1.

Fungible (capable of substitution by other things of the same

quantity and quality)
PROPERTY 2. Non-fungible (incapable of such substitution, hence, the identical
thing must be given or returned)
h. According to its definiteness
1. Define property - 1. Generic
2. Specific
ANS: Property may be defined as anything which is or may be the object of i. According to whether in the custody of the court of free
appropriation. 1. In custodia legis
2. Free property (not in custodia legis)
2. Distinguish between thing and property
5. Is the Human Body, whether dead or alive, a real or personal property-
ANS: Strictly speaking, the concept of thing is broader than the concept of
property, because while property refers only to those objects which are ANS: Whether dead or alive, it is neither real or personal property, for it is not
or may be the object of appropriation, thing refers also to those which even property at all, in that it generally cannot be appropriated. It is
are not or may not be the object of appropriation. In other words, thing indeed, a thing or a being, for it exists; in fact, it is tangible or corporeal
is the genus, while property is the species. being a thing. While a human being is alive, he cannot, as such, be the
object of a contract, for he is considered outside the commerce of man.
3. The three kinds of things, depending on the nature of their ownership: He may, of course, offer to another the use of various parts of the body.
He may donate part of his blood, may even sell part of his hair; but he
a. Res nullius belong to no one and the reason is that they have not yet
cannot sell his body.
been appropriated
b. Res communes really owned by everybody in that their use and
6. The different academic classifications of real properties
enjoyment are given to all mankind.
c. Res alicujus are owned privately, either collectively or individually ANS:
1. Immovables by nature, or those which cannot be moved from place to
4. Classification of property:
place, such as those mentioned in Nos. 1 (with respect to land and
a. According to its nature, mobility and non-mobility roads) and 8 in Art. 415 of the NCC.
1. Movable or personal property 2. Immovables by incorporation, or those which are attached to an
2. Immovable or real property immovable in such a manner as to form and integral part thereof, such
b. According to its ownership as those mentioned in Nos.1 (except lands & roads), 2, 3, and 4 of Art.
1. Public dominion 415, NCC.
2. Private ownership 3. Immovables by destination, or those which are placed in an immovable
c. According its alienability for the use, exploitation or perfection of such immovable, such as those
1. Within the commerce of man mentioned in Nos. 4, 5, 6, 7 and 9 of Art. 415, NCC.
2. Outside the commerce of man 4. Immovables by analogy, or those which are considered immovables by
d. According to its existence
operation of law, such as those mentioned in No. 10 of art. 415, NCC.
1. present property
2. future property
7. The following are immovable properties enumerated by law
e. According to its materiality or immateriality
1. Tangible or corporeal (can be seen or touched)
ANS:
2. Intangible or incorporeal (rights or credits)
a. Land, buildings, roads and constructions of all kinds adhered to the soil;
f. According to its dependence or importance
b. Tress, plants, and growing fruits, while they are attached to the land or
1. Principal
2. Accessory form an integral part of an immovable;
g. According to its capability of substitution
 c. Everything attached to an immovable in a fixed manner in such a way
that it cannot be separated therefrom without breaking the material or
deterioration of the object;
d. Statues, reliefs, paintings or other objects for use or ornamentation,
placed in buildings or on lands by the owner of the immovable in such a
manner that it reveals the intention to attach them permanently to the
tenements;
e. Machinery, receptacles, instruments or implements intended by the
owner of the tenement for an industry or works which may be carried on
in a building or on a piece of land, and which tend directly to meet the
needs of the said industry or works;
f. Animal houses, pigeon houses, beehives, fishponds or breeding places of
similar nature, in case their owner has placed them or preserves them
with the intention to have them permanently attached to the land and
forming a permanent part of it; the animals in these places are included;
g. Fertilizer actually used on a piece of land;
h. Mines, quarries, and slag dumps, while the matter thereof forms part of
the bed, and waters either running or stagnant;
i. Docks and structures which, though floating, are intended by their
nature and object to remain at affixed place on the river, lake or coast;
j. Contracts for public works, and servitudes and other real rights over
immovable property. (Art. 415NCC)
8. Requisites in order that machinery may be considered an immovable
property
ANS:
1. The machinery must have been placed by the owner or an agent of the
same.
2. An industry or works must be carried on in the building or land;
3. The machinery must tend directly to meet the needs of the industry or
works;
4. The machinery must be essential and principal to the pursuance of the
business of the owner, and not merely incidental.
9. When a Machinery attached to a land or a tenement considered
immovable
ANS: In par. 5 of Art. 415, NCC.
The exception is when placed on the land or tenement by a tenant.
(Davao Sawmill vs. Castillo)
The exception to the exception is when the tenant had promised to
leave the machinery on the tenement at the end of lease, or when he
acted only as agent of the owner of the land. (Valdez vs. Central)
10. Is a building an immovable property?
ANS: Yes, it is obvious that in the enumeration of immovable properties in Art.
415, NCC, a building is mentioned independently of the land. By this,
there is no other conclusion that a building is by itself an immovable
property. (Lopez vs. Oroso, Jr.)
11. May a building be considered a personal property
ANS: Yes. If there is a stipulation as when it is used as security in the
payment of an obligation where a chattel mortgage is executed over it.
It may also be considered personal if the building is being bought for
purpose of demolishing the same. In this case, the materials resulting
from the demolition are being bought.
12. Is mortgage on land movable or immovable property?
ANS: It depends. If the mortgage is registered in the Registry of Property, it
constitutes a real right over an immovable within the meaning of No. 10
of Art. 415 of the NCC, which declares that the contracts for the public
works, servitudes and other real rights over immovable property are
classified as immovable property. However, if the mortgage is not
registered in the Registry of Property although valid as between the
contracting parties, it cannot be classified as immovable property.
13. Is a barong-barong built on the parcel of land belonging to him be
classified as immovable property
ANS: No, because the structure must be more or less permanent in nature in
order that it may be classified as an immovable. If the same is a mere
superimposition on the land, like the barongbarong, the same is not an
immovable property.
14. Sapphire owns a house and lot. The house is made of concrete
materials. Sapphire sold it to Emerald for purposes of demolition. How is
the house classified?
ANS: It is movable or personal property. In one case the Supreme Court ruled
that a building sold to be demolished may be considered personal
property because the true object of the sale would be the materials.
15. The following things are deemed to be personal property
ANS:
 1. Those movables susceptible of the appropriation which are not
included in Art. 415, NCC.
2. Real property which by any special provision of law is considered as
personalty;
3. Forces of nature which are brought under control by science;
4. In general, all things which can be transferred from place to place
without impairment of the real property to which they are fixed. (Art
416, NCC)
The following are also considered personal property:
1. Obligations and actions which have for their object movables or
demandable sums; and
2. Shares of stocks of agricultural, commercial and industrial entities,
although they may have real estate. (Art. 417, NCC.)
16. How is movable property classified according to its nature
ANS: As to their possibility of being consumed by their use, movable or
personal property may be either:
1. Consummable or those which cannot be used in a manner appropriate to
their nature without their being consumed; or
2. Non-consummable or those which can be used in a manner appropriate
to their nature without their being consumed. (Art. 418, NCC)
As to their possibility of being substituted by others of the same kind and
quality, they may be either:
Fungibles, or those which can be substituted by others of the same kind
and quality; or
Non-fungibles, or those which cannot be substituted by other of the
same kind and quality.
17. The tests to be applied successively in order to determine whether an
object is movable or not
ANS: 1. Whether the object can be transported from place to place;
2. Whether the change of location can take place without injury to the
immovable to which it may be attached; and whether it is not included
in the enumeration found in Art. 415, NCC.
If the answer to all the above question is in the affirmative, then the
object is movable.
18. Is a painting which the owner lent to somebody, who then attached the
same on the wall of his house to beautify it with the obligation to return
it within one week considered as movable or immovable
ANS: It is movable due to lack of intent to attach it permanently.
19. May certain things partake both of the nature of real and personal property
ANS: Yes, certain things may partake of the nature of real and personal
property at the same time. This is expressly recognized in No. 2 Art. 416
of the NCC, which states that real property which by any provision of
law is considered as personalty is deemed to be movable or personal
property. Thus, under the Chattel Mortgage Law (Sec. 7, Act No. 1508),
growing crops may be the object of a contract of chattel mortgage.
Similarly, growing crops may also be considered as personalty for the
purpose of a contract of sale.
20. Is a vessel personal or real property
ANS: It is a personal property. In the first place, it can be transported from
place to place; in the second place, the change of location can take
place without injury to immovable to which it may be attached; and in
the third place, it is not included in the enumeration of immovable in
Art. 415 of the NCC. However, because of its importance in the world of
commerce, it partakes of the nature of immovables when it comes to
requirement of registration. Thus, if it is mortgaged under the Chattel
Mortgage Law, the mortgage must be registered not only in the Chattel
Mortgage Register but also in the office of the Collector of Customs at
the port of entry.
21. The following things are property of public dominion
ANS:
1. Those intended for public use such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads
and others of similar character.
Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.
22. What is meant by public lands, public domain and government
lands, and how shall we distinguish one from the other
ANS: Public lands and public domain are synonymous. They refer only to
government lands which are opened to private appropriation and
 settlement by homestead and other similar acts as provided by law. On
the other hand, public lands and government lands are not only public
lands, but also other lands already reserved for or devoted to pubic use
or subject to private right. Therefore, the government owns lands which
are known as public lands or public domain as well as lands which are
not public lands or public domain.
23. Lands of the public domain are classified into
ANS: 1. Agricultural; 2. Forest or timber; 3. Mineral lands, and 4. National
parks.
24. Patrimonial property of the State or of provinces, cities and
municipalities
ANS: Those properties of the State which are not intended for public use, or
public service or for the development of national wealth, as well as those
property of provinces, cities and municipalities which are not intended
for public use are patrimonial.
25. What is meant by property of private ownership
ANS: Property or private ownership, besides that patrimonial property of the
State, provinces, cities and municipalities, consists of all property
belonging to private persons, either individually or collectively.
26. May the Roponggi property in Japan be sold
ANS: No, because the said property is a property of the State intended for
public use or public service.
27. What is the Regalian Doctrine
ANS: It is a doctrine which reserves to the State the full ownership of all
natural resources or natural wealth that may be found in the bounds of
the earth.
28. If you are an owner of parcel of land, what rights do you have on the
same
ANS: You are also the owner of the surface and everything under it. You can
make constructions, works, plantations and excavations. But your right is
not absolute because it is subject to certain restrictions or limitations like
servitudes, special laws, ordinances, requirements of aerial navigation
and the principles of human relations.
As regards, the mineral found in it, you are not the owner because
ownership of minerals is reserved in favour of the State even if the land
is a private land. In fact you have no right to extract the mineral without
the permission of the State.
29. What is a hidden treasure and who owns the same
ANS: By hidden treasure is understood, for legal purpose, any hidden and
unknown deposit of money, jewelry, or other precious objects, the lawful
ownership of which does not appear.
It belongs to the owner of the land, building or other property on which
it is found.
30. Alberta found a hidden treasure inside the land of Terence. How will the
treasure be divided if Alberta is a usufructuary of the land; lessee;
farmer; labourer hired to look for it
ANS: If Alberta is usufructuary, or lessee or farmer, she is entitled to of the
hidden treasure because they are considered as strangers to the land.
If she is the labourer intended or hired to look for it, she is entitled to
her wage or salary only.
31. Suppose Alberta in the preceding question has an instrument to look for
a hidden treasure, can she still be considered a finder by chance
ANS: Yes, because the word by chance means there should be purpose or
intention to look for it.
The better rule however, is that by chance means good luck,
whether there was a deliberate search or not for the treasure, but no
prior agreement as to how it is to be divided. One who intentionally
looks for it is embraced if he does not ask for permission, he is a
trespasser.
32. Define ownership
ANS: It is an independent right of exclusive enjoyment and control of a thing
for the purpose of deriving therefrom all advantages required by the
reasonable needs of the owner and the promotion of the general welfare
but subject to the restrictions imposed by law and the rights of others.
33. The traditional attributes or elements of ownership or the rights of
person over his property are 37. As a consequence of ownership, the rights of a person over his property
are
ANS: a. The right to enjoy, which includes:
Jus utendi, or the right to use; ANS:
Jus fruendi, or the right to enjoy the fruits; and 1. To enjoy the property;
Jus abutendi, or the right to consume the thing by its use. 2. To dispose of the property;
3. To recover the property from any holder or possessor;
b. The right to dispose (jus disponendi), or the right to alienate, 4. To exclude any person from the enjoyment and disposal of the property;
encumber, transform, or even to destroy the property. 5. To enclose or fence his land or tenement;
6. To just compensation in case of eminent domain;
c. The right to vindicate (jus vindicandi), or the right of action 7. To construct any works, or make any plantation or excavation on the
available to the owner to recover the property against the holder surface or subsurface of his land;
or possessor. 8. To the ownership of all or a part of hidden treasures found in his
property; and
34. The kinds of ownership are 9. To the ownership of all accessions to his property.

ANS: a. full ownership this includes all the rights of the owner
b. naked ownership ownership where the rights to the use and
fruits are denied.
c. sole ownership where ownership is vested in only one person. 38. Force in defense of property justified if the following requisites
d. co-ownership where the ownership is vested in two or more concur
owners.
ANS:
35. Is the right of ownership absolute
1. The force must be employed by the owner or lawful possessor of
ANS: It is not absolute because it has limitations which are imposed for the the property;
benefit of humanity and based on certain legal maxims: 2. There must be an actual or threatened physical invasion or
a. the welfare of the people is the supreme law of the land salus usurpation of the property.
populi suprema est lex;
b. use your property so as not to impair the rights of others sic
utere tuo ut alienum non laedas. ACCESSION

36. The limitations upon the right of ownership

ANS:
1. General limitations imposed by the State for its benefit such as the power
of eminent domain, the police power, and the power of taxation;
2. Specific limitations imposed by law, such as legal servitudes;
3. Limitations imposed by the party transmitting the property either by
contract or by will;
4. Limitations imposed by the owner himself, such as voluntary servitudes,
mortgages, pledges, and lease rights; and
5. Inherent limitations arising from conflict with other rights, such as those
caused by contiguity of property.
39. Define accession and is it a mode of acquiring ownership
ANS: It is the right pertaining to the owner of a thing over everything which is
produced thereby, or which is incorporated or attached thereto, either
naturally or artificially. From the very definition itself, it is clear that it is
not a mode of acquiring ownership; it is merely a consequence of the right
of ownership. Furthermore, under Art. 712 of the NCC which enumerates
the different modes of acquiring ownership or other real rights, accession
is not included.
40. The different kinds of accession are

We might add to the above enumeration the constitutional prohibition ANS: A.) Accession discreta, or the right pertaining to the owner of a thing
regarding acquisition of private land by aliens and other constitutional limitations. over everything which is produced thereby.

1. Natural fruits, or spontaneous products of the soil, and the
young and other products of animals.
2. Industrial fruits are those produced by lands of any kind through
cultivation of labor.
3. Civil fruits are rents of buildings, the price of leases of lands and
other property and the amount of perpetual or life annuities or
other similar income. (Art. 442, NCC)
B.) Accession continua, or the right pertaining to the owner of a thing
over everything which is incorporated or attached thereto, either
naturally or artificially.
1. With regard to immovable property:
a. Accession industrial, or that which takes place in case of:
(i) Building
(ii) Planting, or
(iii) Sowing (Arts. 445-455, NCC)
b. Accession natural, which may be in the form of either;
(i) Alluvium, or the accretion which lands adjoining the
banks of rivers, lakes, creeks or torrents gradually
receive from the effects of the currents of the
waters. (Art. 457, NCC)
(ii) Avulsion or the accretion which takes place
whenever the current of a river, lake, creek or
torrent segregates from one estate on its bank a
known portion of land and transfers it to another
estate. (Art. 459, NCC)
(iii) Change of river beds, or that which takes place
when a river bed is abandoned through the natural
change in the course of the waters. (Art. 461, NCC)
(iv) Formation of islands either on the seas within the
jurisdiction of the Philippines, on lakes, and on
navigable or floatable rivers or non-navigable and
non-floatable rivers. (Art. 465, NCC)
2. With regard to movable property:
a. Adjunction or conjunction, or that which takes place
whenever movable things belonging to different owners are
united in such a way that they cannot be separated without
injury, thereby forming a single object. (Art. 466, NCC)
b. Commixtion or confusion, or that which takes place whenever
there is a mixture of things solid or liquid belonging to
different owners, the mixture of solids being called
commixtion, while that of liquids, confusion. (Art. 472, NCC)
c. Specification or that which takes place whenever a person
imparts a new form to materials belonging to another
person. (Art. 474, NCC)
41. To whom does the offspring of animals belong when the male and
female belong to different owners
ANS: Applying the principle of partus sequitur ventrem, the offspring
belongs to the owner of the female.
41. Is the rule of accession discreta that to the owner of the thing belong
the natural, industrial and civil fruits absolute in character
ANS: No. It is subject to the following exceptions:
1. the thing is in possession of a possessor in good faith in which case
such possessor is entitled to the fruits.
2. If the thing is subject to a usufruct in which case the usufructuary is
entitled to the fruits.
3. If the thing is leased in which case the lessee is entitled to the fruits
of the thing, although such lessee must pay the owner rentals which
are in the nature of civil fruits.
4. If the thing is in possession of an antichretic creditor in which case
such creditor is entitled to the fruits with the obligation of applying
them to the interest and principal.
42. The basic principles governing accession continua are
ANS: 1. That to the owner of a thing belong the extension or increase of such
thing;
2. That this extension of the right of ownership is realized, as a general
rule, under the juridical principle that the accessory follows the
principal (Accessio cedit principali);
3 That this incorporation of the accessory with the principal saving the
exceptions provided by law is effected only when two things are so
united that they cannot be separated without injuring or destroying
the juridical nature of one of them; and
4. That, as a general rule, punitive liability attaches to the party who
acts in bad faith, but not to the party who acts in good faith.
43. If Alpha builds in good faith a house on the land of Bravo, what are the
rights of the parties
ANS: a. The rights of the owner of the land are:
1.) He can appropriate the house upon payment of indemnity. The
phrase upon payment of indemnity means that Alpha has the
 right to retain the house for as long as Bravo has not yet paid
the indemnity; or
2.) He has the right to sell the land to the builder in good faith. He
can compel the builder to buy the land, unless the value of the
land is considerably more than the value of the building. If so,
then the builder must rent or the remedy is a forced lease.
b. The right of the builder is to ask for indemnity if the landowner opts
to appropriate the house. The reason for this is that the
appropriation without compensation would amount to solutio
indebiti. Anyway, Alpha is in good faith.
44. In the immediately preceding question, can Bravo file a suit for
ejectment and pray for demolition upon knowing that Alpha built her
house on his land
ANS: No. He has yet to make a choice. If he has not yet done so, he cannot
ask for the ejectment of Alpha, but if he opted to sell the land where
the value of the same is not considerably more than the value of the
house, and the builder does not pay the land then Alpha can be
ejected. If she cannot pay, she should not be allowed to continue using
the land.
45. If the landowner chooses to appropriate the building, can the builder ask
the owner of the land to sell it instead
ANS: No, because the option to appropriate the building or sell the land
belongs to the landowner. The only right of the builder in good faith is
the right to reimbursement, not to compel the owner of the land to sell.
The option is not to buy but to sell. The option is given to the landowner
because his right is older; and because of the principle of accession, he
is entitled to the thing attached to his land.
46. What then is the remedy left to the owner of the land if the builder fails
to pay-
ANS: While the NCC is silent on this point, guidance may be derived from the
decision of the Supreme Court, thus: (1) In Miranda vs. Fudalan, 97 Phil.
801, the Supreme Court said that the parties may decide to leave the
things as they are and assume the relation of lessor and lessee, and
should they disagree as to the amount of rental, then they can got to the
court to have the amount fixed. (2) Should the parties not agree to
assume the relation of the lessor and lessee, another remedy is
suggested in the Ignacio vs. Hilario case wherein the Supreme Court
ruled that the owner of the land is entitled to have the improvement
removed when after having chosen to sell his land, the builder in good
faith fails to pay for the same. (3) A further remedy is indicated in
Bernardo vs. Bataclan case where the Supreme Court approved the sale
of the land and improvement in a public auction, applying the proceeds
thereof first to the payment of the value of the land and the excess, if
nay, to be delivered to the owner of the house in payment thereof.
47. May a lessee be a builder in good faith
ANS: In one case, it was held that lessees are not builders in good faith. They
came into the possession of the lot by virtue of a contract of lease
executed by petitioners mother in their favor. They are then estopped to
deny their landlords title, or to assert a better title not only in themselves,
but also in some third person while they remain in possession of the
leased premises and until they surrender possession to the landlord. This
estoppel applies even though the lessor had no title at the time. The
relation of lessor and lessee was created and may be asserted not only by
the original lessor, but also by those who succeed to his title.
Being mere lessees, they knew that their occupation of the premises
would continue only for the life of the lease. Plainly, they cannot be
considered as possessors or builders in good faith.
48. What are the rights, if any, of a builder in bad faith
ANS: As a rule, he has no right. But he is entitled to reimbursement for
necessary expenses for the preservation of the land, not the value of the
building (Art. 452, NCC). The reason for this rule is, after all, the owner
would have borne the same expenses of preservation of the land.
49. What are the rights of the owner of the land in case there is a builder in
bad faith
ANS: 1. To appropriate the building without payment of indemnity plus
damages. In this case, the builder is like a donor;
2. He can demand the demolition of the house plus damages;
3. He can compel the builder to buy the land even if the value is
considerably more than the value of the building plus damages.
(Arts. 450 and 451, NCC)
50. What are the rights and obligations of the owner of the land who uses
the materials of another
ANS: a. If the landowner acted in good faith
1. He becomes the owner of the materials but he must pay for
their value. The only exception is when they can be removed
without destruction to the work made or to the plants. In such
case, the owner of the materials can move them.
b. If the landowner is in bad faith
 2. He becomes the owner of the materials but he may pay their
value and damages. The only exception is when the owner of
the materials decides to remove them whether or not
destruction would be caused. In this case, the materials would
still belong to the owner of said materials who in addition will
still be entitled to damages.
51. What are the rights and obligations of the owner of the materials
ANS: a.) If the landowner acted in good faith
1. The owner of the materials is entitled to reimbursement provided
he does not remove them;
2. He is entitled to removal provided no substantial injury is
caused;
b.) If the landowner acted in bad faith
1. The owner of the materials is entitled to absolute right of removal
and damages whether or not substantial injury is caused;
2. He is entitled to reimbursement and damages in case he chooses
not to remove.
52. If you plant and grow crops on the farm of your neighbor knowing fully
well that the farm is not yours, what are yours rights with reference to
the crops, if your neighbor is in good faith
ANS: There is a distinction:
1) If the crops have been already gathered, then you have to return the value
of the crops or the crops themselves minus the expenses essential for their
production, gathering and preservation;
2) If not yet gathered, that is, the crops are still standing, you completely
forfeit them in favor of the owner of the land without any right of indemnity
except of course for the necessary expenses, not of the crops but of the
land.
53. Define alluvium
ANS: Alluvium may be defined as the accretion which the lands adjoining the
banks of rivers, creeks, torrents or lakes gradually received from the
effects of the current of the waters.
54. The rule with regard to alluvium?
ANS: To the owners of the land adjoining the banks of rivers belongs the
accretion which they gradually receive from the effects of the current of
the waters. (Art 457, NCC)
The owners of the estates adjoining ponds or lagoons do not acquire the
land left dry by the natural decrease of the waters, or lose that
inundated by them in extraordinary floods. (Art 458, NCC)
55. Define avulsion
ANS: Avulsion may be defined as the accretion which takes place whenever
the current of a river, creek, torrent or lake segregates from an estate
on its bank a known portion of the land and transfers it to another
estate.
The rule with regard to avulsion
ANS: Whenever the current of a river, creek or torrent segregates from an
estate on its bank a known portion of land and transfer it to another
estate, the owner of the land to which the segregated portion belonged
retains the ownership of it, provided that he removes the same within 2
years.
Trees uprooted and carried away by the current of the waters belong to
the owner of the land upon which they may be cast, if the owners do not
claim them within 6 months. If such owners claim them, they shall pay
the expenses incurred in gathering them or putting them in a safe place.
56. Rule on uprooted trees
Example: Because of the force of the river current, some trees on the estate of
A were uprooted and cast on the estate of B, who owns the trees?
ANS: A should still be considered as the owner of the uprooted trees but if he
does not claim them within six months, B will become the owner. If A
makes the claim, he will have to shoulder the expenses for gathering or
putting them in a safe place.
Failure to make the claim within 6 months will bar any future action to
recover the trees.
57. Rule if the trees have been transplanted
ANS: In the example given above, even if the trees have been transplanted by
the owner of the land upon which they have been cast on his own land
ownership still pertains to the person who lost the trees provided that
the claim was made properly. Incidentally, the owner of the land upon
which the trees have been cast does not have to wait for six months
before he can temporarily set them aside to make proper use of his own
land.
58. Effect if claim is made but trees are not removed

