be registered. o Who can declassify it? Executive branch of government o Is payment of land taxes sufficient? No. It must be couple with possession in the concept of an owner o If it is not held since June 12, 1945, then what is required apart from adverse possession for the proper period? The claimant must prove, by government act, that the land was classified as public and alienable lands. What is the status of reclaimed lands? o Lands reclaimed by government are not available for sale to private parties unlike other alienable public lands. (Chavez v. PEA) o The general rule that the grant of patent or certificate of title makes alienable land of the public domain automatically become private land does not apply to government units and entities like the PEA. o When then can it become private land? When it is transferred to qualified private parties or government entities not tasked to dispose public lands (unlike the PEA) What properties cannot be registered? o [public lands] o 1. Forest lands o 2. Mineral lands o 3. Grazing lands o 4. Mangroves o 5. Manmade alluvial deposits along a river

N.B. contrast with accretion o [public waters] o 1. Rivers o 2. Lakes o 3. Water sheds o [reservations] o 1. Military reservations o 2. Other reservations o [previously titled] o 1. Previously titled lands What is the process of land registration? o 1. Survey Who performs this step? Survey plan is signed by geodetic engineer Approved by Director of Lands Is this an essential requisite? YES. o 2. File application for registration Where? In RTC where the land is actually situated Can be to MTC is value is 100k or less What to identify? 1. Basis of ownership 2. Identity of Land 3. Adjacent owners 4. Occupants/tenants 5. Encumbrances o 3. Set date of initial hearing o 4. Publication/posting What is the time frame? It must precede the initial hearing or else the court has no jurisdiction Publication: 1. Official Gazette 2. Newspaper of general circulation N.B. both must be done (Director v. CA) Notice:

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1. To all persons whose addresses are known o Within 7 days of publication in OG 2.To DPWH, governor, and mayor if adjacent to road or public highway 3. To DAR, if river, farm, etc. 4. Others, by discretion Posting by ex-officio sheriff: 1. Conspicuous place o At least 14 days before hearing 2. Bulletin board in municipality or city 5. Oppositor files verified opposition When? On or before hearing 6. Otherwise, court issues order of general default What if the oppositor attends hearing but does not file an opposition? 1. Can be declared in default 2. Or can be given extension, after which, failure to comply leads to default 7. Ocular inspection What is checked? 1. Improvements 2. Lot owners 3. Adjacent owners What happens after? The court prepares a report 8. Hearing/trial What must the applicant prove? 1. Proof of publication (jurisdictional matter) 2. Proof of ownership 3. Proof of identity of land What can the oppositors introduce? Rebuttal evidence 9. Decision What are the 3 situations? 1. In favor of applicant

2. In favor of oppositor/s 3. Dismiss case because nobody proved ownership o 10. Court issues order for Decree o 11. Issuance of Decree Becomes incontrovertible after 1 year from issue (because the law allows the remedy of Petition for Review within this period, under PD 1529) o 12. ROD issues OCT What are the remedies from an Order of Default? o 1. Before decision Motion to lift order of default based on FAME o 2. After decision Petition for relief based on FAME What are the remedies from a Decision? o 1. MR on ground that decision is contrary to law/evidence o 2. MNT on grounds of FAME or newly discovered evidence o 3. Appeal, on ground that it is contrary to law/evidence o When must any of these be filed? Within 15 days from receipt of decision What are the remedies from a Final Judgment? o (N.B. decision becomes final after lapse of 15 days) o A. When a decree has not been issued 1. Petition for relief under ROC Rule 38 What grounds? o FAME What are the requirements? o 1. Verified o 2. Filed 60 days from notice but no more than 6 months from entry of decision o B. When a decree has been issued 1. Petition for review under PD 1529, Sec. 32 What grounds? o Actual and extrinsic fraud When may it be filed?

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Within 1 year from issuance of decree Exception? o When there is an innocent purchaser for value When is there an IPV? o 1. No knowledge of defect in title o 2. Payment of just price o 3. Examined sellers duplicate certificate of title 2. Action for reconveyance When do you file this? o If more than 1 year has elapsed Ground? o Extrinsic fraud or breach of trust Exception? o When there is an IPV o What is the remedy then? Action for damages ( value of land + damages) When can it be filed? o 1. Within 4 years of discovery of fraud when there is need to annul fraudulent deed o 2. Within 10 years from breach of implied trust if aggrieved party is not in possession of the land o 3. Imprescriptible from breach of implied trust if aggrieved party is in possession of the land Akin to a quieting of title o 4. Imprescriptible from breach of express trust 3. Action for damages Requisites for award of damages? o 1. Unlawful deprivation of land

2. No negligence of the party deprived o 3. Reconveyance is not possible o 4. Action filed within 4 years What is the effect of a final decision with publication? o It binds all parties in rem (binds the whole world) o How can oppositors and squatters who entered before the decree be evicted thereafter? Writ of possession from the court o What about those who entered after the issuance of the decree? Ejectment suit What is a certificate of title? o It is evidence of title, that the land is registered under the Torrens system o How many copies of the certificate? Original with the ROD Duplicate with the registered owner o What happens when there are conflicting certificates? Earlier one prevails unless it is defective Compare cadastral registration with ordinary land registration: o In cadastral registration, it is the government, through the Director of Lands, that commences the petition and NOT the persons claiming. o Those claiming are merely compelled to go to court to make a claim or make known their interest in the land. What is the procedure in cadastral registration? o 1. Survey conducted President tells Director of Lands to conduct the survey Notice and publication to those with interest and general public Official Gazette Conspicuous place on municipal building bulletin board Copy sent to mayor, barangay captain, and Sanggunian

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Persons claiming interest inform the geodetic engineers of boundaries of claimed land Parcels are designated as lots 2. Petition Filed by Director of Lands (represented by Sol-Gen), filed with RTC, and showing public interest involved. Describe the land and the plan. 3. Notice given (same as usual) Publication Mailing Posting 4. Answer to petition filed by claimant 1. Identity of claimant 2. What is the lot claimed and what is the interest therein or time of possession/manner of acquisition 3. Provide adjoining owners and encumbrances or adverse claims, if any When is a MTD allowed? Already subject to prior patent Or res judicata applies 5. Hearing, judgment, and issuance of decree What are the possible results? 1. Judgment of ownership o Usual remedies allowed o If no appeal performed, court orders LRA to issue certificate of title o Registration of decree by the LRA 2. Declare land as public 3. Order correction of technical description of the land or resolve overlapping titles o For both, as long as no impairment of substantive rights of owners

Actions, dealings, and subsequent registration 1. Amendments of CT o When can amendment be done summarily? 1. Registered interest has terminated

2. Clerical error in certificate 3. No serious dispute as to error or change of status 4. Not amount to reopening 5. Not impair rights of IPV o What if there is substantial change in the CT? It must go through ordinary registration proceeding 2. Reconstitution o `What if the duplicate OCT is lost? File action for replacement o What if the original OCT is lost? File action for reconstitution What is the requirement for this? Petition that notifies occupants, adjacent owners, adverse claimants by publication, posting, and personal notices Otherwise, the reconstituted title is void o What is the special requirement re: IPVs on reconstituted titles? If a title has been reconstituted the buyer must exercise extraordinary diligence to be deemed an IPV o X pretends to be owner of land, files, for reconstitution, obtains reconstituted certificate, and mortgages to Z. Y, the true owner, still has his TCT copy. Does Z have a right through the mortgage? No. Z has no better right than X, especially where Y, the true owner, still has his TCT copy. o When is notice to owners or adjacent lots or actual occupants NOT needed for reconstitution? When the source of reconstitution is the owners duplicate copy thereof 3. Double sale o In a double sale situation, to whom does ownership passes? The buyer in GF who first records the sale in the ROP o What is a notice of adverse claim?

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A measure to protect interest of person dealing over a piece of land, and to warn third persons dealing with that property What is specially required in the notice? It must state how and under whom the right was acquired When is a notice of adverse claim effective? Upon entry in the day book, even if the owners duplicate has not been surrendered What is subsequent registration? o When the land is already titled and you deal with it o When is there registration of voluntary transactions? Once the deed is entered into the day book, the registrant surrenders the owners duplicate of title, and pays fees o Example of voluntary transactions? Sale and mortgage o When is mortgage deemed registered? Entry in the day book, even if it is not annotated at the back of the title NOTE: for involuntary dealings, entry in the day book is enough, even if the title is not surrendered. The reason is obvious: the owner is likely not to surrender his title in an involuntary dealing, unlike a voluntary one. o How long is the life of an adverse claim? 30 days, after which it lapses What must be done and what is the effect? The affidavit of adverse claim must be entered into the day book, so the subsequent buyer is constructively bound If there is a notice of lis pendens or adverse claim, how does it affect the double sale situation? The party seeking to register cannot invoke good faith when there is an annotation at the back of the title Can a private individual bring an action for reversion?

o o

No he cannot. What is the prescriptive period for reversion? None, because its the right of the State to recover properties registered but are not capable of private appropriation

Chain of title Can the buyer have title even if the seller does not? o Yes, on certain situations. This is an exception to the civil law doctrine that the stream cannot be higher than the source. In general, what is the effect of a forged deed? o It is a nullity and cannot serve as just title. Situation 1: X is the registered owner of TCT 12345. X goes to the US and gives title to Y in trust. Y forges Xs signature in the deed of sale in Ys favor. Y gets TCT 12346. Y sells land to Z as IPV. Z registers the land and gets TCT 12347. o Does Y have a valid title? No, its void. o Does Z have a valid title? Yes. o X returns from the US and learns of the sale. Can X recover from Z? No. Z is an IPV. What is Xs remedy? Go after Y for damages. When can X recover from Z? If Z had not yet obtained his TCT. o Hypothetically, could Y have mortgaged the land in favor of Z, and would it have been valid? Yes and yes. While legally Y is not the owner of the land and cannot mortgage it, as far as Z is concerned, Y is the registered owner. X must respect the mortgage. Situation 2: X is the registered owner of TCT 12345. Y misrepresents to Z that he is X and sells the land to Z. Z gets title TCT 12345. o Does Z have a valid title?

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No. Z is negligent because he has the duty to find out if the seller is the registered owner. (This duty also applies if the price is suspiciously low.) Note that there is no chain of title, since Y did not get title in his name. Thus, Z has no title either. o What is Xs remedy? Since the title is void, X can recover the property from Z. Situation 3: Y forges the deed of sale but does not register it to get a new title. Y shows it to Z, and Z buys. Y makes deed of title in favor of Z. o Can X recover the property from Z? Yes, he can. There is no chain of title. o Who should shoulder the loss? The one who is negligent. In this case, it was Z. What is the requirement of diligence for those dealing with property covered by a Torrens title? o Not required to go beyond what appears on the face of title.

Distinguish the two. Mutuum SM is consumable Ownership transferred to bailee Gratuitous or onerous Pay same amount or same kind/quality Personal property only Loan for consumption No right to demand return before lapse of term agreed upon

Commodatum SM is non-consumable Ownership retained by bailor Essentially gratuitous Return same thing Real or personal property Loan for use or temporary possession Right to demand return of the thing in case of urgent need, even before expiration of term Loss shouldered by bailor

Loss shouldered by bailee even if the loss is caused by fortuitous event Distinguish between commodatum and lease.

CREDIT TRANSACTIONS Loan Contracts What are the characteristics of a loan contract? o 1. Real Contract, because delivery of the thing loaned is necessary to perfect the K o 2. Unilateral Contract only the borrower has obligations upon perfection What are the kinds of Loan? o 1. Commodatum (hiram) The bailor delivers to the bailee a non-consumable thing and the bailee may use it for a certain time and return the same thing o 2. Mutuum (utang) The bailor delivers to the bailee money or some consumable thing and the latter will pay the same amount or the same kind/quality

Commodatum Lease Real contract Consensual contract SM is non-consumable thing SM can be even work or service Essentially gratuitous Onerous Distinguish between commodatum and usufruct. Commodatum By law or by contract Purely personal right to use anothers property Essentially gratuitous Real contract Bailee only acquires use of thing, but not fruits Consumable goods may be the SM only when the purpose of the K is for mere exhibition Usufruct By law, contract, testamentary succession, or prescription Real right to the fruits of anothers property May be onerous Consensual contract Usufructuary acquires right to both use and fruits of the property May be over consumables like money

What are the characteristics of commodatum? o 1. Essentially gratuitous What if its not? Its a lease.

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2. Purpose: temporary use of the thing loaned Can acquisitive prescription in favor of the bailee vest? No. There is no just title. The duty to return prevails. o 3. Use is limited to the thing, but not the fruits Exception? If stipulated otherwise o 4. SM is generally non-consumables unless the purpose of the contract is exhibition of consumable things X lent Y P200000 to deposit in Ys corporations bank account to meet the minimum capitalization requirement. Y would be tasked to return it after a month. What is the contract? Commodatum, even if the SM was consumable goods. The purpose was merely to show requisite capitalization, not for consumption. o 5. Bailor need not be the owner, as long as he has possessory interest o 6. Personal contract What if one of the parties dies? The contract is extinguished; it doesnt get inherited. Cf. for usufruct, this is not the rule because usufruct is a real right over the property. It attaches. o 7. Bailee cannot lend or lease the SM of the contract to a third person What is the exception? Member of the bailees household What are the exceptions to the exception? 1. Stipulated to the contrary 2. Nature of the thing forbids its use What are the obligations of the bailee? o 1. Liable for ordinary expenses for use and preservation of the thing

Is the bailee liable for ordinary wear and tear of the thing due to use? No. What are the exceptions? o 1. If done with fault or negligence o 2. Devoted the thing to a different purpose from what was stipulated o 2. Bailee not liable for loss due to fortuitous event What are the exceptions? 1. Bailee devoted thing to different purpose 2. Bailee kept thing longer than period stipulated 3. Thing was delivered with appraisal of its value o Unless stipulated otherwise 4. Balee lent the thing to a third person outside his household 5. Bailee, given a choice to save either the thing or his own thing, chose the latter X lent Y his jeep to bring Ys sick wife the hospital. On the way back, Y took on paying passengers who paid money. The jeep then was struck by lahar and was destroyed. Is Y liable? Yes. The contract is commodatum, and Y devoted the jeep to a purpose different from what it was lent for. o 3. Bailees are solidarily liable when the thing is loaned to 2 or more bailees in the same contract o Can the bailee retain the thing loaned as security for claims against the bailor? No, not even due to extraordinary expenses incurred What are the obligations of the bailor? o 1. Allow the bailee the use of the thing loaned for the period stipulated, or until accomplishment of the purpose What are the exceptions? 1. Urgent need, which suspends the commodatum

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2. Precarium: o A. Duration not stipulated o B. Use or purpose not stipulated o C. Use of thing merely tolerated by the bailor When else can the bailor demand the thing to be returned? Acts of ingratitude by the bailee o 2. Refund extraordinary expenses for preservation of the thing What is the notice requirement? The bailor must be notified before the expenses were incurred What is the exception to this? Urgent need to repair o 3. Refund 50% of extraordinary expenses from actual use of thing loaned What is the exception? Contrary stipulation o 4. Pay damages to bailee for known hidden flaws in the thing loaned What are the characteristics of mutuum? o 1. Borrower acquires ownership of the thing and can dispose of it o 2. If the thing loaned is money, it must be in legal tender and in case of extraordinary inflation or deflation, basis of payment may be value of the currency at time of creation of obligation o 3. If consumable thing is loaned, borrower must return thing of same kind/quality Distinguish between mutuum and lease: Lease Anything Ownership is retained by lessor Relationship is landlord-tenant or lessor-lessee

Mutuum SM is money or consumable thing Ownership is transferred Relationship is creditor-debtor

What are the rules on interest? o 1. Interest must be expressly stipulated in writing

What are the exceptions? 1. Debtor is in delay liable to pay legal interest as indemnity, even in the absence of stipulation of interest 2. Interest due shall earned interest from the time its judicially demanded (interest on the interest) 2. Usury Law has been suspended But in case the interest rate is too exorbitant, the obligation is still valid although the interest may be reduced What is the legal interest? 12% for loan or forbearance of money 6% for other obligations Ex. damages for personal injury, unearned profits, etc. But it becomes 12% from the time when judgment becomes final and executory until payment of such From whence can legal interest be counted? Usually, from rendition of judgment, not demand But when the demand is established with reasonable certainty, the interest begins to run from when judicial or extrajudicial claim is made (from default) What are examples of SC rulings re: interest rate? 5.5%/month is excessive and unconscionable (E and U) 6%/month (72% per annum) is E and U 3%/month (36% per annum) reduced to 1%/month (12% per annum) Penalty charge of 5%/month is E and U Is an escalation clause valid? Yes, if it also includes a de-escalation clause or a stipulation that the rate of interest shall be reduced in

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the event that the maximum rate of interest is reduced by law or the Monetary Board Can an escalation clause stipulate that escalation is dependent on one of the parties? No. That would violate mutuality of contracts. Can a debtor be made liable for both stipulated monthly interest and the stipulated penalty charge? Yes. Can there be compounding of the penalty or compensatory interest (adding to the principal)? Yes, and this shall earn new interest.

What are the kinds of deposit? o 1. Judicial o 2. Extra-judicial Voluntary necessary Distinguish between judicial and extra-judicial deposits. Judicial By order of court SM may be immovable or movables Purpose is to secure or protect owners right Always onerous Thing delivered only upon court order

Extra-judicial By will of the parties SM is movables Purpose is safekeeping Essentially gratuitous Return upon demand by depositor

Deposit What are the characteristics of deposit? o 1. Real contract o 2. If gratuitous, unilateral. If onerous, bilateral. o 3. Principal purpose is safekeeping of the thing delivered o 4. Essentially gratuitous Exceptions? 1. Contrary stipulation 2. Depositary is in business of storing goods 3. Property saved from destruction during calamity without owners knowledge (must compensate depositary) Distinguish deposit from mutuum. Mutuum Purpose is consumption of SM Lender must wait for period to expire SM is money or consumable thing

Deposit Purpose is safekeeping Depositor can demand return at will SM is movables (extra-judicial) and immovables (judicial)

Distinguish between deposit and commodatum. Commodatum Purpose is transfer of use Always gratuitous

Deposit Purpose is safekeeping May be gratuitous

What are the characteristics of voluntary deposit? o 1. Delivery made upon will of depositor o 2. Depositor need not be the owner of the thing, although thats usually the case o 3. May be oral or in writing What are the obligations of the depositary? o 1. Keep the thing safely and return it when required, even if a specific term was stipulated What are the special requirements in return if it is locked or sealed? 1. Return the thing deposited in the same condition, if delivered closed and sealed 2. Pay for damages if the seal or lock is broken through his fault (which is presumed) 3. Keep secret of the deposit when the seal/lock is broken When can the depositary open the thing deposited, even if locked and sealed? 1. Presumed authority (ex. keys were delivered)

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2. In case of necessity 2. Liable for loss if through fault or negligence What is the presumption? If lost while in the possession of depositary, there is presumption of fault How does the degree of negligence differ? For gratuitous deposit, the standard of care required is less than for onerous deposit 3. Cannot deposit the thing to a third person 4. Liable for loss of the thing deposited, if: 1. Transferred to a third person without authority Negligence need not be proved 2. Transferred to a third person, with authority, but the third person is manifestly careless or unfit Negligence need not be proved 3. Thing is lost due to negligence of own employees When is the depositary not liable? Loss of the thing without negligence of the third person, if transfer was authorized, and the person was not manifestly careless or unfit 5. Notify the depositor and wait for decision if he will change the way or manner of deposit Exception? If the delay will cause danger 6. If the thing earns interest, must 1) collect interest as it becomes due, and 2) take steps as may be necessary to preserve its value and the rights corresponding to it 7. Not to commingle things deposited if so stipulated, even if they are the same kind/quality So usually he can commingle? Yes. 8. Not to make use of the thing, otherwise, liable for damages. Exceptions? 1. Express permission of depositor 2. Preservation of the thing requires its use

What if the thing is non-consumable and the depositary has permission to use it? It becomes commodatum What if it is money or consumable thing? It becomes mutuum But what if the principal purpose is still safekeeping? o Then it becomes an irregular deposit o When is the depositary liable even if loss is due to fortuitous event? 1. Stipulated 2. Used the thing without depositors permission 3. Delays in return 4. Allows others to use it, although the depositary himself may be authorized to use it To whom can return of the thing deposited be made? o 1. To the depositor, heirs, or successors, or to the person designated in the contract o 2. If the depositor was incapacitated when the deposit was made (ex. minor): Return to his guardian or administrator Or the depositor himself if he acquires capacity o 3. If the depositor was capacitated, but he lost it, then return to his guardian/legal representative Where must it be returned? o 1. Place agreed upon o 2. If no stipulation, place where the thing deposited is Even if it was transferred? Yes, even if it should not be the same place where the original deposit was made Exception? When there is malice on the part of the depositary who transferred the thing Who shoulders transportation costs? The depositor When must the thing be returned?