If say within 4 months a claim is made but no steps are yet taken to recover
the trees, may an action still be filed afterwards for recovery of the trees?
ANS: It is submitted that the answer is YES, provided the action is brought
within the period set by law for prescription of movable (since
uprooted) property. (Art. 1140 4 years for ordinary prescription).
The six-month period given in Art. 460 should be considered only as
condition precedent; in other words, A has to make the claim within 6
months. The recovery (as distinguished from the claim) can be made
within the period for prescription. If no claim is made within six
months, the ownership changes.
59. Article applies to uprooted trees
If instead of being uprooted, the trees still remain attached to the land that has
been carried away, it is Art. 459 that must govern.
Article 459: Whenever the current of a river, creek or torrent segregates from an
estate on its bank a known portion of the land and transfers it to another estate,
the owner of the land to which segregated portion belonged retains the
ownership of it provided that he removes the same within two years.
60. Must owner of land upon which the uprooted trees have been cast be
given compensation?
ANS: It depends. If he has incurred expenses for preserving them as when
he gathered them in a safe place for eventual return or when he
transplants them only for preservation purposes, he is doubtless
entitled to indemnification. If he has done nothing, he cannot demand
indemnification unless he has suffered in any way and the real owner
has benefited in that, for example, they were not carried away by the
current. (See Art. 22)
Article 461. River beds which are abandoned through the natural change in the
course of the waters ipso facto belong to the owners whose lands are
occupied by the new course in proportion to the area lost. However,
the owners of the lands adjoining the old bed shall have the right to
acquire the same by paying the value thereof, which value shall not
exceed the value of the area occupied by the new bed.
61. Distinguish between alluvium and avulsion.
ANS: The 2 may be distinguished from each other in the following ways:
1. In alluvium, the accretion is gradual, whereas in avulsion, it is
sudden and abrupt;
2. In alluvium, the accretion cannot be identified, whereas in
avulsion, it can be identified;
3. In alluvium, there is merely an attachment, whereas in avulsion
there is first detachment followed by attachment; and
4. In alluvium, the accretion belongs to the owner of the land to
which the attachment is made ipso jure, whereas in avulsion,
the ownership is retained by the owner of the land from which it
is detached, at least, for a certain period.
62. The rule with regard to changes in the course of rivers.
ANS: River beds which are abandoned through the natural change in the
course of the waters ipso facto belong to the owners whose lands are
occupied by the new course in proportion the area lost. However, the
owners of the lands adjoining the old bed shall have the right to
acquire the same by paying the value thereof, which value shall not
exceed the value of the area occupied by the new bed (Art. 461, NCC)
Attention, however, must be called to the fact that the above provision
has already been superseded by the following provision of the Water
Code of the Philippines (P.D. No. 1067).
Article 58. When a river or stream suddenly changes its course to traverse
private lands, the owners of the affected lands may not compel the
government to restore the river to its former bed; nor can they
restrain the government from taking steps to revert the river or
stream to its former course. The owners of the lands thus affected
are not entitled to any compensation for any damage sustained
thereby. However, the former owners of the new bed shall be the
owners of the abandoned bed in proportion to the area lost by each.
The owners of the affected lands may undertake to return the river or
stream to its old bed at their own expense; Provided, that a permit therefore is
secured from the Minister of Public Works and works pertaining thereto are
commenced within two years from the change in the course of the river or stream.
Requisites that must be complied with in order that the owner of the land
adjoining the bank of a river may become the owner of an accretion on the land.
ANS: They are the following:
1. The deposit must be gradual or imperceptible or impervious;
2. It must be cause by the current of a river;
3. The current must be that of a river;
4. The river must continue to exist; and
5. The increase must be comparatively little. (Art. 457, NCC)
 NOTE: If the increase is through artificial means, the law does not b. If the river on which the land is formed is navigable, the island
apply. belongs to the State. (Art. 464, NCC)

63. Suppose that a river dries up, who is the owner of the old bed? If the river is non-navigable, the island belongs to the riparian
owner, nearer the island. If the said island is formed exactly at the middle
ANS: The old bed will be considered as property of public of the river, it shall be divided longitudinally in halves between the two
ownership riparian owners. (Art. 465, NCC)

64. What is accretion? 69. What is adjunction and give the kinds of adjunction?

ANS: Accretion is the process whereby the soil is deposited while alluvium is ANS: It is a process by virtue of which two movables belonging to the
the soil deposited. Accretion is broader scope that alluvium because different owners are united in such a way that they form a single
strictly speaking, alluvium applies only to the soil deposited on river object.
banks.
The kinds of adjunction are:
65. Reasons why alluvium is granted to the riparian owner.
a. engraftment
ANS: a. to compensate him for the loss he may suffer due to erosion or b. attachment
destructive force of the water and danger from floods; c. weaving
b. to compensate him because the property is subject to d. painting
encumbrances and legal easement; e. writing
c. the interest of agriculture require that the soil be given to the
person who is in the best position to cultivate the same;
d. since, it cannot be said with certainty from where the soil came, 70. If two movables belonging to different owners are united in such a
it is but just that it be given to him who can best utilize the way that they form a single object, to whom shall the object belong?
property.
ANS: 1. When both owners had acted in good faith: If the two things
66. If the riparian owner has a title to the land, does that cover the which are united cannot be separated from each other without
alluvial deposit? Why? injury, the owner of the principal things acquires the accessory,
indemnifying the owner of such accessory for its value. (Art.
ANS: No, because there is specific technical description of the land. There 466, NCC)
must first be an independent application for registration of the land.
If the two things can be separated without injury, their
67. May the alluvial deposits be lost by prescription in favor of another? respective owners may demand their separation. (Art. 469,
Reason. par.1, NCC)

ANS: Yes, because it is not covered by a Torrens title. It can be lost by Nevertheless, in case the thing united for the use,
prescription after 30 years. embellishment or perfection of the other is much more precious
that the principal thing, the owner of the former may demand
its separation, even though the thing to which is has been
68. Who owns an abandoned river bed? How about an island formed on incorporated may suffer some injury. (Art. 469, par.2, NCC)
a river?
2. When the owner of the accessory had acted in bad faith:
ANS: a. River beds which are abandoned through the natural change in Whenever the owner of the accessory thing had made the
the course of the waters ipso facto belong to the owners whose incorporation in bad faith, he shall lose the thing incorporated
lands are occupied by the new course in proportion to the area and shall have the obligation to indemnify the owner of the
lost. (Art. 461, NCC) principal thing for the damages he may have suffered. (Art.
470, NCC).

3. When the owner of the principal had acted in bad faith: if the
one who has acted in bad faith is the owner of the principal
thing, the owner of the accessory thing have a right to choose
between the former, paying him its value or that the thing
belonging to him be separated, even though for this purpose it
be necessary to destroy the principal thing; and in both cases,
furthermore, there shall be indemnity for damages. (Art. 470, 74.
NCC)
4. When both owners had acted in bad faith: If either one of the
owners has made the incorporation with the knowledge and
without the objection of the other, their respective rights shall be
determined as though both acted in good faith. (Art. 470, NCC) 75.
a. If mixture is caused by one owner in good faith, or by will of
both owners, or by chance, or by common agent, co-ownership
results.
b. If mixture is made by one owner in bad faith, then he loses his
material in favor of another and he is liable for damages.
What is specification?
ANS: Specification is the giving of a new form to anothers material
through application of labor where labor becomes the principal.
State the rules in specification.

71. In adjunction or conjunction, what are the tests to be applied in ANS: The rules in specification can be stated in this manner:
order to determine the principal?
1. If the worker is in good faith:
ANS: In general, there are 4 tests which may be applied. In their order of a. he appropriates the new thing but he must indemnify the
preference, they are as follows: owner of the materials. If the material is more precious
than the new thing, the owner of the material has the
1. That to which the other has been united as an ornament or for option:
its use or perfection;
2. The thing of greater value; aa. to get the new thing but he has to pay for the work;
3. If they are of equal value, that of the greater volume; or
4. If not one of these tests can be applied, then, the question will ab. demand indemnity for material
be resolved by taking into consideration all pertinent provisions
applicable as well as their respective merits, utility and volume. 2. If the worker is in bad faith, the owner of the material has the
(Arts. 467 and 468, NCC.) option:
a. to appropriate the work without paying for the labor; or
In painting and sculpture, writings, printed matter, engraving and b. to demand indemnity for the materials with damages.
lithographs, the board, metal, stone, canvas, paper or parchment shall be
deemed the accessory thing. (Art. 468. par.2, NCC) The option to appropriate, however, does not apply if the value of
the resultant work is more valuable for artistic or scientific reasons.
72. What is mixture and state its kind?
76. State the distinctions among adjunction, specification and mixture:
ANS: Mixture is combination or union of materials where the respective
identities of the component elements are lost. ANS:1. Adjunction involves at least two things.
Mixture involves at least two things.
The kinds of mixture are: Specification may involve only one thing but the form is
changed.
a. Commixion which is a mixture of solids; 2. In adjunction and specification, accessory follows the principal.
b. Confusion which is a mixture of liquids. In mixture, co-ownership results.
3. In adjunction, the things joined retain their nature.
73. State the rules on mixture. In mixture, the things mixed or confused, retain or loss their
respective nature.
ANS: The rules in mixture may be stated this way: In specification, the new object retains or preserves the nature
of the original object.
77. What are the tests in determining which of two things is the principal
and the accessory?
ANS: The tests are: (1) intention; (2) value; (3) volume and (4) merits.
Under the test of intention, the rule is, that to which a thing is
attached is the principal; and that to which is attached to the thing is the
accessory.
Example: A ring and a diamond. Based on the test of intention, the
ring is the principal and the diamond is the accessory.
In the case of the ring, if the diamond is more valuable, the latter is
the principal and the ring is the accessory.
Under the test of volume, that which is bigger is the principal; that
which is smaller is the accessory.
Since the ring is bigger than the diamond, the ring is the principal
and the diamond is the accessory.
The test of merits is a combination of utility and volume.
QUIETING OF TITLE
78. When may an Action to quiet title prosper?
ANS: When the following requisites are present:
1. Existence of an instrument or record or claim or encumbrances
or proceeding;
2. The document appears to be valid or effective;
3. But the document is in truth and in fact; invalid, ineffective,
voidable or unenforceable; and
4. The document is prejudicial to the title. (Art. 476, NCC)
81. Nature of the Action
The result is not binding upon the whole world, therefore not in
rem. It is in rem. It is really in personam because it is enforceable only
against the defeated party, or privies and that a suit to quiet title brought
against one co-owner, is NOT res judicata with respect to the other co-
owners who were not made parties thereto. In fact, an action for
conveyance, which is really in personam, has, in at least one case, been
considered by our Supreme Court, as an action to quiet title. Technically, it
is quasi in rem, which is an action in personam concerning real property.
82. Are personal (movable) properties referred to in the action to quiet
title?
As the law is worded, NO, because the law says real property or
any interest therein. But by analogy, the same principles should apply to
personal property, particularly vessels, which although movable, partake of
the nature of real property.
83. Does the Action to Quiet Title Prescribe?
ANS: It depends.
a. If the plaintiff is in possession of the property, the action DOES
NOT PRESCRIBE.
Reason: While the owner continues to be liable to an action,
proceeding, or suit upon the adverse claim, he has a continuing right to be
given aid by the court to ascertain and determine the nature of such claim
and its effect on his title, or to assert any superior equity in his favor. He
may wait until his possession is disturbed or his title is attacked before
taking steps to vindicate his right. Thus, a buyer of land in 1931, who
possesses it from that date may still compel the sellers successors-interest
to execute the proper deed of conveyance in 1954, so that the deed may be
registered.

79. Kinds of Action referred to: b. If the plaintiff is NOT in possession of the property, the action
MAY PRESCRIBE. Moreover, even if the action is brought
ANS: a. Remedial - action to remove the cloud or to quiet title. within the period of limitations, it may be barred by LACHES,
(Art. 476, par. 1) where there is no excuse offered for the failure to assert the
b. Preventive - action to prevent a future cloud or doubt title sooner. If somebody else has possession, the period of
prescription for the recovery of the land is either 10 or 30 years,
80. Reasons for allowing the Action: depending on ordinary or extraordinary prescription. And even
if brought within the prescriptive period, the action may no
ANS: a. the prevention of litigation (eventual litigation); longer prosper if there has been an unreasonable or unjustified
b. the protection of the true title and possession; delay in filing the suit.
c. the promotion of right and justice.
 As a general rule, it is settle that an action to quiet title does not Example:
prescribe.
On As estate is a wall facing the street. The wall is in danger of falling. May
The plaintiff must either have legal or equitable title to or interest in the owner be compelled to demolish or repair it? Yes, and if he does not do so, the
the real property which is the subject matter of the action. Otherwise, the administrative authorities may either order its demolition at As expense or take
action will not prosper. He need not be in possession of said property. (Art. measures to insure public safety.
477, NCC).
The Complainant
84. Non-necessity of Possession
The complainant who brings the case must either have his property adjacent
The plaintiff may be in possession or not in possession. The to the dangerous construction, or must have to pass by necessity in the immediate
differences in effect are: vicinity. If the construction falls, the owner would be liable for damages, as a
general rule.

Article 483. Whenever a large tree threatens to fall in such a way as to cause
damage to the land or tenement of another or to travelers over a
public or private road, the owner of the tree shall be obliged to fell
and remove it; and should he not do so, it shall be done at his
expense by order of the administrative authorities.

If Plaintiff is in If Plaintiff Is Out Possession

possession C0-OWNERSHIP

01. Define Co-ownership?

a. period does not prescribe a. period
b. only prescribes There is co-ownership whenever the ownership of an undivided thing or
right is to remove or b. aside from being given the right to right belongs to different persons.
prevent cloud remove or prevent cloud, he may
also bring the ordinary actions of 02. What Governs Co-ownership?
ejectment, publiciana or
reinvindicatoria within the proper a. contracts
prescriptive periods. b. special legal provisions
c. provisions of the Title on Co-ownership

RUINOUS BUILDINGS AND In default of the 1st, apply the 2nd; in the absence of the 2 nd, apply the
TREES IN DANGER OF FALLING 3rd. (Art. 484, NCC)

03. Sources of Co-ownership (How It Arises)

Article 485. If a building, wall, column, or any other construction is in danger of
falling, the owner shall be obliged to demolish it or to execute the a. By law
necessary work in order to prevent it from falling. b. By contract
c. By chance
If the proprietor does not comply with this obligation, the d. By Occupation or occupancy
administrative authorities may order the demolition of the structure at e. By succession or will
the expense of the owner, or take measures to insure public safety.
04. Characteristics of Co-ownership
Rule in Case of Building, etc., In Danger of Falling
1. There must be more than one subject or owner;
 2. There is one physical whole divided into ideal shares; 1. Co-ownership of an undivided thing
3. Each ideal share is definite in amount, but is not physically segregated 2. Co-ownership of an undivided right
from the rest;
4. Regarding the physical whole, each co-owner must respect each other in b. From the viewpoint of source
the common use, enjoyment or preservation of the physical whole; 1. Contractual co-ownership (an agreement not to divide for ten years
5. Regarding the ideal share, each co-owner holds almost absolute control allowed (Art.494, NCC)
over the same; 2. Non-contractual co-ownership (if the source is not a contract).
6. The co-ownership does not have juridical personality
7. A co-owner is in a sense a trustee for other co-owners. c. From the viewpoint of the rights of the co-owners:
1. Tenancy in common (or ownership in common or just co-ownership as
contemplated in Art. 484).
05. Distinctions between co-ownership and partnership- 2. Joint tenancy (also called joint ownership).

1. Co-ownership has no legal personality; while partnership has a legal or 08. Rights of the co-owners-
juridical personality;
2. Co-ownership is created by contract or the other things; while a 1. Full ownership of his part and share of fruits or benefits;
partnership is created by contract only; 2. The right to alienate, assign or mortgage his share;
3. The purpose of co-ownership is for collective enjoyment; while 3. The right to substitute another in his enjoyment, except when personal
partnership is for profit; rights are involved (Art. 493, NCC)
4. An agreement of a co-ownership exist for 10 years is valid; while in 4. The right to exempt himself from necessary expenses or taxes by
partnership, there is no term limit; renouncing part of his interest in the co-ownership (Art. 488, NCC).
5. There is no mutual representation in co-ownership; while there is mutual
representation in partnership; 09. Actions covered by the term Ejectment which is one of the rights of
6. Co-ownership is not dissolved by death or incapacity of a co-owner; while co-owners are the following --
partnership is dissolved by death or incapacity of a partner;
7. A co-owner can dispose of his share without the consent of the others; a. forcible entry;
while in partnership, a partner cannot substitute another in his place b. unlawful detainer;
without the consent of the others; c. accion publiciana;
8. In co-ownership, profits must depend on proportionate share; while in d. accion reindivicatoria;
partnership, profits may be stipulated by the partners. e. quieting of title;
f. replevin.
06. Distinctions between conjugal partnership and co-ownership-
10. May prescription run against a co-owner? Are there exceptions?
1.Conjugal partnership arises only because of a marriage contract; while co-
ownership arises by an ordinary contract; ANS: No, as a rule. Prescription does not run against co-owners and co-heirs
2. The parties in a conjugal partnership must be a male and a female; while as long as the co-ownership is expressly or impliedly recognized.
in co-ownership sex is immaterial;
3. In conjugal partnership, the owners are always two; while in co-ownership, The exception is repudiation, provided that the following requisites are
the co-owner may be more than two; present:
4. In conjugal partnership, the profits are divided equally, unless there is
contrary stipulation in the marriage settlement; while in co-ownership, 1. He must make known to the others that he is repudiating the co-
profits are proportional to their respective shares; ownership and claiming complete ownership of the entire property.
5. Death of either party in conjugal partnership dissolves it; while death of 2. Evidence of repudiation and knowledge of others is clear and convincing.
one in co-ownership does not dissolve it. 3. There is open, continuous, peaceful, public and adverse possession for a
period to time required under the law.
07. Kinds of Co-ownership
Note: Mere receiving of rents or profits, payment of taxes, or construction of a
a. From the viewpoint of subject matter: fence or building would not be sufficient proof of exclusive or adverse
 possession because anyone in the co-ownership may do it. Definite
repudiation is necessary.
11. How do you determine the share of the co-owners to the benefits and
charges arising from the co-ownership?
ANS : The share of the co-owners in the benefits and charges arising from the
co-ownership shall be proportional to their respective interests and any
stipulation in a contract to the contrary shall be void. Consequently, in
order to determine the share of the co-owners in the benefits and
charges, we must first determine their respective interests in the co-
ownership. Under the law, such interests are presumed equal, unless the
contrary is proved. (Art. 485, par.2, NCC)
12. What are the limitations upon the right of a co-owner to use the thing
owned in common?
ANS: The thing should be used only: (1) in accordance with the purpose for
which it is intended; (2) in such a way as not to injure the interest of the
co-ownership; (3) in such a way as not to prevent the other co-owners
from using it according to their rights. (Art. 486, NCC)
13. Perpendicular Co-ownership-
This is not an ordinary case of ownership where all the floors and everything
else belong to all co-owners. Here, we have a case of perpendicular co-ownership
where the different stories belong to different persons. This is still co-ownership for
there is some unity in the use or ornamentation of the property, particularly in the
main and common walls, roof, stairs, etc. This is uncommon in our country.
NOTE: If the various units are in one plane as when one storey units all sets on
the ground the co-ownership may be referred to as a horizontal co-
ownership. A combination of both perpendicular and horizontal co-
ownership can result in a situation very similar to a condominium which
may be in the form of a building consisting of several stories, each storey
being by itself divided into different units, owned by different persons.
Note that each unit cannot be considered owned in common. Under the
Condominium Law, a condominium corporation can be formed to take
care of common property, like the common stairs, common halls, etc.
14. In a co-ownership, under what circumstances may a co-owner not
demand partition?
ANS: They are the following:
1.) When there is an agreement, but the period should not exceed ten years;
2.) When the testator prohibits it, but the period shall be limited to twenty
years;
3.) When it is prohibited by law (As in conjugal partnership or absolute
community property except in case of legal separation);
4.) When partition renders the object unserviceable;
5.) When the legal nature of the property does not allow partition of the object,
like a party wall. (Arts. 494 & 495, NCC)
15. How co-ownership is extinguished/terminated?
(a) judicial partition
(b) extrajudicial partition
(c) when by prescription, one co-owner has acquired the whole property by
adverse possession as against all the others, and repudiating unequivocally
the co-ownership of the other
(d) when a stranger acquires by prescription the thing owned in common
(e) merger in one co-owner
(f) loss or destruction
(g) expropriation (here the indemnity will be distributed accordingly).
16. May the co-owners of a property agree that the co-ownership shall be
for an indefinite period? Why?
ANS: NO. In one case, the Supreme Court ruled that the duration of the
juridical condition of co-ownership is not limitless. Under Arts. 494 and
1083 of New Civil Code, co-ownership of an estate should not exceed 20
years. Any agreement to keep the thing or property undivided should be
for ten year period only. If the parties stipulate a definite period of
indivision which exceeds the maximum allowed by law, said stipulation is
void only as to the period beyond such maximum period.
The Civil Code is silent as to the effect of the indivision of property
for more than twenty years. The Supreme Court, however, said that it
would be contrary to public policy to sanction co-ownership beyond the
period set by law. Otherwise, the 20 year limitation would be rendered
meaningless.
17. Is an existing mortgage a bar to the partition of a property? Why?
ANS: No, because the latter does not operate to extinguish the mortgage. A
mortgage is inseparable from the property. Under Art. 2126 of NCC, a
mortgage directly and immediately subjects the property upon which it
is imposed, whoever, the possessor may be, to the fulfillment of the
obligation for whose security it was constituted. Furthermore, Art. 494
of the NCC, provides that no co-owner shall be obliged to remain in the
co-ownership. Each co-owner may demand at any time the partition of
the thing owned in common, insofar as his share is concerned.
18. Will redemption by a co-owner of a co-owned property, in its entirety,
terminate or extinguish co-ownership?