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Generally, upon demand or at will, regardless of period stipulated o Exceptions? 1. Thing is judicially attached while in depositarys possession 2. Depositary was notified of the opposition of a third person to the return or removal of the thing When can the depositary return the thing deposited at his will (Requisites)? o 1. The deposit must be gratuitous o 2. Justifiable reasons exist What are the rules on alteration by the depositarys heir (i.e. heir of the depositary sold the thing deposited)? o 1. If in GF, the heir may either return the price he received or assign his right of action against the buyer in case the price was not yet paid o 2. If in BF, heir liable for damages and may be sued for estafa What is the relationship between a bank and depositor? o The depositor is the creditor, and the bank is the debtor o It is NOT a deposit contract, but a mutuum So what is the legal effect of failure to pay deposited money? Its failure of debtor to pay a loan, and not breach of trust from depositarys failure to return the SM When does the obligation of a bank to pay interest on a deposit cease? When the operations of the bank are completely suspended by the C.B. What are the obligations of the depositor? o 1. Pay expenses for preservation of the thing if deposit is gratuitous o 2. Pay for losses incurred due to character of the thing deposited What are the exceptions? 1. Depositor was unaware

2. Depositor was not expected to know the dangerous character of the thing 3. Depositor notified the depositary about it 4. Depositary was aware, even without depositors advice o Can the depositary retain the thing deposited in pledge until full payment of what is due him by reason of deposit? Yes, he may. Cf. The rule is different from commodatum, which does not allow retention When is there necessary deposit? o 1. In compliance with legal obligation A. judicial deposit of thing where multiple persons dispute possession of such B. deposit with bank or public institution of public bonds/instruments of credit [payable to order/bearer] given in usufruct, when the usufructuary does not give proper security for their conservation C. Deposit of thing pledged when the creditor uses it without authority of the owner or misuses the thing D. In suits, when provided by the ROC E. Constituted to guarantee contracts with the government o 2. Made during a calamity o 3. By travelers, in hotels and inns What are the required actions of the depositor? 1. Depositary is informed about the effects brought by the guests 2. Guests took precautions for safekeeping When is the hotelkeeper liable, regardless of amount of care exercised? 1. Loss or injury is caused by servants, employees, or strangers [if the two requisites concur above] 2. Loss is caused by robber or thief acting without irresistible force When is the hotelkeeper not liable?

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1. Loss is caused by force majeure or theft/robbery attended by irresistible force 2. Loss is due to acts of guests, his family, servants/visitors 3. Loss due to character of the things brought into the hotel Can a hotelkeeper stipulate absolute exemption from liability? No. This is void. Can the hotelkeeper retain the things of guests as security for unpaid lodging expenses and supplies? Yes. See the usual rule on deposits, with which this is consistent. Contra commodatum cant do this. Judicial deposit: see above table for distinction vis--vis extra-judicial deposits

Guaranty and Suretyship Distinguish between guaranty and suretyship Suretyship S is primarily liable and not entitled to benefit of excussion S assumes liability as a regular party to the undertaking and promises to pay if the principal does not pay S is an insurer of the debt Usually embodied in the same instrument as the principal obligation; thus, the surety is a party to the contract

Guaranty G is secondarily liable G binds himself to pay only when principal cannot pay G is insurer of debtors insolvency Usually embodied in a separate agreement before or after the principal obligation

Is there need for a separate consideration which the surety must receive? o No. The surety is bound by the same consideration that makes the contract effective between the primary parties.

If there is doubt, what is presumed, guaranty or suretyship? o Guaranty. Suretyship is never presumed. o Is an unconditional guaranty a suretyship? No. It just means that unlike a conditional guaranty, it needs no other extraneous event to trigger the guarantors liability. But the principle remains that the principal must first default. Differentiate insurer of debtors insolvency (G) and insurer of the debt: o 1. Surety promises to pay the principals debt if the principal will not pay. Must a surety be notified of the principals default first? No. In fact, no prior demand is needed; direct suit against the principal is the demand in itself. Is there need to demand the principal to pay first? No, especially where demand would be useless. A suretyship is a direct contract to pay the debt of another. The surety is absolutely liable as soon as default is made, without need for demand from the principal or notice of default. o 2. Guarantor promises to pay the principals debt if the principal cannot pay. So this requires due diligence and exhaustion of remedies against the debtor. X Corp is liable to Y Corp for P5M. Z is X corp.s surety. X Corp defaulted and was placed in a state of suspension of payments. Can Y Corp. proceed against Z? o Yes. The suspension only applies to X Corp, and as surety, there is no need to exhaust X corp.s property before going against Z. H and W are spouses. H signed a suretyship agreement to cover for the liabilities of XYZ corp. Can the conjugal partnership be made liable when XYZ defaults? o No. This act did not redound to the benefit of the partnership and is thus borne alone by H.

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What is the nature and extent of guaranty? o 1. Guarantee is generally gratuitous What is the exception? Contrary stipulation o 2. Accessory contract What if the principal obligation is void? The guaranty cannot exist. o 3. Guarantors liability cannot exceed the principal obligation But does this provision include interest and other costs? No. The liability for interest and other costs does not stem from contract but from the default. So the guarantor can technically pay more than the obligation secured. o 4. Doubt must be resolved in favor of the guarantor or surety What is the exception? Compensated sureties What are the qualifications of a guarantor? o 1. Possesses integrity o 2. Capacity to bind himself o 3. Sufficient property to answer for obligation o What if the creditor required and stipulated a specific person should be the guarantor, can there be substitution? No. The selection of the guarantor is part of the terms of agreement. What are the effects of guaranty between the guarantor and creditor? o 1. Guarantor has right to benefit of excussion o Exceptions? [waiver] 1. G expressly renounced excussion 2. G fails to set-up benefit of excussion and fails to point out to the creditor available property of the debtor in the Philippines 3. G fails to interpose it as defense before judgment is rendered against him

[nature of obligation] 4. Suretyship 5. He is a judicial bondsman and sub-surety 6. Pledge or mortgage has been given by the G as special security [debtor clearly insolvent] 7. Debtor is insolvent 8. Presumed that execution of debtors property will not satisfy the obligation [absconding] 9. G absconded or cannot be sued in the Philippines Unless he left a manager/representative o 2. Compromise between the creditor and principal can benefit but not prejudice the guarantor, otherwise, he would be released o 3. If there are several guarantors and only one debtor, the guarantors are entitled to benefit of division. Their liability is joint. Exceptions? 1. Solidarity 2. Any of the circumstances in 2057 taking place o A. A guarantor is convicted of crime involving dishonesty o B. Guarantor becomes insolvent When can a guarantor who paid the entire debt seek reimbursement from co-guarantors? 1. He paid by virtue of judicial demand 2. AND because the principal debtor was insolvent o What is a continuing guaranty or suretyship? One that is constituted to cover even future debts, the amount of which is not yet known. What are the effects of guaranty between the debtor and guarantor? o A. Guarantor who pays for a debtor must be indemnified by the latter.

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What does the indemnity cover? 1. Amount of debt 2. Legal interest from the time payment was made known to the debtor 3. Expenses incurred by guarantor after notifying debtor that payment has been demanded of him 4. Damages, if due What are the exceptions to indemnity rule? 1. Guaranty constituted without knowledge or against the will of the debtor. In this case, the guarantor can only recover to extent debtor was benefited. 2. Guaranty did not intend to be paid back (donation) although in this case, debtors acceptance is needed o In any case, payment is valid as to the creditor who has accepted it 3. Waiver Can the guarantor demand more than what he has paid? No. B. Guarantor has right to be subrogated against the debtor to enforce the indemnity C. Guarantor can proceed (see below what proceed means) against debtor even before payment when: [Just causes for guarantor] 1. He is sued for payment 2. Reasonable grounds to fear the debtor intends to abscond [Insolvency] 3. Insolvency of debtor 4. Debtor is in imminent danger of insolvency [Expiration of period, etc.] 5. Debtor bound himself to relieve him from the guaranty within a specific period, and this period has expired

6. Debt has become demandable because period for payment has expired 7. After lapse of 10 years when the principal obligation has no fixed period for maturity Unless the nature of the obligation is such that it cannot be extinguished except for a period longer than 10 years o In all these cases under #3, what are the options of the guarantor (what does proceed against the debtor mean)? 1. Obtain release from the guaranty 2. Demand security to protect him against creditors claims or insolvency of the debtor How is guaranty extinguished? o 1. When the principal obligation is terminated (the usual ways see oblicon) Also, material alterations (where there is additional obligation, new burden, etc.) o 2. Release of one guarantor by the creditor What is the effect if it is without the consent of the other guarantors? Then they benefit to the extent of the share of the released guarantor o 3. Extension of term granted by the creditor to the debtor without guarantors consent What if theres a continuing guaranty allowing for extensions? Then extension of term does not extinguish the guaranty. Does the creditors neglect to immediately sue the principal constitute an extension of term? No. There has to be a separate agreement for a definite period without the consent of the guarantor. o 4. If there can be no subrogation because of the fault of the creditor What is an example of this?

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When the creditor releases or fails to register a mortgage What if the guarantors are solidary? Same effect. Does this provision apply to sureties? No. (Zobel v. CA) What about legal and judicial bonds? o They are not entitled to the benefit of excussion because they are guarantors but sureties whose liability is primary and solidary.

Pledge What is a pledge? o It is a contract by virtue of which the debtor delivers to the creditor or third person a movable or document evincing incorporeal rights o Purpose is to secure a principal obligation What are the essential requirements of pledge? o 1. Constituted to secure fulfillment of principal obligation o 2. Pledgor or mortgagor is absolute owner of the thing What if the thing is conjugal property of spouses and only one acted as pledgor? The pledge is only over of the property What if the property is covered by certificate of title (this actually applies more to REM, not pledge)? The innocent pledgee or mortgagee for value can rely on the certificate, if there is no reason to further inquire, and is protected o 3. Person has free disposal of the property, or legally authorized to do so o 4. Thing pledged is delivered to the creditor or third person by common agreement Characteristics of pledge? o 1. Real contract thing must be delivered o 2. Accessory contract o 3. Unilateral contract

Because the obligation solely rests on the part of the creditor: to return the thing upon fulfillment of the principal obligation Can the pledgee keep the thing for himself after default? No. This is pactum commissorium o 4. Subsidiary contract Obligation does not arise until fulfillment of the principal obligation X borrowed 400K from Y, pledging shares of stock worth 800K to secure the obligation. An economic crisis occurred, plunging the value of the stocks to 100K. Can Y demand X surrender other shares worth 700K? o No. There is no showing the fall in value was due to Xs fault. Likewise, there was no showing Y was deceived as to the substance or quality of the shares, where would have the right to claim another thing in their place or immediate payment of the obligation. o And more importantly, the right of a pledgee is to just sell the pledged share at a public sale. May the pledge secure future advancements that the pledgor may procure from the pledge? o Yes. o Contra: chattel mortgage cannot secure future debts Distinguish pledge from REM: REM Immovable property Delivery of the thing NOT necessary REM not valid against third persons if not registered

Pledge Movable property Delivery of object pledged Pledge not valid against third persons unless description of the thing pledged + date of pledge is in public instrument

Who has ownership of the thing pledged? o Still the pledgor o Can he sell the thing pledged? Yes, as long as the pledgee assents

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Does this sale extinguish the pledge? No, it survives and follows the thing, even if ownership is transferred o What happens then? 1. The pledgee still possesses the thing until the obligation is paid 2. The pledgee may still sell the thing in case of default Can the debtor demand its return before the debt is paid? o No, possession is the security of the creditor. o What is the exception? If the thing is in danger of being impaired or destroyed, the pledgor can substitute it with a thing of the same kind and quality o What presumption arises upon return of the thing pledged? That the pledge has been extinguished Is there a presumption that the main obligation has been extinguished too? No. What is the obligation of the pledgee? o Take care of the thing pledged with the diligence of a GFF o When is he entitled to reimbursement? Expenses incurred for preservation o When is he liable? Loss or deterioration by reason of fraud, negligence, delay, or violation of terms of contract Is a pledgee authorized to transfer possession of the thing to another? o No. Remember, hes not the owner. He has to be authorized to do this. o Can the pledgee use the thing pledged? None. He needs authority, again. o X borrowed P10K from Y, payable Dec. 1. X pledged his car to Y, allowing Y to use it by express stipulation. X wanted to pay his debt on June 1, demanding that Y

accept the money and return the car. Can X compel Y to accept? No. The debt was due Dec. 1. When a period is stipulated, it is presumed to be for the benefit of both the debtor and creditor. In fact here, Y is authorized to use the car, which is the presumed benefit. X cannot pre-pay. When can the pledgor request the thing pledged be deposited judicially or extra-judicially? o 1. Creditor used the thing without authority o 2. Creditor misused the thing o 3. Thing is in danger of being lost or impaired due to negligence or willful act of the pledgee What is the effect of sale of the thing pledged upon default of the debtor? o The principal obligation is extinguished whether the price of sale is more or less than the amount due o 1. If the price is more than the amount due, the debtor is not entitled to excess o 2. If the price is less than the amount due, the creditor is not entitled to recover the deficiency o Differentiate from CM: In CM, the excess is returned, and the deficiency is demandable (Take note of Recto Law, however) What are examples of legal pledges under the law? o 1. Possessor in GF exercising right of retention for necessary and useful expenses o 2. Usufructuary exercising right of retention for taxes paid on the capital and for extraordinary expenses o 3. Mechanics lien o 4. Agent exercising right of retention for necessary expenses for execution of agency and for damages which execution of agency caused him o 5. Bailee exercising right of retention for damage caused by flaws in the thing loaned where the bailor knew about it but did not inform the bailee

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6. Depository exercising right of retention for necessary expenses if deposit is gratuitous or for fortuitous damages caused him by the character of the thing deposited 7. Hotel-keeper, over guests things for unpaid board and lodging How does the pledgee/creditor exercise his remedy? But must first demand payment of the amount due Have the thing retained sold at public auction, within 1 month after demand

Creditor has no right to fruits Upon default, creditor is not the owner (no pactum commissorium)

Vendee entitled to fruits Upon consolidation, vendee is the owner

Real Estate Mortgage (REM) What is a REM? o A contract where the debtor secures to the creditor the fulfillment of a principal obligation, by subjecting to such security immovable property or real rights in case the principal obligation is not complied with. What are the characteristics of a REM? o 1. Accessory and subsidiary contract o 2. Unilateral because the only obligation is for the creditor to free the property from encumbrance upon payment o 3. Mortgagor retains possession of the property in general Remember: pactum non alienando is void (prohibition for the mortgagor to dispose the property) o 4. Over immovable or alienable real rights over immovables o 5. REM must appear in a public document recorded in the ROP If not registered, just binding between the parties o 6. REM is a real right that attaches to the property So the REM is both a real right and real property by itself o 7. Mortgagor must be the absolute owner of the property, otherwise, it is void Pacto de retro sale Principal contract Conditional title Conditional transfer of possession

REM Accessory contract No transfer of title No transfer of possession

What is the effect of REM? o It subsists until after payment of obligation. o The right of the mortgagee in case of non-payment is foreclosure of the REM. Pactum commissorium is against public policy. What is the extent of the mortgage? o REM is not limited to the property itself, but also its accessions, improvements, growing fruits, rents, income, proceeds of insurance in case it perishes, or expropriation value if condemned. o EXCEPT: contrary stipulation. Can the mortgage be alienated or assigned? o Yes and the assignee or transferee is entitled to foreclose the mortgage in case of non-payment of the obligation. If the transferee becomes the owner of the property this is a void pactum commissorium. What if the mortgagor transfers the property? o 1. It does not relieve him from his obligation to pay the debt to the creditor, in the absence of novation. o 2. Creditor must make demand against the debtor. If the latter cannot pay, then the creditor can demand payment of the credit from the possessor of the property (transferee), and foreclose thereafter if there is non-payment. 1. Judicial foreclosure under Rule 68 of the ROC. o Is there redemption here? No, just equity of redemption where the mortgagor is given the chance to pay the debt within the 90-120 days period after the judgment becomes final OR after the foreclosure sale but before confirmation. o There is redemption, however, if the mortgagee is a banking institution (1 year for natural person mortgagors and 3 months/before registration whichever comes first for juridical person mortgagors)

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2. Extrajudicial foreclosure under Act 3135. o When does this apply? When the mortgagee is given specific power or express authority to foreclose. If there is none, there can be no EJ foreclosure. o Where must auction be conducted? Province where the property is found o What is the requirement of notice? 1. Posting of notice of sale in 3 public places therein 2. Publication in newspaper of GC once a week for 3 consecutive weeks If the sale is postponed, republish. Is personal notice to the mortgagor required? No. Unless, of course, the contract provides for it. Can these notice requirements be waived? No, its for the benefit of the public, not the parties. o How long does the mortgagor have to redeem? Within 1 year from date of sale. If the land is registered property, then from registration of certificate of sale. But if the mortgagor is a juridical person and the mortgagee is a bank, quasi-bank, or trust entity, then redemption is only within 3 months from foreclosure or registration of certificate of sale with ROD, whichever is first. o What is required for a valid redemption? 1. Within proper period 2. Payment of purchase price of property plus 1% interest per month Taxes with same 1% interest if paid by purchaser 3. Written notice of redemption served on officer who made the sale, and duplicate filed with ROD

What if the purchaser contends the right of the redeeming person to do so (e.g. it was not the mortgagor but one of his heirs that is redeeming)? The sheriff cannot usurp judicial functions. He cannot decide, so he must advice judicial redress to the parties. Does the mortgagee have a right to recover deficiency postforeclosure? o Yes, he may. The action to recover the deficiency prescribes after 10 years from right of action. If a mortgagor dies, what are the 3 mutually exclusive options of the mortgagee? o 1. Waive mortgage and pursue claim against estate as an ordinary claim o 2. Judicial foreclosure of the mortgage, and recover deficiency, if any as an ordinary claim against the estate o 3. Rely on the mortgage exclusively (e.g. EJ foreclosure), without right to file claim for deficiency What if the mortgagor files a collection suit? o It bars foreclosure of mortgage. The creditor cannot avail both remedies because it is in essence a splitting of his cause of action into two. What is the nature of a writ of possession? o The purchaser may petition for a writ of possession within the redemption period by filing an ex parte motion under oath. o He files a bond. Upon approval of the bond thereafter, the court must issue a writ of possession. It is a matter of course and not a matter of discretion. o Since, its ex parte, any questions regarding the validity of the sale, the mortgage, etc. must be tried in separate proceedings. When else may the purchaser file for a writ of possession? o When ownership has been consolidated upon himself, at the end of the redemption period. o The bond is no longer necessary in this case because he is the absolute owner already.

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Can an ex-parte writ of possession be enforced against a third party who is in actual possession of the foreclosed property and is not in privity with the mortgagor? o No, it cannot. Under Art. 433 of the NCC, one who claims to be owner of a property possessed by another must bring appropriate judicial action in this case, it must be an action for ejectment (or publiciana). o To rule otherwise would unduly prejudice the third person who did not have a chance to oppose the claim, since the proceedings to issue a writ of possession are ex parte. What are the remedies of such third party claimants to property involved in a foreclosure sale, when the third party was not part of the foreclosure and there is no privity? o Two options: a) terceria where he serves upon the sheriff an affidavit of his title and a copy is given to the judgment creditors; in this case, the officer is not bound to keep the property; b) independent separate action, to recover ownership and possession of the contested property (Rule 39, Sec. 16 of the ROC) Is a purchaser in a foreclosure sale who hasnt turned over the excess of the proceeds of sale to the mortgagor entitled to a writ of possession? o In a case, the SC ruled that hes not entitled. Can a REM cover future loans or advancements? o Yes, if stipulated by the parties in the contract.

Antichresis What is a contract of antichresis? o A contract where the creditor acquires right to receive the fruits of an immovable of his debtor, with the obligation to apply the proceeds to the payment of interest (if there is), and then to the principal of the credit o What if the loan does not earn interest? There can still be a contract of antichresis. The payments are applied directly to the principal, then. o Again, take note that pactum commissorium is void. What are its characteristics?

1. Accessory contract 2. Formal contract because the amount of the principal and of the interest must be in writing or else the antichresis contract is void Is delivery of the property a requisite for the contracts validity (i.e. is it a real contract)? o NO. The delivery is only to allow the creditor to receive the fruits and apply them, and not to make the contract valid. o But note, it is a formal contract. What is the requirement of appraisal? o The fruits of the immovable must be appraised at their actual market value at the time of application (to know how much is deducted). Can the debtor demand the return of the property before the debt is totally paid? o No. It stands as security. What are the obligations of the antichretic creditor? o 1. Pay taxes and charges of the estate and necessary expenses on the property Where does he take the funds? From the fruits of the property Failure to do so damages in favor of debtor There can be contrary stipulation as re: payment of taxes and charges o 2. Apply fruits to the interest, and then the principal of the debt What are the creditors remedies in case of default? o 1. Bring action for specific performance o 2. Petition for sale of real property in foreclosure sale under Rule 68 of the ROC, or if the parties agreed upon it, extrajudicial foreclosure under Act 3135 Pledge Personal property Real contract

o o

Antichresis Real property Formal contract

Antichresis Property delivered to creditor

REM Debtor usually retains the property

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Creditor acquires only the right to receive fruits of the property. It is NOT a real right. Creditor pays taxes and charges unless stipulated otherwise Creditor given possession of the property must apply the fruits to the interest then the principal

No right over fruits, but it is a real right that attaches to the property Creditor has no such obligation Mortgagee has no such obligation

one can file for replevin) Registration in CM Registry is necessary to be valid beyond the parties If foreclosed, excess goes to debtor and deficiency can be recovered by the creditor. EXCEPT: if Recto Law applies

Registration in ROP not necessary for validity (just in a public document) If sold, excess and deficiency are not recoverable in general

Chattel Mortgage What are the characteristics of a CM contract? o 1. Accessory contract o 2. Formal, because it must be registered in the CM Registry to be valid What if its not registered? Its not null and void, but it only binds the parties. o 3. Unilateral only the creditor has obligation: to free the thing from encumbrance upon fulfillment of the obligation o 4. It must be constituted by the absolute owner of the thing with free disposal of the property X went abroad and left his car with its certificate of registration with Y. Y falsified Xs signature and sold it to Z. Z, in order to pay for the amount, executed a CM over the car in favor of a savings and loan association which lent money to him. Z failed to pay and the car was sold at a public auction where the SLA won. X returned to the country and sought to recover possession of the car. Can he? o Yes. A CM can only be constituted by the absolute owner with free disposal thereof, which Z was not since the seller, Y, had no title over the car. Since X was unlawfully deprived of possession of a movable, he can recover possession. o However, since Z purchased the car from a public sale, X must reimburse the SLA for the price at which it was bought for. Pledge Delivery is necessary

CM Delivery is not necessary (to get it,

What are the offenses involving CM? o 1. Knowingly removing personal property covered by CM to any other province or city without written consent of the mortgagee o 2. Selling or pledging such personal property without consent of the mortgagee written on the back of the mortgage and recorded in CM Registry o What if the mortgagor thereafter pays the debt anyway or informs the mortgagee post-sale? He is still criminally liable under the RPC. o Is the sale valid? Yes, but the mortgagor is liable criminally. What is valid subject matter of CM? o 1. Shares of stock in corporation o 2. Interest in business o 3. Machinery and house of mixed materials treated by the parties as personal property And no third party will be prejudiced thereby o 4. Vessels, if the mortgage is recorded with MARINA o 5. Motor vehicles, if mortgage is recorded with both the LTO and the CM Registry o 6. House intended to be demolished o 7. Growing crops and large cattle What is the rule when the parties constitute a CM over a building? o In general, this cannot be done, but the parties are estopped from questioning it. Thus, the CM is valid. But if it will be foreclosed, follow procedure for foreclosure of REM, because third parties are not bound by the constitution of a CM over immovables.

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What if the property is found in a place other than where the mortgagor resides? o Register it in both registers in both provinces. Otherwise, the CM is void as to third parties. o But again, the CM is valid as between the parties this is always the rule if there is some infirmity: valid between the parties, but not against the world. What is the effect of registration? o Makes the CM effective against third parties. It creates a lien/real right which follows the chattel wherever. What if the mortgage is assigned to another? o 1. No need to record the assignment in the registry o 2. The assignee is subrogated to the rights of the transferee to the CM What is an Affidavit of GF? o It is an oath in a contract of CM that the parties: severally swear that the mortgage is made for the purpose of securing the obligation specified therein and for no other purpose and that it is a just and valid obligation and not one entered for fraud o If it is not appended, same rule as above: it cannot bind third persons without notice or subsequent creditors. o In effect: an Affidavit of GF gives the CM preferred status. o What is the implication of the Affidavit of GF which has then become doctrinal in CMs? Because it only secures the obligation specified, a CM cannot cover future debts, unlike a REM. What are the options in foreclosure? o 1. Public sale o 2. Private sale needs express stipulation in the contract EXCEPT: a) fraud or b) duress o When can a CM be foreclosed? After 30 days from time that the condition is broken N.B. the 30 day period is a grace period to help the mortgagor discharge the obligation After there is 10 day notice:

o o

1. Given to the mortgagor o N.B. unlike REM, where it isnt essential to give personal notice to the mortgagor 2. Posting of public notice of time, place, and purpose of the sale Is there right of redemption after sale? No, there is none, unlike in a REM. Can the mortgagee recover deficiency post-sale? Yes, unlike in a pledge. Action accrues within 10 years from sale. What is the exception? Recto Law, if it is a sale of personal property in installments. So if it is foreclosed, no deficiency. But under the Recto Law, after specific performance which leads to execution sale, there can be recovery of deficiency because it is not a foreclosure.

Quasi-contracts When does negotiorum gestio arise? o When one voluntarily takes charge of the management of business or property of another, without any power from the latter o What is he obliged to do? Continue such management until termination of the affair and its incidents, or the owner is in a position to substitute him o When does negotiorum not arise? 1. Property or business has been abandoned 2. Manager has been tacitly authorized What are the obligations of the officious manager? o 1. Perform duties with diligence of GFF o 2. Liable for damages through fault or negligence o 3. Liable for acts of a delegate, if he appoints one o 4. Liable for fortuitous event if:

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A. He undertakes risky operations B. Prefers own interest to that of the owner C. Fails to return the property or business upon demand of owner D. Assumption of management in BF E. He is manifestly unfit to carry on the management, unless done to save the property or business from imminent danger F. His intervention prevented a more competent manager from taking over, unless done to save the property or business from imminent danger o 5. Liable for contracts entered into with third persons, unless: A. owner ratified B. the contract refers to things pertaining to the owner What are the obligations of the owner? o If he derived benefit or the property was saved from imminent danger: 1. Liable for obligations incurred in his interest 2. Reimburse officious manager for necessary and useful expenses, and damages the manager may have suffered o If he did not derive benefit: Still liable as above if: a) the manager acted in GF, and b) property or business is intact and ready to be returned to the owner When does negotiorum end? o 1. Owner repudiates it or ends it o 2. Manager withdraws from management o 3. Death, civil interdiction, insanity, or insolvency of owner or manager When does solutio indebiti arise? o Something is received when there is no right to demand it and it was given through mistake What is the obligation of the recipient? o He must return it. o What if he accepted it in BF?

1. He must pay legal interest if a sum of money is involved 2. Liable for fruits received or fruits that should have been received if it bears fruits 3. Answerable for loss or impairment What if he accepted it in GF? 1. Answerable for loss or impairment only so far as it has benefited him 2. If he already alienated it, return the price or assign the action to collect the sum 3. Exempt from returning/restoring it if in GF, he already destroyed the document, allowed action to prescribe, gave up pledges, or cancelled guaranties

Concurrence and Preference of Credits What are properties exempt from liability for obligations? o Survival necessities o 1. Family Home, except for: A. non-payment of taxes B. debts prior to constitution of FH C. debts secured by mortgage on premises of the FH D. debts due to laborer, mechanics, architects, etc. for the construction of the FH o 2. Clothing and necessaries of the family o 3. Furniture and household things not exceeding 1K o 4. Provisions for family for 3 months o Money received for support o 1. Right to receive support and things procured from such support o 2. Earnings within the month to support the family o 3. Proceeds of life insurance o 4. Right to receive legal support from government or those procured from such o Employment/trade necessities o 1. Tools and implements for trade/employment o 2. 2 beasts of burden used in occupation o 3. Professional libraries

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o 4. One fishing boat and net for fishermen o Specially enumerated o 1. Lettered gravestones o 2. Copyrights and other properties exempted by law o 3. Property in custodia legis, and of public dominion What are preferred credits as to specific movable property? (2241) o 1. Taxes on the movable o 2. Malversation by public officials of such movables o 3. Vendors lien As long as debtor still possesses it if resold, on the proceeds of sale o 4. Credits secured by pledge, chattel mortgage o 5. Mechanics or repairmans lien, on the thing o 6. Laborers wages, on the thing o 7. Salvage, on the goods saved o 8. Tenancy, on the share of fruits/harvest o 9. Carriers lien, on the goods carries o 10. Hotels lien On movables belonging to guests, but not for money loaned to guests o 11. Crop loan, over the fruits harvested o 12. Rentals for one year, on the movables in the property leased o 13. Claim of depositor, on goods wrongfully sold by the depositary o For these cases, what if the movables on which the lien exists have been wrongfully taken? The creditor can demand them from any possessor, within 30 days from unlawful seizure What are preferred credits over specific immovable property? (2242) o 1. Taxes, on the immovable o 2. Vendors lien, for sale of real property o 3. Contractors lien, over the property o 4. Lien of material-men, when material was used for property o 5. Mortgages recorded in ROP o 6. Expenses of preservation, when the law authorizes reimbursement (see property law and oblicon)

7. Recorded attachments, by virtue of judicial order 8. Warranty in partition of co-heirs of property 9. Conditional donations, on the immovable donated as to pecuniary charges and other conditions o 10. Premiums for 2 years in favor of insurers, on the insured property What is the order of preference as to other properties of the debtor? (2244) o 1. Funeral expenses o 2. Wages of employees for one year o 3. Expenses of last illness o 4. Workmens compensation o 5. Support for one year o 6. Support during insolvency o 7. Fines in crimes o 8. Legal expenses for administration of insolvents estate o 9. Taxes other than those over specific property National government first Then to province Then to city or municipality o 10. Torts o 11. Donations o 12. Credits in public instrument or covered by final judgment Have preference among themselves in order of property of dates of instruments or judgments What is the order of preference of credits? o 1. Credits which enjoy preference as to specific movables exclude all others to the extent of the value of the movable o 2. If there are two or more credits as to the same movable, claims are pro rata (meaning, the enumeration is not in order) Except for payment of taxes due the State; this always goes first o 3. APPLY SAME RULES TO SPECIFIC IMMOVABLES o 4. For enumeration in 2244, follow the order o 5. For common credits, no preference; just apply property pro rata regardless of dates X purchased an aircraft in cash, and had outstanding balance of P500K. He incurred indebtedness of P300K for repairs with a

o o o

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repair company over the aircraft. He borrowed P1M from a bank for additional capital and constituted a CM on the aircraft. During a flight, a passenger was injured and was awarded P200K in damages. The aircraft was sold for 1M. The following claims thus exist o A. Vendors lien on movable o B. Repairmans lien on movable o C. CM lien on bank loan o D. Tort claim o What is the order of preference? C CM lien on bank loan prevails over the tort claim. The liens of the vendor and repairman do not exist anymore because the property has been sold and thus the debtor is not in possession of the thing. The claims become ordinary claims that are defeated by the CM lien of the bank. When does the preference of workers to wages apply? o When there is a declaration of bankruptcy or judicial liquidation of the company What happens when there is a distressed corporation that asks for rehabilitation and suspension of payments? o Preferred creditors cannot assert preference anymore, and stand in equal footing with other creditors. This allows the receiver to exercise discretion free from legal interference that might hinder rescue of the company.

Insolvency Law (old law) What is the difference between suspension of payments and insolvency? o In suspension, purpose is to delay payments; in insolvency, purpose is to discharge debtor from debts o In suspension, amount of debt is not changed; in insolvency, creditors receive less than their credits (or where there are preferences, some may not receive at all) N.B. correlate with concurrence and preference What is suspension of payments?

It applies to situations where a debtor has properties, but not enough to pay debts as they fall due. He is still solvent, but not liquid. What is the effect of suspension of payments? o 1. No disposition of property of debtor except in ordinary course of business o 2. No payment except in ordinary course of business o 3. Upon request to court, all pending executions against debtor shall be suspended Except those covered by mortgage Which creditors are not affected by suspension of payments? o 1. Those with claims within 60 days immediately preceding filing of petition: A. claims for personal labor B. claims for maintenance C. expenses of last illness of debtor D. Funeral of spouse or children of debtor o 2. Those possessing legal or contractual mortgages What is the procedure to petition for suspension of payments? o 1. File petition in RTC where debtor resides 6 months prior. o 2. Along with the petition, file: A. Verified list of creditors B. Debts and liabilities C. Statement of assets and liabilities D. Proposed agreement/schedule o 3. Court issues order calling all creditors to a meeting (2-8 weeks from order) Publication and notice o 4. Meeting of creditors Quorum: represent at least 60% of liabilities of the debtor o 5. Creditors approve the proposition Need double majority vote to approve: A. 2/3 of creditors B. 2/3 of 60% of the liabilities o 6. Objections can be made within 10 days of meeting A. Defects in call for meeting or the meeting itself

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B. Fraudulent connivance between one or some creditors and the debtor to vote in favor of the agreement C. Fraudulent conveyance of claims to obtain a majority o 7. Court issues order directing the agreement to be carried out What is the procedure for voluntary insolvency? o 1. Debtor files petition that he is insolvent and cannot pay debts in full, accompanied by: A. verified schedule of liabilities B. verified inventory of properties o 2. Court issues order of adjudication Publication and service of order to creditors Is hearing needed? No, not in voluntary insolvency o 3. Meeting of all creditors to elect assignee of debtors property Clerk of court conveys property to him What is the effect? The assignee gets legal title over the property What if someone has a mortgage over the property? File a motion to be excluded from the insolvency proceedings because he will pursue the mortgage lien What if there is an existing claim being filed in court? The case will only determine how much is due the creditor, but he has to join the other creditors when he takes what is due him What attachments and judgments shall be set aside? Those levied or secured within 30 days before insolvency proceeding (again, there is badge of fraud)

SAME RULE for dispositions within 30 days before insolvency proceedings, unless there is value received in GF for the property o 4. Liquidation of assets and payment of debts o 5. Composition Offer of terms of composition is made after filing of schedule of liabilities and creditors The offer must be accepted in writing by the same double majority of creditors It is made after depositing the consideration to be paid and the cost of proceedings The court must approve the terms of composition o What is the effect? The debtor is discharged from debts, except if corporation o What are available remedies? Objection Appeal to SC What is the procedure for involuntary insolvency? o 1. Three or more creditors file petition When should they have been creditors? More than 30 days prior to petition, to avoid fraudulent conveyance The creditors must be residents of the Philippines o 2. Court issues order requiring debtor to show cause why he must not be declared insolvent Debtor files MTD or answer o 3. Hearing of the case Issuance of order declaring debtor insolvent Then he will be required to submit schedule of assets and liabilities Publication and service of order o (N.B. procedure from this point is the same as voluntary insolvency including commentaries) o 4. Meeting of all creditors to elect assignee of debtors property Clerk of court conveys property to him o 5. Liquidation of assets and payment of debts o 6. Composition

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What is the effect? The debtor is discharged from debts, except if corporation What are available remedies? Objection Appeal to SC

(whichever is higher) -andThe claims are at least more than 60 days old or a creditor has initiated foreclosure proceedings that makes debtor insolvent

FRIA N.B. see how FRIA has modified the above rules What is the biggest change introduced by the FRIA? o There are new rules for out-of-court settlement of liabilities of debtors. Before, its purely contractual. Now there are rules governing these. How does the FRIA define an insolvent? o One who is unable to pay his liabilities as they fall due in the ordinary course of business or has liabilities greater than his assets What are the three methods of rehabilitation of a corporation under the FRIA? o 1. Court-supervised rehabilitation o 2. Pre-negotiated rehabilitation o 3. Out-of-court restructuring agreements Voluntary rehab Petitioner Debtor Involuntary rehab Creditors Prenegotiated rehab Debtor who may be joined by any of his creditors Plan approved by creditors with at least 2/3 of debtors liabilities, including Informal rehab None

secured creditors holding more than 50% of secured claims and unsecured creditors holding 50% of unsecured claims

secured obligations approved -andCreditors with at least 75% of unsecured obligations approved -andApproved by creditors holding at least 85% of total liabilities (secured and unsecured)

How to initiate

Corporations: majority of BOD + 2/3 votes of SH interest Partnerships: majority

Creditors have aggregate claim of 1M+ or at least 25% of subscribed capital stock

Debtor agreed -andCreditors with at least 67% of

When is a petition for voluntary rehabilitation deemed to commence? o Upon the court issuing a commencement order, indicating that the petition is sufficient in form or substance o Issued within 5 working days from filing of the petition o What if the petition is deficient? Instead of dismissing it, the court may order the issuance of an amended/supplemental petition or the submission of additional documents What does the commencement order do? o 1. Declare the debtor under rehab o 2. Orders publication of order and notice to creditors o 3. Appoints a rehab receiver General rule: Courts discretion

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1. But if the debtor is a securities market participant, court prioritizes nominee of the appropriate securities or investment protection fund 2. If nominated by at least 50% of secured creditors and unsecured creditors, court must appoint him o 4. Sets date for initial hearing Covers w/n the debtor can be rehabilitated o 5. Directs creditors to file claims within 5 days from initial hearing o 6. Invites government through BIR to file a comment to the petition or file claims against the debtor When does the stay or suspension order (SO) issue? o In addition to the commencement order What is the SO? o It prohibits sale and disposition of assets of the debtor and orders suspension of all actions against him or his estate. What are the actions not covered by the SO? o [SC or QJA] o 1. Appeal already pending in the SC Once there is FJ, directed to the rehab court o 2. Subject to rehab courts discretion, actions pending in QJAs Any FJ will be directed to court as a non-disputed claim o [Nature of action] o 3. Claim against sureties and those solidarily liable with debtor, accommodation mortgagors, issuers of LOC o 4. Criminal actions o [Securities transactions] o 5. Actions by customers of a securities market participant to recover those entrusted to the latter in the ordinary course of business or action by the securities market participant to pay off these claims o 6. Actions by licensed broker or dealer to sell pledged securities of the debtor (pursuant to pledge or margin agreement) o 7. Clearing and settlement of financial transactions through facilities of SEC/BSP accredited clearing agency and actions

by these agencies to reimburse themselves for transactions settled for the debtor What is the difference of effect of the SO on secured and unsecured claims? o It applies with equal force. The SO does not impair the security or lien of a secured creditor, except that it suspends the right to enforce the claim. What are the other effects of commencement? o 1. The court can issue can order prohibiting suppliers from withholding essential goods and services from the debtor. This ensures the continuous delivery of goods and services necessary for the debtors business. o 2. Waiver of all taxes from commencement order to approval of the rehabilitation plan or its dismissal How long does the commencement order last? o For as long as there is a substantial likelihood that the debtor will be successfully rehabilitated When can the court modify the terms of the SO or relieve from suspension a creditors claim? o Either: 1. A creditor does not have adequate protection over the property securing his claim, or Lack of adequate protection: o A. Debtor fails to honor pre-existing agreement with creditor to keep the property insured o B. Debtors fails to take reasonable steps to preserve the property o C. Property has depreciated to extent that creditor is undersecured 2. The value of the claim exceeds the FMV of the property securing it o What can the court order? 1. Additional securities or steps to preserve the property; or 2. Allow creditor to enforce security claim on debtor

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For what purposes can the debtors property still be used? o 1. Ordinary course of business o 2. Admin expenses during rehab proceedings o When is the debtor allowed to dispose of encumbered property? When necessary for continuation of ordinary course of business o What is new money? Post-commencement-order loans or obligations approved by court. These are considered admin expenses. What is the rule on cancellation or confirmation of contracts? o Within 90 days from the commencement order, the debtor may elect to confirm or cancel contracts. This is to get out of onerous obligations. o Any contract not confirmed in 90 days is deemed cancelled. o What is the remedy of creditors with cancelled contracts? Can claim actual damages (if any), which will be considered a pre-commencement-order claim. What are the powers of the rehab receiver? o Annul pre-commencement transactions intended to defraud the creditors o N.B. Creditors may file or commence it if receiver refuses the creditor benefits from such action to extent of his claim Who approved the rehab plan drawn by the receiver? o Just majority of each sub-class of creditors (as determined by the plan) o Unlike the old law, the debtor does not vote o What if the creditors do not approve? The court may still confirm the plan if its proven that the creditors would still receive a net present value greater than what they would have received if the debtor had been under liquidation What are the only grounds by which the creditors can oppose a plan if approved by court? o 1. Creditors support induced by fraud o 2. Documents or data relief upon were false or misleading

o 3. Rehab plan not supported by voting creditors What is the period for confirmation of the plan? o Within1 year, or else there will be automatic liquidation (to avoid delaying)

PRESCRIPTION

What are the kinds of prescription? o 1. Acquisitive What are the requisites of acquisitive prescription? 1. Capacity to acquire by prescription 2. Thing is capable of acquisition by prescription 3. Possession of the thing under certain conditions 4. Lapse of required time under law o 2. Extinctive or statute of limitations Who may acquire by prescription? o 1. Person capable of acquiring property through other modes o 2. State o 3. Minors through guardians or personally Against whom may prescription run? o 1. Incapacitated person/minors with guardians o 2. Absentees with administrators o 3. Persons abroad with administrators o 4. Juridical persons except the state as to non-patrimonial property When does prescription not run? o 1. Between husband and wife even if there is CSP or JSP o 2. Between parents and children, during minority/insanity o 3. Between guardian and ward, during guardianship Which are subject to prescription? o All things within the commerce of men private property and patrimonial property of State

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What are not subject to prescription? 1. Public domain 2. Intransmissible rights 3. Movables possessed through crime 4. Registered land What is the rule on renunciation of prescription? o Person may renounce prescription already obtained, but not right to prescribe in the future o How is renunciation done? Express or tacit. Tacit is when acts imply abandonment of the right acquired o Who may impugn renunciation? Creditors and other persons interested in making prescription effective notwithstanding renunciation o X borrowed money from Y on November 29, 1933 as evidenced by a PN. Y said that he waives prescription and may still collect even after the 10 year period under law. X failed to pay after repeated demands so Y sued him on January 7, 1953. Can Y collect? Yes. What happened here was not an actual waiver of prescription (which cannot be done) but since there was a 10 year grace period, the period only started running from November 29, 1943. So the 10 year period ends on November 29, 1953. January 7, 1953 is within the period. What are the kinds of acquisitive prescription and their requisites? Extraordinary acquisitive Possession in BF Just title Period: Movables 8 years Immovables 30 years In concept of owner Public, peaceful, uninterrupted

Ordinary acquisitive Possession in GF Just title Period: Movables 4 years Immovables 10 years In concept of owner Public, peaceful, uninterrupted

What is the concept of good faith that differentiates ordinary from extraordinary prescription?