ANS: The fact that a co-owner redeems a co-owned property in its entirety,
shouldering the expenses therefor, does not make said co-owner the owner
of it all. The redemption made by him does not put an end to the existing
state of co-ownership. The property remains to be in a condition of co-
ownership.
The redemption of the property, however, entails a necessary expense.
Necessary expenses may be incurred by one co-owner but this is subject
to his right to collect reimbursement from the remaining co-owners.
19. Distinguish between the right of a co-owner to make repairs for the
preservation of the property owned in common, to perform acts of
administration, and to perform acts of ownership or alteration.
ANS: 1. With regard to acts of preservation: Repairs for preservation may be
made at the will of one of the co-owners, but he must, if practicable,
first notify the owners of the necessity for such repairs. (Art. 489,
NCC)
2. With regard to acts of administration: Acts of administration can be
performed only with the concurrence of the majority of the co-
owners. (Art. 492, NCC)
3. With regard to acts of alteration: Acts of alterations can be
performed only with the concurrence of the co-owners. (Art. 491,
NCC)
20. What is meant by acts of administration and acts of alteration?
Distinguish one from the other.
ANS: Acts of administration are those which refer to the enjoyment, exploitation
and alteration of the thing which do no affect its substance or form, while
acts of alteration are those by virtue of which a co-owner, in opposition to
the expressed or tacit agreement of all the co-owners, and in violation of
their will, changes the thing from the state in which the others believe it
should remain, or withdraws it from the use to which they believe it is
intended.
Consequently, acts of administration are transitory in character, while acts of
alteration are more permanent. The former do not affect the substance or form
of the thing, while the latter relate to the substance or essence of the thing itself.
And in relation to the right of a co-owner, the former require the consent or
resolution of the majority of the co-owners, while the latter require the consent
of all.
21. Who has the right of administration of the property owned in common?
ANS: The management of the property owned in common lies, in the first
place, in the co-owners themselves. In this, management, the majority
of interest control, and their decisions are binding upon the minority.
However, the administration may be delegated by the co-owners to
one or more persons, whether co-owners or not. In such case, the
powers and duties of such administrators shall be governed by the
rules on agency. Should there be no majority, or should the resolution
of the majority be seriously prejudicial to those interested in the
property owned in common, the court, at the instance of an
interested party, may order the appointment of an administrator.
22. Is the lease of the entire community property an act of administration
or an act of ownership or alteration?
ANS: Lease of personal property is a mere act of administration and
therefore, requires the resolution of the majority of the co-owners.
However, lease of real property may be an act of administration or an
act of alteration depending upon the circumstances of each particular
case. Thus: (1) If the lease is recorded in the Registry of Property,
whatever may be the duration thereof, it is an act of ownership and
therefore, requires the unanimous consent of all the co-owners, since
under the law, a special power of attorney is required. (see Art. 1647,
NCC) (2) If the lease is not recorded in the Registry of Property, but
the duration thereof is more than one year, it is also an act of
ownership and, therefore, requires the unanimous consent of all the
co-owners, since, again, under the law, a special power of attorney is
required. (see Art. 1878, No. 8, NCC) (3) If the lease however, is not
recorded in the Registry of Property and the duration thereof is only
one year or less, it is an act of administration and therefore, merely
requires the resolution of the majority of the co-owners.
23. a. What is meant by condominium?
b. Who has title to the condominium project?
ANS:
a. According to the Condominium Act (R. A. No. 4726), a condominium is an
interest in real property consisting of a separate interest in a unit in a
residential, industrial or commercial building and an undivided interest in
common, directly or indirectly, in the land on which it is located and in other
common areas of the building. A condominium may include, in addition, a
separate interest in other portions of such real property.
b. We must qualify our answer. When we speak of the condominium project,
we refer to the entire parcel of real property divided or to be divided in
condominiums, including all structures thereon. Thus, as far as the unit of
the project which is being used by a condominium owner is concerned, such
owner has title thereto, but as far as the common areas, including the land
are concerned, all of the condominium owners have an undivided interest or
title thereto. However, title to such common areas, including the land, may
be held by a corporation (hereinafter known as condominium corporation) in
 which the holder of separate interests shall automatically be members or Article 524 Possession may be exercised in ones own name or in that of
shareholders, to the exclusion of others, in proportion to the appurtenant another.
interest of their respective units in the common areas.
Who is in actual possession of a rented parcel of land?

POSSESSION The lessor, thru the tenant, is in actual possession of the land (in the
concept of the owner) that is, if the lessor is not the owner; if he is the owner, he is
called the possessor-owner. The tenant, by himself, is in actual possession in the
Possession defined - it is the holding of a thing or the enjoyment of a right. concept of holder.

It is really a fact since it exists but from the moment it exists, certain Possession in anothers name -
consequences follows, thus making possession also a right.
a. voluntary as when an agent possesses for the principal by virtue of an
Right to possession is a right or incident of ownership while Right of agreement.
possession is an independent right of itself, independent of ownership. b. Necessary as when a mother possesses for a child still in the maternal
womb.
Q : What are the degrees of possession? c. Unauthorized no authority given to possess a thing.

ANS : a. Mere holding or having without any right whatsoever like the possession Suppose I visit a piece of land once in a while and I declare for taxation
itself. purposes the fact that the land belongs to me, this does not necessarily mean that I
b. Possession with juridical title, but not that of an owner like that of a am in possession of the land, for those facts, by themselves, do not show
lessee, pledgee or depositary. This is called juridical possession. possession. Note however, that the holding of a possessory information is considered
c. Possession with just title, but not from the true owner. This is called real evidence of possession. (Bishop of Nueva Segovia vs. Mun. of Bantay, 24 Phils. 347)
possessory right. Example is when a person in goodfaith buys an
automobile from another who delivers the same to the former and who Specific examples of possession in the concept of holder:
merely pretended to be the owner.
d. Possession with a title of dominium, that is, with a just title from the 1) that of the tenant
owner. This is really ownership or possession that springs from 2) that of the usufructuary
ownership. 3) that of the depositary
4) that of the bailee in commodatum
Requisites or Elements of possession:
Article 526. He is deemed a possessor in good faith who is not aware that there
1) There must be a holding or control of a thing or a right. exists in his title or mode of acquisition any flow which invalidates it.
2) There must be a deliberate intention to possess (animus possidendi)
3) The possession must be by virtue of ones own right. He is deemed a possessor in bad faith who possesses in any case contrary to
the foregoing.
Classes of possession:
Mistake upon a doubtful or difficult question of law may be the basis of good
1) In ones own name or in that of another faith.
2) In the concept of owner or in the concept of holder
3) In good faith or in bad faith Q : If a person is aware of the defects of his predecessors title, should
he be considered in good faith or bad faith?
Ownership is different from possession.
ANS : Although Manresa says he should be considered in good faith because after all
A person may be declared the owner, but he may not be entitled to the law speaks of his title, not that of the predecessor, still the fact remains
possession. The possession in the concept of holder may in the hands of another, that he is not allowed to get from a person who is not the owner. Therefore,
such as a lessee or tenant. we should consider him in bad faith unless of course he has valid reasons to
believe that his own title is good.

Bad faith is personal. Just because a person is in bad faith (knows of the
defect or flaw of his title) does not necessarily mean that his successors in interest
are also in bad faith. As a matter of fact, a child or heir may even be presumed in
good faith, notwithstanding the fathers bad faith.
Traditio brevi manu- (the opposite of constitutom possessorium) this
exists when a person who possessed property not as an owner (like a lessee), now
possesses it as an owner.
Essential requirements for possession:

Article 527. Good faith is always presumed, and upon him who alleges bad faith 1) the corpus (or the thing physically detained)
on the part of a possessor rests the burden of proof. 2) the animus or intent to possess

Article 528. Possession acquired in good faith does not lose this character except Acquisition of possession from the viewpoint of who possesses:
in the case and from the moment facts exist which shows that the
possessor is not unaware that he possesses the thing improperly or 1) personal
wrongfully. 2) through authorized person (agent or legal representative)
3) thru unauthorized person (but if only subsequently ratified)
Article 529. It is presumed that possession continues to be enjoyed in the same
character in which it was acquired, until the contrary is proved. Essential requisites:

Article 530. Only things and rights which are susceptible of being appropriated may 1) for personal acquisition
be the object of possession. a) intent to possess
b) capacity to possess
The following cannot be appropriated and hence cannot be possessed: c) object must be capable of being possessed

a) property of public dominion 2) thru an authorized person

b) res communes a) intent to possess for the principal
c) easements (if discontinuous or non-apparent) b) authority/capacity to possess for another
d) things specifically prohibited by law c) principal has intent and capacity to possess

Res Nullius (abandoned or ownerless property) may be possessed but 3) thru an unauthorized person (as in negotiorium gestio)
cannot be acquired because prescription presupposes prior ownership in another. a) intent to posses for another (the principal)
However, said res nullius may be acquired by occupation. b) capacity of principal to possess
c) ratification by principal
ACQUISITION OF POSSESSION
Article 533. The possession of hereditary property is deemed transmitted to the
How is possession acquired-(Article 531 correlate with Article 555) heir without interruption and from the moment of the death of the
decedent, in case the inheritance is accepted. One who validly
a) by material occupation of a thing or the exercise of a right (quasi- renounces an inheritance is deemed never to have possessed the
possession). This includes constitutom possessorium or traditio brevi same.
manu.
b) by the subjection to our will (this includes tradition longa manu)-by mere Time of acquisition of possession:
agreement; or by the delivery of keys-traditio simbolica)
c) by constructive possession or proper acts and legal formalities a) if the heir accepts-from the moment of death since there is no
interruption
Constitutom possessorium- exists when a person who possessed property b) if the heir refuses (or is incapacitated to inherit)-he is deemed never to
as an owner, now possesses it in some other capacity, as that of a lease or have possessed the same
depositary.
Some effects of acquisition of possession thru succession:
 If the father or decedent was in bad faith, it does not necessarily mean 4) if both present a title, the Court will determine. In the meantime, the thing
that the son was also in bad faith. The son is presumed to be in good shall be judicially deposited.
faith. However, since the father was in bad faith, the consequences of
the good faith of the son should be counted only from the date of the Preferences of ownership (not possession) in case of double sale (Article 1544)
decedents death. and in double donation (Article 744):

A minor may acquire the possession of a fountain pen donated to him, a) movable property-preference in ownership is given to the person
but in case of a court action, his parent or legal representative must who first possessed it in good faith
intervene. (Article 535)
b) immovable property-preference in ownership is given:
1) to the first who registered his right in good faith in the Registry
A minor and other incapacitated persons may acquire property or rights of Property
by prescription, either personally or thru their parents, guardians or legal 2) if there was no registration, to the person who first possessed in
representatives. (Article 1107) good faith
3) if there was no possession, to the person who presents the
Modes through which possession cannot be acquired: oldest title, provided that the title had been acquired in good
faith
1) thru force or intimidation
2) thru mere tolerance (permission) In case of conflict between a sale and a mortgage-it is the unrecorded sale
3) thru clandestine, secret possession that is preferred for the reason that if the original owner had parted with his
ownership of the thing sold, he no longer had the ownership and free disposal of that
The intruder does not acquire any right to possession (no legal possession) thing so as to be able to mortgage it. (Maria Bautista vda. de Reyes vs. de Leon L-
22331, June 6, 1967)
The legal possessor, even if physically ousted, is still the possessor and therefore:
Co-possessors of a parcel of land that is mortgaged must be made parties to
1) still entitled to the benefit of prescription foreclosure proceedings, otherwise they cannot be deprived of possession of that
2) still entitled to the fruits portion of land actually possessed by them. (Concha vs. Hen. Divinagracia, L-27042,
3) still entitled as possessor for all purposes favorable to his possession September 30, 1981)

General Rule regarding possession as a Fact: EFFECTS OF POSSESSION

Possession as a fact cannot be recognized at the same time in two different
personalities.
Exceptions:
co-possessors since here, there is no conflict of interest, both of them
acting as co-owners
possession in different concepts or different degrees, example, both
owner and tenant are the possessors as a fact at the same time; the
first, in the concept of an owner; the second, in the concept of holder
(Article 538)
Article 539. Every possessor has a right to be respected in his possession; and
should he be disturbed there he shall be protected in or restored to
said possession by the means established by the laws and the Rules
of Court.
A possessor deprived of his possession through forcible entry may within ten
days from the filing of the complaint present a motion to secure from the competent
court, in the action for forcible entry, a writ of preliminary mandatory injunction to
restore him in his possession. The court shall decide the motion within 30 days from
the filing thereof.

Rules/Criteria to be used in case of conflict or dispute regarding possession: Article 540. Only the possession acquired and enjoyed in the concept of owner can
serve as title for acquiring dominion.
1) present possessor shall be preferred
2) if both are present, the longer in possession The following cannot acquire ownership by prescription as long as they
3) if both began to possess at the same time, the one who presents a title remain such-mere possessors in the concept of holder: lessees; trustees; antichretic
creditors; agents; attorneys regarding their clients properties; depositaries; co-
owners
Although payment of land taxes is not evidence of ownership and although a
mere tax declaration or a tax assessment does not by itself give the title, and is of
little value in proving ones ownership, still the payment of the land tax is one of the
most persuasive and positive indicia, which shows the will of a person to possess in
concepto de dueno or with claim of ownership. And therefore, prescription may
eventually be had, provided that the other requisites are present.
Article 541. A possessor in the concept of owner has in his favor the legal
presumption that he possesses with a just title and he cannot be
obliged to show or prove it.
Difference with respect to just title in possession and just title on
prescription:
1) in possession, just title here is presumed, while in prescription, just title
here must be proved;
2) in possession, just title here means titulo verdadero y valido (true and
valid title sufficient to transfer ownership) while in prescription, just title
means titulo colorado (merely colorable) title although there was a mode of
transferring ownership, the grantor was not the owner
The kinds of titles:
1) true and valid title-here there was a mode of transferring ownership and the
grantor was the owner
2) colorable title-that title where, although there was a mode of transferring
ownership, still something is wrong, because the grantor is not the owner
3) putative title-that title where although a person believes himself to be the
owner, he nonetheless is not, because there was no mode of acquiring
ownership
Article 542. The possession of real property presumes that of the movables therein,
so long as it is not shown or proved that they should be excluded.
Article 544. A possessor in good faith is entitled to the fruits received before the
possession is legally interrupted.
Natural and industrial fruits are considered received from the time they are
gathered or secured.
Civil fruits are deemed to accrue daily and belong to the ges possessor in good
faith in that proportion.
Article 545. If at the time the good faith ceases. There should be any natural or
industrial fruits, the possessor shall have a right to a part of the
expenses of cultivation, and to a part of the net harvest, both in
proportion to the time of possession.
The charges shall be divided on the same basis by the two possessors.
The owner of the thing may, should he so desire, give the possessor in good faith
the right to finish the cultivation and gathering of the growing fruits, as an indemnity
for his part of the expenses of cultivation and the net proceeds; the possessor in
good faith who for any reason whatever should refuse to accept this concession, shall
lose the right to be indemnified in any other manner.
Rights of a possessor (in the concept of owner) as to the necessary
expenses:
a) if in good faith-entitled to:
1. refund
2. retain the premises till paid
b) if in bad faith-entitled only to a refund (no right of retention as
penalty) (Article 546)
Rights of possessor (in the concept of owner) as to the useful expenses:
a) if in good faith-(Article 546)
1. right to reimbursement (of either the amount spent or
increase in value- plus value-at owners option
2. right of retention till paid
3. right of removal (provided no substantial injury is caused
to the principal, reducing its value-unless the owner
exercises the option in paragraph 1 of Article 547
b) if in bad faith-the possessor in bad faith is not entitled to
any right regarding the useful expenses
Article 547. If the useful improvements can be removed without damage to the
principal thing, the possessor in good faith may remove them, unless
the person who recovers the possession exercises the option under
paragraph 2 of Article 546. (which is the option of refunding the
amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof.)
Rights of a possessor (in the concept of owner) with reference to
luxurious or ornamental expenses:
a) if in good faith-
 In general, no right of refund or retention but can remove if no
substantial injury is caused. However, owner has the option to allow:
1) possessor to remove
2) or retain for himself (the owner) the ornament by refunding the
amount spent (Article 548)
b) if in bad faith-
In general, no right of refund or retention but can remove if no
substantial injury is caused. However the owner has the option to allow:
1) possessor to remove
2) or retain for himself (the owner) the ornament by refunding the
value it has at the time the owner enters into possession (Article
549)
Rights of the possessor (in concept of owner) regarding fruits:
a). If in Good Faith :
1) Gathered or severed or harvested fruits are his own
2) Pending or ungathered fruits pro-rating between possessor and
owner of expenses, net harvest and charges (Art. 545)
b). If in Bad Faith:
1) Gathered fruits must return value of fruits already received as well
as value of fruits which the owner or legitimate possessor could have
received with due care or diligence minus necessary expenses for
cultivation, gathering and harvesting to prevent the owner from
being unjustly enriched.
2) Pending or ungathered fruits no rights at all, not even to expenses
for cultivation because by accession, all should belong to the owner,
without indemnity. (Art. 449)
Article 550 The cost of litigation over the property shall be borne by every
possessor.
Article 551 Improvements caused by nature or time shall always inure to
the benefit of the person who has succeeded in recovering
possession.
Article 552 A possessor in good faith shall not be liable for the deterioration or
loss of the thing possessed, except in cases in which it is proved
that he has acted with fraudulent intent or negligence, after the
judicial summons.
A possessor in bad faith shall be liable for deterioration or loss
in every case, even if caused by a fortuitous event.
Article 553 One who recovers possession shall not be obliged to pay for
improvements which have ceased to exist at the time he takes
possession of the thing.
Article 554 A present possessor who shows his possession at some previous
time, is presumed to have held possession at also during the
intermediate period, in the absence of proof to the contrary.
Article 555 A possessor may loss his possession:
a) By the abandonment of the thing;
b) By an assignment made to another either by onerous or
gratuitous title;
c) By the destruction or total loss of the thing, or because it
goes out of commerce;
d) By the possession of another, subject to the provisions of
Art 537, if the new possession has lasted longer than one
year. But the real right of possession is not lost till after the
lapse of 10years.
Article 556 The possession of movables is not deemed lost so long as they
remain under the control of the possessor, even though for the
time being he may not know their whereabouts.
Article 557 The possession of immovables and of real rights is not deemed
lost, or transferred for purposes of prescription to the prejudice
of third persons, except in accordance with the provisions of the
Mortgage Law and the Land Registration Laws.
Article 559 The possession of movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any
movable or has been unlawfully deprived thereof, may recover it
from the person in possession of the same.
If the possessor of a movable lost or of which the owner has
been unlawfully deprived, has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
Article 560 Wild animals are possessed only while they are under ones
control; domesticated or tamed animals are considered
domestic or tame, if they retain the habit of returning to the
premises of the possessor.
Article 561 One who recovers, according to law, possession unjustly lost, shall A usufruct over real property being a real right, must be duly
be deemed for all purposes which may redound to his benefit, to registered in order to bind innocent third parties.
have enjoyed it without interruption.
Classification of usufruct according to quantity or extent of fruits:
a) As to fruits total or partial
USUFRUCT
b) As to object universal or singular or particular

Article 562 Usufruct gives a right to enjoy the property of another with the Classification of usufruct as to the number of persons enjoying the right:
obligation pf preserving its form and substance, unless the title 1) Simple if only one usufructuary enjoys
constituting it or the law otherwise provides. 2) Multiple if several usufructuaries enjoy
1) Simultaneous at the same time
Ownership really consist of 3 fundamental rights 2) Successive one after the other
1) Jus disponendi (the right to dispose)
2) Jus utendi (right to use)
Classification of usufruct as to quality or kind of objects:
3) Jus fruendi (right to the fruits)
i. Usufruct over rights
The combination of the latter two is called usufruct (from the term usufructus. ii. Usufruct over things
The remaining right (jus disponendi) is really the essence of what is termed naked 1) Normal usufruct this involves non-consumable things where the form
ownership and substance are preserved
2) Abnormal usufruct usufruct over consumable property like vinegar or
Rights of action available to usufructuary (the person entitled to the money (this is also called quasi-usufruct)
usufruct):
Classification as to terms or conditions:
1) Action to protect the usufruct itself 1) Pure usufruct no term or condition
2) Action to protect the exercise of the usufruct 2) With a term or period
Ex die from a certain day
Usufruct distinguished from easements (servitudes): In diem up to a certain day
1) In usufruct, the object may be real or personal property while in 3) With a condition (conditional)
easement, only real property; Rules governing a usufruct:
2) In usufruct, what can be enjoyed are all uses and fruits of the property a) First, the agreement of the parties or the title giving the usufruct
while easement is limited to a particular use; b) Second, in case of deficiency, apply the Civil Code
3) A usufruct cannot be constituted on an easement, but it may be
constituted on the land burdened by an easement while an easement In case of conflict between the rights granted as usufructuary by virtue of a
may be constituted in favor of, or burdening, a piece of land held in will, and codal provisions, the former, unless repugnant to the mandatory provisions
usufruct; of the Civil Code, should prevail.
4) Usually extinguished by death of usufructuary while easement is not
extinguished by the death of the owner of the dominant estate.
RIGHTS OF THE USUFRUCTUARY
Similarities between the two:
a) Both are real rights, whether registered or not;
b) Both right may be registered; Article 566 The usufructuary shall be entitled to all the natural, industrial and
c) Both may ordinarily be alienated or transmitted in accordance with the civil fruits of the property in usufruct. With respect to hidden
formalities set by law. treasures which may be found on the land or tenement in any
name, that is, with respect to hidden treasure which may be found
Article 563 Usufruct is constituted by law, by the will of private persons on land or tenement, shall be considered a stranger.
expressed in acts inter vivos, or in a last will and testament and by
prescription.
Article 567 Natural or industrial fruits growing at the time the usufruct begins,
belong to the usufructuary. Those growing at the time the usufruct
terminates belong to the owner.
This article refers to pending natural or industrial fruits (as there can be no
pending civil fruits, for they accrue daily)
Rules as to fruits pending at the beginning of usufruct:
1. Belong to the usufructuary;
2. No necessity of refunding owner for expenses incurred (for the owner gave
the usufruct evidently without any thought to being reimbursed for the
pending fruits);
3. But without prejudice to the right of third persons (Thus, if the fruits had
been planted by a possessor in good faith, the pending crops expenses and
charges shall be pro-rated between said possessor and the usufructuary)
Rules as to fruits pending at the termination of usufruct:
1. Belong to the owner;
2. But the owner must reimburse the usufructuary for ordinary cultivation
expenses and for the seeds and similar expenses, from the proceeds of the
fruit;
3. Also, rights of innocent third parties should not be prejudiced.
Article 568 If the usufructuary has leased the lands or tenement given in
usufruct, and the usufruct should expire before the termination of
the lease, he or his heirs and successors shall receive only the
proportionate share of the rent that must be paid by the lessees.
Article 569 Civil fruits are deemed to accrue daily and belong to the usufructuary
in proportion to the time the usufruct may last.
Article 571 The usufructuary shall have the right to enjoy any increase which the
thing in usufruct may acquire through accession, the servitudes
established in its favor and in general, all the benefit inherent
therein.
Article 572 The usufructuary may personally enjoy the thing in usufruct, lease it
to another, or alienate his right of usufruct, even by a gratuitous
title; but all the contracts he may enter into as such usufructuary
shall terminate upon the expiration of the usufruct, saving leases of
rural lands, which shall be considered as subsisting during the
agricultural year.
Article 573 Whenever the usufruct includes things which, without being
consumed, gradually deteriorate through wear and tear, the
usufructuary shall have the right to make use thereof in accordance
with the purpose for which they are intended, and shall not be
obliged to return them at the termination of the usufruct except in
their condition at that time; but he shall be obliged to indemnify the
owner for any deterioration they may have suffered by reason of his
fraud or negligence.
Article 574 Whenever the usufruct includes things which cannot be used without
being consumed, the usufructuary shall have the right to make use
of them under the obligation of paying their appraised value at the
termination of the usufruct, if they were appraised when delivered.
In case they were not appraised, he shall have the right to return
the same quantity and quality, or pay their current price at the time
the usufruct ceases. (This is a quasi-usufruct)
Article 575 The usufructuary of fruit-hearing trees and shrubs may make use of
the dead trunks, and even of those cut-off or uprooted by accident,
under the obligation to replace them with new plants.
Article 576 If in consequence of a calamity or extraordinary event, the trees or
shrubs shall have disappeared in such a considerable number that it
would not be possible or it would be too burdensome to replace
them, the usufructuary may leave the dead, fallen or uprooted
trunks at the disposal of the owner, and demand that the latter
remove them and clear the land.
The obligations of a usufructuary in the enjoyment of a special usufruct over
a woodland:
1. Must bear in mind that he is not the owner and therefore, in the exercise of the
diligence in caring for the property, he must see to it that the woodland is
preserved, either by development or by replanting, thus he cannot consume all,
otherwise nothing would be left for the owner;
2. In the cutting or felling of trees, he must
a. Follow the owners habit or practices
b. In default thereof, follow the customs of the place
c. If there be no customs, the only time the usufructuary can cut down
trees will be for repair or improvement, but here the owner must first be
informed.
3. Cannot alienate the trees unless he is permitted by the owner or unless he needs
the money to do some repairs. (Article 577, NCC)
In a usufruct of an action to recover through the courts, the usufructuary can
demand from the owner:
 1) The authority to bring the action (usually a special power of attorney); and 2. Or the naked owner may choose retention of the property as
2) Proof needed for a recovery. administrator;
3. Or the naked owner may demand receivership or administration of the
The institution of the action may in the usufructarys name, for being the owner of
real property, sale of movable, conversion or deposit of credit
the usufruct, he is properly deemed a proper party-in-interest. If the purpose is the
retirements or investments of cash or profits.
recovery of the property or right, he is still required to obtain the naked owners
authority. If the purpose is to object to or prevent disturbance over the property, no b) In the rights of the usufructuary:
special authority from the naked owner is needed. (Article 578, NCC)

Article 580 The usufructuary may set off the improvements he may have made
on the property against any damage to the same.
Article 581 The owner of the property the usufruct of which is held by another,
may alienate it, but he cannot alter its form or substance, or do
anything thereon which may be prejudicial to the usufructuary.
A co-owner may give the usufruct of his share to another even without the
consent of the others, unless personal considerations are present. The usufructuray
in such a case takes the owners place as to administration (management) and
collection of fruits or interest. (Article 582, NCC)
If there be partition, the usufructuary continues to have the usufruct of the
part allotted to the co-owner concerned and if the owners make a partition without
the intervention of the usufructuary, this is all right and the partition binds the
usufructuary. Necessarily however, the naked owner must also respect the usufruct.
(Article 582, NCC).
OBLIGATIONS OF THE USUFRUCTUARY
1. The usufructuary cannot possess the property till he gives the security
2. He cannot administer the property, hence, he cannot execute a lease
thereon
3. He cannot collect credits that have matured, nor invest them unless the
Court or the naked owner consents
4. But he can alienate his right to the usufruct since failure to give the
security did not extinguish the usufruct.
The Caucion Juratoria- is the promise under oath made by the
usufructuary to take care of the property and return the same at the end of the
usufruct. It take s the place of the bond and is based on necessity and humanity as
when a poor family acquires by inheritance, of a badly needed house.
After the security is given by the usufructuary, he shall have the right to all
the proceeds and benefits from the day on which he should have commenced to
receive them (retroactive effect) (Article 598, NCC)
He (the usufructuary) shall take good care of the things given in usufruct as
a good father of a family. (Article 589, NCC)
A usufruct is extinguished: (Article 603, NCC)

The usufructuary has obligations before, during and after the usufruct a. by the death of the usufructuary, unless a contrary intention appears;
b. by the expiration of the period for which it was constituted or by
the fulfillment of any resolutory condition provived in the title creating
The usufructuary, before entering upon the enjoyment of the property is the usufruct;
obliged: c. by the merger of the usufruct and ownership in the same person;
d. by renunciation of the usufruct;
1) To make an inventory of all the property, which shall contain an appraisal of e. by the total loss of the thing in usufruct;
the movables and a description of the condition of the immovables; f. by the termination of the right of the person constituting the usufruct;
2) To give security binding himself to fulfill the obligations imposed upon him. g. by prescription
(Article 583, NCC)
Other causes are:

Effects of failure to give security (unless exempted) (Article 586, NCC) a. Annulment;
b. Rescission;
a) In the rights of the naked owner: c. mutual withdrawal;
d. legal causes ending legal usurfruct
1. He may deliver the property to the usufructuary but even if delivery is
made, the naked owner may still later on demand the needed security; Rights and Obligations at the end of the usufruct: (Article 612, NCC)
 A. on the part of the usufructuary:
1. must return he property to the naked owner;
2. the right to retain the property till he is reimbursed for the taxes
on the capital and indispensble extraordinary repairs or
expenses;
3. to remove removable improvements or set them off against
Damages he has caused (Article 580, NCC).
B. On the part of the naked owner:
1. must cancel the security or mortgage provided the usufructuary has
complied with all his obligations;
2. must in case of rural leases, respect leases made by the usufructuary till
the end of the agricultural year; burdened with easements.
3. make reimbursements to the usufructuary in proper cases.
Classification of Easements:
EASEMENTS OR SERVITUDES
Easement or Servitude
Is an encumbrance imposed upon an immovable for the benefit of a
community or one or more persons (personal easements) or for the benefit of
another person belonging to a different owner (real or predial easement).
Lease distinguished from Easement:
1. Lease is a real right only when it is registered or when the (lease of the
real property) exceeds one year; while Easement is always a real right;
2. In Lease, there is rightful and limited use and possession without
ownership; while in Easement, there is rightful limited use but without
ownership or possession;
3. Lease may involved real or personal property; while easement refer only to
immovable.
Dominant Estate the immovable in favor of which the easement is established
and that which is subject thereto is the servient estate.
Personal Easement distinguished from Usufruct:
1. A personal easement cannot be alienated while usufruct can be alienated;
2. In personal easement, the use is specifically designated while in usufruct,
the use has a broader scope and in general comprehends all the possible
uses of the thing.
Characteristics of Easement:
1. It is a real right, therefore an action IN REM is possible against the
possessor of the servient estate;
2. Impossible only in anothers property;
3. It is a real right may be alienated although the naked ownership is
maintained;
4. It is a limitation or encumbrance on the servient estate for anothers benefit;
5. There is inseparability from the estate to which it belongs;
6. It is indivisible even if the tenement is divided;
7. It is intransmissible unless the tenement affected be also transmitted
or alienated;
8. It is perpetual as long as the dominant and/or the servient estate exists
unless sooner extinguished by causes enumerated by law.
There is no easement on personal property only immovables may be
A. According to party given the benefit-
1. Real or predial for the benefit of another immovable belonging to a
different owner.
2. Personal for the benefit of one or more persons or of a community.
Example: easement or right of way for the passage of the
community.
B. According to the manner that they are exercised:
1. Continuous their use is incessant without the intervention of any
act of man; example easement of drainage.
2. Discontinuous they are used at intervals and depend upon the act
of man. Example: Easement of a right of way. Easement of Light
and View is continuous.
C. According to whether or not their existence is indicated:
1. Apparent those made known and continually kept in enjoyment of
the same. Example Right of way when there is an alley or
path.
2. Non-apparent they show no external indication of their existence.
Example: right of way when there is no visible path or alley.
D. According to the purpose of the easement or the nature of the
limitation:
1. Positive Easement the owner of the servient estate is obliged
to:

a.) Allow something to be done on his property; or
b.) Do it himself.
Obligation of the Dominant Estate
2. Negative Easement the owner of the servient estate is prohibited
to do something which he could lawfully do were it not for the
existence of the easement. Example: Easement of light and view
when the window or opening is on ones wall or estate.
E. According to the source or origin:
1. Voluntary
2. Mixed
3. Legal example: waters: right of way, party wall
How easements are acquired:
a.) If continuous or apparent
1. by Title
2. by Prescription (10 years)
b.) If discontinuous and apparent (only by Title) Rights of the Servient Estate:
c.) If continuous and non-apparent (only by Title)
d.) If discontinuous and non-apparent (only by Title)
Q : May the easement of right of way be acquired by prescription?
ANS: No, because it is discontinuous or intermittent. Since the dominant owner
cannot be continually crossing the servient estate, but can do so only at
intervals, the easement is of a discontinuous nature.
The Rights of the Dominant Estate
a. To exercise the easement and all the necessary rights for its use including Obligations of the Servient Estate:
accessory easement.
b. To make on the servient estate all works necessary for the use
and preservation of the servitude, but-
1. this must be at his own expense
2. he must notify the servient owner
3. select convenient time and manner
4. he must not alter the easement nor render it more burdensome
c.) To ask for a mandatory injunction to prevent impairment or obstruction in Easements are extinguished: (Article 631)
the exercise of the easement as when the owner of the servient estaste
obstructs the right of way by building a wall or fence.
d.) To renounce totally the easement if he desires exemption from
contribution to expenses
a.) He cannot alter the easement
b.) He cannot make it more burdensome
1.) thus, he cannot use the easement except for movable originally
contemplated;
2.) In the easement of right of way, he cannot increase
c.) If there be several dominant estate, each must contribute to necessary
repairs and expenses in proportion to the benefits received by each
estate and not in proportion to the value of each estate.
a. To retain ownership and possession of the portion of his land affected by the
easement even if indemnity for the right is given unless the contrary has
been stipulated;
b.To make use of the easement, unless deprived by stipulation provided that
the exercise of the easement is he not adversely affected and
provided further that he contributes to the expenses in proportion to
benefits received, unless there is a contrary stipulation;
c. To change the location of a very inconvenient substitute is made without
injury to the dominant estate;
a.) He cannot impair the use of the easement;
b.) He must contribute to the expenses in case he uses the easement,
unless there is a contrary stipulation;
c.) In case of impairment, to restore conditions to the status quo at his
expense plus damages;
d.) To pay for the expenses incurred for the change of location or form of the
easement.
1.) By merger of the same person of the ownership of the dominant and
servient estates;
 2.) By non-use for ten-years, with respect to discontinuous easements,
this period shall be computed from the day on which they ceased to be
used, with respect to continuous easements from the day on which an
act contrary to the same took place;
3.) When either or both of the estates fall into such condition that the
easement cannot be used, but it shall revive if the subsequent
easement condition of the estates or either of them should again permit
its use, unless when the use becomes possible, sufficient time for
prescription has elapsed;
4.) By the expiration of the term or fulfillment of the condition, if the
easement is temporarily or conditional;
5.) By the renunciation of the owner of the dominant estate;
6.) By the redemption agreed upon the owners of dominant and servient
estates.
Legal Easements they are easements imposed by the law, and which have for
their object either: for public use or in the interest of private persons.
How Legal Easements for private interest are governed:
a.) Agreement of interested parties provided not prohibited by law nor
prejudicial to third person;
b.) In default of A, general or local laws and ordinances for the general
welfare;
c.) In default of B, the Civil Code
Causes for extinguishment of the easement of right of way:
a.) Opening of a new road;
b.) Joining the dominant estate to another
For Easement of Right of Way for the passage of livestock is:
a.) animal path 75 meters (width maximum)
b.) animal trail 37 meters and 50 centimeters
c.) cattle 10 meters
The easement of a party wall is a compulsory kind of co-ownership where the
shares of each owner cannot be separated physically.
The existence of an easement of an easement of a party wall is presumed,
unless there is title, or exterior sign, or proof of the contrary. (Article 659)
Article 668 The period of prescription for the acquisition of an easement of light
and view shall be counted --
a.) from the time of the opening of the window, if it is through a party
wall
b.) from the time of the formal prohibition upon the proprietor of the
adjoining land or tenement, if the window is through a wall on the
dominant estate.
When easement of light and view positive and negative:
a.) Positive - if the window is thru a party wall. Therefore, the period of
prescription commences from the time the window is
opened;
b.) Negative - If the window is thru ones own wall, that is, thru a wall of the
dominant estate. Therefore, the time for the period of
prescription should begin from the time of notarial
prohibition upon the adjoining owner.
Rules with respect to the planting of trees (Article 679, NCC)
Regarding distances, follow ordinances (if there be any), then customs. If
either ordinances, nor customs are present, the following distances must be
observed:
a.) Tall trees two (2) meters from the boundary line to center of the tree.
b.) Small trees or shrubs 50 centimeters from boundary line to the center
of the tree or shrub
The remedy for violation: demand uprooting of the tree or shrub.
Rules regarding intrusions or extensions of branches and roots (Article 680)
a.) Branches the adjacent owner has the right to demand that they be cut
off (insofar as they spread over his property)
b.) Roots he may cut them off himself (because by accession or
incorporation he has acquired ownership over them)
Prescription:
a. of the right to demand the cutting of the branches this does not
prescribe if tolerated by invaded owner; if demand is made, prescription
runs from the date of said demand;
 b. of the right to cut off the roots this is imprescriptible unless a notarial
prohibition is made Nuisance - is an act, omission, establishment, business, condition of
property, or anything else which:
The owner of the trees even if the branches and roots have invaded the
adjacent land can cut down the tree himself, for he owns the tree. a) injures or endangers the health or safety of others; or
b) annoys or offends the senses; or
Article 681 Fruits naturally falling upon adjacent land belong to the owner of c) shocks, defies or disregards decency or morality; or
said land d) obstructs or interferes with the free passage of any public highway or
street, or any body of water; or
Rules as to fruits: e) hinders or impairs the use of property

a. If the fruits still hang on to the trees, they are still owned by the tree The word nuisance is derived from Latin nocumentum or the French nuire
owner; (to harm or hurt or injure).

b. It is only after they have naturally fallen (not taken by poles or shaken that
they belong to the owner of the invaded land.
Reason for the Rule It is based not on accession for they were not grown or
produced by the land nor added to it (naturally or artificially) nor on occupation
(for they are not res nullius); but to avoid disputes and arguments between the
neighbors. The mode of acquisition may be said to be the law.
Q : Who is servient in an easement against nuisance?
Nuisance as distinguished from negligence and from trespass:
a) from negligence - negligence is penalized because of lack of proper care; but
a nuisance is wrong, not because of the presence or absence of care, but
because of the injury caused.
b) from trespass - in trespass, there is entry into anothers property; this is not
necessarily so in nuisance. In trespass, the injury is direct and immediate; in
nuisance, it is only consequential.

ANS. : The proprietor or possessor of the building or piece of land, who commits the Classification of nuisances:
nuisance thru noise, offensive odor, etc., is servient. In another sense, the
building or the land itself is the servient estate, since the easement is a.) old classification -
inherent in every building or land.
1) nuisance per se - always a nuisance.
Ex: house of prostitution
Who is dominant in an easement against nuisance? 2) nuisance per accidens - a nuisance only because of the location or other
circumstances.
The general public, or anybody injured by the nuisance. Ex: noisy factory in a residential district

b) new classification -
What are the rights of the dominant estate?
1) according to relief whether given or not
1. if it is a public nuisance, the remedies are: a. actionable
a) a prosecution under the Revised Penal Code or any local b. non-actionable
ordinance; or 2) according to manner of relief
b) a civil action; or
c) abatement, without prejudicial proceedings a. those abatable by criminal and civil actions
b. those abatable only by civil actions
2. if the nuisance is a private nuisance, the remedies are: c. those abatable judicially
a) a civil action; or d. those abatable extrajudicially
b) abatement, without judicial proceedings
3) according to the Civil Code
NUISANCE
 a. public - affects a community or neighborhood or any considerable
number of persons PARTNERSHIP
b. private - that which is not public

Article 698 - Lapse of time cannot legalize any nuisance, whether public or Article 1767 - By the contract of partnership, two or more persons bind
private. themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among
Article 1143 - The action to abate a public or private nuisance is not themselves.
extinguished by prescription.
Two or more persons may also form a partnership for the
The above articles 698 and 1143 do not apply to easements which are exercise of a profession.
extinguished by prescription.
Characteristics of the contract:
The remedies against a public nuisance are:
a. It is consensual, because it is perfected by mere consent. It is also
1) prosecution under the Penal Code or any local ordinance; or bilateral or multilateral, because it is entered into between two or
2) a civil action; or more persons; nominate, because it is designated by a specific
3) abatement without judicial proceedings name; principal, because its existence does not depend on the life of
another contract; onerous, because certain contributions have to be
Article 701 - If a civil action is brought by reason of the maintenance of a public made; and preparatory, in the sense that after it has been entered
nuisance, such action shall be commenced by the city or municipal into, other contracts essential in the carrying of its purposes can be
mayor. entered into;
b. There must be a contribution of money, property or industry to a
Article 702 - The district health officer shall determine whether or not abatement, common fund;
without judicial proceedings, is the best remedy against a public c. The object must be a lawful one;
nuisance. d. There must be an intention of dividing the profit among the partners
since the firm is for the common benefit or interest of its partners.
In the City of Manila, it is the City Engineer who is the official concerned e. There must be the affectio societatis the desire to formulate an
regarding illegal construction. active union with people among whom there exists mutual
confidence and trust (delectus personarum).
Article 704 - Any private person may abate a public nuisance which is specially f. A new personality that of the firm must arise, distinct from the
injurious to him by removing, or if necessary, by destroying the separate personality of each of the members.
thing which constitutes the same, without committing a breach of
the peace or doing unnecessary injury. But it is necessary: Capacity to become partners:
a) that demand be first made upon the owner or possessor of the
property to abate the nuisance; a) In general, a person capacitated to enter into contractual relation
b) that such demand has been rejected; may become a partner;
c) that the abatement be approved by the district health officer and b) A minor cannot become a partner unless his parents or guardian
executed with the assistance of the local police; and consents. Without such consent, the partnership contract is
d) that the value of the destruction does not exceed three thousand voidable, unless other partners are in the same situation in which
pesos. case the contract is unenforceable.
c) A married woman cannot contribute conjugal funds as her
Article 707 - A private person or a public official extrajudicially abating a contribution to the partnership, unless she is permitted to do so by
nuisance shall be liable for damages: her husband or unless she is the administrator of the conjugal
a) if he causes unnecessary injury; or partnership, in which latter case, the court must give its
b) if an alleged nuisance is later declared by the courts to be not a real consent/authority;
nuisance.
 d) A partnership being a juridical person by itself can form another
partnership, either with private individuals or with other
partnerships, there being no prohibition on the matter;
e) A Corporation cannot become a partner on grounds of public policy;
otherwise, people other than its officers may be able to bind it.
However, a corporation can enter into a joint venture with another
where the nature of that venture is in line with the business
authorized in its charter.
Article 1768 -The partnership has a juridical personality separate and distinct from
that of each of the partners, even in case of failure to comply with
the requirements of Article 1772, first paragraph.
Q: Under Article 1772, every contract of partnership having a capital of
P3,000.00 or more in money or property, shall appear in a public instrument,
which must be recorded in the office of the SEC. Suppose this requirement
has not been complied with, is the partnership still a juridical person,
assuming all other requirements are present?
ANS : Yes, in view of the express provision of Art. 1768. Par. 1 of 1772, is not
intended as a prerequisite for its acquisition of juridical personality by the
partnership, but merely as a condition for the issuance of license to engage
in business or trade.
Consequences of the partnership being a juridical entity:
1) Its juridical personality is separate and distinct from that of each of
the partners.
2) The partnership can, in general:
a) acquire and possess property of all kinds;
b) incur obligations;
c) bring civil or criminal actions;
d) can be adjudged insolvent even if the individual members be each
financially solvent.
Unless he is personally sued, a partner has no right to make a separate
appearance in court, if the partnership being sued is already represented.
Article 1769 - In determining whether a partnership exists, these rules
shall apply:
a) Except as provided by Article 1825, persons who are not partners as to
each other are not partners as to third persons;
b) Co-ownership or co-possession does not itself establish a partnership,
whether such co-owners or co-possessors do or do not share any profits
made by the use of the property;
c) The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint common right or
interest in any property from which the returns are derived;
d) The receipt by a person of a share of the profits of a business is prima
facie evidence that he is a partner in the business, but no such inference
shall be drawn if such profit were received in payment:
a. as a debt by installments or otherwise;
b. as wage of an employee or rent to a landlord;
c. an an annuity to a widow or representative of a deceased
partner;
d. as interest on a loan, though its amount of payment vary with
the profits of the business;
e. as the consideration for the sale of a goodwill of a business or
other property by installment or otherwise.
Article 1770 - A partnership must have a lawful object or purpose, and must be
established for the common benefit or interest of the partners.
When an unlawful partnership is dissolved by a judicial decree, the
profits shall be confiscated in favor of the State, without prejudice
to the provisions of the Penal Code governing the confiscation of
the instruments and effects of a crime.
If a partnership has several purposes, one of which is unlawful;
the partnership can still validly exists so long as the illegal
purpose can be separated from the legal purpose.
Is a judicial decree needed to dissolve an unlawful partnership?
ANS: No, for the contract is void from the very beginning, and therefore, never
existed from the viewpoint of the law. However, there would be nothing
wrong in having the court dissolve the partnership. This will be good and
convenient for everybody; moreover, there maybe a question as to whether
or not the partnership is indeed unlawful. This is particularly true when the
object was lawful at the beginning but has later on become unlawful.
The consequences of unlawful partnership:
a) If the firm is also guilty of a crime, the Revised Penal Code governs both the
criminal liability and the forfeiture of the proceeds of the crime and the
instruments or tools with which it was committed. Such proceeds and the
instruments or tools shall be confiscated and forfeited in favor of the
government, unless they be the property of a third person not liable for the
offense, but those articles which are not subject of lawful commerce shall be
destroyed. (Art. 45, RPC)
b) The partners forfeit the proceeds or profits, but not their contributions,
provided no criminal prosecution has been instituted. If the contributions
 have already been made, they can be returned; if the contributions have not
been made, the partners cannot be made to make the contribution;
c) An unlawful partnership has no legal personality.
Article 1771 - A partnership maybe constituted in any form, except, where
immovable property or real rights are contributed thereto, in which
case a public instrument shall be necessary.
For the validity of the contract among the partners as well as for
enforceability, no form is required, as a general rule, regardless of the value of the
contributions. Therefore, the contract may even be oral.
Exception: Whenever real properties or real rights in real properties are
contributed regardless of the value a public instrument is
needed. The contract itself must be in the public instrument;
moreover, there must be an inventory of the immovables.
This inventory must be signed by the parties and attached to the public
instrument. (Art. 1773, NCC)
The inventory is important to show how much is due from each partner to
complete his share in the common fund and how much is due to each of them in the
event of liquidation. Without such inventory, the contract is void.
For effectivity of the partnership contract insofar as innocent third persons
are concerned, the same must be registered if real properties are involved.
Article 1772 - Every contract of partnership having a capital of 3,000 pesos or
more, money or property, shall appear in a public instrument,
which must be recorded in the office of the SEC. Failure to comply
with the requirements of the preceding paragraph shall not affect
the liability of the partnership and the member thereof to third
persons.
The purpose of the registration with the office of the SEC is to set a condition
for the issuance of licenses to engage in business or trade.
Effect of non-registration:
a) Even if not registered, the partnership having a capital of 3,000 or
more is still a valid one, and therefore has legal personality. Of course, if
real properties had been contributed, regardless of value, a public
instrument is needed for the attainment of legal personality.
b) If registration is needed or desired, any of the partners of a valid
partnership can compel the others to execute the needed public
instrument and to subsequently cause its registration. This right cannot
be availed of if the partnership is void.
Article 1773 A contract of partnership is void, whenever immovable property is
contributed thereto, if an inventory of said property is not made,
signed by the parties, and attached to the public instrument.
A general partnership is one where all the parties are general partners,
that is, they are liable even with respect to their individual properties, after the
assets of the partnership have been exhausted.
A limited partnership - is one where at least one partner is a general
partner and the others are limited partners.
A limited partner - is one whose liability is limited only up to the extent
of his contribution.
A partnership where all the partners are limited partners cannot exist as a
limited partnership; it will even be refused registration. If at all it continues, it will be
a general partnership, and all the partners will be general partners.
Persons who together cannot form a universal partnership:
a) husband and wife - as a rule. (Art. 133)
b) those guilty of adultery or concubinage (Art. 739)
c) those guilty of the same criminal offense, if the partnership was
entered into in consideration of the same. (Art. 739)
A particular partnership - has for its object determinate things, their use
or fruits, or specific undertaking, or the exercise of a profession or vocation. (Art.
1783, NCC)
Obligations of a partner:
a) to give his contribution; (Art. 1786 & 1788)
b) not to convert firm money or property for his own use; (Art. 1788)
c) not to engage in unfair competition with his own firm: (Art. 1808)
d) to account for and hold as trustee, unauthorized personal profits;
(Art.1807)
e) pay for damages caused by his fault; (Art. 1794)
f) duty to credit to the firm, payment made by a debtor who owes him
and the firm; (Art. 1792)
g) to share with the other partners the share of the partnership credit,
which he has received from an insolvent debtor. (Art. 1743)
Rights of a partner:
a) property rights - (Art. 1810)
1. rights in specific partnership property (SPP)
2. interest in the partnership, that is, share in the profits and surplus:
 3. right to participate in the management
b) right to associate with another person in his share. (Art.1804)
c) right to inspect and copy partnership books. (Art. 1805)
d) right to demand a formal account. (Art. 1809)
e) right to ask for the dissolution of the firm at the proper time.
Generally, a partnership begins, from the moment of the execution of the
contract.
Exception: - when there is a contrary stipulation.
Generally, even if contribution have not yet been made, the firm already exists,
for partnership is a consensual contract.
A partnership is unlimited as to its duration in the sense that no time limit is
fixed by law. The duration may be agreed upon expressly (as when there is a definite
period) or impliedly (as when a particular enterprise is undertaken it being
understood that the firm ends as soon as its purpose has been achieved.
Two kinds of a partnership at will -
a) 1st kind - when there is no term, express or implied;
b) 2nd kind - when it is continued by the habitual managers - although
the period has ended, or the purpose has been accomplished.
The essential differences between a partnership and corporation:
a) with regard to creation -
A partnership is created by voluntary agreement of the partners WHEREAS a
corporation is always created by some express legislative authority, either in the form
of a special or of a general law.
b) with regards to liability of members-
Partners are usually liable to partnership creditors not only to the extent of
their capital contribution to the firm but even with their own private property,
WHEREAS the stockholders of a corporation, after they have paid for their shares are
not subject to any further liability unless otherwise provided by law.
c) with regards to effect of transfer of interest -
Because of the rule of delectus personarum, the third person to whom a
partner has transferred his interest in the partnership does not become a partner
without the consent of all the other partners, WHEREAS the third person to whom a
stockholder has transferred his share becomes automatically a stockholder even
without the consent of the other stockholders;
d) with regards to effect of death or bankruptcy of members -
The death or bankruptcy of a partner usually covers the dissolution of the
firm, WHEREAS the death or bankruptcy of a stockholder does not result in such
dissolution;
e) with regards to the effect of acts of member -
As a general rule, the partners are the agent of the partnership, hence act of
partners done or the account of the partnership is binding not only on the
partnership but also on the members. ON THE OTHER HAND, whatever acts the
stockholders might execute for the account of the corporation, either individually or
collectively, are not binding on the corporation.
THE DIFFERENT KINDS OF PARTNERS
a) As to Liability -
1.) General Partners those who can be held liable for partner-
Ship obligation even to the extent of their private property
2.) Limited Partners those who cannot be held liable for part-
nership obligations
b) As to Contribution -
1.) Capitalist Partners those who contribute money or property
To the common fund
2.) Industrial Partners those who contribute only their skill or
Industry to the common fund
c) As to Management -
1.) Managing Partners those who manage or administer
Partnership affairs
2.) Silent Partners those who have no voice in the manage-
ment of partnership affairs
d) As to Third Persons -
1.) Ostensible Partners those publicly known as such
2.) Secret Partners those whose connection to the partnership
is not known.
3.) Partners by Estoppel those who represent themselves, or
consent to another or others representing them to anyone as
partners either in an existing partnership or the one that is
fictitious or apparent. They are also known as de facto
partners.
e) As to Object --
 1.) universal
2.) particular
A universal partnership profits comprises all that the partners may acquire by
their industry or work during the existence of the partnership.
CAN A HUSBAND AND WIFE ENTER INTO A CONTRACT OF PARTNERSHIP?
If a partnership is a universal partnership, they cannot enter into such
contract,. This is so because person prohibited from making donations to each other
are prohibited from entering into universal partnership. However, if the partnership is
a particular partnership or a limited partnership, they can.
HOW SHALL THE PROFITS AND LOSSES OF A PARTNERSHIP BE
DISTRIBUTED?
ANS : We must distinguish whether there is an agreement or none.
1.) If there is an agreement the profits and losses shall be distributed in
conformity with such agreement . If the agreement is only with respect
to the profits the share for the partners in losses shall be in the same
proportion as their share in the profits.
2.) If there is no agreement
a.) Profits -
1. Capitalist Partners their share shall be in proportion to
what they may have contributed to the common fund
2. Industrial Partner their share shall be that which is
just and equitable under the circumstances
b.) Losses
1. Capitalist Partners their share shall be in proportion to
what they may have contributed to the common fund
2. Industrial Partners- they shall not be liable or the losses
CAN AN INDUSTRIAL PARTNER ENGAGE IN A BUSINESS OTHER THAN THAT
OF THE PARTNERSHIP?
An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so, and if he should do o, the capitalist
partners may either exclude him from the firm or avail themselves of the benefits
which he may have obtained in violation of the provision, with right to damages in
either case (Art. 1789, NCC)
CAN A CAPITALIST PARTNER ENGAGE IN A BUSINESS OTHER THAN THAT OF
THE PARTNERSHIP?
The capitalist partner cannot engage for their own account in any operation,
which is of the kind of business in which the partnership is engaged, unless there is
stipulation to the contrary. Any capitalist partner violating this prohibition shall bring
to the common fund any profit accruing to him from his transactions and shall
personally bear all the losses.(Art. 1808)
WHO SHALL MANAGE THE PARTNERSHIP?
The management of the partnership may be vested by agreement in one, or
some, or all o the partners, or even in a third person, either in the articles of
partnership or after the partnership had already been constituted, If there is no
agreement, it is vested in all the partners (Art. 1803, NCC)
Principle of a delectus personarum refers to the rule which is inherent
in every partnership that no one can become a member of the partnership without
the consent of all the partners. Consequently, even if a partner will associate
another person in his share in the partnership, the associate shall not be admitted
into the partnership without the consent of all the partners, even if the partner
having an associate should be a manager (Art. 1804, NCC).
If a partner assigns his whole interest in the partnership to a third person,
such an assignment does not result in the latter becoming a substitute partner.
May a partner from a sub-partnership with a third person with respect to his
interest in the partnership?
ANS: Yes, and even without the consent of the other partners.
When may a partner demand for a formal accounting of partnership affairs?
1. If he is wrongfully excluded from the partnership business or possession of
its property of its property by his co-partners;
2. If the right exists under the terms of any agreement;
3. If a partner has derived profits from any transaction connected with the
formation, conduct or liquidation of the partnership of from any use by
him of its property, or;
4. Whenever other circumstances under it just and reasonable.
What are the property rights of a partner? Are these rights assignable?
ANS:
1. his rights in specific partnership property
2. his interest in the partnership
3. his right to participate in the management