Reasonable belief by the person that he is the owner and could validly transmit ownership o Must exist through the entire period required for prescription What does just title mean as applicable to both ordinary and extraordinary acquisitive prescription? o Titulo Colorado where there was a mode of transferring ownership but something is wrong because the grantor was not the owner Had the grantor been the owner, the mode would have transferred ownership o How does this differ from mere titulo putativo? Here, there was no mode of acquiring ownership, although the person believes he has obtained title What is in concept of owner? o It not out of mere tolerance of the owner, but is actually adverse to the latter. It is a claim that the acquirer owns the property. What is public, peaceful, uninterrupted? o Known to the owner of the thing o Not acquired through violence o And continuous enjoyment of the property o When is there an interruption? 1. If natural If through any cause, possession ceases for more than 1 year. If 1 year or less, as if no interruption. 2. If civil (judicial summons) interrupts, by default Exceptions? o 1. Lack of legal solemnities o 2. Plaintiff desists from complaint, or allows lapse of proceedings o 3. Possessor is absolved from complaint 3. Renunciation by possessor 4. Possession during wartime What are the rules in computing the period?

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o o

Tacking is allowed to predecessor-in-interest When does this happen? There must be privity; possible when there is succession of rights What if the character of possession differs? o Predecessor in bad faith, possessor in GF use extraordinary acquisition Presumed to be in possession in intervening periods unless disproved Exclude first day, include last

Declare contract void Recover property under express trust Probate of will Quieting of title if possessed

SALES Introduction What are the obligations created by a contract of sale? o Seller: Transfer ownership Deliver possession of the subject matter o Buyer: To pay the price What are the elements of a contract of sale? o 1. Consent o 2. Subject matter Upon perfection: determinable Capable of being made determinate without further agreement between the parties Is a generic-determinable subject matter subject to loss? o No. Upon consummation: determinate (requires physical segregation or particular designation) o 3. Price What are the stages in the life of sale? o 1. Negotiation o 2. Perfection A contract of sale (COS) is already perfected at this point A contract to sell (CTS) is already perfected too, but has a suspensive condition payment of full price o 3. Consummation What are the characteristics of a sale contract?

Prescription of actions: 30 years Recovery of immovables (from loss of possession) Mortgage Written contract Obligation created by law Judgment Recovery of movables (from loss of possession) Oral contract Quasi-contract Default period Injury to rights of plaintiff Quasi-delict 1 year Forcible entry/unlawful detainer Defamation Demand right of way Abate public/private nuisance

10 years

8 years

6 years

5 years 4 years

Imprescriptible

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1. Nominate, principal 2. Consensual Non-performance does not void the contract Does the seller need to own the thing during perfection of the contract? No. Only upon consummation. o 3. Bilateral and reciprocal Obligation of one party is the cause of the other Recall: Compensatio morae rules Resolution for failure to comply with reciprocal obligation o 4. Onerous o 5. Commutative Inadequate price does not invalidate sale, but may be a badge of vitiated consent o 6. Title, not a mode Tradition is the mode to transfer ownership Sale just creates the obligation to transfer and deliver Distinguish from barter: o Barter is thing-for-thing; sale is thing-for-money o Special rules for barter: 1. If the thing received in barter is found not to be the other partys, cannot be compelled to deliver what he promised 2. If he lost by eviction the thing received in barter, he may recover what he gave in exchange, with damages As long as it didnt fall in the hands of a third person in GF o Special rules for sales: 1. SOF 2. Right of legal redemption to adjoining owners of urban lands Distinguish from piece-of-work: o 1. Check if it is possible to produce the product ahead of any special order

o o

POW if it can only be made upon receipt of specifications (ex. A/C specially fitting building space) Otherwise, sale (ex. window sashes that can be customized) o 2. POW is unique and always different from other orders o 3. Essence of sale is object; essence of sale is service Service takes into account the plan and the labor. Sale just requires that an object be delivered at some future date. o Is research output POW? No. There is no transfer of ownership. o Why is it important to distinguish? Sale is obligation to give. POW is obligation to do. Remedies differ. Distinguish from agency to sell: o There is sale, not agency, if the middle man had to pay the price for the thing, and then sell it thereafter. There are two contracts of sale here. o Agency is fiduciary, and the agent must act with loyalty. Distinguish Contract of Sale (COS) from Contract to Sell (CTS): o CTS, upon perfection, must: Have a stipulation that the SM remains with the seller until full payment of the price Specific right granted to the seller to extra-judicially rescind the contract in case of default If missing, its a COS OR, there is a stipulation that upon payment of full price, the seller executes a deed of sale in favor of the buyer o Upon consummation: COS title passes upon delivery Non-payment is a substantial breach CTS title not passed to the buyer until payment of full purchase price Payment of the full purchase price is a suspensive condition o Remedies:

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COS need to rescind to recover ownership There can be forfeiture of payments already made by the buyer to the seller as long as its provided for in the contract and its not unconscionable CTS ownership retained, so the contract is automatically extinguished Only action is for recovery of possession Return payments made But there can be decision based on equity if there were sufficient payments already made

Parties Who has capacity to enter into a sale contract? o Anyone with capacity to enter into a normal contract. o For minors, follow usual rule. What is the status of a Contract for sale of necessaries to minor? If perfected and delivered, it is a valid contract. If just perfected, it is voidable, as per usual rule. What do prohibited sales here include? o Also legal redemption, compromises, and renunciations Can spouses sell to each other? o In general, no. o Exceptions? 1. CSP 2. JSP o N.B. prohibition also applies to common law spouses What are the special disqualifications? o 1. Agents over principals property Unless the principal consented. This is the only relationship that can be validated by the principal by consent. o 2. Guardian over wards property o 3. Executor or administrator over estate property

What if the executor or administrator bought the property after administration ceased? Generally, valid. But void if there was an agreement entered into with the heir during administration. Short gap of time between termination of administration and sale is a badge of fraud. o 4. Public officers and employees over property of the State, subdivision, or GOCC entrusted to them o 5. Officers of the court over property under litigation or levy in the court they function in What is the rule on sale of property after litigation or levy? If it was offered before, it cannot be ratified after. If its just the first time, its valid. o 6. Lawyers over property and rights under litigation Are contingency fees valid? Yes. Transfer of property only happens after favorable judgment. Courts may only nullify it if the lawyer exercises undue influence. Can there be ratification? o No. These are void contracts. o But there can be a new contract entered into, applying to: Agent Guardian Executor/administrator o The following cannot ratify through new contracts: Public officers and employees Officers of court Lawyers

Subject matter What are the requisites for a valid subject matter? o 1. Possible subject matter o 2. Licit

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o 3. Determinate or at least, determinable What does possible subject matter mean? o The person need not be the owner of the subject matter upon perfect of the sale contract, and only during delivery must he have a right to do so o Possible means that it may not exist at the moment but it can definitely exist. So you cannot sell a fountain of youth, because its an impossible thing. What is emptio rae speratae"? o A sale based on the suspensive condition that the thing comes into existence. What is emptio spae? o Sale of a vain hope or expectancy. It is void. (Under Jurado, it says that its valid and perfected because what was sold was hope itself) What are examples of illicit subject matters? o Sale of intransmissible rights, sale of future inheritance, etc. What is determinable and what is determinate? o Determinable upon perfection of the contract, the thing is capable of being made determinate, without necessity for a new agreement between the parties. Ex. a contract refers to an existing document o Determinate particularly designated or physically segregated already o If neither determinable nor determinate, no contract. What is essential for perfection as re: quantity and quality? o Identity and quality of the subject matter is ESSENTIAL for perfection. o Quantity is not as important, but the standard is that there is no need to enter into a new contract to determine it. o What is the status of generic things sold? Upon perfection, they are determinable. They are not subject to loss. Upon consummation, they are determinate. o What about sale of undivided interest in property? Co-ownership comes about

What about sale of undivided share in mass of fungible goods? Proportional co-ownership over the mass If mass is less than the measure bought, the buyer owns the entire mass and the seller must make up the deficiency But if a specific mass is sold without weighing, the subject matter is a definite object even if there are minor differences in measure What is the effect of failure to deliver the subject matter? o It does not affect the validity of the contract. o If the person sold something not his, the buyer does not obtain better right over the goods, unless the real owner is estopped. o What is the exception to this rule? Judicial sale. The owner of property sold on judicial sale must be the absolute owner. This is why the mortgagor must be the absolute owner of the thing mortgaged. o What if the seller subsequently obtains title over the thing sold? It passes to the buyer by operation of law. But of course, there must be physical delivery.

Price What are requisites of valid price? o 1. Real o 2. Must be in money or its equivalent Note: there can be post-perfection agreements like dacion en pago to give something else other than money o 3. Certain or ascertainable at the time of perfection What is real? o When the buyer has every intention to pay and seller has every intention to receive. o Take note of absolutely or relatively simulated contracts. o What if the price indicated is false but not simulated? The contract is valid.

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The contract may be reformed to reflect the true intent of the parties. o What if the price indicated is only nominal/meager (ex. P1), is it valid? If it masks the true price given, its valid. But note that Philippine law requires not just consideration but valuable consideration, so if it is found out that there is none, the price is invalid (because it might actually be a donation). So gross inadequacy in itself does not invalidate the contract but it may indicate vitiation or that its a donation. What is certain or ascertainable? o Certain if it is in a definite amount. o Ascertainable if reference can be made to another thing certain or judgment of another person. Can a third party fix the price? Yes, it is valid. The third partys act is a suspensive condition. What if the third party refuses or cannot fix the price? Or what if the price cannot be determined through the thing certain? The contract is inefficacious because of failure of suspensive condition. So there is a valid contract at one point. Can either party fix the price? No. When can the courts fix the price? 1. Third party is in BF 2. Mistake What is the rule for sales where there is no price agreed upon? o Attempt to determine the price in any other matter. But most of the time, it becomes an inefficacious contract (because for instance, the thing certain cannot determine the price, or a third person designated to do so does not or cannot). o If there is delivery and appropriation already:

Seller is estopped. He cannot ask for the thing back. Also, return of the thing would violate mutuality of contract because the buyer already appropriated it. Buyer is unjustly enriched. He must pay a reasonable price. What is the rule on manner of payment? o It must also be certain or ascertainable. It is essential, being part of the prestation of the contract. o What is the presumption? Immediately demandable and payable, if nothing is provided o What is the exception? If the intent clearly shows some other manner apart from immediate payment but the contract does not provide for it, there is no contract (no price). o X wanted to buy a car from ABC Company, on the condition that X would procure a loan from DEF Finance, as stipulated on the agreement. The loan was denied. Is there a void contract for lack of manner of payment? No. There is a valid contract, but with a suspensive condition that did not come into fruition. For an executory contract of sale, how is it taken out of the SOF? o 1. Written memorandum must evince all the essential requisites of a contract of sale, or o 2. If it has been partially or fully executed What is the effect of deficiency of price? o Does not affect validity of the sale contract, but may indicate vitiated consent or that it is a donation contract. o For a judicial sale, inadequacy can avoid a sale if: 1. Price is shocking to the conscience 2. And one can get a better price 3. And there is no right to redeem Because if there is right to redeem, the low price would make it easier to get the property back o What if its sale for an inadequate price by a guardian or absentees representative?

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Remember the more than lesion rule, which can lead to rescission. What if a sale with right to repurchase has a deficient price? There is a presumption that it is an equitable mortgage. The remedy for the seller is to reform the contract, while the buyer can foreclose the equitable mortgage.

Formation of contract of sale What is the rule on offers and acceptance? o See OBLICON notes. What is the difference of Contract to Sell (CTS) from an option contract (OC)? o CTS promise to buy and sell a determinate thing for a price certain o OC contracted offer, securing the privilege to buy, so the other party cannot enter into a contract with another What is their similarity? o Both contracts are subject of specific performance. o Both are perfected contracts, but not the COS per se What is required for an OC to be valid? o 1. Agreed time o 2. Determined price o 3. Separate consideration Need not be in cash. It can be a mortgage, buying the lands in half a property, etc., as long as its an undertaking of value. Does the OC fall under the SOF? o No. But the resulting sale contract will. What if the requisites for an OC are not complete? o Its a VALID offer but a VOID option contract. o So it can be withdrawn with no consequence. But if its accepted before withdrawal, a contract of sale ensues. How is the option exercised? o Merely advising the offering party. No need to pay stipulated price of the sale yet upon exercise of the option.

What is the rule and remedy when an option contract is perfected? o The optionee has the right to exercise the option anytime during the period, and this will bring about a valid contract of sale. o If the offer is withdrawn, then it results in a breach of the option contract, but the offer cannot be accepted anymore. (Ang Yu) CLVs opinion: if the offeror withdraws the offer during the period, it is void. The offeree can still accept the offer. o If the offeror withdraws the offer and sells the thing it to a third person in BF, the optionee can exercise the option and compel specific performance from the third person. o If the offeror withdraws the offer and sells the thing to a third person in GF, the optionee can recover damages from breach of contract of sale, and not just breach of the option contract. What is the Right of First Refusal (RFR)? o A promise on the part of the owner that he will sell it first to the promisee should he decide to sell the thing. o What is certain among perfection of the RFR? Just the object of the contract. NOT YET the price and manner of payment. o Must there be a consideration? Yes, but need not be separate from the main contract. o Must it be in a written contract? Yes, otherwise it is unenforceable. (SOF) What if a RFR is not honored? o No specific performance o Damages only What if the property is offered to a third person after being offered to one with a RFR? o The offered price to the third person must at least be under the same terms and conditions as the prior offer. N.B. Take note of the usual rule offer must be certain, acceptance must be absolute, otherwise its a counter-offer. What is the nature of earnest money? o Its part of the purchase price. o Its given only when there is already a sale.

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Buyer is bound to pay the balance. When there is failure to pay the balance, the earnest money is returned upon resolution; it is not forfeited. What are the rules on form that you must take note of? o 1. Sale of real property by an agent (must be in SPA) o 2. Sale of large cattle (in writing and registered w/ municipal treasurer) o 3. Sale of land by non-Christians o 4. Transactions involving rights over real property must be in public document to be registrable (1358) But not a requirement for perfection o 5. SOF

Transfer of ownership/performance of sale contract When is there tradition? o When the thing sold is placed in the control and possession of the vendee o With intent to deliver What are the types? o 1. Actual o 2. Constructive any manner signifying transfer of possession Constitutum Possessorium: sold as owner, continue to possess as lessee Traditio Brevi Manu: bought as lessee, and become owner Traditio Longa Manu: delivery by agreement o 3. Symbolic ex. delivery of keys to a car What is the effect of execution of public instrument? o For both movables and immovables, it is equivalent to delivery of the thing, unless the contrary can be inferred. o What are the exceptions to this rule? 1. Contrary stipulation in the instrument 2. Seller did not control the subject matter at the time of execution of the instrument Except: when there is express agreement that the buyer will take steps to obtain

material possession of the thing from a third person 3. Seller did not have control or ability to transfer physical possession of the property for a reasonable length of time after execution of the public instrument What is the rule on delivery by carrier? o GENERALLY, delivery to carrier is delivery to buyer o Exceptions: 1. FAS sales (Free Alongside Ship) Delivery when goods placed alongside vessel 2. FOB sales (Free On Board) FOB shipping point delivery to carrier is delivery to buyer o Buyer must pay freight FOB destination delivered to buyer only upon reaching destination o Seller must pay freight 3. CIF sales (Costs, Freight, Insurance) The buyer pays fixed price while seller pays insurance and freight up to the point of destination In delivery of movables, what if the seller delivered less goods than what he contracted to sell? o 1. Buyer may reject. o 2. If buyer accepts and retains the goods knowing the contract wont be performed in full, he must pay at contract rate (meaning, lessen the cost). o 3. If buyer used or disposed the goods before he knew the contract wont be performed in full, he just pays fair value. What if the seller delivered more than what he contracted to? o 1. Buyer may reject the excess. o 2. If its indivisible subject matter, he may reject the whole. o 3. If he accepts the whole, he still pays contract rate. o 4. Same rule if the seller delivers goods where some match the contract specifications and some do not. What is the rule for sale of immovables where the area is stated?

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The seller must deliver all that is stated in the contract. If the area is less or the quality is different: 1. Proportional reduction of price OR 2. Resolution of contract (as long as the lack is more than 1/10 of the area) But if the buyer would not have bought the property had he known the smaller area or inferior quality, he can still resolve even if less than 1/10 o If area is more than stated: 1. Reject excess OR 2. Accept all, but pay contract price o What if the sale of property is by lump sum? No change in the price even if the area is less or more than what is in the contract. Usually indicated by lack of price-per-unit When does delivery not transfer title? o 1. On sale or return Buyer has option to return instead of paying the price Delivery vests ownership but the buyer may return the goods within the time stipulated/reasonable time o 2. Sale on acceptance (or on approval or on trial) Delivery is transfer only, until: Buyer signifies approval Buyer does not signify approval but retains goods without notice of rejection o N.B. for #1 and 2, there must be clear and written agreement that sale is on sale or return or sale on acceptance o 3. Reservation of ownership o 4. Sale is not valid o 5. Seller is not owner What are the exceptions? 1. True owner is estopped 2. Sale made by registered or apparent owner according to registration laws 3. Sale pursuant to statutory power of sale or under order of court

o o

4. Purchased in merchants store, fairs, markets

Double sales What is the general rule for double sales (registered immovables)? o The Torrens system prevails in setting priorities. o When the property is covered by two different titles, the earlier one prevails. o When one buyer bought the land as registered under Act 3344 (old registration law), and another bought the land as registered under Torrens title (PD 1529), the latter prevails. What if there was a prior unregistered sale and a subsequent judicial sale? o 1. If the land was registered, the judicial sale wins Because the rule that first-registrant-wins applies and in this case, the ordinary sale was unregistered while the judicial sale is o 2. If the land was unregistered, the unregistered sale wins Because there are no rights to step into for the second buyer What is the rule for movables? o First person to take possession of it in GF wins (no need to register for movables) What is the rule for unregistered immovables? o 1. First person who registers the land in the ROP in GF o 2. If neither, the first person who possessed it in GF o 3. If neither,s the person who presents older title in GF o N.B.: this pertains to unregistered lands, and registration here is registration of the land in the ROP (Torrens) o When does this rule apply? 1. Two valid sales 2. Same subject matter 3. From same person 4. Conflicting interests What does purchaser in GF mean? o No notice of other persons right or interest. Paid full and fair price upon purchase, and before notice.