Only the second right is assignable but not the others.
Partners Interest It is his share of the profits and surplus.
Effects of a conveyance by a partnership of his whole interest in the
partnership
1. it does not dissolve the partnership;
2. it does not entitle the assignee to interfere in the management of the
business, or to require an accounting of partnership transaction, or to inspect
the partnership books; however, in case of fraud in the management of the
partnership, he may avail himself of the usual remedies;
3. it entitles the assignee to receive in accordance with his contract the profits
to which the assignor would otherwise be entitled; and
4. upon dissolution of the partnership, the assignee is entitled to receive his
assignors interest and may then demand for an accounting.
Charging Order upon a partners interest in the partnership refers to the
remedy available to a judgment creditor of a debtor partner to charge the interest of
the latter in the partnership by means of a court order for the purpose of satisfying
the amount of the judgment. This changing order, however, is always subject to the
preferred rights of partnership creditors.
Can the partners be held liable for a partnership obligation? If so, what is
the nature of their liability?
ANS: Yes, in the case of partnership obligations arising from the contracts, all
general partners, including industrial ones, shall be liable pro-rata with all their
property and after all the partnership assets have been exhausted: in other words,
the liability o the partners is joint an subsidiary. In the case of a partnership
obligation arising from a criminal offense, or a quasi-delict, all partners are liable
solidarily with the partnership. In the case of a partnership obligation under the
Workmens Compensation Act all partners are also liable solidarily with the
partnership. (Liwanag Case)
A PARTNER BY ESTOPPEL refers to a person who represents him-self or
consents to another or others representing him to anyone as a partner either in an
existing partnership or in one that is fictitious or apparent (Art. 1825, NCC)
The only instance when an existing partnership is bound by the representation
made by or in behalf o a partner by estoppel is when all the partners had given their
consent to such representation. It will be only then that a partnership obligation shall
result. In such a case, any third person who, relying on such representations, gave
credit to the partnership, can hold the partnership as well as all the of the partners,
including the partner by estoppel, liable in accordance with Art.1805. A good example
would be those who, not being members of the partnership, include their names in
the firm name.(Art. 1815)
DISSOLUTION is the change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on of the members business.
WINDING UP - refers to the process of liquidating partnership affairs
TERMINATION refers to that moment when partnership affairs are
wound up
CAUSES FOR THE DISSOLUTION OF A PARTNERSHIP (ART. 1830):
1. Without violation of the agreement between the partners:
a. By the termination of the definite term or particular un-
dertaking specified in the agreement;
b. By the express will of any partner, who must act in
good faith when no definite term or particular undertaking is
specified;
c. By the express will o all the partners who have not
assigned their interest or suffered them to be charged for their
separate debts either before or after the termination o any
specified term or particular undertaking;
d. By the expulsion of any partner from the business bond
file in accordance with such a power conferred by the
agreement between the partners;
2. In contravention of the agreement between the partners where the
circumstances do not permit a dissolution under any other provision o
this article, by the express will of any partner at any time.
3. By any event which makes it unlawful for the business of the partnership
to be carries on or for the members to carry it on in partnership
4. When a specific thing which a partner had promised to contribute to the
partnership, perishes before the delivery, in any case by the loss of the
thing, when the partner who contributed it having reserved the
ownership thereof, has only transferred to the partnership the use or
enjoyment of the same, but the partnership shall not be dissolved by the
loss of the thing when it occurs after the partnership has acquired
ownership thereof;
5. By the death of any partner;
6. By the insolvency of any partner or of the partnership;
7. By the civil interdiction o any partner;
8. By the decree of court.
ON THE APPLICATION OF A PARTNER, THE COURT SHALL DECREE A
DISOLUTION WHENEVER:
 the partnership or its legal representative o the last surviving partner,
1.) A partner has been declared insane in any judicial proceedings or is not insolvent. (Art. 1836)
shown to be o unsound mind;
2.) A partner becomes in any other way incapable of the partnership DISTINCTION BETWEEN A GENERAL PARTNERSHIP AND A LIMITED
contract; PARTNERSHIP:
3.) A partner has been guilty of such conduct as tends to affect prejudicially
the carrying on of the business; 1.) As to composition: A general partnership is composed only of general
4.) A partner willfully or persistently commits breach of the partnership partners, WHEREAS, a limited partnership is composed of at least one
agreement , or otherwise so conduct himself in matters relating to the general partner and one limited partner
partnerships business that I not reasonably practicable to carry on the 2.) As to constitution: A general partnership as a general rule, maybe
business in partnership with him; constituted in any form whereas a limited partnership must be stated in
5.) The business o the partnership can only be carried on at a Loss. a certificate of limited partnership, duly signed and sworn by all the
partners and recorded in the office o the SEC;
ON THE APPLICATION OF THE PURCHASER OF A PARTNERS INTEREST: 3.) As to firm name: A GP must operate under a firm name which may or
may not include the name of one or more partners, whereas a LP must
1.) At the termination of the specific term or particular undertaking; also operate under a firm name, followed by the word Limited;
4.) As to must also operate under a firm name, followed by the word
2.) At any time if the partnership was a partnership at will when the Limited;
interest was assigned or when the charging order was issued (Art. 1831) 5.) As to dissolution and winding up: there are also differences, formal and
procedural between the dissolution and winding up of a GP or LP.
THE DISSOLUTION OF THE PARTNERSHIP, TERMINATES ALL AUTHORITY O
THE MANAGING PARTNER OR OF ANY PARTNER, AS THE CASE MAY BE, TO DISTINGUISH A GENERAL PARTNER AND LIMITED PARTNER:
ACT OR THE PARNERSHIP. THIS RULE IS SUBJECT TO THE
FOLLOWINGEXCEPTIONS: 1) A general partner can be held personally liable for partnership obligation
after all of the assets of the partnership have been exhausted, whereas a
- Acts necessary to wind up partnership affairs; limited partner cannot be held liable;
- Acts necessary to complete transactions begun but not when finished 2) A general partner may participate in the management o the partnership,
- Acts or transactions which would bind the partnership I dissolution had whereas a limited partner does not;
not taken place, provided the other party to such transactions: 3) A general partner may contribute money, property or industry to a
common fund, whereas a limited partner, as such can only contribute
had extended credit to the partnership prior to dissolution and had money or other property only;
no knowledge or notice of such dissolution; 4) The name o a general partner may appear in the firm name, whereas, that
of a limited partner does not;
Although he had not so extended credit , had nevertheless known o 5) There is limitation on the right of a general partner to engage in another
the partnership prior to dissolution and having no knowledge or business or in the same kind of business as that in which the partnership is
notice o dissolution, the act of dissolution had not been advertised in engaged, whereas there is no such limitation in the case of a limited
a newspaper o general circulation in the place of which the business partner.
was regularly carried on .
CAN A LIMITED PARTNER BE HELD LIABLE FOR PARTNERSHIP
WHO HAS THE RIGHT OR DUTY TO WIND UP OR LIQUIDATE PARTNERSHIP OBLIGATIONS?
AFFAIRS?
ANS : A limited partner as such cannot be held liable for partnership
1. If the winding up or liquidation of the affairs is judicial, the right or duty obligations. However, if his surname appears in the partnership or firm
to wind up or liquidate partnership affairs devolves upon the partner or name or if he participates in the management or control of the
legal representative or assignee designated by the court. If it is business, then he is liable as a general partner.
extrajudicial, the right or duty devolves upon the managing partner. But
where there is no managing or even where there is, he dies, then the The interest of a limited partner is assignable.
right or duty evolves upon the partner who have not wrongfully dissolved
 A SUBSTITUTED LIMITED PARTNER - is a person admitted to all the
rights of a limited partner who has died or has assigned his interest in
partnership.
An assignee of the interest of a limited partner shall have the right to
become a substituted limited partner if all the members consent thereto or if the
assignor, being thereunto empowered by the certificate of limited partnership
gives the assignee that right. However, he becomes a substituted limited partner
only from the moment that the certificate is appropriately amended.
The substituted limited partner has all the rights and powers, and is
subject to all the restrictions and liabilities of his assignor, except those liabilities of
which he was ignorant at the time he become a limited partner an which could not
be ascertained from the certificate.
*WHAT IS THE ORDER OF PAYMENT IN THE WINDING UP OF PARTNERSHIP
LIABILITIES:
If it is a general partnership, the order of payment is as follows:
a. those owing to creditors other than partners;
b. those owing to partners other than for capital and profits;
c. this owing to partners in respect of capital
d. those owing to partners in respect of profit(Art.1839)
If the partnership is a limited partnership the order of payment is as follows:
1) those to creditors in the order of priority as provided by
law except those to limited partners on account of their
contributions, and to the general partners
2) those limited to partners in respect to their share of the
profits and other compensation by way of income on their
contribution;
3) those to limited partners in respect to the capital of
their contributions;
4) those to general partners other than for capital and
profits
5) those to general partners in respect to profits;
6) those to general partners in respect to capital
ART. 1787 When the capital or part thereof which a partner is about to
contribute consist of goods, their appraisal must be made in the
manner prescribed in the contract of partnership, and in the absence
of stipulation, it shall be made by experts chosen by the partners,
and according to current prices, the subsequent changes thereof for
the account of the partnership.
ART. 1788 A partner who has undertaken to contribute a sum of money and
fails to do so becomes a debtor for the interest and damages from
the time he should have complied with his obligation.
The same rule applies to any amount he may have taken from the
partnership coffers, an his liability shall begin from the time he
converted the amount to his own use
ART. 1791 If there is no agreement to the contrary, in case of imminent loss of
the business of the partnership, any partner who refuses to
contribute an additional share to the capital, except on industrial
partners, to save the venture, shall be obliged to sell his interest to
the other partners.
ART. 1792 If a partner authorized to manage collects a demandable sum, which
was owed to him in his own name, from a person who owed the
partnership another sum also demandable, the sum thus collected
shall be applied to the credits in proportion to their amount, even
though he may have given a receipt for his own credit only, but
should he have given it for the account of the partnership credit,
the amount shall be fully applied to the latter.
ART. 1793 A partner who has received, in whole or in part, his share of a
partnership credit, when the other partners have not collected
theirs, shall be obliged if the debtor should thereafter become
insolvent, to bring to the partnership capital what he received
even though he may have given receipt or his own share only.
ART. 1794 Every partner is responsible to the partnership for damages
suffered by it through his fault, and he cannot compensate
them with the profits and benefits which he may have earned for
the partnership by his industry. However, the courts may
equitably lessen his responsibility if through the partners
extraordinary efforts in other activities of the partnership, unusual
profits have been realized.
ART. 1798 If the partners have agreed to entrust to a third person the
designation of the share of each one in the profits an losses, such
designation may impugned only when it is manifestly
inequitable. In no case may a partner who has begun to execute
the decision of the third person, or who has not impugned the
same within a period o three (3) months from the time he had
knowledge thereof, complain of such decision.
The designation of losses and profits cannot be entrusted to one of
the partners.
The general rule is that a stipulation excluding one or more partners
from any share in the profits or losses is void. Reason:
 the partnership is for common benefit. One exception is in the ART.1805 - The partnership books shall be kept, subject to an agreement
case of the industrial partner whom the law itself excludes from between the partners, at the principal place of
losses. If the law does this, a stipulation exempting the industrial business of the partnership and every partner shall at any
partner from losses is naturally valid. reasonable hour have access to and may inspect and copy any of
them.
ART. 1800 The partner who has been appointed manager in the
Articles of partnership may execute all acts of administration ART.1807 - Every partner must account to the partnership for any benefit, and
despite the opposition of his partners, unless he should act in bad hold as trustee for it any profit derived by him without the
faith; and his power is irrevocable without just or lawful cause. consent of the other partners from any transaction
The vote of the partners representing the controlling interest connected with the formation, conduct, or
shall be necessary for such revocation of power. liquidation of the partnership or from any use by him of its property.

A power granted after the partnership has been constituted maybe ART.1811 - A partner is a co-owner with his partners of specific partnership
revoked at anytime. property. (SPP)

THE INCIDENCE OF THI CO-OWNERSHIP ARE THE FOLLOWING:

ART.1801 - If two or more partners have been entrusted with the management of
the partnership without specification of their
respective duties, or without a stipulation that one of them shall not
act without the consent of all the others, each one may separately
execute all acts of administration, but if any of them should oppose
the acts of the others, the decision of the majority shall prevail. In
case of a tie, the matter shall be decided by the partners owning the
controlling interest
ART. 1802 - In case it should have been stipulated that none of the managing
partners shall act without the consent of the others, the
concurrence of all shall be necessary for the validity of the acts, and
the absence or disability of any one of them cannot be alleged,
unless there is imminent danger or grave or irreparable injury to
the partnership.
ART. 1803 - When the manner of management has not been agreed upon, the
following rules shall be observed;
1) All the partners shall be considered agents and whatever anyone
of them may do alone shall bind the partnership, without
prejudice to the provisions of ART. 1801.
2) None of the partners may ,without the consent of the others,
make any important alteration in the immovable property of the
partnership, even if it may be useful to the partnership.
But if the refusal or consent by the other partners is
manifestly prejudicial to the interest of the partnership, the
courts intervention may be sought.
a) A partner subject to any agreement between the partners, has an
equal right with his partners to possess specific partnership property for
partnership purposes but he has no right to possess such property for
any purposes without the consent of his partners;
b) A partners right in specific partnership property is not assignable
except in connection with the assignment of rights of all the partners in
the same property;
c) A partners right in specific partnership property is not subject to
attachment or execution, except on a claim against the partnership;
d) A partner right in specific partnership property is not subject
to legal support under Article 291
ART. 1826 - A person admitted as a partner into an existing partnership is
liable for all the obligations of the partnership arising before his
admission as though he had been a partner when such obligation
were incurred, except that this
liability shall be satisfied only out of partnership property, unless
there is a stipulation to the contrary.
ART. 1827 - The creditors for the partnership shall be preferred to those of each
partner as regards the partnership property. Without prejudice to
this right, the private creditors of each Partner may ask the
attachment and public sale of the share of the latter in the
partnership assets.
ART. 1864 - The certificate hall be cancelled when the partnership is dissolved
or all limited partners cease to be such.
A certificate shall be amended when:

1. there is a change in the name of the partnership or in the

 or character of the contribution of any limited partner;
2. a person is substituted as a limited partner;
3. an additional limited partner is admitted;
4. a person is admitted as a general partner;
5. a general partner retires, dies, becomes insolvent or insane, or
is sentenced to civil interdiction and the business is continued
under Article 1860;
6. there is change in the character of the business of the
partnership;
7. there is a false or erroneous statement in the certificate;
8. a person is substituted as a limited partner;
9. there is a change in the time as stated in the certificate for the
dissolution of the partnership of for the return of a contribution;
10. a time is fixed for the dissolution of the partnership or the return
of a contribution, no time having been specified in the
certificate, or
11. the members desire to make a change in any other statement in
the certificate in order that it shall accurately represent the
agreement among them.
Article 1866 A contribution, unless he is general partner, is not a proper party
to proceeding by or against a partnership, except where the object
is to enforce a limited partners right against or liability of the
partnership.
Article 1846 The surname of a limited partner shall not appear in the partnership
name unless:
1. it is also the surname of a general partner; or
2. prior to the time when the limited partner become such, the business had
been carried on under a name in which his surname appeared.
SALE
Contract of Sale One of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing and the other to pay therefore a
price certain in money or its equivalent. ( Art.1458)
Essential Requirements:
1) Consent of the parties by virtue of which the vendor obligates himself to
transfer the ownership of and to deliver a determinate thing, and the vendee
obligates himself to pay therefore a price certain in money or its equivalent;
2) Object certain which is subject matter of the contract;
3) The Cause of the obligation, the cause as far as the vendor is concerned is
the acquisition of the price certain in money or its equivalent while the cause
as far as the vendee is concerned is the acquisition of the thing which is the
object of the contract.
Characteristics:
Consensual, bilateral, and reciprocal; principal; onerous, commutative, and
nominate.
Contract of Sale distinguished from Contract to Sell
1. In the first, title passes to the vendee upon delivery of the thing sold,
whereas, in the second, by agreement, ownership is reserved in the vendor
and is not to pass until full payment of the price;
2. In the first, non-payment is a negative resolutory condition, whereas in the
second, full payment is a positive suspensive condition;
3. In the first, the vendor lost and cannot recover ownership until and unless
the contract is rescinded. Whereas in the second, title remains in the vendor,
and when he seeks to eject vendee because of non compliance of such
vendee with the suspensive condition stipulated, he is enforcing the contact
and not resolving the same.
Emptio Res Speratae distinguished from Emptio Spei
1. The first refers to a sale of a thing having a potential existence, whereas the
second refers to a sale of a mere hope or expectancy.
2. In the first, uncertainty is with regard the quantity and quality but not with
regard the existence of the thing, in the second, the uncertainty is with
regard with the existence of the thing;
3. In the first, the contract deals with a future thing, in the second, the
contract deals with a present thing-the hope or expectancy;
4. In the first, the sale is subject to the condition that the thing should exist, so
that if it does not, there is no contract for lack of an essential requisite, in
the second, the sale produces effects even though the thing itself does not
come to existence, since the subject matter is the hope itself.
Since the contract of sale is consensual, it is perfected at the moment when
there is a meeting of the minds upon the thing which is the object of the contact and
upon the price. However, in case of a sale by auction, it is perfected when the
auctioneer announces its perfection by the fall of the hammer or in any other
customary manner.
In a contract of sale, the ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery. The parties however may stipulate
that the ownership will not pass to the vendee until the latter shall have fully paid the
purchase price.
A promise to buy and sell a determinate thing for a certain price is reciprocally
demandable. An accepted unilateral promise to buy or sell a determinate thing for a
price certain is binding upon the promissor is the promise is supported by a
consideration distinct from the price.
Earnest money whenever earnest money is given in a contract of sale, it shall
be considered as part of the price and as proof of the perfection of the contract. It
then could be simply defined as part of the purchase price advanced by the vendee to
the vendor as a token of the perfection of the contract.
In a contract of sale of personal property, the price of which is payable in
installments, the different remedies in case of breach available to the vendor
are:
1. Exact fulfillment of the obligation, should the vendee fail to pay;
2. Cancel the sale, should the vendees failure to pay cover two or more
installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendees failure to pay cover two or more
installments. The last case, have shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.
The foregoing remedies of the unpaid seller are alternative, not cumulative.
When goods are delivered to the buyer on sale or return to give buyer an
option to return the goods instead of paying the price, the ownership passes to the
buyer on delivery, but he may revert the ownership in the seller by returning or
tendering the goods within the time fixed in the contract, or if no time has been
fixed, within a reasonable time.
When goods are delivered to the buyer on approval or on trial or on
satisfaction, or other similar terms, the ownership passes to the buyer:
1. When he signifies his approval or acceptance to the seller or does any act
adopting the transaction;
2. if he does not signify his approval or acceptance to the seller but retains the
goods without giving notice of rejection, then if a time has been fixed for the
return of the goods, on the expiration of such time, and if no such time has
been fixed, on the expiration of a reasonable time. What is a reasonable time
is a question of fact. (Art.1502)
What title is acquired by the vendee or buyer if the object which he bought
was sold by somebody who is not the ownner thereof and who was not
authorized to sell it?
ANS: The vendee in such case, acquires no better title to the object than the
vendor had. This rule is subject to the following exceptions:
1. when the true owner is estopped or precluded by his conduct from denying
the vendors authority to sell;
2. when the sale is made by the registered or apparent owner in accordance
with recording or registration laws;
3. where the sale is made pursuant to a statutory power of sale or under the
order of a court of a competent authority; and
4. where the purchase is made in a merchants store, or in fairs, or in markets
in accordance with the Code of Commerce and special laws.
As far as the third exception is concerned, it must be observed that if the object
which was sold at the public sale if movable property, the true owner who had lost it
or who has been unduly deprived of it can still recover the same from the vendee.
However, if the latter had acquired it in good faith, such owner cannot obtain its
return without reimbursing the price paid therefore.
What are the obligations of the seller and the buyer in contracts of C.I.F
and F.O.B sale.
ANS: In C.I.F sales of goods, the buyer pays a fixed price, while the seller pays
the insurance freight up to the place of destination. In F.O.B sales of
goods, the goods are shipped by the seller to a certain point without any
expense to the buyer, but after delivery at such point all subsequent
expenses incident to the transportation and delivery shall be paid by the
buyer. Thus the sale is F.O.B at the place of shipment, the buyer must pay
the freight. (Art.1525)
Remedies of the unpaid seller (Art.1526)
1. A lien on the goods or right to retain them for the price while he is in
possession of them;
2. In case of insolvency of the buyer, a right of stopping the goods in
transitu after he has parted with the possession of them;
3. A right of resale;
4. A right to rescind the sale.
The unpaid seller of goods who is in possession of them is entitled to retain
possession of them until payment or tender of the price in the following
cases:
1. When the goods have been sold without any stipulation as to credit;
 2. Where the goods have been sold on credit, but the term of credit has
expired;
3. Where the buyer becomes insolvent.
The unpaid seller losses his right of lien or retention in the following cases;
1. When he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the ownership in the goods or
the right to possession thereof;
2. When the buyer or his agent lawfully obtains possession of the goods;
3. By waiver thereof (Art. 1529)
The right of stoppage in transitu refers to the right of the unpaid seller to
resume possession of the goods anytime while they are in transit by virtue of which
he will then be entitled to same rights in regard to the goods as he would have had if
he had never parted with the possession. This right is available to the unpaid seller
when he has already parted with the possession of the goods and the buyer is or
becomes insolvent. (Art. 1530)
How Right of Stoppage In Transitu Exercised either by obtaining actual
possession of the goods or by giving notice of his claim to the carrier or other bailee
in whose possession the goods are. Such notice may be given either to the person in
actual possession of the goods or to his principal. In the latter cases, the notice, to
be effectual, must be given at such time and under circumstances that the principal,
by its exercise of reasonable diligence, may present a delivery to the buyer.
When notice is given by the seller to the carrier, or other bailee in possession of
the goods, he must redeliver the goods to, or according to the directions of the seller.
The expenses of such delivery must be borne by the seller. If, however, a negotiable
document of title representing the goods has been issued by the carrier, or other
bailee, he shall not be obliged to deliver or justified in delivering the goods to the
seller unless such document is first surrendered for cancellation. (Art.1532)
Right of Resale available to the unpaid seller :
1. When the goods are perishable in nature;
2. Where the seller has expressly reserved the right of resale in case the buyer
should make default;
3. Where the buyer has been in default in payment of the price for
unreasonable time.
It is however, essential before the resale can be made that the unpaid seller
should have a right of lien or should have stopped the goods in transitu.
Effect of the Resale- buyer acquires a good title against the original buyer. The
unpaid seller, on the other hand, shall not be liable to the original buyer upon the
contract of sale or for any profit made by reason of the resale.
HOW IS RESALE EFFECTED?
ANS: Maybe made either by public or private sale. However, the unpaid, who is
bound to exercise reasonable care and judgment in making the resale,
cannot directly or indirectly buy the goods.
It is not essential to the validity of the resale that notice of an intention to
resell the goods be goods be given by the seller to the original buyer. But
where the right to resell is not based on the perishable nature of the goods,
or upon express provision of the contract of sale, the giving or failure to give
such notice shall be relevant in any issue involving the question whether the
buyer had been in default for an unreasonable time before the resale was
made ( Art.1533)
Right of rescission available to the unpaid seller, when:
1. Where he expressly reserved the right to do so in case the buyer should
make default; and
2. Where the buyer has been in default in the payment of the price for un
reasonable time.
It is essential however that before rescission can be made, the unpaid seller
should have a right of lien or should have stopped the goods in transitu.
Effect of Rescission once the unpaid seller has rescinded the transfer of title
and resumed ownership on the goods, he shall not be thereafter be liable to the
buyer upon the contract of sale. As a matter of fact, he may recover from the buyer
damages for any loss occasioned by the breach of the contract.
It is not essential that such overt act should be communicated to the buyer.
The unpaid sellers right of lien or stoppage in transitu is not affected should the
buyer sold the goods to another before he exercises the right, unless he assented
thereto.
WHERE THE SAME THING IS SOLD TO DIFFERENT PURCHASERS, TO WHOM
SHALL THE OWNERSHIP BE TRANSFERRED?
ANS: As to movables, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith.
As to immovables
a. to the person acquiring it who in good faith first recorded it in the
Registry of Property;
b. In default thereof, to the person who in good faith was first in
possession;
 c. In default thereof, to the person who presents the oldest title,
provided there is good faith. ( Art. 1544)
Warranty in case of eviction is an implied warranty in contracts of sale, by
virtue of which, if the vendee is deprived of the whole or part of the thing purchased
by a final judgment based on a prior right to the sale or an act imputable to the
vendee, such vendor shall answer for the eviction even though nothing has been said
in the contract on the subject. (Art.1548)
Two kinds of Waiver of Warranty Against Eviction:
1. Consciente waiver there is merely voluntary renunciation made by the
vendee of the right to warranty in case of eviction.
2. Intencionada waiver- there is voluntary renunciation by the vendee of the
right to warranty against eviction, with knowledge of the risk of eviction and
assuming the consequences thereof. The effect of such renunciation in case
of eviction is to relieve the vendor of any liability. ( Art 1554)
IF THERE IS NO AGREEMENT WITH REGARD TO WARRANTY IN CASE OF
EVICTION, WHAT IS THE EXTENT OF THE LIABILITY OF THE VENDOR?
ANS: The Vendee shall have the right to demand of the vendor:
1. the return of the value of the thing sold had at the time of eviction, be it
greater or less than the price of the sale;
2. the income or the fruits;
3. the cost of the suit which caused the eviction and those of the suit brought
against the vendor for the warranty;
4. the expenses of the contract, if the vendee has paid them;
5. the damages and interests, and the ornamental expenses, if the sale was
made in bad faith.
Accion Redhibitoria is the action instituted by the vendee against the vendor to
avoid a sale on account of some one of defect in the thing sold which renders it unfit
for the use intended of which will diminish its fitness for such use to such extent, that
had the vendee been aware thereof, he would have not acquired it.
Accion Quanti Minoris is an action to procure the return of a part of the
purchase price paid by the vendee to the vendor by reason of such defect.
Instances when vendee may suspend payment of the price:
1. Should he be disturb in the possession or ownership of the thing sold; or
2. Should he have reasonable grounds to fear such disturbance by a vindicatory
action or by a foreclosure of mortgage.
The right, however, does not exist in the following cases:
1. Should there be a stipulation to that effect, or
2. Should the vendor give security for the return of the purchase price, or
3. Should the vendor have caused the disturbance or danger to cease; or
4. Should the disturbance consist only of a mere act of trespass.
A Contract of Sale is extinguished by the same causes in all other obligations,
and also by conventional or legal redemption.
Conventional Redemption is that which takes place when the vendor reserves
the right to repurchase the thing sold with the obligation to reimburse to the vendee
the price of the sale, the expenses of the cntract, other legitimate payments made
by reason of the sale, as well as necessary and useful expenses made on the thing
sold.
WHEN IS CONVENTIONAL REDEMPTION PRESUMED TO BE AN EQUITABLE
MORTGAGE?
ANS: Under the following circumstances:
1. When the price of the sale with right to repurchase is unusually inadequate;
2. When the vendor remains in possession as a lessee or otherwise;
3. When upon of after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
4. When the purchaser retains for himself a part of the purchase price;
5. when the vendor binds himself to pay the taxes on the thing sold;
6. IN any other cases, where it may be fairly inferred that the real intention of
the parties is that the transaction shall secure the payment of a debt or the
performance of another obligation;
7. When there is doubt as to whether the contract is a contract of sale with
right to repurchase or an equitable mortgage.
WHAT IS THE PERIOD FOR THE REDEMPTION OF PROPERTY SOLD WITH THE
RIGHT OF REPURCHASE?
ANS : In absence of any express agreement, that period of redemption shall be four
(4) years from the date of the contract. Should there be any agreement, the
period cannot extend ten (10) years. However, the vendor may still exercise
the right to repurchase within thirty (30) days from the time final judgment
was rendered in a civil action on the basis that the contract was a true sale
with right to repurchase.
WHAT ARE THE OBLIGATIONS OF THE VENDOR A RETRO WHEN HE
EXERCISES HIS RIGHT OF REPURCHASE?
ANS:
1. To return to the vendee the price of the sale;
2. To pay the expenses of the contract and other legitimate payments made by
reason of sale; and
3. To pay all necessary and useful expenses made on the thing sold.
Legal Redemption is the right subrogated upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by purchase or
dation in payment, or by any other transaction whereby ownership is transmitted by
onerous title.
INSTANCES OF LEGAL REDEMPTION, RECOGNIZED BY OUR LAW:
Under the Civil Code:
1. Redemption by the other co-heirs, or by any or some of them, should a co-
heir sell his hereditary right to a stranger;
2. Redemption by an owner of an adjoining land should the owner of a piece of
rural land, the area of which does not exceed one hectare, alienate it to a
third person. If two or more adjoining owners desire to exercise the right at
the same time, the owner of a smaller area shall be preferred; and should
both lands have the same area, the one who first requested the redemption.
(Art. 1621)
3. Redemption by an owner of adjoining land should the owner of a piece of
urban land, which is so small and so situated that a major portion thereof
cannot be used for any practical purpose within a reasonable time and which
said owner had bought merely for speculation, resell it to a third person. If
the resale has not yet been perfected, an owner of adjoining land shall have
the right of preemption; in other words, his right to buy the property is
preferred to that of third persons. If two or more adjoining owners desire to
exercise the right of pre-emption or redemption, as the case may be, the
owner whose intended use of the land appears best justified shall be
preferred. (Art. 1622)
4. Redemption by a debtor should the credit or other incorporeal right in
litigation be sold by the creditor to a third person. (Art. 1634)
Under other laws:
1. Redemption by the applicant, his widow, and legal heirs within five years
should a piece of land under a homestead of free patent be alienated to a
third person. ( Sec. 119, Com. Act. No. 141)
2. Redemption by a judgment debtor within one year should real property
belonging to him be sold on execution. (Revised Rules of Court)
3. Redemption by owner should the property belonging to him be sold for
delinquent realty taxes. (Section 736, Rev. Adm. Code)
4. Redemption by mortgagor within one year should his mortgaged
property be foreclosed and subsequently sold. (Revised Rules of Court)
Distinction between redemption and pre-emption
1. In redemption, the sale to a third person has already been perfected,
whereas in pre-emption, the sale to a third person has not yet been
perfected;
2. The right of redemption has a much broader scope than the right of pre-
emption. As a matter of fact, the latter may be exercised only where there
is a prospective resale of a small piece of urban land originally bought by the
prospective vendor merely for speculation;
3. The right of redemption is directed against the third person who bought the
property, whereas the right of pre-emption is directed against the
prospective vendor who is about to resell the property;
4. The effect of redemption is to extinguish a contract that has
already been perfected or even consummated, whereas the effect of pre-
emption is to prevent the birth or perfection of a contract.
THE RIGHT OF PRE-EMPTION OR REDEMPTION REGULATED BY ARTS. 1630
TO 1622 OF THE CIVIL CODE IS TO BE EXERCISED?
ANS: The right must be exercised within thirty (30) days from the notice in writing
by the prospective vendor, or by the vendor as the case may be.
Sale distinguished from dation in payment:
1. In sale, there is no pre-existing credit. While in dation theres a pre-existing
credit;
2. In the first, gives rise to obligations while in the second, it extinguishes
obligations;
3. In the first, the cause or consideration is the price from the viewpoint of the
seller or obtaining the object from the viewpoint of the buyer, while in the
second, the cause or consideration from the viewpoint of the person offering
dation in payment is the extinguishment of his debt and from the viewpoint
of the creditor, it is the acquisition of the object offered in lieu of the original
credit;
4. In the first, there is greater freedom in the determination of the price, while
in the second, there is less freedom.
Sale distinguished from lease
In a sale, the seller transfers ownership; in a lease, the lessor or landlord
transfers merely the temporary possession and use of the property.
Article 1460 A thing is determinate when it is particularly or physically
segregated from all others of the same class. The requisite that a
thing be determined is satisfied if at the time the contract is
entered into, the thing is capable of being made determinate
without the necessity of a new or further agreement between the
parties.
Future goods are those still to be:
1. Manufactured or printed;
2. Raised or future agricultural products;
3. Acquired by seller after the perfection of the contract;
4. Those whose acquisition depends upon a contingency which may or may not
happen.
The sole owner of a thing may sell an undivided interest therein. (Art. 663)
Distinction between a contract of sale and an agency to sell:
a. In sale, the buyer pays the price; the agent delivers the price
which in turn he got from this buyer;
b. In sale, the buyer after delivery becomes the owner, the agent who is
supposed to sell does not become the owner even if the property has already
been delivered to him;
c. In sale, the seller warrants; the agent who sells assumes no personal liability
as long as her acts within his authority and in the name of the principal.
In the Quiroga vs Parsons Hardware Co. (38 Phil. 501), the defendant
entered into a contract of sale not an agency to sell. There was the price that was
fixed and there was the duty to pay the same regardless of whether or not the
defendant had sold the beds. The word agent simply means that the defendant
was the only one who could sell the plaintiffs beds in Visayas.
Rules to determine if the contract is one of sale or a piece of work:
a. If ordered in the ordinary course of business sale
b. If manufactures specially and not for the market piece of work.
If one will construct a house on his own land and I will get both the land
and the house, it would seem that this could be a sale.
Rules to determine whether a contract is one of sale or of barter: (Art. 1468)
a. First rule Intent
b. If intent does not clearly appear
1. If thing is more valuable than money barter
2. of 50-50 sale
3. If thins is less valuable than money sale
Under the statute of fraud, the sale of:
1. Real property (regardless of the amount)
2. Personal property if P500 or more must be in writing to be enforceable.
A seller, in an auction sale, can bid, provided such a right to bid is reserved; and
notice was given that the sale by auction is subject to a right to bid on behalf of the
seller.
A seller also may employ others to bid for him, provided he has notified the
public that the auction is subject to the right to bid on behalf of the seller. People
who bid for the seller, but are not themselves bound, are called by-bidders or
puffers.
The ownership of the thing sold is transferred to the vendee upon actual
or constructive delivery thereof (Art. 1477)
Ownership is not transferred by perfection but by delivery.
The parties may stipulate that ownership in the thing shall not pass to
the purchaser until he has fully paid the price. (Art. 1478)
Generally, ownership is transferred upon delivery, but even if delivered, the
ownership may still be with the seller till full payment of the price is made, if there is
a stipulation to this effect. But of course, innocent third parties cannot be
prejudiced. This stipulation is usually known as pactum reservati dominii and is
common in sales on the installment plan.
Policitacion this is a unilateral promise to buy or sell which is not accepted.
This produces no juridical effect and creates no legal bond. This is a mere
offer.
Option it is a contract granting a person the privilege to buy or not to buy certain
object at any time within the agreed period at a fixed price. The contract of
option is a separate and distinct contract from the contract. It must have its
own cause or consideration.
Who bears the risk of loss?
a. If the object has been lost before perfection, the seller bears the loss
because there was no contract and being the owner, the seller bears the
loss;
b. If the object was lost after delivery to the buyer, clearly
the buyer bears the loss. Res perit domino the owner bears the loss;
c. If the object is lost after perfection but before delivery,
here the buyer bears the loss, as exception to the rule of res perit domino.
 (The implication in the case of Roman vs Grimalt is that had the sale been 1. Actual or real
perfected, the buyer would have borne the loss, that is, he would still have had to 2. Legal or constructive
pay for the object even if no delivery had been made.) a. Legal Formalities
b. symbolical tradition
Meaning of fungibles are personal property which may be replaced with c. traditio longa manu
equivalent things. Fungibles are almost the same as consumable goods with this d. traditio brevi manu
difference: that while the distinction between consumables and non-consumables is e. tradition constitutum possessorium
based on the nature of the thing, the differences between fungibles and non-
fungibles is based on the intention. Thus rice is ordinarily consumable, but if I The instances when seller is still owner despite delivery: -
borrowed a sack of rice for display purposes only, and I promised to return the
identical sack of rice, the rice here is non-fungible. 1. Express stipulation;
2. If under the bill of lading the goods are deliverable to seller or agent or their
If the deed of sale of land is notarized by a notary public whose authority had order;
expired, the sale would still be valid, since for the validity of its sale, a public 3. If the bill of lading, although stating that the goods are to be delivered to
instrument is not even essential. buyer or his agent, is kept by the seller or his agent;
4. When the buyer although the goods are deliverable to order of buyer, and
The husband and wife cannot sell property to each other, except: although the bill of lading is given to him, does not honor the bill of
exchange sent along with it. But of course, innocent third parties should not
1. When there is a separation of property agreed upon in the marriage be adversely affected.
settlements;
2. When there has been a judicial separation of property. (Art. 1490) Rules when the quantity is less than that agreed upon (Art. 1522)

Art. 1493 If at the time the contract of sale is perfected, the thing which is the 1. Buyer may reject;
object of the contract has been entirely lost, the contract shall be 2. Or buyer may accept what have been delivered, at the contract rate.
without any effect.
Rules when the quantity is more than the agreement: -
But is the thing is lost in part only, the vendee may choose between
withdrawing from the contract and demanding the remaining part, a. Buyer may reject all. He must not be burdened with the duty of
paying its price in proportion to the total sum agreed upon. segregation, if he does not so desire;
b. Buyer may accept the goods agreed upon and reject the rest;
Obligations of the vendor: - c. If he gets all, he must pay for item at the contract rate.