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If the circumstances call for an investigation and he did not, hes in BF (ex. lis pendens or annotated adverse claim). o So what is required for second person: Second buyer must show continuing GF until full ownership vests. The first buyer can simply defeat this continuing GF by registering. As soon as he second buyer obtains knowledge of the first sale, its akin to registration in favor of buyer #1, because second buyer loses GF. What is the subsidiary rule? o Primus tempore, potior jure (First in time, first in right). This applies when the above rule doesnt apply for lack of requisites, or if one is a CTs and one is a COS. o If one is a CTS and one is a COS, the CTS wins if the CTS buyer fulfilled all the conditions already and there was a subsequent COS after.

Follow res perit domino. The goods remain at the sellers risk until ownership is transferred to the buyer. When the ownership of the goods has been transferred to the buyer, then the risk transfers to him. What are the exceptions? 1. If the possession has been transferred to the buyer or the latters bailee, but the ownership remained with the seller as a security (think: trust receipts), then risk has passed to the buyer; 2. If delivery has been delayed due to the buyers or sellers fault, then the party at fault bears the risk

Documents of title Recall WAREHOUSE RECEIPTS notes, esp. on warranties and how to garnish/levy a negotiable document of title and a non-negotiable document of title o Ex. need to surrender receipt, can ask help from court for injunction, conflict between assignment of document and levy of the same document and the rule on notice, etc. What is a document of title and its purpose? o It is a document used in the ordinary course of business in the sale or transfer of goods, as proof of possession or control of the goods, or authorizing the possessor of the document to transfer or receive (by endorsement or delivery) the goods represented by the document What are the warranties of seller of documents of title? o 1. The document is genuine o 2. He has legal right to negotiate or transfer it o 3. He has no knowledge of any fact that would impair the validity or worth of the document o 4. He has right to transfer title to the goods and that the goods are merchantable or fit for a particular purpose What are the rules on levy/garnishment of the goods? o If a document of title has been transferred but not negotiated to a person: The person acquires right title over the goods as against the transferor only

Risk of loss What are the general rules to remember? o 1. Generic things do not perish o 2. The 6 rules on loss, deterioration, and improvement with or without fault (Art. 1189) What if the loss occurred prior to perfection? o The seller obviously bears the loss What if the loss occurred after perfection but before delivery of the thing? o If entirely lost, then the contract is extinguished. o If partially lost, the buyer may either resolve the contract or demand delivery with reduction of price. o What if there is sale of specific goods and the seller did not know that the goods perished in part or have deteriorated as to change the goods character? 1. Buyer may avoid the sale or 2. Treat the sale as valid as to existing or nondeteriorated goods and pay price for such What if the loss occurred when ownership is transferred?

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If the document is non-negotiable, he may inform the bailee-issuer of the receipt of the transaction and have the bailee hold the goods for him What happens prior to the transferee informing the bailee? He may be defeated in right by an attaching creditor, or by the transferor/another transferee who informs the bailee of another sale How goods can be garnished: Before the bailee can heed a garnishment order, the receipt must either be: 1. Surrendered or impounded by court, or 2. Further negotiated be enjoined by court What is the remedy of such creditor? May ask help from the court for injunction or attachment

Remedies of unpaid seller What is an unpaid seller? o 1. Whole price has not been paid or tendered o 2. Negotiable instrument received as conditional payment and the condition was broken due to dishonor, insolvency, etc. What are the ordinary remedies of an unpaid seller? o 1. If ownership has been transferred to the buyer, specific performance for price o 2. If ownership has not yet been transferred to the buyer, it can be resold for a reasonable price. The seller can also offer to deliver to the buyer. If the buyer refuses to receive the goods, the seller becomes a bailee for the buyer. The seller can ask for specific performance for the price. o 3. If price is payable on a certain day, the seller can ask for specific performance for the price regardless of delivery The buyer can launch as a defense the sellers incapability to perform his obligation

What are the special remedies for an unpaid seller? (Note: these are special because they are self-help remedies and can be done as long as there is no physical intrusion) o 1. Possessory lien over the goods When ownership has been transferred: Seller has lien on goods or right to retain goods if he still possesses them. When ownership has not been transferred: Seller has right to withhold delivery. Buyers disposition of the goods does not terminate lien. Exceptions: 1. If seller assents 2. What was sold was a negotiable instrument held by a possessor in GF When can possessory lien be exercised? 1. Goods sold without credit stipulation or term of credit has expired already OR 2. Buyer has become insolvent When does the possessory lien terminate? 1. Seller delivers goods to carrier or bailee without reservation of ownership 2. Buyer lawfully obtains possession of goods 3. Waiver o 2. Stoppage in transitu Right to stop goods in transit Buyers disposition of the goods does not affect stoppage. Exceptions: 1. If seller assents 2. What was sold was a negotiable instrument held by a possessor in GF N.B. Same exceptions as in possessory lien When are the goods in transit? Carrier/bailee has them before buyer takes delivery of the goods Goods rejected by buyer and carrier/bailee continues in possession

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BUT if the goods are being carried on behalf of the buyer already or the carrier wrongfully refuses to deliver goods to the buyer, they are deemed NOT in transit How is this right exercised? 1. Actual possession 2. Notice to carrier 3. If there is negotiable document of title, need to cancel it first before carrier gives goods back to seller [N.B. the next two special remedies require prior exercise of possessory lien over the goods or stoppage in transitu] o 3. Special right of resale In what instances does this right apply? 1. Perishable goods 2. Seller expressly reserves right of resale in case of default 3. Buyer has been in default for unreasonable time What is the prerequisite? The unpaid seller should have a right of lien or should have stopped the goods in transitu What is the effect? Seller may resell even without rescinding the original sale contract Buyer is liable for: o 1. Damages and o 2. Difference for the price, if the subsequent sale is for a lower price When does seller have to give notice? 1. If goods are perishable, no need for notice 2. When the goods are not perishable, to see if the default has been for an unreasonable time Seller cannot buy the goods for himself. o 4. Special right to rescind When may this right be exercised?

1. Express reservation of right to rescind 2. Default for unreasonable time What is the prerequisite? The unpaid seller should have a right of lien or should have stopped the goods in transitu Buyer is liable for breach Give notice to buyer of rescission, not in order to exercise the right, but to determine whether default has been for unreasonable time period

Warranties What are express warranties? o Those provided in the contract What are implied warranties? o 1. Implied warranty by seller that he has a right to sell the thing at the time ownership is to pass and that the buyer from that time will have legal and peaceful possession of the thing o 2. Implied warranty that the thing is free from any hidden faults or defects, or any undeclared charges/encumbrances o BUT this cannot hold liable a pledgee, mortgagee, sheriff, auctioneer, with authority under fact or law, for the sale of a thing where a third person has legal or equitable interest What are the buyers remedies for breach of warranty by the seller? o 1. Accept the goods but recoup price or have it reduced o 2. Accept the goods and file for damages o 3. Refuse to accept the goods and file for damages o 4. Resolve COS and refuse to accept the goods OR have mutual restitution, if applicable When can the buyer not rescind? If he knew of breach of warranty but accepted goods without protest Failed to notify the seller within reasonable time If he fails to return the goods or offer to return them

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If the goods are not in good condition anymore due to the buyers fault What if the seller refuses to accept the goods back? The buyer becomes a bailee With lien to secure price which has already been paid With no prejudice to sellers right to enforce liens of an unpaid seller Are these remedies mutually exclusive? Yes Except: may seek rescission even after choosing fulfillment if it becomes impossible o 5. If there is breach of warranty of quality, the loss is the difference between the actual value of the goods and the value of the goods had they complied with the warranty When is there an implied warranty on quality or fitness of the goods? o 1. Buyer expressly/impliedly makes known to the seller the particular purpose for which the goods were acquired and the buyer relies on the sellers judgment or skill implied warranty that the goods are suited for the purpose o 2. Goods are bought by description from a seller who deals in goods of that description implied warranty that the goods are of merchantable quality What is warranty in case of eviction? o It is an implied warranty wherein if the vendee is deprived of the whole or part of a thing purchased by FJ based on a right prior to the sale by the vendor, the vendor is answerable for the eviction o What are the requisites? 1. Deprivation of the vendee of the whole/part of the thing bought 2. By virtue of final judgment 3. Based on a right prior to the sale or an act imputable to the vendor

4. Vendor must be summoned in the suit for eviction at the vendees instance o What can the vendee demand of the vendor in case of breach of warranty against eviction? 1. Return value of the thing when sold 2. Income or fruits if he has been ordered to deliver them to the party who won the suit 3. Cost of suit which caused eviction (or suit brought against vendor) 4. Expenses of the contract if vendee paid 5. Damages and interests, and ornamental expenses if sale was in BF When can the vendee demand the rescission of the contract? 1. If due to the eviction a part of the thing sold was so important that the vendee would not have bought it without said part 2. Two or more things jointly sold for lump sum (or for separate price for each if it is clear the vendee would not have purchased one without the other) o What are the two kinds of waiver of warranty against eviction? 1. Consciente voluntary renunciation made by the vendee of the right Effect: liability of the vendor in case of eviction only extends to the payment of the value of the thing sold 2. Intencionada voluntary renunciation by the vendee of the right to warranty against eviction with knowledge of the risk of eviction and assuming its consequences Effect: no liability whatsoever for the vendor What is an accion redhibitoria? o Actions instituted by the vendee against the vendor to avoid a sale on account of some vice or defect in the thing which renders it unfit for the use intended

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What is accion quanti minoris? o Action to procure return of a part of the purchase price paid by the vendee to the vendor due to the defect What is the prescriptive period for either? o 6 months from date of delivery o Except redhibitory actions based on faults/defects of animals, which is 40 days from date of delivery

Breach of contract What are the remedies covered by this section (overview)? o 1. Ordinary remedies of seller for breach of sale of movables o 2. Recto Law o 3. Ordinary remedies of seller for breach of sale of immovables Art. 1592 for failure to pay Anticipatory breach o 4. Maceda Law o 5. Remedies of buyer in sale of movables Specific performance Four actions in case of breach of warranty Anticipation of breach o 6. Remedies of buyer in sale of immovables Anticipation of breach Condominium law What are the remedies of the seller for breach of contract of sale of movables? o 1. If ownership has been transferred to the buyer, specific performance for price o 2. If ownership has not yet been transferred to the buyer, it can be resold for a reasonable price. The seller can also offer to deliver to the buyer. If the buyer refuses to receive the goods, the seller becomes a bailee for the buyer. The seller can ask for specific performance for the price. o 3. If price is payable on a certain day, the seller can ask for specific performance for the price regardless of delivery

The buyer can launch as a defense the sellers incapability to perform his obligation What is the remedy for sale of movables on installment (RECTO LAW)? o Three options: 1. Exact fulfillment of the obligation, if buyer fails to pay an installment Can there be recovery of deficiency? o Yes. 2. Cancel the sale, if buyer fails to pay 2 or more installments Is there return of price? o Usually, none, to compensate for deterioration What is the validity of an agreement not to return price already paid? o Valid as long as not unconscionable What is the nature of rescission? o It bars further recovery (because payments are returned and the SM is returned) 3. Foreclose CM on the thing, if buyer fails to pay 2 or more installments NO ACTION to recover unpaid balance Does this bar foreclosure on another guarantee and another security? o Yes. What if the seller forecloses on additional securities instead of the CM? o Loses lien on the CM. What is the effect of taking back the SM by the seller? o Its tantamount to foreclosure What if property is sold for two installments only? o There can be no failure to pay 2 or more installments, so even if CM is

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foreclosed, the unpaid balance can still be recovered (exception to 1484) o What else is deemed a purchase of movables on installment? 1. Financing agreements 2. Lease with option purchase o Are the remedies mutually exclusive? Yes. But if the chosen remedy fails, can choose another. Remedies of seller for sale of immovables? (if not covered by Maceda Law) o 1. For anticipatory breach If the seller has reasonable fear of breach or loss, may immediately sue for rescission of sale Or else, he can only rely on substantial breach o 2. For failure to pay the price It does not bar the transfer of ownership or nullify the sale K But he can rescind it through judicial or notarial demand What does Art. 1592 provide? Even if it is stipulated that failure to pay the price leads to rescission, there has to be a demand for rescission first, to grant the buyer of every opportunity to comply with the obligation So if there is no judicial demand or notarial act, the buyer can still pay what is due When does Art. 1592 apply? o Ordinary sale of real property transferring ownership simultaneously with the delivery of the real property sold What is the remedy for seller of immovable on installment (MACEDA LAW)? o When ML applies: 1. Sale in installments AND

2. The immovable is residential real estate or condo unit (not commercial, industrial, or agrarian reform land) AND 3. Either a CTS (notice of cancellation) or COS (demand for rescission) Even applies to financing transactions If buyer has paid at least 2 years of installments: 1. Grace period of 1 month for every 1 year of installment payments to pay (without interest) Can only be availed once every 5 years What if there is a stipulation that there is no grace period or there is payment of interest? o INVALID. 2. If the seller cancels the contract, he must refund to the buyer the cash surrender value of payments already made: 50% + 5% for every year beyond 5 years of installments (not exceeding 90% total) When does actual cancellation take place? AFTER expiration of grace period, the seller gives: o 1. Cash surrender value o 2. Notarial demand for rescission o 3. And there is lapse of 30 days from receipt of notarial demand What if the lot has been sold to an innocent purchaser for value at this time? Option 1: Buyer can demand return of actual market value + 12% interest Option 2: Buyer may demand substitute lot What is the nature of this 30 day period after notarial demand? nd It, in fact, is a 2 30 day grace period for which payment can be made. But in this grace period, there are interests and penalties. Can there be judicial rescission under the ML?

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No. The law requires notarial rescission. If a judicial rescission is filed instead, the court will dismiss it. Note again if the situation involves Maceda Law, then judicial rescission (actually, resolution), does not apply because the action must be a notarial rescission If Art. 1592 (not ML) applies: Either judicial or notarial rescission. Rescission cannot be extra-judicial; buyer can otherwise still continue paying. o If buyer has paid less than 2 years of installments: 1. Grace period: only 60 days from date the installment became due 2. After grace period, the seller may either cancel the contract (CTS) by giving notarial notice of rescission (COS). There is another 30 day period before the cancellation or rescission takes effect. What about the cash surrender value? It doesnt apply to this situation. The buyer does not get it back. What are the remedies of the buyer in a sale of movables? o 1. Specific performance o 2. Recall four actions above for breach of warranty: 1. Accept goods, but recoup/reduce price 2. Accept goods, with damages 3. Refuse goods, with damages 4. Resolve contract o 3. Suspension of payments in anticipation of breach If buyer has a reasonable fear of disturbance, vindicatory action, or foreclosure Until when must suspension last? 1. Seller has caused disturbance to stop 2. Seller issues a security for return of the price 3. There is stipulation that the buyer must pay nonetheless

Is trespassing considered as a valid ground to suspend payments? No. What are the remedies of the buyer in a sale of immovables? o 1. Suspension of payment if there is reasonable fear of disturbance or danger Unless the seller gives security for return of price o 2. Subdivision or condominium projects (PD 957) No forfeiture of payments where there is failure to develop condominium projects or subdivisions and then the buyer stopped payments Buyer can ask for refund of what he paid notice and demand can be simultaneous

Extinguishment of sale What are the causes to extinguish a contract of sale? o 1. Ordinary causes to extinguish an obligation o 2. Breach (discussed directly before) o 3. Conventional or legal redemption What is conventional redemption (sale pacto de retro)? o When the seller expressly reserves the right to repurchase the thing sold. It must be reserved by the seller in the same instrument of sale. Once consummated, cannot make pahabol the stipulation in a separate document. In fact, it cannot be in a separate document (unless its something else like an option to buy). It MUST be in the same sale instrument and stipulated before consummation. o It does not prevent the consummation of the sale. o Can enforce the right from third persons or possessors deriving right from the buyer, even if the subsequent sale contract did not mention the conventional redemption. Of course, respect laws on Mortgage and Property Registration Decree. Compare with option contract?

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Conventional redemption need not have separate and distinct consideration to be valid. o The period of the conventional redemption cannot exceed 10 years, while an option contract may exceed this period. o Option contract need to just give notice that you are exercising the option. o Conventional redemption give notice AND tender payment with consignation What is the period for redemption? o 1. If none agreed upon, 4 years o 2. If there is a period agreed upon, cannot exceed 10 years o 3. 30 days from judgment of the court, if there is judgment declaring a contract one with conventional right to redeem and not something else (ex. Equitable mortgage) o When is the period suspended? Pendency of action in GF questioning the validity of the underlying sale contract suspends the prescription. But mere failure to pay the price does not suspend it. What is the effect of the agreement? o It is a valid contract of sale with a resolutory condition that the seller exercising right to redeem. What must be returned to the buyer by the seller? o 1. Price o 2. Expenses of the contract o 3. Necessary and useful improvements/expenses When is a contract presumed to be an Equitable Mortgage (EM)? o 1. Price of sale with right to repurchase is unusually inadequate o 2. The seller remains in possession of the property as lessee or otherwise o 3. The period of redemption is extended in another instrument o 4. The buyer retains for himself a part of the purchase price o 5. The seller binds himself to pay for the taxes of the thing sold o 6. Any other similar case In case of doubt, what is the rule?

A sale purporting to be pacto de retro (with conventional redemption) is deemed an EM. o Same with absolute sales, but the real intent is to secure an obligation. What is the consequence if a contract is declared an EM, and not pacto de retro? o Title of buyer cannot ripen into full ownership because his possession is not in the concept of an owner. o There can be no consolidation of title in the buyers hands (otherwise its pactum). o The seller can redeem as long as the buyer hasnt foreclosed yet. How is consolidation of ownership in the vendee by failure of the vendor to exercise option in a pacto de retro done? o Through an ordinary civil action (so all indispensable parties i.e. those with interest must be impleaded) What is legal redemption and when does it apply? o Mechanism of law to minimize co-ownership. o 1. Among co-heirs Selling to a stranger prior to partition Can redeem within 1 month from receipt of notice of sale to stranger Applies only to hereditary rights (co-heirs) o 2. Among co-owners Selling to a stranger of a co-owners share If two or more co-owners decide to redeem, they acquire in proportion to their existing shares o 3. Adjoining owners of: A. Rural land Sale of land which does not exceed 1 hectare Not applicable to lands separated by servitudes If two or more are requesting redemption, prefer the one with the smaller lot. If equal, prefer the first requestor to redeem. Purpose: maximize use of rural lands

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B. Urban land ONLY applies when there is sale of a small piece of land which was bought by a seller for mere speculation (sold when prices go up) Purpose: prevent speculation in real estate when there is housing problem already in urban area What is the special rule for sale of adjoining urban land? o The right is not just of redemption but also preemption. It means if the resale has not yet been perfected, the adjoining owner can preclude sale because he is preferred. o 4. Sale of credit in litigation by the creditor When does legal redemption start to run? o Within 30 days of receipt of notice in writing by the prospective seller or seller o Written notice is indispensable even if the redeemer gains knowledge of the sale some other way o Exceptions? 1. Suit in court to eject or collect rentals from coowners 2. Laches by redeemers 3. The co-owner himself acted as middleman or intermediary in the sale to the third party

PARTNERSHIP Contract of partnership What are the elements of a Partnership contract? o 1. Meeting of the minds to form a partnership A partnership is consensual contract

You cannot add a new person to the partnership unless everyone consents Mere co-ownership does not make a partnership o 2. Agreement to contribute to common fund with joint interest in the profits or losses thereof Share of profits must come from the equity position and not some other role (ex. creditor, employee) o 3. Consideration: promised contributions Partners are debtors to the partnership to the extent of promised contribution. They pay damages and interest for failing to do so. Industrial partners contribute their service, so they cannot engage in a business for themselves. What are the two essential requisites of any partnership contract? o 1. Two or more persons bind themselves to contribute money, property, or industry to a common fund N.B. mere co-ownership does not per se constitute a partnership o 2. Intention by the partners to divide the profits amongst themselves What is the presumption? Receipt of share in net profits is prima facie evidence that the person is a partner What are the cases where this rule does not apply? 1. Wages of an employee 2. Rentals paid to landlord 3. Annuity of surviving spouse or representative of deceased partner 4. Consideration for sale of goodwill or other property Key attributes of Partnership: o 1. Consensual, but weak juridical personality Arises even if the partnership is not registered Can be extended beyond term if the partnership is not liquidated or settled at end of term

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Really merely for convenience of transacting with the public o 2. Mutual agency o 3. Delectus personae There is special fiduciary relationship between partners. There is utmost trust. When it is breached, any partner can dissolve the partnership midstream, even before stated period. In fact, even if there is bad faith, a partner may dissolve the partnership midstream, but with damages. The moment one partner is gone, the partnership is dissolved. o 4. Subject to unlimited liability Partners are liable pro rata with their separate property after all partnership assets have been exhausted Does this include even industrial partners? Yes Can there be a contractual stipulation denying unlimited liability? No. But it can be valid only as an internal agreement among partners. Characteristics of a partnership contract: o 1. Nominate and principal o 2. Consensual Failure to register and provide a public instrument is not fatal to the existence of the partnership o 3. Onerous and bilateral o 4. Preparatory and progressive Distinguish universal from general partnership: o Universal partner contributes all his property o Particular determinate things, or specific undertaking, or exercise of profession or vocation o Why is the distinction important? Those who cannot donate to each other cannot enter into contract of universal partnership

Can spouses enter into a partnership? No. This would indirectly change their property relations. o What is the default rule? Particular partnership o X and Y are partners in real estate projects. X was abroad and Y stumbled upon a potentially lucrative piece of property. Y was convincing X to commit to the new venture but X refused. Y initially temporarily used partnership property to secure the new property but returned it and used his own property when X refused. The property earned big profits. X is claiming part of the earnings. Is X entitled? HELD: No. They are not universal partners, and only particular partners. Without sufficient basis, the law cannot presume a partnership between X and Y as to the new property. Term of partnership: o 1. Fixed term or particular undertaking But partners may choose to continue after, which will turn it into a partnership at will Even if there is specific duration or purpose, any partner may choose to dissolve the partnership But if there is no cause or there is BF, damages o 2. Partnership at will Any partner may dissolve it at will, but if there is BF, damages What is the extent of a general partners liability? o 1. Liable pro rata when partnership properties have been exhausted o 2. Solidarily liable with the partnership for wrongful acts or omissions causing injury to third persons when the partner acts in the ordinary course of business o 3. Also solidarily liable with the partnership when a partner acting with apparent authority receives money from a third person and misappropriates it o What about a subsequent partner?