a. To transfer ownership (cannot be waived); Rules when quantity is different: -

b. To deliver ( cannot be waived);
c. To warrant the object sold (this can be waived) a. accept the goods which are in accordance with the contract;
d. To preserve the thing from perfection to delivery, otherwise, he can be held b. and reject the rest.
liable for damages. (Art. 1495)
When is the vendor not obliged to make delivery after the perfection of the
As a rule, in the absence of agreement, ownership is not transferred, contract of sale?
even if sold, unless there has been delivery.
The vendor is not obliged to make said delivery in the following:
In general, delivery of the property to a person who has purchased the property
in his own name (although he used the money of another) will give title to said a. If the vendee has not paid him the price;
purchaser and not the owner of the money used. b. If no period for the payment has been fixed in the contract otherwise, the
vendor might play a futile waiting game;
c. Even if a period for such payment has been fixed in the contract if the
Kinds of delivery or tradition: - vendee has lost the right to make use of the period and still refuse to pay.
A seller is deemed an unpaid seller
1. If only part of the price has been paid or delivered;
2. Mere delivery of a negotiable instrument does not extinguish the obligation
because it may be dishonored.
When are goods in transit
1. From the time when they are delivered to a carrier by land, water, or air, or
other bailee for the purpose of transmission to the buyer, until the buyer, or
his agent in that behalf, takes delivery of them from such carrier or other
bailee;
2. If the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them, even if the seller has refused to receive
them back.
When are goods no longer in transit
If the buyer, or his agent in that behalf, obtains delivery of the goods before
their arrival of the appointed destination;
If, after the arrival of the goods at the appointed destination, the carrier or
other bailee acknowledges to the buyer or his agent that he holds the goods
on his behalf and continues in possession of item as bailee for the buyer or
his agent; and it is immaterial that further destination for the goods may
have been indicated by the buyer;
If the carrier or other bailee wrongly refuses to deliver the goods to the
buyer or his agent in that behalf. (Art. 1531)
The period of limitation (prescriptive period) for a redhibitory action based on the
fraud or defects of animals is forty (40) days from the date of their delivery to the
vendee. And six (6) months for breach of warranty against hidden defects; rescission
of the contract because of the same; or proportionate reduction in the price because
of the same; rescission or proportionate reduction in the price of sales of real estate
either by the unit or for a lump sum because of failure to comply with the provisions
of the contract.
If an animal should die within three (3) days after its purchase, the vendor shall
be liable if the disease which caused the death existed of the time of the contract.
(Art. 1578)
AGENCY
Article 1868 By the contract of agency, a person binds himself to render
some service, or to do something in representation or in
behalf of another with the consent or authority of the latter
a. The definition is so broad and therefore defective.
As it is so worded, it would seem that the agent must always expressly
represent the principal. This is not necessarily so, for sometimes an agent
does not disclose his principal; he may soon act in behalf of himself, but
here the principal would still be bound as when the contract involves things
belonging to the principal.
b. Its Characterestics:
Agency is a principal, nominate, bilateral, preparatory, cumulative and
generally onerous contract;
Generally, it is also a representative relation, not a status since agency is not
inherent or permanent;
It is a fiduciary relation since it is based on trust and confidence.
Essential elements of a contract of agency:
There is consent, express or implied of the parties to establish the
relationship of agency;
The object is the execution of a juridical act in relation to a third person;
The agent acts as a representative and not for himself; and
The agent acts within the scope of his authority.
1. Distinguish a contract of agency from contract of lease of services
a. In the first, the principle of representation is applied,
whereas in the second, it is not; in other words, in the first, the basis of the
contract is representation, whereas in the second, the basis is employment;
b. In the first, the contract may be extinguished at will by the principal,
whereas in the second, concurrence of both party is necessary;
c. The agent exercises discretionary powers in order to attain the ends for
which he was appointed, whereas the employee exercises ministerial
function only;
d. The first is a preparatory contract; whereas the second is a principal
contract.
2. Distinguish a contract of agency from contract with an independent
contractor
1. In the first, the principle of representation exists, whereas in the second,
such principle is not recognized;
 2. An agent is more or less under the control of his
principal, whereas, an independent contractor is not under the control of the
person with whom he contracts;
3. An agent binds his principal provided that he acts within
the scope of his authority, whereas an independent contractor cannot bind
the person with whom he contracts, by his acts;
4. If a third person is injured through the fault or
negligence of an agent, he can proceed against the principal for damages,
but if he is injured through the fault or negligence of an independent
contractor, he cannot proceed against the person with whom the latter had
contracted damages;
5. The first is a preparatory contract, whereas the second,
is a principal contract.
THE DIFFERENT KINDS OF AGENCY
1. As to Constitution:
Express when it is expressly constituted
Implied a. from the acts of the principal
b. from his silence or inaction
c. from his failure to repudiate the agency, knowing that another
is acting in his behalf without authority.
2. As to form
oral
written
3. As to cause
onerous when it is for compensation
gratuitous when there is no compensation
4. As to extent-
general when it comprises all of the business of the principal
special when it comprises one or more specific transactions
5. As to third persons
agent de jure
agent by estoppel as when a person, who is not really an agent, represents
himself or is represented as such.
There can be a perfected contract of agency even if the acceptance by the
agent is merely implied. As far as acceptance by mere silence of inaction is
concerned, the following rules shall govern:
RULES GOVERNING IMPLIED AGENCY:
Between the persons who are present, the acceptance may be implied if the
principal delivers his power of attorney to the agent and the latter receives it without
objection;
Between the persons who are absent, the acceptance cannot be implied, unless:
The principal transmits his power of attorney to the agent, who receives it
without objection, or
The principal entrusts to him by letter or telegram a power of attorney with
respect to the business in which he is habitually engaged as an agent, and he did not
reply to the letter or telegram.
In a sale of a piece of land, or any interest therein through an agent, the
authority of an agent must be in writing, otherwise, the sale shall be void. (Art.
1874)
DISTINCTION OF GENERAL AND SPECIAL AGENCY:
GENERAL AGENCY refers to that type of agency with comprises all of the
business of the principal, whereas special agency, refers to that type of agency which
comprises one or more transactions. Whether general or special, the agency may be
couched in general terms. In such a case, the agency merely authorizes the agent to
perform acts of administration. Consequently, a general agency may or may not be
couched in general terms but an agency couched in general agency, if it comprises
all of the business of the principal, or a special agency, it is comprises only one or
more specific transactions.
Instances where a special power of attorney is necessary in order to
bind the principal (Art. 1878)
- to make such payment as are not usually considered as acts of
administration;
- to effect novation which put an end to obligations existing at the time
of the constitution of the agency;
- to compromise, to submit to arbitration, to renounce right to appeal, -
to waive objections to venue, or to abandon a prescription already
acquired;
- to waive any obligation gratuitously;
- to enter into any contract by which ownership of an immovable is
transmitted or acquired gratuitously or for a valuable consideration;
- to make gifts, except customary ones for charity or those made to
employees in the business managed by the agent;
- to loan or borrow money, unless the latters act be urgent and indispensable
for the preservation of the things under administration;
- to lease any real property to another person for more than one year.
 - to bind the principal to render some services without compensation
- to bind the principal in a contract of partnership;
- to obligate the principal as a guarantor or surety;
- to create or convey real rights over immovable property;
- to accept or repudiate an inheritance;
- to ratify or recognize obligations contracted before agency,
any other act of dominion.
A special power to sell excludes the power to mortgage, and a special power to
mortgage does not include the power to sell. Consequently, if an agent, holding a
special power to sell, mortgages the property, the contract would be unenforceable
(Art. 1879).
If the special power to sell does not specify the manner or terms of payment, the
agent may not sell the property on credit.
The most fundamental obligations of an agent:
a) to carry out the agency;
b) to act within the scope of his authority; and
c) to act on behalf of his principal.
Broadly speaking, the words authority and power of an agent are amount in excess of the purchase price is bound to make an accounting to his
interchangeable terms. However authority refers to the mandate given to the
agent by his principal, whereas power refers to the extent of the mandate of the
agency. In other words, the first is the cause, whereas the second is the effect.
An agent authorized to sell a given authority cannot bind his principal by selling
such commodity, either directly or indirectly, to himself. Consequently, if he sells the
commodity to himself, by acting through a sub-agent, the sale is unenforceable
unless the principal ratifies the sale after he has full knowledge of the facts.
If the agent entered into a contract with a third person in his own name or
without disclosing his principal, the contract could be binding only as between the two
parties, because obviously, the third person did not rely on the credit of the principal
when he entered into the contract. However, there are two instances where the
principal is bound by the contract:
a) where the contract involves things belonging to him; and
b) where he ratifies the contract or derives benefit therefrom.
SUPPOSE AN AGENT CONTRACTS IN THE NAME OF HIS PRINCIPAL BUT
EXCEEDING THE SCOPE OF HIS AUTHORITY, WHAT IS THE STATUS AND
EFFECT OF THE CONTRACT?
ANS: The answer is a distinction.
Its effect upon the principal: As far as the principal is concerned, the contract is
unenforceable. This is true whether the third person is aware or unaware of the fact
that the agent was acting outside the scope of his authority. Consequently, is such
third person is prejudiced as a result of the contract, he would not be able to proceed
against the principal. There are, however, two (2) instances, where he may hold the
principal liable, namely:
a) where such principal has ratified the contract. In such case, the contract
becomes valid and binding; and
b) where such principal had allowed the agent to act as though he had full
power. In such a case, the former is solidarily liable with the latter.
Its effect upon the agent: As far as the agent is concerned, the status of the
contract shall depend upon whether the third person was unaware or aware of the
fact that such agent was acting beyond the scope of his authority. If the third person
was unaware of such fact, the contract is certainly binding as between the two
parties, although unenforceable insofar as the principal is concern. If the third
person was aware of such fact, the contract is unenforceable, even as between the
two parties. In such a case, the agent cannot be held liable, unless he undertook
effort to secure the principals ratification. Obviously, the principal cannot be held
liable unless he ratifies the contract.
An agent who receives something by virtue of the agency, such as gift or an
principal even if such thing, gift or excess is not owing to the latter because of Art.
1891 which provides that Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may have received by virtue
of the agency, even though it may not be owing to the principal. Any stipulation
exempting the agent from the obligation to render an account shall be void.
An agent may appoint a substitute if the principal has not prohibited him from
doing so; but he shall be responsible for the acts of his substitute:
1) when he was no given the power to appoint one;
2) when he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall
be void.
A commission agent is one who is engaged in the business of buying and
selling for a principal of personal property, which for this purpose has to be placed in
his possession and at his disposal.
A broker is a middleman or intermediary who, in behalf of others, and for a
commission, or fee, negotiates contracts or transactions relative to real or personal
property in the name of the principal.
Distinction between a broker and a commission agent relative to real or
personal property:
 1) The job of a commission agent involves a three-fold relationship, in other
words, the agent is related not only to his principal and to the buyer or
seller, but also to the property constituting the object of the transaction
which should be placed in his possession and at his disposal. The job of a
broker on the other hand, involved only a double relationship, in other
words, the broker is a pure intermediary, a pure go-between who does not
have either the custody or the possession of the property that he disposes
of.
2) A commission agent engages only in the business of buying and selling
personal property for his principal; whereas, a broker engages in the
business of buying or selling for his clients personal or real property;
3) A commission agent should have a place of business, whereas, this is not
necessary for the broker;
4) The broker is much more independent than the commission agent.
A commission merchant is a commercial agent to whom the possession of
personalty is entrusted by or for the owner, to be sold, for compensation, in
pursuance of the agents usual trade or business, with the title to the goods
remaining in the principal. He differs from a broker can only buy or sell in the name
of his principal.
The ordinary commission given to a commission agent is merely the fee or
compensation for the sale of the goods which are placed in his possession and at his
disposal, whereas the guarantee commission (del credere commission) is merely
additional compensation for the risks of the collection. Should the commission agent
receive on a sale, in addition to the ordinary commission, a guarantee commission:
(1) he shall bear the risk of collection, and (2) he shall pay the principal, the
proceeds of the sale on the same terms agreed upon with the purchaser.
A contract of agency may be revoked, either express or implied.
Implied revocation may be effected:
1) by the act of the principal in appointing another agent for the same business
or transactions.
2) by the act of the principal in directly managing the business entrusted to the
agent.
3) by the act of the principal in subsequently granting a special power of
attorney as regards the business to another agent where he had previously
granted a general power of attorney to the agent.
Causes for the extinguishment of a contract of agency. (Art 1919)
(E D W A R D)
1) by the Expiration of the period for which the agency was constituted
2) by the Death, civil interdiction, insanity or insolvency of the principal or the
agent
3) by the Withdrawal of the agent
4) by the Accomplishment of the object or purpose of agency
5) by Revocation
6) by the Dissolution of the firm or corporation which entrusted or accepted the
agency
An agency is not revocable at will in the following cases:
1) if a bilateral contract depends upon it;
2) if it is the means of fulfilling an obligation already contracted;
3) if a partner is appointed manager of the partnership and his removal from
the management is unjustifiable;
4) if it has been constituted in the common interest of the principal and of the
agent or with interest of a third person who has accepted the stipulation in
his favor.
An agency coupled with an interest refers to an agency wherein the agent has
acquired some interest of his own in the execution of the authority granted to him, in
addition to his mere interest in the contract of employment with the resulting gains.
DISTINCTIONS
Between agency and partnership an agent acts not for himself but for his
principal; a partner acts for himself, for his firm and for his partners.
Agency from loan an agent may be given funds by the principal to advance
the latters business, while a borrower is given money for purposes of his own, and
he must generally return it, whether or not his business is successful.
Agency from lease of property the agent is controlled by the principal
whereas the lessee is not controlled by the lessor; The agency may involve things
other than property whereas a lease of property involves property only. The agent
can bind the principal, while the lessee, as such cannot bind the lessor.
Agency from Trust:
1) an agent usually hold no title at all; while a trustee may hold legal title to
the property;
2) usually, an agent acts in the name of the principal; while a trustee may act
in his own name;
3) usually, agency may be revoked or terminated at any time, while trust is
usually ended by the accomplishment of the purposes for which it was
formed
4) agency may not be connected at all with the property, while trust involves
control over the property;
5) the agent has authority to make contracts which will be binding on his
principal; while a trustee does not necessarily or even possess such
authority to bind the trustor or the cestui que trust;
6) agency is really a contractual relation, while a trust may be the result of the
contract or not; it may be created by law.

Agency to sell from sale:
1) in the first, the ownership of the goods is not transferred to the agent while
in the second, the ownership is transferred to the buyer after delivery;
2) in the first, the agent delivers the price, while in the second, the buyer pays
the price.
Agency to buy from sale:
1) in the first, the agent acquires ownership in behalf of the principal, while in
the second, the buyer acquires ownership for himself;
2) in the first, the agent must account for all benefits or discounts received from
the seller, while in the sale, the buyer who obtains discount does not have to
reveal such fact to its own buyer.
3) The agent delivers the price, while the buyer pays the price.
Agency from Guardianship
1) the agent represents a capacitated person while a guardian represents an
incapacitated person;
2) the agent is appointed by the principal and can be removed by the latter,
while the guardian is appointed by the court and stands in loco parentis;
3) the agent is subject to the direction of the principal while the guardian is not
subject to the directions of the ward, but must of course act for the benefit
of the latter;
4) the agent can make the principal personally liable, while the guardian has no
power to impose personal liability on the ward.
Agency from Judicial administrator:
1) an agent is appointed by the principal, while a judicial administrator is
appointed by the court;
2) an agent represents the principal, while a judicial administrator represents
not only the court but also the heirs and creditors of the estate;
3) an agent generally does not file a bond, while an administrator files a bond;
4) an agent is controlled by the principal thru their agreement, while an
administrators acts are subject to specific orders from the court.
An agency is presumed to be for a compensation, unless there is proof to the
contrary (Art. 1875)
A special promise to compromise does not authorize submission to arbitration
(Art. 1880)
Two fundamental principles of agency (Art 1881)
1) the agent must act within the scope of his authority
2) the agent must act in behalf of his principal
Authority distinguished from instructions:
1) the principal affects only third persons, because if the act is done beyond the
scope of the agents authority, the principal is not bound; while instruction
concerns only the principal and the agent;
2) Third persons must therefore verify or investigate the authority, while in
instruction, third persons do not have to verify or investigate the
instructions.
CREDIT TRANSACTIONS
Credit refers to the belief or trust by a person in anothers ability to
comply with an obligation; and credit transaction refers to the contracts of
agreements based on the said trust or credit.
Scope of the Credit Transactions:
a. the principal contracts of loan (both commodatum and mutuum) and
deposit;
b. the accessory contracts of personal guaranty and real guaranty;
c. preference and concurrence of credits.
Article 1933 By the contract of loan, one of the parties delivers to another, either
something not consumable so that the latter may use the same
for a certain time and return it, in which case the contract is called
a commodatum, or money or other consumable thing upon the
condition that the same amount of the same thing and quality
shall be paid, in which case the contract is simply called a loan or
mutuum.
Commodatum is essentially GRATUITOUS.
Simple loan maybe gratuitous or with a stipulation to pay interest in
commodatum, the bailor retains the ownership of the thing loaned while in simple
loan, ownership passes to the borrower.
Distinctions between mutuum and commodatum:
1) In the first, equivalent amount is to be returned (subject matter is fungible);
while in the second, the same thing is to be returned (subject matter is non-
fungible);
2) Mutuum may be gratuitous or onerous (with interest) while commodatum is
gratuitous ( if there is compensation, it ceases to be commodatum);
3) Ownership goes to the borrower or bailee; while in commodatum ownership
is retained by the lender or bailor;
4) Refers only to personal property, while in the second, may involve real and
personal property;
 5) Referred to as loan for consumption, while commodatum referred to as loan
for use or temporary possession;
6) Borrower, because of his ownership, bears risks of loss; while lender, because
of ownership, bears risks of loss;
7) Can be generally obliged to pay only at the end of period, while object at the
end of period, still in some cases as return can be demanded even before the
end of the period.
Consumable and Non-consumable distinguished:
1) Consumable a movable which cannot be used in a manner appropriate for
its nature without its being consumed. i.e. gasoline.
2) Non-consumable a movable which can be used in a manner appropriate to
its nature without its being consumed. i.e. book
Fungible and Non-fungible distinguished:
1) Fungible if the intention is to allow a substitution of the thing given
2) Non fungible if the intention is to compel a return of the identical thing
given.
Whether a thing is consumable or not depends on the nature of the thing;
whether it is fungible or not depends on the intention. Hence, sugar is consumable
and ordinarily fungible but if the intention is merely to display the sugar for exhibition
(ad ostentationem) then it is still consumable (nature) but non-fungible (intention).
Bailment it is derived from a French word bailler meaning to deliver. It is
defined as the delivery by one person to another in trust for a specific purpose, with
a contract express or implied, that the first shall be faithfully executed and the
property returned or duly accounted for when the special purpose is accomplished or
kept until the bailor reclaims it
Parties in a bailment:
1) bailor the giver; and
2) bailee the recipient of the thing bailed.
Insofar as the borrower is concerned, the cause of consideration in a contract of
bailment of loan is the acquisition of thing; insofar as the lender is concerned, it is
the right or require the return of the same thing or its equivalent.
Credit defined as applied to loans
It is the ability to borrow money or thing by virtue of the confidence or trust
reposed by a lender that the borrower will pay what he may promise. It is derived
from a Latin word credere meaning to trust.
Loan distinguished from Rent or Lease:
1) In loan, the lender losses his property for the borrower becomes the owner
thereof, while in rent or lease, the owner of the property does not lose his
ownership, he merely loses control thereof in a limited way for the duration
of the rent or lease;
2) The relationship is one of lender and borrower, while the relationship is one
of lessor and lessee.
Loan distinguished from deposit:
1) In loan, the purpose is to grant its use to the borrower, while in deposit, the
purpose is safekeeping by depository (who generally cannot use);
2) Generally, the borrower pays only at the end of the period; while in deposit,
the returning can be demanded by the depositor at any time;
3) Relationship is that of lender (creditor) and borrower (debtor), while the
relationship is that of depositor and depository;
4) There can be compensation of credits, while in deposit, theres no
compensation of things deposited with each other (except by mutual
agreement)
Loan distinguished from Sale:
1) Loan is a real contract, while sale is a consensual contract;
2) Generally, unilateral because only borrower has the obligations while sale is
bilateral and reciprocal.
COMMODATUM
Commodatum and Loan are real contracts. They are perfected by the
delivery of the object loaned. On the other hand, consensual contracts are perfected
by mere consent.
Commodatum is a real, principal, essentially gratuitous and personal
contract where one of the parties (called a bailor or lender) delivers to another
(called the bailee or borrower) a non-consumable object, so that the latter may use
the same for a certain period and later return it.
The term is derived from the Latin Commodum or commodo meaning
usefulness to a borrower.
Features or Characteristics of Commodatum as a Contract:
1) Real (because it is perfected by delivery)
2) Principal (because it can stand alone by itself)
3) Gratuitous (otherwise, the contract is one of lease)
4) Personal in Nature (because of trust)
What bailee (borrower) in commodatum acquires:
Commodatum gives the right to the use (jus utendi) and not the rights to the
fruits (jus fruendi) otherwise the contract maybe one of usurfruct. But of course a
stipulation that the bailee may make use of the fruits of the thing loaned is valid. In
such a case, however, the right to get the fruits us merely incidental and not the
main cause of the contract.
Bailor in commodatum (lender) is called comodatario in Spanish, bailee in
commodatum (borrower) is termed comodante.
Subject matter of Commodatum
Usually, only non- consumable goods may be the object of a commodatum
for the thing itself should not be consumed and must be returned, but when a jar of
vinegar is given merely for exhibition the thing itself is not consumed. It is only used
ad ostentationem. Note that the vinegar in this case is non-fungible for the same
vinegar must be returned.
Properties that may be the object of Commodatum:
1. Immovable property
2. Movable property
Example of Commodatum involving Land:
A borrowed Bs land so that he can erect thereon a small barong-barong to
be used for the time that A works in Bs province. If there is no rental this is a case
of commodatum, but if rental is paid, this would be a lease.
Article 1938 The bailor in commodatum need not be the owner of the thing
leased.
Bailor (lender) need not be the owner. Reason: the contract of commodatum
does not transfer ownership. All that is required is that the bailor has the right to use
the property which he is lending, and that he be allowed to alienate his right to use.
Hence, in lease for example, a lessee may become a sub-lessor, unless he has been
expressly prohibited to do so in contract of lease.
Take note of the Mercado vs Aguilar case, wherein Mercado, the occupant
of a stall in the Batangas market has allowed Aguilar to occupy the same gratuitously
with the promise of Aguilar to return it upon demand. Aguilar claims that Mercado
has no right to demand because Mercado, being a mere lessee of the municipality has
no right to cede its occupancy in commodatum.
Held: Mercado had the right to give it in commdatum. If a lessee, by a
contract of a sub-lease, may transfer to another the enjoyment of the thing leased
for a consideration, there is no reason why he should be unable to cede gratuitously
its use. Aguilar should return the stall.
Article 1939 Commodatum is purely personal in character.
Consequently:
1. The death of either the bailor or bailee extinguishes the contract;
2. The bailee can neither lend nor lease the object of the contract to a third
person. However, the members of the bailees household may make use of
the thing loaned, unless there is a stipulation to the contrary or unless the
nature of the thing forbids such use.
Example of the first paragraph:
A loaned to B the formers car by way of commodatum. If either A or B dies, the
contract is extinguished.
(Note: If there are two or more borrowers, the death of one does not extinguish
the commodatum as to the other, unless there is stipulation to the contrary).
Example of the 2nd paragraph:
A loaned to B a stereo by way of commodatum. B cannot lend or lease this to a
friend. But the children of B, his household may use the same unless there is a
stipulation to the contrary. But said stereo cannot be used as a chair, because
the nature of the thing forbids such use.
Article 1940 A stipulation that the bailee may make use of the fruits of the
things loaned is valid
As a rule, the bailee is not entitled to the fruits, otherwise the contract may be
one of usufruct. It should be noted that the right to use is distinct from the right to
enjoy the fruits, since under the law, fruits should as a rule pertain to the owner of
the thing producing the fruits. However, to stipulate that the bailee may make use of
the fruits would not destroy the essence of a commodatum for liberality is still the
actual cause or consideration of the contract.
Obligations of the bailee:
a) The bailee is obliged to pay for the ordinary expenses for the use and
preservation of the thing loaned. (Art. 1941)
Reason: The bailee is supposed to return the identical thing, so he is
obliged to take care of the thing with the diligence of a good
father of a family.
b) The bailee is liable for the loss of the thing, even if it should be through a
fortuitous event under the following instances: (Art. 1942)
 1. If he devotes the thing to any purpose different from that for which it
has been loaned (amounts to bad faith or abuse of generosity
considering that commodatum is gratuitous);
2. If he keeps it longer than the period stipulated or after the
accomplishment of the use for which the commodatum has been
constituted (guilty of default or mora);
3. If the thing loaned has been delivered with appraisal of its value, unless
there is a stipulation exempting the bailee from responsibility in case of a
fortuitous event (the giving of the value was made to hold the bailee
liable for after all this is not a sale and neither is ownerhip transferred);
4. If he lends or leases the thing to a third person, who is not a member of
his household (amounts to violation of its personal character);
5. If being able to save either the thing borrowed or his own thing, he
chose to save the latter (amounts to an act of ingratitude and to a failure
to exercise due diligence).
The bailee does not answer for the deterioration of the thing loaned due
only to the use thereof and without his fault (Art. 1943)
The bailee cannot retain the thing loaned on the ground that the bailor owes
him something, even though it maybe by reason of expenses. However, the
bailee has a right of retention for damages mentioned in Article 1951. (Art. 1944)
When there are two or more bailees to whom the thing is loaned in the
same contract, they are liable solidarily. (Art. 1945)
Obligation of the bailor:
a) The bailor cannot demand the return of the thing loaned till after the
expiration of the period stipulated or after the accomplishment of the use for
which the commodatum has been constituted. However, if in the meantime,
he should have urgent need of the thing, he may demand its return or
temporary use.
In case of temporary use by the bailor, the contract of commodatum is
suspended while the thing is in the possession of the bailor. (Art. 1946)
b) The bailor may demand the thing at will, and the contractual relation is
called a precarium, in the following cases:
1. If either the duration of the contract nor the use to which the thing
loaned should be devoted has been stipulated;
2. If the use of the thing is merely tolerated by the owner (Art. 1947)
Precarium a special form of commodatum wherein the
possession of the borrower is precarious, that is,
dependent on the lenders will.
c) The bailor may demand the immediate return of the thing, if the bailee
commits any act of ingratitude as specified in Art. 765. (Art. 1948)
The grounds of ingratitude under Art. 765 (which are the same
grounds for the revocation of a donation):
a. If the donee should commit offense against the person, the honor or the
property of the donor, or his wife, or children under his parental
authority;
b. If the donee imputes to the donor any criminal offense or any act
involving moral turpitude, even though he should prove it, unless the
crime or the act has been committed against the donee himself, his wife,
or children under his authority;
c. If he unduly refuses him support when the donee is legally or morally
bound to give support to the donor.
d) The bailor shall refund the extraordinary expenses during the contract for
the preservation of the thing loaned, provided the bailee brings the same to
the knowledge of the bailor before incurring them, except when they are so
urgent that the reply to the notification cannot be awaited without danger.
If the extraordinary expenses arise on the occasion of the actual use of the
thing by the bailee, even though he acted without fault they shall be borne
by both the bailor and bailee, unless there is a stipulation to the contrary.
(Art. 1949)
e) If for the purpose of making use of the thing, the bailee incurs expenses
other than those referred to in Articles 1941 and 1949, he is not entitled to
reimbursement. (Art. 1950)
f) The bailor, who, knowing the flaws of the thing loaned does not inform the
bailee of the same, shall be liable to the latter for the damages which he
may suffer by reason thereof. (Art. 1951)
g) The bailor cannot exempt himself from the payment of expenses or
damages by abandoning the thing to the bailee. (Art. 1952)