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He is not personally responsible for liabilities arising prior to his joining the partnership Distinguish a capitalist partner from an industrial partner: o Capitalist: Contributes money or property Liable for losses (cannot stipulate otherwise) Cannot engage in competing business or venture o Industrial: Contributes services Not liable for losses (except when all the partnership assets have been exhausted) Cannot engage in any other business at all o Terms of a partnership contract provide Participation: A 40%, B 40%, C 20%. Both A and B provide the entire capital and C was industrial partner. The partnership went bankrupt. Can a creditor hold C liable for losses? Yes, because third parties are not subject to internal agreements between the partners as to losses. So the creditor can hold C liable for 20% since that is his participation. C, in turn, can ask for reimbursement from A and B because of their agreement that C does not share in losses. What is a partner by estoppel? o He is not really a partner, but because of his acts, he has led third parties to believe so. He is liable as a regular partner as to these creditors. Pro rata with other partners who consented to the representation. The partnership itself is only liable as the partnership per se if all the partners acceded to the representation What is the registration requirement? o 1. If capital contributed is 3K or more, must be in a public document and registered with SEC What is the consequence of failure to register?

None. It has no adverse legal consequence. It does not affect partnership liability to third persons. Purpose of registration: Prevent tax evasion by large partnerships Allow public to determine nature of the partnership more accurately o 2. For partnerships where real rights or immovable properties are contributed there must be a public document, inventory, and registration with the SEC What is the consequence of failing to register this public document? The partnership is void, under express provision of law. But this cannot prejudice liability towards third parties. N.B. The partners lose the benefit of excussion. They are solidarily liable, and not just jointly and subsidiarily liable. N.B. But under CLVs blog discussion, failure to register really has no adverse effect even here because third parties cannot be prejudiced by failure to register, and as among the partners, there are still contractually bound (consensual agreement). Priority rules if registered A. Partnership creditors over partnership properties B. Separate creditors over separate properties Can a corporation enter into a partnership? What about a JV? o Cannot enter into partnership. o But can become a limited partner because there is no unlimited liability in this case and it will not participate in the management of the partnership. o Can enter into a JV (because there is a particular purpose only)

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What is the rule on liabilities as regards the firm name? o If a non partner has his name in the firm name, he is subject to the liability of a partner.

Rights and powers of the partners What are the three general rights of the partners? o 1. Right to participate in management of the partnership (manager) o 2. Right over specific property of the partnership (agent of other partners) o 3. Interest in the partnership (equity holder) What is the management right of the partners? o Presumption is that there is mutual agency acts of one can bind the partnership. But what is stipulated in the partnership articles is what prevails. o BUT the doctrine of apparent authority prevails. Third persons cannot be prejudiced; they are not expected to look up the articles of partnership, even if registered. What is the rule as to acts within the ordinary course of business? o Representations by partners bind the partnership, if acting within scope of his authority. o Wrongful acts in ordinary course of business: Solidarily liable with the partnership for wrongful acts or omissions causing injury to third persons when the partner acts in the ordinary course of business Also solidarily liable with the partnership when a partner acting with apparent authority receives money from a third person and misappropriates it What are the other acts exhibiting that the partners generally act as agents for the partnership? o 1. Admission or representation made by any partner concerning partnership affairs within scope of authority: evidence against the partnership o 2. Notice to any partner regarding partnership affairs, knowledge acquired by a partner while a partner, and knowledge of a partner who reasonably could and should have

communicated it to the acting partner operate as notice to the partnership o 3. See the two rules on solidary liability as re: wrongful acts or omission in ordinary course of business and misapplication of property received from third person What is the rule as to acts NOT within ordinary course of business? o NOT valid unless approved by all the partners. o Examples: Assigning partnership property in trust, mortgaging, or pledging it Disposing of the goodwill of the business Confession of judgment Entering into compromise as to liability or claim Renouncing claims by partnership or submitting it to arbitration What if management is stipulated in favor of one partner? o He may execute all acts of administration despite opposition by other parties. o If stipulated in the articles of partnership, it is irrevocable except for just or lawful cause. If not stipulated in the articles of partnership, it is essentially revocable. What if management is stipulated in favor of 2 or more partners? o If there is opposition, majority wins. o If there is a tie, controlling interest prevails. What if it is stipulated that none of the managing partners should act without consent of the others? o Follow the rule, then. o Exception is if there is imminent danger or irreparable injury to the partnership. What is the nature of power of alteration (ownership/control)? o Cannot be done without consent of all other partners, even if useful o But if the refusal is manifestly prejudicial to the partnership, court intervention may be sought What is the rule on sale of real property? o If the title is in the name of the partnership,

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Conveyance in the name of the partnership, done with authority valid Conveyance in the name of the partnership, done by a partner without authority partnership may recover it unless the purchaser is in GF and for value Conveyance in the name of a partner, done with authority only equitable interest is passed Conveyance in the name of a partner, done without authority no effect o If title is in the name of a partner, Conveyance by a partner with authority (whether in the name of the partnership or own name) only equitable interest is passed Conveyance by a partner without authority no effect o If title is in the name of some but not all of the partners: If the records disclose partnership interests partners named in the title can convey title, but the partnership may recover if they acted without authority, except for purchaser in GF and for value If the records do not disclose partnership interests partners named in the title may convey title over property, but the partnership may recover if they acted without authority o If title is in the name of all of the partners: Conveyance done by all the partners passes all their rights over the property What is the nature of their co-ownership interests over the partnership property? o Partner has equal right to posses the partnership property only for partnership purposes Compare with normal co-ownership: can use the property as long as non-injurious to other co-owners o Partners right over partnership property is non-assignable except in assignment of rights of all partners over the property o Partners right over the property is not subject to:

1. Attachment or execution on personal claims, unless on claim against the partnership 2. Legal support What is the rule on equity rights? o These can be transferred or assigned. What is passed is the right of the assignor to receive profits. o Does this dissolve the partnership? No. The rights are separable. o Does this give the transferee management rights? No. The rights are separable. When can separate creditors attach and publicly sell the shares of a partner on assets? o It must be during dissolution only, and after satisfaction of partnership creditors. What is the share of the partners in profits and losses? o It is done according to agreement. o A. If only shares are mentioned, losses follow the same proportion o B. In absence of stipulation, follow proportion of contribution But industrial partners do not share in losses o Can designation of profits and losses be left to one of the partners? No. o Can it be left up to a third person? Yes, but it can be impugned if manifestly inequitable. Unless it has been executed or more than 3 months have passed. What are the other rights? o 1. Right to inspect partnership books at reasonable hour o 2. Right to demand true and full information of all things regarding the partnership o 3. Right to demand accounting Partner who receives partnership profits holds it in trust for everyone When can there be demand for formal accounting?

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1. Excluded from partnership business or property 2. Right is stipulated in articles 3. When it is just/reasonable 4. Right to dissolve the partnership Can be done whenever But there are damages if done in bad faith

Duties and obligations of the partners 1. Obligation to contribute to the common fund o The partners are debtors to the partnership to the extent of what was promised. MONEY: incurs damages and interest for delay PROPERTY: Liable for breach of warranty against eviction Liable for fruits from date of obligation Risk is borne by the partnership if appraised, up to appraised value, or if fungible and cannot be used without deteriorating, or meant to be sold REAL PROPERTY: need registration, as stated above SERVICE OR INDUSTRY: No specific performance (obviously), so only damages for failure to perform o Is there obligation to make additional contributions? None, generally. What if there is imminent loss or danger to the firm? Still no compulsion to contribute. But all those who do not contribute are obliged to sell their interest to the other partners, except of course for industrial partners. o What if there is default of obligation to contribute what are the remedies? 1. Specific performance with damages

2. Dissolution of the partnership NOT rescission, because you cannot have mutual restitution (will prejudice business) o What is unlimited liability? When the partnership is insolvent It is pro rata and subsidiary BUT insolvency does not automatically dissolve the partnership. The partners can continue to pursue the business in hopes of improvement. 2. Fiduciary duties to partners o A. Duty to account What is the rule on secret profits/benefits? Only held in trust for the partnership. Other partners can seek recovery or dissolve the partnership. o B. Duty of diligence Liable for damages to the partnership through own fault. Can he compensate liability for damages with profits/benefits he might have earned for the partnership? No. BUT he may equitably lessen his liability if his extraordinary efforts have led to unusual profits for the partnership. When can the acts of a designated managing partner be opposed? If done in BF. And his power may be revoked. o C. Duty of loyalty Liable to partnership if he took partnership funds or property and applied them to his own use with interest and damages What if there is a debtor to both the partnership and a partner?

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1. If he pays debt to partner alone split proportionately between partnership and partners credit 2. If he pays debt to partnership alone apply entirely to the partnership Exception? o If the debtor provides otherwise and the debt to the partner is more onerous D. Separate fiduciary duties of an partner 1. Industrial partner cannot engage in any other business, regardless of nature Remedies of other partners: o Exclude industrial partner from the firm, with damages o Avail of benefits derived by the industrial partner, with damages 2. Capitalist partner cannot engage in competing business Remedies of other partners: o Have that partner give all benefits accrued to the partnership and bear all the losses to the partnership because of the competing business 3. Subsequent partner only liable for obligations of partnership prior to joining with partnership property (not personally) When are non-partners liable? 1. Names appear in firm name 2. Estoppel, as to third persons Bind the partners who consented or acted under the representation as well

B. For contracts entered into for and in behalf of the partnership o C. Keeping of books at principal place of business, accessible at reasonable hour 2. To third persons o A. From firm name: for anyone represented as partner therein o B. Partners are assumed to be mutual agents for the partnership, and their acts generally bind the partnership except: 1. Act is not in ordinary course of business and the one acting has no authority 2. The third person knows the partner acting has no authority NOTE: intra-partnership problems cannot prejudice third parties in good faith, who have expectations that the contract will push through o Third persons have no duty to know what is stipulated in the articles of partnership. They can rely on normal right and authority of the partners to bind the partnership.

Dissolution, winding up, termination What is the effect of dissolution? o It breaks up the vinculum juris between the partners but does not terminate it until there is full winding up. o But not all dissolution leads to winding up and termination. The partners can choose to continue on the business. What are the effects of dissolution? o Extinguishes the right and power of the partners to represent each other in the partnership as a going concern. 1. Except winding up and completion of pending transactions 2. And except acts that would have bound the partnership had it not been dissolved, when the third person is not aware of the dissolution, such fact not advertised in a newspaper of GC. What are the exceptions to these exceptions? 1. When the partnership purpose was declared illegal

Obligations of the partnership 1. To the partners o A. For amounts disbursed for and in behalf of the partnership With interest

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2. When the partner acting was insolvent 3. The partner has no authority to wind up o But since the partners can choose to continue with the partnership even after dissolution, and so contracts entered into by the partnership after dissolution are not void. In a case, there was no termination and there was no publication to warn third persons: creditors can fully expect transactions to push through. What are the grounds that dissolve the partnership without need for court decree? o 1. Dissolution without violation of partnership agreement o 2. Dissolution with violation of partnership agreement o 3. Dissolution by force majeure Loss of specific thing to be contributed Business became unlawful Death, insolvency, civil interdiction of any partner What dissolves the partnership with need for court decree? o [loss of capacity] o 1. Partner became insane in judicial proceeding o 2. Partner became incapacitated in performing his part in the contract o [wrongful acts] o 3. Partner guilty of conduct prejudicial to the business o 4. Partner willfully and persistently breached the partnership contract o [equity] o 5. Partnership business can only be carried out with a loss o 6. Other equitable grounds What is the effect of dissolution not in violation of partnership agreement? o No damages. Any of the partners can participate in the winding up. o Except, of course, when a partner is expelled in good faith. The one expelled is disqualified. o The remaining partners have no choice but to wind-up, if the withdrawing partner insists.

They cannot force continuation of the business, unless they agree to settle the equity interests of the withdrawing partner. What is the effect of dissolution in violation of partnership agreement? o The partners seeking dissolution are liable for damages. They cannot participate in continuation of the business. o Right of the partners who did not dissolve the partnership? If the business is discontinued, right to share in net assets + damages from erring partners. May decide to continue the business. They may possess the partnership property by either paying a bond in court or paying the erring partner the value of his interest in the partnership. o Right of the partners who dissolved the partnership? If the business is discontinued, right to share in net assets, less damages. If the business is continued: Released from liabilities Have value of his interest in the partnership secured by a bond in court or paid in cash, less damages. What is the right of the partner with lawful/just cause to ask for the judicial dissolution of the partnership due to fraud/misrepresentation by other partners (see enumeration above)? o He has a lien on: 1. Surplus of partnership property after satisfying liabilities to third persons 2. Any sum of money paid to purchase interest in the partnership 3. Any capital or advances contributed by him o He can stand in the creditors place for payments made by him for partnership liabilities o He should be indemnified by the guilty party What are the priority rules in winding up of partnership?

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o 1. To non-partner creditors o 2. To partners, other than capital or profits o 3. To partners, for capital o 4. To partners, for profits When a partner dissolves the partnership, can he demand for the return of his shares, contributions, etc.? o No. Go through dissolution. This way, the partnership creditors are given priority.

Limited partnership What are the requirements to form a limited partnership? o 1. Execute a certificate of limited partnership Provide who are general, and who are limited partners Provide their contributions and when these are returned. Limited partners cannot be industrial partners. o 2. File certificate with the SEC N.B. Regardless of compliance, who are limited and who are general partners are binding inter se. What is the rule on false statements in the certificate? Those who knew of the falsity are liable to third persons prejudiced. (So if the third person was not prejudiced by the falsity, no liability.) o 3. Name of the partnership must have LTD. o When can there be cancellation of the certificate? Dissolution of the partnership Or all limited partners cease to be such o How can a certificate be amended? Signed and sworn by all members What are the powers of general partners? o Same as in a normal non-limited partnership. o But the following acts need consent of limited partners: [prejudice to the partnership] 1. Any act in contravention of the certificate

2. Act that would make the business impossible to carry on 3. Confession of judgment against the partnership 4. Use of partnership property other than for partnership purpose [expansion of participants] 5. Admitting another person as GP 6. Admitting another person as LP o What is the relationship of general and limited partners? Not mutual agency, but business trust. The limited partners thus can engage in other businesses. What are the rights and obligations of limited partners? o [as to contribution] o 1. Limited liability only to extent of contribution What if they interfere with management? A. They become general partners as to third persons B. But not as to co-partners, who must respect the contractual agreement inter se o 2. Return of contribution What are prerequisites to return of contribution? 1. All partnership liabilities to third persons paid o If there is premature return of contributions, these are liable for the obligations to third persons 2. Consent of all members obtained o Except when there can be legal demand for return of contribution (see below) 3. Certificate cancelled or amended to allow for withdrawal or reduction of members When can there be legal demand for return of contribution? 1. Dissolution of partnership 2. Date for return had arrived

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3. After six months notice for return of contributions (if no return date stated) What is returned to him? Cash, regardless of what he contributed. Unless, of course, there is agreement otherwise. o [as to income] o 3. Receive share by way of income After liabilities to creditors have been settled o 4. To assign equity interest Only gets profits, but does not become limited partner unless there is consent and amendment of certificate o [fringe acts] o 5. To inspect books o 6. To demand accounting o 7. To loan money and transact other business, but should not: Receive partnership property as collateral Receive payment if there are not enough partnership assets to discharge other obligations o [to dissolve] o 8. To dissolve the partnership ONLY when he demands rightfully for his contributions but he did not get them or partnership does not have enough properties to return his contributions whence it also has not paid liabilities Can limited partners be compelled to contribute to assets of partnership in case there is imminent loss? o No, unless provided in the contract. o BUT the usual provision that there is forced sale of partnership interest to other partners for failure to contribute does not apply to LPs. Does death of a limited partner dissolve the partnership? o No. Only a general partners death (of course, the others can choose to continue) o The limited partners estate can simply settle liabilities and claims of the limited partner. What is the order of payment of liabilities?

o o o o o o

1. To third party creditors 2. To LPs, for profits 3. To LPs, for capital contribution 4. To GPs, other than capital or profits 5. To GPs, for profits 6. To GPs, for capital (N.B. 5 and 6 deviate from usual rule)

AGENCY

Define agency: o Agency is where a person binds himself to render service or to do something in representation of another, with the latters consent or authority Nature of agency: o Agent acts as a representative and not for himself o Agent acts within scope of his authority Elements of contract of agency? o 1. Consent of the principal and agent o 2. Object: execution of a juridical act in relation to third parties o 3. Consideration: either commission or liberality Characteristics of agency contract? o 1. Nominate, principal o 2. Consensual o 3. Unilateral and generally onerous o 4. Preparatory and representative o 5. Fiduciary and revocable Neither the principal or agent can be forced to remain in the relationship when they choose to have it terminated Consequences of fiduciary relationship: o 1. Agent estopped from asserting adverse title over subject matter of agency belonging to the principal o 2. Must choose best course of action for the principal, and not one that favors himself to the detriment of the principal o 3. Cannot acquire for himself property of the principal entrusted for disposition

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Unless principal consents, or Agent purchases after agency is terminated Doctrines flowing from preparatory and representative character of agency: o 1. Agent is stranger to the resulting contract between the principal and third party No rights No obligations No legal standing o 2. Liabilities pertain to the principal o 3. All the acts the principal can do in person, he may do through an agent except those strictly personal o 4. Agent not liable to a contract, except: A. if he binds himself to the contract expressly B. if he exceeds limits of powers without giving the other party sufficient notice of his powers o 5. Knowledge of agent is knowledge of principal, except: A. where agents interests are adverse to the principal B. agents duty is not to disclose the information C. person claiming benefit of the rule colludes with the agent to defraud the principal Differentiate from a broker: o A broker is just a middleman between two parties, and he does not represent either and cannot bind either to the transaction. o Not prohibited from purchasing property of the primary party, unlike an agent. What is the form needed for a contract of agency? o None in particular; its a consensual contract o But sometimes a written SPA is needed. Differentiate an express from an implied agency: o Express agency there is actual acceptance o Implied agency implied from: 1. Acts of principal 2. Silence or lack of action 3. His failure to repudiate the agency, knowing that a person is acting on his behalf without authority

4. Principal delivers power of attorney to the agent and he accepts it without objection if both are in the same place, physically present N.B. But if not physically present in the same place, as when the power is delivered through mail, silence is not implied acceptance Exceptions to this? 1. Principal transmits power of attorney to the agent who receives it without objection 2. Principal entrusts to the agent by letter or telegram a power of attorney with respect to the business in which the latter is habitually engaged in, and he did not reply o By estoppel How can the agent be duly authorized as to particular third persons? o A. If the principal informs another person that he has given power of attorney to an agent, the latter becomes a duly authorized agent as to that third person o B. If the principal states by public advertisement the constitution of agency, the agent is duly authorized as to any person o How long does this power last? Until notice is rescinded in the same manner in which it was given What is agency by estoppel? o Even when the agent has exceeded his powers, the principal should be made liable if he allowed the agent to act as though he had full powers. o Elements: 1. Principal manifested a representation of the agents authority 2. Third person in GF relied on the representation 3. Third person changed his position, to his detriment, relying on the representation Differentiate a general from special agency?

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General agency is one that encompasses all of the business of the principal. (Universal agency) o Special agency is to cover only one or more specific transactions. (Particular agency) What is the general obligation of the agent who accepts the agency? o Legally bound to carry out the terms of the agency o Breach: principal can sue for damages, but not compel specific performance because it doesnt apply to obligations to do o What is the measure of damages? Based on the prejudice the principal suffered due to non-performance of the act required The general rule is that death of the principal terminates the agency. What is the narrow exception? o The agent must finish business already began prior to the principals death, should delay entail any danger What is the obligation of an agent who declines the agency? o Bound to observe diligence of GFF in the custody of the goods until the owner appoints an agent or takes charge of the goods Is the agent liable for contracts he enters? o Generally, no. o UNLESS: 1. He exceeds authority 2. He binds himself to the contract personally o What if the agent exceeds his powers? 1. The principal may ratify. Can the third party still invoke the agent exceeding his authority? o No, because the principal has ratified the act already. 2. If the principal does not ratify, the contract is unenforceable as against principal. But if the third party did not know the extent of the agents powers, the contract is binding between the agent and third party. Usual rule: agent is bound if he exceeds authority

3. But if the third person was aware that the agent exceeded his powers, the contract is unenforceable even between the agent and the third person. [Both are in pari delicto] o What if the agent acts within the scope of his authority as written but contrary to a personal understanding between him and the principal? The act will bind the principal as to a third party who relies on the power of the agent as written. Private or secret orders will not prejudice a third party relying on written powers of agent. o What if the agent acts in a manner more advantageous to the principal? He is deemed to have acted within the scope of his authority. What is the obligation of one dealing with an agent? o Must discover, upon his peril, not only the fact of agency but also the nature and extent of the authority of the agent When is the third party directly liable to the agent himself? o 1. Agent contracts in own name on matter within scope of agency o 2. Agent possesses a beneficial interest in the subject matter of agency (ex. selling under a del credere commission) o 3. Third party commits tort against the agent What is the duty of diligence of the agent? o Cannot carry out an agency if its execution will manifestly result in loss or damage to the principal. o N.B. the word is manifestly because the agent does not guarantee against small loses in the exercise of business judgment o What if the agent breaches this duty? Liable for damages to the principal If an agent is empowered to sell his principals property, may he purchase it for himself? o No, he cannot. This is provided in Art. 1491. Of course, the principal may ratify the sale. o Special rule in Sales law.

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If an agent is empowered to borrow or lend money, may he transact with himself? o 1. If empowered to borrow, he may be the lender at the current interest Else, liable for return difference o 2. If empowered to lend, he may not borrow without the principals consent Else, liable for damages What if the agent acts in his own name? o The principal has no right of action against the third persons, neither do the third persons have right of action against the principal. o Exceptions to this rule? 1. When the transaction involves the things of the principal. In this case, the principal is bound. 2. When the principal ratifies the contract or derives benefit from it. o What is the remedy of the principal? The principal can file action as against the agent for damages. o What if the agent enters into a contract in his own name on a matter that falls within the scope of the agency? He is bound to render an account of his transactions and deliver to the principal what he received by virtue of the agency even if it may not be owing to the principal This is based on the duty of loyalty and Art. 1891 o What if the agent uses the principals own funds? The agent owes interest from the day he borrowed the money This presumes the transaction was not one in breach of the duty of loyalty (scope of agency) or else, the effect is not payment of interest on the loan but an accounting and turn-over in favor of the principal What is the rule as bonuses or profits derived by the agent through the agency, but not owing to the principal? o He must account it to the principal. Every agent is bound to deliver to the principal what he may have received by virtue of

the agency, even though it may not be owing to the principal (ex. excess price). Any agreement or stipulation to the contrary is void. o An agent who derives secret benefit from the contract of agency is liable to the principal for breach of duty of loyalty, and will forfeit his commissions. o When does the duty to account not apply? The agent may retain in pledge the things which are the object of the agency until the principal reimburses and pays indemnity in 1912 (agent advancing costs of agency) and 1913 (damage caused to agent through no fault of his) When can the agent appoint a sub-agent? o If the principal did not prohibit him from doing so. o What is the main effect? Sub-agent is agent of principal too o When is the agent responsible for the acts of the subagent? 1. When he was not given power to appoint one 2. When he was allowed, but the one chosen was notoriously incompetent/insolvent o What if the principal expressly prohibited appointment of a subagent? 1. All acts of sub-agent are void as to the principal 2. The agent is responsible personally for the contracts entered into by the sub-agent What is the scope of the powers of an agent in general? o General powers: Only acts of administration o Even if the principal provides that the agency may do whatever he deems appropriate, or even if the agency authorizes general and unlimited management What needs a SPA? o N.B. these are acts of strict dominion o 1. Making payments not considered as acts of administration o 2. Effect novation of obligations o 3. Compromise, submit to arbitration, renounce right to appeal, waive objections, renounce prescription o 4. Waive obligations gratuitously

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5. Transfer of immovable (whether onerous or gratuitous) 6. Make non-customary gifts 7. Loan or borrow money Unless urgently needed to preserve a thing under administration o 8. Lease for more than 1 year o 9. Contract for principal to perform service without compensation o 10. Bind principal in partnership contract o 11. Obligate principal as guarantor or surety o 12. Convey or create rights over real property o 13. Accept or repudiate inheritance o 14. Ratify or recognize obligations contracted before agency o 15. Other acts of strict dominion o Must a SPA be in writing? Technically no, but if its not the contract is virtually unenforceable. The principal may however pursue the resulting contract, while the third-party is estopped from refusing to comply with a contract he willingly entered into absent written authority of the agent. Except sale of piece of land (see below) For the power of an agent to sell a piece of land, what is required? o It must be in writing, or else it is void. o What does this provision really mean in light of Ocfemia? Its void to the extent that a third person cannot enforce the obligation against a principal if the authority of the agent is not placed in writing. But if the principal wants the sale to push through, then it can push through. So its an odd void contract because its subject to ratification. o Does special authority to sell property include authority to mortgage it? No, by express provision of Art. 1879. What are the obligations of a commission agent? o 1. Take custody of goods o 2. Not to commingle similar goods belonging to different principals o 3. Cannot sell on credit without principals authorization

o o o

If pre-authorized to sell on credit, inform principal with the names of buyers or else, deemed sold on cash basis o 4. Bear risks of collection of proceeds of the transaction under del credere commission set-up o 5. Collect credits for principal Else, liable for damages o 6. Take responsibility for fraud and negligence What are the rights and obligations of the principal? o 1. The principal is NOT bound by contracts entered into by the agent without or outside scope of authority, EXCEPT: 1. If he ratified it expressly or tacitly 2. Principal allowed agent to act as if he had full authority 3. Principal revoked agency but the third party acted in GF without such notice of revocation o 2. Principal is liable for torts committed by the agent within scope of authority o 3. Principal must advance sums necessary for the agency if the agent requests. If the agent paid for it first, the principal must reimburse o 4. Principal NOT liable for expenses of agent if: A. Outside scope of authority B. Incurred due to agents fault C. Agent incurred them with knowledge of unfavorable result, if the principal was not aware thereof D. Express stipulation o 5. Must indemnify agent for damages sustained without agents fault o 6. Pay agent for his services o 7. If two or more principals constituted the same agent for a common undertaking, they are solidarily liable As opposed to constituting two agents by the same persons, the usual rule is joint liability, not solidary liability as between the agents What is the power given to the agent if the principal has not reimbursed or indemnified the former?

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o He may hold things which are the subject of agency in pledge A constituted B as an agent to sell a piece of property for 30K, and B will get 5% commission. B found a buyer, C, but A said that he is no longer interested in selling and terminated Bs authority. Thereafter, A sold the land to C. Can B ask for commission? o Yes, A acted in bad faith, so B is entitled to his commission. The termination of Bs contract of agency is clearly to evade paying commission. o CONTRAST this to another case where the agent found a buyer, but the buyer was willing to pay only P9/SQM whereas the agency was for him to sell the property for P10/SQM. The agents authority was terminated, but when he asked for an extension, he was given it. Three months after, the seller sold the land to the same buyer the agent found. There was no badge of bad faith here. What is an irrevocable agency? o An agency cannot be revoked if: 1. A bilateral contract depends upon it 2. It is the means of fulfilling an obligation already contracted 3. A partner is appointed managing partner and there is no just cause o What are examples of agency coupled with an interest? X sold Y a parcel of land and to help Y pay for the purchase price, constituted Y as an agent to subdivide and sell the parcels of land. X cannot revoke the agency at will. X sold Y a vessel on the condition that for the first five years, Y would appoint X the agent of the vessel. Y cannot revoke the agency at will. o Otherwise, when can an agent withdraw? He just gives due notice to the principal. If the principal suffers damage due to the withdrawal, the agent must indemnify the principal, unless the agents basis for withdrawing is impossibility to continue performance of obligation without grave detriment to himself. What happens in the meantime?

The agent continues to act as such for the meantime until the principal is able to constitute a new agency. EVEN IF the reason for withdrawing is valid. When is agency extinguished? o 1. Revocation Even if it is constituted as irrevocable for a definite term or period the principal just pays damages to agent for damages caused if any When is there implied revocation? Appointing a new agent for the same business, or The principal directly manages the business Or by granting a SPA as regard the same business to another agent, where he previously granted a GPA to one agent. Principal must give notice: To particular third parties Or the world, through publication N.B. a third party with no notice of revocation, acting in GF, can still pursue the contract entered with an agent Recall: when an is agency irrevocable o 2. Withdrawal of agent o 3. Death, civil interdiction, insanity, or insolvency of principal or agent When does agency remain in full force notwithstanding death of the principal? A. Constituted in common interest of the principal and agent B. There is stipulation pour autrui which has been accepted C. Agentt did not know the principal was dead and third party was in GF o N.B. If the third party was in BF, void for lack of consent, an essential element

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4. Dissolution of juridical entity which entrusted or accepted the agency o 5. Accomplishment of purpose or object of agency o 6. Expiration of period of agency What is the obligation of the agent even after the agency was terminated? o Keep confidential matters learned during course of agency, if confidential

COMPROMISE What is a compromise? o It is a contract where parties make reciprocal concessions to put an end to litigation or avoid it altogether. What matters cannot be compromised? o 1. Civil status of persons o 2. Validity of marriage or legal separation o 3. Ground for legal separation o 4. Future support o 5. Jurisdiction of courts o 6. Future legitime What is the effect of compromise? o It has the effect of res judicata between the parties. o If the one party does not want to comply with the compromise, the other party may: Enforce the compromise OR rescind the compromise and insist on his original demand

use of a thing or render some service to another, who pays compensation. Define lease of services and lease of things: o Lease of things one party binds himself to give to another the enjoyment or use of a thing for a price certain, whether for a definite or indefinite period What is the ceiling for the period? Ninety-nine years o Lease of service one party binds himself to execute a piece of work or render some service for a price certain Without an agency relationship Distinguish the two kinds of lease: o In things, the object is a thing, and in services the object is some service o In things, the principal obligation of the lessor is to deliver the thing leased to the lessee, and in series the principal obligation is to perform some service o In things, specific performance is a remedy, in service, only damages Is a boundary-based contract between the owner of a jeep and the driver a lease? o No. The driver does not spend anything to acquire the jeep. The boundary and gas obligation which must be covered by the driver and the keeping of excess earnings is just a system of compensation. Instead, there is an employer-employee relationship.

Lease of rural and urban lands May the lessee assign the lease to a third person without the lessors consent? o No. The lessee may not assign the lease without the lessors consent. May the lessee sublease the property to a third person without the lessors consent? o Yes. The lessee may sublease the property even without the lessors consent. But the lessee must still comply with his responsibility to perform the contract toward the lessor.

LEASE What is lease? o Lease is a consensual, bilateral, onerous, and commutative contract where one person binds himself to grant temporary

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May the lessor hold the sublessee for rent due from the lessee? o Yes, there can be an accion directa. But the sublessee cannot be held liable beyond the amount due from him under the sublease. What is the nature of the sublease agreement? o It must comply with the lease agreement as to the manner of use and preservation of the thing. o And so, if the lease agreement provides that the property must only be residential, the sublease cannot be for the use of the property as a commercial area. Is a lessor responsible for hidden defects in the property that is leased to a lessee? o Yes. The warranties applicable to sale also apply to lease, even if the lessor was not aware of such defects. What are the obligations of the lessor? o 1. Deliver the thing, which must be fit for the use intended o 2. To make necessary repairs on the thing to keep it fit for such use Unless provided otherwise o 3. Maintain the lessee in peaceful and adequate enjoyment of the lease during the contract What are the obligations of the lessee? o 1. Pay the price of lease o 2. Use the thing leased with diligence of GFF, devoting it to use stipulated (or according to nature of the thing if none is stipulated) o 3. Pay expenses for deed of lease What is the remedy for breach by either party? o 1. Rescission with damages o 2. Damages alone What if the thing leased is lost fortuitously? o The lease is terminated. o If the thing is reconstructed, there is no automatic renewal of the lease contract, if there is no BF involved. What is tacit renewal of a contract of lease (tacita reconduccion)? o A new contract of lease is impliedly created or established if at the end of the lease contract, the lessee continues enjoying the

lease for 15 days, with acquiescence of the lessor and no notice to contrary provided by lessor. o Period of the new lease is according to provisions of law: A. for rural lands, duration is what is necessary to gather fruits it may yield for a year B. for urban lands, duration is depending on rent paid (yearly if monthly rent; monthly if weekly rent, etc.) But if lessee has stayed more than 1 year, the courts may fix a longer term than the usual monthly rent If lessee has stayed more than 6 months, the courts may fix a longer term than the usual weekly rent If lessee has stayed more than 1 month, the courts may fix a longer term than the usual daily rent o But all other terms of the contract are the same. o Of course, if there is an option to purchase the leased property within the original lease period, and it expires, and only tacitly extended, the option to purchase is not renewed (it is a separate contract, and is not a mere clause/term). What are the grounds to eject a lessee judicially? o 1. Period has expired o 2. Lack of payment of price o 3. Violation of conditions of contract o 4. Lessee devotes the thing leased to use other than what was stipulated or its nature What are the different instances where the purchaser of the thing leased cannot terminate the lease? o 1. When the lease is recorded in the ROP o 2. There is a stipulation in the contract of sale that the purchaser will respect the lease o 3. The purchaser actually knows of the existence of the lessee o 4. The sale is fictitious o 5. The sale is pacto de retro What is the rule as to improvements introduced by the lessee on the property, upon termination of the lease?

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For useful improvements PREMISE: these are suitable to the purpose of the lease and did not alter the form/substance of the property The lessor must pay the lessee of the value of improvement What if the lessor refuses? The lessee can remove the thing, even if it causes damage o For ornamental improvements Lessee not entitled to reimbursement But the lessee may remove it if it doesnt cause any damage But the lessor may choose to pay the value of the thing, which terminates the lessees right to remove the improvement o Do the rules for builders in GF under property law apply to lessees? No, lessees are not builders or possessors in GF because they know their right and occupancy of the land is based on the contract of lease. If the period of the lease is not fixed, what is the period? o A. for rural lands, duration is what is necessary to gather fruits it may yield for a year o B. for urban lands, duration is depending on rent paid (yearly if monthly rent; monthly if weekly rent, etc.) But if lessee has stayed more than 1 year, the courts may fix a longer term than the usual monthly rent If lessee has stayed more than 6 months, the courts may fix a longer term than the usual weekly rent If lessee has stayed more than 1 month, the courts may fix a longer term than the usual daily rent o

One where the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. o The contractor may either employ only his skill/labor, or furnish the material himself. What is the rule on loss if the contractor bound himself to purchase the material? o If the loss occurs before the delivery, the contractor bears the loss o EXCEPT: if there is delay in receiving it (mora accipiendi)

TORTS

Principles of torts and classification Define quasi-delicts: o Fault or negligence of a person, who by his act or omission, connected or unconnected with but independent from any contractual relation, causes damage to another person o Whether punishable or not punishable by law o Whether criminal in character or not Classify torts: o Whether intentional, voluntary, or negligent o Key element: it must cause damage to another Can an act that breaks a contract also be a tort? o Yes. What is the rule prohibiting double recovery? o The injured party cannot recover damages twice. o Ex. in negligence cases, the aggrieved party can either enforce civil liability under culpa criminal (Art. 100 of RPC) or file a separate action for quasi-delict (Art. 2176 of NCC). When he has recovered from one action, the injured party is barred from the other remedy because he cannot recover damages twice for the same act. Differentiate between double recovery and double remedy?

Contract for piece of work What is a contract for piece of work?

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Double recovery is not allowed; double remedies are allowed. An aggrieved party may resort to both remedies simultaneously or successively, but may only recover the bigger amount. So if he successively files the cases, he can nd only recover from the 2 if the amount adjudged is larger and only to the extent of the excess. What are the elements in an action based on quasi-delict? o 1. Fault or negligence of the defendant o 2. Damage suffered by the plaintiff o 3. The relation of cause and effect between the fault/negligence of the defendant and the damage incurred by plaintiff Recall: that for a collision of cars, the passenger has remedies: o 1. Culpa contractual against employer car wherein he is riding, because there is a contract of transportation Defense of ER is extraordinary diligence o 2. Culpa aquliana against either driver and their companies (joint tortfeasors) Defense of ER is diligence of GFF is selection and supervision o 3. Culpa criminal against either driver, with the employers liable subsidiarily if the drivers are insolvent Defense of ER is solvency of the EE

o o

The tortfeasor Who are possible tortfeasors? o 1. Direct tortfeasor o 2. Persons made responsible for others Who are the persons who can be made responsible for others? o 1. Parents, as re: damage caused by minor children who live in their company What is the definition of Minor here? Still 21, and not 18, because RA 6809 has excepted marriage and torts from the complete emancipation of one who has reached 18 years old.

2. Guardians, as re: damage caused by minors or incapacitated persons under their authority and living in their company o 3. Owners and managers of establishment/enterprise, as re: damage caused by employees on occasion of their functions o 4. Employers, as re: damage caused by employees and household helpers acting within scope of duties Even if the employer is not engaged in business/industry N.B. this thus covers responsibility of the registered owner of a vehicle for acts of his driver o 5. State, when it acts through a special agent But not when the damage is caused by the official to whom the task done properly pertains. In this case, the official alone is responsible. What is a special agent? A government employee who is performing a job foreign to his usual duties o 6. Teachers or heads of establishments of arts and trade, as re: damage caused by students or apprentices when they are in the formers custody Differentiate claim for employers liability under Art. 2180 of the NCc and Art. 103 of the RPC. o Under the NCC, in quasi-delicts: Only requires preponderance of evidence Employers liability is direct and primary Defense available: due diligence in the selection and supervision of the employee The employee need not be insolvent, because the employee and employer are both primarily liable (joint tortfeasors) o Under the RPC, in civil liability for crimes: Employers liability is subsidiary; so the employee has to be found insolvent The felony committed by the employee must be in the discharge of his duty Requisites for subsidiary civil liability of employer?

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1. ER-EE relationship 2. ER is engaged in some industry 3. EE committed criminal act in the discharge of his duties (not necessarily *while* in the discharge of duties) 4. EE is insolvent What if the felony was committed by a minor? Then it is an exception to the general rule, because under Art. 101 of the RPC, the liability of parents for felonies of minor children is also primary, and not subsidiary Does the ER need to be impleaded? No. Enforcing liability subsidiarily is just an enforcement issue. Therefore, neither can there be modification or relitigation. The enforcement motion, however may be conveniently litigated within the same proceeding at that which held the EE liable. Is a hospital liable for the negligence of an independent contractor physician? o Generally, hospitals are not liable under the Schloendorff doctrine, which deems physicians as professionals and independent contractors whose performance of duties are beyond the control of the hospital. o Exceptions to this rule? 1. Apparent authority If the hospitals actions as principal misleads the public into believing that the relationship or authority exists 2. Corporate negligence If the hospitals fail to give reasonable effort in monitoring or overseeing the treatment prescribed and administered by the physicians practicing in their premises What is the presumption when an injury is caused by the negligence of an employee?