Reason: The value of the thing loaned/borrowed might be less than the
value of the expenses or damages.
Simple Loan or Mutuum:
Article 1953 A person who receives a loan of money or any other fungible thing
acquires thereof, and is bound to pay to the creditor an equal
amount of the same kind an quality.
In mutuum the ownership passes to the borrower, but of course, he must
pay later.
Take note of the Grijaldo case (L-20240, Dec. 31, 1965) where Grijaldo who
borrowed money from a bank secured by a chattel mortgage in the standing crops on
his land, which crops were destroyed by the Japanese during the war, was still
obliged to pay, for his obligation was to pay a generic thing money representing the
loan with interest. The chattel mortgage on the crops simply stood as security for the
fulfillment of his obligation and therefore, the loss of the crops did not extinguish his
obligation to pay, because the account can still be paid from sources other than the
mortgaged crops.
Article 1954 A contract whereby one person transfers the ownership of non-
fungible things to another with the obligation on the part of the
latter to give things of the same kind, quantity and quality is
considered a barter. (It is not a commodatum nor a mutuum).
Article 1955 The obligation of a person who borrows money shall be governed by
the provision of Art. 1249 and 1250.
If what was loaned is a fungible thing other than money, the
debtor owes another thing of the same kind, quantity and quality,
even if it should change in value. In case it is impossible to deliver
the same kind, its value at the time of the perfection of the loan
shall be paid.
Article 1956 No interest shall be due unless it has been expressly stipulated in
writing. (for the use of the money)
Kinds of interest:
Interest may be paid either as compensation for the use of the money
(monetary interest) or as damages (compensatory interest).
How Interest Arises:
The right to interest arises only by virtue of a contract or by virtue of
damages for delay or failure to pay principal on which interest is demanded.
When Interest Earns Interest:
Interest due shall earn legal interest from the time it is judicially demanded,
although the obligation may be silent. (Art. 2212)
Interest by way of damages:
a) Part of the contract said: The first installment payable in three (3)
months shall have no interest. But the debtor was in default. Should he
pay interest for damages? Held: Yes, not interest for compensation but
interest for damages.
b) In contracts for the payment of a sum of money, the measure of
damages for delay is limited to the interest provided by law.
c) If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed
upon, and in the absence of stipulation, the legal interest which is now
12% per annum (not anymore 6% per annum).
Repeal of the Usury Law:
Central Bank Circular No. 905 has repealed the Usury law. Today, there is no
more maximum rate of interest. The rate will just depend on the mutual agreement
of the parties. Interest can now be charged as the lender and borrower may agree
upon. Central Bank Circular No. 416 fixing the rate of interest at 12% per annum
deals with: loans, forbearance of any money; goods or credit; and judgments.
In the determination of the interest, if it is payable in kind, its value shall be
appraised at the current price of the products or goods at the time and place of
payment. (Art. 1958)
The general rule is that accrued interest (interest due and unpaid) will not
bear interest, except:
a) If there is agreement to this effect (Art. 1959) or
b) If there is judicial demand (Art. 2212)
Then, such accrued interest will bear interest at the legal rate, unless a
different rate is stipulated. (Art. 1959)
If the borrower pays interest when there has been no stipulation therefore,
the provisions concerning solutio indebiti or natural obligations, shall be applied as
the case may be. (Art. 1960)
 If a borrower borrows money and orally agrees to pay legal interest at 10% Kinds of deposits
per annum, there is really no obligation to pay since the interest was not agreed
upon in writing. If he nevertheless pays because he considers it his moral obligation 1. Judicial (sequestration) when an attachment or seizure of property in
to pay said interest, he cannot recover the interest that he has given voluntarily. This litigation is ordered.
will now be a natural obligation.
2. Extra-judicial
But if no interest was stipulated and by mistake he pays interest, this will be
a question of undue payment or solutio indebiti. a) voluntary made by the will of the depositor
b) necessary
Charging interest in advance is permissible provided said interest does not 1. made in compliance with a legal obligation;
correspond to interest for more than one year. 2. on the occasion of a calamity;
3. made by travelers in hotels or inns;
IF A DEBTOR HAS PAID USURIOUS INTEREST, HOW MUCH CAN HE GET BACK 4. made by travelers with common carrier.
FROM HIS CREDITOR?
CHARACTERISTICS OF THE CONTRACT OF DEPOSIT:
ANS: Under Art. 1961, in case of conflict between the NCC and the Usury Law, the
NCC applies, and therefore, the interest in excess of 12% or 14% maybe a) It is a real contract perfected by delivery. Nonetheless, there can be
recovered, with interest. However, in the case of Angel Rose Warehousing vs. consensual contract to make or constitute a deposit;
Chelda Enterprises, the Supreme Court ruled that the entire interest can be b) The principal purpose is the safekeeping of the thing delivered. Thus, if
recovered by the debtor for such stipulation is void, (thus, it is as if there is safekeeping is merely secondary, the contract is not a deposit but some
no stipulation as to interest). On the other hand, the principal contract of other contract like one of lease or commodatum;
loan by itself is valid, hence, this maybe recovered by the creditor. In case of c) The depositary cannot use the thing deposited except:
demand, and if the debtor is in default, said principal debt earns interest
from the date of the demand. The interest is not by way of compensation but 1. With the express permission of the depositor; or
by way of damages. 2. When the preservation of the thing deposited requires its use, but
then it must be used only for that purpose.

DEPOSIT d) Only movable things can be the object of deposit;

e)
A deposit is constituted from the moment a person receives a thing
belonging to another, with the obligation of safely keeping it and of returning the
same. If the safekeeping of the thing delivered is not the principal purpose of the f)
contract, there is no deposit but some other contract. (Art. 1962)
It is a gratuitous contract, except when there is an agreement to the
contrary or unless the depositary is engaged in the business of storing
goods;
The contract is neither unilateral or bilateral according to whether it is
gratuitous or compensated (onerous).

A contract of deposit, being a real contract, is perfected by delivery but on Deposit distinguished from Sale and Barter:
agreement to constitute a deposit is merely consensual, and is therefore binding
upon mere consent. 1. In deposit, ownership is not transferred but in S & B, ownership is
transferred upon delivery;
The principal purpose of a deposit is the safekeeping of the thing delivered, 2. Its a real contract, while S & B are consensual (perfected by mere consent);
but this does not mean that the depositary can never use. He can, in two instances: 3. Generally gratuitous, while S & B always onerous.

a) With the express permission of the depositor; Deposit distinguished from Commodatum:
b) When the preservation of the thing deposited requires its use, it must be
used but only for that purpose. 1. It may be gratuitous, while the second is essentially and always gratuitous.
2. Principal purpose is safekeeping, while the second, the principal purpose is
Of course, if safekeeping is not the principal purpose, there is no deposit but use.
some other contract like one of lease or commodatum.
Deposit distinguished from Agency: A deposit may also be made by two or more persons each of whom believes
himself entitled to the thing deposited with a third person, who shall deliver it in a
1. In deposit, the purpose is safekeeping, while in agency, the purpose is the proper case to the one to whom it belongs. (Art. 1968)
representation by the agent of the principals affairs;
2. The custody of the things is the principal and essential reason for deposit, The depositor need not be the owner as a matter of fact, the law provides
while the custody of the things is merely an incidental or accessory obligation that the depositary cannot demand that the depositor prove his ownership of the
of the agent; thing deposited. After all, a depositor does not transfer ownership over the subject
3. Its generally gratuitous, while agency is generally onerous or for a matter.
compensation.
Form of contract of deposit (Art. 1969)
A so-called deposit of an advance payment in the case of a sale is not the deposit
contemplated by law. It is advance payment and ownership is transferred to the Oral
seller once given. Written.

An agreement to constitute a deposit is binding, but the deposit itself is not
perfected until the delivery of the thing. (Art. 1963)
A deposit may be constituted judicially or extra-judicially. (Art. 1964)
Distinctions between extra-judicial deposit and judicial deposit:
a) In EJD, the origin is the will of the parties, while JD, its the will of the court;
b) In EJD, the status is that theres a contract, while in JD, theres no contract;
c) In EJD, the purpose is the custody and safekeeping of the thing for the
benefit of the depositor, while in JD, it is to guarantee the right of the plaintiff
in case of a favorable judgment;
d) In EJD, the cause is gratuitous as a rule, while in JD, its onerous;
e) In EJD, the subject matter is always a movable property, while in JD, its
either movable or immovable property, but generally immovable;
f) In EJD, its always in behalf of the depositor, while in JD, its in behalf of the
winner.
Generally, deposit is gratuitous. Exceptions: (Art. 1965)
In either case, however, there must be a delivery.
Rule when depositor is incapacitated (Art. 1970)
If a person having capacity to contract accepts a deposit made by one who
is incapacitated, the former shall be the subject to all the obligations of a depositary,
and maybe compelled to return the thing by the guardian, or administrator of the
person who made the deposit, or by latter himself if he could acquire capacity.
Rule if depository is incapacitated (Art. 1971)
If the deposit has been made by a capacitated person with another who is
not the depositor shall only have an action to recover the thing deposited while it is
still in the possession of the depositary, or to compel the latter to pay him the
amount by which he may have enriched or benefited himself with the thing or its
price. However, if a third person who acquired the thing acted in bad faith, the
depositor may bring an action against him for its recovery.

1. When there is a contrary agreement. The two principal obligations of the depositary:
2. When its depositary is engaged in the business of storing goods.
a.) the safekeeping and
Kinds of Extra-Judicial Deposit (EJD):
b.) the return of the ring, when required
a) Voluntary as when there is mutual consent;
b) Necessary when there is a deposit because of a calamity (depositum The duty of safekeeping:
miserable) a.) If the contract does not state the diligence which is to be observed in the
performance, that of a good father of a family shall be required;
Voluntary deposit is that wherein the delivery of the object is made by the will b.) The depositary is responsible if the loss occurs through his fault, but as a
of the depositor. (Art. 1968) rule not if the loss is through a fortuitous event.

Effect if deposit is gratuitious or onerous

 More care is required if the deposit is for a compensation than if it is
gratuitous. But even if gratuitous, care must still be exercised. In case of non-fault on
the depository, the depositor-owner bears the loss because of the maxim res perit
domino. A guardian is not the depositary of the wards properties (Phil. Trust Co. Vs.
Ballestero, L8261, April, 1956)
Article 1973 Unless there is a stipulation to the contrary, the depositary cannot
deposit the thing with a third person. If deposit with a third person
is allowed, the depositary is liable for the loss if he deposited the
thing with a person who is manifestly careless on unfit. The
depository is responsible for the negligence of his employee.
REASON : The depositary is as a rule not allowed to deposit with a third
person because a deposit is founded on the fact that the depositor
has precisely chosen a particular depository by virtue of the
latters qualification and because of the trust and confidence
reposed on him by the depositor.
Article. 1974. The depositary may change the way of the deposit if under the
circumstances he may reasonably presume that the depositor
would consent to the change if he knew of the facts of the
situation. However, before the depositary may make such change,
he shall notify the depositor thereof and wait for his decision,
unless delay would cause danger. (n)
The depositary holding certificates, bonds, securities or instruments which
earn interest is duty bound to collect not only the interest on intangible properties,
when due, but also the capital itself, and to whatever may have been received or
collected, to the depositor. Naturally, this would not be the case should there be a
contrary agreement (Art.1975, 1st par.)
This above particular provision does not apply to contracts for the rent of
safety deposit boxes. (Art. 1975, 2nd par.) The reason for this is that here the renter
of the box is supposed to have control over the box and contents thereof, and the
real owner of said boxes should therefore not have the duty imposed in the first par.
As A matter of fact, this is really a lease of a thing (the box) and not a contract of
deposit.
Article 1976. Unless there is a stipulation to the contrary, the depositary may
commingle grain or other articles of the same kind and quality, in
which case the various depositors shall own or have a proportionate
interest in the mass.
Article. 1977. The depositary cannot make use of the thing deposited without the
express permission of the depositor. Otherwise, he shall be liable for
damages. However, when the preservation of the thing deposited
requires its use, it must be used but only for that purpose.
Article.1978. When the depositary has permission to use the thing deposited, the
contract loses the concept of a deposit and becomes a loan or
commodatum, except where safekeeping is still the principal
purpose of the contract. The permission shall not be presumed, and
its existence must be proved.
Palay was deposited so that it would be threshed into rice. Is this a deposit
or a hire of services? Answer: While deposit of palay was converted into a hire of
services, yet, after the object of the hiring (conversion into rice) has been fulfilled,
the rice continued to be a deposit in the possession of the thresher for them to
return to the owner upon demand. (Delgado vs. Bonnevie and Arandex, 23 Phils.
308)
WHEN DEPOSIT IS REALLY A LOAN:
1. Where money, consisting of coins of legal tender, is deposited with a person,
and the latter is authorized by the depositor to use and dispose of the same,
the agreement thus entered between the depositor and the depository is not
a contract of deposit but a loan (Levellena vs. Lion, et.al, (11 Phils 141);
2. Evidence showing that interest has been offered as compensation for the use
of money deposited leads one to the conclusion that the contract, although
denominated by the parties as deposit is really one of loan. (CO Agriela vs.
Nepomuceno, 55 Phils. 283)
CAN THE RIGHT TO DEMAND THE RETURN OF THE THING DEPOSITED
PRESCRIBED?
ANS: Things received on deposit do not prescribed for the depositary cannot claim
that ownership of the thing deposited was transferred to him, but simply the
custody thereof. The possession of a depositary as such, is not adverse to
that of the depositor. Possession in order to ripen into prescription, must
among other things be in the concept of an owner, public, peaceful and
uninterrupted. Adverse possession, can of course, give rise to prescription.
Art. 1979. The depositary is liable for the loss of the thing through a fortuitous
event:
(1) If it is so stipulated;
(2) If he uses the thing without the depositor's permission;
(3) If he delays its return;
(4) If he allows others to use it, even though he himself may have been
authorized to use the same.
A bank can compensate a debtors debt with a debtors deposit because
insofar as the deposit is concerned, the relationship between them is that of a debtor
and creditor not depositary and depositor. (Gullas vs. PNB, 62 Phils. 619)
A depositor is disputably presumed to be the owner of the funds standing in
his name in a bank deposit. (Fultun Iron Works case 55 Phils. 208)
Current and savings deposits are loans to bank because it can use the same.
A post dated check cannot be regarded as a check. A bank cannot therefore
deduct from a clients checking (current) amount postdated checks which have been
issued by the depositor at least not until the date indicated on the check (Ong Sip vs.
PBTC, GR. No. 27328)
Because the PNB has a charter of its own, it is not an ordinary corporation,
and is not therefore governed by the Corporation Law. Thus, a stockholder cannot
inspect its books, otherwise its charter would be violated. Only the Central Bank can
inspect (Gonzales vs. PNB, GR. # 33320, May 30, 1983)
The recovery of time deposits from a distressed bank as well as damages
should be in the RTC in an ordinary action, not a petition for mandamus and
prohibition. Bank deposits are really loans, and failure to return the same is failure to
pay an obligation as a debtor, not a breach of trust for there is no trust, constructive
or otherwise. The depositors remedy is to file his claim in the liquidation proceeding
of the bank. (Serrano vs. Central Bank, L-30571, Feb. 14, 1980, 96 SCRA 96)
Banks are not required to pay interest on deposit for the period during which
they are not allowed to operate by the Central Bank. This is demanded by fairness.
However, interest that had accrued prior to the suspension should be paid by the
bank for after all, it had made use then of the money deposited. (The Oversees Bank
of Manila vs. CA, L-49363, June 11,1981)
Article. 1981. When the thing deposited is delivered closed and sealed, the
depositary must return it in the same condition, and he shall be
liable for damages should the seal or lock be broken through his
fault.
Fault on the part of the depositary is presumed, unless there is proof to the
contrary.
As regards the value of the thing deposited, the statement of the depositor
shall be accepted, when the forcible opening is imputable to the depositary, should
there be no proof to the contrary. However, the courts may pass upon the credibility
of the depositor with respect to the value claimed by him.
When the seal or lock is broken, with or without the depositary's fault, he
shall keep the secret of the deposit.
Article1982. When it becomes necessary to open a locked box or receptacle, the
depositary is presumed authorized to do so, if the key has been
delivered to him; or when the instructions of the depositor as
regards the deposit cannot be executed without opening the box or
receptacle. (n)
Article 1983. The thing deposited shall be returned with all its products,
accessories and accessions. Should the deposit consist of money,
the provisions relative to agents in article 1896 shall be applied to
the depositary.
Article 1896. The agent owes interest on the sums he has applied to his own use
from the day on which he did so, and on those which he still owes
after the extinguishment of the agency.
Article 1984. The depositary cannot demand that the depositor prove his
ownership of the thing deposited. Nevertheless, should he discover
that the thing has been stolen and who its true owner is, he must
advise the latter of the deposit. If the owner, in spite of such
information, does not claim it within the period of one month, the
depositary shall be relieved of all responsibility by returning the
thing deposited to the depositor. If the depositary has reasonable
grounds to believe that the thing has not been lawfully acquired by
the depositor, the former may return the same.
Article 1985. When there are two or more depositors, if they are not solidary, and
the thing admits of division, each one cannot demand more than his
share. When there is solidarity or the thing does not admit of
division, the provisions of Articles 1212 and 1214 shall govern.
However, if there is a stipulation that the thing should be returned
to one of the depositors, the depositary shall return it only to the
person designated.
Article 1986. If the depositor should lose his capacity to contract after having
made the deposit, the thing cannot be returned except to the
persons who may have the administration of his property and rights.
Article 1987 If at the time the deposit was made a place was designated for the
return of the thing, the depositary must take the thing deposited to
such place; but the expenses for transportation shall be borne by the
depositor.
If no place has been designated for the return, it shall be made where the
thing deposited may be, even if it should not be the same place where the deposit
was made, provided that there was no malice on the part of the depositary.
Article. 1988. The thing deposited must be returned to the depositor upon
demand, even though a specified period or time for such return may
have been fixed.
This provision shall not apply when the thing is judicially attached
while in the depositary's possession, or should he have been notified
of the opposition of a third person to the return or the removal of
the thing deposited. In these cases, the depositary must
immediately inform the depositor of the attachment or opposition
Article 1989. Unless the deposit is for a valuable consideration, the depositary
who may have justifiable reasons for not keeping the thing deposited
may, even before the time designated, return it to the depositor;
and if the latter should refuse to receive it, the depositary may
secure its consignation from the court. (1776a)
Article 1990. If the depositary by force majeure or government order loses the
thing and receives money or another thing in its place, he shall
deliver the sum or other thing to the depositor.
Article 1991 The depositor's heir who in good faith may have sold the thing which
he did not know was deposited, shall only be bound to return the
price he may have received or to assign his right of action against
the buyer in case the price has not been paid him.
OBLIGATIONS OF THE DEPOSITOR
Article.1992 If the deposit is gratuitous, the depositor is obliged to reimburse the
depositary for the expenses he may have incurred for the
preservation of the thing deposited.
Article 1993. The depositor shall reimburse the depositary for any loss arising
from the character of the thing deposited, unless at the time of the
constitution of the deposit the former was not aware of, or was not
expected to know the dangerous character of the thing, or unless he
notified the depositary of the same, or the latter was aware of it
without advice from the depositor.
Article 1994. The depositary may retain the thing in pledge until the full payment
of what may be due him by reason of the deposit. (1780)
Article 1995. A deposit its extinguished:
(1) Upon the loss or destruction of the thing deposited;
(2) In case of a gratuitous deposit, upon the death of either the
depositor or the depositary. (n)
The above enumeration is not exclusive there are other grounds, namely:
1) Expiration of the term
2) Demand at will of the depositor
3) Termination of the purpose of the deposit
4) Fulfilment of the resolutory condition
5) Mutual withdrawal from the contract.
Art.icle 1996. A deposit is necessary:
(1) When it is made in compliance with a legal obligation;
(2) When it takes place on the occasion of any calamity, such as
fire, storm, flood, pillage, shipwreck, or other similar events;
otherwise termed as depositor miserables.
Two other kinds of necessary deposits
a) That made by travellers in hotels or inns;
b) That made with common
Example of necessary deposit made in compliance with a legal obligation:
A borrowed 20,000 from B and as a security thereof, pledged his rolex
watch. If B uses the said watch without authority of A, A may ask that the watch be
judicially or extra judicially deposited.
Other examples of necessary deposit in compliance with a legal obligation:
1. Cash deposits to be made by certain officers and officials;
2. Deposits to be made by those who desire to use firearms.
Example of necessary deposit under par. 2:
In a fire, Felicity saves Inas car. Felicity is in possession of the car and she
is supposed to be its depositary.
A TRAVELLER SPENT A NIGHT IN A HOTEL. A HOTEL SERVANT MALICIOUSLY
DESTROYED THE CELLULAR PHONE OF THE TRAVELLER. IS THE HOTEL-
KEEPER LIABLE?
ANS: Yes, provided that he had previously been informed about it and provided
further that the traveller followed any precaution that may have been given
by the hotel-keeper or his substitutes regarding its care and vigilance of said
property.
For purposes of necessary deposits, the word guests and travellers are
synonymous.
The liability of the hotel or innkeeper commences as soon as there is an
evident intention on the part of the travellers to avail himself of the accommodation
of the hotel or inn. It does not matter whether compensation has already been paid
or not, or whether guest has already partaken of the food and drink or not.
ANS: Yes. This is an act of stranger, not considered a force majeure. The
management should have been taken the necessary steps to prevent the
occurrence of things like this.
He cannot free himself from responsibility by posting notices to the effect
that he is not liable for the articles brought by the guest. Any stipulation to this
effect (between him and the guests) shall be void. ( Art. 2003)
He keeper has a right to retain the things brought into the hotel by the
guest, as a security for credits on account of lodging, and supplies usually furnished
to hotel guests. (Art. 2004) This right of retention is given to compensate the
innkeeper for the extra ordinary liabilities imposed upon him by the law. It does not
exists when the debtor is not a guest of the hotel.
A sequestration or judicial deposit takes place when an attachment or
seizure of property in litigation is ordered.( Art. 2005)
Movables or immovables may be the subjects of sequestration.
The depositary of property or objects sequestrated cannot be relieved of his
responsibility until the controversy which gave rise thereto has come to an end,
unless the court so orders. ( Art. 2007)

He is liable for the vehicles, animals and articles which have been introduced
or placed in the annexes of the hotel. ( Art. 1999)

It shall include the loss of, or injury to the personal property of the guests
caused by the servants or employees of the keepers as well as strangers but not that
which may proceed from any force majeure. (Art. 2000)

The act of a thief or robber, who has entered the hotel is not deemed force

GUIRITAN NOTES
majeure, unless it is done with the use of arms or through an irresistible force. (Art.
2001)

But he (hotel-keeper) is not liable for compensation if the loss is due to the A COMPILATION OF NOTES IN
acts of the guest, his family, servants or visitors, or if the loss arises from the PARTNERSHIP, SALES, AGENCY,
character of the things brought into the hotel. (Art. 2002)
CREDIT TRANSACTIONS AND PROPERTY
IF A WAS A GUEST IN BS HOTEL. C, A DRUNKARD, ENTERED THE HOTEL AND
DESTROYED HIS PERSONAL BELONGINGS DESPITE THE FACT THAT A HAD
BEEN GIVEN PROPER NOTICE AND HAD FOLLOWED ALL PRECAUTIONS. IS B
LIABLE?
FELIXBERTO L. GUIRITAN, NPS-VI
CITY PROSECUTOR
DEPUTIZED OMBUDSMAN PROSECUTOR
Butuan City