There s a presumption that the employer is also negligent and is thus solidarily liable o Rebuttable by showing exercise of diligence of GFF in selection and supervision of the employee X sold his car to Y and Y failed to register it. Y ended up being responsible for a car accident due to negligence. Since the registration was still under Xs name, can X be sued? o Yes, the suit can prosper against the registered owner, but it is the actual owner who is ultimately liable. The purpose of car registration is to reduce the difficulty in identifying the party liable in accidents. What is the rule if the owner of the vehicle is inside the vehicle with his driver when the accident happened? o Art. 2154: if the owner was in the vehicle and could have, through due diligence, prevented the misfortune, then he is solidarily liable with the driver o Thus, his defense is different from the employer who is not in the car, who can use diligence of GFF in selection and supervision of employees. o What is the difference in liability? If the owner is in the car, he can demand reimbursement of of the amount from his driver after paying If the owner was not in the car, he can demand reimbursement of the whole amount from his driver after paying o When is a driver presumed negligent? 1. Guilty of reckless driving at least twice in the preceding two months 2. Violation of traffic regulations at least twice in the preceding two months 3. Violating a traffic regulation during the mishap What is the liability of joint tortfeasors (Art. 2194)? o If two or more persons are liable for a quasi-delict, their responsibility is solidary. o The responsibility is solidary so long as the accident causing the injury was due to the concurrent acts of two or more persons: whether quasi-delict, intentional tort, strict liability (or

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arising from criminal offenses or even if there is an underlying contract). When can the State be a tortfeasor? o 1. Performance of proprietary functions o 2. State enters into contract with private person o 3. Imputed liability under Art. 2180 for acts of special agents

Proximate cause What is proximate cause? o That cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred o Remote cause: One that is removed or separate from the proximate cause of the injury o Immediate cause: Final act in the series of causes leading to a particular result or event, directly producing the result (Stricter that proximate cause in torts, only proximate cause is needed) What is contributory negligence? o If the negligence of the plaintiff cooperated with the negligence of the defendant in bringing about the injury, such negligence of the plaintiff would be an absolute bar to recovery. o If the negligence of the plaintiff was merely contributory, the immediate and proximate cause to the injury still being the defendants acts, then the amount recoverable by the plaintiff is mitigated by the courts. What is imputed negligence? o The negligence of a certain person in a transaction or act which gave rise to the injury complained of is imputable or chargeable against the person for whom he was acting or against his associates. What is last clear chance (or discovered peril or humanitarian doctrine)? o Where both parties are negligent in such a way that it would be impossible to determine whose negligence was the proximate

cause, then the party with the last clear opportunity to avoid the accident through proper care and failed to do so is the party solely responsible for the injury. Elements of last clear chance? 1. Prior negligence of the plaintiff 2. Defendant knew the plaintiffs negligence 3. Defendant had last clear chance to avoid the peril but failed to do so 4. Accident occurs due to the negligence of the defendant

Intentional torts What are the elements of abuse of right? o 1. Legal right or duty o 2. Exercised in bad faith o 3. For the sole intent of injuring or prejudicing another o Ex. creditors already discussed pari passu division of claims against insolvent person, then one creditor assigned his claim to a third person so the latter can recover in full What are the elements of acts contrary to law? o 1. Act is willful or negligent o 2. It is contrary to law o 3. Damages suffered by the injured party o When does this apply? When there is no specific law providing for indemnity for the violation of such and damage is caused What are the elements of acts contrary to morals? o 1. Legal act o 2. Contrary to morals, good customs, public order, or public policy o 3. Done with intent to injure What the elements of unjust enrichment? o 1. No just or legal ground for defendants enrichment o 2. Enrichment on the part of the defendant o 3. Enrichment is at the expense of the plaintiff o 4. Damage or loss suffered by the plaintiff o When does this claim apply?

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When there is no other remedy in contract, quasicontract, crime, or quasi-delict. And so if there is failure to pay for services, but there is a contract, file under the contract and not unjust enrichment. What is thoughtless extravagance? o If done during period of acute public want or emergency o May be stopped by the courts at the instance of government or a private charitable institution What is meddling with social relations? o 1. Prying into anothers residence o 2. Meddling or disturbing the private life or family relations of another o 3. Intriguing to cause another to be alienated from his friends o 4. Vexing or humiliating another on account of beliefs, lowly station in life, place of birth, physical defect, or other personal condition What are the elements of dereliction of duty? o 1. Public servent defendant exercises ministerial duty o 2. Neglect or refusal to perform a duty owing the plaintiff o 3. Damage to plaintiff o Note: it must be done with bad faith. This does not apply when the officer thought in GF that the plaintiff is not entitled to some relief or service. What is unfair competition as a tort? o It must be through the use of force, intimidation, deceit, machinations, or other unjust, oppressive, or highhanded method o Applies to agricultural, industrial, and commercial enterprises What is violation of civil/political rights as a tort? o When public officers or employees or a private individual directly or indirectly obstructs, violates, or impedes/impairs the plaintiffs constitutional rights and liberties This is an independent civil action. Can have exemplary or moral damages. o What is the required evidence? Preponderance of evidence.

Is good faith a defense? No. o Differentiate this from the Bill of Rights: Under the Bill of Rights, the act complained of must be committed by public officers. Under the NCC, it can be by public officers or private individuals. Under the NCC, there can be indirect or direct violations. o What kind of duty is contemplated here? Duty that is owed to an individual particularly, and there is particular injury to him. It does not cover duties owing in general to the public, collectively. What are the elements of interference in contractual relations? o 1. Valid contract o 2. Outsider knew the existence of the contract o 3. The third party induces one party to breach the contract without valid justification or excuse o 4. Damage o What are the defenses by the one charged with tortuous interference? 1. Business competition and lawful means are used 2. Honest advice in GF, in his duty as an adviser 3. Lack of inducement 4. If the interest protected is superior to the interest broken in social importance o What is the liability of the party induced to break the contract? In bad faith: liable for all the natural and probable consequences of his act or omission, whether foreseen or unforeseen In good faith: only liable for foreseen consequences

Negligence When is there presumption of negligence? o 1. Res ipsa loquitur

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2. If the death or injury results from possession of dangerous weapon or substances, except when possession of such is indispensable to his occupation or business o 3. Violation of traffic rules o 4. Common carriers o 5. Repondeat superior What is res ipsa loquitur? o Where a thing is shown to be under the management of the defendant or his employees, and the accident in the ordinary course of events would not have occurred had there been proper care, it gives rise to evidence that the accident was due to the fault of the defendant, unless rebutted o What are the elements of res ipsa loquitur? 1. Accident would not ordinarily occur in the absence of negligence 2. Caused by an agency or instrumentality under the exclusive control of the defendant 3. Not due to any voluntary action or contribution of the plaintiff What are the defenses against negligence? o 1. Contributory negligence See above for discussion. Remember that this is only a partial defense that mitigates damages. o 2. Assumption of risk But note: even if there is an assumption of risk, measures must be taken by the defendant to minimize risk to the injured party Elements? 1. Plaintiff knew the risk is present 2. He understood its nature 3. He freely and voluntarily chose to incur the risk o 3. Last clear chance See above discussion NOTE: that this doctrine will not apply as a defense for breach of contract of carriage. Neither can one

o o

o o

negligent party use this as a defense against liability to a third person, by pointing at the negligence of another. It must be between two parties in a situation where it is impossible to determine whose negligence it was that was the proximate cause of the accident. 4. Prescription What is the usual prescription? 4 years from discovery of the act (discovery rule) 1 year if from the act of a public officer involving exercise of powers/duties What are the prescriptive periods under the Consumer Act? 4 years from purchase for apparent defects 2 years from knowledge or purchase for hidden defects 5. Fortuitous events See Oblicon discussion 6. Diligence For employers: diligence of a GFF is selection and supervision of employees 7. Mistake and waiver See Oblicon discussion 8. Damnum absque injuria What is this? Damage without injury, arising from a persons exercise of his legal rights. If the injury arises from abuse of right, then damnum absque injuria does not apply. 9. Emergency rule What is this? One who suddenly finds himself in danger and is required to act without time to consider the best means to avoid the danger is not guilty of negligence for failing to choose the best option, in hindsight

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Unless the emergency in which he finds himself in is of his own doing

Special liability in particular activities What is the special liability of provinces, cities, municipalities as to roads and streets? o They are liable for injuries caused by defective condition of roads and streets. o This special liability trumps provisions on liability arising from charters and general laws. o The road or street need not necessarily be owned by the LGU (thus it can be a national road). What matters is that it is under the control of supervision of the said road/street. What is the responsibility of a proprietor of a building/structure? o He is responsible for injuries caused by its total or partial collapse, if it be due to lack of necessary repairs o The doctrine of last clear chance does not apply here (De Roy v. CA) o Proprietors likewise are responsible for: 1. Explosion of machinery not taken care of with due diligence 2. Excessive smoke harmful to persons/property 3. Falling trees situated near highways or lanes, if not due to force majeure 4. Emanations from tubes, canals, sewers, or deposits of infectious matter constructed without precautions What is the responsibility of manufacturers and processors? o In general, manufacturers and processors of foodstuffs, drinks, toilet articles, and similar goods are liable for damages for death and injuries caused by noxious or harmful substances used, even if there is no contractual relation with the consumers. o When is a product defective under the Consumer Protection Act (CPA)? When it does not offer the safety rightfully expected of it, taking into account: a) presentation of the product,

b) use and hazards reasonably expected out of it, and c) time it was put into circulation NOT simply because a better product is on the market o When is the manufacturer or producer not liable? 1. It did not place the product in the market 2. It placed it in the market but it was not defective 3. Consumer or third party is solely at fault o When is the seller liable? 1. When it is not possible to identify the manufacturer or producer or importer 2. The product supplied does not clearly identify the manufacturer or producer or importer 3. He does not adequately preserve perishable goods o What is the liability for product or service imperfection? If the products are unfit or inadequate for consumption, or there is inconsistency with information in the container The provider must correct the imperfection within 30 days of demand by the consumer (parties can change period to 7-180 days, min and max) What are the options of the consumer if the provider fails to correct it? 1. Replacement of the product 2. Immediate reimbursement of the amount paid 3. Proportionate price reduction When can an engineer, architect, or contractor be liable for collapse of a building? o The engineer or architect who drew up plans and specifications is liable for damages if within 15 years from completion, if it collapses due to: 1. defects in the plans OR 2. defects in the ground o The contractor is liable for damages if within 15 years the edifice falls due to: 1. defects in construction 2. use of inferior materials

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o o o

3. violation of terms of contract What if the engineer/architect supervises construction? He is solidarily liable with the contractor What is the effect of accepting the building? It is not a waiver of action on these claims What is the prescriptive period? Within 10 years of collapse of building Can the owner of the building demand reconstruction thereof if the building collapses due to the fault of the engineer, architect, or contractor? Yes, he may. The obligation is an obligation to do. If a person is obliged to do something in contravention of an obligation, it may be executed at his own cost. Or what has been poorly done can be undone, and then reconstructed.

o 2. Moral o 3. Nominal o 4. Temperate or moderate o 5. Liquidated o 6. Exemplary or corrective What are the general principles applied to damages? o 1. Amount must be fair, just, and commensurate to the damage o 2. Damage and amount proven by competent evidence o 3. Only proximate damages, not remote or speculative, may be recovered What must be proved so that damages may be recovered? o 1. Injury (legal invasion of a right) o 2. Breach of duty (wrongful act, not just hurtful) o 3. Breach must be the proximate cause of the injury

Actual or compensatory damages What are actual damages? o Compensation for pecuniary loss actually suffered and proved by the plaintiff. What is the general rule? o One is entitled to adequate compensation only for pecuniary loss suffered by him as has been proved. o Measure is not defendants gain, but plaintiffs loss. Except in certain cases like in the IP Code (measured by benefit of defendant) What is the exception that recovery is limited to proven loss? o 1. Stipulation o 2. Provided by law (ex. fixed indemnity) What are the kinds of actual damages? o 1. Cano emergente loss of what a person already possesses o 2. Lucro cesante failure to receive as a benefit that would have pertained to him What is restitutio in integrum? o Amount awarded to the plaintiff must be that sum which will put the party who was injured or who has suffered in the same position as he would have been if he had not sustained the injury

Strict liability Who are instances that fall under the doctrine of strict liability? o 1. Possessors and users of animals o 2. Nuisance o 3. Product liability/violations of Consumer Act What is the liability of possessors and users of animals? o The possessor, and not just the owner, of the offending animal is liable even if the animal escapes or becomes lost. It does not matter that the dog was tame and was merely provoked. o The owner/possessor is liable as long as the animal causes injury. Nuisance: see Property Law Manufacturers and processors: See above discussion

DAMAGES

What are the different kinds of damages? o 1. Actual or compensatory

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What is the recoverable value in the following instances o Damage to property value of the property at the time of destruction o Personal injury and death 1. Reasonable expenses incurred to treat his or her relatives injury 2. Future medical expenses 3. In case of death, for wake and funeral expenses N.B. Expenses after burial are NOT compensable Differentiate recoverable damages based on breach of contract or quasi-contract, depending on GF or BF: o Defendant in GF liable for natural and probable consequences of the breach which the parties could have foreseen when the obligation was entered into o Defendant in BF liable for all damages reasonably attributable to the obligation What about recoverable damages from quasi delicts? o Defendant is liable for all damages which are the natural and probable consequences of the act or omission. It need not have been foreseen or reasonably foreseen by the defendant. A. What are covered by cano emergente? o Court only gives credence to those expenses supported by a receipt and which appear to have been incurred in connection with the wake, death, or burial of the victim. o The following cannot be recovered: 1. Incurred after considerable lapse of time from burial or with no relation death, wake, or burial 2. Incurred for purely aesthetic or social purpose 3. Receipt appears to have been modified 4. Incurred before date of slaying of victim 5. Not in fact shouldered by heirs Ex. plane tickets of relatives or in-laws 6. Merely incidental 7. Cannot reasonably be itemized B. What is disability/commercial credit? o 1. Actual damages for loss or impairment of earning capacity for personal injury (temporary or permanent)

2. Actual damages for injury to business standing or commercial credit C. What is fixed indemnity? o It does not replace the loss of earning capacity o P50K payment to heirs of deceased o P75K payment for qualified rape D. What is the loss of earning capacity? o Loss of earning capacity = Life expectancy x (Gross annual income necessary living expenses) Note: Life expectancy: (2/3 x [80 age at time of death]) o How are net earnings proved? Sufficient evidence to prove net earnings of the deceased Exceptions when non-availability of documentary evidence is fine: 1. Victim was self-employed earning less than minimum wage 2. Victim was employed as a daily wage worker earning less than minimum wage o How are living expenses proved? Fixed at 50% of the gross income in the absence of proof of amount of living expenses o What if the deceased was obliged to give support according to law? The recipient who is not an heir called to inheritance by law may demand support from the person causing death for a period not beyond 5 years (court sets the length of time) E. Interest o 1. If there is a stipulation as to rate, apply it, unless it is unconscionable and excessive apply legal rate o 2. If interest is imposed, but no rate stipulated, apply legal rate A. Obligation involving payment of damages: 6% Compute from date of demand if indemnities can be established with reasonable certainty

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Compute from date of judgment of trial court, if indemnities cannot be established with reasonable certainty B. Obligation involving loan or forbearance of money: 12% Compute from date of default (extrajudicial or judicial demand) o 3. Once there is finality of judgment , interest becomes 12% o Can there be interest for unliquidated damages? No. There must be certainty of amount of damages before interest is demanded. F. Attorneys fees o What is the general rule? Attorneys fees cannot be recovered o What are the exceptions? [Based on award] 1. Exemplary damages are awarded 2. Double judicial costs awarded [Bad faith] 3. Malicious prosecution 4. Clearly unfounded civil actions against plaintiff 5. Defendant grossly acted in BF in refusing to satisfy a plainly valid claim 6. Defendants acts/omissions compelled plaintiff to litigate with third persons or incur expenses to protect his interests [Nature of action] 7. Action for legal support 8. Action for recovery of wages 9. Indemnity under ECSIF and employers liability laws 10. Separate civil action to recover culpa criminal liability [Equity] 11. Any other case where the court deems it equitable o What are the rules in awarding attorneys fees? Plaintiff must clearly state basis in the complaint

Court must state basis for the award, or else its null and void As fees go to lawyer As damages go to client When can there be attorneys lien? There can be none, over real property subject of litigation If the action is for damages, can claim a lien on the award What is the basis of the amount? That which is stipulated in the retainer agreement If there is none stipulated, it is fixed on the basis of quantum meruit the reasonable worth of his services

Moral damages What are moral damages? o To alleviate the moral suffering the injured party has undergone by reason of the defendants culpable action What are the requisites of moral damages? o 1. Injury sustained by claimant (physical, mental, or psychological) o 2. Culpable action or omission established o 3. It is the proximate cause of the tortuous act (fraud or bad faith) o 4. Award of damages predicated on circumstances enumerated below o 5. Testimony or evidence proves the suffering caused When is moral suffering presumed? 1. Rape 2. Murder 3. Homicide In what circumstances may moral damages be awarded? Physical injuries Intentional torts (e.g. human relations chapter)

Culpa aquiliana

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Culpa contractual

Culpa criminal

Contract of carriage Labor cases

Bad faith (except banks no need to prove bad faith) Gross negligence Physical injuries Lascivious acts Adultery or concubinage Illegal or arbitrary arrest Illegal search Defamation Death of passenger Fraud or bad faith Bad faith Oppression against labor

EXCEPT libel or slander against the corporation (damage of corporate reputation)

Nominal damages What are nominal damages? o In order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized o Not for the purpose of indemnifying the plaintiff for loss suffered What is the nature of nominal damages? o If there is absence of proof of actual damages, only nominal damages are awarded o Assessment of nominal damages up to the court. The plaintiff has to just prove breach of right no need to prove bad faith, fraud, or malice. Examples of violation of nominal damages: o Violation of due process in labor cases, although dismissal may be valid o Act of bank which merely relied on entries in a deed of mortgage without checking or adjusting its records, leading to prejudice to plaintiff Can nominal damages co-exist with actual damages or any other kind of damages for that matter? o No. Nominal damages ALWAYS stand alone.

Who may recover moral damages? o Only the party who suffered. o Except: parents of the child seduced, abducted, raped, or abused What are the factors in determining amount of moral damages? o 1. Sentimental value o 2. Extent of humiliation o 3. Extent of pain and suffering o 4. Standing of the offender and offended o 5. Age of the claimant What are the elements of malicious prosecution in criminal case? o 1. Fact of prosecution and the action terminated with an acquittal o 2. Prosecutor acted without probable cause o 3. There was legal malice What are the elements of malicious prosecution in civil case? o 1. False allegation o 2. Lack of probable cause o 3. Malice or bad faith o 4. Injury o 5. Action terminated Can corporations and other artificial beings be entitled to moral damages? o No.

Temperate damages What are temperate or moderate damages? o These are more than nominal, but less than actual. These are awarded when the court finds some pecuniary loss has been suffered but the amount, from the nature of the case, cannot be established with certainty. Ex. NAPOCORs construction of geothermal plants resulted into damages to a nearby resort. There is pecuniary loss, but it cannot be ascertained so temperate damages were awarded.

Liquidated damages

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What are liquidated damages? o Those agreed upon by the parties in a contract, in case of breach thereof. Can these co-exist with actual damages? o No. Liquidated and actual damages are mutually exclusive. What is the general rule? o Liquidated damages substitute for damages and interest. Exceptions? o 1. Stipulated otherwise o 2. Interest was not paid o 3. Fraud

Exemplary or corrective damages What are exemplary damages? o Those imposed by way of example or correction for the public good. o In addition to moral, temperate, liquidated, or actual damages Who determines when exemplary damages are given? o The courts, on its discretion. It cannot be: demanded alleged waived What must be established first? o Claimant must first establish its right to actual, moral, temperate, or liquidated damages When is it awarded? o Culpa aquiliana attended by gross negligence o Culpa contractual wanton, fraudulent, reckless, oppressive, or malevolent manner o Culpa criminal attended by aggravating circumstances

[acts of other party] 3. Contributory negligence of the other party 4. Plaintiff himself contravened terms of the contract 5. Plaintiff derived some benefit from the contract [equity] 6. When defendant acted upon advice of counsel which led to exemplary damages being awarded o 7. Loss would have resulted anyway o 8. Defendant has done his best to lessen the plaintiffs loss or injury since the filing of the action What is the duty of the party suffering loss or injury? o Must exercise diligence of GFF to minimize damages arising from the act or omission in question What is the doctrine of avoidable consequences? o A party cannot recover damages from consequences which the party could reasonably have avoided o These are acts or omissions of the plaintiff after the defendants act or omission (as opposed to contributory negligence, which precedes the act or omission)

o o o o o o

Damages in case of death 1. Indemnity for death: fixed at 50K 2. Indemnity for loss of earning capacity o Unless the deceased had no earning capacity at said time o If deceased obliged to give support, the recipient who is not an heir may demand support from the accused for a period not exceeding 5 years, in a period set by court 3. Moral damages for mental anguish o ONLY spouse, legitimate or illegitimate descendants and ascendants (SAD) o Not brothers/sisters 4. Exemplary damages o If crime attended by aggravating circumstances 5. Attorneys fees and expenses of litigation o When a separate civil action to recover civil liability from a crime is filed o Or there are exemplary damages awarded

Mitigation of damages What are the factors that mitigate liability? o [defenses] o 1. Diligence of a GFF o 2. Mitigating circumstances

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6. Interests, if proper

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